NTN NTN Buzztime Inc New

ITEM 11. Executive Compensation

Compensation Processes and Procedures

The N&CG/C Committee is responsible for determining the amount and form of compensation paid to our executive officers, including our chief executive officer. Our chief executive officer presents compensation recommendations to the N&CG/C Committee with respect to the executive officers who report to him. The N&CG/C Committee may accept or adjust such recommendations. The N&CG/C Committee is solely responsible for determining the compensation of our executive officers. Our full board of directors participates in evaluating the performance of our executive officers, except that Mr. Wolff, our chief executive officer and a member of our board of directors, does not participate when our board of directors evaluates his performance and he is not present during voting or deliberations regarding his performance or compensation matters.

When determining executive officer compensation, and the various components that comprise it, the N&CG/C Committee evaluates and considers publicly available executive officer compensation survey data, to present a competitive compensation package to attract and retain top talent, including an appropriate level of salary, performance-based bonus, and/or equity incentives. Typically, the N&CG/C Committee evaluates between three and five different sources of compensation data to provide relevant market benchmark data for a given executive role. Additionally, the N&CG/C Committee is authorized to engage outside advisors and experts to assist and advise the N&CG/C Committee on matters relating to executive compensation. The N&CG/C Committee did not engage any outside advisors or experts to assist or advise the N&CG/C Committee on any matters relating to executive compensation during 2019 or the hiring of any executive officers.

The compensation we paid to our named executive officers in 2019 and the compensation decisions we made in early 2020, predated the global COVID-19 pandemic. These decisions did not take into account the potential impact of the pandemic on our business. The pandemic continues to rapidly evolve and we do not yet know the full extent of its potential effects on our business. The N&CG/C Committee is evaluating the situation and may exercise its discretion in amending or adjusting the compensation of our executive officers and employees in light of recent developments.

Our Named Executive Officers

Under applicable SEC rules and regulations, all individuals who served as our principal executive officer during 2019, our two most highly compensated executive officers (other than our principal executive officer) who were serving as executive officers at the end of 2019, and up to two additional individuals who would have been one of our top two most highly compensated executive officer had they been serving as an executive officer at the end of 2019 are referred to as our “named executive officers.” Our named executive officers for 2019 were:

* Mr. Krishnan resigned as our chief executive officer in September 2019. Under SEC rules, Mr. Krishnan is considered a named executive officer because he served as our principal executive officer during a portion of 2019.

2019 Named Executive Officers Compensation Overview

During 2019, our named executive officers received an annual base salary. As discussed below, there was no incentive compensation awarded to our named executive officers for 2019. None of our named executive officers receive or are eligible for any perquisites or benefits, other than benefits that are available to our other full-time employees. The employment of each of our named executive officers is at-will. During 2019, we had written employment agreements with Mr. Wolff, Ms. Gurrola and Mr. Krishnan. Each of the components of our 2019 executive compensation program is discussed below under the Summary Compensation Table.

Salaries. Each of our named executive officers receives a base salary. The base salary is the fixed cash compensation component of our executive compensation program and it recognizes individual performance, time in role, scope of responsibility, leadership skills and experience. The base salary compensates an executive for performing his or her job responsibilities on a day-to-day basis. Generally, base salaries are reviewed annually company-wide and adjusted (upward or downward) when appropriate based upon individual performance, expanded duties, changes in the competitive marketplace and, with respect to upward adjustments, if we are, financially and otherwise, able to pay it. We try to offer competitive base salaries to help attract and retain executive talent.

Non-Equity Incentive Plan Compensation For 2019, the N&CG/C Committee approved the NTN Buzztime, Inc. Executive Incentive Plan for Eligible Employees of NTN Buzztime, Inc. Fiscal Year 2019 (the “2019 Incentive Plan”). The 2019 Incentive Plan permits the payout of any incentive compensation earned under the plan to be paid, at the discretion and in the sole determination of the N&CG/C Committee, either in (i) cash, (ii) shares of our common stock issued under the NTN Buzztime, Inc. Amended 2010 Performance Incentive Plan or any successor long-term incentive plan, or (iii) any combination of (i) and (ii). If incentive compensation is paid in shares, the number of shares issued is determined by dividing the amount earned by the closing price of our common stock on the date on which the N&CG/C Committee approves the amount of incentive compensation earned. Payments under the 2019 Incentive Plan, if any, are contingent on the applicable participant’s continued employment with us on the payout date.

