Item 10. Directors, Executive Officers and Corporate Governance
The names of, and
certain information regarding, our current directors are set forth below.
Directors of MDC Partners
Name
|
|
Age
|
|
Principal Occupation
|
|
Director Since
|
Mark Penn
|
|
66
|
|
Chief Executive Officer of MDC; President and Managing Partner of the Stagwell Group.
|
|
2019
|
Charlene Barshefsky
|
|
69
|
|
Senior International Partner at WilmerHale.
|
|
2019
|
Bradley J. Gross
|
|
47
|
|
Managing Director at Goldman Sachs & Co.
|
|
2017
|
Anne Marie O’Donovan
|
|
61
|
|
Director of Indigo Books & Music, Inc., Aviva Canada, Cadillac Fairview, and Investco.
|
|
2016
|
Kristen M. O’Hara
|
|
50
|
|
Chief Business Officer, Hearst Magazines.
|
|
2019
|
Wade Oosterman
|
|
59
|
|
Vice Chair of Bell Canada and Group Chair of Bell Media.
|
|
2020
|
Desiree Rogers
|
|
60
|
|
Chief Executive Officer and Co-Owner of Black Opal Beauty.
|
|
2018
|
Irwin D. Simon
|
|
61
|
|
Chairman and CEO of Aphria Inc.
|
|
2013
|
Mark Penn
Mark Penn has been the Chief Executive
Officer of MDC Partners since March 18, 2019. He has also been the President and Managing Partner of The Stagwell Group, a private
equity fund that invests in digital marketing services companies, since its formation in June 2015. Prior to The Stagwell Group,
Mr. Penn served in various senior executive positions at Microsoft. As Executive Vice President and Chief Strategy Officer of Microsoft,
he was responsible for working on core strategic issues across the company, blending data analytics with creativity. Mr. Penn also
has extensive experience growing and managing agencies. As the co-founder and CEO of Penn Schoen Berland, a market research firm
that he built and later sold to WPP Group, he demonstrated value-creation, serving clients with innovative techniques such as being
the first to offer overnight polling and unique ad testing methods now used by politicians and major corporations. At WPP Group,
he also became CEO of Burson Marsteller, and managed the two companies to substantial profit growth during that period. A globally
recognized strategist, Mr. Penn has advised corporate and political leaders both in the United States and internationally. He served
for six years as White House Pollster to President Bill Clinton and was a senior adviser in his 1996 re-election campaign, receiving
recognition for his highly effective strategies. Mr. Penn later served as chief strategist to Hillary Clinton in her Senate campaigns
and her 2008 Presidential campaign. Internationally, Mr. Penn helped elect more than 25 leaders in Asia, Latin America and Europe,
including Tony Blair and Menachem Begin. Penn has extensive leadership experience as a CEO and an agency operator, and his background
as an agency founder, executive strategist and marketer, and global thought leader were critical qualifications that led to his
appointment as CEO and a member of the Board. Mr. Penn resides in Washington, D.C. Mr. Penn was nominated by Stagwell Agency Holdings
LLC (“Stagwell”) pursuant to its rights as purchaser of the Class A Subordinate Voting Shares and Series 6 Convertible
Preference Shares. Please see Executive Officers of MDC Partners below.
Charlene Barshefsky
Charlene Barshefsky is a Senior International
Partner at WilmerHale, a multinational law firm based in Washington, D.C., a position she has held since 2001. Ambassador Barshefsky
advises multinational corporations on their market access, regulatory, investment and acquisition strategies in major markets across
the globe. Prior to joining WilmerHale, Ambassador Barshefsky was the United States Trade Representative (USTR) and a member of
President Clinton’s Cabinet from 1997 to 2001 and Acting and Deputy USTR from 1993 to 1996. As the USTR, she served as chief
trade negotiator and principal trade policymaker for the United States and, in both roles, negotiated complex market access, regulatory
and investment agreements with virtually every major country in the world. She serves on the boards of directors of the American
Express Company and the Estee Lauder Companies and is a member of the board of trustees of the Howard Hughes Medical Institute.
She is also a member of the Council on Foreign Relations. Ambassador Barshefsky’s distinguished record as a policymaker and
negotiator, ability to assess regulatory risks, as well as exceptional Board director experience for some of the world’s
most respected consumer companies across a range of sectors focused on digital innovation are key qualifications for the Board.
Ambassador Barshefsky resides in Washington, D.C. Ambassador Barshefsky was nominated by Stagwell pursuant to its rights as the
purchaser of the Class A Subordinate Voting Shares and Series 6 Convertible Preference Shares.
Bradley Gross
Bradley Gross is a Managing Director within
the Merchant Banking Division (“MBD”) of Goldman, Sachs & Co., a position he has held since 2007. Mr. Gross is
focused on US technology, media and telecom investing and serves as a member of the MBD Corporate Investment Committee and MBD
Risk Committee. Mr. Gross joined Goldman Sachs in 1995 and rejoined the firm after completing business school in 2000. He became
a vice president in 2003 and was named Managing Director in 2007. Mr. Gross serves on the boards of directors of Neovia Logistics
Holdings, a provider of logistics solutions, and Proquest Holdings, a leading information services business serving the higher
education market. Mr. Gross brings to the board an exceptional risk management track record, extensive public company board experience
and technological experience, all of which qualify him for the Board. Mr. Gross resides in New York, New York. Mr. Gross was nominated
by Goldman Sachs pursuant to its rights as the purchaser of the Series 4 Convertible Preference Shares.
Anne Marie O’Donovan
Anne Marie O’Donovan is an experienced
senior executive, public company board member, and CPA, with over 30 years of Canadian and global financial services industry expertise.
She is a member of the board of directors of Indigo Books & Music, a Canadian book and lifestyle company, Aviva Canada, a leading
property and casualty insurance company, Cadillac Fairview, an owner/operator/ developer of office, retail and mixed-use properties,
and Investco, an investment subsidiary of the Canadian Medical Association. Most recently she served as Executive Vice President
at Scotiabank, where she was Chief Administrative Officer for Global Banking and Markets division. Prior to that Ms. O’Donovan
had a long, distinguished career at Ernst & Young, a professional services and accounting firm, as Partner. She holds an HBA
degree from the Richard Ivey School of Business at the University of Western Ontario and is a Fellow of the Institute of Chartered
Accountants of Ontario. Spencer Stuart, a leadership consulting firm that was engaged by the MDC Partners’ board of directors
in 2016 to complete an extensive director search, recommended Ms. O’Donovan to the board. Among other qualifications, Ms.
O’Donovan brings to the Board an in-depth knowledge in the areas of executive leadership, risk management, regulatory, governance,
financial management, technology, operations and internal audit, as well as relevant experience working with international teams
across Europe, Asia and Latin America. Ms. O’Donovan resides in Oakville, Ontario.
Kristen M. O’Hara
Kristen M. O’Hara is a strategic marketing and media professional
who has worked for several global enterprises. Ms. O’Hara has served as the Chief Business Officer of Hearst Magazines since
January 2020. Prior to that she served as VP Business Solutions of Snap Inc. from September 2018 to October 2018, and prior to
that, served as Chief Marketing Officer, Global Media for Time Warner Inc. (now Warner Media, LLC), a position she held since May
2011. Earlier executive roles with Time Warner Inc.’s Global Media Group include Senior Vice President and Managing Director,
Senior Vice President of Marketing and Client Partnerships, and from 2002 to 2004, Ms. O’Hara was the Vice President of Corporate
Marketing and Sales Strategy for the Time Inc. division of Time Warner Inc. From 1993 to 2002, Ms. O’Hara served in several
positions at global marketing communications firm Young & Rubicam Inc., driving business development and brand strategy for
blue chip advertisers. Ms. O’Hara has served as member of the board of CIIG Merger Corp., a Nasdaq listed company, since
December 2019 and Ms. O’Hara has been a member of the board of trustees of the Signature Theatre Company since 2012. She
was formerly a member of the boards of directors of Iconix Brand Group, Inc., a Nasdaq-listed company, from September 2016 to January
2018, and the Data & Marketing Association. Ms. O’Hara’s marketing and advertising experience, and high level of
expertise in data, social and digital media, offer critical skills and perspectives to the Board. For all of the foregoing reasons,
Ms. O’Hara is qualified to serve on the board of directors of MDC Partners. Ms. O’Hara resides in Bronxville, New York.
Ms. O’Hara was nominated for election to the MDC Partners board of directors pursuant to a settlement agreement by and between
the Company and FrontFour Capital Group LLC.
Wade Oosterman
Wade
Oosterman is Vice Chairman of Bell Canada, Canada’s largest telecommunications service provider, a position he has held since
2018. Mr. Oosterman has also been Group President of Bell Media, Canada’s largest media company, since 2015, and has been
Chief Brand Officer of Bell Canada and BCE since 2006. Mr. Oosterman served as President of Bell Mobility from 2006 to 2018. Prior
to joining Bell Canada, Mr. Oosterman served as Chief Marketing and Brand Officer for TELUS Corp., and Executive Vice President,
Sales and Marketing for TELUS Mobility. In 1987, Mr. Oosterman co-founded Clearnet Communications Inc. and served on its board
of directors until the successful sale of Clearnet to TELUS Corp. Mr. Oosterman serves on the board of directors of Telephone Data
Systems Inc., a telecom operator participating in the US Midwest markets, and Enstream, a joint venture of the three largest Canadian
telecom providers engaged in the business of mobile payments and identity verification. He has also served on the boards of directors
of Ingram Micro and Virgin Mobile Canada. Among other qualifications, Mr. Oosterman brings to the board financial acumen, risk
assessment and mitigation, and exceptional operations experience. His leadership includes extensive experience in both sell-side
and buy-side transactions, with a substantial footprint extending beyond Canada to China, Japan, Korea, Europe and the US.
Since 2008, during Mr. Oosterman’s tenure, Bell has delivered the highest shareholder returns in North America in the telecom
sector. He holds a BA in Economics and Financial Studies from the University of Western Ontario and an MBA from the Ivey School
at Western University. Mr. Oosterman resides in Toronto, Ontario.
Desirée Rogers
Desirée Rogers is the Chief Executive
Officer and Co-Owner of Black Opal Beauty, LLC, a masstige makeup and skincare company sold in Walmart, CVS and Rite Aid as well
as internationally. She served as Chairman of Choose Chicago, the tourism agency for the city of Chicago with over $1 billion in
revenue, from 2013 until 2019. At Choose Chicago, Ms. Rogers’ digital marketing leadership resulted in record results of
over 57 million visitors in 2018 and 2019. Ms. Rogers was Chief Executive Officer of Johnson Publishing Company, a publishing and
cosmetics firm, from 2010 to 2017. During the period of 2009 to 2010, Ms. Rogers was The White House Special Assistant to the President
and Social Secretary under the Obama administration. Prior to this post, Ms. Rogers served as the President of Allstate Social
Network for Allstate Financial, a personal lines property and casualty insurer. Ms. Rogers is a member of the boards of directors
of World Business Chicago, The Economic Club of Chicago, The Conquer Cancer Foundation, Donors Choose and Inspired Entertainment
Inc., and is formerly a member of the board of directors of Pinnacle Entertainment, Inc. Ms. Rogers is a results-oriented business
leader, and brings to the board strong interpersonal, collaborative and diplomatic skills. For all of the foregoing reasons, Ms.
Rogers is qualified to serve on the board of directors of MDC Partners. She has been a member of the MDC Partners Board of Directors
since her appointment on April 26, 2018, and currently chairs the Human Resources and Compensation Committee and serves on the
Nominating and Corporate Governance Committee. Ms. Rogers resides in Chicago, Illinois.
Irwin D. Simon
Irwin D. Simon is a business executive,
who in 1993 founded The Hain Celestial Group, Inc. (NASDAQ: HAIN) which he built into a leading, global organic and natural products
company with over $3 billion in net sales and served as President, Chief Executive Officer and Chairman through 2018. Mr. Simon
has more than 30 years of business experience spanning many domestic and international leadership and operating roles. Prior to
Hain Celestial, he was employed in various marketing and sales positions at The Häagen-Dazs Company, a frozen dessert company,
then a division of Grand Metropolitan, a multi-national luxury brands company. Mr. Simon currently serves as Chairman of the Board
and Chief Executive Officer of Aphria Inc. (NYSE: APHA), a leading global cannabis company. He also served as a Director of Barnes
& Noble, Inc., the largest retail bookseller in the United States. Most recently, Mr. Simon was appointed Executive Chairman
of Act II Global Acquisition Corp. (NASDAQ: ACTT), a blank check company he co-founded in the “better-for-you” sector.
