UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

Filed by the Registrant  ☒                             Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

☐		Preliminary Proxy Statement
☐		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material Pursuant under §240.14a-12

MEDALLION FINANCIAL CORP.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than The Registrant)

Payment of Filing Fee (Check the appropriate box):

☒		No fee required.
☐		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		(1)		Title of each class of securities to which transaction applies:
		(2)		Aggregate number of securities to which transaction applies:
		(3)		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):
		(4)		Proposed maximum aggregate value of transaction:
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☐		Fee paid previously with preliminary materials.
☐		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.
		(1)		Amount Previously Paid:
		(2)		Form, Schedule or Registration Statement No.:
		(3)		Filing Party:
		(4)		Date Filed:

 

 

 

MEDALLION FINANCIAL CORP.

437 Madison Avenue, 38th Floor

New York, New York 10022

April 30, 2019

Dear Medallion Financial Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of Medallion Financial Corp. to be held on June 14, 2019, at 10:00 a.m., Eastern Time, at The Harmonie Club, located at 4 East 60th Street, New York, New York 10022.

Details of the business to be conducted at the meeting are given in the attached Notice of Annual Meeting of Shareholders and the attached Proxy Statement.

Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented. You may vote over the Internet, by telephone or by mailing a completed proxy card as an alternative to voting in person at the meeting. Voting by one of these methods will ensure that your shares will be represented at the Annual Meeting.

Thank you for your cooperation.

Sincerely,

 

 

A LVIN M URSTEIN

Chairman of the Board of Directors and Chief Executive Officer

MEDALLION FINANCIAL CORP.

437 Madison Avenue, 38th Floor

New York, New York 10022

(212) 328-2100

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD JUNE 14, 2019

 

 

The Annual Meeting of Shareholders, or the Annual Meeting, of Medallion Financial Corp. (except where the context suggests otherwise, the terms the “Company,” “we,” “us” and “our” refer to Medallion Financial Corp.) will be held on June 14, 2019 at 10:00 a.m., Eastern Time at The Harmonie Club, located at 4 East 60th Street, New York, New York 10022, to consider and act upon the following matters:

 

1.

To elect two directors to serve until the 2022 Annual Meeting of Shareholders;

 

2.

To ratify the selection of Mazars USA LLP as our independent registered public accounting firm for the year ending December 31, 2019;

 

3.

To vote on a non-binding advisory resolution to approve the 2018 compensation of the Company’s named executive officers, as described in the accompanying proxy statement; and

 

4.

To transact such other business as may properly come before the meeting or any adjournment thereof.

Only shareholders of record at the close of business on April 15, 2019 will be entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. A list of shareholders entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting and for a period of 10 days prior to the meeting during regular business hours at our principal offices located at the address listed above. All shareholders are cordially invited to attend the Annual Meeting.

Important Notice Regarding the Availability of

Proxy Materials for the Shareholder

Meeting to be Held on June 14, 2019

The proxy statement and 2018 Annual Report to shareholders are available at: https://www.proxydocs.com/MFIN

By Order of the Board of Directors,

 

 

M ARIE R USSO

Secretary

New York, New York

April 30, 2019

 

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOUR VOTE IS IMPORTANT. YOU MAY VOTE BY FOLLOWING THE INSTRUCTIONS IN THE NOTICE OF AVAILABILITY OF PROXY MATERIALS OR THE PROXY CARD YOU RECEIVED IN THE MAIL. FOR DETAILED INFORMATION REGARDING VOTING INSTRUCTIONS, PLEASE REFER TO THE SECTION ENTITLED “QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING / HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?” ON PAGE 3 OF THE PROXY STATEMENT. IF YOU DECIDE TO ATTEND THE MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.

2019 ANNUAL MEETING OF SHAREHOLDERS

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

TABLE OF CONTENTS

 

		Page
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS			1
VOTING SECURITIES AND VOTES REQUIRED			1
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING			2
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			6
PROPOSAL NO. 1 ELECTION OF CLASS II DIRECTORS			9
PROPOSAL NO. 2 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			11
Principal Accountant Fees and Services			11
Audit Committee Report			13
PROPOSAL NO. 3 NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION			14
CORPORATE GOVERNANCE			15
Organization of the Board of Directors			15
Code of Ethics			19
Shareholder Communications with the Board of Directors			19
OUR DIRECTORS AND EXECUTIVE OFFICERS			20
EXECUTIVE COMPENSATION			23
Compensation Discussion and Analysis			23
Compensation Committee Report			33
Summary Compensation Table			34
2018 Grants of Plan-Based Awards			35
Narrative Discussion for Summary Compensation Table and 2018 Grants of Plan-Based Awards Table			35
Outstanding Equity Awards at 2018 Fiscal Year-End			36
2018 Option Exercises and Stock Vested			36
Potential Payments Upon Termination or Change-in-Control			37
Pay Ratio Disclosure			38
DIRECTOR COMPENSATION			39
EQUITY COMPENSATION PLAN INFORMATION			41
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			41
STOCK REPURCHASE PROGRAM			41
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			42

		Page
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			42
OTHER MATTERS OF BUSINESS			43
FORM 10-K			43
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS			43

MEDALLION FINANCIAL CORP.

437 Madison Avenue, 38th Floor

New York, New York 10022

(212) 328-2100

 

 

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS

June 14, 2019

 

 

This proxy statement is furnished in connection with the solicitation of proxies by our Board of Directors for use at the Annual Meeting to be held on June 14, 2019 and at any adjournments or postponements of the Annual Meeting. The purposes of the Annual Meeting are set forth herein and in the accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at 10:00 a.m. Eastern Time at The Harmonie Club, located at 4 East 60th Street, New York, New York 10022. The date of the mailing of this proxy statement and accompanying proxy is on or about April 30, 2019. All shares of common stock will be voted in accordance with the shareholders’ instructions.

Shareholders are entitled to one vote per share on all matters voted upon at the Annual Meeting. Shareholders do not have the right to cumulate their votes for directors. The presence at the Annual Meeting, in person or by proxy, of a majority of the shares of common stock outstanding on April 15, 2019 will constitute a quorum. If the accompanying proxy is properly signed and timely returned to American Stock Transfer & Trust Company, LLC and not revoked, it will be voted in accordance with the instructions contained therein.

Unless contrary instructions are given, the persons designated as proxy holders on the accompanying proxy card will vote:

 

(i)

FOR the Board of Directors’ nominees;

 

(ii)

FOR the ratification of Mazars USA LLP as our independent registered public accounting firm for the year ending December 31, 2019;

 

(iii)

FOR the approval of a non-binding advisory resolution to approve the 2018 compensation of the Company’s named executive officers, as described in this proxy statement; and

 

(iv)

if any other matters properly come before the Annual Meeting, in accordance with their best judgment on such matters.

Any proxy may be revoked by a shareholder at any time before its exercise by delivery of a written revocation to American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219. The powers of the proxy holder with respect to a particular proxy will be suspended if the person executing that proxy attends the Annual Meeting in person and so requests. Attendance at the Annual Meeting will not in itself constitute revocation of the proxy.

VOTING SECURITIES AND VOTES REQUIRED

On April 15, 2019, the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting, an aggregate of 24,600,507 shares of our common stock, $0.01 par value per share, or Common Stock, were outstanding and entitled to vote. Shareholders are entitled to one vote per share.

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the meeting shall be necessary to constitute a quorum for the transaction of business. If less than a majority of the outstanding shares entitled to vote are represented at the Annual Meeting, a majority of the shares so represented may adjourn the Annual Meeting to another date, time or place, and notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before an adjournment is taken. A plurality of the votes cast is required for the election of directors. A majority of the votes cast is required for all other matters. Abstentions and broker non-votes will be considered as present for quorum purposes but will not be counted as votes cast. Abstentions and broker non-votes will have no effect on the matters to be voted on at the Annual Meeting.

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND

THE ANNUAL MEETING

 

Q:	WHY AM I RECEIVING THESE MATERIALS?

 

A:

Our Board of Directors is providing these proxy materials for you in connection with the Annual Meeting, which will take place on June 14, 2019. As a shareholder, you are invited to attend the Annual Meeting and are entitled to and requested to vote on the proposals described in this proxy statement.

 

Q:	WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?

 

A:

The information included in this proxy statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the compensation of directors and our most highly paid officers, and certain other required information. Our 2018 Annual Report, including our 2018 consolidated financial statements, is also enclosed.

 

Q:	WHY DID I RECEIVE A NOTICE IN THE MAIL REGARDING THE AVAILABILITY OF PROXY MATERIALS INSTEAD OF A FULL SET OF PROXY MATERIALS?

 

A:

In accordance with the Securities and Exchange Commission rules, we may furnish proxy materials, including this proxy statement and our Annual Report, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Accordingly, we are sending the Notice of Availability of Proxy Materials to our shareholders of record and beneficial shareholders as of April 15, 2019, which is the record date for the Annual Meeting.

 

Q:	WHAT WILL BE VOTED ON AT THE MEETING?

 

A:	There are three matters scheduled to be voted on at the Annual Meeting:

 

(i)

The election of two directors to serve until the 2022 Annual Meeting of Shareholders;

 

(ii)

The ratification of Mazars USA LLP as our independent registered public accounting firm for the year ending December 31, 2019; and

 

(iii)

The approval of a non-binding advisory resolution to approve the 2018 compensation of the Company’s named executive officers, as described in this proxy statement.