Participants in the 2019 Incentive Plan earn incentive compensation based on the level of achievement of the following performance measures:

● targeted earnings before interest, tax, depreciation and amortization (EBITDA), as approved by the N&CG/C Committee (weighted up to 10%);

● targeted revenue, as approved by the N&CG/C Committee (weighted up to 15%); and

● the extent to which certain strategic milestones are achieved, as evaluated and approved by the N&CG/C Committee (weighted up to 75%).

Each 2019 Incentive Plan participant had a target payout amount, based on a percentage of his or her annual base salary (excluding benefits) as of December 31, 2019, that was assigned according to such participant’s position and job level. The target payout amounts for the named executive officers for 2019, assuming all performance measures were achieved at a rate of 100%, were:

The N&CG/C Committee determines the extent to which the performance measures are achieved. In [MONTH 2020], after careful review, the N&CG/C Committee determined that the EBITDA performance target was achieved and that neither of the other two performance measures were achieved. Although the EBITDA performance target was achieved and a performance-based bonus was earned, in order to conserve cash, our executive officers and the N&CG/C Committee mutually agreed to waive payment of the bonus earned in 2019.

In connection with Mr. Wolff’s appointment as interim chief executive officer in September 2019, Mr. Wolff was eligible to participate in the 2019 Interim CEO Performance Incentive Plan (the “2019 Interim CEO PIP”). The 2019 Interim CEO PIP is a performance incentive plan under which, for the achievement of performance goals described therein, we would grant to Mr. Wolff such number of shares of our common stock equal to $20,000 divided by the closing price per share of our common stock on the date of grant. Upon grant, such shares would be fully vested. The performance goals were related to: (1) the retainment of certain key employees determined by the N&CG/C Committee through at least March 17, 2020; (2) having a target amount of unrestricted cash, as determined and approved by the N&CG/C Committee, as of March 17, 2020; and (3) meeting target sales for our Buzztime Basic product offering, as determined and approved by the N&CG/C Committee, by March 31, 2020. In March 2020, the N&CG/C Committee determined that the performance goal related to the retainment of key employees was achieved, and we issued 9,506 shares to Mr. Wolff, representing $20,000 worth of shares of our common stock, net of withholding taxes.

Employment Agreements

During 2019, we had written employment agreements with Mr. Wolff, Ms. Gurrola and Mr. Krishnan.

Mr. Wolff and Ms. Gurrola

As previously reported, in March 2020, we entered into an amendment to Mr. Wolff’s employee agreement dated March 19, 2018, which was subsequently amended in September 2019 and January 2020. In January 2020, we also entered into an amendment to Ms. Gurrola’s employment agreement dated September 17, 2010. The following is a summary of the material terms of Mr. Wolff’s and Ms. Gurrola’s employment agreements, as amended.

Base Salary. Mr. Wolff’s base salary is $325,000 and will increase to $350,000 effective July 1 2021. However, in an effort to help preserve cash, up to 20% of Mr. Wolff’s base salary may be paid in shares of our common stock. Additionally, Mr. Wolff agreed to defer payment of approximately 45% of all of his annual base salary payments between May 1, 2020 and October 31, 2020 until the earlier of October 31, 2020 or such time as our board of directors determines in good faith that we are in the financial position to pay his accumulated deferred salary. Ms. Gurrola’s base salary is $190,000.

