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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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No fee required
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Sincerely,
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March 19, 2019
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Brian O. Casey
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President and Chief Executive Officer
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WESTWOOD MANAGEMENT • WESTWOOD TRUST • WESTWOOD ADVISORS • WESTWOOD INTERNATIONAL ADVISORS
200 CRESCENT COURT, SUITE 1200 • DALLAS, TEXAS 75201 • T.214.756.6900 • F.214.756.6979 • westwoodgroup.com
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Proposal 1.
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The election of six directors to hold office until the next annual meeting of Westwood's stockholders and until their respective successors shall have been duly elected and qualified;
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Proposal 2.
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The ratification of the appointment of Deloitte & Touche LLP as Westwood's independent auditors for the year ending December 31, 2019;
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Proposal 3.
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To approve the Sixth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan;
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Proposal 4.
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To cast a non-binding, advisory vote on the Company's executive compensation; and
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Proposal 5.
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To approve an amendment to each of the Company's Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws, as amended.
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By Order of the Board of Directors
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Westwood Holdings Group, Inc.
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Brian O. Casey
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President and Chief Executive Officer
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Q:
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When and where is the annual meeting?
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A:
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The annual meeting will be held on Wednesday, April 24, 2019, at 10:00 a.m., Central Time, at The Crescent Club, 200 Crescent Court, Suite 1700, Dallas, Texas 75201.
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Q:
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What am I being asked to vote on?
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A:
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Our stockholders are being asked to vote on the following proposals at the annual meeting:
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•
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To elect six directors to hold office until the next annual meeting of Westwood’s stockholders and until their respective successors shall have been duly elected and qualified;
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•
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To ratify the appointment of Deloitte & Touche LLP as Westwood’s independent auditors for the year ending December 31, 2019;
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•
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To approve the Sixth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan;
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•
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To cast a non-binding, advisory vote on the Company's executive compensation; and
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•
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To approve an amendment to each of the Company's Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws, as amended.
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Q:
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How does the Board of Directors recommend that I vote?
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A:
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The Board of Directors recommends that you vote your shares (i) "FOR" each of the six director nominees for election to the Board of Directors, (ii) "FOR" the ratification of the appointment of Deloitte & Touche LLP as Westwood’s independent auditors for the year ending December 31, 2019, (iii) "FOR" the approval of the Sixth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan, (iv) "FOR" the approval, on a non-binding, advisory basis, of the Company's executive compensation, and (v) "FOR" the approval of the amendments to each of the Company's Amended and Restated Certificate of Incorporation, as amended, and the Company's Amended and Restated Bylaws, as amended.
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If you submit your properly executed proxy without voting instructions, your shares represented by that proxy will be voted as recommended by the Board of Directors.
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Q:
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Who is entitled to vote at the annual meeting?
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A:
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Stockholders of record at the close of business on March 4, 2019 (the "record date") are entitled to notice of, and to vote at, the annual meeting and any adjournments or postponements thereof. A holder of shares of our common stock as of the record date is entitled to one vote in person or by proxy for each share of common stock owned by such holder on all matters properly brought before the annual meeting or at any adjournments or postponements thereof. As of March 4, 2019, there were 9,034,902 shares of common stock outstanding and entitled to vote on each of the proposals.
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Q:
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What constitutes a quorum?
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A:
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We must have a quorum in order to carry on the business of the annual meeting. This means at least a majority of the shares of common stock outstanding as of the record date must be represented at the annual meeting, either by proxy or in person. Abstentions and broker non-votes, which are described in more detail below, are counted as shares present at the annual meeting for purposes of determining whether a quorum exists.
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Q:
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What is the difference between holding shares as a "stockholder of record" and as a "beneficial owner"?
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A:
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Stockholder of Record: A stockholder of record holds shares registered directly in the stockholder's name with our transfer agent. As a stockholder of record, you have the right to grant your voting proxy directly to us in accordance with the procedures described below or to vote in person at the annual meeting.
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Beneficial Owner: If your shares are held through a bank, broker or other nominee, you are the "beneficial owner" of shares held in "street name," and these proxy materials are being forwarded to you by your bank, broker or other nominee, which is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote your shares by completing the instructions provided to you by your bank, broker or other nominee. However, since you are not a stockholder of record, you may not vote these shares in person at the annual meeting unless you obtain a valid proxy from your bank, broker or other nominee (who must be the stockholder of record) giving you the right to vote the shares.
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Q:
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What is a broker non-vote?
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A:
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Generally, a broker non-vote occurs when a bank, broker or other nominee that holds shares in "street name" for customers is precluded from exercising voting discretion on a particular proposal because (i) the beneficial owner has not instructed the bank, broker or other nominee how to vote, and (ii) the bank, broker or other nominee lacks discretionary voting power to vote such shares. A bank, broker or other nominee does not have discretionary voting power with respect to the approval of "non-routine" matters absent specific voting instructions from the beneficial owners of such shares.
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Under applicable rules, Proposals 1, 3, 4 and 5 are considered "non-routine" matters, on which banks, brokers and other nominees are not allowed to vote unless they have received voting instructions from the beneficial owners of such shares. The proposal to ratify the appointment of Deloitte & Touche LLP as Westwood’s independent auditors for the year ending December 31, 2019 (Proposal 2) is considered a routine matter on which banks, brokers and other nominees may vote in their discretion on behalf of beneficial owners who have not provided voting instructions. Your bank, broker or other nominee will send you instructions on how you can instruct them to vote on Proposal 2. If you do not provide voting instructions, your bank, broker or other nominee will have discretionary authority to vote your shares with respect to Proposal 2.
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Q:
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What vote is required to approve each proposal?
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A:
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Proposal 1: The election of directors requires the affirmative "FOR" vote of a plurality of the shares represented in person or by proxy at the annual meeting and entitled to vote. This means that the six director nominees who receive the most votes will be elected. You may vote "FOR" or "WITHHOLD" with respect to the election of each director. As the election of directors is a non-routine matter under applicable rules, your bank, broker or other nominee cannot vote without instructions from you. Therefore, only "FOR" votes will be counted in determining whether a plurality has been cast in favor of a director. Broker non-votes and "WITHHOLD" votes will not affect the outcome on the election of directors.
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Proposal 2: The ratification of the appointment of Deloitte & Touche LLP as Westwood’s independent auditors for the year ending December 31, 2019 requires the affirmative "FOR" vote of a majority of the votes cast at the annual meeting. Abstentions will have no effect on the outcome of this proposal.
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Proposal 3: The approval of the Sixth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan requires the affirmative "FOR" vote of a majority of the votes cast at the annual meeting. As the approval of Proposal 3 is a non-routine matter under applicable rules, your bank, broker or other nominee cannot vote without instructions from you. An abstention is a vote cast under current NYSE rules, and, as a result, abstentions will have the effect of a vote "AGAINST" this proposal. A broker non-vote, however, is not a vote cast under current NYSE rules, and, as a result, will have no effect on the outcome of this proposal.
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Proposal 4: The non-binding, advisory vote on the Company's executive compensation requires the affirmative "FOR" vote of a majority of the votes cast at the annual meeting. As the advisory vote on the Company's executive compensation is a non-routine matter under applicable rules, your bank, broker or other nominee cannot vote without instructions from you. Broker non-votes and abstentions will have no effect on the outcome of this proposal.
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Proposal 5: The approval of the amendments to each of the Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws, as amended requires the affirmative "FOR" vote of the holders of at least two-third (2/3) of the outstanding shares of common stock. As the approval of amendments to the Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws, as amended, are non-routine matters under applicable rules, your bank, broker or other nominee cannot vote without instructions from you. Abstentions and broker non-votes will have the effect of a vote "AGAINST" this proposal.
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Q:
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Who is entitled to vote?
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A:
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Only stockholders of record as of the close of business on March 4, 2019, the record date, will be entitled to vote on the proposals at the annual meeting. Each share of common stock is entitled to one vote.
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Q:
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How do I vote?
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A:
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If you are the record holder of your shares, you can vote by attending the annual meeting in person or by completing, signing and returning your proxy card in the enclosed postage-paid envelope. You can also vote by Internet at www.voteproxy.com using the control number shown on your proxy card or voting instruction card.
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If your shares are held by your broker as your nominee (that is, in "street name"), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares. If your shares are held in street name, your proxy card may contain instructions from your broker that allow you to vote your shares using the Internet or telephone. Please consult with your broker if you have any questions regarding the electronic voting of your shares held in street name.
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Q:
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Is my proxy revocable and can I change my vote?
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A:
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If you are a stockholder of record you may revoke your proxy at any time before it is officially voted by doing one of the following:
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Sending a written notice revoking your proxy to Julie K. Gerron, our Corporate Secretary, at 200 Crescent Court, Suite 1200, Dallas, Texas 75201;
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Signing and mailing to us a proxy bearing a later date;
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Changing your vote by Internet (if you voted by Internet); or
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•
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Attending our annual meeting and voting in person.
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If you are not a stockholder of record, but instead hold your shares in "street name" through a bank, broker or other nominee, the above-described options for revoking your proxy do not apply. Instead, you will need to follow the instructions provided to you by your bank, broker or other nominee in order to revoke your proxy and submit new voting instructions.
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Q:
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Is my vote confidential?
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A:
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Yes. Only the inspector of votes and certain of our employees will have access to your proxy card. All comments will remain confidential, unless you ask that your name be disclosed.
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Q:
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What percentage of stock do the directors and executive officers own?
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A:
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Collectively, our executive officers and directors beneficially owned approximately 880,542 shares, or approximately 9.7%, of our outstanding common stock as of March 4, 2019.
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We believe that our executive officers and directors intend to vote their shares of our common stock on each of the proposals presented in this proxy statement as recommended by the Board of Directors.
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Q:
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Who are the largest principal stockholders?
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A:
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Based on our review of Schedule 13G, Schedule 13D and Form 13F filings, as of March 4, 2019, the ten institutional stockholders with the largest percentage ownership of our outstanding common stock were BlackRock, Inc. (8.1%), Wells Fargo & Company (8.0%), GAMCO Investors, Inc. (6.2%), Conestoga Capital Advisors, LLC (5.6%), Renaissance Technologies LLC (5.5%), Dimensional Fund Advisors LP (4.1%), The Vanguard Group, Inc. (4.0%), Royce & Associates, LP (2.2%), SSgA Funds Management Inc. (1.7%) and DePrince, Race & Zollo, Inc. (1.4%).
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Brian O. Casey, our President and Chief Executive Officer, owned 3.7%, Susan M. Byrne, our Vice Chairman, owned 2.7% and Mark R. Freeman, our former Chief Investment Officer, owned 1.0%, of our outstanding common stock as of March 4, 2019. Our employees and directors, including Ms. Byrne and Messrs. Casey and Freeman, collectively owned approximately 21% of our outstanding common stock as of March 4, 2019.
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Q:
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What is the deadline to propose actions for consideration at the 2019 annual meeting of stockholders?
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A:
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To be included in the proxy statement for the 2020 annual meeting, stockholder proposals must be in writing and must be received by Westwood at our principal executive office at 200 Crescent Court, Suite 1200, Dallas, Texas 75201, Attn: Corporate Secretary, no later than November 28, 2019. In addition, such stockholder proposals must comply with Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which lists the requirements for the inclusion of stockholder proposals in company-sponsored proxy materials.
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If a stockholder intends to present a proposal at the 2020 annual meeting, but does not seek to include the proposal in the 2020 proxy statement, notice of the proposal must be received by Westwood at our principal executive offices at least 45 calendar days before the date of this proxy statement, or your proxy will confer discretionary authority on the person(s) named in the form of proxy for the 2020 annual meeting to vote on the proposal if it is properly presented for consideration at the meeting.
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Q:
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How may I recommend or nominate individuals to serve as directors, and what is the deadline to propose or nominate individuals to serve as directors?
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A:
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You may propose director candidates for consideration by the Governance/Nominating Committee of our Board of Directors. Any such recommendations must be in writing to our Corporate Secretary at our principal executive office and received at least 120 calendar days before the one-year anniversary of the date that the proxy statement for the previous year’s annual meeting was released to stockholders. However, if we did not hold an annual meeting during the previous year or if the date of the current year’s annual meeting has been changed by more than 30 days from the date of the previous year’s annual meeting, then the deadline is a reasonable time before we begin to print and mail our proxy materials.