 

Q:	WHAT IS OUR VOTING RECOMMENDATION?

 

A:	Our Board of Directors recommends that you vote your shares:

 

(i)

FOR the Board of Directors’ nominees;

 

(ii)

FOR the ratification of Mazars USA LLP as our independent registered public accounting firm for the year ending December 31, 2019; and

 

(iii)

FOR the approval of a non-binding advisory resolution to approve the 2018 compensation of the Company’s named executive officers, as described in this proxy statement.

 

Q:	WHAT SHARES CAN I VOTE?

 

A:

All shares owned by you as of the close of business on April 15, 2019, the record date, may be voted by you. These shares include (1) shares held directly in your name as the shareholder of record, including shares purchased through our Dividend Reinvestment Plan and (2) shares held for you as the beneficial owner through a stockbroker or bank.

 

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Q:	WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND AS A BENEFICIAL OWNER?

 

A:	Most of our shareholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

SHAREHOLDER OF RECORD

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, the shareholder of record, and these proxy materials are being sent directly to you by us. As the shareholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the meeting. We have enclosed a proxy for you to use.

BENEFICIAL OWNER

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker or nominee which is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker on how to vote and are also invited to attend the meeting. However, since you are not the shareholder of record, you may not vote these shares in person at the meeting unless you obtain a signed proxy from the record holder giving you the right to vote the shares. Your broker or nominee has enclosed or provided a voting instruction card for you to use in directing the broker or nominee on how to vote your shares.

 

Q:	HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?

 

A:	Shares held directly in your name as the shareholder of record may be voted in person at the Annual Meeting. If you choose to do so, please bring the enclosed proxy card or proof of identification.

EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING, WE RECOMMEND THAT YOU ALSO SUBMIT YOUR PROXY AS DESCRIBED BELOW SO THAT YOUR VOTE WILL BE COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE ANNUAL MEETING. SHARES HELD IN STREET NAME MAY BE VOTED IN PERSON BY YOU ONLY IF YOU OBTAIN A SIGNED PROXY FROM THE RECORD HOLDER GIVING YOU THE RIGHT TO VOTE THE SHARES.

 

Q:	HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?

 

A:

Whether you hold shares directly as the shareholder of record or beneficially in street name, you may direct your vote without attending the meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker or nominee. Please refer to the summary instructions below and those included on your proxy card or, for shares held in street name, the voting instruction card included by your broker or nominee.

You may do this by signing your proxy card or, for shares held in street name, the voting instruction card included by your broker or nominee and mailing it in the accompanying enclosed, pre-addressed envelope. If you provide specific voting instructions, your shares will be voted as you instruct. If you sign but do not provide instructions, your shares will be voted as described in “HOW ARE VOTES COUNTED?” below.

For beneficial shareholders with shares registered in the name of a brokerage firm or bank, a number of brokerage firms and banks are participating in a program that offers telephone and Internet voting options. Shareholders should refer to the voting instruction form provided by their brokerage firm or bank for instructions on the voting methods they offer.

 

3

Registered stockholders with shares registered directly in their names with our transfer agent, American Stock Transfer & Trust Company, LLC, will also be able to vote by telephone and Internet. If your shares are held in an account at a brokerage firm or bank participating in this program or registered directly in your name with American Stock Transfer & Trust Company, LLC, you may vote those shares by calling the telephone number specified on your proxy or accessing the Internet website address specified on your proxy instead of completing and signing the proxy itself. The giving of such a telephonic or Internet proxy will not affect your right to vote in person should you decide to attend the Annual Meeting.

The accompanying proxy card provides instructions on how to vote via the Internet or by telephone.

 

Q:	CAN I CHANGE MY VOTE?

 

A:

You may change your proxy instructions at any time prior to the vote at the Annual Meeting. For shares held directly in your name, you may accomplish this by granting a new proxy bearing a later date (which automatically revokes the earlier proxy), by delivery of a written revocation to American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219 or by attending the Annual Meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request. For shares held beneficially by you, you may accomplish this by submitting new voting instructions to your broker or nominee.

 

Q:	HOW ARE VOTES COUNTED?

 

A:

In the election of directors, you may vote “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of the Board of Directors. The election of our directors requires a plurality of the votes cast, so abstentions and broker non-votes will not be counted in determining which nominees received the largest number of votes cast. This means the nominees for election to the Board of Directors at the Annual Meeting who receive the largest number of properly cast “FOR” votes will be elected as directors.

The approval of all other proposals requires the affirmative vote of a majority of the votes cast. Abstentions and broker non-votes will have no effect on the results of the votes on such proposals.

 

Q:	WHAT IS THE QUORUM REQUIREMENT FOR THE ANNUAL MEETING?

 

A:

The quorum requirement for holding the meeting and transacting business is the presence in person or by proxy of the holders of a majority of the shares issued and outstanding and entitled to vote. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum.

Generally, broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received instructions from the beneficial owner to vote on a particular matter, and (2) the broker lacks discretionary power to vote such shares with respect to such matter.

 

Q:	WHAT IS THE VOTING REQUIREMENT TO APPROVE THE PROPOSALS?

 

A:	Approval of the director nominees requires a plurality of the votes cast at the Annual Meeting, in person or by proxy. Approval of all other matters requires the affirmative vote of the holders of a majority of the votes cast at the Annual Meeting, in person or by proxy.

If you are a beneficial owner and do not provide the shareholder of record with voting instructions, your shares may constitute broker non-votes, as described in “WHAT IS THE QUORUM REQUIREMENT FOR THE ANNUAL MEETING?” above.

 

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Q:	WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION CARD?

 

A:	It means your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.

 

Q:	WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?

 

A:

We will announce preliminary voting results at the Annual Meeting and disclose final results in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission, or the Commission, on or before June 20, 2019. The Form 8-K will be available on the “Investor Relations” section of our website at www.medallion.com and on the Commission’s website at www.sec.gov.

 

Q:	WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE ANNUAL MEETING?

 

A:

Other than the proposals described in this proxy statement, we do not expect any matters to be presented for a vote at the Annual Meeting. If you grant a proxy, the persons named as proxy holders will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any unforeseen reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.

 

Q:	WHAT CLASSES OF SHARES ARE ENTITLED TO BE VOTED?

 

A:	Each share of our Common Stock outstanding as of the close of business on April 15, 2019, the record date, is entitled to vote on all items being voted upon at the Annual Meeting. On the record date, we had approximately 24,600,507 shares of Common Stock issued and outstanding.

 

Q:	WHO WILL COUNT THE VOTES?

 

A:	A representative of American Stock Transfer & Trust Company, LLC, our transfer agent, will tabulate the votes and act as the inspector of election.

 

Q:	IS MY VOTE CONFIDENTIAL?

 

A:

Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within us or to third parties except (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, or (3) to facilitate a successful proxy solicitation by our Board of Directors. Occasionally, shareholders provide written comments on their proxy card, which are then forwarded to our management.

 

Q:	WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE MEETING?

 

A:

We will pay the entire cost of the proxy preparation and solicitation, including reimbursing brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to shareholders. We have retained Alliance Advisors, LLC to act as a proxy solicitor for a fee of approximately $6,500, plus reimbursement of out-of-pocket expenses. We are soliciting proxies primarily by mail. In addition, our directors, officers and regular employees as well as our proxy solicitor may solicit proxies in person, by telephone or by electronic communication. Our directors, officers and regular employees will not receive any additional compensation for such solicitation activities.

 

5

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of April 15, 2019, regarding the ownership of our Common Stock by (i) the persons known by us to own more than five percent of the outstanding shares, (ii) all of our directors and nominees, (iii) each of our executive officers named in the Summary Compensation Table, and (iv) all of our directors and executive officers as a group. The number of shares beneficially owned by each director or executive officer is determined under rules of the Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of April 15, 2019 through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of such shares.

 

Name and Address		Shares of Common Stock Beneficially Owned					Percentage of Common Stock Beneficially Owned (1)
Alvin Murstein (2) Chairman, Chief Executive Officer, and Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				1,627,388					6.62	%
Andrew M. Murstein (3) President, Chief Operating Officer, and Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				1,861,629					7.57	%
Larry D. Hall (4) Senior Vice President and Chief Financial Officer c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				85,867					*
Stephen A. Lewis (5) Senior Vice President of Medallion Capital, Inc. c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				35,234					*
Donald S. Poulton (6) Chief Executive Officer and President of Medallion Bank c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				74,331					*
Henry L. Aaron (7) Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				17,000					*
John Everets (8) Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				80,555					*

 

6

Name and Address		Shares of Common Stock Beneficially Owned					Percentage of Common Stock Beneficially Owned (1)
Frederick A. Menowitz (9) Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				26,500					*
David L. Rudnick (10) Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				226,277					*
Allan J. Tanenbaum (11) Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				38,788					*
Lowell P. Weicker, Jr. (12) Director c/o Medallion Financial Corp. 437 Madison Avenue, 38th Floor New York, NY 10022				37,485					*
All executive officers and directors as a group (16 persons) (13)				4,219,162					17.10	%
Key Colony Fund, L.P. (14) 155 N. Wacker Drive, Suite 4600 Chicago, IL 60606				1,563,028					6.35	%

 

*	Less than 1.0%

(1)

Applicable percentage of ownership is based on 24,600,507 shares of Common Stock outstanding as of April 15, 2019 together with the exercisable options for such shareholder or group of shareholders, as applicable. In computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person, shares subject to options are not deemed outstanding for purposes of computing the percentage ownership of any other person.

