ITEM
11. EXECUTIVE COMPENSATION.
Compensation
Discussion and Analysis
This
Compensation Discussion and Analysis section discusses the compensation programs and policies for our officers listed in the Summary
Compensation Table below (“Named Executive Officers”) and the compensation committee’s role in the design and
administration of these programs and policies and in making specific compensation decisions for our Named Executive Officers.
Compensation
Review
Our
compensation committee established compensation policies designed to provide competitive compensation levels that correlate pay
with our annual performance and reward above average corporate performance, recognize individual initiative and achievements and
assist us in attracting and retaining qualified executives.
Our
compensation committee could engage outside advisors, experts and others to assist it in determining executive compensation. Our
compensation committee engaged GK Partners, Inc. (“GK Partners”) to provide the services described below in
connection with its compensation review for the year ended December 31, 2019. The compensation committee, considering all relevant
factors, including those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act and applicable NYSE American rules,
was not aware of any conflict of interest that has been raised by the work performed by GK Partners. Other than the services for
which the compensation committee directly engaged GK Partners, GK Partners provided no services to us for the year ended December
31, 2019.
The
compensation committee made all final determinations with respect to executive officers’ compensation, based on an appraisal
of our financial status and a subjective assessment of individual performance. Our chief executive officer could make recommendations
to the compensation committee relating to the compensation of other executive officers, but the compensation committee had full
autonomy in determining executive compensation. Other than standard fees for board and committee service, which were determined
by the full board, the compensation committee considered and approved all director compensation, which was determined through
a subjective assessment of individual contributions.
The
compensation committee could delegate to one or more of our executive officers the authority to make grants of equity-based compensation
to eligible individuals who are not executive officers. Any such executive officer was required to regularly report to the compensation
committee grants so made and the compensation committee could revoke any delegation of authority at any time.
Our
compensation committee was charged with performing an annual review of our executive officers’ cash and other compensation
to determine whether we provided adequate incentives and motivation to executive officers and whether the compensation we provided
to our executive officers was comparable to the compensation provided to other executive officers in similarly situated companies
based on our review of public compensation disclosures, although we do not use benchmarks. For 2019, our compensation committee
engaged GK Partners to evaluate publicly available compensation information regarding executive compensation at twelve
peer companies, which were identified by management, to review and assess whether we are providing generally competitive compensation
for our Named Executive Officers. These companies were:
B.
Riley Financial Inc.
|
JMP
Group Inc.
|
Blucora,
Inc.
|
LPL
Financial Holdings Inc.
|
Cowen
Group, Inc.
|
Oppenheimer
Holdings Inc.
|
Focus
Financial Partners, Inc.
|
Piper
Sandler Companies
|
Greenhill
& Co., Inc.
|
Raymond
James Financial Inc.
|
INTL
FCStone Inc.
|
Silvercrest
Asset Management Group Inc.
|
Within
the financial services industry, there are a limited number of publicly-traded companies that resemble us in size, scope and nature
of business operations. One of the peer group companies selected, LPL Financial Holdings Inc. (“LPL Financial”),
is primarily engaged in the independent brokerage business, our largest segment, although LPL Financial is substantially larger
than us. Raymond James Financial Inc. was selected because of its significant presence in the independent brokerage business,
although it participates in other business lines and is also substantially larger in size. The other peer group companies were
selected because they generally engage in investment banking, brokerage, wealth management or asset management activities, are
generally not depository institutions, and are roughly comparable to us in terms of market capitalization. The compensation committee
did not rely solely on this information and did not benchmark its decisions regarding total compensation or elements of compensation
to any particular percentile range within the peer group.
Compensation
Objectives
The
objectives of our compensation programs were to attract, motivate and retain qualified persons to serve as our executive officers.
Our compensation programs were designed to provide competitive compensation to our Named Executive Officers; reward individual
initiative and achievements; integrate pay with our performance; and ensure that executive compensation was adequately designed
to align the interests of executive officers with our shareholders consistent with our long-term performance.
Compensation
Components
The
four primary compensation components are base salary, brokerage commissions (for those officers who are registered representatives),
cash bonuses and equity awards. Decisions with respect to one component of compensation tend not to affect decisions regarding
other components. We do not have specific policies for allocating between annual and long-term compensation or between cash and
non-cash compensation. We discuss each of the four components of compensation in more detail below.
Base
Salary. We provide base salaries to provide our Named Executive Officers a fixed level of cash compensation commensurate with
their particular positions and qualifications. Generally, we set executive base salaries at levels comparable with those of executives
in similar positions and with similar responsibilities at comparable companies. We seek to maintain base salary amounts at or
near the industry norms. Base salaries are not intended to be the sole component of total annual cash compensation. We review
base salaries annually, subject to terms of employment agreements, and our compensation committee seeks to adjust base salaries
when necessary to realign them with industry norms based on a review of publicly-available compensation information, including,
for 2019, the peer group information identified above, after taking into account individual responsibilities, performance and
experience. We do not use specific industry benchmarks, however.
Brokerage
Commissions. If an executive is a registered representative, part of the executive’s total compensation prior to fiscal
2019 was a percentage of the brokerage commissions derived from customer accounts. We believed this form of additional compensation
helped incentivize our executives who are registered representatives. For each of fiscal 2017 and 2018, Mark Zeitchick and Adam
Malamed were the only Named Executive Officers who were paid brokerage commissions. See the column entitled “All Other Compensation”
in the Summary Compensation Table below for the amount of brokerage commissions paid to each of Mark Zeitchick and Adam Malamed
in fiscal 2017 and 2018. Effective with fiscal 2019, the compensation committee determined that commissions would no longer be
part of the overall compensation of Named Executive Officers.
Discretionary
Cash Bonus. We historically granted discretionary cash bonuses to executives and directors, including non-employee directors.
This was an important part of executive compensation. These bonuses could exceed base salary amounts and were more closely tied
to both company and individual performance. Our compensation committee established bonus amounts by taking account of, among other
things, a subjective assessment of individual performance, growth in our business through organic growth and acquisitions, satisfaction
of financial goals, including earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted,
changes in shareholder value and the business environment in which we operated during the year. We believe that EBITDA, as adjusted,
is correlated to shareholder value creation and therefore is one of the appropriate measures to consider in determining executive
compensation. EBITDA, as adjusted, is intended to minimize or eliminate the effect of items that do not directly reflect our performance
or individual executive performance. While the compensation committee considered the foregoing objective factors, the actual bonus
amount for each executive officer was based on the compensation committee’s subjective assessment of both our overall performance
for the year, in the context of the business environment in which we operated, and the contribution that each such individual
made to that performance. The compensation committee believed that a discretionary bonus plan is appropriate because objective,
short-term financial measures may not adequately reflect the relative contributions of individual executives.
For
2019, we granted a $1,775,000 cash bonus to Richard Lampen, our former chairman, president and CEO; a $2,235,000 cash bonus to
Mark Zeitchick, our former executive vice president; a $1,485,000 cash bonus to Adam Malamed, our former executive vice president
and chief operating officer; a $450,000 cash bonus to Brett Kaufman, our senior vice president and chief financial officer; and
a $450,000 cash bonus to Joseph Giovanniello, our former senior vice president-corporate and regulatory affairs. We also granted
a $1,525,000 cash bonus to Howard Lorber, our former vice-chairman. This bonus was based on the contribution made by Mr. Lorber
to the growth of our business, including through recruiting, acquisitions and development of client relationships. Additional
considerations for the bonuses for Messrs. Lampen, Zeitchick, Malamed, Kaufman and Giovanniello for 2019 included: increased consolidated
revenue and adjusted EBITDA; the continued successful recruiting of advisors and growth in the levels of advisory and total client
assets at our independent advisory and brokerage businesses; the growth of cash sweep programs; the implementation of increased
levels of shared services across the enterprise; improved results in our insurance brokerage segment; return of capital to shareholders
through common stock dividends and share repurchases; and the success of our public offering of senior notes. Bonus payments for
our executive officers in 2019 were greater or equal to those paid in 2018 due to our compensation committee’s subjective
assessment of our overall performance in the context of the business environment in which we operated and its consideration of
the factors described above.
