Global Eagle Entertainment
Global Eagle Entertainment Inc. (Form: DEF 14A, Received: 11/28/2017 06:07:54)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

 

 

 

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Global Eagle Entertainment Inc.

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LOGO

Global Eagle Entertainment Inc.

6100 Center Drive, Suite 1020

Los Angeles, California 90045

November 28, 2017

Dear Fellow Stockholders:

You are cordially invited to attend the 2017 Annual Meeting of Stockholders of Global Eagle Entertainment Inc. on Thursday, December 21, 2017, at 8:00 a.m. (Pacific Time) at 6100 Center Drive, Suite 333, Los Angeles, California.

You can find details about the business that we will conduct at the Annual Meeting as well as other information about the Annual Meeting in the attached Notice of 2017 Annual Meeting of Stockholders and Proxy Statement. As a stockholder, we will ask you to vote on a number of proposals.

Whether or not you plan to attend the Annual Meeting, your vote is important. After reading the attached Notice of 2017 Annual Meeting of Stockholders and Proxy Statement, please promptly submit your proxy or voting instructions.

This year, we are filing our Proxy Statement and holding our Annual Meeting later than usual due to the delay in filing our 2016 Annual Report on Form 10-K caused by the complexity of our 2016 audit. With our 2016 audit now complete, we will continue to improve the efficiency and efficacy of our financial-reporting function. In addition, our team will continue to work tirelessly to become current in all our SEC filings in early 2018. As I mentioned at the beginning of my tenure as CEO in early 2017, this was a transition year for Global Eagle, and as the year comes to a close, we are very excited about the prospect for a return to growth in the year ahead.

On behalf of the management team and your Board of Directors, thank you for your continued support and interest in our company.

Sincerely,

 

 

LOGO

Jeffrey A. Leddy

Director and Chief Executive Officer


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LOGO

 

 

 Notice of 2017 Annual Meeting

 of Stockholders

 

December 21, 2017

8:00 a.m. (Pacific Time)

The 2017 Annual Meeting of Stockholders of Global Eagle Entertainment Inc. (the “Annual Meeting”) will be held on December 21, 2017 at 8:00 a.m. (Pacific Time) at 6100 Center Drive, Suite 333, Los Angeles, California for the following purposes:

AGENDA:

 

1.

Elect Robert W. Reding and Ronald Steger as Class III members of our Board of Directors;

 

2.

Approve a new 2017 Omnibus Long-Term Incentive Plan;

 

3.

Approve (on an advisory basis) the compensation of our named executive officers for 2016;

 

4.

Ratify (on an advisory basis) the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017; and

 

5.

Transact any other business that properly comes before the Annual Meeting and any adjournment or postponement thereof.

We describe these items of business in more detail in the Proxy Statement accompanying this Notice.

Only stockholders of record as of the close of business on November 20, 2017 are entitled to receive notice of, and to vote at, the Annual Meeting and any and all adjournments or postponements thereof. Stockholders who hold shares in street name may vote through their brokers, banks or other nominees.

Regardless of the number of shares you own or whether you plan to attend the Annual Meeting, please vote. All stockholders of record can vote (i) over the Internet by accessing the Internet website specified on the enclosed proxy card and following the instructions provided to you, (ii) by calling the toll-free telephone number specified on the enclosed proxy card and following the instructions when prompted, (iii) by written proxy by signing and dating the enclosed proxy card and returning it to us pursuant to the instructions under “How do I vote?” on page 67 of this Proxy Statement or (iv) by attending the Annual Meeting and voting in person.

We encourage you to receive all proxy materials electronically. If you wish to receive these materials electronically, please follow the instructions on the proxy card. See also “Electronic Access to Proxy Statement and Annual Report” on page 70 of the Proxy Statement for more information in this regard.

By Order of the Board of Directors,

 

 

LOGO

Stephen Ballas

Executive Vice President, General Counsel and Corporate Secretary

November 28, 2017

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2017 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 21, 2017

This Notice of 2017 Annual Meeting and Proxy Statement and our 2016 Annual Report are available on our website at www.globaleagle.com under “Investors—Financial Info.”