(2)

Includes 1,338,300 shares of Common Stock owned by the Alvin Murstein Second Family Trust of which Alvin Murstein is a trustee and beneficiary, 135,211 shares of Common Stock owned by Mr. Murstein directly, 117,660 shares of Common Stock owned by the Aileen J. Murstein Family 2012 Trust of which Mr. Murstein is the grantor and Mr. Murstein’s spouse is a co-trustee and the beneficiary, 5,000 shares of Common Stock owned by Mr. Murstein’s spouse and 31,217 shares of restricted Common Stock owned by Mr. Murstein directly. Does not include 34,899 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(3)

Includes 1,481,863 shares owned by the Andrew Murstein Family Trust, of which Andrew M. Murstein is a trustee and beneficiary, 334,422 shares held by Mr. Murstein directly and 45,344 shares of restricted Common Stock owned by Mr. Murstein directly. Does not include 98,713 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(4)	Includes 62,264 shares of Common Stock owned by Larry D. Hall directly and 23,603 shares of restricted Common Stock owned by Mr. Hall directly. Does not include 26,589 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(5)	Includes 19,244 shares of Common Stock owned by Stephen A. Lewis directly and 15,990 shares of restricted Common Stock owned by Mr. Lewis directly. Does not include 18,280 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

 

7

(6)	Includes 56,814 shares of Common Stock owned by Donald S. Poulton directly and 17,517 shares of restricted Common Stock owned by Mr. Poulton directly. Does not include 21,604 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(7)	Consists of 17,000 shares of Common Stock issuable upon the exercise of options. Does not include 4,000 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(8)

Includes 70,000 shares of Common Stock owned by John Everets directly, 3,000 shares of Common Stock held by Arcturus Capital, of which Mr. Everets is a 50% owner and 7,555 shares of Common Stock issuable upon the exercise of options. Does not include 3,778 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(9)	Includes 15,500 shares of Common Stock owned by Frederick A. Menowitz directly and 11,000 shares of Common Stock issuable upon the exercise of options. Does not include 12,000 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(10)

Includes 8,424 shares of Common Stock owned by David L. Rudnick directly, 208,853 shares of Common Stock held by Alliance Bernstein in a Roth Individual Retirement Account for the benefit of Mr. Rudnick and 9,000 shares of Common Stock issuable upon the exercise of options. Does not include 12,000 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(11)	Includes 34,566 shares of Common Stock owned by Allan J. Tanenbaum directly and 4,222 shares of Common Stock issuable upon the exercise of options. Does not include 2,111 shares of Common Stock issuable upon exercise of options not exercisable within 60 days of April 15, 2019.

(12)

Includes 1,000 shares of Common Stock owned by Lowell P. Weicker, Jr. directly, 12,885 shares of Common Stock owned by the Lowell P. Weicker Estate for Lowell P. Weicker, Jr. of which Mr. Weicker is the income beneficiary, 2,300 shares of Common Stock held by Bank of New York Mellon Wealth Management in an Individual Retirement Account for the benefit of Mr. Weicker, Jr.’s spouse, 300 shares of Common Stock owned by Mr. Weicker, Jr.’s spouse and 21,000 shares of Common Stock issuable upon the exercise of options.

(13)	Consists of 72,777 shares of Common Stock issuable upon the exercise of options. Does not include 277,181 shares of Common Stock issuable upon the exercise of options not exercisable within 60 days of April 15, 2019.

(14)	Based upon a Schedule 13D/A filed with the Commission on April 1, 2019 by Key Colony Fund, L.P., or Key Colony. In the Schedule 13D/A, Key Colony reported that it has sole voting and dispositive power with respect to 1,563,028 shares.

 

8

PROPOSAL NO. 3

NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

As required pursuant to Section 14A of the Exchange Act, we are asking our shareholders to cast a non-binding advisory vote on the 2018 compensation of our named executive officers, as described in the Compensation Discussion and Analysis and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement. This vote gives shareholders the opportunity to convey their views regarding our overall executive compensation programs and policies more broadly. We believe that our compensation policies and procedures are centered on a pay-for-performance culture and are strongly aligned with the long-term interests of our shareholders. The principles of our executive compensation program are intended to encourage good governance, protect and promote shareholder interests and further align the interests of our executives with those of the Company, as discussed further in the Compensation Discussion and Analysis on page 23.

We also believe that both we and our shareholders benefit from responsive corporate governance policies and constructive and consistent dialogue. This proposal, commonly known as a “say-on-pay” proposal, gives you as a shareholder the opportunity to endorse or not endorse our executive pay program and policies through the following resolution:

“RESOLVED, that the 2018 compensation paid to the Company’s named executive officers, as disclosed in the Proxy Statement for the Company’s 2019 Annual Meeting of Shareholders, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. We currently hold our “say-on-pay” vote every year. Shareholders will have an opportunity to cast an advisory vote on the frequency of “say-on-pay” votes at least every six years. The next advisory vote on the frequency of the “say-on-pay” vote will occur no later than 2024.

 

 

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT, INCLUDING THE COMPENSATION DISCUSSION AND ANALYSIS, COMPENSATION TABLES AND NARRATIVE DISCUSSION.

 

 

 

14

CORPORATE GOVERNANCE

Organization of the Board of Directors

The Board of Directors is responsible for our management and direction and for establishing broad corporate policies. As further described below, the Board of Directors held regularly scheduled meetings during the year ended December 31, 2018. The Board of Directors is comprised of eight total members, a majority of whom (five) are independent under NASDAQ listing standards. The Board of Directors held eight formal meetings during the year ended December 31, 2018. Each director attended at least 75% of the meetings of the Board of Directors and all committees of the Board of Directors on which he served. Our directors are encouraged to attend the annual meeting of shareholders. Two of our directors attended last year’s annual meeting.

Board Leadership Structure

Alvin Murstein serves as both the Chief Executive Officer and Chairman of the Board of Directors. The Board of Directors believes that this leadership structure of Mr. Murstein’s service as both the Chief Executive Officer and Chairman of the Board of Directors is in the best interest of our company and our shareholders. Mr. Murstein possesses detailed and in-depth specialized knowledge of the commercial loan and taxicab medallion loan businesses, opportunities and challenges facing our company and is thus best positioned to develop strategies and agendas that ensure that the Board of Director’s time and attention are focused on the most critical matters. His combined role enables greater efficiency regarding management of the Company, provides for decisive leadership, ensures clear accountability, and enhances our ability to communicate our message and strategy clearly and consistently to our shareholders, employees and customers. Because of the ease of communication arising from the relatively small size of the Board of Directors and the small number of independent directors, the Board of Directors has determined not to designate a lead independent director.

The Board of Directors believes that our independent directors provide effective oversight of management. Moreover, in addition to feedback provided during the course of Board of Director meetings, the independent directors hold regular executive sessions. We believe that this approach effectively encourages full engagement of all directors in executive sessions, while avoiding unnecessary hierarchy. Following an executive session of independent directors, the presiding director, John Everets, acts as a liaison between the independent directors and the Chairman regarding any specific feedback or issues, provides the Chairman with input regarding agenda items for Board and Committee meetings, and coordinates with the Chairman regarding information to be provided to the independent directors in performing their duties. The Board believes that this approach appropriately and effectively complements the combined Chairman/Chief Executive Officer structure.

Board’s Role in Risk Oversight

While risk management is primarily the responsibility of our management team, the Board of Directors is responsible for the overall supervision of our risk management activities. The Board’s oversight of the material risks faced by our company occurs at both the full board level and at the committee level.

Management provides regular updates throughout the year to the respective committees regarding the management of the risks they oversee, and each of these committees report on risk to the full board at regular meetings of the Board. For example, the Audit Committee reviews the adequacy of management information systems, internal accounting and financial controls. The Compensation Committee advises management and the Board of Directors on broad compensation policies to incentivize performance results without increasing risk. The Nominating and Governance Committee establishes, oversees and reviews governance principles and processes. The Investment Oversight Committee reviews the Company’s managed loan portfolio and makes determinations and recommendations concerning such portfolio as necessary or appropriate. In addition to the reports from the committees, the Board receives presentations throughout the year from various department and

 

15

business unit leaders that include discussion of significant risks as necessary. At each Board meeting, the Board addresses matters of particular importance or concern, including any significant areas of risk that require Board attention.

We believe that our approach to risk oversight, as described above, optimizes our ability to assess inter-relationships among the various risks, make informed cost-benefit decisions, and approach emerging risks in a proactive manner for our company. We also believe that our risk structure complements our current board leadership structure, as it allows our independent directors, through our fully independent board committees and otherwise, to exercise effective oversight of the actions of management in identifying risks and implementing effective risk management policies and controls.