In
addition to his bonus award described above, Mr. Malamed received a retention award of $400,000, which vested on the Closing Date.
The retention award will be reported in the Summary Compensation Table for the years in which it vests.
In
addition to his bonus award described above, Mr. Kaufman received a retention award of $100,000, which vests in two equal annual
installments at December 31, 2020 and 2021. Under the terms of the retention award, Mr. Kaufman is required to return 100% of
the retention award after taxes if he voluntarily terminates his employment with us or is terminated with “Cause”
(as defined in his employment letter) prior to December 31, 2020. Mr. Kaufman is required to return 50% of the retention award
after taxes if he voluntarily terminates his employment with us or is terminated with “Cause” (as defined in his employment
letter) prior to December 31, 2021. The retention award will be reported in the Summary Compensation Table for the years in which
it vests based on his continued service.
In
addition to his bonus award described above, Mr. Giovanniello received a retention award of $100,000, which vested on the Closing
Date. The retention award will be reported in the Summary Compensation Table for the years in which it vests based on his continued
service.
Equity
Awards. We previously granted stock-based awards, which included stock options and restricted stock, to incentivize executives
for long-term performance and to provide an appropriate balance between our long-term and short-term incentives. The percentage
of compensation paid as long-term incentives as compared with cash payments was made through a subjective determination. The compensation
committee developed its equity award determinations based on its judgment as to whether the total compensation packages provided
to our executives, including prior equity awards, were sufficient to retain, motivate and adequately reward the executives.
We
did not grant any restricted shares of common stock in January 2020. In January 2019, we granted 400,000 restricted shares of
common stock to each of Messrs. Lampen and Zeitchick, 275,000 restricted shares of common stock to Mr. Malamed and 60,000 restricted
shares of common stock to each of Messrs. Kaufman and Giovanniello. The foregoing restricted shares vested in four equal annual
installments beginning on the first anniversary of the grant date, with the remainder vesting on the Closing Date.
Dividends
on Unvested Restricted Stock. Under the terms of restricted stock awards made to our
Named Executive Officers under the 2009 Plan, dividend distributions were made to the executive officers with respect to unvested
shares of common stock. These distributions were made at the same rate as dividends paid on all other shares of our common stock.
In 2019, Named Executive Officers earned cash dividend payments on unvested restricted stock as follows: Mr. Lampen – $42,000;
Mr. Zeitchick – $42,000; Mr. Malamed – $27,000; Mr. Kaufman – $6,000; and Mr. Giovanniello – $6,000. In
accordance with the disclosure rules of the SEC, these amounts have not been separately reported in the Summary Compensation Table
because the value of the dividends was included in the initial grant date fair value of the underlying stock grants which is reported
in the table.
Other
Compensation. We maintained various employee benefit plans, including medical, dental, life and disability insurance and 401(k)
plans, and these plans were available to all salaried employees. Advisor Group also maintains various employee benefit plans,
including medical, dental, life and disability insurance and 401(k) plans, and these plans are available to all salaried employees
of ours as of the Closing Date. We paid all medical, dental and basic life insurance premiums for our executive officers (except
for Mr. Lampen) pursuant to their respective employment agreements. We reimbursed Mr. Lampen, Mr. Zeitchick and Mr. Malamed, on
an after-tax basis, for various automobile expenses and Mr. Lampen for certain health, dental and life insurance premiums. In
addition, we reimbursed certain of our executive officers for club memberships and dues.
Risk
Considerations in our Compensation Programs
We
have reviewed our compensation structures and policies as they pertain to risk and have determined that our compensation programs
do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on our company.
Tax
Considerations
Section
162(m) of the Internal Revenue Code generally disallows a public company’s tax deduction for compensation in excess of $1
million in any taxable year paid to the chief executive officer, principal financial officer and the three most highly compensated
officers (other than the chief executive officer and the principal financial officer). Previously, qualifying performance-based
compensation was not subject to the deduction limit if certain requirements were satisfied. Stock options granted under these
plans generally qualified as “performance-based” compensation that is fully deductible and not subject to the Section
162(m) deduction limit. The exemption from Section 162(m)’s deduction limit for performance-based compensation was repealed
in December 2017, such that compensation paid to our named executive officers in excess of $1 million will not be deductible unless
it qualifies for transition relief. In determining executive compensation, our compensation committee considers, among other factors,
the possible tax consequences. Tax consequences, including tax deductibility, are subject to many factors (such as changes in
the tax laws) that may be beyond our control. Also, the compensation committee believes that it is important for it to retain
maximum flexibility in designing compensation programs that meet its stated objectives. For these reasons, the committee, while
considering tax deductibility as one of the factors in determining compensation, does not limit compensation to those levels or
types of compensation that will be deductible by us.
Consideration
of our Most Recent Shareholder Advisory Vote on Executive Compensation
Last
year, at our 2019 Annual Meeting, our shareholders cast an advisory vote on executive compensation, referred to as a “say-on-pay
proposal”, as required by Section 14A of the Exchange Act. At the 2019 Annual Meeting, approximately 95% of the total votes
cast were in favor of the say-on-pay proposal, and we considered such approval an endorsement of our executive compensation philosophy
and programs. Therefore, our executive compensation philosophy and programs remained substantially unchanged since last year.
Board
of Directors Report on Executive Compensation
The
information contained in this Board of Directors Report shall not be deemed “soliciting material” or “filed”
with the SEC, nor shall such information be incorporated by reference into any document we file with the SEC, or subject to the
liabilities of Section 18 of the Exchange Act, except to the extent that such report is specifically stated to be incorporated
by reference into such document.
In
fulfilling our role, we met and held discussions with the Company’s management and reviewed and discussed the Compensation
Discussion and Analysis contained in this Annual Report. Based on the review and discussions with management and our business
judgment, we recommended that the Compensation Discussion and Analysis be included in this Annual Report for filing with the Securities
and Exchange Commission.
|
Submitted
by the Board of Directors:
|
|
|
|
Ahmed
Hassanein
|
|
Jamie
Price
|
|
Matthew
Schlueter
|
Summary
Compensation Table
The
following table shows the compensation paid to our Named Executive Officers for 2019, 2018 and 2017.