 



Table of Contents

TABLE OF CONTENTS

 

INTRODUCTORY INFORMATION      1  

PROPOSAL 1         

  Elect Class III Director Nominees (Robert W. Reding and Ronald Steger)      4  
DIRECTORS AND EXECUTIVE OFFICERS      5  

Directors

     5  

Executive Officers

     8  
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE      11  
EXECUTIVE COMPENSATION      18  

Compensation Discussion and Analysis

     18  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT      42  

Section 16(a) Beneficial Ownership Reporting Compliance

     45  

PROPOSAL 2         

 

Approve a New 2017 Omnibus Long-Term Incentive Plan

     48  

PROPOSAL 3         

  Approve (on an Advisory Basis) Our Compensation to Our Named Executive Officers for 2016      58  

PROPOSAL 4         

  Ratify (on an Advisory Basis) the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2017      59  
AUDIT-RELATED MATTERS      60  
RELATED PARTY TRANSACTIONS POLICY AND TRANSACTIONS      64  
OTHER MATTERS      67  

Questions and Answers Regarding These Proxy Materials and Voting

     67  

Householding of Proxy Materials

     70  

Electronic Access to Proxy Statement and Annual Report

     70  
ANNEX A      A-1  

Reconciliation of GAAP Measure to Non-GAAP Measure

     A-1  
ANNEX B      B-1  

Global Eagle Entertainment Inc. 2017 Omnibus Long-Term Incentive Plan

 

    

 

B-1

 

 

 


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PROXY STATEMENT

FOR THE 2017 ANNUAL MEETING OF STOCKHOLDERS

To Be Held on December 21, 2017

This Proxy Statement is being furnished to stockholders of record of Global Eagle Entertainment Inc. (“Global Eagle,” the “Company,” “we,” “us” or “our”) as of the close of business on November 20, 2017 in connection with the solicitation by our Board of Directors (“Board”) of proxies for the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 6100 Center Drive, Suite 333, Los Angeles, California on Thursday, December 21, 2017, at 8:00 a.m. (Pacific Time), or at any and all adjournments or postponements thereof, for the purposes stated in the Notice of 2017 Annual Meeting of Stockholders.

INTRODUCTORY INFORMATION

Why am I receiving these materials?

 

 

We have sent you these proxy materials because our Board is soliciting your proxy to vote at the Annual Meeting, including at any adjournments or postponements of the Annual Meeting. We invite you to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However,

you do not need to attend the meeting to vote your shares. Instead, you may complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or through the Internet.

 

 

How do I attend the Annual Meeting?

 

 

Stockholders may participate in the Annual Meeting by visiting 6100 Center Drive, Suite 333, Los Angeles, California on Thursday, December 21, 2017, at 8:00 a.m.

(Pacific Time). We discuss how to vote in person at the Annual Meeting below under “How do I vote?” on page 67.

 

 

Who can vote at the Annual Meeting?

 

 

Only our stockholders of record at the close of business on November 20, 2017 (which is the record date for the Annual Meeting) will be entitled to vote at the Annual Meeting. On this record date, there were 90,770,478 shares of our common stock outstanding and entitled to vote. For ten days prior to the Annual Meeting, during normal business hours, we will make available for examination by any stockholder a complete list of all stockholders on the record date at our offices at 6100 Center Drive, Suite 1020, Los Angeles, CA 90045. We will also make this list of stockholders available at the Annual Meeting.

Stockholder of Record: Shares Registered in Your Name

If at the close of business on November 20, 2017 your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, then you are a stockholder of record. As a stockholder of record, you may vote in person during the meeting or vote by proxy.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If at the close of business on November 20, 2017 you held your shares in an account at a brokerage firm, bank, dealer or other similar organization, rather than in your own name, then you are the beneficial owner of shares held in “street name” and that organization will forward these proxy materials to you. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting without a legal proxy.

 

 

Global Eagle Entertainment Inc. - 2017 Proxy Statement     1  


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INTRODUCTORY INFORMATION

 

What am I voting on?

 

 

The matters scheduled for a vote are to:

 

1.

Elect Robert W. Reding and Ronald Steger as Class III members of our Board (each to serve for a three-year term);

 

2.

Approve a new Global Eagle Entertainment Inc. 2017 Omnibus Long-Term Incentive Plan (the “2017 Omnibus Plan”);

3.

Approve (on an advisory basis) the compensation of our named executive officers for 2016, as disclosed in this Proxy Statement; and

 

4.

Ratify (on an advisory basis) the appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for the fiscal year ending December 31, 2017.

 

 

What are the recommendations of our Board?

 

 

Unless you give other instructions on your signed proxy card, or by telephone or on the Internet, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of our Board. We set forth the recommendations of our Board, together with a description of each item, in this Proxy Statement. In summary, our Board recommends a vote:

 

 

FOR the election of Robert W. Reding and Ronald Steger as Class III members of our Board (each to serve for a three-year term) ( see Proposal 1);

 

FOR the approval of our new 2017 Omnibus Plan ( see Proposal 2);

 

 

FOR the approval (on an advisory basis) of the compensation of our named executive officers for 2016 ( see Proposal 3); and

 

 

FOR the ratification (on an advisory basis) of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2017 ( see Proposal 4).

 

 

How many votes do I have?