Director Independence

As required under the NASDAQ listing standards, the Board of Directors annually determines each director’s independence. Under NASDAQ rules, independent directors must comprise a majority of a company’s board of directors. In addition, NASDAQ rules require that, subject to specified exceptions, each member of a company’s audit, compensation, and nominating and governance committees be independent. Under NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of the company’s board of directors, the director does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his family members, and us, our senior management and our independent registered public accounting firm, the Board has affirmatively determined that the following five directors are independent directors within the meaning of the applicable NASDAQ listing standards: Henry L. Aaron, John Everets, Frederick A. Menowitz, Allan J. Tanenbaum and Lowell P. Weicker, Jr. In making this determination, the Board found that none of these directors or nominees for director has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Board Committees

We have five standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Executive Committee and the Investment Oversight Committee. Each of these committees, except the Executive Committee, has a written charter approved by the Board of Directors. A copy of each charter can be found in the “Investor Relations – Corporate Governance” section of our website at www.medallion.com .

Audit Committee

The Audit Committee reviews the results and scope of the audit and other services provided by our independent public accountants. The Audit Committee met nine times during the year ended December 31, 2018 to review (i) the effectiveness of the public accountants during the audit for the year ended December 31, 2018, (ii) the adequacy of the 2018 financial statement disclosures for the year ended December 31, 2018, (iii) our internal control policies and procedures, and (iv) the selection of our independent public accountants. The members of the Audit Committee are Messrs. Everets, Menowitz, Tanenbaum and Weicker. Mr. Everets is the Chairman and audit committee financial expert. Each Audit Committee member meets the independence requirements of NASDAQ and the Commission.

Compensation Committee

The Compensation Committee evaluates and approves the compensation of our directors and executive officers (which is presented to the Board of Directors for ratification) including (i) all incentive compensation or

 

16

equity-based incentive plans or arrangements established by us for officers and employees, including the grant of stock options and restricted stock to employees, (ii) adoption and amendment of all employee restricted stock, stock option and other employee benefit, plans and arrangements and (iii) the terms of any employment agreements and arrangements with, and any termination of our officers. The Compensation Committee reviews management’s recommendations and advises management and the Board of Directors on broad compensation policies such as salary ranges, annual incentive bonuses, long-term incentive plans, including equity-based compensation programs, and other benefit and perquisite programs. The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee.

The Compensation Committee has the resources and authority to discharge its duties and responsibilities, including the authority to retain counsel and other experts or consultants. The Compensation Committee has sole authority to select and retain a compensation consultant, to terminate any consultant retained by the Compensation Committee, and to approve the fees and other retention terms of any consultant. These consultants report directly to the Compensation Committee. The Compensation Committee did not engage an executive compensation consultant for initial 2018 pay decisions, but did conduct a search and engaged Meridian Compensation Partners, LLC, or Meridian, in late 2018 to conduct a comprehensive competitive benchmark review and assist with compensation changes going forward.

The Compensation Committee meets with the frequency necessary to perform its duties and responsibilities. The Compensation Committee usually makes many of its performance-based decisions at a meeting held in February of each fiscal year, including evaluating the performance of our named executive officers during the immediately preceding year, determining the amount of their annual cash bonuses for the preceding year and determining base salaries for the upcoming fiscal year. Grants of equity compensation are generally made in the first quarter of each year.

The members of the Compensation Committee are Messrs. Aaron, Tanenbaum and Weicker. Mr. Tanenbaum is the Chairman. Each member of the Compensation Committee is an “independent director,” as defined under the NASDAQ Marketplace Rules. Each member is also a “non-employee director,” as defined in Rule 16b-3 promulgated under the Exchange Act. The Compensation Committee met five times during the year ended December 31, 2018 and made recommendations and certain decisions concerning executive and board compensation, including annual incentives, long-term/stock based compensation and other executive employment matters. The Board of Directors approved all recommendations and ratified all decisions of the Compensation Committee during the year ended December 31, 2018. See “Compensation Discussion and Analysis.”

Nominating and Governance Committee

The Nominating and Governance Committee identifies individuals qualified to become members of the Board of Directors and recommends individuals to the Board of Directors for nomination as members of the Board of Directors and its committees. The Nominating and Governance Committee is also charged with overseeing the evaluation of the Board of Directors and reviewing our board governance principles and advising the Board of Directors on such board governance. The members of the Nominating and Governance Committee are Messrs. Aaron, Menowitz and Tanenbaum. Mr. Tanenbaum is the Chairman. Each Nominating and Governance Committee member meets the independence requirements of NASDAQ and the Commission. The Nominating and Governance Committee met one time during the year ended December 31, 2018.

Nominees for the Board of Directors should be committed to enhancing long-term shareholder value and must possess a high level of personal and professional ethics, sound business judgment and integrity. The Board of Directors’ policy is to encourage the selection of directors who will contribute to our overall corporate goals: responsibility to shareholders, finance leadership, effective execution, high customer satisfaction and superior employee working environment. In nominating a candidate for election to the Board of Directors, the Nominating

 

17

and Governance Committee may take into consideration such factors as it deems appropriate. These factors may include judgment, skill, diversity, experience with businesses and other organizations comparable to us, the interplay of the candidate’s experience with the experiences of other board members, and the extent to which the candidate would be a desirable addition to the Board of Directors and any committees. While the Nominating and Governance Committee carefully considers diversity when considering directors, it has not established a formal policy regarding diversity. In evaluating potential candidates for the Board of Directors, the Nominating and Governance Committee considers the above factors in the light of the specific needs of the Board of Directors at that time.

In recommending candidates for election to the Board of Directors, the Nominating and Governance Committee considers nominees recommended by directors, officers, employees, shareholders and others, using the same criteria to evaluate all candidates. The Nominating and Governance Committee reviews each candidate’s qualifications, including whether a candidate possesses any of the specific qualities and skills desirable in certain members of the Board of Directors. Evaluation of candidates generally involves a review of background materials, internal discussions and interviews with selected candidates as appropriate. Upon selection of a qualified candidate, the Nominating and Governance Committee would recommend the candidate for consideration by the full Board of Directors. The Nominating and Governance Committee may engage third-party consultants or search firms to assist in identifying and evaluating potential nominees. To recommend a prospective nominee for the Nominating and Governance Committee’s consideration, submit the candidate’s name and qualifications to our Secretary in writing to the following address: Medallion Financial Corp., Attn: Secretary, 437 Madison Avenue, 38th Floor, New York, New York 10022, with a copy to Medallion Financial Corp., Attn: General Counsel at the same address. When submitting candidates for nomination to be elected at the annual meeting of shareholders, shareholders must also follow the notice procedures and provide the information required by our bylaws.

In particular, for the Nominating and Governance Committee to consider a candidate or candidates recommended by a shareholder for nomination at the 2020 Annual Meeting of Shareholders, written notice of such shareholder’s intent to make such nomination or nominations must be given, either by personal delivery or by United States mail, postage prepaid, to our Secretary not later than 120 days in advance of the date of our notice of annual meeting released to shareholders in connection with the previous year’s annual meeting of shareholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year’s notice of annual meeting of shareholders, then, in that event only, a shareholder’s notice must be delivered to and received at our principal executive offices at least 30 days before the notice of the date of the annual meeting is mailed to shareholders in the current year. The notice must include the information specified in our bylaws, including the following:

 

•

the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated;

 

•

a representation that the shareholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting the person or persons specified above;

 

•

a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder;

 

•

such other information regarding each nominee proposed by such shareholders as would be required to be included in our proxy statement filed pursuant to the proxy rules of the Commission had the nominee been nominated, or intended to be nominated, by the Board of Directors; and

 

•

the consent of each nominee to serve as our director if so elected.

 

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Executive Committee

The Executive Committee meets on an ad hoc basis to provide strategic and managerial advice to management. The members of the Executive Committee are Messrs. Alvin Murstein, Andrew M. Murstein and David L. Rudnick. Mr. Alvin Murstein is the Chairman. The Executive Committee did not meet during the year ended December 31, 2018.

Investment Oversight Committee

The Investment Oversight Committee meets on an ad hoc basis to (i) review information about our managed loan portfolio, including, but not limited to, loan delinquencies; (ii) make such determinations or recommendations with respect to our managed loan portfolio as well as our role as a servicing agent as it may deem necessary or appropriate; (iii) consider such other matters related to our managed loan portfolio as it deems necessary or appropriate; (iv) approve all taxi medallion loan modifications, subject to guidelines that may be established from time to time by the Investment Oversight Committee and any other required approvals; and (v) conduct such other related matters as may be directed by the Board of Directors. The members of the Investment Oversight Committee are Messrs. Alvin Murstein, Andrew M. Murstein, John Everets, David L. Rudnick and Allan Tanenbaum. Mr. John Everets is the Chairman. The Investment Oversight Committee was formed on February 20, 2018 and met five times during the year ended December 31, 2018.

Code of Ethics

We have adopted a code of ethics policy for our directors, officers and employees. These persons must act ethically at all times and in accordance with the guidelines comprising our Code of Ethical Conduct and Insider Trading Policy to establish standards and procedures for the prevention and detection of activities which signal a conflict of interest or an abuse of fiduciary duty. To further promote ethical and responsible decision-making, the Board of Directors also adopted a Code of Ethical Conduct for Senior Financial Officers. Our Code of Ethical Conduct and Insider Trading Policy and Code of Ethical Conduct for Senior Financial Officers can be found in the “Investor Relations – Corporate Governance” section of our website at www.medallion.com . If we make any substantive amendments to the Code of Ethics or grant any waiver from a provision of the Code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website. The Board of Directors expects our directors, as well as our officers and employees, to act ethically at all times and to acknowledge their adherence to the policies comprising our Code of Ethics, which include, among other things, rules prohibiting loans or other extensions of credit, securities transactions during “blackout” periods, acceptance of gifts, and certain interested transactions.