Name
and
Principal
Position
|
|
Fiscal
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards ($) (1)
|
|
|
Option
Awards ($)
|
|
|
Non-Equity
Incentive
Plan
Compensation ($)
|
|
|
All Other
Compensation ($) (2)
|
|
|
Total ($)
|
|
Richard J. Lampen,
|
|
|
2019
|
|
|
|
325,000
|
|
|
|
1,775,000
|
|
|
|
1,296,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,087
|
|
|
|
3,443,087
|
|
Former Chairman, President and
|
|
|
2018
|
|
|
|
250,000
|
|
|
|
1,775,000
|
|
|
|
1,043,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,021
|
|
|
|
3,115,271
|
|
CEO(3)(4)
|
|
|
2017
|
|
|
|
200,000
|
|
|
|
1,425,000
|
|
|
|
657,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,160
|
|
|
|
2,366,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Zeitchick,
|
|
|
2019
|
|
|
|
425,000
|
|
|
|
2,235,000
|
|
|
|
1,296,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
244,056
|
|
|
|
4,200,056
|
|
Former Executive Vice
|
|
|
2018
|
|
|
|
400,000
|
|
|
|
1,550,000
|
|
|
|
1,043,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
790,301
|
|
|
|
3,783,551
|
|
President(3)
|
|
|
2017
|
|
|
|
375,000
|
|
|
|
1,425,000
|
|
|
|
657,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
630,318
|
|
|
|
3,087,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam Malamed,
|
|
|
2019
|
|
|
|
400,000
|
|
|
|
1,835,000
|
(5)
|
|
|
891,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
98,146
|
|
|
|
3,224,146
|
|
Former Executive Vice President and
|
|
|
2018
|
|
|
|
375,000
|
|
|
|
1,075,000
|
(5)
|
|
|
642,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
783,228
|
|
|
|
2,875,228
|
|
Chief Operating Officer(3)
|
|
|
2017
|
|
|
|
350,000
|
|
|
|
850,000
|
(5)
|
|
|
358,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
599,927
|
|
|
|
2,158,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett H. Kaufman,
|
|
|
2019
|
|
|
|
375,000
|
|
|
|
500,000
|
(6)
|
|
|
194,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
66,992
|
|
|
|
1,136,392
|
|
Senior Vice President
|
|
|
2018
|
|
|
|
350,000
|
|
|
|
450,000
|
|
|
|
160,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,863
|
|
|
|
1,008,363
|
|
and Chief Financial Officer
|
|
|
2017
|
|
|
|
325,000
|
|
|
|
450,000
|
|
|
|
95,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,192
|
|
|
|
909,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Giovanniello,
|
|
|
2019
|
|
|
|
350,000
|
|
|
|
550,000
|
(7)
|
|
|
194,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,327
|
|
|
|
1,140,727
|
|
Former Senior Vice President- Corporate and
|
|
|
2018
|
|
|
|
325,000
|
|
|
|
550,000
|
(7)
|
|
|
160,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44,884
|
|
|
|
1,080,384
|
|
Regulatory Affairs(3)
|
|
|
2017
|
|
|
|
300,000
|
|
|
|
475,000
|
(7)
|
|
|
95,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,886
|
|
|
|
909,486
|
|
(1)
|
Represents
the aggregate grant date fair value of restricted stock granted for each of the three fiscal years ended December 31, 2019,
2018 and 2017 as determined in accordance with FASB ASC Topic 718, rather than an amount paid to or realized by the Named
Executive Officer. The FASB ASC Topic 718 amounts from these grants may never be realized by the Named Executive Officer.
|
|
|
(2)
|
The
following table sets forth a detailed breakdown of the items which compose “All Other Compensation”:
|
Name
|
|
Year
|
|
|
Tax
Reimb.
Payments ($)
|
|
|
Automobile
Expenses ($)
|
|
|
Health, Dental
and
Life Insurance
Premiums ($)
|
|
|
Club
Memberships
and Dues ($)
|
|
|
Company
Matching
Contribution to
401(k)Plan ($)
|
|
|
Commissions
from
Customer
Accounts ($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Lampen
|
|
|
2019
|
|
|
|
18,005
|
|
|
|
21,263
|
|
|
|
5,103
|
|
|
|
2,716
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,087
|
|
|
|
|
2018
|
|
|
|
17,964
|
|
|
|
21,263
|
|
|
|
5,078
|
|
|
|
2,716
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,021
|
|
|
|
|
2017
|
|
|
|
35,217
|
|
|
|
21,264
|
|
|
|
4,596
|
|
|
|
23,083
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Zeitchick
|
|
|
2019
|
|
|
|
88,331
|
|
|
|
27,048
|
|
|
|
13,716
|
|
|
|
109,081
|
|
|
|
5,880
|
|
|
|
—
|
|
|
|
244,056
|
|
|
|
|
2018
|
|
|
|
33,946
|
|
|
|
27,050
|
|
|
|
13,274
|
|
|
|
25,256
|
|
|
|
5,775
|
|
|
|
685,000
|
|
|
|
790,301
|
|
|
|
|
2017
|
|
|
|
34,924
|
|
|
|
26,170
|
|
|
|
12,873
|
|
|
|
23,351
|
|
|
|
—
|
|
|
|
533,000
|
|
|
|
630,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam Malamed
|
|
|
2019
|
|
|
|
10,349
|
|
|
|
17,353
|
|
|
|
40,762
|
|
|
|
29,683
|
|
|
|
—
|
|
|
|
—
|
|
|
|
98,146
|
|
|
|
|
2018
|
|
|
|
10,723
|
|
|
|
16,715
|
|
|
|
39,413
|
|
|
|
31,377
|
|
|
|
—
|
|
|
|
685,000
|
|
|
|
783,228
|
|
|
|
|
2017
|
|
|
|
652
|
|
|
|
—
|
|
|
|
39,192
|
|
|
|
27,083
|
|
|
|
—
|
|
|
|
533,000
|
|
|
|
599,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett H. Kaufman
|
|
|
2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
40,762
|
|
|
|
20,350
|
|
|
|
5,880
|
|
|
|
—
|
|
|
|
66,992
|
|
|
|
|
2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,413
|
|
|
|
2,675
|
|
|
|
5,775
|
|
|
|
—
|
|
|
|
47,863
|
|
|
|
|
2017
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,192
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Giovanniello
|
|
|
2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
40,447
|
|
|
|
—
|
|
|
|
5,880
|
|
|
|
—
|
|
|
|
46,327
|
|
|
|
|
2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,109
|
|
|
|
—
|
|
|
|
5,775
|
|
|
|
—
|
|
|
|
44,884
|
|
|
|
|
2017
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,886
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,886
|
|
(3)
|
Resigned
as one of our officers on the Closing Date of the Merger.
|
|
|
(4)
|
Does
not include payments to Vector Group under the management services agreement with Vector Group described under the caption
“Compensation Arrangements for Executive Officers” below.
|
|
|
(5)
|
Includes
(i) for 2019, $350,000 in retention awards paid in 2018 and 2019, which vested on December 31, 2019, (ii) for 2018, $275,000
in retention awards paid in 2017 and 2018, which vested on December 31, 2018 and (iii) for 2017, $250,000 in retention awards
paid in 2016 and 2017, which vested on December 31, 2017.
|
|
|
(6)
|
Includes
$50,000 in retention awards paid in 2019, which vested on December 31, 2019.
|
|
|
(7)
|
Includes
(i) for 2019, $60,000 in retention awards paid in 2018 and 2019, which vested on December 31, 2019, (ii) for 2018, $100,000
in retention awards paid in 2017 and 2018, which vested on December 31, 2018 and (iii) for 2017, $100,000 in retention awards
paid in 2016 and 2017, which vested on December 31, 2017.
|
Compensation
Arrangements for Executive Officers
Richard
J. Lampen served as our president and chief executive officer under a management services agreement with Vector Group and an employment
agreement with us until the Closing Date. Under the management services agreement, Vector Group made Mr. Lampen’s services
available to us and provided, upon our request, other financial, tax and accounting resources, including assistance in
complying with Section 404 of the Sarbanes-Oxley Act of 2002 and assistance in the preparation of tax returns, in exchange for
an annual fee of $850,000, payable in quarterly installments to Vector Group, and an indemnification by us of Vector Group. The
management agreement terminated in connection with the Merger. Pursuant to Mr. Lampen’s employment agreement, entered into
in January 2015, he received an annual base salary of $250,000 (increased to $325,000 effective January 2019), reimbursement for
various automobile and health and dental insurance expenses, two club memberships and dues and a discretionary bonus. The agreement
terminated on the Closing Date in connection with Mr. Lampen’s resignation with good reason. In January 2020, we paid a
$1,775,000 discretionary bonus to Mr. Lampen for 2019, which is reflected in the Summary Compensation Table above.