 

 

For each matter that we are submitting for your vote, you have one vote for each share of common stock that you owned at the close of business on November 20, 2017.

 

 

How many votes are needed to approve each proposal?

 

 

 

For Proposal 1 (the election of our Class III director nominees), the two director nominees will be elected if the votes cast “FOR” each such director nominee exceed the votes cast “AGAINST” that nominee. Votes to “ABSTAIN” and broker non-votes are not considered “votes cast,” and so will have no effect on the outcome of the nominee’s election.

 

 

To be approved, Proposal 2 (the approval of our new 2017 Omnibus Plan) must receive “FOR” votes from the holders of a majority of the votes cast, i.e. , the votes cast “FOR” the Proposal must exceed the votes cast as “AGAINST.” Votes to “ABSTAIN” and broker non-votes are not considered “votes cast,” and so will have no effect on the outcome of this Proposal.

 

 

To be approved, Proposal 3 (the advisory approval of the compensation of our named executive officers for 2016) must receive “FOR” votes from the holders of a majority of votes cast, i.e. , the votes cast “FOR” the Proposal must exceed the votes cast as “AGAINST.” Votes to “ABSTAIN”

   

and broker non-votes are not considered “votes cast,” and so will have no effect on the outcome of this Proposal. The outcome of this vote is advisory only, and will not be binding on us.

 

 

To be approved, Proposal 4 (the advisory ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2017) must receive “FOR” votes from the holders of a majority of the votes cast, i.e. , the votes cast “FOR” the Proposal must exceed the votes cast as “AGAINST.” Votes to “ABSTAIN” and broker non-votes are not considered “votes cast,” and so will have no effect on the outcome of this Proposal. (Note that in the absence of instructions from you, your broker may use its discretion to vote your shares on this Proposal. See “Other Matters—Questions and Answers About These Proxy Materials and Voting—What are ‘broker-non votes’?” on page 69.) The outcome of this vote is advisory only, and will not be binding on us.

 

 

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INTRODUCTORY INFORMATION

 

Explanatory Note Regarding Information Also Included in our 2016 Annual Report on Form 10-K

 

 

We have also previously provided some of the information in this Proxy Statement in our 2016 Annual Report on Form 10-K (“2016 Form 10-K”) that we filed with the Securities and Exchange Commission on November 17, 2017, such as the Compensation Discussion and Analysis beginning

on page 18. We have made immaterial changes to some of that information where appropriate, such as stylistic changes for purposes of presentation in this Proxy Statement, but there is no material variation from the information that we previously provided in the 2016 Form 10-K.

 

 

Global Eagle Entertainment Inc. - 2017 Proxy Statement     3  


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PROPOSAL 1   ELECT CLASS III DIRECTOR NOMINEES (ROBERT W. REDING AND RONALD STEGER)

 

Our Board currently consists of eight directors, and is divided into three classes (Classes I, II and III). The term of each directorship is three years, and one class of directors is elected each year. All directors are elected for three-year terms or until their successors are elected and qualified, or, if sooner, until the director’s death, resignation or removal.

At the Annual Meeting, our stockholders will vote to elect our Class III director nominees (Robert W. Reding and Ronald Steger), both of whom are current directors. If elected, the

Class III directors will each have a term expiring at the 2020 Annual Meeting of Stockholders. Information concerning each nominee for director is set forth below on page 5 under “Directors and Executive Officers.” Each director nominee has agreed to serve if elected, and we have no reason to believe that any director nominee will be unable to serve the Company for the full three-year director term.

 

 

Required Vote

This is an uncontested Board election. As such, under our by-laws, each nominee must receive the affirmative vote of a majority of the votes cast on his election, i.e ., the votes cast “FOR” such director nominee must exceed the votes cast “AGAINST.” Shares represented by executed proxies (but with no marking indicating “FOR” or “AGAINST” the nominee) will be voted “FOR” the election of the director nominees. Votes to “ABSTAIN” and broker non-votes are not considered “votes cast,” and so will have no effect on the outcome of the nominee’s election. If any nominee becomes unavailable for election as a result of an unexpected occurrence (such as his death prior to the Annual Meeting), your shares will be voted “FOR” the election of a substitute nominee proposed by us.

Board Recommendation

OUR BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF ROBERT W. REDING AND RONALD STEGER AS CLASS III MEMBERS OF OUR BOARD AS OUTLINED IN THIS PROPOSAL 1.