For all of the foregoing reasons, Mr. Simon is qualified to serve on the board of directors of MDC Partners. He also serves on
the board of directors at Tulane University and on the Board of Trustees at Poly Prep Country Day School. Mr. Simon is also the
majority owner of the Cape Breton Screaming Eagles, a Quebec Major Junior Hockey League team and co-owner of St. John’s Edge
of the National Basketball League of Canada.
Indebtedness of Directors, Executive
Officers and Senior Officers
There is currently no indebtedness owed
to MDC by any of MDC’s Directors, executive officers or senior officers, and there was no such indebtedness owed to MDC as
of December 31, 2019. The Company’s Corporate Governance Guidelines prohibit the Company from making any new personal loans
or extensions of credit to Directors or executive officers of the Company.
Insurance
MDC holds directors’ and officers’
liability insurance policies that are designed to protect MDC Partners and its directors and officers against any legal action
which may arise due to wrongful acts on the part of directors and/or officers of MDC. The policies are written for a current limit
of $70 million, subject to a corporate deductible up to $2,500,000 per indemnifiable claims. In respect of the fiscal year
ended December 31, 2019, the cost to MDC of maintaining the policies was $1,013,623. The twelve-month premium cost of the current
policy, effective from July 31, 2019 – July 31, 2020, is equal to $1,070,386.
Executive Officers of MDC Partners
The executive officers
of MDC Partners as of April 27, 2020 are:
Name
|
|
Age
|
|
Office
|
Mark Penn
|
|
66
|
|
Chief Executive Officer
|
Frank Lanuto
|
|
57
|
|
Chief Financial Officer
|
Jonathan Mirsky
|
|
51
|
|
General Counsel
|
David C. Ross
|
|
40
|
|
Executive Vice President, Strategy and Corporate Development
|
Vincenzo DiMaggio
|
|
46
|
|
Senior Vice President, Chief Accounting Officer
|
____________
There is no family
relationship among any of the executive officers or directors.
Mr. Penn joined MDC Partners in March 2019
and currently serves as Chairman and Chief Executive Officer. Mr. Penn has been acting as the Managing Partner and President at
the Stagwell Group since 2015. Prior thereto, Mr. Penn served as Microsoft’s Executive Vice President and Chief Strategy
Officer and held Chief Executive Officer position in multiple strategic public relation firms.
Mr. Lanuto joined MDC Partners in June
2019 as Chief Financial Officer. Prior to joining MDC Partners, Mr. Lanuto served as Vice President, Corporate Controller at
Movado Group, Inc. since August 2015. Before Movado Group, he spent over 17 years overseeing global financial functions and operations
activities in the advertising, marketing and media services industries.
Mr. Mirsky joined MDC Partners in June
2019 as General Counsel. Prior to joining MDC Partners, from January 2001 through June 2019, Mr. Mirsky was a partner at the Washington
law firm Harris, Wiltshire & Grannis LLP, where his practice focused on mergers and acquisitions and preparing and negotiating
complex commercial agreements.
Mr. Ross joined MDC Partners in 2010
and currently serves as Executive Vice President, Strategy and Corporate Development. Prior to joining MDC Partners, Mr.
Ross was an attorney at Skadden Arps LLP where he represented global clients in a wide range of capital markets offerings, M&A
transactions, and general corporate matters.
Mr. DiMaggio joined MDC Partners in 2018
as Chief Accounting Officer. Prior to joining MDC Partners, he served as the Senior Vice President, Global Controller & Chief
Accounting Officer at Endeavor, from 2017 to 2018. Prior thereto, he worked at Viacom Inc. from 2012 to 2017 as Senior Vice President,
Deputy Controller and at the New York Times Company from 1999 to 2012 ultimately serving as its Vice President, Assistant Corporate
Controller.
Corporate Governance
Director Independence
The Board has established guidelines for
determining director independence, and all current directors, with the exception of Mr. Penn, have been determined by the Board
to be independent under applicable Nasdaq rules and the Board’s governance principles, and applicable Canadian securities
laws within the meaning of National Instrument 58-101 — Disclosure of Corporate Governance Practices. Mr. Gross was nominated
to the Board in 2017 by Broad Street Principal Investments, L.L.C., an affiliate of The Goldman Sachs Group Inc. (“Goldman
Sachs”), pursuant to its rights as the purchaser of the Series 4 Convertible Preference Shares. At that time, the Company
and the purchaser determined to treat Mr. Gross as ineligible to sit on the Board’s committees, without the Board making
an affirmative determination as to his independence. In light of the changes in Board composition during 2019, the Board first
evaluated Mr. Gross’s independence in June 2019 and determined him to be independent under applicable Nasdaq rules and the
Board’s governance principles.
Procedures for Recommending Nominees to our Board
The Company’s Corporate Governance
Guidelines contain a majority voting policy, which requires a director nominee who receives, in an uncontested election, a number
of votes “withheld” that is greater than the number of votes cast “for” his or her election to promptly
offer to resign from the Board. The Board shall accept the resignation absent exceptional circumstances. Unless the Board decides
to reject the offer, the resignation shall become effective 60 days after the date of the election. In making a determination whether
to reject the offer or postpone the effective date, the Board of Directors shall consider all factors it considers relevant to
the best interests of the Company. A director who tenders a resignation pursuant to the Corporate Governance Guidelines will not
participate in any meeting of the Board at which the resignation is considered. The Company will promptly issue a news release
with the Board’s decision.
Committees of the Board of Directors
The Board oversees the management of the
business and affairs of MDC Partners as required by Canadian law. The Board conducts its business through meetings of the Board
and three standing committees: the Audit Committee, the Human Resources & Compensation Committee and the Nominating and Corporate
Governance Committee.
Copies of the charters of the Audit Committee,
the Human Resources & Compensation Committee and the Nominating and Corporate Governance Committee, as well the Code of Conduct
and Corporate Governance Guidelines, are available free of charge at MDC Partners’ website located at http://www.mdc-partners.com/investors/corporate-governance.
Copies are also available to any shareholder upon written request to 330 Hudson, 10th Floor, New York, NY 10013, Attn: Investor
Relations.
Audit Committee
The purpose of the Audit Committee is to
provide assistance to the Board in fulfilling its fiduciary obligations and oversight responsibilities with respect to (1) the
integrity of the Corporation’s financial statements, (2) the Corporation’s compliance with legal and regulatory requirements,
(3) the independent auditor’s qualifications and independence, and (4) the performance of the Corporation’s internal
audit function and independent auditors. The Committee will also provide risk oversight, including cybersecurity risks, and prepare
the report that SEC rules require to be included in the Corporation's annual proxy statement.
The current members of the Audit Committee
are Anne Marie O’Donovan (Chairperson), Charlene Barshefsky and Wade Oosterman. Each of the members of the Audit Committee
is “financially literate” as required by applicable Canadian securities laws. The Board has determined that Ms. O’Donovan
and Mr. Oosterman each qualify as an “audit committee financial expert” under the Sarbanes-Oxley Act of 2002 and applicable
Nasdaq and Securities and Exchange Commission regulations, and each member of the Audit Committee has been determined by the Board
to be independent pursuant to Item 407 of Regulation S-K.
Nominating and Corporate Governance Committee
The purpose of the Nominating and Corporate
Governance Committee is to (1) identify and to select and recommend to the Board individuals qualified to serve as directors of
the Company and on committees of the Board, (2) to advise the Board with respect to the Board composition, procedures and committees,
(3) to develop and recommend to the Board a set of corporate governance principles applicable to the Company, (4) and to oversee
the evaluation of the Board ensure the committees fulfill their mandates.
The current members of the Nominating &
Corporate Governance Committee are Irwin Simon (Chairman), Charlene Barshefsky, Kristen O’Hara, and Desirée Rogers.
Human Resources and Compensation Committee
The purpose of the Human Resources &
Compensation Committee is to oversee the Corporation's executive compensation and benefit plans and practices, including its incentive-compensation
and equity-based plans, and to review and approve the Corporation’s management succession plans. The Committee also produces
a Committee report on executive compensation as required by the Securities and Exchange Commission to be included in the Corporation's
annual proxy statement or annual report on Form 10-K filed with the SEC.
The current members are Desirée Rogers (Chairperson),
Bradley J. Gross, Kristen O’Hara and Irwin Simon. All members are independent, non-employee directors.
Code of Conduct
The Company has adopted a Code of Conduct,
which applies to all directors, officers (including the Company’s Chief Executive Officer and Chief Financial Officer) and
employees of the Company and its subsidiaries. The Code of Conduct also satisfies the requirements for a code of ethics, as defined
by Item 406 of Regulation S-K promulgated by the SEC. The Company’s policy is to not permit any waiver of the Code of Conduct
for any director or executive officer, except in extremely limited circumstances. Any waiver of this Code of Conduct for directors
or officers of the Company must be approved by the Company’s Board of Directors. Amendments to and waivers of the Code of
Conduct will be publicly disclosed as required by applicable laws, rules and regulations. The Code of Conduct is available free
of charge on the Company’s website at https://www.mdc-partners.com/investors/corporate-governance, or by writing
to MDC Partners Inc., 330 Hudson Street, 10th Floor, New York, New York 10013, Attention: Investor Relations. The Company intends
to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, certain provisions
of the Code of Conduct that apply to its principal executive officer, principal financial officer and principal accounting officer
by posting such information on its website, at the address and location specified above.
Delinquent Section 16(a) Reports
Under Section 16(a) of the Exchange Act, each person serving
as a director or executive officer during the last fiscal year and any persons holding 10% or more of the common stock are required
to report their ownership of common stock and any changes in that ownership to the SEC within a prescribed period of time and
to furnish the Company with copies of such reports. To the Company’s knowledge, based solely upon a review of copies of
such reports received by the Company which were filed with the SEC for the fiscal year ended December 31, 2019, and upon written
representations from such persons that no other reports were required, the Company has been advised that all reports required
to be filed under Section 16(a) have been timely filed with the SEC except for the Form 4 for Clare Copeland filed on February
22, 2019, Form 4’s for David Doft, Mitchell Gendel, Scott Kauffman, and David Ross filed on March 20, 2019, Form 4 for Daniel Goldberg
filed on August 2, 2019, Form 3 and Form 4 for Vincenzo DiMaggio filed on April 3, 2020 and the Form 3 for Charlene Barshefsky
filed on March 12, 2020.
Item 11. Executive Compensation
This Compensation Discussion and Analysis
(or “CD&A”) section outlines our compensation philosophy and describes the material components of our executive
compensation practices for our named executive officers or “NEOs” in 2019:
MARK PENN
|
|
Chairman & Chief Executive Officer
|
FRANK LANUTO
|
|
Chief Financial Officer
|
JONATHAN MIRSKY
|
|
General Counsel and Corporate Secretary
|
DAVID ROSS
|
|
Executive Vice President, Strategy and Corporate Development
|
In addition, two of our former executive
officers, David Doft, our Former Executive Vice President and Chief Financial Officer, and Mitchell Gendel, our Former Executive
Vice President and General Counsel, are also considered in our NEO group for 2019, although each departed the Company in 2019.
We are currently eligible to provide disclosure pursuant to the rules applicable to smaller reporting companies. As a smaller reporting
company, we are not required to treat Frank Lanuto, our CFO, as a Named Executive Officer. Nonetheless, we have elected to include
the same disclosure for Mr. Lanuto as we have provided for our other Named Executive Officers.
EXECUTIVE SUMMARY
Engagement of New Senior Leadership Team
2019 was a transformative year for the
Company’s senior management team. Mark Penn became Chief Executive Officer of the Company and built out the Company’s
senior leadership with a new Chief Financial Officer and new General Counsel. Specifically, during the course of 2019, the Company
made the following significant changes to its senior management team:
|
·
|
Effective March 18, 2019, following
an extensive search process, and in connection with the investment of Stagwell in the Company, the Company’s Board of Directors
appointed Mark Penn as the Chairman & Chief Executive Officer (“CEO”);
|
|
·
|
Frank Lanuto, a financial leader with
significant advertising holding company experience, joined the Company as Chief Financial Officer (“CFO”) on
June 10, 2019; and
|
|
·
|
On June 17, 2019, Jonathan Mirsky, an
experienced corporate attorney, joined the Company as General Counsel and Corporate Secretary.
|
In connection with the changes to our senior
management team, we entered into employment agreements with each of Messrs. Penn, Lanuto and Mirsky, each of which reflect our
compensation philosophy and are described more fully below. The Company also entered into agreements with two of its departing
executive officers, outgoing CFO David Doft and outgoing General Counsel Mitch Gendel, to retain their services for a transitional
period and ensure a smooth transition for the new senior management team.