In addition, the Board of Directors has established a policy for reporting employee concerns to the Audit Committee of the Board of Directors. Anyone with a concern about our accounting, internal accounting controls, or auditing matters may confidentially report such concern by telephone to a special dedicated toll-free phone number. This policy was previously announced to all of our employees and the telephone number is published in our common-area workplaces. All such communications are confidential and shall be promptly reviewed by the Audit Committee.

Shareholder Communications with the Board of Directors

Shareholders may communicate with our Board of Directors through our Secretary by writing to the following address: Board of Directors, c/o Secretary, Medallion Financial Corp., 437 Madison Avenue, 38th Floor, New York, New York 10022. Our Secretary will forward all correspondence to the Board of Directors, except for junk mail, mass mailings, loan complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Our Secretary may forward certain correspondence, such as loan-related inquiries, elsewhere within us for review and possible response.

 

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OUR DIRECTORS AND EXECUTIVE OFFICERS

The table below sets forth the name, ages and titles of the persons who were our directors and executive officers as of April 15, 2019:

 

Name		Age				Position(s) Held
Independent Directors
Henry L. Aaron (1)			85				Director
John Everets (1)			72				Director
Frederick A. Menowitz (2)			82				Director
Allan J. Tanenbaum (3)			72				Director
Lowell P. Weicker, Jr. (4)			87				Director
Non-Independent Directors
Alvin Murstein (1)(5)			84				Chairman, Chief Executive Officer, and Director
Andrew M. Murstein (3)(5)			54				President, Chief Operating Officer, and Director
David L. Rudnick (2)(5)			78				Director
Executive Officers Who Are Not Directors
Larry D. Hall			65				Senior Vice President and Chief Financial Officer
Stephen A. Lewis			70				Senior Vice President of Medallion Capital, Inc.
Thomas J. Munson			36				Executive Vice President and Chief Credit Officer
Donald S. Poulton			65				Chief Executive Officer and President of Medallion Bank
Marie Russo			94				Senior Vice President and Secretary
Marisa T. Silverman			40				Chief Compliance Officer and General Counsel
Alexander S. Travis			42				President of Medallion Capital, Inc.

 

(1)	Indicates a Class III director whose term expires at the 2020 Annual Meeting of Shareholders.

(2)	Indicates a Class I director whose term expires at the 2021 Annual Meeting of Shareholders.

(3)	Indicates a Class II director standing for election at this Annual Meeting.

(4)	Indicates a Class II director whose term expires at the 2019 Annual Meeting of Shareholders.

(5)	Indicates a non-independent director as determined under applicable NASDAQ listing standards.

The address for each director is c/o Medallion Financial Corp., 437 Madison Avenue, 38th Floor, New York, New York 10022.

The address for the executive officers is our principal offices, located at 437 Madison Avenue, 38th Floor, New York, New York 10022.

Independent Directors Not Standing for Election

Henry L. Aaron has served as our director since November 2004. Mr. Aaron served as a director of Turner Broadcasting System, Inc. from 1980 until its acquisition by Time Warner, Inc. in 1996. Mr. Aaron is currently Senior Vice President of Atlanta National League Baseball Club, Inc. Mr. Aaron sits on the board of directors of the Atlanta Braves. Mr. Aaron previously served as a director of DSW Inc., Retail Ventures, Inc. and Sports Properties Acquisition Corp. He is a member of the Board of Governors for Boys and Girls Clubs of America. Mr. Aaron is a recipient of the Presidential Medal of Freedom, the nation’s highest civilian award, awarded by President George W. Bush. Mr. Aaron brings strong executive management skills to our Board of Directors. He also provides the Board of Directors with experience on other public company boards of directors which provides our Board of Directors with insight on developing best practices for public companies in areas such as risk oversight and corporate governance matters.

John Everets has served as our director since July 2017. Mr. Everets is currently a partner at Arcturus Capital in Boston, Massachusetts. Prior to joining Arcturus, he was lead investor, Chairman of the Board and

 

20

Chief Executive Officer of the Bank of Maine from 2010 to 2015, where he led the recapitalization of the Bank, helped improved its financial position and eventually joined with Camden National Bank to form the largest bank in northern New England. Before leading the Bank of Maine, Mr. Everets was Chairman of Yorkshire Capital. Prior to that, he was Chairman and CEO of GE HPSC, Inc., from 1993 to 2006, where he grew the company from $100 million in assets to $1 billion before it was acquired by General Electric in 2004. Mr. Everets also previously held several executive positions at Advest, Inc. Mr. Everets is currently a Director of the Eastern Company, a Trustee of the Boston Athenaeum and is on the Board of Directors of Newman’s Own Foundation where he chairs the Finance Committee. He brings extensive financial and leadership experience at both public and private companies to our Board of Directors.

Frederick A. Menowitz has served as our director since May 2003. Mr. Menowitz is currently an independent active real estate investor with over 50 years of experience and a philanthropist. Mr. Menowitz received a B.A. from the University of Virginia and a J.D. from the University of Virginia School of Law. He is a Founder of Mount Sinai Medical Center, Miami Beach, Florida and a member of the Board of Directors of the Cystic Fibrosis Foundation. Mr. Menowitz brings legal and business expertise and finance and investment skills to our Board of Directors.

Lowell P. Weicker, Jr. has served as our director since February 2003. Mr. Weicker served as Governor of the State of Connecticut from 1991 to 1995. He served as a United States Senator representing the State of Connecticut from 1970 to 1988. Mr. Weicker previously served as a director of World Wrestling Entertainment, Inc. and Compuware Corporation. He received a B.A. from Yale University and a L.L.B. from the University of Virginia School of Law. Mr. Weicker brings valuable skills to the Board of Directors that he acquired through his extensive career in the public sector, such as his expertise in the areas of government relations and external affairs. He also provides the Board of Directors with experience on other public company boards of directors which provides our Board of Directors with insight on developing best practices for public companies in areas such as risk oversight and corporate governance matters.

Non-Independent Directors Not Standing for Election

Alvin Murstein has served as Chairman of our Board of Directors since our founding in 1995 and has been our Chief Executive Officer since February 1996. Mr. Murstein has also been Chairman of the board of directors and Chief Executive Officer of Medallion Funding LLC, formerly known as Medallion Funding Corp., since its founding in 1979. Mr. Murstein received a B.A. and an M.B.A. from New York University and has been an executive in the taxicab industry for over 60 years. Mr. Murstein served on the board of directors of the Strober Organization, Inc., a building supply company, from 1988 to 1997. Alvin Murstein is the father of Andrew M. Murstein. Mr. Murstein brings to our Board of Directors over 50 years of experience in the ownership, management, and financing of commercial businesses and taxicab medallions. He has deep knowledge of our company and its business, having served as Chairman of our Board of Directors since our founding in 1995 and our Chief Executive Officer since 1996.

David L. Rudnick has served as our director since February 1996. Mr. Rudnick serves as President of Rudco Properties, Inc., a real estate management concern and CEO of the Century Associates Group, a national commercial real estate concern which he founded in 1969. Mr. Rudnick served as President of Rudco Industries, Inc., an international manufacturer of machine readable documents, from 1963 to 1986. Mr. Rudnick previously served as President of the Financial Stationers Association and a director of West Side Federal Savings & Loan Association. Mr. Rudnick received an A.B. with honors in economics from Harvard University and an M.B.A. from Columbia University Graduate School of Business. Mr. Rudnick is Andrew M. Murstein’s father-in-law. Mr. Rudnick brings investment and executive management skills to our Board of Directors. He also has deep knowledge of our company and its business, having served on our Board of Directors since 1996.

 

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Executive Officers Who Are Not Directors

Larry D. Hall has served as our Chief Financial Officer since March 2004. Prior to that he served as our Acting Chief Financial Officer since July 2003, as our Chief Accounting Officer since May 2001 and as our Assistant Treasurer since October 2000. Mr. Hall previously served as Chief Financial Officer of Sports Properties Acquisition Corp. Mr. Hall was employed by Citibank as Vice President – Corporate Financial Control/Corporate Reporting & Analysis from October 1995 to October 2000. Mr. Hall was Vice President – Finance/Controller, Treasurer and Secretary of Consolidated Waste Services of America from April 1993 to March 1995. Prior to that, he was Vice President – Manager of Line Accounting for Wells Fargo and Co. from November 1987 to March 1993 and Senior Audit Manager in the Financial Services Industry Group for Arthur Andersen & Company from September 1976 to October 1987. Mr. Hall received his B.S. in business administration from the University of Southern California.

Stephen A. Lewis has served as Senior Vice President of Medallion Capital, Inc. since 1998. Mr. Lewis was a Vice President of Capital Dimensions, from 1989 until it was acquired by us in 1998. Mr. Lewis has served on several corporate boards and currently focuses on strategic growth of the Medallion Capital portfolio. He previously served as President of the Midwest Region of the Small Business Investor Alliance, or SBIA, and also served on its National Board of Governors. Mr. Lewis has a B.S. in Mechanical Engineering and an M.S. in Industrial Engineering from Ohio University.