 

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DIRECTORS AND EXECUTIVE OFFICERS

Directors

 

Name

 

    

Class I

 

    

Class II

 

    

         Class III         

 

 

Edward L. Shapiro, Board Chair

 

          X

 

    

 

Jeffrey E. Epstein

 

     X

 

         

 

Stephen Hasker

 

     X

 

         

 

Jeffrey A. Leddy

 

     X

 

         

 

Robert W. Reding

 

               X

 

 

Jeff Sagansky

 

          X

 

    

 

Harry E. Sloan

 

          X

 

    

 

Ronald Steger

 

                   X

 

 

Total directors in Class

 

     3

 

     3

 

     2

 

CLASS III DIRECTOR NOMINEES

Term expiring (and nominated for re-election) at the 2017 Annual Meeting

 

Robert W. Reding

 

Age: 68

Director Since:  January 2013

Board Committee:  Compensation (Chair)

Robert W. Reding has been a member of our Board since January 2013. He has been a consultant in the commercial airline industry since January 2012. Prior to that, from September 2007 until December 2012, Mr. Reding was Executive Vice President—Operations for American Airlines and Executive Vice President of AMR Corporation. Prior to that, Mr. Reding served as Senior Vice President—Technical Operations for American Airlines from May 2003 to September 2007. Mr. Reding joined AMR Corporation in March 2000 and served as Chief Operations Officer of its AMR Eagle division through May 2003. Prior to joining AMR Corporation, Mr. Reding served as President and Chief Executive Officer of Reno Air (from 1992 to 1998) and as President and Chief Executive Officer of Canadian Regional Airlines (from 1998 to March 2000). Mr. Reding is a graduate of the United States Air Force pilot training program and served as an officer and pilot flight examiner with the United States Air Force from 1972 to 1979. He has an FAA Air Transport Pilot Rating for Douglas DC-9-MD-80 and Boeing 737 series aircraft and has accumulated over 10,000 hours as a commercial pilot. He is a member of the President’s Council of California State Polytechnic University and has served as a board member of various aviation, civic and charitable organizations. Mr. Reding has a BS in Aeronautical Engineering from California State Polytechnic University and his MBA from Southern Illinois University.

We believe Mr. Reding is qualified to serve on our Board due to his operating and management experience, including more than 20 years of experience in the airline industry.

Ronald Steger

 

Age: 63

Director Since:  April 2017

Board Committee:  Audit (Chair)

Ronald Steger has been a member of our Board since April 2017 and has served as our Audit Committee Chair since June 2017. He has served on the board of directors of Overseas Shipholding Group, Inc. (NYSE: OSG) since August 2014 and currently serves on that board’s Audit Committee (as chair) and its Corporate Governance & Risk Committee. Mr. Steger previously served on the board of directors of International Seaways Inc. (NYSE: INSW) from November 2016 to June 2017, where he served on that board’s Audit Committee and its Corporate Governance & Risk Assessment Committee. Since September 2015, Mr. Steger has served as the Senior Technical Advisor to the Effectus Group, an accounting advisory firm based in Silicon Valley, and since February 2014, he has served on the Advisory Board of ATREG, Inc., a global advisory firm specializing in the semiconductor and related advanced technology verticals. Mr. Steger began his career with KPMG in 1976 and was admitted into its partnership in 1986. He served as an SEC Reviewing Partner at KPMG from 2003 to 2013 and retired from KPMG in December 2013. Mr. Steger has a BS in Accounting from Villanova University.

We believe Mr. Steger is qualified to serve on our Board due to his experience serving on boards of public companies and his extensive background in accounting.

 

 

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DIRECTORS AND EXECUTIVE OFFICERS

 

CLASS I DIRECTORS

Terms Expiring at the 2018 Annual Meeting of Stockholders

 

Jeffrey E. Epstein

 

Age: 61

Director Since:  February 2013

Board Committee:  Governance

Jeffrey E. Epstein has been a member of our Board since February 2013. He is an Operating Partner at Bessemer Venture Partners, which he joined in November 2011. He has served on the board of directors of The Priceline Group (Nasdaq: PCLN) since April 2003, and is a member of that board’s Audit Committee and its Compensation Committee; on the board of directors of Shutterstock, Inc. (NYSE: SSTK) since April 2012, and is Chair of that board’s Audit Committee and a member of its Nominating and Governance Committee; and on the board of directors of Twilio Inc. (NYSE: TWLO) since July 2017, and is a member of that board’s Audit Committee. From September 2008 to April 2011, Mr. Epstein was Executive Vice President and Chief Financial Officer of Oracle Corporation (NYSE: ORCL). He also serves on the board of directors of Kaiser Permanente. Mr. Epstein has an MBA from the Stanford University Graduate School of Business and a BA from Yale College.

We believe Mr. Epstein is qualified to serve on our Board due to his expertise in finance and financial reporting as a former chief financial officer of multiple publicly held companies, including Oracle Corporation, one of the world’s largest enterprise software companies.