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For the 2020 annual meeting, the deadline for proposing or nominating individuals to serve as director is November 28, 2019. Director candidates recommended by stockholders are evaluated by the Governance/Nominating Committee based on the same criteria applied by the Governance/Nominating Committee to director candidates identified by that committee. To be valid, a stockholder’s notice to the Corporate Secretary must set forth specified information, as further described in "Corporate Governance Information—Director Nominees."
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Q:
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Who is soliciting my proxy and who will pay the solicitation expenses?
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A:
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The Company is soliciting your proxy by and on behalf of our Board of Directors, and we will pay the cost of preparing and distributing this proxy statement and the cost of soliciting votes. We will reimburse stockbrokers and other custodians, nominees and fiduciaries for forwarding proxy and solicitation material to the owners of our common stock.
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Q:
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Who can help answer my additional questions?
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A:
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Stockholders who would like additional copies, without charge, of this proxy statement or have additional questions about this proxy statement, including the procedures for voting their shares, should contact:
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Terry Forbes, Chief Financial Officer & Treasurer
Westwood Holdings Group, Inc.
200 Crescent Court, Suite 1200
Dallas, Texas 75201
Telephone: (214) 756-6900
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Name
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Age
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Position(s) With Westwood
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Brian O. Casey
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55
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President, Chief Executive Officer and Director
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Richard M. Frank
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71
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Chairman of the Board of Directors
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Susan M. Byrne
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72
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Vice Chairman of the Board of Directors
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Ellen H. Masterson
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68
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Director
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Geoffrey R. Norman
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75
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Director
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Raymond E. Wooldridge
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80
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Director
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Independent Directors
(1)
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Audit
Committee
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Compensation
Committee
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Governance/Nominating
Committee
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Richard M. Frank
(2)
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M
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C
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M
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Ellen H. Masterson
(3)
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C
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M
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Robert D. McTeer
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M
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Geoffrey R. Norman
(3)
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M
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M
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Martin J. Weiland
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M
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C
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Raymond E. Wooldridge
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M
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M
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M
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(1)
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The Board of Directors has determined that all members of the Audit, Compensation and Governance/Nominating Committees are "independent directors" under the applicable rules of the NYSE and the Securities and Exchange Commission ("SEC").
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(2)
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Richard M. Frank is the Chairman of the Board of Directors and, as such, he chairs executive sessions of the Board of Directors.
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(3)
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The Board of Directors has determined that Geoffrey R. Norman and Ellen H. Masterson are qualified as Audit Committee financial experts within the meaning of the regulations of the SEC and have accounting and related financial management expertise within the meaning of the NYSE Corporate Governance Listing Standards.
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•
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Overall compensation levels that are competitive with the market;
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•
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Limits on annual cash incentive awards;
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•
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Its discretionary authority to reduce annual cash incentive awards;
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Use of long-term equity incentive awards to reward executives and other key employees for driving sustainable, profitable growth for stockholders and clients;
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Vesting periods for long-term equity incentive awards that encourage executives and other key employees to focus on sustained stock price appreciation; and
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The Company's internal control over financial reporting and other financial, operational and compliance policies and practices currently in place that are intended to prevent manipulation of performance.
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Name
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Fees Earned
or Paid in Cash ($) |
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All
Other Compensation ($) (1) |
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Stock Awards
($) (2) |
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Total
($) |
Susan M. Byrne
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70,000
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267,643
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95,000
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432,643
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Richard M. Frank
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105,000
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5,000
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95,000
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205,000
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Ellen H. Masterson
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85,000
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5,000
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95,000
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185,000
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Robert D. McTeer
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70,000
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5,000
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95,000
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170,000
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Geoffrey R. Norman
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70,000
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5,000
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95,000
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170,000
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Martin J. Weiland
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75,000
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5,000
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95,000
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175,000
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Raymond E. Wooldridge
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70,000
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5,000
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95,000
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170,000
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(1)
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Susan M. Byrne earned
$262,643
as a consultant for the Company from January 1,
2018
to December 31,
2018
. Each non-employee director also earns a $1,000 annual retainer and $1,000 for each regularly scheduled quarterly meeting for serving on the separate Board of Directors of Westwood Trust.
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(2)
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Stock awards include a $90,000 award for each non-employee director and a $5,000 award for each non-employee director serving on the separate Board of Directors for Westwood Trust. Stock awards reflect the grant date fair value of the time-based restricted stock granted to directors in
2018
in accordance with Accounting Standards Codification Topic 718 ("ASC 718"), "Stock Compensation." The assumptions used in the valuation of the restricted stock awards are discussed in Note 10 "Employee Benefits" of our audited financial statements, which are included in our
2018
Annual Report on Form 10-K. All restricted stock grants were made under the Fifth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan and are subject to a one-year vesting period as described above.
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Name
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Unvested
Restricted Stock |
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Susan M. Byrne
(1)
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1,622
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Richard M. Frank
(1)
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1,622
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Ellen H. Masterson
(1)
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|
1,622
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Robert D. McTeer
(1)
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1,622
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Geoffrey R. Norman
(1)
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|
1,622
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Martin J. Weiland
(1)
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|
1,622
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Raymond E. Wooldridge
(1)
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|
1,622
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(1)
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Issued on
April 25, 2018
and have a vesting date of
April 25, 2019
, subject to such director's continued service as a director through the vesting date.
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Name
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Position
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Brian O. Casey
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President and Chief Executive Officer
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Terry Forbes
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Senior Vice President, Chief Financial Officer and Treasurer
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Fabian Gomez
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Senior Vice President, Chief Operating Officer
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Julie K. Gerron
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Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary
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Steven Paddon
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Senior Vice President, Head of Institutional Sales
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Mark R. Freeman
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former Executive Vice President and Chief Investment Officer
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Tiffany B. Kice
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former Senior Vice President, Chief Financial Officer and Treasurer
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•
|
Assets under management as of December 31,
2018
were
$16.6 billion
, a
31%
decrease
compared to December 31,
2017
. Quarterly average assets under management
decreased
8%
to
$21.4 billion
for
2018
compared to
2017
, which contributed to the
9%
decrease in total revenue from 2017.
|
•
|
Our LargeCap Value, Emerging Markets Plus, SMidCap, SMidCap Plus, Emerging Markets, and Emerging Markets SMidCap strategies exhibited strong performance.
|
•
|
Our SmallCap strategy was selected to participate in the Morningstar U.S. Equity Fund.
|
•
|
The effective tax rate decreased to
26.6%
for
2018
compared to
41.0%
for
2017
related to the Tax Reform Act enacted in December 2017.
|
•
|
In October
2018
, our Board approved a
6%
increase in our quarterly dividend to
$0.72
per share for an annual rate of
$2.88
per share, which results in a dividend yield of
8.5%
using the year-end stock price of
$34.00
per share.
|
•
|
We repurchased 108,289 shares of our common stock for an aggregate purchase price of $4.0 million.
|
•
|
Our financial position remains strong with liquid cash and short-term investments of
$118.2 million
and no debt as of December 31,
2018
.
|
•
|
We closed the sale of our Omaha-based Private Wealth operations, received net proceeds of $10.0 million and recognized a $0.5 million gain on sale.
|
•
|
Deliver competitive total direct compensation at levels to attract, motivate and retain talented executives who can contribute to the success of our business;
|
•
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Award compensation that motivates and rewards short- and long-term individual and company performance but discourages excessive risk-taking; and
|
•
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Align named executive officers’ interests with those of our stockholders.
|
• Artisan Partners Asset Management
|
|
• Manning & Napier
|
• BrightSphere Investment Group
|
|
• Pzena Investment Management, Inc.
|
• Cohen & Steers, Inc.
|
|
• Silvercrest Asset Management Group, Inc.
|
• Diamond Hill Investment Group, Inc.
|
|
• Victory Capital Holdings
|
• GAMCO Investors, Inc.
|
|
• Virtus Investment Partners, Inc.
|
• Hennessy Advisors, Inc.
|
|
• WisdomTree Investments Inc.
|
Component of Pay
|
Purpose and Rationale
|
Base salary
|
Fixed portion of compensation to pay for executing primary day-to-day duties and responsibilities
|
Annual cash incentive awards
|
Variable at-risk element of pay to reward for achieving specific pre-established annual performance goals
|
Mutual fund award
|
Variable at-risk element of pay to motivate the CIO to maximize performance of a key investment strategy by achieving a pre-established annual performance goal
|
Long-term equity awards
|
Variable at-risk element of pay to drive performance that delivers long-term shareholder value and links the interests of our executives and shareholders and retains critical talent
|
Employee and post-retirement benefits
|
Market-competitive form of compensation to underpin the financial security and health and welfare of our executives during and after employment with Westwood
|
|
|
|
|
|
|
|
|||||
Named Executive Officers
|
|
Base Salary
as of 1/1/18 |
|
Base Salary
as of 12/31/18 |
|
Percentage
Change |
|||||
Brian O. Casey,
President and Chief Executive Officer |
|
$
|
650,000
|
|
|
$
|
650,000
|
|
|
—
|
%
|
Terry Forbes,
Senior Vice President, Chief Financial Officer & Treasurer (1) |
|
$
|
183,000
|
|
|
$
|
225,000
|
|
|
23
|
%
|
Fabian Gomez,
Senior Vice President and Chief Operating Officer (1) |
|
$
|
235,000
|
|
|
$
|
260,000
|
|
|
11
|
%
|
Julie K. Gerron,
Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary |
|
$
|
225,000
|
|
|
$
|
250,000
|
|
|
11
|
%
|
Steven Paddon,
Senior Vice President, Head of Institutional Sales |
|
$
|
—
|
|
|
$
|
250,000
|
|
|
—
|
%
|
Mark R. Freeman,
Executive Vice President and Chief Investment Officer |
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
—
|
%
|
Tiffany B. Kice,
Senior Vice President, Chief Financial Officer & Treasurer |
|
$
|
250,000
|
|
|
$
|
—
|
|
|
NM
|
Name
|
|
2018 Annual Incentive Payout
|
|
Determining Factors
|
|||
Terry Forbes
|
|
$
|
110,000
|
|
|
●
|
Contributions to the Company’s strategic initiatives, including corporate development, financial and tax planning;
|
●
|
Membership on the Company’s Information Technology Steering Committee, Enterprise Risk Management Committee and Disclosure Committee; and
|
||||||
●
|
Firm-wide oversight and enhancements of our financial reporting process and internal control over financial reporting.
|
||||||
Fabian Gomez
|
|
$
|
200,000
|
|
|
●
|
Contributions to the Company's strategic initiatives, including strategic planning, information technology and investment operations;
|
|
|
●
|
Membership on the Company's Information Technology Steering Committee and Enterprise Risk Management Committee; and
|
||||
|
|
●
|
Management and oversight of our information technology and investment operations.
|
||||
Julie K. Gerron
|
|
$
|
165,000
|
|
|
●
|
Management and oversight of our compliance with legal and regulatory requirements;
|
|
|
●
|
Management and oversight of risk management issues, including review and negotiation of legal agreements and participation in internal risk management committees;
|
||||
|
|
●
|
Oversight of external counsel with a goal toward timely resolution of legal issues (e.g. litigation, trademark issues, corporate governance, etc.); and
|
||||
|
|
●
|
Effective representation of our legal and compliance program and processes to clients, investment consulting firms and other financial intermediaries.
|
||||
Steven Paddon
|
|
$
|
225,000
|
|
|
●
|
Management and oversight of our institutional sales and client service teams;
|
|
|
●
|
Membership on the Company's Information Technology Steering Committee and Enterprise Risk Management Committee;
|
Name
|
|
Number of Restricted Shares Granted (#)
|
|
Grant Date Fair Value of Shares ($) (1)
|
||
Terry Forbes
|
|
1,908
|
|
|
106,314
|
|
Fabian Gomez
|
|
4,650
|
|
|
259,098
|
|
Julie K. Gerron
|
|
3,577
|
|
|
199,310
|
|
Tiffany B. Kice
(2)
|
|
4,650
|
|
|
259,098
|
|
(1)
|
Amounts reflect the grant date fair value of time-vested restricted stock awards granted to Messrs. Forbes and Gomez and Mses. Gerron and Kice in
2018
, computed in accordance with ASC 718. The assumptions used in the valuation of the restricted stock awards are discussed in Note 10 "Employee Benefits" of our audited financial statements, included in our
2018
Form 10-K. The grant date fair value for these time-vested awards was based on
$55.72
per share, which was the closing price of our common stock on the grant date of February 23,
2018
, adjusted for the accrual of dividends on unvested shares.