Incentive Bonus. Mr. Wolff’s incentive performance-based bonus for 2020 will be 43% of his base salary, or $150,000. In 2019, the amount of such bonus was 50% of his base salary. Ms. Gurrola’s incentive performance-based bonus for 2020 will be 20% of her base salary, or $38,000. The performance-based bonuses, if earned, will be payable as follows: 16.66% will be payable if the applicable performance targets for each of our 1st, 2nd and 3rd fiscal quarters are achieved, and 50% will be payable if the applicable performance targets for the applicable fiscal year are achieved. The performance targets will be established by our board of directors (or its N&CG/C Committee), the level of achievement will be determined and approved by our board of directors (or its N&CG/C Committee), and we anticipate that the performance targets will continue to fall into three categories, the achievement of which will be determined following each quarter or year, as applicable: strategic, financial and operational. All incentive-based compensation payable to Mr. Wolff and Ms. Gurrola will be subject to any clawback policy that we may establish.

Mr. Wolff was also entitled to receive a $30,000 cash bonus if he were to remain employed with us for at least 180 days from September 17, 2019, the date on which he was appointed as interim chief executive officer. To preserve cash, we agreed to issue to him such number of shares of our common stock equal to a pro rata amount of the $30,000 bonus (determined by multiplying $30,000 by a fraction, the numerator of which is the number of days lapsed between September 17, 2019 and January 14, 2020, the effective date of the amendment to his employment agreement appointing him as chief executive officer, and the denominator of which is 180) divided by the closing price of our common stock on January 14, 2020. As a result, we issued 5,102 shares of our common stock to Mr. Wolff in respect of this bonus, the value of which was net of withholding taxes on the amount of bonus earned. The value of the portion of these shares issued in respect of the September 17, 2019 to December 31, 2019 period are included in the “Stock Awards” column in the 2019 Summary Compensation Table.

Equity Grants. Under the terms of their employment agreements, in January 2020, Mr. Wolff and Ms. Gurrola were each granted a stock unit award of 75,000 and 25,000 shares of our common stock, respectively. The awards were made under, and are subject to, our 2019 Performance Incentive Plan, and vest quarterly beginning on the 3-month anniversary of the grant date, in each case, subject to the executive’s continued service to us as of the applicable vesting date.

Mr. Krishnan

In September 2019, we entered into a limited term employment and separation agreement and general release of all claims (the “Krishnan Agreement”) with Mr. Krishnan. The Krishnan agreement replaced the previous employment agreement, as amended, that we entered into with Mr. Krishnan. Under the Krishnan Agreement, through October 17, 2019, Mr. Krishnan served as our director of special projects and worked with Mr. Wolff and members of our board as-needed. His base salary remained at the annualized rate of $350,000, and paid in accordance with our regular payroll practices over the limited term period of employment. If we terminated Mr. Krishnan’s employment without cause before October 17, 2019, then Mr. Krishnan would have received the base salary he would have received through October 17, 2019. On the effective date of the Krishnan Agreement and in consideration for a release of claims, 5,000 of Mr. Krishnan’s outstanding RSUs vested, and we granted to Mr. Krishnan 30,000 RSUs, which would generally have vested upon the effective date of a change in control if it occurred on or before March 17, 2020. That condition did not occur, and therefore all 30,000 RSUs were cancelled on March 17, 2020.

Termination of Employment and Change-in-Control Arrangements

Each of the employment agreements of Mr. Wolff and Ms. Gurrola provides for certain benefits upon termination of employment under specified circumstances. If the executive’s employment is terminated by us or by the executive, we will pay him or her any accrued and unpaid base salary and reimburse him or her for expenses incurred through the date of termination of employment. We refer to the foregoing as the “accrued obligations.” In addition to the accrued obligations, if the executive’s employment with us is terminated by us without cause or by the executive for good reason, subject to the executive delivering to us a general release of claims in our favor, we will pay Mr. Wolff as severance an amount equal to one month of his base salary for every full year of full-time employment, subject to a minimum of six months and a maximum of nine months, payable in substantially equal installments on a bi-weekly basis over the applicable severance period. Mr. Wolff has been employed with us for over five years. Similarly, the amount of severance to which Ms. Gurrola will be entitled if we terminate her employment without cause or if she resigns for good reason will be equal to nine months of her base salary, payable in one lump sum. She has been employed with us for over 10 years. Provided that each executive timely elects continued insurance coverage pursuant to COBRA, we will reimburse him or her for a period of months equal to the number of months paid in severance.