Aligning Pay with Performance
While approving significant changes to
our senior management team during 2019, the Human Resources & Compensation Committee (the “Compensation Committee”)
remained committed to its compensation strategy of appropriately linking compensation levels with shareholder value creation by:
|
·
|
Aligning pay with financial performance
as a meaningful component of total compensation;
|
|
·
|
Providing total compensation capable of
attracting, motivating and retaining executives of outstanding talent;
|
|
·
|
Focusing our executives on achieving key
objectives critical to implementing the Company’s business strategy and achieving financial performance goals; and
|
|
·
|
Safeguarding the Company’s business
interests, including protection from adverse activities by executives.
|
In 2019, approximately
83% of the target total compensation (excluding benefits) for our CEO was variable/performance-based pay, while performance-based
pay for all other NEOs (other than Messrs. Doft and Gendel) averaged 70% of target total compensation (excluding benefits and
one-time signing bonuses). For all of our NEOs, 100% of the annual incentives could be earned only if individual and other pre-established
financial performance goals were met, while 100% of long-term incentive awards could be earned only if financial performance
goals (except in limited circumstances described herein) were met. In addition, the newly hired NEOs received inducement long-term
incentive awards, which took the form of cash- or stock-settled stock appreciation rights (“SARs”) and restricted
stock, which are aligned with stockholder interests because they increase in value only with improved stock price performance.
What We Do and What We Do Not Do
Our compensation program is constructed
in conformity with prevailing governance standards. The following are some of the key compensation practices we follow to drive
performance, as well as some practices we avoid because we do not believe they promote our long-term goal of aligning pay with
performance.
|
|
|
|
|
|
|
|
|
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|
|
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|
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What We Do
|
|
|
|
|
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What We Do Not Do
|
|
|
|
|
|
|
|
|
✓
|
|
Mitigate undue risk in compensation programs
|
|
|
|
✗
|
|
No repricing of underwater stock options
|
|
|
|
|
|
|
|
|
✓
|
|
Maintain equity ownership guidelines for executives
|
|
|
|
✗
|
|
No tax gross-ups
|
|
|
|
|
|
|
|
|
✓
|
|
Provide reasonable post-employment and change in control
protection to executives
|
|
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|
✗
|
|
No significant perquisites
|
|
|
|
|
|
|
|
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✓
|
|
Use an independent compensation consultant that does not provide other services to the Company
|
|
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✗
|
|
No “single-trigger” change in control cash
severance to executives
|
|
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✓
|
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Maintain a compensation committee comprised only of independent, non-employee directors
|
|
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✗
|
|
No hedging or pledging of Company securities by directors and executive officers
|
|
|
|
|
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Shareholder Approval of our NEO Compensation
At the Company’s
most recent Annual Meeting held on June 4, 2019, the Company submitted its executive compensation program to an advisory vote
of its shareholders (also known as the “say-on-pay” vote). This advisory vote received support from approximately 91%
of the total votes cast at the annual meeting. Therefore, in considering compensation and long-term incentives in 2019, the Company
continued its practice of focusing on pay for performance.
The Company pays
careful attention to shareholder feedback, including the say-on-pay vote, and management and the Board have undertaken a concerted
effort to focus on shareholder outreach and solicitation of feedback in recent years.
OVERVIEW
OF OUR 2019 COMPENSATION PROCESS
Primary Compensation Elements
As summarized
in the following table, the Company traditionally uses a mix of short- and long-term and fixed and variable elements in compensating
the NEOs: base salary, annual cash bonus incentives and long-term incentive awards. As described in more detail below, the Compensation
Committee administers the long-term incentive program for our NEOs with the goal that all long-term equity awards granted to NEOs
will either be subject to performance-based vesting requirements or will have value only to the extent that our stock price increases
following the grant date, in addition to continued employment conditions. In limited situations only, such as inducement grants,
long-term incentive awards may include equity-based awards that vest based solely on continued employment.
Annual Long-term
Incentives Pay Element Salary Annual Incentive
Performance-Based Cash Awards Performance-Based Equity Awards
RECIPIENT All Named Executive Officers
FIXED OR VARI-ABLE COMPENSATION
Fixed Variable
DURATION OF PERFORMANCE Short-term Emphasis
Long-term Emphasis PERFORMANCE
PERIOD Ongoing 1 year 3 years 1-3 years
FORM OF DELIVERY Cash Cash
Equity
Process for Determining the Compensation of Our Named Executive
Officers
The Company’s
executive compensation program is administered and overseen by the Compensation Committee. During 2019, our Compensation Committee
was composed of four independent, non-employee directors. The Compensation Committee oversees the Company’s executive compensation
and benefit plans and practices, including its incentive compensation and equity-based plans, and reviews and approves the Company’s
management succession plans. Specifically, the Compensation Committee determines the salaries or potential salary increases, as
applicable, and the performance measures and awards under the annual bonus incentive program for our CEO and other executive officers.
The Compensation Committee also determines the amount and form of long-term incentive awards.
Role of Compensation Consultant
In 2017, 2018
and 2019, the Compensation Committee retained Mercer, a compensation consulting firm, to provide objective analysis, advice and
information to the Compensation Committee, including competitive market data and recommendations related to our CEO and other executive
officer compensation, including recommendations regarding annual and long-term incentive awards. Additionally, in 2019, Mercer
provided feedback to the Compensation Committee related to the compensation terms for our employment agreements with the new executives.
Mercer reports to the Compensation Committee Chairman and has direct access to Compensation Committee members. In accordance with
Nasdaq listing standards and SEC regulations, the Compensation Committee assessed the independence of Mercer and determined that
it was independent from management and that Mercer’s work has not raised any conflict of interest.
Mercer has attended
Compensation Committee meetings at the Compensation Committee’s request and has also met with the Compensation Committee
in executive session without management present. In particular, the Compensation Committee worked with Mercer to structure performance-based
annual and long-term incentive programs designed to retain the Company’s senior management team and to motivate them to achieve
goals that increase shareholder value. The Compensation Committee sought to ensure that its incentive plans properly align management
incentive compensation targets with the performance targets most relevant to shareholders. The Compensation Committee also considered
recent trends in executive compensation.
Use of Comparator Companies
In determining
compensation opportunities and payments to executives, the Compensation Committee may, from time to time, review competitive opportunities,
payments, practices and performance among a comparator group of companies. We engage in formal benchmarking of NEO compensation.
We intend that, if our named executive officers achieve individual and financial corporate objectives in a given year, they will
earn total direct compensation that compares favorably with the total direct compensation earned by executives performing similar
functions at comparator companies. Our Human Resources & Compensation Committee aims to set total target compensation at a
level between the 25th and 50th percentiles as compared to our comparator companies.
The comparator
group of peer marketing service companies used in 2019 was identified by Mercer and approved by the Chair of the Compensation Committee.
The group is comprised of the following publicly-traded companies ranging in size from ~$800 million to $4.5 billion in revenue
(or approximately one-half to three-times that of the Company): IAC/InterActiveCorp; Sinclair Broadcast Group; Clear Channel; John
Wiley & Sons; Scholastic Corporation; The New York Times Company; Meredith Corporation; Criteo S.A.; TEGNA Inc.; Tribune Media
Company; Gray Television, Inc.; Entercom Communications Corp.; The E.W. Scripps Company; and The McClatchy Company. We also consider
data regarding Omnicom and The Interpublic Group of Companies for reference purposes, but do not formally include them for benchmarking
purposes given their size compared to the Company.
Role of Named Executive Officers in Compensation Decisions
The Compensation
Committee considers input from senior management in making determinations regarding the overall executive compensation program
and the individual compensation of the NEOs and other executive officers. As part of the Company’s annual planning process,
the CEO and EVP, Strategy and Corporate Development develop targets for the Company’s incentive compensation programs and
present them to the Compensation Committee. These targets are reviewed by the Compensation Committee to ensure alignment with the
Company’s strategic and annual operating plans, taking into account the targeted year-over-year improvement as well as identified
opportunities and risks. Based on performance appraisals, including an assessment of the achievement of pre-established financial
and individual “key performance indicators,” the CEO recommends to the Compensation Committee cash and long-term incentive
award levels for the Company’s other executive officers. Each year, the CEO presents to the Compensation Committee his evaluation
of each executive officer’s contribution and performance over the past year, and strengths and development needs and actions
for each of the executive officers. The Compensation Committee exercises its discretionary authority and makes the final decisions
regarding the form of awards, targets, award opportunities and payout value of awards. No executive officer participates in discussions
relating to his or her own compensation.
The following
table identifies the roles and responsibilities of the Compensation Committee and management in the oversight of the Company’s
executive compensation program:
Compensation Committee
|
Management
|
• Sets policies
and gives direction to management on all aspects of the executive compensation program
• Engages and
oversees the independent compensation consultant, including determining its fees and scope of work
• Based upon performance,
peer group and general industry market data, evaluates, determines and approves compensation (salary, bonus and equity awards)
for each executive officer
• Determines
the terms and conditions of equity incentive awards for all award recipients
• Reviews succession
planning to mitigate the risk of executive departure and to help ensure individual development and bench-strength through different
tiers of Company leadership
• Evaluates
and considers regulatory and legal perspectives on compensation matters, rating agency opinions on executive pay, published investor
compensation policies and position parameters, and recommendations of major proxy voting advisory firms
• Coordinates
with the other committees of the Board to identify, evaluate and address potential compensation risks, where they may exist
|
• Analyzes competitive
information supplied by the independent compensation consultant and others in light of the Company’s financial and operational
circumstances
• Considers how other
factors may affect pay decision-making, such as the Company’s targeted earnings, internal pay equity, overall financial performance
and the Company’s ability to absorb increases in compensation costs
• Uses the data
and analysis referenced above to formulate recommendations for the Committee’s review and consideration
|
Risk Assessment
The Compensation
Committee reviews with management the design and operation of the Company’s compensation practices and policies, including
performance goals and metrics used in connection with incentive awards and determined that these policies do not provide the Company’s
executive officers or other employees with incentives to engage in behavior that is reasonably likely to have a material adverse
effect on the Company. As discussed below in greater detail, the principal measures of our business performance to which NEO compensation
is tied are EBITDA (as defined below) and individual key performance criteria.
2019 Principal Pay Element
Determinations
2019 Principal Pay Element Determinations and Link to Company
Strategy
The following table provides an overview
of the principal pay elements provided to our NEOs and material decisions made with respect to these elements in 2019, and explains
how each element is linked to our overall business strategy:
Pay Element
|
|
Description
|
|
2019 Determinations
|
|
Link To Business &
Strategy
|
BASE SALARY
|
|
• Fixed cash
compensation recognizing individual performance, role and responsibilities, leadership skills, future potential and internal pay
equity considerations
• Set upon hiring
or promotion, reviewed as necessary based on the facts and circumstances and adjusted when appropriate
|
|
• In connection
with their hiring, the Compensation Committee set the base salaries of Messrs. Penn, Lanuto and Mirsky taking into account feedback
from Mercer. Base salaries were benchmarked against appropriate comparator companies
|
|
• Competitive
base salaries help attract and retain key executive talent
• Any material
adjustments are based on competitive market considerations, changes in responsibilities and individual performance
|
|
|
|
|
|
ANNUAL INCENTIVES
|
|
• Performance-based cash compensation dependent on performance against annually established financial targets and personal performance
|
|
• The Compensation Committee awarded performance-based cash bonuses to Messrs. Penn, Lanuto, Mirsky and Ross based on the Company’s achievement of its 2019 EBITDA target as well as individual performance and contributions
|
|
• Our annual incentives motivate and reward achievement of annual corporate and personal objectives that build shareholder value
|
|
|
|
|
|
|
|
LONG-TERM INCENTIVES
|
|
• Opportunity to earn cash and equity long-term incentive awards, subject to continued employment, if the Company achieves financial performance goals (EBITDA) over a one (1) to three (3) year measurement period following the date of grant
|
|
• The Compensation
Committee granted cash and equity long-term incentive awards to Messrs. Penn, Lanuto, Mirsky, and Ross to encourage them to focus
on delivering key financial metrics over the next three years
|
|
• Like our annual
incentives, our long-term incentives encourage senior leaders to focus on delivering on our key financial metrics, but do
not encourage or allow for excessive or unnecessary risk-taking in achieving this aim
• The long-term
incentives also ensure that executives have compensation that is at risk for longer periods of time and is subject to forfeiture
in the event that they terminate their employment
• The long-term
incentives also motivate executives to remain with the company for long and productive careers built on expertise
|
INDUCEMENT AWARDS/CASH SIGNING BONUSES
|
|
• One-time awards granted to new executives in the form of SARs, restricted stock and/or cash signing bonuses
|
|
• The Compensation Committee granted inducement awards to Messrs. Penn, Lanuto and Mirsky in connection with each joining the Company
|
|
• Attract talented, experienced executives to join and remain with the Company
|
New CEO Compensation and Inducement
Award
On March 18, 2019, following an extensive
search process and concurrent with the investment by Stagwell in the Company, Mr. Penn became CEO and began implementing a turnaround
plan to significantly improve the Company’s financial and operational performance. The Compensation Committee consulted with
Mercer and utilized benchmarks in negotiating the terms of Mr. Penn’s employment contract, including as to his base salary,
incentive compensation targets, and an inducement award in the form of SARs. Specifically, the Compensation Committee established
Mr. Penn’s base salary at $750,000, benchmarked in the lower range (<25th percentile) of peer group CEOs and
approximately 40% lower than that of the Company’s prior CEO. Mr. Penn’s total direct compensation target, which is
more heavily weighted to “at-risk” performance-based awards, was benchmarked at the 50th percentile of peer
group CEOs. The Compensation Committee also granted a one-time inducement award of 1,500,000 SARs to Mr. Penn, which vest over
three years subject to continued employment. The terms of this inducement award, and other key terms of Mr. Penn’s employment
contract, are discussed in detail under the heading “Narrative Disclosure to Summary Compensation Table” below.