|
(2)
|
Ms. Kice forfeited her time-based restricted stock grant of 4,650 shares upon her departure in October 2018.
|
•
|
A performance-based restricted stock award for 35,966 performance shares, earned as follows:
|
◦
|
50% in performance shares based upon an Income before income taxes goal of $20.0 million for
2018
, which vest ratably over a three-year period, and
|
◦
|
50% in performance shares based upon an Income before income taxes target of $36.0 million for
2018
, but ranges from 25% of target for threshold performance of $32.0 million to 185% of target for maximum performance of $44.5 million ("Target Performance shares"), which vest ratably over a three-year period.
|
▪
|
Based on actual
2018
Income before income taxes of $36.5 million, the following table illustrates the performance shares Mr. Casey earned:
|
|
Shares
|
|
%
|
||
Non-variable shares earned
(1)
|
17,983
|
|
|
|
|
Target Performance shares:
|
|
|
|
||
Threshold
|
4,496
|
|
|
25
|
%
|
Target
|
17,983
|
|
|
100
|
%
|
Maximum
|
33,269
|
|
|
185
|
%
|
Target Performance shares earned based on Income before income taxes
(1)
|
18,703
|
|
|
104
|
%
|
Total performance-based shares earned
|
36,686
|
|
|
|
(1)
|
One third of these shares vested on March 8, 2019. The remainder will vest 50% on March 8, 2020 and 2021, subject to Mr. Casey’s continued employment with the Company through each vesting date. Any unvested shares will accelerate and become fully vested upon Mr. Casey’s death, disability, termination without cause or for good reason, or upon a change of control.
|
•
|
A performance-based restricted stock award for 17,983 performance shares, earned as follows:
|
◦
|
50% in performance shares based upon an Income before income taxes goal of $20.0 million for
2018
, which vest ratably over a three-year period, and
|
◦
|
50% in performance shares based upon an Income before income taxes target of $36.0 million for
2018
, but ranges from 25% of target for threshold performance of $32.0 million to 185% of target for maximum performance of $44.5 million ("Target Performance shares"), which vest ratably over a three-year period.
|
|
Shares
|
|
%
|
||
Non-variable shares earned
(1)
|
8,992
|
|
|
|
|
Target Performance shares:
|
|
|
|
||
Threshold
|
2,248
|
|
|
25
|
%
|
Target
|
8,991
|
|
|
100
|
%
|
Maximum
|
16,633
|
|
|
185
|
%
|
Target Performance shares earned based on Income before income taxes
(1)
|
9,351
|
|
|
104
|
%
|
Total performance-based shares earned
|
18,343
|
|
|
|
(1)
|
One third of these shares vested on March 8, 2019. Subject to his Separation Agreement, Mr. Freeman forfeited the remainder upon his departure on March 8, 2019.
|
|
COMPENSATION COMMITTEE
|
|
Richard M. Frank, Chairman
Martin J. Weiland
Raymond E. Wooldridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Name and
Principal Position (a) |
|
Year
(b) |
|
Salary
($) (c) (1) |
|
Bonus
($) (d) (2) |
|
Stock
Awards ($) (e) (3) |
|
Non-Equity
Incentive Plan Compensation ($) (f) (4) |
|
All
Other Compensation ($) (g) (5) |
|
Total
($) (h) |
||||||
Brian O. Casey
|
|
2018
|
|
650,000
|
|
|
—
|
|
|
1,994,314
|
|
|
1,066,500
|
|
|
27,500
|
|
|
3,738,314
|
|
President and Chief Executive Officer
|
|
2017
|
|
650,000
|
|
|
—
|
|
|
1,996,368
|
|
|
1,539,000
|
|
|
29,700
|
|
|
4,215,068
|
|
|
2016
|
|
650,000
|
|
|
—
|
|
|
3,954,038
|
|
|
1,350,000
|
|
|
26,500
|
|
|
5,980,538
|
|
|
Terry Forbes
|
|
2018
|
|
191,633
|
|
|
110,000
|
|
|
106,314
|
|
|
—
|
|
|
27,500
|
|
|
435,447
|
|
Senior Vice President, Chief Financial Officer & Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fabian Gomez
|
|
2018
|
|
255,833
|
|
|
200,000
|
|
|
259,098
|
|
|
—
|
|
|
27,500
|
|
|
742,431
|
|
Senior Vice President, Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Julie K. Gerron
|
|
2018
|
|
225,000
|
|
|
165,000
|
|
|
199,310
|
|
|
—
|
|
|
27,500
|
|
|
616,810
|
|
Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary
|
|
2017
|
|
225,000
|
|
|
—
|
|
|
199,824
|
|
|
200,000
|
|
|
29,700
|
|
|
654,524
|
|
|
2016
|
|
222,500
|
|
|
—
|
|
|
274,409
|
|
|
190,000
|
|
|
26,500
|
|
|
713,409
|
|
|
Steven Paddon
|
|
2018
|
|
158,173
|
|
|
225,000
|
|
|
—
|
|
|
—
|
|
|
29,669
|
|
|
412,842
|
|
Senior Vice President, Head of Institutional Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mark R. Freeman
|
|
2018
|
|
500,000
|
|
|
—
|
|
|
997,157
|
|
|
650,000
|
|
|
27,500
|
|
|
2,174,657
|
|
Executive Vice President and Chief Investment Officer
|
|
2017
|
|
500,000
|
|
|
—
|
|
|
2,093,438
|
|
|
1,772,500
|
|
|
29,700
|
|
|
4,395,638
|
|
|
2016
|
|
500,000
|
|
|
—
|
|
|
1,118,400
|
|
|
1,822,091
|
|
|
26,500
|
|
|
3,466,991
|
|
|
Tiffany B. Kice
|
|
2018
|
|
224,750
|
|
|
—
|
|
|
259,098
|
|
|
—
|
|
|
10,945
|
|
|
494,793
|
|
Senior Vice President, Chief Financial Officer & Treasurer
|
|
2017
|
|
250,000
|
|
|
225,000
|
|
|
237,252
|
|
|
35,000
|
|
|
29,700
|
|
|
776,952
|
|
|
2016
|
|
245,833
|
|
|
225,000
|
|
|
249,566
|
|
|
12,500
|
|
|
26,500
|
|
|
759,399
|
|
(1)
|
This column represents base compensation earned during each of the fiscal years presented. Since a significant portion of the reported compensation of Messrs. Casey and Freeman represents potential pay, we believe it is useful to supplement the information provided in the above table by also looking at the pay that Messrs. Casey and Freeman actually realized during the year. See "Compensation Discussion and Analysis - CEO Realized Pay" and "Compensation Discussion and Analysis - CIO Realized Pay."
|
(2)
|
For 2018, the amounts for Messrs. Forbes, Gomez and Paddon and Ms. Gerron reflect the cash payments made under our employee bonus pool. Pursuant to the terms of Mr. Paddon's Offer Letter, he was entitled to a minimum cash bonus target of $160,500 for 2018. Pursuant to the terms of Ms. Kice’s Offer Letter, she was entitled to a minimum cash bonus target of $225,000 for 2017 and 2016.
|
(3)
|
For
2018
, the amounts contained in column (e) reflect (i) for Mr. Casey, the grant date fair value of his
2018
performance-based restricted stock awards based on target performance (35,966 shares), whereby the maximum threshold is 51,252 shares, or $2,841,923, (ii) for Mr. Forbes, the grant date fair value of his time-vested restricted stock award granted in
2018
(
1,908
shares), (iii) for Mr. Gomez, the grant date fair value of his time-vested restricted stock award granted in
2018
(
4,650
shares), (iv) for Ms. Gerron, the grant date fair value of her time-vested restricted stock award granted in
2018
(
3,577
shares) (v) for Mr. Freeman, the grant date fair value of his
2018
performance-based restricted stock awards based on target performance (17,983 shares), whereby the maximum threshold is 25,625 shares, or $1,420,906 and (vi) for Ms. Kice, the grant date fair value of her time-vested restricted stock award granted in
2018
(
4,650
shares).
|
(4)
|
For 2018, the amounts in column (f) reflect the cash payment to Mr. Casey, in accordance with his annual cash incentive award. The amount for Mr. Freeman reflects the cash payment made under his annual cash incentive award in accordance with his Separation Agreement.
|
(5)
|
The amounts in column (g) reflect each named executive officer’s 401(k) Company matching contribution and Company profit sharing contribution under the Savings Plan. See the "Compensation Discussion and Analysis" section above for a further description of the plan contributions in
2018
. Pursuant to the terms of Mr. Paddon's offer letter, he was also entitled to reimbursement of his relocation expenses of $13,852.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
|
|
Estimated Future Payouts Under Equity Incentive Plan Awards
|
|
All Other Stock Awards:
Number of Shares of Stock (#) (i) (4) |
|
Grant Date
Fair Value of Stock ($) (j) (5) |
||||||||||||||||
Name
(a) |
|
Grant
Date (b) |
|
Threshold
($) (c) |
|
Target
($) (d) (1) |
|
Maximum
($) (e) (2) |
|
Threshold
(#) (f) |
|
Target
(#) (g) (3) |
|
Maximum
(#) (h) |
|
|||||||||||
Brian O. Casey
|
|
3/8/18
|
|
675,000
|
|
|
1,350,000
|
|
|
2,497,500
|
|
|
18,245
|
|
|
36,490
|
|
|
51,998
|
|
|
—
|
|
|
1,996,368
|
|
Terry Forbes
|
|
2/23/18
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,908
|
|
|
106,314
|
|
Fabian Gomez
|
|
2/23/18
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,650
|
|
|
259,098
|
|
Julie K. Gerron
|
|
2/23/18
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,577
|
|
|
199,310
|
|
Mark R. Freeman
|
|
3/8/18
|
|
—
|
|
|
650,000
|
|
|
750,000
|
|
|
8,992
|
|
|
17,983
|
|
|
25,625
|
|
|
—
|
|
|
997,157
|
|
|
4/9/18
|
|
—
|
|
|
500,000
|
|
|
1,000,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tiffany B. Kice
|
|
2/23/18
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,650
|
|
|
259,098
|
|
(1)
|
The amounts in column (d) reflect target performance payout to Messrs. Casey and Freeman in accordance with the
2018
cash incentive awards and target performance payout to Mr. Freeman under his
2018
MFSI Agreement.
|
(2)
|
The amounts in column (e) reflect maximum performance payout to Messrs. Casey and Freeman in accordance with the
2018
cash incentive awards and maximum performance payout to Mr. Freeman under his
2018
MFSI Agreement.
|
(3)
|
The amounts in column (g) reflect Messrs. Casey's and Freeman's
2018
performance-based restricted stock awards subject to vesting upon our Income before income taxes for
2018
. See the "Compensation Discussion and Analysis" section above for a further description of performance-based restricted stock incentive awards.
|
(4)
|
The amount in column (i) reflects time-vested restricted stock award granted to Messrs. Forbes and Gomez and Mses. Gerron and Kice in
2018
. The shares vest as follows: 50% after two years; 75% after three years; and 100% after four years. Ms. Kice forfeited her shares upon departure.
|
(5)
|
The amounts in column (j) reflect the grant date fair value of (i) the tranche of Messrs. Casey’s and Freeman’s performance-based restricted stock award subject to vesting, and (ii) Messrs. Forbes and Gomez and Mses. Kice’s and Gerron’s time-vested restricted stock awards granted in
2018
, computed in accordance with ASC 718. The assumptions used in the valuation of the restricted stock awards are discussed in Note 10 "Employee Benefits" of our audited financial statements, included in our
2018
Form 10-K. The grant date fair value for Messrs. Forbes and Gomez and Mses. Kice's and Gerron’s time–vested awards was based on
$55.72
per share, which was the closing price of our common stock on the grant date of
February 23, 2018
, adjusted for the accrual of dividends on unvested shares. The grant date fair value for Messrs. Casey's and Freeman's award was $54.71, which was based on the closing price of our common stock on the grant date of
March 8, 2018
, adjusted for the accrual of dividends.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Option Awards
|
|
Stock Awards
|
|||||||||||||||||
Name
(a) |
|
Number of
Securities Underlying Unexercised Options (#) Exercisable (b) |
|
Option
Exercise Price ($) (e) |
|
Option
Expiration Date (f) |
|
Number
of Shares of Stock That Have Not Vested (#) (g) (1) |
|
Market
Value of Shares of Stock That Have Not Vested ($) (h) (3) |
|
Equity
Incentive Plan Awards: Number of Unearned Shares That Have Not Vested (#) (i) (2) |
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested ($) (j) (3) |
|||||||
Brian O. Casey
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77,678
|
|
|
2,641,052
|
|
Terry Forbes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,955
|
|
|
168,470
|
|
|
—
|
|
|
—
|
|
Fabian Gomez
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,357
|
|
|
454,138
|
|
|
—
|
|
|
—
|
|
Julie K. Gerron
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,728
|
|
|
364,752
|
|
|
—
|
|
|
—
|
|
Mark R. Freeman
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,878
|
|
|
1,457,852
|
|
Tiffany B. Kice
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
The shares in column (g) will vest in late February of each year according to the following schedule provided that the individual is still employed by us on the vesting date. Ms. Kice forfeited 12,046 unvested shares upon her departure on October 31, 2018.