Stephen Hasker

 

Age: 48

Director Since:  April 2015

Board Committees:  Audit, Compensation

Stephen Hasker has been a member of our Board since April 2015. He has been Global President and Chief Operating Officer of Nielsen N.V. (NYSE: NLSN) since 2009, and previously served as its President, Global Products. Mr. Hasker joined Nielsen in 2009 from McKinsey & Company, where he was a partner in McKinsey’s Global Media, Entertainment and Information practice from 1998 to 2009. Prior to McKinsey, Mr. Hasker spent five years in several financial roles in the United States, Russia and Australia. Mr. Hasker has an undergraduate degree from the University of Melbourne and has an MBA and a Masters in International Affairs from Columbia University. He is a member of the Australian Institute of Chartered Accountants.

We believe Mr. Hasker is qualified to serve on our Board due to his experience as a public company executive at Nielsen

N.V., which provides him with insight into consumer tastes for entertainment, content and services, and his overall experience with media and entertainment businesses.

Jeffrey A. Leddy

 

Age: 62

Director Since:  February 2013

CEO Since:  February 2017

Board Committees: None

Jeffrey A. Leddy has been a member of our Board since February 2013 and has served as our Chief Executive Officer since February 2017. He previously served as Chief Executive Officer of Verizon Telematics, Inc. (formerly Hughes Telematics, Inc. prior to its acquisition by Verizon Communications in July 2012) from December 2006 until January 2015 and served as a member of its board of directors from April 2006 to July 2012. From 2005 to 2011, he served on the boards of directors of various Hughes Communications-affiliated companies. From April 2003 through December 2006, Mr. Leddy served as Chief Executive Officer and President of SkyTerra Communications, Inc., and he served on its board of directors from 2006 to 2008. Prior to becoming SkyTerra’s Chief Executive Officer, Mr. Leddy served in the roles of President, Chief Operating Officer and Senior Vice President of Operations for that company. Mr. Leddy has BA in Physics from the Georgia Institute of Technology and an MS in Electrical Engineering from Stanford University.

We believe Mr. Leddy is qualified to serve on our Board due to his extensive experience with satellite communications and telematics businesses and extensive executive experience, including his public company experience as a chief executive officer and director.

 

 

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DIRECTORS AND EXECUTIVE OFFICERS

 

CLASS II DIRECTORS

Terms Expiring at the 2019 Annual Meeting

 

Jeff Sagansky

 

Age: 65

Director Since:  May 2011

Board Committees:  Audit, Compensation

Jeff Sagansky has been a member of our Board since May 2011. He served as our President from our formation as a special purpose acquisition company in 2011 until our business combination with Row 44 and Advanced Inflight Alliance AG in January 2013. Mr. Sagansky was President of Silver Eagle Acquisition Corp. (a special purpose acquisition company) from April 2013 until its business combination with Videocon d2h Limited (Nasdaq: VDTH) in March 2015, and he currently serves on Videocon d2h’s board of directors and on its Audit Committee. From January 2013 until December 2016, Mr. Sagansky was a member of the board of directors of Starz Entertainment (Nasdaq: STRZA, STRZB), where he served on that board’s Audit Committee and its Compensation Committee. Mr. Sagansky has been President and CEO of Double Eagle Acquisition Corp. (Nasdaq: EAGL) since June 2015. He is a member of the board of directors of Scripps Networks Interactive, Inc. (Nasdaq: SNI) and serves on the board’s Audit Committee and its Corporate Governance Committee. Mr. Sagansky served as Chairman of RHI Entertainment, Inc. from 2009 to 2011. He served as Co-Chairman of Peace Arch Entertainment Group, Inc. from 2007 to 2008, and served as its interim chief executive officer from November 2007 to July 2008. Mr. Sagansky has a BA from Harvard College and an MBA from Harvard Business School.

We believe Mr. Sagansky is qualified to serve on our Board of Directors due to his extensive executive leadership experience with the management and operations of companies in the entertainment sector, including public companies in the television industry, as well as his depth of experience in the media and entertainment industries generally.

Edward L. Shapiro

 

Age: 52

Director and Board Chair Since:  February 2013

Board Committee:  Governance

Edward L. Shapiro has been a member of our Board in February 2013 and has served as our Board Chair since that date. He served as a Managing Partner of PAR Capital Management, Inc. from 1997 to December 2016. Prior to joining PAR Capital, Mr. Shapiro was a Vice President at Wellington Management Company, LLP, and before that an

analyst at Morgan Stanley & Co. Mr. Shapiro has served on the board of directors of United Continental Holdings, Inc. (NYSE: UAL) since April 2016, and he served on the board of US Airways from 2005 to 2008. Mr. Shapiro also served on the board of directors of SONIFI Solutions, Inc. from November 2010 to December 2016. Mr. Shapiro has a BS in Economics from the Wharton School of the University of Pennsylvania and an MBA from UCLA Anderson School of Management.