Inducement Awards and Signing Bonuses
to Other New NEOs in 2019
In June 2019, the Compensation Committee
granted inducement awards, including signing bonuses, to each of Messrs. Lanuto and Mirsky. The amounts and terms of these awards
are discussed in detail under the heading “Narrative Disclosure to Summary Compensation Table” below.
2019 Incentive Awards: Financial and Individual Performance
Metrics
Pay-for-Performance Analysis; Achievement
of 2019 Financial Targets. The Company’s compensation program is designed to reward performance relative to corporate
financial performance criteria and individual incentive criteria. The Company’s overall financial performance for 2019 exceeded
the financial targets established by the Compensation Committee. Specifically, the Company’s 2019 EBITDA performance exceeded
the Company’s baseline EBITDA target ($179.7 million). In 2019, EBITDA performance was measured based on the definition of
EBITDA contained in the Company’s Credit Agreement. The Compensation Committee also determined that the Company achieved
certain other financial and strategic goals in 2019, including reduction of the consolidated compensation-to-revenue ratio, increases
in net new business through the year, a significantly improved balance sheet position at year end, portfolio realignment into agency
networks, real estate consolidation in New York City and the successful sublet of the Company’s prior headquarters. The Compensation
Committee’s executive compensation decisions in 2019 aligned with this exceptional financial and operational performance.
Calculation of 2019 Annual Incentive
Awards; Individual Performance Metrics. In 2019, each NEO was eligible to earn an annual bonus in an amount equal to his
base salary plus a potential discretionary adjustment for exceptional performance. In determining the 2019 annual incentive awards
to be paid to each of the named executive officers, following the conclusion of fiscal 2019, the Compensation Committee reviewed
actual financial performance and individual performance relative to individual incentive criteria. The Company does not apply a
formula or use a pre-determined weighting when comparing overall performance against the various individual objectives, and no
single objective is material in determining individual awards. Rather, the Compensation Committee assessed each executive’s
individual performance to determine the actual bonus incentive award payable to each NEO. For NEOs other than the Chief Executive
Officer, the Compensation Committee’s assessment was partially based on a performance review by the Chief Executive Officer.
On January 23, 2020, the Compensation Committee approved annual incentive awards to the NEOs in the following amounts: Mr. Penn
— $750,000; Mr. Ross — $625,000; Mr. Lanuto — $350,000; and Mr. Mirsky — $200,000.
2020 LTIP Awards Issued in 2019.
In November 2019, the Compensation Committee granted awards under the Company’s 2014 Long-Term Cash Incentive Plan (the “2014
LTIP Plan”) and 2011 and 2016 Stock Incentive Plans to each of our NEOs as described below, in each case with a performance
period commencing January 1, 2020. The Compensation Committee chose EBITDA, as defined in the Company’s Credit Agreement,
as the financial performance measure under each of these awards. The Compensation Committee evaluated using additional or alternative
performance metrics with respect to these awards, but ultimately determined to use only EBITDA because it is a key measure of the
Company’s profitability, as well as availability under existing lines of credit, that generally correlates to our stock price
performance. Specifically, the Compensation Committee set the 2020 EBITDA target at $205 million under each award.
2020 Cash LTIP Awards. In
November 2019, the Compensation Committee granted awards under the Company’s 2014 LTIP Plan to each of our NEOs in the following
target amounts: Mr. Penn — $1,155,000; Mr. Ross — $400,000; Mr. Mirsky — $242,000; and Mr. Lanuto — $198,000.
These grants vest at the end of the applicable three-year measurement period (January 1, 2020 – December 31, 2022), subject
to achievement of financial performance criteria and continued employment (the “2020 Cash LTIP Awards”). The financial
performance criteria are based on three-year cumulative EBITDA as measured against the approved annual EBITDA targets for such
period.
A payout of between 75% and 100% of the
target opportunity will be made if the Company achieves a three-year cumulative EBITDA amount equal to or greater than 90% but
less than 100% of the three-year cumulative EBITDA target, based on a straight-line interpolation for actual cumulative EBITDA
between 90% and 100% of the cumulative EBITDA target; a payout at the target opportunity will be made if the Company achieves the
three-year cumulative EBITDA target; and a payout of the target opportunity plus an additional amount between 0% and 100% of the
target opportunity will be made if the Company exceeds the three-year cumulative EBITDA target based on a straight-line interpolation
for actual cumulative EBITDA between 100% and 105% of the cumulative EBITDA target, subject to a cap of two times the target opportunity.
No payout would be earned in the event the Company fails to achieve three-year cumulative EBITDA at least equal to or greater than
90% of the cumulative EBITDA target.
These awards vest automatically upon a
change in control of the Company (“single-trigger”). Subject to achievement of financial performance targets, these
awards vest on a pro rata basis upon termination of the NEO’s employment without cause or by the NEO for good reason.
2020 LTIP Equity Incentive Awards.
In November 2019, the Compensation Committee also determined to award each NEO restricted stock grants under the Company’s
2011 and 2016 Stock Incentive Plans. Vesting for these awards is conditioned upon achievement of one (1) year financial performance
targets and continued employment pursuant to the terms of an award agreement made under the Plans (the “2020 LTIP Equity
Incentive Awards”). Pursuant to the terms of the 2020 LTIP Equity Incentive Awards, the shares of restricted stock granted
to our NEOs will vest based upon the Company’s level of achievement of EBITDA over the performance period commencing on January
1, 2020 and ending on December 31, 2020 and the NEO’s continued employment until December 31, 2022.
On November 4, 2019, the Company issued
2020 LTIP Equity Incentive Awards to each of the NEOs in the following amounts: Mr. Penn — 577,500 shares; Mr. Ross —
200,000 shares; Mr. Mirsky — 121,000 shares; and Mr. Lanuto — 99,000 shares. Each of the foregoing 2020 LTIP Equity
Incentive Awards will vest on December 31, 2022, based on the Company’s EBITDA as described above. For achievement of an
EBITDA amount equal to or greater than 90% of the EBITDA target (the “Minimum EBITDA Amount”) but less than 100% of
the EBITDA target, a prorated amount between 75% and 100% of the 2020 LTIP Equity Incentive Award will vest, determined based on
straight-line interpolation for EBITDA between the Minimum EBITDA Amount and EBITDA target. For achievement of an EBITDA amount
equal to or greater than 100% of the EBITDA target, 100% of each 2020 LTIP Equity Incentive Award will vest. No shares would vest
in the event the Company fails to achieve at least 90% of the Minimum EBITDA Amount.
These awards generally do not vest automatically
upon a change in control of the Company, except in connection with a termination of the NEO’s employment without cause or
by the NEO for good reason (“double-trigger”). Subject to achievement of financial performance targets, these awards
vest on a pro rata basis upon termination of the NEO’s employment without cause or by the NEO for good reason.
2018 EVP Awards – Payment and
Amendment. In December 2018, the Compensation Committee approved a series of one-time retention/transaction awards (the
“2018 EVP Retention Awards”) for five (5) senior executives of the Company, including each of Messrs. Doft, Gendel,
and Ross. The amount of each 2018 EVP Retention Award was equal to the applicable NEOs respective base salary or target annual
bonus award. Payment of each 2018 EVP Retention Award by the Company was conditioned on continued employment through the successful
closing of a “significant transaction” during 2019 as defined in such awards.
In connection with their Separation Agreements,
which are summarized in more detail below, in 2019, Messrs. Doft and Gendel each received a 2018 EVP Retention Award payout in
the amount of $650,000 pursuant to the terms of such award. Additionally, in June 2019, the Compensation Committee approved an
amendment to the 2018 EVP Retention Award of Mr. Ross. The amended terms included a cash payment of $375,000 subject to continued
employment until December 31, 2019 and a grant of 137,500 shares of restricted stock, subject to performance vesting upon the Company’s
achievement of certain EBITDA targets during calendar years 2019 and 2020.
Other Elements of Compensation
We provide our
NEOs with basic health and welfare benefits that are generally the same as those made available to other salaried employees located
in the same jurisdiction. The table below highlights certain other compensation components we offer and as a general matter, certain
components we have decided not to offer.
|
|
WHAT WE OFFER
|
|
|
|
|
|
WHAT WE DO NOT OFFER
|
|
|
|
|
|
|
|
|
✓
|
|
Medical and dental insurance
|
|
|
|
✗
|
|
Supplemental or other non-qualified pension plans
|
|
|
|
|
|
|
|
|
✓
|
|
401(k) Savings Plan
|
|
|
|
✗
|
|
Post-retirement medical benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
✗
|
|
Post-retirement life insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
✗
✗
|
|
Tax reimbursement or “gross-up” payments
Excessive perquisites
|
|
|
Separation and Release Agreements
In connection with their departures, we
entered into separation and release agreements with each of Messrs. Doft and Gendel, which we refer to as the “Separation
Agreements”. In consideration of their respective agreements to provide transitional support services for an agreed-upon
period and their release of claims against the Company, and consistent with the terms of their employment agreements, the Separation
Agreements provided for each of Messrs. Doft and Gendel to receive the severance payments and benefits that are set forth in the
Summary Compensation Table and described more fully on pages 29-30.
OTHER COMPENSATION-RELATED
POLICIES
Stock Ownership Guidelines
The Company’s stock ownership guidelines
require that each named executive officer own a significant equity stake in the Company during the period of their employment.
The Compensation Committee believes that stock ownership by senior managers strengthens their commitment to the future of the Company
and further aligns their interests with those of our shareholders. The Board has adopted the following stock ownership guidelines:
our CEO and CFO shall own stock with a value of at least four (4) times his base salary, and each other NEO shall own stock
with a value of at least three (3) times their base salary. An executive must reach his target ownership level within four years
after becoming subject to the stock ownership guidelines.
Prohibition of Pledging or Hedging of the Company’s
Stock
The Board has adopted policies to prohibit
any pledge or hedging of the Company’s stock by officers and directors of the Company. Currently, no stock is pledged or
hedged by any of the Company’s directors or officers.
Employment Agreements
The Company has employment or services
agreements with the CEO and all of the other NEOs. These agreements, which are summarized on pages 21-22, formalize the terms of
the employment relationship and assure the executive of fair treatment during employment and in the event of termination while
requiring compliance with restrictive covenants. Employment agreements promote complete documentation and understanding of employment
terms, including strong protections for our business.
Business Protection Terms
The Company’s NEOs are subject to
significant contractual restrictions intended to prevent actions that potentially could harm our business, particularly after termination
of employment. These business protections include obligations not to solicit clients or employees, not to disparage us, not to
reveal confidential information, and to cooperate with us in litigation. Business protection provisions are included in employment
agreements and in connection with compliance with the Company’s Code of Conduct.
Equity Award Grant Policies
The Board of Directors and the Compensation
Committee have adopted policies and procedures governing the granting of any equity incentive awards, including the following:
|
•
|
Equity incentive awards granted to executive officers must be approved by the Compensation Committee
or the full Board of Directors and must be made at quarterly in-person meetings and not be made via unanimous written consent.
An attorney (who may be an employee of the Company) must be present at each Compensation Committee or Board
meeting.
|
|
•
|
If grants are required to be awarded in connection with hiring new employees in between
regularly-scheduled Compensation Committee meetings, such grants may be approved at a special meeting, which may be
telephonic or in-person.
|
|
•
|
Options, SARs and other equity incentive awards must be priced at or above the closing price on
the date immediately prior to the date of the Compensation Committee meeting at which the grant is approved.
|
Severance Policies
We provide severance protection to our
named executive officers in employment agreements, as detailed below under the caption “Potential Payments upon Termination
or Change-In-Control.” This protection is designed to be fair and competitive to aid in attracting and retaining experienced
executives. We believe that the protection we provide, including the level of severance payments and post-termination benefits,
is appropriate.