Mark
Zeitchick served as our executive vice president until the Closing Date. Pursuant to Mr. Zeitchick’s employment agreement,
he received an annual base salary of $400,000 (increased to $425,000 effective January 2019), a percentage of commissions from
customer accounts, reimbursement for various automobile and health and dental insurance expenses, two club memberships and dues
and a discretionary bonus. The agreement terminated on the Closing Date in connection with Mr. Zeitchick’s resignation with
good reason. In January 2020, we paid a $2,235,000 discretionary bonus to Mr. Zeitchick for 2019, which is reflected in the Summary
Compensation Table above.
Adam
Malamed served as our executive vice president and chief operating officer until the Closing Date. Pursuant to Mr. Malamed’s
employment agreement, he received an annual base salary of $375,000 (increased to $400,000 effective January 2019), a percentage
of commissions from customer accounts, reimbursement for various automobile and health and dental insurance expenses, a club membership
and dues and a discretionary bonus. The agreement terminated on the Closing Date in connection with Mr. Malamed’s resignation
with good reason. In January 2020, we paid a $1,485,000 discretionary bonus to Mr. Malamed for 2019, which is reflected in the
Summary Compensation Table above. Mr. Malamed also had $350,000 of retention awards paid in 2018 and 2019 that vested on December
31, 2019 as described in the Summary Compensation Table above.
Brett
H. Kaufman has served as our senior vice president and chief financial officer under the terms of an employment agreement providing
for a $350,000 annual base salary (increased to $375,000 effective January 2019). He is also eligible for a discretionary bonus,
which was $450,000 for 2019 and is reflected in the Summary Compensation Table above, and payment of health and dental insurance
premiums. Mr. Kaufman also had $50,000 of retention awards paid in 2019 that vested on December 31, 2019, as described in the
Summary Compensation Table above. The current term of the agreement with Mr. Kaufman, which automatically renews for successive
one-year periods unless terminated by either party upon 60 days’ written notice prior to the expiration of the then current
term, is through December 31, 2020.
Joseph
Giovanniello served as our senior vice president-corporate and regulatory affairs until the Closing Date and also serves as senior
vice president and general counsel of Ladenburg Thalmann & Co. Inc. Under his employment agreement, Mr. Giovanniello received
an annual base salary of $325,000 (increased to $350,000 effective January 2019), payment of health and dental insurance premiums
and a discretionary bonus. In January 2020, we paid a $450,000 discretionary bonus to Mr. Giovanniello for 2019, which is reflected
in the Summary Compensation Table above. Mr. Giovanniello also had $100,000 of retention awards paid in 2018 and 2019 that vested
on December 31, 2019, as described in the Summary Compensation Table above. The agreement terminated on the Closing Date
upon Mr. Giovanniello’s resignation with good reason from his position as our senior vice president – corporate
and regulatory affairs.
For
more information regarding the employment agreements of our Named Executive Officers, see the section entitled “Potential
Termination or Change in Control Payments” below.
CEO
Pay Ratio
Pursuant
to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of the annual total compensation
of Richard J. Lampen, our chief executive officer as of December 31, 2019, to the annual total compensation of our median employee
(excluding the chief executive officer).
The
ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u). The SEC’s rules for identifying
the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to
adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their
employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable
to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize
different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.
We
identified our median employee from all full-time, part-time, and temporary workers who were included as employees on our payroll
records as of a determination date of December 31, 2019, based on total taxable earnings during 2019 (excluding the chief executive
officer). For employees hired during the year, their compensation was annualized to reflect a full year of wages. The median employee
identified by this compensation measure had anomalous compensation characteristics and was substituted with a similarly situated
employee with a materially equivalent compensation level.
The
2019 annual total compensation as determined under Item 402 of Regulation S-K for our chief executive officer was $3,443,087,
as reported in the Summary Compensation Table of this annual report. The 2019 annual total compensation as determined under Item
402 of Regulation S-K for our median employee was $68,772. The ratio of our chief executive officer’s annual total compensation
to our median employee’s annual total compensation for fiscal year 2019 is 50 to 1.
Grants
of Plan-Based Awards in 2019
The
following table shows grants made to our Named Executive Officers in 2019. The grant date fair value of option awards or awards
of restricted stock may not be realized by the individuals.
Name
|
|
Grant Date
|
|
All Other
Stock
Awards:
Number of Shares of
Stock or
Units (1)
(#)
|
|
|
All Other Option Awards: Number of Securities Underlying Options (#)
|
|
|
Exercise or Base Price of Option Awards ($)
|
|
|
Grant Date
Fair Value of Stock and Option Awards (2) ($)
|
|
Richard Lampen
|
|
1/10/2019
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,296,000
|
|
Mark Zeitchick
|
|
1/10/2019
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,296,000
|
|
Adam Malamed
|
|
1/10/2019
|
|
|
275,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
891,000
|
|
Brett Kaufman
|
|
1/10/2019
|
|
|
60,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194,400
|
|
Joseph Giovanniello
|
|
1/10/2019
|
|
|
60,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194,400
|
|
(1)
|
Represents
restricted stock granted on January 10, 2019.
|
|
|
(2)
|
Represents
the aggregate grant date fair value of stock options and restricted stock granted for the year ended December 31, 2019 as
determined in accordance with FASB ASC Topic 718, rather than an amount paid to or realized by the officer. Assumptions used
in the calculation of the grant date fair value of stock options are included in note 19 to our audited financial statements
for the year ended December 31, 2019 included in the 10-K. The FASB ASC Topic 718 amounts from these grants may never be realized.
|
Outstanding
Equity Awards at December 31, 2019
The
following table summarizes the outstanding option awards and unvested awards of restricted stock held by our Named Executive Officers
at December 31, 2019. All such option awards and unvested awards of restricted stock vested and were converted into the right
to receive consideration in connection with the Merger.
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of Securities Underlying
Unexercised Options (#) Exercisable
|
|
|
Number of Securities Underlying
Unexercised Options (#) Unexercisable
|
|
|
Equity Incentive Plan Awards:
Number of Securities Underlying Unexercised
Unearned Options (#)
|
|
|
Option Exercise Price ($)
|
|
|
Option Expiration Date
|
|
Number
of Shares or Units of Stock that have not vested
#
|
|
|
Market Value of Shares or
Units of Stock that have not vested $
|
|
|
Equity Incentive Plan Awards:
Number of unearned shares, units or other rights that have not vested (#)
|
|
|
Equity Incentive Plan Awards:
Market or payout value of unearned shares, units or other rights that have not vested ($)
|
|
Richard J. Lampen
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.28
|
|
|
03/02/2021
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.80
|
|
|
01/31/2022
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.40
|
|
|
01/28/2023
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.25
|
|
|
01/17/2024
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4.25
|
|
|
01/20/2025
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
150,000
|
|
|
|
50,000
|
(1)
|
|
|
—
|
|
|
|
2.65
|
|
|
01/14/2026
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,500
|
(2)
|
|
|
217,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,500
|
(3)
|
|
|
478,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243,750
|
(4)
|
|
|
848,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
(5)
|
|
|
1,392,000
|
|
|
|
—
|
|
|
|
—
|
|
Mark Zeitchick
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.28
|
|
|
03/02/2021
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.80
|
|
|
01/31/2022
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.40
|
|
|
01/28/2023
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.25
|
|
|
01/17/2024
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4.25
|
|
|
01/20/2025
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
150,000
|
|
|
|
50,000
|
(1)
|
|
|
—
|
|
|
|
2.65
|
|
|
01/14/2026
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,500
|
(2)
|
|
|
217,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,500
|
(3)
|
|
|
478,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243,750
|
(4)
|
|
|
848,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
(5)
|
|
|
1,392,000
|
|
|
|
—
|
|
|
|
—
|
|
Adam Malamed
|
|
|
200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.28
|
|
|
03/02/2021
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.80
|
|
|
01/31/2022
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.40
|
|
|
01/28/2023
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
135,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.25
|
|
|
01/17/2024
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4.25
|
|
|
01/20/2025
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
37,500
|
|
|
|
12,500
|
(1)
|
|
|
—
|
|
|
|
2.65
|
|
|
01/14/2026
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,250
|
(2)
|
|
|
108,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(3)
|
|
|
261,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
(4)
|
|
|
522,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,000
|
(5)
|
|
|
957,000
|
|
|
|
—
|
|
|
|
—
|
|
Brett H. Kaufman
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.90
|
|
|
01/14/2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
125,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.28
|
|
|
03/02/2021
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
125,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.80
|
|
|
01/31/2022
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
62,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.40
|
|
|
01/28/2023
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.25
|
|
|
01/17/2024
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(2)
|
|
|
34,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(3)
|
|
|
69,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
(4)
|
|
|
130,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(5)
|
|
|
208,800
|
|
|
|
—
|
|
|
|
—
|
|
Joseph Giovanniello
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.90
|
|
|
01/14/2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.28
|
|
|
03/02/2021
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.80
|
|
|
01/31/2022
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.40
|
|
|
01/28/2023
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.25
|
|
|
01/17/2024
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(2)
|
|
|
34,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(3)
|
|
|
69,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
(4)
|
|
|
130,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(5)
|
|
|
208,800
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
These
options vested on January 14, 2020.