We believe Mr. Shapiro is qualified to serve on our Board due to his extensive experience with travel, media and related businesses, considerable expertise in finance and financial matters, deep understanding of our aviation connectivity business through his service to Row 44 (one of our predecessor companies prior to our business combination with Row 44 and Advanced Inflight Alliance AG in January 2013) and the airline industry and his experience in corporate governance matters.

Harry E. Sloan

 

Age: 67

Director Since:  May 2011

Board Committee:  Governance (Chair)

Harry E. Sloan has been our Board since May 2011. He also served as our Chairman and Chief Executive Officer until our business combination with Row 44 and Advanced Inflight Alliance AG in January 2013. Mr. Sloan was Chairman and Chief Executive Officer of Silver Eagle Acquisition Corp. (a special purpose acquisition company) from April 2013 through its business combination in March 2015 with Videocon d2h Limited (Nasdaq: VDTH). From October 2005 to August 2009, Mr. Sloan served as Chairman and Chief Executive Officer of Metro-Goldwyn-Mayer, Inc., and was its Chairman until January 2011. From 1990 to 2001, Mr. Sloan was Chairman and Chief Executive Officer of SBS Broadcasting, S.A., a company that he founded in 1990, and he served as its Executive Chairman until 2005. Mr. Sloan currently serves on the UCLA Anderson School of Management Board of Visitors and on the Executive Board of UCLA Theatre, Film and Television. Mr. Sloan has a BA degree from the University of California, Los Angeles and a JD from Loyola Law School.

We believe Mr. Sloan is qualified to serve on our Board due to his extensive background and experience as an executive in the media and entertainment industries and his substantial mergers-and-acquisitions experience.

 

 

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DIRECTORS AND EXECUTIVE OFFICERS

 

Executive Officers

Our current executive officers are as follows:

 

Name

 

  

Age

 

  

Title

 

 

Jeffrey A. Leddy

 

   62

 

  

Chief Executive Officer

 

 

Paul Rainey

 

   42

 

  

Chief Financial Officer

 

 

Sarlina See

 

   47

 

  

Chief Accounting Officer

 

 

Joshua Marks

 

   41

 

  

Executive Vice President, Connectivity

 

 

Walé Adepoju

 

   46

 

  

Executive Vice President, Media & Content

 

 

Stephen Ballas

 

   42

 

  

Executive Vice President, General Counsel and Corporate Secretary

 

 

The following is biographical information for our current executive officers (other than our director and CEO Jeffrey A. Leddy, whose biographical information we have provided on page 6).

Paul Rainey

 

Paul Rainey joined the Company as Executive Vice President and Chief Financial Officer in April 2017. Mr. Rainey previously served as Chief Financial Officer of Harris CapRock Communications from May 2014 to April 2017. Prior to Harris CapRock Communications, Mr. Rainey served as Chief Financial Officer of General Electric Company’s (NYSE: GE) Lighting Professional Solutions business from March 2013 to April 2014 and as Chief Financial Officer of its Power Equipment business from March 2010 to February 2013. Prior to March 2010, Mr. Rainey served in two senior financial planning and analysis roles at General Electric from January 2007 to March 2010 and from October 2003 to October 2005. Between those appointments, Mr. Rainey served as a FamilyLife missionary from November 2005 to December 2006. Mr. Rainey currently serves on the boards of directors of Cutwell 4 Kids and America Responds with Love, and previously served on the boards of directors of Hesed Consulting, Georgia CASA and the Notre Dame Business Advisory Council. Mr. Rainey has a MS in Accountancy and a BBA in Finance and Computer Applications from the University of Notre Dame.

Sarlina See

 

Sarlina See joined the Company as Chief Accounting Officer in May 2017. Ms. See previously served as Global Business Unit Controller of Stanley Oil & Gas, which is a division of Stanley Black & Decker, Inc. (NYSE: SWK), from May 2013 to May 2017. From January 2008 through May 2013, Ms. See served as the Global Controller at Digital Energy, a division of GE Energy Connections (which is a business unit of General Electric Company). Prior to that, Ms. See held other senior finance positions and audit roles at various General Electric Company business units from 1997 to 2007. Ms. See

has a BBA in Accounting from Idaho State University and is a Certified Public Accountant.