Thomas J. Munson has served as our Executive Vice President and Chief Credit Officer since April 2017. Mr. Munson joined us in October 2012 as Vice President of Medallion Financial Corp. and Senior Vice President of Medallion Funding LLC and had served as Senior Vice President of Medallion Financial Corp. from March 2015 to April 2017. Prior to joining Medallion, Mr. Munson was a Vice President of Valley National Bank (formerly State Bank of Long Island) in their Middle Market/Commercial Lending Group. Mr. Munson received a B.S. in finance with a minor in economics from The University of Scranton and an MBA from Long Island University.

Donald S. Poulton has served as the Chief Executive Officer and President of Medallion Bank since May 2015. Mr. Poulton joined us in August 2002 as the Chief Lending Officer of Medallion Bank. Prior to joining Medallion Bank, Mr. Poulton served as the Chief Lending Officer and Executive Vice President of American Investment Financial. Mr. Poulton received a B.S. in finance from the University of Utah.

Marie Russo has served as our Senior Vice President and Secretary since February 1996. Ms. Russo has also been Senior Vice President and Secretary of Medallion Funding LLC, since June 1996. Ms. Russo served as Vice President of Operations of Tri-Magna from 1989 until its acquisition by us in May 1996. From 1989 to 1996, she was Vice President of Medallion Funding LLC, and from 1983 to 1986, she was Controller of Medallion Funding LLC. Ms. Russo received a B.S. in accounting from Hunter College.

Marisa T. Silverman has served as our General Counsel and Chief Compliance Officer since March 2015. Ms. Silverman joined us in November 2004 serving first as Legal Intern and as Assistant General Counsel beginning in September 2005. Ms. Silverman received a B.A. in Political Science from Bard College and a J.D. from St. John’s University School of Law.

Alexander S. Travis joined Medallion Capital, Inc. in 2014 and has served as President since December 2018. Prior to joining Medallion Capital, Inc., Mr. Travis held various positions within private equity, investment banking and institutional asset management. Mr. Travis holds a B.S. in Finance from Iowa State University.

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

This Compensation Discussion and Analysis, or CD&A, describes the Company’s executive compensation program for the year ended December 31, 2018. Our compensation program is designed to attract, motivate and retain the colleagues who lead our business. In particular, this CD&A explains how the Compensation Committee made 2018 compensation decisions for the following named executive officers, or NEOs:

 

Name		Position
Alvin Murstein		Chairman and Chief Executive Officer
Andrew M. Murstein		President and Chief Operating Officer
Larry D. Hall		Senior Vice President and Chief Financial Officer
Stephen A. Lewis		Senior Vice President of Medallion Capital, Inc.
Donald S. Poulton		Chief Executive Officer and President of Medallion Bank

Our Business Roots

We are a finance company that has historically had a leading position in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. Recently, our strategic focus and growth has been through Medallion Bank, which originates consumer loans for the purchase of recreational vehicles, boats and trailers and to finance small-scale home improvements. Since Medallion Bank acquired a consumer loan portfolio and began originating consumer loans in 2004, it has increased its consumer loan portfolio at a compound annual growth rate of 16% (19% if there had been no loan sales during 2016, 2017 and 2018).

A Shifting Business Strategy and Organization Model

In January 2017, we announced our plans to transform our strategy to transition away from taxi medallion lending, a business significantly challenged in recent years, to focus on our consumer finance portfolio. In early 2018, management laid out a three-prong strategy to reduce the Company’s medallion exposure, grow consumer segments and deconsolidate the Taxi Medallion Loan Trust III, or Trust III, facility. We believe our business transformation will result in our long-term profitability and success.

On March 7, 2018, a majority of our shareholders authorized our Board of Directors to withdraw our election to be regulated as a business development company, or BDC, under the 1940 Act. Effective April 2, 2018, following the approval of our shareholders, we withdrew our election to be regulated as a BDC and since that time we have operated and will continue to operate as a non-investment company. This withdrawal allowed us to consolidate the financial results of our primary operating subsidiary, Medallion Bank, and controlled or majority-owned portfolio investments together with the Company. This transition has simplified our reporting and more accurately reflects our operating results.

2018 – A Year of Transformation and Progress

Management’s three-prong strategy has proven successful and management is confident that we have taken the appropriate measures to get back to a path of profitability. Our significant improvements and progress, as of December 31, 2018, included:

 

•

Reduced medallion lending portfolio by 60% from $388 million to $156 million;

 

•

Reduced medallion loans as a percentage of total loans from 28% in 2017 to 16% in 2018;

 

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•

Increased our net consumer lending portfolio 11% to $762 million compared to $684 million;

 

•

Increased consumer lending portfolio 22% per year since 2011, or 30% inclusive of loans sold out of portfolio; and

 

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Deconsolidated the Trust III facility resulting in a recorded fourth quarter gain to earnings and tangible book value of approximately $19.2 million after taxes and elimination of $63.2 million of medallion loans and loans in process of foreclosure from the Company’s balance sheet, along with $98.5 million of debt and payables that Trust III owed to its lender while remaining as a fee based servicer of the loans in Trust III.

Medallion Bank’s ability to originate consumer loans has been highly successful and will continue to drive meaningful value for the Company and its shareholders. While the Company has faced challenges and significant work was involved in executing our three-prong strategy to transition the Company back to a path of profitability, our progress has been significant and we are confident our results will result in positive shareholder value.

Impact of Say on Pay Vote and Shareholder Engagement

As required by Section 14A of the Exchange Act, our shareholders voted on a non-binding advisory resolution regarding the compensation of the NEOs at the 2018 Annual Meeting of Shareholders. We pay careful attention to communication received from shareholders regarding executive compensation, including the non-binding advisory vote.

During our period of transformation, the Company received shareholder support for our non-binding advisory resolution of 66.3% in 2018, compared to 58.4% shareholder approval at our 2017 Annual Meeting of Shareholders. While there was an increase in shareholder approval of our say-on-pay proposal in 2018, as we stated in our 2018 proxy statement, we undertook a comprehensive shareholder outreach initiative inviting shareholders to provide feedback on executive compensation practices, summarize the results of the shareholder outreach process and share changes we have implemented.

We reached out to 21 of our institutional shareholders, which account for 84% of institutionally-held shares. Two institutions engaged with management, eight institutions declined and eleven did not respond to our initial outreach and follow-up. While the number of shareholders that accepted our offer to talk to us was limited, we valued the input and will continue to encourage shareholder engagement. Themes from our discussions focused on our board structure and disclosure. Investors suggested that we consider board refreshment and diversity and commented on the average age of our Board of Directors. We also received feedback that shareholders would like more information shared in our CD&A. In response to this feedback, and consistent with our prior goals to improve our compensation programs, the Compensation Committee committed to conducting a comprehensive review of the current pay programs and enhancing the CD&A disclosure. Our Board of Directors plans to recruit new directors who are more diverse.

Additionally, as part of our outreach and following our 2018 Annual Meeting of Shareholders, the Compensation Committee retained the services of Meridian Compensation Partners, LLC, or Meridian, as its independent compensation consultant with a goal to enhance our compensation program and practices. Meridian developed a new peer group aligned with our industry classification, benchmarked executive and board compensation, shared best practices and discussed potential adjustments to the annual and long-term incentive plans. Meridian also assisted with the implementation of risk mitigating compensation practices, such as stock ownership guidelines and a compensation recoupment policy, as well as assisted with increased disclosure in the CD&A.

Governance Best Practices

The principles of our executive compensation programs are to encourage good governance, protect and promote the interests of our stockholders, align the interests of our executives with those of the Company,

 

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promote a culture of integrity and accountability, and enhance stockholder value. Below we summarize our compensation best practices:

 

•

Stock Ownership Guidelines – We require our executives and directors to own and hold shares in the Company. (See page 31 for a description of our new policy.)

 

•

Compensation Recoupment Policy – We have adopted a compensation recoupment policy requiring the return of incentive compensation in the event of a financial restatement or in the event an executive engages in conduct that is detrimental to the Company. (See page 32 for a description of our new policy.)

 

•

Independent Compensation Advisor – The Compensation Committee engaged Meridian as its independent compensation consultant.

 

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Performance-Based Compensation – A significant portion of our executive compensation is paid based on performance.

 

•

Corporate Governance Documents – We have adopted the following corporate governance documents:

 

•

Code of Ethical Conduct and Insider Trading Policy, which, among other guidelines, prohibits short sales, investments in derivatives of the Company’s securities and margin purchases; and

 

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Code of Ethical Conduct for Senior Financial Officers.

 

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No Guaranteed Equity Incentives – We do not have any contracts that guarantee equity incentives will be granted to our NEOs.

 

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No Tax Gross-Ups in our 2018 Equity Incentive Plan.

 

•

No repricing of awards without shareholder approval.

Other Changes Implemented in 2018-2019

In addition to the new stock ownership guidelines and recoupment policy described above, the Compensation Committee also worked with Meridian to make the following improvements to our compensation programs:

 

•

Developed a performance-based “Scorecard” to provide structure for determining the annual bonus payouts and annual equity awards. The Scorecard was piloted for the 2018 annual incentive payouts and will provide further structure for the 2019 bonus program. (See the “Annual Bonus/Incentive” section on page 27 for list of scorecard factors introduced in 2018.)