In the event of a change in control and if the executive is employed by us through the effective date of the change in control, then 100% of the then unvested portion of the stock units and stock options we granted to each of Mr. Wolff and Ms. Gurrola then outstanding will vest and, as applicable, become exercisable as of immediately before such effective date.

Other than as described above and the agreements that govern their equity awards, we do not have any contract, agreement, plan or arrangement, whether written or unwritten, that provides for payment to a named executive officer at, following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control or a change in the named executive officer’s responsibilities following a change in control.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning equity awards held by the named executive officers that were outstanding as of December 31, 2019:

We account for stock-based payments including equity awards under our equity incentive plans in accordance with the requirements of FASB ASC No. 718, Compensation – Stock Compensation. For a discussion regarding the effect of a change in control on certain equity awards held by Messrs. Krishnan and Wolff and Ms. Gurrola, see “Termination of Employment and Change-in-Control Arrangements,” above.

Director Compensation

We compensate our non-employee directors for their service in such capacity with annual retainers and equity compensation as described below. Directors who are also our employees do not receive any additional compensation for their services as directors. We do not pay fees to any of our directors for meeting attendance. The N&CG/C Committee reviews our non-employee director compensation practices and policies at least annually and makes a recommendation to our board of directors as to the amount, form and terms of non-employee director compensation. Our board of directors, taking the N&CG/C Committee’s recommendation into consideration, sets the amount, form and terms of non-employee director compensation.

Annual Retainers

We pay our non-employee directors a $25,000 annual retainer for their services as directors. We pay the chairman of our board of directors, assuming she or he is a non-employee director, an additional $20,000 annual retainer for services in such capacity. We pay our non-employee directors an additional annual retainer for their service on board committees as set forth in the table below.

The annual retainers are paid quarterly in arrears and are paid no later than 30 days following the end of the applicable quarter. Each non-employee director may elect that the retainer payment he or she is eligible to receive, or a portion of such retainer, be paid in the form of a restricted stock award under our equity incentive plan rather than cash. Such an election must be made during an open trading window under our insider trading policy and no later than the 15^th day of the last month of the quarter for which the retainer is to be paid. An election applies only to the quarter for which it is made. Once an election is made with respect to a quarter, it may not be withdrawn or substituted unless our board of directors determines, in its sole discretion, that the withdrawal or substitution is occasioned by an extraordinary or unanticipated event. Restricted stock awards will be made on the same date as a cash retainer payment would otherwise be paid, will vest in full on the date of grant, and the amount of shares subject to such award will equal the amount of the applicable cash retainer payment divided by the closing price of our common stock on the last day of the applicable quarter.

Equity Compensation

We grant stock options to our non-employee directors upon the commencement of their service as a director and upon their re-election to our board of directors. The stock options are granted under our stockholder-approved equity incentive plan.

In connection with the commencement of a new non-employee director’s term of service, we grant to such new director a stock option to purchase 600 shares of our common stock. These stock options have an exercise price equal to the closing price of our common stock on the date of grant, and are fully vested and exercisable on the date of grant as to 50% of the shares and the remaining 50% of the shares vest and become exercisable, subject to the director’s continued service on our board of directors, in 12 equal monthly installments beginning in the month immediately following the date of grant.

Each non-employee director who is re-elected for an additional term of service on our board of directors is automatically granted a stock option to purchase 400 shares of our common stock on the date of our annual stockholder meeting. These stock options have an exercise price equal to the closing price of our common stock on the date of grant and vest and become exercisable, subject to the director’s continued service on our board of directors, in 12 equal monthly installments thereafter.

The stock options described above expire on the earlier of 10 years from the date of grant or 90 days from the date the director ceases to serve on our board of directors. In the event of a change in control, as defined in the Amended 2010 Performance Incentive Plan, the N&CG/C Committee may in its discretion determine that these stock options vest and become fully exercisable as of immediately before such change in control.

2019 Director Compensation

The following table sets forth the compensation of each director, who is not a named executive officer, for service during 2019. This table excludes Mr. Wolff, who is a named executive officer and does not receive any compensation from us for his service as a director. See the section below entitled “Executive Officer Compensation” for information about Mr. Wolff’s compensation.