Joshua Marks

 

Joshua B. Marks joined the Company in August 2015 and has been our Executive Vice President, Connectivity since April 2017. Mr. Marks previously served as our Senior Vice President, Operations Solutions from August 2015 through June 2016. From January 2011 to August 2015, Mr. Marks was the Chief Executive Officer and a member of the board of directors of Marks Systems, Inc. (known as masFlight), an aviation data analytics company that he co-founded and that we acquired in August 2015. From February 2008 to December 2010, Mr. Marks was the Chief Financial Officer and a member of the board of directors of eJet Aviation Holdings, a provider of VIP aircraft maintenance services, and the Executive Director of the American Aviation Institute, a commercial aviation policy think-tank. From 2003 to 2008, Mr. Marks served as a senior executive of MAXjet Airways, a transatlantic premium airline that he co-founded. Earlier in his career, Mr. Marks served as Associate Director of the George Washington University aviation institute and held key roles at two technology companies, Virtualis Systems (acquired by Allegiance Telecom) and VelociGen (acquired by SOA Software). Mr. Marks has a BA from Harvard College and an MBA from Harvard Business School.

Walé Adepoju

 

Walé Adepoju joined the Company in July 2014 and has been our Executive Vice President, Media & Content since September 2016. Mr. Adepoju was our Chief Commercial Officer from May 2014 to August 2016. From September 2013 to April 2014, Mr. Adepoju was Chief Operating Officer of Advanced Inflight Alliance AG (“AIA”) (one of our predecessor companies prior to our business combination with Row 44 and AIA in January 2013) and previously served as AIA’s Chief Strategy Officer from April 2012 to August 2013. From May 2000 to April 2012, Mr. Adepoju served as Managing Director at IMDC Aviation Consulting. Prior to

 

 

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IMDC, Mr. Adepoju served as Director of Strategy at Spafax, which is affiliated with the advertising and public-relations company WPP PLC. Earlier in his career, Mr. Adepoju worked as an air transport analyst providing investment advice on aerospace companies and products. Mr. Adepoju has a degree in Manufacturing Engineering and a Masters in Air Transport Management from Cranfield University.

Stephen Ballas

 

Stephen Ballas joined the Company as General Counsel and Corporate Secretary in April 2016 and has been our Executive Vice President, General Counsel and Corporate Secretary since September 2016. Prior to joining the Company, Mr. Ballas was a Senior Vice President and Deputy General Counsel at CBRE Group, Inc. (NYSE: CBG) from July 2013 to April 2016. From July 2011 to July 2013, Mr. Ballas served as a Senior Counsel at CBRE Global Investors, which is CBRE Group’s real estate investment management arm. He served as a Vice President at GSO Capital Partners, the credit-investment arm of The Blackstone Group (NYSE: BX), from 2010 to 2011, and as a Senior Counsel at the New York-based hedge fund TPG-Axon Capital from 2007 to 2010. Mr. Ballas was a corporate associate at the law firm of Simpson Thacher & Bartlett LLP from 2002 to 2007. Mr. Ballas has a BA in Economics from Duke University and a JD from Georgetown Law School.

FORMER EXECUTIVE OFFICERS

The following is biographical information for David Davis (our former CEO), Michael Zemetra (our former CFO), Thomas Severson (our former CFO and Treasurer) and Abel Avellan (our former President and Chief Strategy Officer). They were among our group of named executive officers for 2016, but have since separated from our employ.

David M. Davis

 

Dave Davis was our Chief Executive Officer from July 2014 until February 2017. Prior to serving as our Chief Executive Officer, Mr. Davis was our Chief Financial Officer and Treasurer from January 2013 through July 2014 and was our Chief Operating Officer from January 2014 until July 2014. Mr. Davis served as a director of Row 44, Inc. from December 2011 to January 2013 and as Chief Financial Officer of that company from November 2012 to January 2013. In 2010, Mr. Davis co-founded Bearpath Capital, which is a private-equity firm. From December 2008 to September 2010, he was a senior managing director at Perseus, which is a merchant bank and private-equity fund management company. From August 2005 to December 2008, and previously from 1994 to 1999, Mr. Davis served at Northwest Airlines, and was its Executive Vice President and Chief

Financial Officer from 2005 to 2008. From 2002 to 2004, Mr. Davis served as a senior financial executive, including Chief Financial Officer, of US Airways. Earlier in his career, Mr. Davis worked for Rosemount Aerospace (later acquired by BF Goodrich) as a marketing engineer and for Rockwell International as a flight-planning engineer. Previously, Mr. Davis served on the boards of directors of ARINC, Inc. and MCH Holdings. Mr. Davis has a BS in Aerospace Engineering and Mechanics and an MBA, both from the University of Minnesota.

