Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
(e)
On August 30, 2017, following approval by the Compensation Committee (the
Committee
) of the Board of Directors (the
Board
) of Regional Management Corp. (the
Company
), the Company entered into employment agreements (each, an
Agreement
, and collectively, the
Agreements
) with each of Donald
E. Thomas, the Companys Executive Vice President and Chief Financial Officer; Daniel J. Taggart, the Companys Senior Vice President and Chief Risk Officer; and Brian J. Fisher, the Companys Vice President, General Counsel, and
Secretary (each such individual, an
Executive
, and collectively, the
Executives
). The Agreements replace the Executives existing offer letters with the Company. Each Agreement became effective as of
August 30, 2017 (the
Effective Date
), and has a term of three years from the Effective Date (the
Employment Term
). In addition, the Company entered into a First Amendment to Employment Agreement, dated as
of August 30, 2017, with Peter R. Knitzer (the
Knitzer Amendment
), and a First Amendment to Employment Agreement, dated as of August 30, 2017, with John D. Schachtel (the
Schachtel Amendment
and,
together with the Knitzer Amendment, the
Amendments
). The Amendments are effective as of August 30, 2017. The following summary of the Agreements and the Amendments is not complete and is qualified in its entirety by
reference to the full text of such agreements and amendments, copies of which are attached as Exhibit 10.1 through Exhibit 10.5 to this Current Report on Form
8-K
and incorporated herein by reference.
Employment Agreements
Mr. Thomas Agreement provides for, among other things, (1) a base salary of $342,000 per year; (2) the opportunity to earn
an annual bonus award under the Companys Annual Incentive Plan based upon the achievement of performance targets established by the Committee (a
Cash Incentive Opportunity
), with a target bonus opportunity equal to no less
than 100% of his base salary; and (3) the opportunity to earn long-term incentive, equity, and/or equity-based awards (an
Equity Incentive Opportunity
) under the Companys 2015 Long-Term Incentive Plan, or any successor
plan (the
Stock Plan
), in the sole discretion of the Board or the Committee. Commencing in 2018, and for the remainder of the Employment Term, Mr. Thomas will be eligible to receive an annual base salary, Cash Incentive
Opportunity, and Equity Incentive Opportunity totaling in the aggregate at least $1,197,000 (subject, in each case, to the achievement of any performance or service criteria established by the Committee in its discretion, as described below). In
addition, in order to provide Mr. Thomas with post-termination exercise benefits with respect to certain nonqualified stock options awarded to him under the Companys 2011 Stock Incentive Plan that are similar to the post-termination
exercise benefits granted to the Companys other executives in the event of certain qualifying terminations, Mr. Thomas Agreement provides that certain of Mr. Thomas stock option award agreements shall be amended in order
to extend the expiration of the post-termination exercise period for any vested and exercisable options to the earlier of (i) the fifth anniversary of Mr. Thomas termination date, and (ii) the tenth anniversary of the applicable
award grant date, in the event that Mr. Thomas employment is terminated for any reason other than by the Company for cause (as defined in the applicable stock option award agreement).
Mr. Taggarts Agreement provides for, among other things, (1) a base salary of $318,000 per year; (2) a Cash Incentive
Opportunity, with a target bonus opportunity equal to no less than 100% of his base salary; and (3) an Equity Incentive Opportunity under the Stock Plan, in the sole discretion of the Board or the Committee. Commencing in 2018, and for the
remainder of the Employment Term, Mr. Taggart will be eligible to receive an annual base salary, Cash Incentive Opportunity, and Equity Incentive Opportunity totaling in the aggregate at least $954,000 (subject, in each case, to the achievement
of any performance or service criteria established by the Committee in its discretion, as described below).
Mr. Fishers
Agreement provides for, among other things, (1) a base salary of $240,000 per year; (2) a Cash Incentive Opportunity, with a target bonus opportunity equal to no less than 100% of his base salary; and (3) an Equity Incentive
Opportunity under the Stock Plan, in the sole discretion of the Board or the Committee. Commencing in 2018, and for the remainder of the Employment Term, Mr. Fisher will be eligible to receive an annual base salary, Cash Incentive Opportunity,
and Equity Incentive Opportunity totaling in the aggregate at least $720,000 (subject, in each case, to the achievement of any performance or service criteria established by the Committee in its discretion, as described below).
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Pursuant to the Agreements, the Committee has discretion to adjust base salaries, determine
allocations between Cash Incentive Opportunities and Equity Incentive Opportunities, establish performance and/or multi-year service criteria, and determine if and to the extent any incentive compensation is earned and payable based on the
attainment of performance criteria and other terms and conditions established by the Committee, and further subject to the terms and conditions of the applicable Company incentive plan and related award agreements (including, if applicable under any
such plan or award agreement, multi-year vesting).
The Company will also provide the Executives with benefits generally available to its
other employees, which may include medical and retirement plans, in addition to the use of a mobile phone and reasonable travel expenses.