|
|
|
(2)
|
These
shares of restricted stock vested on January 14, 2020.
|
|
|
(3)
|
Half
of these shares of restricted stock vested on January 13, 2020 and the remainder vested on the Closing Date.
|
|
|
(4)
|
One-third
of these shares of restricted stock vested on January 12, 2020 and the remainder vested on the Closing Date.
|
|
|
(5)
|
One-quarter
of these shares of restricted stock vested on January 10, 2020 and the remainder vested on the Closing Date.
|
Option
Exercises and Stock Vested
The
following table sets forth information regarding the exercise of stock options and vesting of restricted stock for our Named Executive
Officers during 2019:
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares Acquired on
Exercise
(#)
|
|
|
Value
Realized on Exercise
($) (1)
|
|
|
Number of Shares Acquired on Vesting
(#)
|
|
|
Value
Realized on Vesting
($)
|
|
Richard J. Lampen
|
|
|
600,000
|
|
|
|
1,503,000
|
|
|
|
143,750
|
|
|
|
451,750
|
|
Mark Zeitchick
|
|
|
600,000
|
|
|
|
1,503,000
|
|
|
|
262,500
|
|
|
|
824,938
|
|
Adam Malamed
|
|
|
200,000
|
|
|
|
501,000
|
|
|
|
150,000
|
|
|
|
471,656
|
|
Brett H. Kaufman
|
|
|
—
|
|
|
|
—
|
|
|
|
42,500
|
|
|
|
133,275
|
|
Joseph Giovanniello
|
|
|
—
|
|
|
|
—
|
|
|
|
42,500
|
|
|
|
133,275
|
|
|
(1)
|
Represents
the difference between the exercise price and the market price of the common stock on the date of exercise for each option.
|
Pension
Benefits
We
do not provide pension benefits to our Named Executive Officers.
Nonqualified
Deferred Compensation
We
do not maintain defined contribution or other plans providing for the deferral of compensation on a basis that is not tax qualified.
Qualified
Employee Stock Purchase Plan
On
November 6, 2002, our shareholders approved the Qualified Employee Stock Purchase Plan (the “QESPP”), under
which a total of 5,000,000 shares of our common stock were available for issuance. On November 1, 2006, our shareholders
approved an amendment to increase the number of shares available for issuance under the plan to 10,000,000 shares. In September
2012, our shareholders approved the amendment and restatement of the QESPP. Under this stock purchase plan, as administered by
the compensation committee, all full-time employees could use a portion of their salary to acquire shares of our common stock
during designated periods. Designated periods were set at three months long and commenced on January 1st, April 1st,
July 1st and October 1st of each year and ended on March 31st, June 30th, September
30th and December 31st of each year. On the first day of each such period, known as the “date of grant,”
each participating employee was automatically granted an option to purchase shares of our common stock to be automatically exercised
on the last trading day of the three-month purchase period comprising an option period. The last trading day of an option period
was known as an “exercise date.” On the exercise date, amounts withheld during the period were applied to purchase
shares from us for the participating employees. The purchase price under the QESPP was 95% of the last sale price of our common
stock on the exercise date. As of December 31, 2019, 5,199,006 shares of common stock had been issued under the QESPP. The QESPP
was terminated effective as of the Closing Date.
Potential
Termination or Change in Control Payments
As
of December 31, 2019, Richard Lampen, Mark Zeitchick, Adam Malamed, Brett H. Kaufman and Joseph Giovanniello had employment agreements
with us that provided for potential payments in the event of their termination. Under each of Mr. Lampen’s, Mr. Zeitchick’s
and Mr. Malamed’s employment agreements, if the agreements were terminated by the Company without “Cause” or
by the executive for “Good Reason” (as each such term is defined in the agreements), or in the event of the executive’s
death or disability, or in the case of Mr. Lampen, in the event of retirement (at age 66 or older), the executives would be entitled
to a severance period (24 months in the case of Mr. Lampen and 18 months in the case of Messrs. Zeitchick and Malamed) in which
the executive will continue to be paid his base salary, bonuses and benefits, in addition to having all stock awards immediately
vest upon termination; provided, however, that in the case of Mr. Lampen’s retirement, the Company shall have the option
of paying the salary and bonus in shares of the Company’s common stock. The total estimated payment in the event Mr. Lampen’s
employment had been terminated on December 31, 2019 for the reasons set forth above would have been approximately $4,203,163.
The total estimated payment in the event Mr. Zeitchick’s employment had been terminated on December 31, 2019 for the reasons
set forth above would have been approximately $2,983,074. The total estimated payment in the event Mr. Malamed’s employment
had been terminated on December 31, 2019 for the reasons set forth above would have been approximately $2,461,143. Each of Messrs.
Lampen, Zeitchick and Malamed resigned for “Good Reason” following the Merger and received the benefits set forth
above. For Messrs. Lampen, Zeitchick and Malamed, the cash payments payable to each such executive consisted of a lump sum severance
payment equal to 1.5 times (2 times in the case of Mr. Lampen) the sum of (i) the executive’s base salary and (ii) the bonus
(inclusive of any amounts deferred and retention amounts) paid to the executive in respect of the performance period that ended
immediately prior to the performance period in which the termination occurred (or, if greater, the bonus paid in respect of 2014
for Messrs. Lampen and Zeitchick and 2017 for Mr. Malamed).
If
termination occurred within two years after any “Change in Control” (as defined in the agreements), the executive
would be paid a lump sum payment equal to a number of months multiplied by the executive’s base salary and bonuses (such
number of months being 24 months in the case of Mr. Lampen and 18 months in the case of Messrs. Zeitchick and Malamed). Additionally,
if a “Change in Control” occurred within twelve months after termination of employment by the Company without “Cause”
or by the executive with “Good Reason,” the Company’s remaining severance period payment obligations would instead
be paid in one lump sum. The total estimated payment in the event Mr. Lampen’s employment had been terminated on December
31, 2019 as a result of a “Change in Control” would have been approximately $4,203,163. The total estimated payment
in the event Mr. Zeitchick’s employment had been terminated on December 31, 2019 as a result of a “Change in Control”
would have been approximately $2,983,074. The total estimated payment in the event Mr. Malamed’s employment had been terminated
on December 31, 2019 as a result of a “Change in Control” would have been approximately $2,461,143.