|
(2)
|
The shares in column (i) represent an unearned, performance-based restricted stock incentive award granted to Messrs. Casey and Freeman in 2016, 2017 and 2018, which will vest according to the following schedule, provided that Messrs. Casey and Freeman are, in most cases, still employed by us on the vesting date. Each year, the Compensation Committee establishs a specific goal for that year’s restricted shares grant. The performance goals are based upon criteria set forth in the Stock Incentive Plan. The specific performance goal for each year were established no later than March 31 of the grant year. See the "Compensation Discussion and Analysis" section above for a further description of this performance-based restricted stock incentive award.
|
(3)
|
The amounts in columns (h) and (j) reflect the value of the shares shown in columns (g) and (i), respectively, multiplied by
$34.00
, the closing market price of our common stock as of December 31,
2018
, the last business day in
2018
. Subject to his Separation Agreement, Mr. Freeman forfeited the shares scheduled to vest in 2020 and 2021 upon his departure on March 8, 2019.
|
|
|
Stock Awards
|
||||
Name
|
|
Number of Shares
Acquired on Vesting (#) (a) |
|
Value Realized
on Vesting ($) (b) (1) |
||
Brian O. Casey
|
|
43,957
|
|
|
2,444,449
|
|
Terry Forbes
|
|
1,459
|
|
|
81,587
|
|
Fabian Gomez
|
|
4,974
|
|
|
278,146
|
|
Julie K. Gerron
|
|
5,205
|
|
|
291,064
|
|
Mark R. Freeman
|
|
17,268
|
|
|
960,273
|
|
Tiffany B. Kice
|
|
3,861
|
|
|
212,261
|
|
(1)
|
Values in column (b) reflect shares that vested as of February 23,
2018
at a market value of
$55.92
per share, except for Messrs. Casey's and Freeman's shares, which vested as of March 8, 2018 at a market value of
$55.61
per share and Ms. Kice's 319 shares, which vested as of October 24,
2018
at a market value of
$44.49
per share. Shares vested for Messrs. Casey and Freeman represent performance-based restricted stock and shares vested for Messrs. Forbes and Gomez and Mses. Gerron and Kice represent time-vested restricted stock.
|
•
|
an amount equal to 1.5 times the sum of one year's worth of salary and the annual bonus paid to Mr. Casey for the most recently completed year, to be paid in monthly installments over eighteen months;
|
•
|
all unvested stock options and unvested restricted shares shall be fully vested; provided, however, that to the extent that any such awards are subject to performance-based vesting conditions that are intended to qualify for the performance-based compensation exemption under Section 162(m) of the Internal Revenue Code, then those awards will only become vested if and to the extent that such awards would have become vested in accordance with their terms if Mr. Casey's employment had continued; and provided further that, if such award is subject to periodic vesting based upon performance conditions established for each vesting period, then the annual performance conditions applicable to any such award following the termination of Mr. Casey's employment shall be the same as the last periodic performance goal established with respect to such award prior to the termination of Mr. Casey's employment or, if more favorable to Mr. Casey, the periodic performance conditions established for performance-based vesting of equity or equity-based awards granted to other senior executives who are then still employed by the Company.
|
•
|
amounts earned by the executive during his employment;
|
•
|
one year's worth of salary paid in monthly installments, less the amount of medical insurance premiums the executive would have paid had he remained employed;
|
•
|
bonus and incentive compensation earned by the executive as of the termination date;
|
•
|
vacation time that was earned and unused by the executive; and
|
•
|
medical benefits for the executive and his eligible dependents for twelve months following termination.
|
•
|
amounts earned by the executive during his employment;
|
•
|
bonus and incentive compensation earned by the executive as of the termination date;
|
•
|
vacation time that was earned and unused by the executive; and
|
•
|
medical benefits for the executive and his eligible dependents for twelve months following termination.
|
•
|
an amount equal to two times the sum of one year's worth of salary and the annual bonus paid to Mr. Casey for the most recently completed year, to be paid in monthly installments over twenty-four months;
|
•
|
bonus and incentive compensation earned by the executive as of the termination date;
|
•
|
vacation time that was earned and unused by the executive;
|
•
|
medical benefits for the executive's eligible dependents for eighteen months following termination; and
|
•
|
all unvested stock options and all unvested restricted shares shall be fully vested; provided, however, that to the extent that any such awards are subject to performance-based vesting conditions, the performance goals were achieved at 100% of the target performance. In March 2018, we entered into a Performance Share Agreement with Mr. Casey that provides the unvested restricted shares subject to the award will vest upon a change in control as follows: (a) if the change in control occurs before the last day of the one-year performance cycle, 50% of the shares covered by the award (the "Category 1 Shares") will vest and the remaining 50% (the "Category 2 Shares") will vest assuming target level performance or (b) if the change in control occurs after the end of the performance cycle, all Category 1 Shares and Category 2 Shares will fully vest to the extent then earned based on the Company's actual performance for the performance cycle.
|
•
|
amounts earned by the executive during his employment;
|
•
|
bonus and incentive compensation earned by the executive as of the termination date;
|
•
|
vacation time that was earned and unused by the executive;
|
•
|
medical benefits for the executive's eligible dependents for eighteen months following termination; and
|
•
|
all unvested stock options and all unvested restricted shares shall be fully vested.
|
•
|
vacation time that was earned and unused by the executive;
|
•
|
disability benefits, if any, at least equal to those then provided by the Company to disabled executives and their families;
|
•
|
medical benefits for the executive's eligible dependents for twelve months following termination; and
|
•
|
all unvested stock options and all unvested restricted shares shall be fully vested.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Benefits/payments upon termination
|
|
For cause, voluntary
termination without good reason or non-renewal by the executive |
|
Without cause, for good reason or non-renewal by the Company
|
|
Terminated
due to change in control |
|
Death
|
|
Disability
|
||||||||||||||
Non-compete enforced?
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
N/A
|
|
N/A
|
||||||||||||
Base salary for an additional period
(1)
|
|
$
|
629,993
|
|
|
$
|
—
|
|
|
$
|
975,000
|
|
|
$
|
1,300,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Annual bonus for an additional period
(2)
|
|
—
|
|
|
—
|
|
|
1,599,750
|
|
|
2,133,000
|
|
|
—
|
|
|
—
|
|
||||||
Performance shares
(3)
|
|
—
|
|
|
—
|
|
|
2,641,041
|
|
|
2,641,041
|
|
|
2,641,041
|
|
|
2,641,041
|
|
||||||
Medical benefits
(4)
|
|
20,007
|
|
|
20,007
|
|
|
30,011
|
|
|
30,011
|
|
|
30,011
|
|
|
20,007
|
|
||||||
Total
|
|
$
|
650,000
|
|
|
$
|
20,007
|
|
|
$
|
5,245,802
|
|
|
$
|
6,104,052
|
|
|
$
|
2,671,052
|
|
|
$
|
2,661,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts reflect one year’s base salary, less the amount of medical insurance premiums Mr. Casey would have paid had he remained employed with the Company, for termination for cause, voluntary termination without good reason or non-renewal by Mr. Casey. Amounts reflect 1.5 times Mr. Casey's annual base salary, less the amount of medical insurance premiums Mr. Casey would have paid had he remained employed with the Company, for termination without cause, for good reason or non-renewal by the Company. Amounts reflect 2 times Mr. Casey's annual base salary, less the amount of medical insurance premiums Mr. Casey would have paid had he remained employed with the Company, for termination due to change in control.
|
(2)
|
Amounts reflect 1.5 times Mr. Casey's annual bonus paid for the most recently completed year for termination without cause, for good reason or non-renewal by the Company. Amounts reflect two times Mr. Casey's annual bonus paid for the most recently completed year for termination due to change in control.
|
(3)
|
Amounts reflect the estimated value of the acceleration of Mr. Casey’s outstanding performance-based restricted stock awards (
77,678
shares, which are equal to the number of outstanding performance-based restricted stock shares that are reported in the "Outstanding Equity Awards at December 31,
2018
" table), using our closing stock price of
$34.00
per share as of the last day of business in
2018
.
|
(4)
|
Amounts reflect the Company’s estimated premiums to continue medical benefits for Mr. Casey and his dependents, as applicable, for twelve months after termination for cause, voluntary termination without good reason, non-renewal by the executive or disability, or for eighteen months after termination without cause, for good reason, non-renewal by the Company, change in control or death.
|
•
|
amounts paid under other benefit plans, including our family and medical leave of absence and long-term disability programs.
|
•
|
a merger or consolidation of the Company with or into another corporation in which the Company shall not be the surviving corporation (other than a merger undertaken solely in order to reincorporate in another state) (for purposes hereof, the Company shall not be deemed the surviving corporation in any such transaction if, as the result thereof, it becomes a wholly-owned subsidiary of another corporation);
|
•
|
a dissolution of the Company;
|
•
|
a transfer of all or substantially all of the assets of the Company in one transaction or a series of related transactions to one or more other persons or entities; or
|
•
|
a transaction or series of transactions that results in any entity, person, or group, becoming the beneficial owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities; or during any period of two consecutive years commencing on or after January 1, 2005, individuals who, at the beginning of the period constituted the Company’s Board of Directors, cease for any reason to constitute at least a majority, unless the election of each director who was not a director at the beginning of the period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period; provided, however, that a "Change in Control" shall not be deemed to have occurred if the ownership of 50% or more of the combined voting power of the surviving corporation, asset transferee or Company (as the case may be), after giving effect to the transaction or series of transactions, is directly or indirectly held by (A) a trustee or other fiduciary under an employee benefit plan maintained by the Company, or (B) one or more of the "executive officers" of the Company that held such positions prior to the transaction or series of transactions, or any entity, person or group under their control.
|
•
|
executive’s conviction of any felony or other serious crimes;
|
•
|
executive’s material breach of any of the terms of the employment agreement or any other written agreement or material company policy to which the executive and the Company are parties or are bound, if such breach shall be willful and shall continue beyond a period of 30 days immediately after written notice thereof by the Company to the executive;
|
•
|
wrongful misappropriation by the executive of any money, assets, or other property of the Company or of a client of the Company;
|
•
|
willful actions or failures to act by the executive which subject the executive or the Company to censure by the Securities and Exchange Commission as described in and pursuant to Section 203(e) or 203(f) of the Investment Advisers Act of 1940 or Section 9(b) of the Investment Company Act of 1940 or to censure by a state securities administrator pursuant to applicable state securities laws or regulations;
|
•
|
executive’s commission of fraud or gross moral turpitude; or
|
•
|
executive’s continued willful failure to substantially perform executive’s duties under the applicable agreement after receipt of written notice thereof and an opportunity to so perform.
|
•
|
any material breach by the Company of the employment agreement (including any reduction in the executive’s base salary);
|
•
|
any material adverse change in the status, position or responsibilities of the executive including, in the case of Mr. Casey, a change in the executive’s reporting relationship so that he no longer reports to the Board of Directors, the removal from or failure to re-elect the executive as a member of the Board or if the Company becomes a wholly-owned subsidiary of another company and the executive serves only as an officer of the subsidiary company;
|
•
|
assignment of duties to the executive that are materially inconsistent with the executive’s position and responsibilities described in his employment agreement;
|
•
|
the failure of the Company to assign the employment agreement to a successor to the Company or failure of a successor to the Company to explicitly assume and agree to be bound by the employment agreement; or
|
•
|
requiring the executive to be principally based at any office or location more than 40 miles from the current offices of the Company in Dallas, Texas.