 

•

In 2019, we added stock options to the long-term incentive program to provide a mix of 50% stock options and 50% time-based restricted stock to increase executives’ alignment with shareholders. Such grants will be allocated based on the Compensation Committee’s assessment of the Company’s prior year performance (and consideration of scorecard metrics) as well as individual performance and contribution.

 

•

Evaluated board compensation relative to market and will consider potential changes in 2019 in line with other governance initiatives (e.g. adding member(s) and increasing diversity on the Board of Directors).

EXECUTIVE COMPENSATION PROGRAM AND PAY DECISIONS

The primary objective of our compensation program is to establish compensation levels that enable us to attract, retain and reward executive officers who contribute to our long-term success, to tie annual and long-term cash and equity incentives to the achievement of measurable corporate, business unit and individual performance objectives, and to align executives’ incentives with shareholder value creation.

 

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Principal Elements of Pay

Our executive compensation emphasizes variable pay that is essential to attract, motivate and retain highly qualified and industrious employees. Our policy is to provide total compensation packages that are competitive within our industry. The compensation program includes components designed both to motivate executives and to provide incentives to executives, as well as retain them. The three primary components of our compensation program are base salary, cash bonus and equity incentive awards. Each of these elements serves a specific purpose in our compensation strategy.

 

Element		Form		Purpose/Description
Base Salary		Cash		We pay a competitive base salary rate to attract and retain highly skilled executive talent.
Annual Bonus/Incentive		Cash		Bonuses are paid to encourage achievements relative to our annual business plans and objectives.
Equity Incentive		Equity (restricted stock)		Shares of restricted stock are granted to help retain productive executives and to more closely align their interests with those of shareholders.   In 2019, we moved to a long-term incentive program to grant a mix of stock options and restricted stock to better align our executives with shareholders and reward stock price appreciation.

In implementing our compensation policy, we seek to tie compensation to our financial performance and business objectives, reward high levels of individual performance and base a significant portion of total executive compensation on our annual and long-term performance. While compensation survey data are useful guides for comparative purposes, we believe that a successful compensation program also requires the application of judgment and subjective determinations of individual performance, and to that extent, our Compensation Committee applies such judgment and subjective determinations in reconciling the program’s objectives with the realities of retaining valued employees.

Total Compensation Components and Pay Decisions

Base Salary

We provide our NEOs with base salary as a base level of compensation to compensate them for serving in their respective roles during the fiscal year. Base salary ranges for NEOs are determined based on each NEO’s position and duties and in consideration of competitive market data.

Salaries are reviewed by the Compensation Committee each year, or in the event of a promotion or other significant change in responsibilities. Any increases consider a review and evaluation of an NEO’s performance, the Company’s performance and market data for similar roles at companies similar in industry and size.

In 2018, Messrs. Alvin Murstein and Andrew M. Murstein did not receive a salary increase. The other NEOs received modest increases in base salary. These decisions were made by the Compensation Committee and ratified by the Board of Directors at their respective February 2018 meetings and communicated to each NEO shortly thereafter.

 

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The table below illustrates the percentage increases in NEO base salary from 2017 to 2018.

 

Name and Principal Position		2017 Salary ($)					2018 Salary ($)					Increase (%)
Alvin Murstein				868,972					868,972					—
Chairman, Chief Executive Officer and Director
Andrew M. Murstein				1,017,040					1,017,040					—
President, Chief Operating Officer and Director
Larry D. Hall				325,054					328,305					1	%
Senior Vice President and Chief Financial Officer
Stephen A. Lewis				294,151					302,976					3	%
Senior Vice President of Medallion Capital, Inc.
Donald S. Poulton				334,750					344,793					3	%
Chief Executive Officer and President of Medallion Bank

Annual Bonus/Incentive

NEOs are eligible for annual cash bonuses, as determined by the Compensation Committee and ratified by the Board of Directors. The purpose of the annual bonuses are to compensate NEOs based on their achievements of Company financial and operational goals as well as division and individual performance objectives. For the 2018 bonus decisions, the Compensation Committee used a newly developed “Scorecard” of performance factors (i.e. Scorecard) to provide a more structured reference for determining incentive payouts. The Compensation Committee selected the following performance scorecard metrics for 2018.

 

Overall Company Metrics		Business Segment/Individual Metrics
•  Share price performance in relation to peers, the industry and overall markets   •  Consolidated return on assets   •  Consolidated return on equity   •  Consolidated efficiency ratio   •  Consolidated adjusted tangible book value growth   •  Total Shareholder return   •  Consolidated net charge-off ratio		•  Consumer lending segments return on assets   •  Commercial lending segment return on assets   •  Consumer lending segments return on equity   •  Commercial lending segment return on equity   •  Consumer lending segments efficiency ratio   •  Commercial lending segment efficiency ratio   •  Consumer lending segments adjusted tangible book value growth   •  Commercial lending segment adjusted tangible book value growth   •  Consumer lending segments net charge-off ratio   •  Commercial lending segment net charge-off ratio   •  Consumer lending segments portfolio growth   •  Commercial lending segment portfolio growth   •  Medallion lending segment portfolio reduction   •  Collections/recoveries for medallion lending segment   •  Success and implementation of strategic initiatives   •  Individual performance

 

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The Compensation Committee chose to evaluate performance measures in a holistic manner rather than assign weights to each individual metric. This allows the Compensation Committee the discretion to consider certain metrics more heavily for some executives depending on their role and contribution. Moving into 2019, a similar set of metrics will be defined as the “Scorecard” with a goal to set targets that reflect budget or improvements year over year.

Each component of the 2018 Scorecard was assessed by the Compensation Committee and discussed individually and in aggregate. The role and contribution of each executive was also considered, for example, consumer lending segments portfolio growth had more influence on Donald S. Poulton’s incentive award and commercial lending segment portfolio growth had more influence on Stephen A. Lewis’ incentive award.

All of the above referenced overall Company metrics were considered by the Compensation Committee for the 2018 bonus awards for all NEOs. The additional business segment/individual metrics varied by each NEO’s role and applied to each NEO, as summarized below. The 2018 bonus awards, approved by the Compensation Committee and ratified by the Board of Directors in the following amounts, reflected the combination of overall Company metrics and business segment/individual metrics applicable to each NEO as follows:

 

Name		Business Segment/Individual Metrics Considered in Addition to the Overall Company Metrics		2018 Cash Bonus
Alvin Murstein		Medallion lending segment portfolio reduction; and Collections/recoveries for medallion lending segment.		$	210,000
Andrew M. Murstein		Success and implementation of strategic initiatives.		$	1,386,000
Larry D. Hall		Medallion lending segment portfolio reduction; and Collections/recoveries for medallion lending segment.		$	175,000
Stephen A. Lewis		Commercial lending segment return on assets; Commercial lending segment return on equity; Commercial lending segment efficiency ratio; Commercial lending segment adjusted tangible book value growth; Commercial lending segment net charge-off ratio; and Commercial lending segment portfolio growth.		$	125,000
Donald S. Poulton		Consumer lending segments return on assets; Consumer lending segments return on equity; Consumer lending segments efficiency ratio; Consumer lending segments adjusted tangible book value growth; Consumer lending segments net charge-off ratio; and Consumer lending segments portfolio growth.		$	255,000

Our annual bonus is paid in cash in an amount reviewed and approved by the Compensation Committee and ratified by the Board of Directors.

Long-Term Incentive Compensation

Prior to April 1, 2018, we operated as a BDC under the 1940 Act, and the number of restricted stock, warrants, options or rights to subscribe or convert to our voting securities that we were able to issue was limited.

At our shareholder meeting on June 15, 2018, following our change from a BDC to a non-investment company, shareholders approved the 2018 Equity Incentive Plan, or the 2018 Plan. The 2018 Plan provides for grants of stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance awards, and other awards that may be settled in or based upon our Common Stock to our directors, employees, and any person who has been offered employment by us; provided that such prospective employee could not receive any payment relating to an equity incentive award until such person has commenced employment with us. The Compensation Committee is authorized to grant equity incentive awards. A grant of an equity incentive

 

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award is subject to certain forfeiture provisions and thus are restricted as to transferability until such forfeiture restrictions have lapsed. The restrictions on equity incentive awards issued pursuant to the 2018 Plan may be related to continued service to us, the achievement of specified performance objectives, or other restrictions deemed by the Compensation Committee from time to time to be appropriate and in our best interests and in the interests of our shareholders.

Prior to the 2018 Plan, the Company had a 2015 Employee Restricted Stock Plan, a 2009 Employee Restricted Stock Plan and a 2006 Employee Stock Option Plan, all of which are no longer active (i.e. no shares can be allocated from these plans), although unvested shares remain outstanding under these plans.

Equity awards issued in 2018 consisted of time-based restricted stock awards, which are allocated to reflect the Compensation Committee’s assessment of prior year (i.e. 2017) performance and serve to help retain productive NEOs and to more closely align the interests of our NEOs with those of shareholders.

In 2019, we added stock options to the long-term incentive program to provide a mix of 50% stock options and 50% time based restricted stock and increase executives’ alignment with shareholders. The grants of stock options and restricted stock to NEOs in early 2019 were allocated based on the Compensation Committee’s assessment of the Company’s prior year performance (and consideration of scorecard metrics), as well as individual performance and contribution.