If
terminated by the Company for “Cause” or by executive without “Good Reason,” the executive would be entitled
only to any salary and expense reimbursement owed to him through the date of termination.
Each
of Messrs. Lampen’s, Zeitchick’s and Malamed’s employment agreements defined “Cause,” “Disability,”
“Good Reason” and “Change in Control” as follows:
|
●
|
Cause
means: (i) having been convicted of or entered a plea of nolo contendere with respect to a criminal offense constituting a
felony; (ii) having committed in the performance of his duties under the agreement one or more acts or omissions constituting
fraud, dishonesty, or willful injury to us which results in a material adverse effect on our business, financial condition
or results of operations; (iii) having committed one or more acts constituting gross neglect or willful misconduct which results
in a material adverse effect on our business, financial condition or results of operations; (iv) having willfully or knowingly
exposed us to criminal liability substantially caused by the executive which results in a material adverse effect on our business,
financial condition or results of operations; or (v) having failed, after written warning from our board of directors specifying
in reasonable detail the breach(es) complained of, to substantially perform his duties under the agreement (excluding, however,
any failure to meet any performance targets or to raise capital or any failure as a result of an approved absence or any mental
or physical impairment that could reasonably be expected to result in a “Disability”).
|
|
|
|
|
●
|
Disability
means: mental or physical impairment or incapacity rendering such executive substantially unable to perform his duties under
the agreement for more than 180 days out of any 360-day period during his employment period.
|
|
|
|
|
●
|
Good
Reason means: (i) a material diminution of such executive’s duties and responsibilities provided in the agreement, including,
without limitation, the failure to elect or re-elect such executive to the same office and as a member of our board of directors
or the removal of such executive from any such position, (ii) a reduction of such executive’s base salary or target
bonus opportunity as a percentage of base salary, (iii) any material breach of any material provision of the agreement by
us, (iv) relocation of his office location from the Miami, Florida metropolitan area, (v) a change in such executive’s
reporting relationship; and (vi) the failure of a successor to all or substantially all of our business and/or assets to promptly
assume and continue our obligations under the agreement, whether contractually or as a matter of law, within 15 days of such
transaction.
|
|
|
|
|
●
|
Change
in Control means the occurrence of: (i) any “person” (as such term is defined in the Exchange Act and as used
in Section 13(d)(3) and 14(d)(2) of the Exchange Act), other than Dr. Phillip Frost, any member of his immediate family,
and any “person” or “group” (as used in Section 13(d)(3) of the Exchange Act) that is controlled
by Dr. Frost or any member of his immediate family, any beneficiary of the estate of Dr. Frost, or any trust, partnership,
corporate or other entity controlled by any of the foregoing, is or becomes, a “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities representing 50% or more of the combined
voting power of our outstanding securities eligible to vote for election of our board of directors; or (ii) the individuals
who, as of the date of the Agreement, were members of our board of directors (the “Incumbent Board”), cease
for any reason to constitute at least two-thirds of the Incumbent Board; provided, however, that if either the election
of any new director or the nomination for election of any new director was approved by a vote of more than two-thirds
of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as
a result of either an actual or threatened election contest or proxy contest; or (iii) consummation of a reorganization,
merger or consolidation, sale, disposition of all or substantially all of our assets or stock or any other similar corporate
event, in each case, unless following such event, (a) all or substantially all of the individuals or entities who were
the beneficial owners, respectively, of our voting stock entitled to vote generally in the election of directors immediately
prior to such event beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding voting
securities entitled to vote generally in the election of our directors, as the case may be, of the corporation resulting
from such event and (b) the individuals who were members of the Incumbent Board immediately prior to the execution of
the agreement providing for the event constitute at least a majority of the members of the board of directors of the relevant
surviving corporation.
|
Under
Mr. Kaufman’s employment agreement, we are required to pay Mr. Kaufman a severance amount equal to his annual base salary
($375,000 at December 31, 2019) due to his termination by us without “Cause” or by him for “Good Reason”.
In the event that Mr. Kaufman’s employment is terminated due to death or “Disability,” Mr. Kaufman will be entitled
to receive a pro-rata bonus for the year of termination based on his bonus for the prior year ($550,000 in the case of any termination
in 2019). Also, Mr. Kaufman and his family will be entitled to receive company paid health and dental benefits for a period of
up to 18 months following any termination due to death, “Disability”, without “Cause” or with “Good
Reason” (approximately $61,143 at December 31, 2019). The total estimated payment in the event Mr. Kaufman’s employment
had been terminated on December 31, 2019 without “Cause” or for “Good Reason” was $436,143. The total
estimated payment in the event Mr. Kaufman’s employment had been terminated on December 31, 2019 as a result of his death
or disability was approximately $611,143. Additionally, Mr. Kaufman is entitled to a supplemental severance payment in the amount
of $550,000 upon a qualifying termination in connection with the Merger.
Mr.
Kaufman’s employment letter defines “Cause”, “Disability” and “Good Reason” as follows:
|
●
|
Cause
means: (i) conviction of, or the entry of a plea of guilty or nolo contendere to, a felony, (ii) alcoholism or drug addiction
which materially impairs Mr. Kaufman’s ability to perform his duties, (iii) continued, intentional and willful failure
to substantially and materially perform his material duties and responsibilities after receipt of written notice and failure
to cure within 30 days of such notice, (iv) willful and deliberate misconduct that results, or is reasonably likely to result,
in material and demonstrative harm to us or our subsidiaries or affiliates, or (v) substantial impairment from performing
his duties for a period of longer than 60 consecutive days or more than 120 days as a result of an action taken by a regulatory
body or self-regulatory agency.
|
|
|
|
|
●
|
Disability
means that Mr. Kaufman, as a result of incapacity due to physical or mental illness, has been substantially unable to perform
his normal duties for an entire period of six consecutive months, and has not returned to the substantial performance of his
duties on a full-time basis within 30 days after written notice of termination is given by us after such six-month period.
|
|
|
|
|
●
|
Good
Reason means: (i) a material diminution in duties or responsibilities, (ii) failure to appoint or elect Mr. Kaufman as our
senior vice president and chief financial officer or his removal from such position, (iii) a reduction in his base salary,
(iv) relocation of his office to a location outside of Miami, Florida (other than in connection with travel necessary to perform
his duties), or (v) a material breach by us of his employment letter, an indemnification agreement between us or any equity
agreement between us, including, without limitation, the failure of any successor to all or substantially all of our assets
to assume our obligations under the employment letter and the indemnification agreement.
|
Under
Mr. Giovanniello’s employment agreement, we were required to pay Mr. Giovanniello a severance amount equal to his annual
base salary ($350,000 at December 31, 2019) due to his termination by us without “Cause” or by him for “Good
Reason”. In the event that Mr. Giovanniello’s employment was terminated due to death or “Disability”,
Mr. Giovanniello would be entitled to receive a pro-rata bonus for the year of termination based on his bonus for the prior year
($550,000 in the case of any termination in 2019). Also, Mr. Giovanniello and his family would be entitled to receive company
paid health and dental benefits for a period of up to 18 months following any termination due to death, “Disability”,
without “Cause” or with “Good Reason” (approximately $60,671 at December 31, 2019). The total estimated
payment in the event Mr. Giovanniello’s employment had been terminated on December 31, 2019 without “Cause”
or for “Good Reason” was $410,671. The total estimated payment in the event Mr. Giovanniello’s employment had
been terminated on December 31, 2019 as a result of his death or disability was approximately $610,671. On the Closing Date, Mr.