Section 162(m)
Pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “Code”), publicly-held corporations are prohibited from deducting
compensation paid to the named executive officers as of the end of the fiscal year, in excess of $1 million. Although the
Compensation Committee considers the impact of Section 162(m) when making its compensation determinations, the Compensation
Committee has determined that its need for flexibility in designing an effective compensation plan to meet our objectives and
to respond quickly to marketplace needs has outweighed its need to maximize the deductibility of its annual compensation. The
Compensation Committee reviews this policy from time to time.
EBITDA
As used in this Form 10-K/A:
“EBITDA” is calculated pursuant
to the Company’s Credit Agreement for the incentive awards granted in 2019, and for awards issued in prior years. “EBITDA”
is a non-U.S. GAAP measure that represents operating income (loss) plus depreciation and amortization, stock-based compensation,
deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items, adjusted for certain
items at the discretion of the Compensation Committee. A reconciliation of these measures to the U.S. GAAP reported results of
operations for the year ended December 31, 2019 is provided in the Company’s Current Report on Form 8-K filed on February
27, 2020.
REPORT OF THE HUMAN RESOURCES
& COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Human Resources & Compensation Committee has reviewed
and discussed with management the Compensation Discussion and Analysis that appears above. Based on this review and discussion
with management, the Human Resources & Compensation Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in the Company’s 2020 Proxy Statement and the Company’s Amended 2019 Annual Report on Form
10-K/A for filing with the SEC.
The Human Resources & Compensation Committee
Desirée Rogers (Chair)
Bradley J. Gross
Kristen O’Hara
Irwin Simon
Executive Compensation
This section contains information, both narrative and tabular,
regarding the compensation for fiscal years 2019, 2018, and 2017 for our NEOs. As discussed in the CD&A, Messrs. Penn, Lanuto
and Mirsky joined the Company in 2019. In addition, Messrs. Doft and Gendel departed the Company in 2019.
SUMMARY COMPENSATION
TABLE
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)(1)
|
Stock
Awards ($)(2)
|
Option
Awards ($)(3)
|
Non-Equity Incentive Plan Compensation ($)(4)
|
All Other Compensation ($)(5)
|
Total
($)
|
Mark Penn,
Chief Executive Officer
and Chairman
|
2019
|
591,346
|
750,000
|
1,899,975
|
1,600,000
|
0
|
72,084
|
4,913,405(*)
|
Frank Lanuto,
Chief Financial Officer
|
2019
|
252,404
|
450,000
|
325,710
|
519,750
|
0
|
31,050
|
1,578,914
|
Jonathan Mirsky,
General Counsel and
Corporate Secretary
|
2019
|
296,154
|
400,000
|
1,025,590
|
183,333
|
0
|
20,927
|
1,926,004
|
David Ross,
|
2019
|
500,000
|
625,000
|
1,266,725(6)
|
0
|
0
|
41,089
|
2,432,814
|
Executive Vice
|
2018
|
500,000
|
0
|
274,500
|
0
|
0
|
21,408
|
795,908
|
President, Strategy
and Corporate Development
|
2017
|
495,833
|
500,000
|
0
|
101,162
|
117,664
|
22,785
|
1,237,444
|
David Doft,
|
2019
|
396,667
|
0
|
394,550(7)
|
0
|
0
|
1,735,843
|
2,527,060
|
Former Executive
Vice
|
2018
|
650,000
|
0
|
366,000
|
0
|
0
|
51,408
|
1,067,408
|
President and
Chief Financial Officer
|
2017
|
650,000
|
650,000
|
0
|
117,630
|
117,664
|
52,785
|
1,588,079
|
Mitchell Gendel,
|
2019
|
396,667
|
0
|
354,443(7)
|
0
|
0
|
1,629,008
|
2,380,118
|
Former Executive
|
2018
|
633,333
|
0
|
366,000
|
0
|
0
|
48,184
|
1,047,517
|
Vice President and
General Counsel
|
2017
|
550,000
|
550,000
|
0
|
117,630
|
117,664
|
50,207
|
1,385,501
|
__________________
|
(*)
|
Excluding Mr. Penn’s inducement award, total compensation would be $3,313,405 (see “New CEO Compensation and Inducement
Award” above).
|
|
(1)
|
Amounts shown for Messrs. Lanuto and Mirsky reflect signing bonuses of $100,000 and $200,000, respectively.
|
|
(2)
|
Reflects the grant date fair value of the equity awards we granted to our NEOs as determined in accordance with FASB Topic
718. For a discussion of the assumptions relating to these valuations, please see “Note 2 — Significant Accounting
Policies” set forth in our annual report on Form 10-K for the year ended December 31, 2019. On November 4, 2019, the Company
issued 2020 LTIP Equity Incentive Awards to each of the NEOs in the following target amounts: Mr. Penn — 577,500 shares;
Mr. Ross — 200,000 shares; Mr. Mirsky — 121,000 shares; and Mr. Lanuto — 99,000 shares. See “Compensation
Discussion and Analysis – 2019 Annual Incentive Awards: Financial and Individual Performance Metrics – 2020 LTIP Equity
Incentive Awards.” Each of the foregoing restricted stock grants will vest on December 31, 2022 based on the Company’s
EBITDA for the period commencing on January 1, 2020 and ending on December 31, 2020.
|
|
(3)
|
Amounts shown in the columns for 2017 and 2019 reflect the grant date fair value of the SARs awards we granted to our NEOs
as determined in accordance with FASB Topic 718. For a discussion of the assumptions relating to these valuations, please see “Footnote
2 — Significant Accounting Policies” set forth in our annual report on Form 10-K for the year ended December 31, 2019.
|
|
(4)
|
Amounts shown in the column for 2017 reflect amounts paid March 2, 2018 in connection with grants made in February 2015 pursuant
to the 2014 Cash LTIP Plan, following a determination of the Company’s financial performance over the 3-year period ended
December 31, 2017.
|
|
(5)
|
The components of “all other compensation” are set forth in the table below.
|
Name
|
Automobile
Allowance ($)
|
Health
Benefits ($)*
|
Long-term
Disability
Insurance
Premiums ($)
|
Severance ($)
|
Vacation
Pay Out ($)
|
Total ($)
|
|
|
|
|
|
|
|
Mark Penn
|
47,500
|
24,584
|
—
|
—
|
—
|
72,084
|
Frank Lanuto
|
14,022
|
16,826
|
202
|
—
|
—
|
31,050
|
Jonathan Mirsky
|
13,463
|
7,262
|
202
|
—
|
—
|
20,927
|
David Ross
|
20,083
|
20,634
|
372
|
—
|
—
|
41,089
|
David Doft
|
18,308
|
20,634
|
233
|
1,655,000
|
41,668
|
1,735,843
|
Mitchell Gendel
|
15,256
|
24,584
|
—
|
1,550,000
|
39,168
|
1,629,008
|
* The “Health Benefits” provided by the
Company are payment of health insurance premiums for the employee and, as applicable, family members eligible for coverage.
|
(6)
|
Reflects the grant date fair value of Mr. Ross’s 2017 LTIP Equity Incentive Award that was approved on January 20, 2017 and was subject to performance conditions. Under FASB ASC Topic 718, this restricted stock award did not have an established grant date fair value until 2019 because the financial performance target, the Cumulative EBITDA Target, had not been established. This award partially vested in February 2020 due to the Company’s partial achievement of the Cumulative EBITDA Target during the period of January 1, 2017 – December 31, 2019. (Specifically, 52,500 shares of Mr. Ross’s grant of 70,000 shares vested on February 26, 2020 based on achievement of at least 90% (but less than 100%) of the minimum cumulative 3-year EBITDA target for the performance period ended December 31, 2019. The remaining award shares were forfeited.) Also reflects the grant date fair value of restricted shares that Mr. Ross received in connection with his 2018 EVP Incentive Award, as amended. See “Compensation Discussion and Analysis — 2019 Annual Incentive Awards: Financial and Individual Performance Metrics — 2018 EVP Awards – Payment and Amendment.” 50% of this award vested in February 2020 due to the Company’s achievement of the EBITDA target for the 1-year period ended December 31, 2019. (Specifically, 68,750 shares of Mr. Ross’s grant of 137,500 shares vested on February 26, 2020, based on achievement of the 2019 EBITDA target. The remaining award shares will vest if the Company achieves the minimum EBITDA threshold for the performance period commencing January 1, 2019 and ending December 31, 2020, as determined by the Compensation Committee on or prior to March 1, 2021.) This table does not reflect 26,738 shares of restricted Class A Shares that were issued on February 28, 2018 and are subject to performance conditions. This award will vest on March 1, 2021, if the Company achieves the Cumulative EBITDA Target during the period of January 1, 2018 – December 31, 2020. Under FASB ASC Topic 718, these restricted stock awards did not yet have an established grant date fair value at December 31, 2019 because the three-year financial performance target was not yet established until the 2020 EBITDA target was determined in the first quarter of 2020.
|
|
(7)
|
Reflects the grant date fair value of Messrs. Doft and Gendel’s respective 2017 Equity Incentive Awards that were approved on January 20, 2017 and were subject to performance conditions. Under FASB ASC Topic 718, these restricted stock awards did not have an established grant date fair value until 2019 because the financial performance target, the Cumulative EBITDA Target, had not been established. Under their respective Separation Agreements, Messrs. Doft and Gendel received accelerated vesting of their respective 2017 Equity Incentive Awards. Also reflects the grant date fair value of Messrs. Doft and Gendel’s respective 2018 Equity Incentive Awards that were approved on February 28, 2018 and were subject to performance conditions. Under FASB ASC Topic 718, these restricted stock awards did not have an established grant date fair value until 2019 because the financial performance target, the Cumulative EBITDA Target, had not been established. Under their respective Separation Agreements, Messrs. Doft and Gendel received accelerated vesting of their respective 2018 Equity Incentive Awards.
|
Narrative Disclosure to Summary Compensation Table
Consistent with its past practice, the
Company entered into employment agreements in connection with the hiring of Messrs. Penn, Lanuto and Mirsky. The compensation terms
for each of Messrs. Penn, Lanuto and Mirsky were determined based on feedback from Mercer and were benchmarked against the Company’s
comparator companies, as described above. The employment agreements for our NEOs are summarized below. For additional information
regarding the compensation arrangements of and compensation decisions relating to our NEOs, see the discussion in our “Compensation
Discussion and Analysis.”
Mark Penn Employment Agreement
The Company entered into an employment
agreement with Mr. Penn, dated March 14, 2019, pursuant to which Mr. Penn is eligible to receive an annualized base salary
of $750,000 and an annual discretionary cash bonus in an amount equal to up to 100% of his then-current base salary. He is eligible
for potential future grants under the Company’s long-term incentive plans with an annual target equal to 350% of his then-current
base salary. On April 5, 2019, Mr. Penn received an inducement grant of 1,500,000 SARs, with an exercise price equal
to $2.19 (the average closing price for MDC’s Class A shares for the twenty (20) trading day period beginning March 5,
2019). These SARs will become vested and exercisable in full in three equal installments on each of the first three (3) anniversaries
of March 18, 2019, the “Commencement Date”, subject to Mr. Penn’s continued employment with the Company
through each vesting date. The SARs will expire on the fifth anniversary of the Commencement Date to the extent not exercised and
will be subject to accelerated vesting upon (i) death or disability, (ii) termination of employment without “Cause”
or with “Good Reason” (in each case as defined in his employment agreement), or (iii) a change in control of the Company.
Mr. Penn is also eligible to receive a monthly $5,000 perquisite allowance to cover automobile expenses, professional dues
and other perquisites. He is also entitled to participate in the retirement plans and benefits in accordance with the plans or
practices of the Company made available to the senior executives of the Company. Under his employment agreement, Mr. Penn is subject
to restrictive covenants during employment and for one (1) year thereafter, including covenants not to solicit clients of the Company,
hire or solicit employees or exclusive consultants of the Company, and render services for any client of the type rendered by the
Company, subject to specified exceptions. The employment agreement also provides for severance payments if Mr. Penn’s employment
is terminated under certain circumstances. The amount and circumstances giving rise to these severance payments are discussed in
further detail under the heading “Potential Payments upon Termination or Change in Control.”
Frank Lanuto Employment Agreement
The Company entered into an employment
agreement with Mr. Lanuto, dated May 6, 2019, pursuant to which Mr. Lanuto is eligible to receive an annual base salary of $450,000
and an annual discretionary bonus in an amount equal to up to 100% of his base salary. The employment agreement provides that Mr.