If an Executives employment is terminated by the Company without cause, by the Executive as a result of good
reason, or due to the Executives disability (each as defined in the applicable Agreement), such Executive will be entitled to receive: (1) accrued but unpaid salary through his termination date; (2) an amount equal
to his salary in effect on the termination date, payable over a period of 12 months following his termination date; (3) an amount equal to his average bonus (as defined in the applicable Agreement) determined as of the termination
date, payable over a period of 12 months following his termination date; (4) the
pro-rata
portion of any bonus for the year in which termination occurs, to the extent earned, plus, if his termination
occurs after
year-end
but before the bonus for the preceding year is paid, the bonus for the preceding year; (5) reimbursement of COBRA premiums for continuation coverage under the Companys group
medical plan for 12 months following his termination date, so long as he is not entitled to obtain insurance from a subsequent employer; (6) reasonable outplacement service expenses for 12 months following his termination date, which shall not
exceed $25,000; and (7) reimbursement of expenses incurred prior to termination. If an Executives employment is terminated by the Company without cause or by an Executive as a result of good reason, and such
termination occurs within six months before or one year after the effective date of a change of control (as defined in the applicable Agreement), then the amounts described in clauses (2) and (3) of the foregoing sentence shall be
increased by a factor of 100% (for a total of two times salary and average bonus).
The amounts that an Executive will be entitled to
receive in the event that his employment terminates due to disability will be reduced by the amount of any disability benefits paid to such Executive pursuant to any disability insurance, plan, or policy provided by the Company to or for the benefit
of such Executive. If any disability benefits paid to an Executive pursuant to any disability insurance, plan, or policy provided by the Company are not subject to local, state, or federal taxation, then the Companys severance obligations in
the event of termination due to such Executives disability will be reduced by an amount equal to the gross taxable amount that the Company would have been required to pay in order to yield the net,
after-tax
benefit that such Executive actually received pursuant to such disability insurance, plan, or policy.
If an Executives employment terminates due to his death, such Executive, his designated beneficiary, or his estate, as applicable, will
be entitled to receive: (1) accrued but unpaid salary prior to his death; (2) reimbursement of expenses incurred prior to his death; and (3) the
pro-rata
portion of any bonus for the year in
which his death occurs, to the extent earned, plus, if his death occurs after
year-end
but before the bonus for the preceding year is paid, the bonus for the preceding year. If the Company terminates an
Executives employment with cause or if an Executive voluntarily terminates his employment, he is entitled only to accrued but unpaid salary and expense reimbursements through his termination date. In the case of voluntary
termination of employment, if termination occurs after
year-end
but before the bonus for the preceding year is paid, the Executive is also entitled to payment of the bonus for the preceding year.
An Executives receipt of severance benefits will be subject to the Executives execution of a release of claims in a form
substantially similar to the form of release attached to the Agreement and within the time period specified in the Agreement.
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Each Executive is also subject to various restrictive covenants, and his entitlement to certain
benefits is contingent upon his compliance with such covenants. Specifically, each Executive is subject to a covenant not to disclose the Companys confidential information during his employment and at all times thereafter, a covenant not to
compete during his employment and for a period of one year following his termination of employment, a covenant not to solicit competitive business services through or from loan sources (each as defined in the Agreement)
during his employment and for a period of one year following his termination of employment, a covenant not to solicit or hire Company employees during his employment and for a period of one year following his termination of employment, and a
non-disparagement
covenant effective during the employment term and at all times thereafter. Each Executives covenant not to compete is limited to an area within twenty-five miles of any Company branch or
other office.
In addition, each Executive shall abide by any equity retention policy, compensation recovery policy, stock ownership
guidelines, or other similar policies maintained by the Company.
Amendments to Employment Agreements
Each of the Knitzer Amendment and the Schachtel Amendment allows the Company, at its option, to provide Mr. Knitzer and
Mr. Schachtel, respectively, with the opportunity to elect to include the amount of any disability insurance premiums paid by the Company pursuant to any disability insurance, plan, or policy as taxable income to Mr. Knitzer or
Mr. Schachtel, respectively. If Mr. Knitzer or Mr. Schachtel elects to include such amount in his taxable income, the applicable Amendment provides that the Company shall reimburse Mr. Knitzer or Mr. Schachtel, as
applicable, for all applicable federal, state, and local income and payroll taxes paid by him resulting from such election. The Knitzer Amendment clarifies that if any disability benefits paid to Mr. Knitzer pursuant to any disability
insurance, plan, or policy provided by the Company are not subject to local, state, or federal taxation, then the Companys severance obligations in the event of termination due to Mr. Knitzers disability will be reduced by an amount
equal to the gross taxable amount that the Company would have been required to pay in order to yield the net,
after-tax
benefit that Mr. Knitzer actually received pursuant to such disability insurance,
plan, or policy.
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