Giovanniello resigned with “Good Resign” from his position as our Senior Vice President – Business and Legal
Affairs and received the applicable benefits set forth above as well as a supplemental severance payment in the amount of $550,000.
Mr. Giovanniello’s employment letter defined “Cause”, “Disability” and “Good Reason”
as follows:
|
●
|
Cause
means: (i) conviction of, or the entry of a plea of guilty or nolo contendere to, a felony, (ii) alcoholism or drug addiction
which materially impairs Mr. Giovanniello’s ability to perform his duties, (iii) continued, intentional and willful
failure to substantially and materially perform his material duties and responsibilities hereunder after receipt of written
notice and failure to cure within 30 days of such notice, (iv) willful and deliberate misconduct that results, or is reasonably
likely to result, in material and demonstrative harm to us or our subsidiaries or affiliates or (v) substantial impairment
from performing his duties for a period of longer than sixty (60) consecutive days or more than 120 days as a result of an
action against taken by a regulatory body or self-regulatory agency.
|
|
|
|
|
●
|
Disability
means that Mr. Giovanniello, as a result of incapacity due to physical or mental illness, has been substantially unable to
perform his normal duties for an entire period of six consecutive months, and has not returned to the substantial performance
of his duties on a full-time basis within 30 days after written notice of termination is given by us after such six-month
period.
|
|
|
|
|
●
|
Good
Reason means: (i) a material diminution in duties or responsibilities, (ii) removal of Mr. Giovanniello as our senior vice
president-corporate and regulatory affairs, (iii) a reduction in his base salary, (iv) relocation of his office to a location
outside of New York City (other than in connection with travel necessary to perform his duties), or (v) a material breach
by us of his employment letter, an indemnification agreement between us or any equity agreement between us, including, without
limitation, the failure of any successor to all or substantially all of our assets to assume our obligations under the employment
letter and the indemnification agreement.
|
Also,
certain of our option and restricted stock agreements contained clauses that provided that in the event of a change in control
of our company, or upon the death or disability of the option holder or upon the termination of the option holder without cause
or for good reason, all stock options or shares of restricted stock under such an agreement become fully vested. The unrealized
value of in-the-money unvested stock options and unvested restricted stock subject to accelerated vesting are shown below as potential
payments to the Named Executive Officers. The unrealized value was calculated by multiplying the number of unvested shares under
“Outstanding Equity Awards at December 31, 2019” above by the closing price of a share of common stock on December
31, 2019 ($3.48), then, in the case of options, deducting the aggregate exercise price of the unvested stock options.
Name
|
|
Change-in- Control
($)
|
|
|
Death
($)
|
|
|
Disability
($)
|
|
|
Termination by Company without Cause or by Named Executive Officer with Good Reason ($)
|
|
Richard J. Lampen
|
|
|
2,977,750
|
|
|
|
2,977,750
|
|
|
|
2,977,750
|
|
|
|
2,977,750
|
|
Mark Zeitchick
|
|
|
2,977,750
|
|
|
|
2,977,750
|
|
|
|
2,977,750
|
|
|
|
2,977,750
|
|
Adam Malamed
|
|
|
1,859,125
|
|
|
|
1,859,125
|
|
|
|
1,859,125
|
|
|
|
1,859,125
|
|
Brett H. Kaufman
|
|
|
443,700
|
|
|
|
443,700
|
|
|
|
443,700
|
|
|
|
443,700
|
|
Joseph Giovanniello
|
|
|
443,700
|
|
|
|
443,700
|
|
|
|
443,700
|
|
|
|
443,700
|
|
Director
Compensation
Prior
to the Closing Date, Directors who were also employees received no additional compensation for serving as directors. Each of our
non-employee directors received annual director fees of $50,000 (increased to $75,000 effective as of January 1, 2019), payable
in quarterly installments. Audit committee, compensation committee and nominating and corporate governance committee members each
received an additional annual fee of $10,000, $5,000 and $5,000, respectively. In addition, effective as of January 1, 2019,
non-employee members of the executive committee received an additional annual fee of $50,000. The lead independent director received
an additional annual fee of $150,000. The chair of each of the audit, compensation and nominating and corporate governance committees
received an additional annual fee of $10,000. Upon their election or re-election, as the case may be, we granted our non-employee
directors 30,000 shares of restricted stock under our 2009 Plan, with such shares vesting over a two-year period, subject to earlier
vesting upon death, disability or a change of control of the Company. We also reimbursed directors for costs incurred in attending
board and committee meetings.
In
addition, for 2019, we paid a discretionary bonus of $1,525,000 in January 2020 to Howard Lorber, our former vice-chairman, based
on the contributions made by him to the growth of our business, including through recruiting, acquisitions and development of
client relationships
The
following table summarizes director compensation for 2019. Compensation for directors who are also Named Executive Officers is
included in the Summary Compensation Table above.
Name
|
|
Fees Earned or Paid in Cash
($)
|
|
|
Stock
Awards (1)
($)
|
|
|
Option Awards ($)
|
|
|
Total
($)
|
|
Henry C. Beinstein
|
|
|
100,000
|
|
|
|
105,300
|
|
|
|
—
|
|
|
|
205,300
|
|
Glenn C. Davis
|
|
|
90,000
|
|
|
|
105,300
|
|
|
|
|
|
|
|
195,300
|
|
Brian S. Genson
|
|
|
85,000
|
|
|
|
105,300
|
|
|
|
—
|
|
|
|
190,300
|
|
Dr. Richard M. Krasno
|
|
|
295,000
|
|
|
|
105,300
|
|
|
|
—
|
|
|
|
400,300
|
|
Michael S. Liebowitz (2)
|
|
|
67,500
|
|
|
|
215,700
|
|
|
|
|
|
|
|
283,200
|
|
Howard M. Lorber
|
|
|
1,600,000
|
|
|
|
105,300
|
|
|
|
—
|
|
|
|
1,705,300
|
|
Jacqueline M. Simkin
|
|
|
100,000
|
|
|
|
105,300
|
|
|
|
—
|
|
|
|
205,300
|
|
|
(1)
|
Represents
the aggregate grant date fair value of restricted stock granted for the year ended December 31, 2019 as determined in accordance
with FASB ASC Topic 718, rather than an amount paid to or realized by the director. The FASB ASC Topic 718 amounts from these
grants may never be realized by the director.
|
|
|
|
|
(2)
|
Mr.
Liebowitz was appointed to the board of directors effective as of January 25, 2019.
|
The
aggregate number of outstanding option awards and shares of restricted stock held by each of our non-executive directors at December
31, 2019 was as follows:
Name
|
|
Aggregate
Number
of
Option
Awards
|
|
|
Aggregate
Number
of
Stock
Awards
|
|
Henry
C. Beinstein
|
|
|
290,000
|
|
|
|
45,000
|
|
Glenn
C. Davis
|
|
|
—
|
|
|
|
45,000
|
|
Brian
S. Genson
|
|
|
290,000
|
|
|
|
45,000
|
|
Richard
Krasno, M.D.
|
|
|
290,000
|
|
|
|
45,000
|
|
Michael
S. Liebowitz
|
|
|
—
|
|
|
|
60,000
|
|
Howard
M. Lorber
|
|
|
2,590,000
|
|
|
|
45,000
|
|
Jacqueline
M. Simkin
|
|
|
290,000
|
|
|
|
45,000
|
|
Compensation
Committee Interlocks and Insider Participation
During
2019, each of Henry C. Beinstein, Brian S. Genson, Dr. Richard Krasno, Michael S. Liebowitz
and Jacqueline M. Simkin served on our compensation committee for all or part of the year, with Dr. Krasno serving as chairman.