Benefits

The Company provides limited benefits and perquisites to NEOs. NEOs participate in the same benefits as employees, including the 401(k) Investment Plan.

Employee Benefits: NEOs are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability, and accidental death and dismemberment insurance, in each case on the same basis as other employees.

401(k) Plan: Since 1996, we have maintained our 401(k) Investment Plan which covers all our full- and part-time employees who have attained the age of 21 and have a minimum of one year of service. Under the 401(k) Investment Plan, an employee may elect to defer not less than 1.0% of his or her total annual compensation, up to the applicable limits set forth in the Internal Revenue Code (the “Code”). Employee contributions are invested in various mutual funds, according to the direction of the employee. We match employee annual contributions to the 401(k) Investment Plan in an amount equal to one-third of the first 6% of an employee’s annual contributions, subject to legal limits.

Perquisites: We provide NEOs with perquisites that we and the Compensation Committee believe are reasonable and consistent with market practice to better enable us to attract and retain superior employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to NEOs.

All of our NEOs are provided with a monthly car allowance, which allows such NEOs to visit clients. In addition, we provide Messrs. Alvin Murstein and Andrew M. Murstein each with a country club membership, social club memberships, term life insurance, incidental costs related to their automobiles such as parking and car insurance and pay for their pro-rated use of our company driver. We believe that the perquisites provided for Messrs. Murstein reflect their roles and contributions to our overall organization. Attributed costs of the personal benefits for the NEOs for the fiscal year ended December 31, 2018 are included in the column titled “All Other Compensation” of the Summary Compensation Table on page 34.

Employment Agreements: We enter into new employment agreements with NEOs only when necessary or appropriate to attract or retain exceptional personnel. Any employment agreement with an executive officer (a) must be approved by the Compensation Committee; and (b) if required by law to be available for public review, must be filed promptly with the appropriate regulatory authority.

 

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Our Compensation Committee authorized the various change in control and severance provisions under our NEO employment agreements in recognition of the importance to us and our shareholders of assuring that we have the continued dedication and full attention of our NEOs prior to and after the consummation of a change in control event. In addition to the foregoing, the provisions are intended to ensure that, if a possible change in control should arise and an NEO should be involved in deliberations or negotiations in connection with the possible change in control, such NEO would be in a position to consider as objectively as possible whether the possible change in control transaction is in our best interests and those of our shareholders, without concern for his position or financial well-being. Absent termination without cause or for good reason, or a change of control event, no NEO is entitled to either equity vesting acceleration or cash severance payments upon termination of employment. For quantification of these severance and change of control benefits, please see the discussion under “Executive Compensation – Potential Payments Upon Termination or Change-in-Control” on page 37.

BENCHMARKING

In response to shareholder feedback and as stated in our 2018 proxy statement, the Compensation Committee engaged Meridian as its independent compensation consultant in 2018, in order to review our executive compensation. In 2018, we developed a new peer group, which was used as a reference for 2018 decisions, but will be utilized more fully in 2019.

Due to our unique business model, there are a limited number of direct peers in related industries. Meridian designated four criteria in identifying peer companies:

 

1.

Universe: Publicly-traded U.S. companies.

 

2.

Industry/Sub-Industry: Companies that operate in similar lines of business as us, as reflected in Global Industry Classification Standard, or GICS, classifications. The compensation consultant screened companies in our GICS industry, Consumer Finance, which includes both Consumer Finance and Specialized Finance GICS sub-industries.

 

3.

Size: Due to our focus on consumer and commercial lending, the primary focus was on the assets screen, with Medallion positioned at the 60 th percentile.

 

4.

Other Characteristics: Companies considered business competitors as designated by the Compensation Committee and analyzed by prevalence in “peers of peers” of competitors.

The Company’s peer group was approved by the Compensation Committee and includes the following companies:

 

ConnectOne Bancorp, Inc.		McGrath RentCorp
Encore Capital Group, Inc.		On Deck Capital, Inc.
PRA Group, Inc.		Marlin Business Services Corp.
CAI International, Inc.		CURO Group Holdings
Consumer Portfolio Services, Inc.		Regional Management Corp.
Mobile Mini, Inc.		World Acceptance Corporation
Willis Lease Finance Corporation		Elevate Credit, Inc.
Enova International, Inc.		General Finance Corporation
EZCORP, Inc.		Atlanticus Holdings Corporation

ROLES OF THE COMPENSATION COMMITTEE, MANAGEMENT AND CONSULTANTS

Role of Compensation Committee

The Compensation Committee of the Board of Directors is responsible for evaluating and determining the compensation of our NEOs and our directors. This includes oversight of the executive compensation program for

 

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the CEO and other executive officers, including base salary, annual bonus, equity compensation and other benefits and perquisites. The Compensation Committee is comprised solely of independent directors and regularly meets in executive session without management. The full Board of Directors typically ratifies the Compensation Committee’s annual determination of NEO compensation.

The Compensation Committee has the sole authority and resources to obtain advice and assistance from internal and external legal and compensation consultants.

Role of Management

Our President and Chief Financial Officer, with the assistance of our human resources department, compile and provide information, make recommendations for the Compensation Committee’s consideration and assist in the management and administration of our executive and other benefit plans. Their responsibilities may include the following:

 

•

Recommending pay levels and equity grants and incentive awards for our other officers;

 

•

Recommending changes to ensure that our compensation programs remain competitive and aligned with our objectives; and

 

•

Providing information to the Compensation Committee, including but not limited to, information concerning (1) Company and individual performance, (2) the attainment of our strategic objectives, (3) the Common Stock ownership of each executive and his or her stock option and restricted stock holdings, (4) equity compensation plan dilution, and (5) peer group compensation and performance data.

Our NEOs may attend the meetings of the Compensation Committee, at its request, but do not participate in meetings where their compensation is deliberated or approved.

Role of Compensation Consultant

In September 2018, the Compensation Committee retained the services of Meridian Compensation Partners, LLC as its independent compensation consultant. Meridian assisted us in developing a new peer group, assisting with incentive plan design changes and implementing risk mitigating compensation practices such as stock ownership guidelines and compensation recoupment policy. The Compensation Committee evaluated the consultant relative to the SEC’s independence factors and determined Meridian is independent.

POLICIES AND PRACTICES

Stock Ownership Guidelines

The Company’s Stock Ownership Guidelines were adopted in 2019 and seek to align the long-term financial interests of our executive officers and Board of Directors with the interests of our shareholders, promote our commitment to sound corporate governance and demonstrate our executive officers and directors commitment to the Company. Our Stock Ownership Guidelines apply to all executive officers and non-employee directors. An executive officer’s or director’s stock ownership guidelines is determined as a multiple of such individual’s annual base salary or cash retainer as follows:

 

Position		Value of Shares
Tier 1 Executives (1)		5x Annual Base Salary
Tier 2 Executives (2)		2x Annual Base Salary
Tier 3 Executives (3)		1x Annual Base Salary
Non-Employee Directors		5x Annual Cash Retainer

 

(1)	Tier 1 Executives includes the Chief Executive Officer and President of the Company.

(2)	Tier 2 Executives includes the Chief Financial Officer of the Company and the division head executive officers.

(3)	Tier 3 Executives includes the executive officers designated by the Board of Directors of the Company.

 

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Shares that count towards the satisfaction of the Company’s Stock Ownership Guidelines include, shares owned outright by an executive officer or director, or jointly with, or separately by, the individual’s immediate family members residing in the same household, time-based vesting restricted shares or restricted stock units whether or not vested, and vested but unexercised in-the-money stock options. Executive officers and directors are required to achieve their stock ownership guidelines within five years of first becoming subject to the Company’s Stock Ownership Guidelines. Fifty percent of the net shares (shares received after tax withholding and any shares retained to satisfy transaction costs) of Company stock received as an equity award from the Company must be held until an executive officer or director has complied with the Company’s Stock Ownership Guidelines. Compliance with the Company’s Stock Ownership Guidelines will be reviewed annually by the Compensation Committee.

Compensation Recoupment Policy

The Company’s Compensation Recoupment Policy seeks to promote a culture of risk mitigation, integrity and accountability. The Compensation Recoupment Policy provides recoupment of incentive compensation due to financial restatement or detrimental conduct.

The Compensation Committee administers the Compensation Recoupment Policy and has the authority to interpret and implement the terms of such policy, exercise (or determine not to exercise) the powers granted to it thereunder, and make determinations under the policy.

No Repricing of Awards

Awards under the 2018 Plan may not be repriced without shareholder approval. For purposes of the 2018 Plan, “repricing” means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms of the award to lower its exercise price or base price (other than on account of capital adjustments resulting from stock splits), (ii) any other action that is treated as a repricing under generally accepted accounting principles, and (iii) repurchasing for cash or canceling an award in exchange for another award at a time when its exercise price or base price is greater than the fair market value of the underlying stock.

Impact of Tax Treatment

Section 162(m) of the Code generally disallows a tax deduction to public companies for remuneration in excess of $1 million paid to any of its covered employees in any taxable year, including NEOs. While our general policy is to maximize the deductibility of compensation, it does not preclude awards or payments that are not fully deductible if, in our judgment, such awards and payments are necessary to achieve our compensation objectives and to protect shareholder interests.

 

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