Lanuto was eligible to receive a signing bonus of $100,000, subject to certain conditions. He is eligible for potential future
grants under the Company’s long-term incentive plans with an annual target equal to $450,000. On June 12, 2019, Mr. Lanuto
received an inducement grant of (i) 225,000 SARs, with an exercise price equal to $2.91 (the average closing price for MDC’s
Class A shares for the ten (10) day trading period beginning May 24, 2019) and (ii) 225,000 SARs, with an exercise price equal
to $5.00. These SARs will become vested and exercisable in full in three equal installments on each of the first three (3) anniversaries
of June 10, 2019 (the “Commencement Date”), subject to Mr. Lanuto’s continued employment with the Company through
each vesting date. The SARs will expire on the fifth anniversary of the Commencement Date to the extent not exercised and will
be subject to accelerated vesting upon a change in control of the Company. Mr. Lanuto is also eligible to receive an annual
$25,000 perquisite allowance to cover automobile expenses, professional dues and other perquisites. He is also entitled to participate
in the retirement plans and benefits in accordance with the plans or practices of the Company made available to the senior executives
of the Company. Under his employment agreement, Mr. Lanuto is subject to restrictive covenants during employment and for a period
of two (2) years thereafter, including covenants not to solicit clients of the Company, hire or solicit employees or exclusive
consultants of the Company, and render services for any client of the type rendered by the Company, subject to specified exceptions.
The employment agreement also provides for severance payments if Mr. Lanuto’s employment is terminated under certain circumstances.
The amount and circumstances giving rise to these severance payments are discussed in further detail under the heading “Potential
Payments upon Termination or Change in Control.”
Jonathan Mirsky Employment Agreement
The Company entered into an employment
agreement with Mr. Mirsky, dated May 6, 2019, pursuant to which Mr. Mirsky is eligible to receive an annual base salary of $550,000
and an annual discretionary cash bonus in an amount equal to up to 100% of his base salary. The employment agreement provides that
Mr. Mirsky was eligible to receive a one-time bonus of $200,000 payable on or about January 15, 2020, subject to certain conditions.
He is eligible for potential future grants under the Company’s long-term incentive plans with an annual target equal to $550,000.
On June 26, 2019, Mr. Mirsky received an inducement grant of (i) 250,000 restricted Class A Shares and (ii) 250,000 SARs, with
an exercise price equal to $5.00. The restricted Class A Shares and SARs will become vested and exercisable in full in three equal
installments on each of the first three (3) anniversaries of June 17, 2019, the “Commencement Date”, subject to
Mr. Mirsky’s continued employment with the Company through each vesting date. The SARs will expire on the fifth anniversary
of the Commencement Date to the extent not exercised and will be subject to accelerated vesting upon (i) death or disability,
(ii) termination of employment without “Cause” or with “Good Reason” (in each case as defined in his employment
agreement), or (iii) a change in control of the Company. Mr. Mirsky is also eligible to receive an annual $25,000 perquisite
allowance to cover automobile expenses, professional dues and other perquisites. He is also entitled to participate in the retirement
plans and benefits in accordance with the plans or practices of the Company made available to the senior executives of the Company.
Under his employment agreement, Mr. Mirsky is subject to restrictive covenants during employment and for a period of one (1) year
thereafter, including covenants not to solicit clients of the Company, hire or solicit employees or exclusive consultants of the
Company, and render services for any client of the type rendered by the Company, subject to specified exceptions. The employment
agreement also provides for severance payments if Mr. Mirsky’s employment is terminated under certain circumstances. The
amount and circumstances giving rise to these severance payments are discussed in further detail under the heading “Potential
Payments upon Termination or Change in Control.”
David Ross Employment Agreement
The Company has an amended and restated
employment agreement with Mr. Ross, dated February 27, 2017, pursuant to which Mr. Ross serves as our Executive Vice President,
Strategy and Corporate Development. Mr. Ross’s term of employment is for an indefinite term, unless and until either Mr.
Ross provides the Company with 30 days’ prior written notice of resignation, or if the Company terminates his employment
with or without “Cause” (as defined in his employment agreement). Mr. Ross currently receives an annualized base salary
of $500,000 (effective as of January 20, 2017), and he is eligible to receive an annual discretionary bonus in an amount up to
100% of his base salary. He is also eligible for potential future grants under the Company’s long-term incentive plans. Mr.
Ross is eligible to participate in any welfare benefit plans and programs including disability, group life (including accidental
death and dismemberment), and business travel insurance provided by the Company to its senior executives. Mr. Ross is also
eligible to receive an annual $25,000 perquisite allowance to cover automobile expenses, professional dues and other perquisites.
He is also entitled to participate in the retirement plans and benefits in accordance with the plans or practices of the Company
made available to the senior executives of the Company. Under his employment agreement, Mr. Ross is subject to restrictive covenants
during employment and for a period of eighteen (18) months thereafter, including covenants not to solicit clients of the Company,
hire or solicit employees or exclusive consultants of the Company, and render services for any client of the type rendered by the
Company, subject to specified exceptions. The employment agreement also provides for severance payments if Mr. Ross’s employment
is terminated under certain circumstances. The amount and circumstances giving rise to these severance payments are discussed in
further detail under the heading “Potential Payments upon Termination or Change in Control.”
OUTSTANDING EQUITY AWARDS
AT 2019 FISCAL YEAR-END
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable (1)
|
|
|
Option Exercise Price ($)
|
|
|
Option
Expiration
Date
|
|
Number of Shares or Units of Stock that Have Not Vested (#)(2)
|
|
|
Market Value of Shares or Units of Stock that Have Not Vested ($)
|
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#)(3)
|
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
(j)
|
|
Mark Penn
|
|
|
|
|
|
|
1,500,000
|
|
|
|
2.19
|
|
|
3/18/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
577,500
|
|
|
$
|
1,605,450
|
|
Frank Lanuto
|
|
|
|
|
|
|
225,000
|
|
|
|
2.91
|
|
|
6/10/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
5.00
|
|
|
6/10/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,000
|
|
|
$
|
275,220
|
|
Jonathan Mirsky
|
|
|
|
|
|
|
250,000
|
|
|
|
5.00
|
|
|
6/17/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
$
|
695,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,000
|
|
|
$
|
336,380
|
|
David Ross
|
|
|
|
|
|
|
43,000
|
|
|
|
6.60
|
|
|
2/01/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
$
|
556,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,500
|
|
|
$
|
382,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
$
|
194,600
|
|
David Doft
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mitchell Gendel
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Mr. Penn received 1,500,000 inducement SARs. These SARs will become vested and exercisable in full in three equal installments on each of the first three (3) anniversaries of March 18, 2019, subject to Mr. Penn’s continued employment with the Company through each vesting date. Mr. Lanuto received 450,000 inducement SARs. These SARs will become vested and exercisable in full in three equal installments on each of the first three (3) anniversaries of June 10, 2019, subject to Mr. Lanuto’s continued employment with the Company through each vesting date. Mr. Mirsky received 250,000 inducement SARs. These SARs will become vested and exercisable in full in three equal installments on each of the first three (3) anniversaries of June 17, 2019, subject to Mr. Mirsky’s continued employment with the Company through each vesting date. The 43,000 SARs granted to Mr. Ross vest in full on January 31, 2020. For information regarding vesting in the event of a termination of employment or a change in control, see “Potential Payments upon Termination or Change in Control”.
|
|
(2)
|
Mr. Mirsky received 250,000 inducement restricted Class A shares. These restricted Class A shares will become vested in three equal installments on each of the first three (3) anniversaries of June 17, 2019, subject to Mr. Mirsky’s continued employment with the Company through each vesting date.
|
|
(3)
|
Mr. Penn’s grant of 577,500
restricted Class A shares, Mr. Lanuto’s grant of 99,000 restricted Class A shares, Mr. Mirsky’s grant of 121,000 restricted
Class A shares, and Mr. Ross’s grant of 200,000 restricted Class A shares will vest on December 31, 2022, based upon the
Company’s level of achievement of EBITDA over the performance period commencing on January 1, 2020 and ending on December
31, 2020. 68,750 shares of Mr. Ross’s grant of 137,500 shares vested on February 26, 2020, based on achievement of the 2019
EBITDA target. The remaining award shares will vest if the Company achieves the minimum EBITDA threshold for the performance period
commencing January 1, 2019 and ending December 31, 2020, as determined by the Compensation Committee on or prior to March 1, 2021.
52,500 shares of Mr. Ross’s grant of 70,000 shares vested on February 26, 2020 based on achievement of at least 90% (but
less than 100%) of the minimum cumulative 3-year EBITDA target for the performance period ended December 31, 2019. The remaining
award shares were forfeited.
This table does not reflect 26,738 shares of restricted Class
A Shares that were issued to Mr. Ross on February 28, 2018 and are subject to performance conditions. This award will vest on March
1, 2021, if the Company achieves the Cumulative EBITDA Target during the period of January 1, 2018 – December 31, 2020. Under
FASB ASC Topic 718, these restricted stock awards did not yet have an established grant date fair value at December 31, 2019 because
the three-year financial performance target was not yet established until the 2020 EBITDA target was determined in the first quarter
of 2020.
|
The following table sets forth information concerning each exercise
of stock options, SARs and similar instruments, and each vesting of stock, including restricted stock, restricted stock units and
similar instruments, during 2019 for each NEO on an aggregated basis.
OPTION EXERCISES AND
STOCK VESTED IN FISCAL YEAR 2019
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares Acquired on Exercise
|
|
|
Value Realized on Exercise
|
|
|
Number of Shares Acquired on Vesting
|
|
|
Value Realized on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
Mark Penn
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Frank Lanuto
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Jonathan Mirsky
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
David Ross
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
David Doft
|
|
|
0
|
|
|
|
0
|
|
|
|
133,476
|
|
|
$
|
321,677
|
(1)
|
Mitchell Gendel
|
|
|
0
|
|
|
|
0
|
|
|
|
133,476
|
|
|
$
|
321,677
|
(1)
|
|
(1)
|
Reflects the value realized on vesting by Messrs. Doft and Gendel of their 2017 and 2018 Equity Incentive Awards. Messrs. Doft
and Gendel each received accelerated vesting of such awards under their respective Separation Agreements.
|
PENSION BENEFITS IN 2019
We do not provide our NEOs with any defined benefit pension
arrangements.
NON-QUALIFIED DEFERRED
COMPENSATION IN 2019
We do not maintain any non-qualified deferred compensation plans
for our NEOs.
POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE IN CONTROL
We have entered into employment agreements
with each of our named executive officers. Under these agreements, we are required to pay severance benefits in connection with
specified terminations of employment, including specified terminations in connection with a change in control of the Company. No
employment agreement for any NEO or other executive officer provides “single-trigger” severance payments in connection
with a change in control. All such employment agreements require a “double trigger” for any change in control severance
payments in excess of basic severance terms, as applicable. In addition, some of our equity incentive plans provide for the accelerated
payment or vesting of awards in connection with specified terminations of employment, certain forms of change in control of the
Company, death or disability. The following is a description of the severance, termination and change in control benefits payable
to each of our named executive officers pursuant to their respective employment agreements and our equity incentive plans. The
equity incentive plans provide for the following benefits in the event of a termination or change in control:
2011 Stock Incentive Plan. The
following conditions shall be referred to as the “2011 CIC and Termination Provisions” and shall be applicable with
respect to the 2020 LTIP Equity Incentive Awards issued to each of the NEOs on November 4, 2019:
In the event of (i) the death or disability
of the executive officer, (ii) termination of the executive officer’s employment without “Cause” or by the executive
officer for “Good Reason” within one year following a Change in Control (as defined in the Company’s 2011 Stock
Incentive Plan), or (iii) a Change in Control in which the Company’s Class A shares are no longer outstanding and publicly
traded immediately following such transaction (each, a “Permitted Acceleration Event”), 100% of award shall vest. In
the event that the executive officer is terminated without “Cause” (subject to such termination not otherwise being
a Permitted Acceleration Event) or resigns for “Good Reason” a number of restricted shares shall vest, if such termination
occurs prior to the Determination Date, on the Determination Date, in an amount equal to the product of (x) the number of restricted
shares that would otherwise vest in accordance with the applicable performance conditions, if any, and (y) a fraction, the numerator
of which shall be the number of full months of service completed by the executive officer from January 1, 2020 through the termination
date, and the denominator of which shall be 36. The “Determination Date” is the date the Company achieves the performance
thresholds set forth in the award, as determined by the Compensation Committee on or prior to March 1, 2021.
2016 Stock Incentive Plan. The
following conditions shall be referred to as the “2016 CIC and Termination Provisions” and shall be applicable with
respect to the 2020 LTIP Equity Incentive Awards issued to each of the NEOs on November 4, 2019:
In the event of (i) the death or disability
of the executive officer, (ii) termination of the executive officer’s employment without “Cause” or by the executive
officer for “Good Reason” within one year following a Change in Control (as defined in the Company’s 2016 Stock
Incentive Plan), or (iii) a Change in Control in which the Company’s Class A shares are no longer outstanding and publicly
traded immediately following such transaction, 100% of the award shall vest. In the event that the executive officer is terminated
without “Cause” (subject to such termination not otherwise being a Permitted Acceleration Event) or resigns for “Good
Reason” a number of restricted shares shall vest, if such termination occurs prior to the Determination Date, on the Determination
Date, in an amount equal to the product of (x) the number of restricted shares that would otherwise vest in accordance with the
applicable performance conditions, if any, and (y) a fraction, the numerator of which shall be the number of full months of service
completed by the executive officer from January 1, 2020 through the termination date, and the denominator of which shall be 36.