|
•
|
a merger or consolidation of the Company with or into another corporation (other than a merger undertaken solely in order to reincorporate in another state) immediately following which the beneficial holders of the voting stock of the Company immediately prior to such transaction or series of transactions do not continue to hold 50% or more of the voting stock (based upon voting power) of the Company or (A) any entity that owns, directly or indirectly, the stock of the Company, (B) any entity with which the Company has merged, or (C) any entity that owns an entity with which the Company has merged;
|
•
|
a dissolution of the Company;
|
•
|
a transfer of all or substantially all of the assets of the Company in one or more related transactions to one or more other persons or entities;
|
•
|
a transaction or series of transactions that results in any entity, "Person" or "Group" becoming the beneficial owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities; or
|
•
|
during any period of two consecutive years commencing on or after January 1, 2016 (in the case of Mr. Casey), individuals who, at the beginning of the period constituted the Company’s Board of Directors, cease for any reason to constitute at least a majority, unless the election of each director who was not a director at the beginning of the period has been approved in advance by directors representing at least two-thirds (2/3) of the directors then in office who were directors at the beginning of the period; provided, however, that a "Change in Control" shall not be deemed to have occurred if the ownership of 50% or more of the combined voting power of the surviving corporation, asset transferee or Company (as the case may be), after giving effect to the transaction or series of transactions, is directly or indirectly held by (A) a trustee or other fiduciary under an employee benefit plan maintained by the Company, or (B) one or more of the "executive officers" of the Company that held such positions prior to the transaction or series of transactions, or any entity, Person or Group under their control.
|
|
|
2018
|
|
2017
|
||||
Audit fees
(1)
|
|
$
|
440,000
|
|
|
$
|
367,040
|
|
Audit-related fees
(2)
|
|
350,000
|
|
|
398,000
|
|
||
Tax fees
(3)
|
|
459,700
|
|
|
—
|
|
||
All other fees
|
|
—
|
|
|
—
|
|
||
Total
|
|
$
|
1,249,700
|
|
|
$
|
765,040
|
|
(1)
|
Includes the aggregate fees billed for professional services in connection with the audit of our annual financial statements, the review of the financial statements included in our Form 10-Qs and testing required by Sarbanes-Oxley Section 404, as well as for services that are normally provided in connection with statutory or regulatory filings or engagements.
|
(2)
|
Includes the aggregate fees billed for financial audit services to common trust funds sponsored by Westwood Trust. These fees are not paid by Westwood but are paid by the common trust funds, with the exception of approximately $60,000 fees paid by Westwood for additional fees related to 2017.
|
(3)
|
Includes the aggregate fees billed for tax services provided to the common trust funds for the year ended December 31, 2018. These fees were not paid by Westwood but are paid by the common trust funds. Deloitte & Touche LLP did not provide any tax services for the year ended December 31, 2017.
|
•
|
Increase the total number of shares currently authorized under the Plan by 200,000 shares; and
|
•
|
Allow stock appreciation rights, restricted stock units and other stock-based awards to be awarded under the Plan.
|
•
|
A significant portion of each named executive officer's total direct compensation -- approximately 50% to 82% (excluding Mr. Paddon and Ms. Kice as discussed above in "Compensation Discussion and Analysis") -- was "at risk" compensation in
2018
, delivered in the form of an annual cash incentive award and an annual equity incentive award.
|
•
|
The annual incentive award to the Chief Executive Officer is based on a scorecard with four performance categories (investment performance, service and sales, financial results and strategic goals). The Chief Executive Officer has the opportunity to earn 50% of target for achieving threshold performance and up to 185% of target for achieving maximum performance (with no payouts for performance below threshold levels).
|
•
|
The annual performance-based restricted stock awards to the Chief Executive Officer and Chief Investment Officer are based upon annual, pre-determined performance goals, the criteria for which were approved by our stockholders in 2006. An expanded list of performance measures upon which performance goals may be based was approved by our stockholders in 2009, 2011, 2016 and 2017. The Chief Executive Officer and Chief Investment Officer have the opportunity to earn 25% of target for achieving threshold performance and up to 185% of target for achieving maximum performance (with no payouts for performance below threshold levels). The awards vest ratably on the first, second and third anniversary of the grant date.
|
•
|
Over the past three years, the named executive officers have not received significant perquisites.
|
•
|
The Compensation Committee endeavors to structure the Company's executive compensation program to motivate and reward our executive officers for taking appropriate business risks, while avoiding pay practices that incentivize excessive risk-taking. In connection with the Compensation Committee's review of our compensation policies and practices for all employees in February
2019
, the Compensation Committee concluded that these policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
|
•
|
each stockholder known by us to own more than five percent (5%) of outstanding common stock;
|
•
|
each director and director nominee;
|
•
|
each named executive officer; and
|
•
|
all directors and executive officers as a group.
|
|
|
|
|
|
||
Beneficial Owners
|
|
Number of Shares
Beneficially Owned |
|
Percent of
Class |
||
5% Beneficial Owners
|
|
|
|
|
||
BlackRock, Inc.
(2)(3)
|
|
732,202
|
|
|
8.1
|
%
|
Wells Fargo & Company
(2)(4)
|
|
726,363
|
|
|
8.0
|
%
|
GAMCO Investors, Inc.
(2)(5)
|
|
563,191
|
|
|
6.2
|
%
|
Conestoga Capital Advisors, LLC
(2)(6)
|
|
508,836
|
|
|
5.6
|
%
|
Renaissance Technologies LLC
(2)(7)
|
|
494,392
|
|
|
5.5
|
%
|
Directors and Named Executive Officers
(1)
|
|
|
|
|
||
Brian O. Casey
|
|
338,537
|
|
|
3.7
|
%
|
Terry Forbes
|
|
8,994
|
|
|
*
|
|
Fabian Gomez
|
|
20,817
|
|
|
*
|
|
Steven Paddon
|
|
5,761
|
|
|
*
|
|
Julie K. Gerron
|
|
33,417
|
|
|
*
|
|
Mark R. Freeman
|
|
92,758
|
|
|
1.0
|
%
|
Tiffany B. Kice
|
|
4,801
|
|
|
*
|
|
Richard M. Frank
|
|
30,868
|
|
|
*
|
|
Susan M. Byrne
|
|
244,715
|
|
|
2.7
|
%
|
Ellen H. Masterson
|
|
7,868
|
|
|
*
|
|
Robert D. McTeer
|
|
19,368
|
|
|
*
|
|
Geoffrey R. Norman
|
|
11,118
|
|
|
*
|
|
Martin J. Weiland
|
|
10,837
|
|
|
*
|
|
Raymond E. Wooldridge
|
|
50,683
|
|
|
*
|
|
All directors and named executive officers as a group (14 Persons)
|
|
880,542
|
|
|
9.7
|
%
|
*
|
Less than 1%
|
(1)
|
The address of each director and named executive officer is 200 Crescent Court, Suite 1200, Dallas, Texas, 75201.
|
(2)
|
The beneficial ownership information reported for this stockholder is based upon the most recent Form 13F, Schedule 13G or Schedule 13D filed with the SEC by such stockholder.
|
(3)
|
The address of BlackRock, Inc. is 55 East 52
nd
Street, New York, New York 10055. On February 6, 2019, BlackRock, Inc. reported its beneficial ownership, indicating that it held sole voting power over 702,207 shares and sole dispositive power over 732,202 shares.
|
(4)
|
The address of Wells Fargo & Company is 420 Montgomery Street, San Francisco, CA 94163. On January 22, 2019, Wells Fargo & Company reported its beneficial ownership, indicating that it held sole voting and sole dispositive power over 7,843 shares and shared dispositive power over 718,520 shares.
|
(5)
|
The address of GAMCO Investors, Inc., or GAMCO is One Corporate Center, Rye, NY 10580. On January 30, 2019, GAMCO reported its beneficial ownership, indicating that it held sole voting power over 563,191 shares.
|
(6)
|
The address of Conestoga Capital Advisors, LLC is 550 E. Swedesford Road, Suite 120, Wayne, PA 19087. On January 8, 2019, Conestoga Capital Advisors, LLC reported its beneficial ownership, indicating that it held sole voting power over 461,026 shares and sole dispositive power over 508,836 shares.
|
(7)
|
The address of Renaissance Technologies LLC is 800 Third Avenue, New York, NY 10022. On February 13, 2019, Renaissance Technologies LLC reported its beneficial ownership, indicating that it held sole voting power over 469,900 shares, sole dispositive power over 479,306 shares and shared dispositive power over 15,086 shares.
|
|
AUDIT COMMITTEE
|
|
Ellen H. Masterson, Chairperson
Richard M. Frank
Geoffrey R. Norman
Raymond E. Wooldridge
|
•
|
If the shares are registered in the name of the stockholder, stockholders should contact us at our offices at 200 Crescent Court, Suite 1200, Dallas, Texas 75201, Attention: Corporate Secretary, or by telephone at 214-756-6900, to inform us of the request.
|
•
|
If a bank, broker or other nominee holds the shares, stockholders should contact the bank, broker or other nominee directly.
|
|
By Order of the Board of Directors,
|
|
|
Brian O. Casey
|
President and Chief Executive Officer
|
1.
|
ESTABLISHMENT, PURPOSE AND TERM OF PLAN
.
|
1.
|
Establishment.
This Sixth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan (the “
Plan
”) is hereby established effective as of March 8, 2019 (the “
Effective Date
”).
|
2.
|
Purpose.
The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract and retain persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group.
|
3.
|
Term of Plan.
The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares (if any) under the terms of the Plan and the agreements evidencing the Awards granted under the Plan have lapsed. However, all Awards shall be granted, if at all, on or before March 10, 2027.
|
2.
|
DEFINITIONS AND CONSTRUCTION
.
|
1.
|
Definitions.
Whenever used herein, the following terms shall have their respective meanings set forth below:
|
(a)
|
“
Acquiring Corporation
”
has the meaning given to it in Section 17.2.
|
(b)
|
“
Annual Incentive Award
”
has the meaning given to it in Section 11.1.
|
(c)
|
“
Award
”
means any form of incentive or performance award granted under the Plan, whether singly or in combination, to a Participant by the Committee pursuant to such terms, conditions, restrictions and/or limitations (if any) as the Committee may establish. Awards granted under the Plan may include:
|
(i)
|
Options awarded pursuant to Sections 6;
|
(ii)
|
Stock Appreciation Rights awarded pursuant to Section 7;
|
(iii)
|
Restricted Stock awarded pursuant to Section 9;
|
(iv)
|
Restricted Stock Units awarded pursuant to Section 10.
|
(v)
|
Other Stock-Based Awards awarded pursuant to Section 14.
|
(vi)
|
Annual Incentive Awards awarded pursuant to Section 11;
|
(vii)
|
Performance-Based Awards awarded pursuant to Section 12; and
|
(viii)
|
Discretionary Bonus Awards awarded pursuant to Section 13.
|
(d)
|
“
Award Agreement
”
means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions of an Award granted to the Participant.
|
(e)
|
“
Board
”
means the Board of Directors of the Company.
|
(f)
|
“
Cashless Exercise
”
has the meaning given to it in Section 6.3(a).
|
(g)
|
“
Cause
”
shall mean any of the following: (i) the Participant’s theft of a Participating Company’s property or falsification of any Participating Company documents or records; (ii) the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information; (iii) any action by the Participant which has a detrimental effect on a Participating Company’s reputation or business; (iv) the Participant’s failure or inability to perform any reasonable assigned duties after written notice from the Participating Company Group or any Participating Company of, and a reasonable opportunity to cure, such failure or inability; (v) any material breach by the Participant of any employment agreement between the Participant and the Participating Company Group or any Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vi) the Participant’s conviction (including any plea of guilty or
|
(h)
|
“
Change in Control
”
has the meaning given to it in Section 17.1.
|
(i)
|
“
Code
”
means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
|
(j)
|
“
Committee
”
means the Compensation Committee or other committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. In the absence of the Compensation Committee or other committee of the Board duly appointed to administer the Plan, “
Committee
”
also means the Board.
|
(k)
|
“
Company
”
means Westwood Holdings Group, Inc., a Delaware corporation, or any successor corporation thereto.
|
(l)
|
“
Consultant
”
means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under the Securities Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act.
|
(m)
|
“
Director
”
means a member of the Board or of the board of directors of any other Participating Company.
