program for key employees, as they help link compensation with long-term shareholder value creation and reward participants based on service and/or performance.
As of March 2, 2020, only 735 Common Shares remained available for issuance under the 2014 Plan. If the 2020 Plan is not approved, we may be compelled to increase
significantly the cash component of our employee and director compensation. This approach may not necessarily align employee and director compensation interests with the investment interests of our shareholders. Replacing equity awards with cash
also would increase cash compensation expense and use cash that could be better utilized if reinvested in our business or returned to our shareholders.
The
following includes aggregated information regarding our view of the overhang and dilution associated with the Predecessor Plan and the potential dilution associated with the 2020 Plan. This information is as of March 2, 2020. As of that date,
there were approximately 44,938,082 Common Shares outstanding.
Common Shares subject to outstanding awards and available for future awards under the 2014 Plan:
Total Common Shares subject to outstanding awards (stock options, time-based RSUs, deferred shares and performance-based RSUs assuming maximum
performance): 4,864,689 shares (approximately 10.83% of our outstanding Common Shares)
Total Common Shares available for future awards under the
2014 Plan: 735 shares (approximately 0.00% of our outstanding Common Shares) (however, as noted above, no further grants will be made under the 2014 Plan upon the effective date of the 2020 Plan)
In summary, the total number of Common Shares subject to outstanding awards (4,864,689 shares), plus the total number of Common Shares available for
future awards under the 2014 Plan (735 shares), represents a current overhang percentage of 9.76% (in other words, the potential dilution of our shareholders represented by the Predecessor Plan).
Proposed Common Shares available for awards under the 2020 Plan:
2,000,000 new shares (approximately 4.45% of our outstanding Common Shares, which percentage reflects the simple dilution of our shareholders that would
occur if the 2020 Plan is approved), subject to adjustment, including under the share counting rules of the 2020 Plan.
The total Common Shares subject to
outstanding awards as of March 2, 2020 (4,864,689 shares), plus the proposed Common Shares available for future awards under the 2020 Plan (up to 2,000,000 shares), represent a total overhang of 6,864,689 shares (13.25%) under the 2020
Plan.
Based on the closing price on the NYSE for our Common Shares on March 2, 2020 of $5.26 per share, the aggregate market value as of March 2, 2020 of
the up to 2,000,000 Common Shares requested under the 2020 Plan was $10,520,000.
In fiscal years 2017, 2018, and 2019, we granted awards (including stock
options, restricted stock units, performance-based restricted stock units and deferred shares) under the 2014 Plan covering 676,940 shares, 746,606 shares, and 1,090,838 shares, respectively. Based on our basic weighted average Common Shares
outstanding for those three fiscal years of 44,445,747, 44,584,668, and 44,820,153, respectively, for the three-fiscal-year period 2017-2019, our average burn rate, not taking into account forfeitures, was
1.88%. (Our individual years burn rates were 1.52% for fiscal 2017, 1.67% for fiscal 2018 and 2.43% for fiscal 2019.)
In determining the number of shares to
request for approval under the 2020 Plan, our management team worked with the Compensation Committee to evaluate a number of factors, including our recent share usage and criteria expected to be utilized by institutional proxy advisory firms in
evaluating our proposal for the 2020 Plan.
If the 2020 Plan is approved, we intend to utilize the shares authorized under the 2020 Plan to continue our practice of
incentivizing key individuals through equity grants. We currently anticipate that the shares requested in connection with the approval of the 2020 Plan will last for about two years, based on our historic grant rates, new hiring and the
approximate current share price, but could last for a different period of time if actual practice does not match recent rates or our share price changes materially. As noted below, our Compensation Committee retains full discretion under the 2020
Plan to determine the number and amount of awards to be granted under the 2020 Plan, subject to the terms of the 2020 Plan. Future benefits that may be received by participants under the 2020 Plan are not determinable at this time.
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