The “Determination Date” is the date the Company achieves the performance thresholds set forth in the award, as determined
by the Compensation Committee on or prior to March 1, 2021.
2020 Cash LTIP Awards. The
following conditions shall be referred to as the “2020 Cash LTIP Provisions”:
The 2020 Cash LTIP Award would vest upon
(i) the death or disability of the executive officer or (ii) termination of the executive officer’s employment without “Cause”
or with “Good Reason” based on the actual performance for the performance period, with the amount of the earned performance-based
award (if any) based on a fraction, the numerator of which shall be the number of full months of service completed by the executive
officer from January 1, 2020 through the termination date, the denominator of which is 36. Upon a Change in Control (as defined
in the Company’s 2014 Long-Term Cash Incentive Compensation Plan) prior to December 31, 2022, the performance-based award
will vest in full, with the amount payable determined by using an EBITDA performance multiplier equal to the greater of (a) one
(1) and (b) the EBITDA performance multiplier calculated in accordance with the terms of the 2020 Cash LTIP award; provided, however,
that if the price per share paid in such Change in Control is equal to or greater than 175% of the average closing trading price
of one of the Company’s Class A shares during the twenty (20) days preceding the grant date, then the EBITDA performance
multiplier shall be two (2).
Mark Penn
Pursuant to his employment agreement, if
MDC terminates Mr. Penn’s employment without “Cause,” or Mr. Penn terminates his employment for “Good Reason”
(as defined in his employment agreement), then MDC is required to pay Mr. Penn a lump sum severance payment within 60 days of the
date of termination equal to the product of 1.5 times the sum of (i) his then-current base salary plus (ii) the amount
of his annual discretionary bonus paid in respect of the year immediately prior to the applicable date of termination. Mr. Penn
will also be entitled to a pro-rata portion of his annual discretionary bonus for the year of termination based on actual performance.
If Mr. Penn’s employment had terminated under these circumstances on December 31, 2019, the aggregate cash payment due to
him under the agreement would have been $1,125,000.
As of December 31, 2019, Mr. Penn had 1,500,000
SARs that would vest upon (i) his death or disability, (ii) termination of his employment without “Cause” or with “Good
Reason,” or (iii) a Change in Control (as defined in the Company’s 2016 Stock Incentive Plan). In the event of termination
of Mr. Penn’s employment by MDC without “Cause,” or by Mr. Penn for “Good Reason” as of December
31, 2019, a total of 1,500,000 SARs would fully vest, and the value of such SARs would be $885,000.
As of December 31, 2019, Mr. Penn had 577,500
restricted shares under the Company’s 2011 Stock Incentive Plan, with a fair value equal to $1,605,450. Pursuant to the 2011
CIC and Termination Provisions, in the event of termination of Mr. Penn’s employment by MDC without “Cause” (subject
to such termination not otherwise being a Permitted Acceleration Event) or by Mr. Penn for “Good Reason” as of December
31, 2019, none of the restricted shares under this award would vest.
Finally, as of December 31, 2019, Mr. Penn
had a 2020 Cash LTIP Award in the amount of $1,155,000. According to the 2020 Cash LTIP Provisions, if Mr. Penn had been terminated
under such circumstances as of December 31, 2019, no payment would be due. As of December 31, 2019, pursuant to the 2020 Cash LTIP
Provisions, the amount that would have been paid to Mr. Penn under this award upon a Change in Control would be $1,155,000.
Frank Lanuto
Pursuant to his employment agreement, if
MDC terminates Mr. Lanuto’s employment without “Cause,” or Mr. Lanuto terminates his employment for “Good
Reason” (as defined in his employment agreement), then MDC is required to pay Mr. Lanuto a lump sum severance payment within
60 days of the date of termination equal to six (6) months’ base salary. If Mr. Lanuto’s employment had terminated
under these circumstances on December 31, 2019, the aggregate cash payment due to him under the agreement would have been $225,000.
If Mr. Lanuto’s employment is terminated
within one year following the closing of a change in control by the company without “Cause,” or by Mr. Lanuto for “Good
Reason,” then MDC is required to pay Mr. Lanuto a lump sum severance payment within 60 days of the date of termination equal
to nine (9) months’ base salary. If Mr. Lanuto’s employment had terminated under these circumstances on December 31,
2019, the aggregate cash payment due to him under the agreement would have been $337,500.
As of December 31, 2019, Mr. Lanuto had
450,000 SARs that would vest upon termination of employment by the company without “Cause,” or by Mr. Lanuto for “Good
Reason,” or a Change in Control (as defined in the Company’s 2016 Stock Incentive Plan). Based on the closing price
of the Company’s Class A shares as of December 31, 2019, this award would have had no value.
As of December 31, 2019, Mr. Lanuto had
99,000 restricted shares under the Company’s 2016 Stock Incentive Plan, with a fair value equal to $275,220. Pursuant to
the 2016 CIC and Termination Provisions, in the event of termination of Mr. Lanuto’s employment by MDC without “Cause”
(subject to such termination not otherwise being a Permitted Acceleration Event) or by Mr. Lanuto for “Good Reason”
as of December 31, 2019, none of the restricted shares under this award would vest.
Finally, as of December 31, 2019, Mr. Lanuto
had a 2020 Cash LTIP Award in the amount of $198,000. According to the 2020 Cash LTIP Provisions, if Mr. Lanuto had been terminated
as of December 31, 2019, no payment would be due. As of December 31, 2019, pursuant to the 2020 Cash LTIP Provisions, the amount
that would have been paid to Mr. Lanuto under this award upon a Change in Control would be $198,000.
Jonathan Mirsky
Pursuant to his employment agreement, if
MDC terminates Mr. Mirsky’s employment without “Cause,” or Mr. Mirsky terminates his employment for “Good
Reason” (as defined in his employment agreement), then MDC is required to pay Mr. Mirsky a lump sum severance payment within
60 days of the date of termination equal to six (6) months’ base salary. If Mr. Mirsky’s employment had terminated
under these circumstances on December 31, 2019, the aggregate cash payment due to him under the agreement would have been $275,000.
If Mr. Mirsky’s employment is terminated
within one year following the closing of a Change in Control by the company without “Cause,” or by Mr. Mirsky for “Good
Reason,” then MDC is required to pay Mr. Mirsky a lump sum severance payment within 60 days of the date of termination equal
to nine (9) months’ base salary. If Mr. Mirsky’s employment had terminated under these circumstances on December 31,
2019, the aggregate cash payment due to him under the agreement would have been $412,500.
As of December 31, 2019, under his inducement
awards, Mr. Mirsky had 250,000 restricted shares and 250,000 SARs that would vest upon (i) his death or disability, (ii) termination
of his employment without “Cause” or with “Good Reason,” or (iii) a Change in Control (as defined in the
Company’s 2016 Stock Incentive Plan). In the event of termination of Mr. Mirsky’s employment by MDC without “Cause,”
or by Mr. Mirsky for “Good Reason” as of December 31, 2019, a total of 250,000 restricted shares and 250,000
SARs would fully vest, with a fair value equal to $695,000.
As of December 31, 2019, Mr. Mirsky also
had 121,000 restricted shares under the Company’s 2016 Stock Incentive Plan, with a fair value equal to $336,380. Pursuant
to the 2016 CIC and Termination Provisions, in the event of termination of Mr. Mirsky’s employment by MDC without “Cause”
(subject to such termination not otherwise being a Permitted Acceleration Event) or by Mr. Mirsky for “Good Reason”
as of December 31, 2019, none of the restricted shares would vest under this award.
Finally, as of December 31, 2019, Mr. Mirsky
had a 2020 Cash LTIP Award in the amount of $242,000. According to the 2020 Cash LTIP Provisions, if Mr. Mirsky had been terminated
as of December 31, 2019, no payment would be due. As of December 31, 2019, pursuant to the 2020 Cash LTIP Provisions, the amount
that would have been paid to Mr. Mirsky under this award upon a Change in Control would be $242,000.
David Ross
Pursuant to his employment agreement, if
MDC terminates Mr. Ross’s employment without “cause,” or Mr. Ross terminates his employment for “good reason,”
then MDC is required to pay Mr. Ross a severance payment within 10 days of the date of termination of one (1) times Mr. Ross’s
total remuneration. Total remuneration means the sum of his then-current base salary plus the highest annual discretionary cash
bonus he earned in the three years ending December 31 of the year immediately preceding the date of termination. He will also be
eligible to receive a pro-rata portion of his annual discretionary cash bonus for the year in which his employment terminates.
If Mr. Ross’s employment had terminated under these circumstances on December 31, 2019, the aggregate cash payment due to
him under the agreement would have been $1,000,000.
Furthermore, Mr. Ross will also be allowed
to continue participating for one year after termination on the same basis as before he was terminated in all benefit plans and,
to the extent permitted under law, also in all retirement plans, provided, however, that if Mr. Ross becomes entitled to receive
coverage and benefits in the same type of plan from another employer, he will no longer be able to participate in these benefit
and retirement plans. MDC will be obligated to pay Mr. Ross the economic equivalent of the benefits in these plans if he is unable
to participate in the plans. The aggregate amount of this benefit would have been approximately $21,006 if Mr. Ross’s employment
had terminated as of December 31, 2019.
If Mr. Ross’s employment is terminated
by the Company without cause, or by Mr. Ross for good reason, within one year following the closing of a change in control, then
Mr. Ross will be entitled to a payment of two (2) times his total remuneration. He will also be eligible to receive a pro-rata
portion of his annual discretionary cash bonus for the year in which his employment terminates. If there had been a change in control
of MDC Partners on December 31, 2019 and Mr. Ross’s employment terminated in connection with that change in control, the
aggregate cash severance payment MDC would have paid him under the contract would be $2,000,000. Furthermore, Mr. Ross will also
be allowed to continue participating for one year after termination on the same basis as before he was terminated in all benefit
plans. MDC will be obligated to pay Mr. Ross the economic equivalent of the benefits in these plans if he is unable to participate
in the plans. The aggregate amount of this benefit would have been approximately $21,006 if Mr. Ross’s employment had terminated
as of December 31, 2019.
As of December 31, 2019, Mr. Ross had 43,000
SARs that would vest upon (i) termination of his employment without “Cause” or with “Good Reason,” or (ii)
a Change in Control (as defined in the Company’s 2011 Stock Incentive Plan). In the event of termination of Mr. Ross’s
employment by MDC without “Cause,” or by Mr. Ross for “Good Reason” as of December 31, 2019, a total of
43,000 SARs would fully vest. Based on the closing price of the Company’s Class A shares on that date, this award had no
value.
As of December 31, 2019, Mr. Ross also
had 200,000 restricted shares granted on November 4, 2019 that would vest in the event of (i) his death or disability, (ii) termination
of his employment without “Cause” or by Mr. Ross for “Good Reason” within one year following a Change in
Control (as defined in the Company’s 2011 Stock Incentive Plan), or (iii) a Change in Control in which the Company’s
Class A shares are no longer outstanding and publicly traded immediately following such transaction, with a fair value equal to
$556,000. In the event that Mr. Ross is terminated without “Cause” (subject to such termination not otherwise being
a Permitted Acceleration Event) or resigns for “Good Reason” a number of restricted shares shall vest, if such termination
occurs prior to the Determination Date, on the Determination Date, in an amount equal to the product of (x) the number of restricted
shares that would otherwise vest in accordance with the applicable performance conditions, if any, and (y) a fraction, the numerator
of which shall be the number of full months of service completed by Mr. Ross from January 1, 2020 through the termination date,
and the denominator of which shall be 36. The “Determination Date” is the date the Company achieves the performance
thresholds set forth in the award, as determined by the Compensation Committee on or prior to March 1, 2021. Accordingly, in the
event of termination of Mr. Ross’s employment by MDC without “Cause” (subject to such termination not otherwise
being a Permitted Acceleration Event) or by Mr. Ross for “Good Reason” as of December 31, 2019, none of the restricted
shares under this award would vest.