|
(n)
|
“
Disability
”
means the permanent and total disability of the Participant within the meaning of Section 22(e)(3) of the Code.
|
(o)
|
“
Employee
”
means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code;
provided
,
however
, that neither service as a Director nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan.
|
(p)
|
“
Exchange Act
”
means
the Securities Exchange Act of 1934, as amended.
|
(q)
|
“
Fair Market Value
”
means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
|
(i)
|
If, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the New York Stock Exchange or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in
The Wall Street Journal
or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.
|
(ii)
|
If, on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith based on a reasonable valuation method that is consistent with the requirements of Section 409A of the Code and the regulations thereunder, without regard to any restriction other than a restriction which, by its terms, will never lapse.
|
(r)
|
“
Good Reason
”
means (i) a resignation occurring within ninety (90) days following a Change in Control; (ii) the relocation of the principal place of business of the Participating Company for which the Participant renders Service to a location more than 40 miles from its location as of the date of the Change in Control without the Participant’s consent or (iii) a material reduction in the Participant’s salary or bonus opportunity, or the Participant’s responsibilities.
|
(s)
|
“
Incentive Stock Option
”
means
an Option intended to be (as set forth in the Option Agreement), and which qualifies as, an incentive stock option within the meaning of Section 422(b) of the Code.
|
(t)
|
“
Insider
”
means an officer or a Director of the Company or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
|
(u)
|
“
Non-Employee Director
”
means a member of the Board who is not an active Employee of the Company or any Subsidiary.
|
(v)
|
“
Nonstatutory Stock Option
”
means
an Option not intended to be (as set forth in the Option Agreement), or which does not qualify as, an Incentive Stock Option.
|
(w)
|
“
Other Stock-Based Award
”
means an Award granted to an eligible person under Section 14 hereof.
|
(x)
|
“
Option
”
means a right to purchase Stock (subject to adjustment as provided in Section 4.3) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.
|
(y)
|
“
Option Agreement
”
means an Award Agreement setting forth the terms, conditions and restrictions of an Option granted to a Participant and any shares acquired upon the exercise thereof. An Option Agreement may consist of a form of “Notice of Grant of Stock Option” and a form of “Stock Option Agreement” incorporated therein by reference, or such other form or forms as the Committee may approve from time to time.
|
(z)
|
“
Option Expiration Date
”
has the meaning given to it in Section 6.4(a)(i).
|
(aa)
|
“
Ownership Change Event
”
has the meaning given to it in Section 17.1.
|
(ab)
|
“
Parent
”
means
(i) any “parent corporation” as defined in Section 424(e) of the Code and any successor provisions; (ii) any other entity that is taxed as a corporation under Section 7701(a)(3) of the Code and is a member of the “affiliated group” as defined in Section 1504(a) of the Code of which the Company is a common subsidiary corporation, and (iii) any other entity as may be permitted from time to time by the Code or the Internal Revenue Service to be an employer of employees to whom Options may be granted; provided, however, that in each case the Company must be consolidated in the Parent’s financial statements.
|
(ac)
|
“
Participant
”
means a person who has been granted one or more awards pursuant to the terms and conditions of the Plan.
|
(ad)
|
“
Participating Company
”
means the Company or any Parent or Subsidiary.
|
(ae)
|
“
Participating Company Group
”
means, at any point in time, all corporations or other entities collectively which are then Participating Companies.
|
(af)
|
“
Performance-Based Exception
”
means the performance-based exception from the tax deductibility limitation imposed by Prior Section 162(m) of the Code, as set forth in Prior Section 162(m)(4)(C) of the Code. Notwithstanding any other provision in the Plan, the Plan is not intended to modify in any material respect any outstanding Performance-Based Award intended to qualify for the Performance-Based Exception.
|
(ag)
|
“
Performance Cycle
”
means, with respect to any Annual Incentive Award, each calendar year, unless otherwise designated by the Committee.
|
(ah)
|
“
Performance Goals
”
means, with respect to any Annual Incentive Award or Performance-Based Award, one or more targets, goals or levels of attainment required to be achieved in terms of the specified Performance Measure(s) during a fiscal year or specified performance period.
|
(ai)
|
“
Performance Measure
”
has the meaning given to it in Section 12.
|
(aj)
|
“
Performance-Based Award
”
has the meaning given to it in Section 12.
|
(ak)
|
“
Permitted Transferees
”
means a member of a Participant’s immediate family, trusts for the exclusive benefit of such Participant and/or such Participant’s immediate family members, and partnerships or other entities in which the Participant and/or such immediate family members are the only partners, provided that no consideration is provided for the transfer. Immediate family members shall include a Participant’s spouse, descendants (children, grandchildren and more remote descendants), spouses of descendants, and shall include step-children and relationships arising from legal adoption.
|
(al)
|
“
Plan
”
has the meaning given to it in Section 1.1.
|
(am)
|
“
Prior Section 162(m) of the Code
” means Section 162(m) of the Code as in effect immediately prior to the amendments made to Section 162(m) of the Code by Section 13601 of the Tax Cuts and Jobs Act of 2017, and the regulations and other guidance promulgated thereunder.
|
(an)
|
“
Restricted Period
”
has the meaning given to it in Section 9.1.
|
(ao)
|
“
Restricted Stock
”
means an award of Stock made under Section 9, which is subject to vesting provisions.
|
(ap)
|
“
Restricted Stock Unit
”
means an Award granted pursuant to Section 10 and shall be evidenced by a bookkeeping entry representing the equivalent of one share of Stock.
|
(aq)
|
“
Rule 16b
-
3
”
means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.
|
(ar)
|
“
Securities Act
”
means the Securities Act of 1933, as amended.
|
(as)
|
“
Service
”
means a Participant’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. A Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders Service to the Participating Company Group or a change in the Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service with the Participating Company Group shall not be deemed to have terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company; provided, however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave the Participant’s Service shall be deemed to have terminated unless the Participant’s right to return to Service with the Participating Company Group is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under any Option Agreement. The Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.
|
(at)
|
“
Stock Appreciation Right
” or “
SAR
”
means a right granted pursuant to Section 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the grant price of the SAR, as set forth in the applicable Award Agreement.
|
(au)
|
“
Stock
”
means the common stock of the Company, as adjusted from time to time in accordance with Section 4.3.
|
(av)
|
“
Subsidiary
”
means (i) any “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code and any successor provisions, (ii) any other entity that is taxed as a corporation under Section 7701(a)(3) of the Code and is a member of the “affiliated group” as defined in Section 1504(a) of the Code of which the Company is a common parent corporation, and (iii) any other entity as may be permitted from time to time by the Code or the Internal Revenue Service to be an employer of employees to whom Options may be granted; provided, however, that in each case the subsidiary corporation must be consolidated in the Company’s financial statements.
|
(aw)
|
“
Ten Percent Owner Participant
”
means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the Code.
|
2.
|
Construction.
Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
|
3.
|
ADMINISTRATION
.
|
1.
|
Administration.
Unless the Board determines otherwise,
the Plan shall be administered by the Committee. All questions of interpretation of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final and binding upon all persons having an interest in the Plan.
|
2.
|
Authority of Officers.
Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, determination or election.
|
3.
|
Powers.
In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
|
(a)
|
to determine the persons to whom, and the time or times at which, Awards shall be granted and, if applicable, the number of shares of Stock to be subject thereto;
|
(b)
|
to designate Options as Incentive Stock Options or Nonstatutory Stock Options;
|
(c)
|
to determine the Fair Market Value of shares of Stock or other property;
|
(d)
|
to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and, if applicable, any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of an Option, (ii) the grant price of an SAR, (iii) the method of payment for shares purchased upon the exercise of the Option, (iv) the method for satisfaction of any tax withholding obligation arising in connection with the Award or such shares of Stock issued or cash provided thereunder, including by the withholding or delivery of shares of Stock or cash, (v) the timing, terms and conditions of the exercisability of the Award or the vesting of any shares acquired upon the exercise thereof, (vi) the time of the expiration of the Award, (vi) the effect of the Participant’s termination of Service with the Participating Company Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Award not inconsistent with the terms of the Plan;
|
(e)
|
to approve one or more forms of Award Agreement or Option Agreement;
|
(f)
|
to amend, modify, extend, cancel or renew any Award, or to waive any restrictions or conditions applicable to any Award or any shares of Stock acquired upon the exercise thereof,
provided, however
, that, notwithstanding anything in this Plan to the contrary: (i) the Committee shall not have discretion to accelerate vesting of an outstanding Award other than in connection with the Participant’s death or Disability, or in connection with the consummation of a Change in Control; and (ii) other than with respect to an adjustment described in Section 4.3, the Committee shall not, without stockholder approval, (A) lower the exercise price of an existing Option, (B) lower the grant price of an existing SAR, (C) cancel an existing Option (or SAR) in exchange for the grant of any new Option (or SAR) with a lower exercise price or grant price than the cancelled or exchanged Option (or SAR), (D) cancel an existing Option (or SAR) in exchange for cash, other property or the grant of any new Award at a time when the exercise price of the existing Option (or the grant price of the existing SAR) is greater than the current Fair Market Value of a share of Stock, or (E) take any other action with respect to an Option or SAR that would be treated as a “repricing” under generally accepted accounting principles;
|
(g)
|
to continue, extend or defer the exercisability of any Award or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following a Participant’s termination of Service with the Participating Company Group;
|
(h)
|
to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Awards;
|
(i)
|
to correct any defect, supply any omission or reconcile any inconsistency in the Plan, any Award Agreement or Option Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law; and
|
(j)
|
to consider, upon an Employee’s termination of Service on account of a Disability, the circumstances of such Disability and whether the Employee’s Award should be amended to provide that it is fully vested, if the Committee in its sole discretion considers such action in the best interest of the Company and the Employee.
|
4.
|
Administration with Respect to Insiders.
With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.
|
5.
|
Indemnification.
In addition to such other rights of indemnification as they may have as members of the Committee or Board or officers or employees of the Participating Company Group, members of the Committee or Board and any officers or employees of the Participating Company Group to whom authority to act for the Committee or Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
|
4.
|
SHARES SUBJECT TO PLAN
.
|
1.
|
Maximum Number of Shares Issuable.
Subject to adjustment as provided in Section 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be
5,048,100
. Shares issued under the Plan shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If all or a portion of an outstanding Award for any reason expires, terminates, is canceled or settled in cash, any shares of Stock subject to that portion of the Award that expired, terminated, was cancelled or was settled in cash shall again be available for issuance under the Plan. If shares of Restricted Stock are forfeited, the shares of Stock so forfeited shall again be available for issuance under the Plan. Notwithstanding the foregoing, shares of Stock that are exchanged by a Participant or withheld by the Company as full or partial payment of the exercise price of an Option, as well as any shares of Stock exchanged by a Participant or withheld by the Company or any Subsidiary to satisfy the tax withholding obligations related to any Award under the Plan, shall not be available for subsequent Awards under the Plan. If any shares of Stock delivered to a Participant upon the exercise of an Option, or any shares of Stock issued to a Participant pursuant to any other Award, shall for any reason be repurchased by the Company under a repurchase option provided under any Award Agreement, the shares of Stock repurchased by the Company under such repurchase option shall revert to and become available for issuance again under the Plan.
|
2.
|
Award Limits.