No member of the compensation committee during 2019 was an officer, employee or former officer of ours or any of our subsidiaries
or had any relationship that would be considered a compensation committee interlock and would require disclosure pursuant to SEC
rules and regulations. None of our executive officers served as a member of a compensation committee or a director of another
entity under the circumstances requiring disclosure pursuant to SEC rules and regulations.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related
Party Policy
In
accordance our audit committee charter and our written related party transactions policy, prior to the Closing Date our audit
committee reviewed and approved or ratified all related party transactions to the extent we entered into such transactions. In
addition, our Code of Business Conduct and Ethics required us to avoid related party transactions that could result in actual
or potential conflicts of interest, except under guidelines approved by our audit committee. Related-party transactions are defined
as transactions in which:
|
●
|
the
aggregate amount involved is expected to exceed $120,000 in any calendar year;
|
|
|
|
|
●
|
we
or any of our subsidiaries is a participant; and
|
|
|
|
|
●
|
any
related person has or will have a material interest.
|
Our
related party transactions policy defines a related person as any of the following: (a) our affiliates, (b) entities for which
investments in their equity securities would be required to be accounted for by the equity method, absent the election of the
fair value option subsection of FASB ASC Section 825-10-15, (c) employee benefit plans and the related trusts which are managed
by or under the trusteeship of management, (d) our principal owners and management and members of their immediate families, (e)
other parties with which we may deal if one party controls or can significantly influence the management or operating policies
of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests,
(f) other parties that can significantly influence the management or operating policies of the transacting parties or that have
an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more
of the transacting parties might be prevented from fully pursuing its own separate interest, (g) our directors and director nominees,
(h) our executive officers, (i) a five percent or greater beneficial owner of our common stock and (j) an immediate family member
of the persons listed in clauses (g), (h) or (i).
A
conflict of interest can arise when a person takes actions or has interests that may make it difficult for such person to perform
his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family,
receives improper personal benefits as a result of his or her position. The audit committee considered all relevant factors when
determining whether to approve a related party transaction, including:
|
●
|
whether
the transaction is on terms no less favorable to us than terms generally available to us from an unaffiliated third-party
under the same or similar circumstances; and
|
|
|
|
|
●
|
the
extent of the related party’s interest in the transaction.
|
A
director could not participate in the approval of any transaction in which he or she was a related party, but had to provide the
audit committee with all material information concerning the transaction. Also, we required each of our directors and executive
officers to complete a directors’ and officers’ questionnaire annually that elicits information about related-party
transactions. These procedures were intended to determine whether any such related party transaction impairs the independence
of a director or presents a conflict of interest on the part of a director or officer.
Related
Party Transactions
From
time to time, our subsidiary, Ladenburg Thalmann & Co. Inc., provides investment banking services in the ordinary course on
customary terms to companies in which certain of our former directors may be directors and/or shareholders.
In
September 2006, we entered into a management services agreement with Vector Group under which Vector Group agreed to make
available to us the services of Richard J. Lampen, Vector Group’s executive vice president, to serve as our president
and chief executive officer and to provide certain other financial, tax and accounting services, including assistance with
complying with Section 404 of the Sarbanes-Oxley Act of 2002 and assistance in the preparation of tax returns. In
consideration for such services, we paid Vector Group an $850,000 annual fee plus any direct, out-of-pocket costs, fees and
other expenses incurred by Vector Group or Mr. Lampen in providing such services, and agreed to indemnify Vector Group for
any liabilities arising out of the provision of the services. We paid $850,000 in 2019 to Vector Group under this agreement.
The agreement was terminable by either party upon 30 days’ prior written notice. The agreement was terminated in
connection with the Merger.
In
February 2018, we extended our office lease with Frost Real Estate Holdings, LLC, an entity affiliated with Dr. Phillip Frost,
our former chairman and principal shareholder, for the five-year period expiring in February 2023. The lease relates to space
in an office building in Miami, Florida where our principal executive offices and a branch office of Ladenburg Thalmann &
Co. Inc. are located. Rental payments for 2019 amounted to approximately $560,000. The lease provides for aggregate payments during
the remaining term of approximately $1,776,000 and minimum annual payment of $444,000.
In
October 2015, Investacorp, Inc. extended its office lease with Frost Real Estate Holdings, LLC for a five-year lease ending in
September 2020. The lease provides for aggregate payments during the five-year term of approximately $2,420,000 and minimum annual
payments of $484,000. The lease relates to space in the same office building in Miami, Florida, where our principal executive
offices and a branch office of Ladenburg Thalmann & Co. Inc. are located. Rental payments for 2019 amounted to approximately
$533,000. We received the advice of a commercial real estate firm at the time we entered into the original lease that the lease
terms were as fair as could have been obtained from an unaffiliated third party.
Ladenburg
Thalmann & Co. Inc. employs Steven Zeitchick, the brother of Mark Zeitchick, a former director and our former
executive vice president. In 2019, Steven Zeitchick received approximately $303,000 in compensation.
Mr.
Dan Sachar, who is the son-in-law of Richard Lampen, our former chairman, president and chief executive officer, is our vice president,
enterprise innovation. Mr. Sachar’s total compensation for 2019 was approximately $455,000, which includes his base salary,
annual cash bonus, equity awards and 401(k) matching contributions for 2019.
One
of our wholly owned subsidiaries, Securities Service Network, LLC (“SSN”), has an operating lease for office facilities
with Cogdill Capital LLC, an entity in which SSN’s Chief Executive Officer and Chief Financial Officer are members who own
a minority percentage of such entity. Rent expense under such lease amounted to $302,000 in 2019. The lease was extended for an
additional year on April 1, 2020, with a monthly base rent of $26,120 during such year.
We
were party to an agreement with Castle Brands Inc. (“Castle”) under which we provided certain administrative,
legal and financial services to Castle. Richard Lampen, our former chairman, president and chief executive officer was also the
president and chief executive officer of Castle and various of our former directors served as directors of Castle. We were paid
approximately $203,000 under this agreement in 2019. The agreement was terminated in 2019.
In
January 2019, Michael Liebowitz joined our board of directors. Mr. Liebowitz was president and CEO of Harbor Group, and owned
50% of the equity interests in Harbor Group until the sale of Harbor Group in September 2018. During the year ended December 31,
2019, Harbor Group was paid by unaffiliated insurance carriers approximately $183,000 in brokerage commissions for placing policies
covering us and our subsidiaries. Mr. Liebowitz did not receive any direct compensation from us during the year ended December
31, 2019, other than applicable director fees.
Independence
of Directors
Prior
to the Closing Date, we followed the NYSE American rules in determining if a director was independent. Our board of directors
also consulted with our counsel to ensure that the board’s determination was consistent with those rules and all other relevant
laws and regulations regarding director independence. In making its independence determinations, our board considered that in
the ordinary course of business we may provide commercial and investment banking, financial advisory and other services to some
of the independent directors and to business organizations and individuals associated with them. Our board determined that, based
on available information, none of these relationships were material or affected the independence of any director. Consistent with
these considerations, our board of directors affirmatively determined that Ms. Simkin, Dr. Krasno and Messrs. Beinstein, Davis,
Genson and Liebowitz were independent directors. Our other directors were not independent under the NYSE American rules because
we employed them or they had other relationships with us that may result in them not being “independent.” All members
of our audit, compensation and nominating and corporate governance committees were independent. Also, our board of directors affirmatively
determined that each member of our audit committee and compensation committee was independent for audit committee and compensation
committee purposes based on the more stringent independence standards imposed by applicable NYSE American and SEC rules.
Following
the Closing Date, our directors no longer meet the independence standards, as we are no longer required to comply with NYSE American
rules.