As of December 31, 2019, Mr. Ross had 26,738
restricted shares awarded in February 2018 that that would vest in the event of (i) his death, (ii) termination of his employment
without “Cause” or by Mr. Ross for “Good Reason” within one year following a Change in Control (as defined
in the Company’s 2016 Stock Incentive Plan), or (iii) a Change in Control in which the Company’s Class A shares are
no longer outstanding and publicly traded immediately following such transaction, with a fair value equal to $74,332. In the event
that Mr. Ross (i) is terminated by the Company without “Cause” or resigns for “Good Reason”, the number
of restricted shares that shall vest on any “Vesting Date” is the product of (a) the number of restricted shares that
would otherwise vest in accordance with the applicable performance conditions, if any, and (b) a fraction, the numerator of which
shall be the number of full months of service completed by Mr. Ross prior to his termination without “Cause” or resignation
for “Good Reason,” as applicable and after the Grant Date, and the denominator of which shall be the number of months
within the performance period commencing on January 1, 2018 and ending on December 31, 2020. The “Vesting Date” is
the date that the Company achieves the minimum EBITDA threshold, as determined by the Compensation Committee on or prior to March
1, 2021. In the event of the termination of Mr. Ross’s employment by the Company without “Cause” or his resignation
for “Good Reason” as of December 31, 2019, none of the restricted shares under this award would vest.
As of December 31, 2019, Mr. Ross also
had 70,000 restricted shares awarded in January 2017 that would vest in the event of (i) his death, (ii) termination of his employment
without “Cause” or by Mr. Ross for “Good Reason” within one year following a Change in Control (as defined
in the Company’s 2016 Stock Incentive Plan), or (iii) a Change in Control in which the Company’s Class A shares are
no longer outstanding and publicly traded immediately following such transaction, with a fair value equal to $194,600. In the event
that Mr. Ross (i) is terminated by the Company without “Cause” or resigns for “Good Reason”, the number
of restricted shares that shall vest on any “Vesting Date” is the product of (a) the number of restricted shares that
would otherwise vest in accordance with the applicable performance conditions, if any, and (b) a fraction, the numerator of which
shall be the number of full months of service completed by Mr. Ross prior to his termination without “Cause” or resignation
for “Good Reason,” as applicable and after the Grant Date, and the denominator of which shall be the number of months
within the performance period commencing on January 1, 2017 and ending on December 31, 2019. The “Vesting Date” is
the date that the Company achieves the minimum EBITDA threshold, as determined by the Compensation Committee on or prior to March
1, 2020. In the event of the termination of Mr. Ross’s employment by the Company without “Cause” or his resignation
for “Good Reason” as of December 31, 2019, a total of 52,500 restricted shares under this award would fully vest, with
a fair value equal to $145,950. (52,500 shares of Mr. Ross’s grant of 70,000 shares vested on February 26, 2020 based on
achievement of at least 90% (but less than 100%) of the minimum cumulative 3-year EBITDA target for the performance period ended
December 31, 2019. The remaining award shares were forfeited.)
Additionally, as of December 31, 2019,
Mr. Ross had 137,500 restricted shares granted in June 2019 that would vest upon (i) his death or disability, (ii) termination
of his employment without “Cause” or with “Good Reason,” or (iii) a Change in Control (as defined in the
Company’s 2016 Stock Incentive Plan), with a fair value equal to $382,250. (68,750 shares of Mr. Ross’s grant of 137,500
shares vested on February 26, 2020, based on achievement of the 2019 EBITDA target. The remaining award shares will vest if the
Company achieves the minimum EBITDA threshold for the performance period commencing January 1, 2019 and ending December 31, 2020,
as determined by the Compensation Committee on or prior to March 1, 2021.)
As of December 31, 2019, Mr. Ross also
had a 2020 Cash LTIP Award in the amount of $400,000. According to the 2020 Cash LTIP Provisions, if Mr. Ross had been terminated
as of December 31, 2019, no payment would be due. As of December 31, 2019, pursuant to the 2020 Cash LTIP Provisions, the amount
that would have been paid to Mr. Ross under this award upon a Change in Control would be $400,000.
Finally, Mr. Ross has a 2018 LTIP cash
award comprised of a $125,000 EBITDA performance-based award and a $125,000 total shareholder return (“TSR”) performance-based
award. Upon termination of his employment without “Cause” or with “Good Reason,” these awards would pro
rata vest based on actual performance up to and including the last day of the completed fiscal year immediately preceding such
termination. Accordingly, if Mr. Ross had been terminated under such circumstances as of December 31, 2019, no payment would be
due. Upon a Change in Control (as defined in the 2014 Long-Term Cash Incentive Plan), (i) the EBITDA performance-based award will
vest, with the amount payable determined using the greater of (a) an EBITDA performance multiplier of one (1) and (b) the EBITDA
performance multiplier that would apply based on actual cumulative EBITDA for the period ended as of the Change in Control; and
(ii) the TSR performance-based award will vest, with an amount payable determined using the greater of (x) a TSR performance multiplier
of one (1) and (y) the TSR performance multiplier that would apply based on the Company’s relative TSR determined by using
the price per share paid in such Change in Control and comparing it to the average Trading Price of the companies in the peer group
for the twenty (20) trading days preceding such Change in Control; provided that if the price per share paid in such Change in
Control is equal to or greater than 150% of the average trading price of a Class A share during such twenty (20) day period, the
TSR performance multiplier will be three (3). As of December 31, 2019, the amount that would have been paid to Mr. Ross under this
award upon a Change in Control would be $250,000.
David Doft
On May 9, 2019, the Company entered into
a Separation Agreement with Mr. Doft, the Company’s former Executive Vice President and Chief Financial Officer. Mr. Doft
resigned from his position as Executive Vice President and Chief Financial Officer of the Company on August 7, 2019. In accordance
with the terms of the Separation Agreement, Mr. Doft was entitled to receive, subject to his execution and non-revocation of a
customary release of claims, (i) a cash payment of $650,000 pursuant to his retention bonus letter agreement dated December 21,
2018, (ii) a cash separation payment equal to $1,655,000 pursuant to his employment agreement, and (iii) continued participation
in the Company’s health benefit plans for a period of up to one year following his termination date. In addition, effective
on the Termination Date, all of Mr. Doft’s unvested and outstanding restricted shares of MDC Class A stock previously granted
to him by MDC were deemed fully vested and Mr. Doft remained eligible to receive a cash payment pursuant to the terms and conditions
of his LTIP Award Agreement dated as of February 23, 2018.
Mitchell Gendel
On May 6, 2019, the Company entered into
a Separation Agreement with Mr. Gendel, the Company’s former Executive Vice President and General Counsel. Mr. Gendel resigned
from his position as Executive Vice President and General Counsel of the Company on August 7, 2019. In accordance with the terms
of the Separation Agreement, Mr. Gendel was entitled to receive, subject to his execution and non-revocation of a customary release
of claims, (i) a cash payment of $650,000 pursuant to his retention bonus letter agreement dated December 21, 2018, (ii) a cash
separation payment equal to $1,550,000 pursuant to his employment agreement, and (iii) continued participation in the Company’s
health benefit plans for a period of up to one year following his termination date. In addition, effective on the Termination Date,
all of Mr. Gendel’s unvested and outstanding restricted shares of MDC Class A stock previously granted to him by MDC were
deemed fully vested and Mr. Gendel remained eligible to receive a cash payment pursuant to the terms and conditions of his LTIP
Award Agreement dated as of February 23, 2018.
Compensation of Directors
The Compensation
Committee is responsible for evaluating and recommending compensation programs for the Company’s non-employee directors to
the Board for approval. In April 2019, the Compensation Committee approved a one-time cash award in lieu of the annual award of
restricted stock that has been customarily granted to non-employee directors in the past. The grant of any annual stock award had
been deferred during the pendency of the Company’s strategic review process, which culminated in the Stagwell investment
and Mr. Penn becoming Chairman and CEO of the Company in March 2019. The Compensation Committee ultimately determined, on a one-time
basis, to award the non-employee directors (other than Brad Gross) cash rather than stock due to the perceived dislocation of the
Company’s stock price at the time, as well as to preserve availability under then-existing equity incentive plans to facilitate
Mr. Penn’s rebuilding of the Company’s management team as described in more detail herein. The Compensation Committee
intends to reevaluate the form of this award in 2020.
The elements of compensation paid to the Company’s non-employee
directors in fiscal year 2019 were as follows:
|
·
|
an annual cash retainer of $70,000;
|
|
·
|
a meeting fee of $2,000 for each Board or committee meeting attended (limited to two meetings per day); and
|
|
·
|
a one-time cash award of $100,000.
|
The Company pays additional fees for certain positions held
by a director as follows:
|
o
|
$75,000 for the Presiding Director;
|
|
o
|
$20,000 for the Audit Committee Chair;
|
|
o
|
$5,000 for the Audit Committee financial expert; and
|
|
o
|
$15,000 for other Committee Chairs.
|
In 2019, Mr. Penn was not entitled to receive any separate or
additional compensation in connection with his services on the Board. Mr. Gross also did not receive any compensation for his services
on the Board, in accordance with the terms of the purchase agreement with Goldman Sachs.
The following table sets forth
the compensation paid to or earned during fiscal year 2019 by our non-management directors:
DIRECTOR COMPENSATION
FOR FISCAL YEAR 2019
Non-Management Director
|
|
Fees Earned or Paid in Cash
($)
|
|
|
Stock Awards
($)
|
|
|
Option Awards
($)
|
|
|
All Other Compensation
($)
|
|
|
Total
($)
|
|
Charlene Barshefsky
|
|
|
134,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
134,500
|
(1)
|
Clare R. Copeland
|
|
|
161,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
161,000
|
(2)
|
Daniel S. Goldberg
|
|
|
212,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
212,000
|
(3)
|
Bradley J. Gross
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0
|
|
Scott Kauffman
|
|
|
151,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
151,000
|
(4)
|
Lawrence S. Kramer
|
|
|
186,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
186,500
|
(5)
|
Anne Marie O’Donovan
|
|
|
265,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
265,000
|
|
Kristen O’Hara
|
|
|
123,333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
123,333
|
(6)
|
Wade Oosterman
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
(7)
|
Desirée Rogers
|
|
|
233,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
233,500
|
|
Irwin D. Simon
|
|
|
352,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
352,000
|
|
__________________
|
(1)
|
Ms. Barshefsky was appointed to the Board on April 8, 2019 and thus received a prorated annual cash retainer. Ms. Barshefsky
received a one-time cash award of $50,000 rather than $100,000.
|
|
(2)
|
Mr. Copeland did not stand for re-election at our 2019 Annual Meeting and thus received a prorated annual cash retainer. Mr.
Copeland also received a one-time cash award of $100,000.
|
|
(3)
|
Mr. Goldberg resigned from the Board on January 21, 2020. In 2019, Mr. Goldberg received his annual cash retainer, in full,
as well as a one-time cash award of $100,000.
|
|
(4)
|
Mr. Kauffman did not stand for re-election at our 2019 Annual Meeting and thus received a prorated annual cash retainer. Mr.
Kauffman also received a one-time cash award of $100,000.
|
|
(5)
|
Mr. Kramer did not stand for re-election at our 2019 Annual Meeting and thus received a prorated annual cash retainer. Mr.
Kramer also received a one-time cash award of $100,000.
|
|
(6)
|
Ms. O’Hara was elected to the Board at our 2019 Annual Meeting and thus received a prorated annual cash retainer. Ms.
O’Hara received a one-time cash award of $58,333 rather than $100,000.
|
|
(7)
|
Mr. Oosterman was appointed to the Board on January 23, 2020 and was not paid any compensation in 2019.
|
No equity awards were granted to our non-employee
directors in 2019. The aggregate number of restricted shares or restricted stock units outstanding as of December 31, 2019 for
our non-employee directors was as follows: 0 shares for Ms. Barshefsky; 0 shares for Mr. Copeland; 26,990 restricted stock units
for Mr. Goldberg; 0 shares for Mr. Gross; 0 shares for Mr. Kramer; 26,990 restricted stock units for Ms. O’Donovan; 0 shares
for Ms. O’Hara; 9,990 shares for Ms. Rogers; 26,990 shares for Mr. Simon; and 428,342 shares for Mr. Kauffman. Mr. Kauffman
is a former chief executive officer of the Company; the vesting terms for the 428,342 shares of restricted stock held by him as
of December 31, 2019, are governed by that certain Succession Agreement between the Company and Mr. Kauffman, which was filed
as Exhibit 10.1 to the Current Report on Form 8-K filed on September 12, 2018.
Compensation Committee Interlocks and
Insider Participation
Desiree Rogers, Bradley J. Gross, Kristen O’Hara and Irwin
Simon served on the Compensation Committee of the Board of Directors during 2019. Larry Kramer and Clare Copeland also served on
the Compensation Committee during 2019, but did not stand for re-election at the Company’s 2019 Annual Meeting of Shareholders.
None of the persons who served on the Compensation Committee at the time of such service are, or have been, an employee or officer
of the Company or had any relationship requiring disclosure under Item 404 of Regulation S-K. In addition, none of the Company’s
executive officers serves, or has served during the last completed fiscal year, as a member of the board of directors or compensation
committee of any other entity that has or has had one or more of its executive officers serving as a member of the Company’s
Board of Directors.