Subject to adjustment as provided in Section 4.3, the maximum aggregate number of shares of Stock with respect to which Awards may be granted in a single calendar year to an individual Participant may not exceed 316,033 shares. The maximum amount a Participant may earn for any calendar year under cash incentive awards (including Annual Incentive Awards and cash Performance Based Awards) granted to such Participant under the Plan is $5 million.
|
3.
|
Adjustments for Changes in Capital Structure
.
|
(a)
|
In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made (i) in the number and class of shares subject to the Plan and to any outstanding Awards (if applicable), (ii) in the exercise or grant price per share of any outstanding Awards (if applicable), and (iii) in the maximum number of shares with respect to which Awards may be granted to any Participant in a calendar year. If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 17.1) shares of another corporation (the “
New Shares
”), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are exercisable for or settled in New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.3 shall be rounded down to the nearest whole number, and in no event may the exercise price of any Award be decreased to an amount less than the par value, if any, of the stock subject to the Award. The adjustments determined by the Committee pursuant to this Section 4.3 shall be final, binding and conclusive.
|
(b)
|
In addition to the adjustments permitted under paragraph (a) above, the Committee, in its sole discretion, may make such other adjustments or modifications in the terms of any Awards that it deems appropriate to reflect any of the events described in Section 4.3(a), including, but not limited to, (i) modifications of performance goals and changes in the length of Performance Cycles or performance periods, (ii) the substitution of other property of equivalent value (including, without limitation, cash, other securities and securities of entities other than the Company that agree to such substitution) for the shares of Stock available under the Plan or the shares of Stock covered by outstanding Awards, including arranging for the assumption, or replacement with new awards, of Awards held by Participants, but in either case only to the extent permitted by Prior Section 162(m) of the Code with respect to Awards intended to qualify for the Performance-Based Exception, or (iii) in connection with any sale of a Subsidiary, arranging for the assumption, or replacement with new awards, of Awards held by Participants employed by the affected Subsidiary by the Subsidiary or an entity that controls the Subsidiary following the sale of such Subsidiary.
|
(c)
|
The determination of the Committee as to the foregoing adjustments set forth in this Section 4.3(c), if any, shall be made in accordance with Sections 409A or 424 of the Code, to the extent applicable, and shall be conclusive and binding on Participants under the Plan.
|
5.
|
ELIGIBILITY AND OPTION LIMITATIONS
.
|
1.
|
Persons Eligible for Awards.
Awards may be granted pursuant to this Plan only to Employees, Consultants, and Directors. For purposes of the foregoing sentence, “Employees,” “Consultants” and “Directors” shall include prospective Employees, prospective Consultants and prospective Directors to whom Awards are granted in connection with written offers of an employment or other service relationship with the Participating Company Group. Eligible persons may be granted more than one (1) Award.
|
2.
|
Option Grant Restrictions.
Any person who is not an Employee on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee shall be deemed granted effective on the date such person commences Service with a Participating Company, with an exercise price determined as of such date in accordance with Section 6.1.
|
3.
|
Fair Market Value Limitation.
To the extent that Options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for Stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portions of such Options which exceed such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of Stock shall be determined as of the time the Option with respect to such Stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 5.3, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 5.3, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option.
|
6.
|
TERMS AND CONDITIONS OF OPTIONS
.
|
1.
|
Exercise Price.
The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share for an Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option, and (b) no Incentive Stock Option granted to a Ten Percent Owner Participant shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.
|
2.
|
Exercisability and Term of Options.
Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Option Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner Participant shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option, and (c) no Option granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences Service with a Participating Company. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, any Option granted hereunder shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.
|
3.
|
Payment of Exercise Price.
|
(a)
|
Forms of Consideration Authorized
.
Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by delivery of a properly executed notice together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “
Cashless Exercise
”
), (iv) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (v) by any combination thereof. In no event shall the Company accept a promissory note in payment of the exercise price, or make a loan to a Participant to enable the Participant to exercise an Option. The Committee may at any time or from time to time, by approval of or by amendment to the standard forms of Option Agreement described in Section 6.6, or by other means, grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.
|
(b)
|
Limitations on Forms of Consideration.
|
(i)
|
Tender of Stock.
Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
|
(ii)
|
Cashless Exercise.
The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise.
|
4.
|
Effect of Termination of Service.
|
(a)
|
Option Exercisability
.
Subject to earlier termination of the Option as otherwise provided herein and unless otherwise provided by the Committee in the grant of an Option and set forth in the Option Agreement, an Option shall be exercisable after a Participant’s termination of Service only during the applicable time period determined in accordance with this Section 6.4 and thereafter shall terminate:
|
(i)
|
Disability.
If the Participant’s Service with the Participating Company Group terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of one (1) year (or such other period of time as determined by the Committee, in its discretion) after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Option Agreement evidencing such Option (the “
Option Expiration Date
”).
|
(ii)
|
Death.
If the Participant’s Service with the Participating Company Group terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of one (1) year (or such other period of time as determined by the
|
(iii)
|
Cause
. If the Participant’s Service with the Participating Company Group is terminated for Cause, the Option shall terminate and cease to be exercisable immediately upon such termination of Service.
|
(iv)
|
Termination of Service.
If the Participant’s Service with the Participating Company Group terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable by the Participant on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months (or such other period of time as determined by the Committee, in its discretion) after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
|
(b)
|
Extension if Exercise Prevented by Law
.
Notwithstanding the foregoing, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 20 below, the Option shall remain exercisable until three (3) months (or such longer period of time as determined by the Committee, in its discretion) after the date the Participant is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date.
|
(c)
|
Extension if Participant Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 6.4(a) of shares acquired upon the exercise of the Option would subject the Participant to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Participant would no longer be subject to such suit, (ii) the one hundred and ninetieth (190
th
) day after the Participant’s termination of Service, or (iii) the Option Expiration Date.
|
(d)
|
Option Vesting
. Every Option awarded under the Plan (including those Options awarded prior to the Effective Date, which are hereby amended to incorporate the following terms) shall become 100% vested if the Participant’s Service with the Participating Company Group terminates because of the death of the Participant, as of the date of the Participant’s death.
|
5.
|
Dividend Payments.
No dividends or dividend equivalents will be accrued or paid with respect to Options.
|
6.
|
Standard Forms of Option Agreement.
|
(a)
|
Option Agreement.
Unless otherwise provided by the Committee at the time the Option is granted, an Option shall comply with and be subject to the terms and conditions set forth in the form of Option Agreement approved by the Committee concurrently with its adoption of the Plan and as amended from time to time
|
(b)
|
Authority to Vary Terms.
The Committee shall have the authority from time to time to vary the terms of any standard form of Option Agreement described in this Section 6.6 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan.
|
7.
|
STOCK APPRECIATION RIGHTS
|
1.
|
Grant of Stock Appreciation Rights.
|
(a)
|
A Stock Appreciation Right may be granted to any eligible person selected by the Committee. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement, provided that the term of any Stock Appreciation Right shall not exceed ten years.
|
(b)
|
A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount equal to the product of (i) the excess of (A) the Fair Market Value of the shares of Stock on the date the Stock Appreciation Right is exercised over (B) the grant price of the Stock Appreciation Right and (ii) the number of shares of Stock with respect to which the Stock Appreciation Right is exercised, subject to any limitations the Committee may impose.
|
(c)
|
The grant price per share of Stock subject to a Stock Appreciation Right shall be determined by the Committee and set forth in the Award Agreement;
provided that
, the grant price for any Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant.
|
(d)
|
The provisions set forth in Section 6.4 with respect to the exercise of Options following termination of employment shall apply as well to such exercise of SARs.
|
2.
|
Payment and Limitations on Exercise.
Payment of the amounts determined under Section 7.1(b) hereof shall be in cash, in shares of Stock (based on the Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee.
|
3.
|
Dividend Payments.
No dividends or dividend equivalents will be accrued or paid with respect to SARs.
|
8.
|
AWARDS TO NON-EMPLOYEE DIRECTORS
.
|
9.
|
AWARD AND DELIVERY OF RESTRICTED STOCK
.
|
1.
|
Restricted Period.
At the time an award of Restricted Stock is made, the Committee shall establish a period or periods of time (each a
“
Restricted Period
”
) or such other restrictions on the vesting of the Restricted Stock as it shall deem appropriate or applicable to such award. Each award of Restricted Stock may have a different Restricted Period or Restricted Periods. The Committee may, in its sole discretion, at the time an award is made, provide for the incremental lapse of Restricted Periods with respect to a portion or portions of the Restricted Stock awarded, and for the lapse or termination of restrictions upon all or any portion of the Restricted Stock upon the satisfaction of other conditions in addition to or other than the expiration of the applicable Restricted Period. The Committee may also, in its sole discretion, shorten or terminate a Restricted Period or waive any conditions for the lapse or termination of restrictions with respect to all or any portion of the Restricted Stock.
|
2.
|
Rights and Privileges.
At the time a grant of Restricted Stock is made to a Participant, a stock certificate representing a number of shares of the Company’s common stock equal to the number of shares of such Restricted Stock shall be registered in the Participant’s name but shall be held in custody by the Company for such Participant’s account. The Participant shall generally have the rights and privileges of a stockholder as to such Restricted Stock, including, without limitation, the right to vote the Restricted Stock, except that, subject to the earlier lapse or termination of restrictions as herein provided, the following restrictions shall apply: (i) the Participant shall not be entitled to delivery of the stock certificate evidencing Restricted Stock until the expiration or termination of the Restricted Period applicable to such shares and the satisfaction of any other conditions prescribed by the Committee; (ii) none of the shares then subject to a Restricted Period shall be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of during the Restricted Period applicable to such shares and until the satisfaction of any other conditions prescribed by the Committee; and (iii) all of the shares then subject to a Restricted Period shall be forfeited and all rights of the Participant to such Restricted Stock shall terminate without further obligation on the part of the Company if the Participant ceases to be an Employee, Consultant or Director of the Company or any of its subsidiaries before the expiration or termination of such Restricted Period and the satisfaction of any other conditions prescribed by the Committee applicable to such Restricted Stock. No dividends or dividend equivalents will be paid with respect to outstanding shares of Restricted Stock then subject to a Restricted Period. The Committee may provide that dividends or dividend equivalents will be accrued with respect to such shares of Restricted Stock, in which event the dividends will be subject to the vesting conditions applicable to the corresponding shares of Restricted Stock. Accordingly, such dividends will be forfeited if and to the extent such vesting conditions are not satisfied. If the Committee determines that dividends with respect to Restricted Stock will be paid in the form of additional shares of Restricted Stock, then the Committee may, in its sole discretion, cause the Company to register in the name of a Participant a stock certificate representing such shares of Restricted Stock issued as a dividend, and may cause the Company to hold such certificate in custody for the Participant’s account subject to the applicable vesting and other terms and conditions. Upon a forfeiture of any shares
|
3.
|
Expiration of Restricted Period.
Upon the expiration or termination of the Restricted Period applicable to Restricted Stock and the satisfaction of any other conditions prescribed by the Committee or at such earlier time as provided for herein, the restrictions applicable to the Restricted Stock to such Restricted Period shall lapse and a certificate for a number of shares of Common Stock equal to the number of shares of Restricted Stock with respect to which the restrictions have expired or terminated shall be delivered, free of all such restrictions, except any that may be imposed by law, to the Participant. The Company shall not be required to deliver any fractional share of Common Stock but shall pay to the Participant, in lieu thereof, the product of (i) the Fair Market Value per share (determined as of the date the restrictions expire or terminate) and (ii) the fraction of a share to which such Participant would otherwise be entitled.
|
4.
|
Vesting Events for Restricted Stock.
If the Employee terminates employment by reason of death, all of his or her shares of Restricted Stock shall become 100% vested upon the date of death. All Restricted Stock awards prior to the Effective Date are hereby amended to incorporate these terms.
|
10.
|
RESTRICTED STOCK UNITS
.
|
1.
|
Award and Restrictions.
Restricted Stock Units shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine.
|
2.
|
Settlement.
Settlement of Restricted Stock Units shall occur upon expiration of the deferral period specified for such Restricted Stock Unit by the Committee (or, if permitted by the Committee, as elected by the Participant). Restricted Stock Units shall be satisfied by the delivery of (a) a number of shares of Stock equal to the number of RSUs vesting on such date, or (b) cash in an amount equal to the Fair Market Value of the specified number of shares of Stock covered by the vesting Restricted Stock Units, or a combination thereof, as determined by the Committee at the date of grant or thereafter.
|
3.
|
Dividends on Restricted Stock Units.
The Committee may, in its sole discretion and as would be set forth in the applicable Award Agreement, require each Restricted Stock Unit to be credited with dividends paid by the Company with respect to one share of Stock (“dividend equivalents”). Dividend equivalents shall be withheld by the Company and credited to the Participant’s account, and interest may be credited on the amount of cash dividend equivalents credited to the Participant’s account at a rate and subject to such terms as determined by the Committee in its sole discretion. Dividend equivalents credited to a Participant’s account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the sole discretion of the Committee, in shares of Stock having a Fair Market Value equal to the amount of such dividend equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit and, if such Restricted Stock is forfeited, the Participant shall have no right to such dividend equivalents.
|
4.
|
Effect of Termination of Employment.
|
(a)
|
Unless the applicable Award Agreement or the Committee determines otherwise, Restricted Stock Units that have not vested, together with Dividend Equivalents, if any, credited on such Restricted Stock Units, shall be forfeited upon the Participant’s termination of employment for any reason other than death.
|
(b)
|
If the Employee terminates employment by reason of death, all of his or her shares of Restricted Stock shall become 100% vested upon the date of death.
|
11.
|
ANNUAL INCENTIVE AWARDS
.
|
1.
|
Annual Incentive Awards.
The Committee may grant annual incentive awards of Stock or cash (each an
“
Annual Incentive Award
”
) to such Participants as the Committee may from time to time recommend, in such amounts and subject to such terms and conditions as the Committee in its discretion may determine. The Committee shall establish the maximum amount of Annual Incentive Awards that may be granted for each Performance Cycle. Notwithstanding the foregoing, all Annual Incentive Awards shall be subject to the provisions of paragraphs (a) through (d) below:
|
(a)
|
Annual Incentive Awards shall be granted in connection with a 12-month Performance Cycle, which shall be the fiscal year of the Company.
|
(b)
|
Subject to Section 4.1, the Committee shall determine the Participants who shall be eligible to receive an Annual Incentive Award for such Performance Cycle.
|
(c)
|
The Committee shall fix and establish, in writing, (A) the Performance Measure(s) that shall apply to such Performance Cycle, (B) an objective formula for computing the amount of the Annual Incentive Awards for such Performance Cycle, where the amount shall be based upon the attainment of various Performance Goals for the applicable Performance Measure(s).
|
(d)
|
Annual Incentive Awards shall be paid in the form of cash, Stock (including Restricted Stock) or any combination thereof, in the discretion of the Committee.
|
12.
|
PERFORMANCE-BASED AWARDS
.
|
1.
|
Performance-Based Awards
. Notwithstanding anything to the contrary contained herein, the Committee may designate any of the Awards available under the Plan (including but not limited to Options, Restricted Stock, Annual Incentive Awards and Discretionary Bonus Awards) as conditioned on the achievement of specified Performance Measures (each such Award a “
Performance-Based Award
”). The grant, exercise, vesting or settlement of Performance-Based Awards may be conditioned on the achievement of specified Performance Goals. The Performance Cycle or performance period(s) applicable to a Performance-Based Award shall be any period of time determined by the Committee
.
|
2.
|
Objective Performance Goals and Performance Measures.
A Performance Goal established in connection with a Performance-Based Award must be based on any one or more of the following performance measures (each, a “
Performance Measure
”) (which may be applied to an individual, a subsidiary, a business unit or division, or the Company and any one or more of its subsidiaries as a whole, as determined by the Committee):
|
(a)
|
Net earnings or net income (before or after taxes, depreciation and amortization);
|
(b)
|
Cash earnings;
|
(c)
|
Earnings per share;
|
(d)
|
Net sales or revenue growth;
|
(e)
|
Net operating income;
|
(f)
|
Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);
|
(g)
|
Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment (discounted or otherwise));
|
(h)
|
Operating income before interest, taxes, depreciation and amortization;
|
(i)
|
Return on stockholders’ equity;
|
(j)
|
Operating margins or operating expenses;
|
(k)
|
Value of the Company’s Stock or total return to stockholders;
|
(l)
|
Value of an investment in the Company’s Stock assuming the reinvestment of dividends;
|
(m)
|
Assets under management;
|
(n)
|
Performance of one or more of our investment products on an absolute basis or relative to a benchmark or peer group;
|
(o)
|
Adjusted pre-tax income;
|
(p)
|
Cost targets, reductions and savings, productivity and efficiencies;
|
(q)
|
Strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology and goals relating to acquisitions, divestitures, joint ventures and similar transactions and budget comparisons;
|
(r)
|
Personal professional objectives, consisting of one or more objectives based on the implementation of plans and policies, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations and the completion of other corporation transactions;
|
(s)
|
Any other criteria as determined by the Committee in its sole discretion; and/or
|
(t)
|
A combination of any or all of the foregoing criteria.
|
3.
|
Calculation of Performance-Based Award.
At the expiration of the applicable performance period, the Committee shall determine the extent to which the Performance Goals established pursuant to this Article are achieved and the extent to which each Performance-Based Award has been earned. The Committee may not exercise its discretion to increase the amount or value of an award that would otherwise be payable in accordance with the terms of a Performance-Based Award that is intended to meet the requirements for the Performance-Based Exception.
|
13.
|
DISCRETIONARY BONUS AWARDS
.
|
1.
|
Discretionary Bonus Awards.
The Committee may grant discretionary bonus awards of Stock or cash (each a “
Discretionary Bonus Award
”
)
to officers and other key Employees of either the Company or any Subsidiary, in such amounts and subject to such terms and conditions as the Committee in its discretion may determine.
|
2.
|
The Committee may grant Discretionary Bonus Awards to eligible Participants in such amounts as the Committee may determine, subject to the limitations set forth in Section 4.1.
|
3.
|
Discretionary Bonus Awards shall be paid in the form of cash, Stock (including Restricted Stock) or any combination thereof, in the discretion of the Committee.
|
14.
|
OTHER STOCK-BASED AWARDS
.
|
15.
|
AWARD VESTING LIMITATIONS
.
|
16.
|
TRANSFERABILITY OF AWARDS
.
|
1.
|
Except as provided in Section 16.3 below, each Option and SAR shall be exercisable only by the Participant during the Participant’s lifetime, or by the Person to whom the Participant’s rights shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, an ISO shall not be transferable other than by will or the laws of descent and distribution.
|
2.
|
Except as provided in Section 16.3 below, no Award and no right under any such Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant and any such purported assignment,
|
3.
|
To the extent specifically provided by the Committee, and on such terms and conditions as the Committee may from time to time establish, an Award may be transferred by a Participant without consideration to one or more Permitted Transferees.
|
17.
|
CHANGE IN CONTROL
.
|
1.
|
Definitions
.
|
(a)
|
An “
Ownership Change Event
”
shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.
|
(b)
|
A
“
Change in Control
”
shall mean (i) a merger or consolidation of the Company with or into another corporation in which the Company shall not be the surviving corporation (other than a merger undertaken solely in order to reincorporate in another state) (for purposes hereof, the Company shall not be deemed the surviving corporation in any such transaction if, as the result thereof, it becomes a wholly-owned subsidiary of another corporation), (ii) a dissolution of the Company, (iii) a transfer of all or substantially all of the assets of the Company in one transaction or a series of related transactions to one or more other persons or entities, (iv) a transaction or series of transactions that results in any entity, “Person” or “Group” (as defined below), becoming the beneficial owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities, or (v) during any period of two (2) consecutive years commencing on or after January 1, 2005, individuals who at the beginning of the period constituted the Company’s Board of Directors cease for any reason to constitute at least a majority, unless the election of each director who was not a director at the beginning of the period has been approved in advance by directors representing at least two-thirds (2/3) of the directors then in office who were directors at the beginning of the period;
provided
,
however
, that a “Change in Control” shall not be deemed to have occurred if the ownership of 50% or more of the combined voting power of the surviving corporation, asset transferee or Company (as the case may be), after giving effect to the transaction or series of transactions, is directly or indirectly held by (A) a trustee or other fiduciary under an employee benefit plan maintained by the Company, (B) one or more of the “executive officers” of the Company that held such positions prior to the transaction or series of transactions, or any entity, Person or Group under their control. As used herein, “Person” and “Group” shall have the meanings set forth in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended, and “executive officer” shall have the meaning set forth in Rule 3b-7 promulgated under such Act .
|
2.
|
Effect of Change in Control on Awards.
Upon a Change in Control, each outstanding Award shall become 100% vested (with any performance conditions imposed with respect to such Award deemed to be achieved at “target” performance levels) and exercisable as of the date ten (10) days prior to the date of the Change in Control, provided that the Participant’s Service has not terminated prior to such date. The exercise or vesting of any Award that was permissible solely by reason of this Section 17.2 shall be conditioned upon the consummation of the Change in Control. Any Option or SAR which is neither assumed or substituted for by the surviving, continuing, successor, or purchasing corporation of Parent thereof, as the case may be (the “
Acquiring Corporation
”) in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control; except as would otherwise result in adverse tax consequences under Section 409A of the Code;
provided, however,
that the Committee may, in its discretion, provide that any Option or SAR shall, immediately prior to the occurrence of a Change in Control, be cancelled in exchange for a payment in cash or securities in an amount equal to (a) the excess of the consideration paid per share of Stock in the Change in Control over the exercise price or grant price per share of Stock subject to the Option or SAR,
multiplied by
(b) the number of shares of Stock subject to the Option or SAR. Notwithstanding the foregoing, shares acquired pursuant to an Award prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the applicable Award Agreement, except as otherwise provided therein. Furthermore, notwithstanding the foregoing, if the Change in Control results from an Ownership Change Event described in Section 17.1(a)(i) and the Company is the surviving or continuing corporation and immediately after such Change in Control less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Awards shall not terminate
|
18.
|
WITHHOLDING
.
|
19.
|
PROVISION OF INFORMATION
.
|
20.
|
COMPLIANCE WITH SECURITIES LAW
.
|
21.
|
TERMINATION OR AMENDMENT OF PLAN
.
|
22.
|
STOCKHOLDER APPROVAL
.
|
February 1, 2002
|
Board adopts Plan, with an initial reserve of 948.35 shares.
|
February 8, 2002
|
Stockholders approve Plan, with an initial reserve of 948.35 shares.
|
May 21, 2002
|
Board adopts amended Plan, with a reserve of 948,100 shares.
|
May 24, 2002
|
Stockholders approve amended Plan, with a reserve of 948,100 shares.
|
July 1, 2002
|
Board adopts amended Plan; including discretionary bonus awards.
|
February 8, 2005
|
Compensation Committee adopts Second Amended and Restated Plan.
|
February 23, 2006
|
Compensation Committee adopts Third Amended and Restated Plan, increasing the reserve by 1,000,000 shares.
|
February 25, 2009
|
Compensation Committee amends Third Amended and Restated Plan, increasing the reserve by 700,000 shares and providing for performance-based awards, approved by stockholders at their 2009 annual meeting.
|
July 22, 2010
|
Board amends the Plan to allow for Compensation Committee discretion with regard to the payment of dividends on restricted stock grants.
|
February 23, 2011
|
Compensation Committee amends Third Amended and Restated Plan, increasing the reserve by 750,000 shares. The Plan was also amended to clarify the Compensation Committee’s authority to prescribe adjustments to the performance measures set forth in Section 12.2 of the Plan, which are used to set performance goals for incentive awards under the Plan that are intended to be exempt from the deduction limitation provisions of Section 162(m) of the Internal Revenue Code of 1986.
|
February 22, 2013
|
Compensation Committee amends Third Amended and Restated Plan, increasing the reserve by 500,000 shares.
|
March 4, 2015
|
Compensation Committee amends Third Amended and Restated Plan, increasing the reserve by 500,000 shares.
|
April 27, 2016
|
Amend the material terms of the Plan to expand the possible performance measures that can be established by the Board or the Compensation Committee of the Board (the “Compensation Committee”) with respect to annual incentive awards or performance-based awards. The Fourth Amendment also permits the Board or the Compensation Committee to adjust the performance measures in a manner that complies with Treasury Regulations governing modifications to performance measures under Section 162(m) of the Internal Revenue Code. Additionally, under the Fourth Amendment, the Board or Compensation Committee may designate any awards available under the Plan as performance-based awards. Finally, the Fourth Amendment restricts the number of shares of the Company’s common stock that can be settled, or cash that can be paid, in respect of a performance-based award in a single calendar year to any Plan participant.
|
March 10, 2017
|
Compensation Committee adopts Fourth Amended and Restated Plan, increasing the reserve by 250,000 shares.
|
March 8, 2018
|
Compensation Committee adopts Fifth Amended and Restated Plan, increasing the reserve by 200,000 shares and prohibiting the accrual and payment of dividends on option awards granted under the Plan.
|
March 7, 2019
|
Compensation Committee adopts Sixth Amended and Restated Plan, increasing the reserve by
200,000
shares. The Plan was also amended to (a) include Stock Appreciation Rights, Restricted Stock Units, and Other Stock-Based Awards as types of Awards available for issuance under the Plan, (b) conform the Plan to changes made to Section 162(m) of the Code by the Tax Cuts and Jobs Act of 2017, and (c) to make certain other clarifying and ministerial changes.
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Signature of Stockholder
|
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Date:
|
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Signature of Stockholder
|
|
Date:
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n
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Note:
|
|
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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n
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