Abel Avellan

 

Abel Avellan was our President and Chief Strategy Officer from July 2016 until April 2017. Mr. Avellan was previously Chief Executive Officer of Emerging Markets Communications (“EMC”), which he co-founded in 2000, until our acquisition of that company in July 2016. Mr. Avellan also served as President and Chief Executive Officer of TRIO Connect LLC (a satellite technology company) from July 2015 to July 2016. Mr. Avellan has over 25 years of experience as a trained engineer and played a major role in developing several of our patented applications designed for bandwidth re-utilization, noise reduction and reduction of antenna sizes for fixed and mobile networks that we acquired in through the EMC acquisition. Mr. Avellan has a BS in Electrical Engineering from Simón Bolívar University.

Michael Zemetra

 

Michael Zemetra served as our Chief Financial Officer and Treasurer from November 2014 until August 2016. Mr. Zemetra previously served as our interim Chief Financial Officer, Treasurer and Chief Accounting Officer from August 2014 to November 2014 and as our Controller and Chief Accounting Officer from July 2013 to August 2014. Prior to joining the Company, from May 2008 to June 2013, Mr. Zemetra held the roles of Senior Vice President and Chief Accounting Officer, Senior Vice President and Controller, and Vice President and Controller at Demand Media, Inc. (NYSE: DMD). Mr. Zemetra also served as Vice President and Corporate Controller for Helio LLC and Clearant, Inc. Mr. Zemetra began his career at PricewaterhouseCoopers LLP. Mr. Zemetra has a Masters in Accounting from the University of Southern California and a BA in Business-Economics from the University of California at Riverside, and is a Certified Public Accountant.

Thomas Severson

 

Mr. Severson joined the Company in July 2016 when we acquired EMC (where he had served as Chief Financial Officer since June 2015), and initially served as Chief

 

 

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Financial Officer of our Maritime & Land business. Mr. Severson became our Chief Financial Officer in August 2016, and served in that role until February 2017. Prior to EMC, from November 2008 to September 2014, Mr. Severson served as Executive Vice President and Chief Financial Officer of Myxer, a streaming internet radio company. Prior to Myxer, from August 2005 through November 2008, he was Executive Vice President and Chief

Financial Officer for The Nicklaus Companies, a golf goods and services company. Mr. Severson also previously held senior finance roles as the Chief Financial Officer for American Media and for Paxson Communications and was Chief Accounting Officer for Sinclair Broadcast Group, Inc. Mr. Severson started his career as a Certified Public Accountant in the Audit Assurance Practice of KPMG. He has a BS in Accounting from the University of Baltimore.

 

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Director Independence

 

Pursuant to Nasdaq Listing Rules, a majority of the members of our Board must qualify as “independent,” as affirmatively determined by our Board. Consistent with this requirement, based on a review and assessment performed by our General Counsel of all relevant identified transactions and relationships between each of our directors, or any of their family members, and us, our senior management and our independent registered public accounting firm, our Board and Corporate Governance and Nominating Committee (the “Governance Committee”) affirmatively determined that each

of our current directors (other than Mr. Leddy, who is our CEO and an employee director) meets the standards of independence under applicable Nasdaq Listing Rules. In making this determination, our Board found all of our directors (other than Mr. Leddy) to be free of any relationship that would impair his individual exercise of independent judgment with regard to the Company. Our Board also determined that each member of its Audit Committee and Compensation Committee is independent under Nasdaq Listing Rules applicable to service on those committees.

 

 

Board Leadership Structure and Role of the Board Chair

 

It is our Board’s policy that a non-management independent director serves as the chair of our Board at all times.

Our Board and our management believe that having a non-management Board Chair reinforces the independence of our Board in its oversight of our business and affairs and is more conducive to objective evaluation and oversight of our management’s performance, increasing management

accountability and improving the ability of our Board to monitor whether management’s actions are in the best interests of our Company and our stockholders.

Currently, Mr. Shapiro serves as our Board Chair. In this capacity, he has the authority, in addition to other powers and responsibilities, to call and preside over Board meetings and to set meeting agendas.

 

 

Role of the Board and Its Committees in Risk Oversight

 

One of our Board’s key functions is informed oversight of our risk management processes. The Board currently administers the risk oversight function as a full board as well as through its committees, which address risks inherent in their respective areas of committee oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure.

Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is

undertaken. Our Audit Committee also monitors compliance with legal and regulatory requirements.

Our Compensation Committee reviews and discusses the Company’s compensation practices and the relationship among risk, risk management and compensation in light of the Company’s objectives.

Our Governance Committee assists the Board in managing the Company’s overall enterprise risk by periodically assessing and responding as appropriate to risks that may arise in connection with the Company’s governance structures and processes.

 

 

Meetings of the Board

 

Our Board met 10 times during 2016. During 2016, each Board member attended at least 75% of the aggregate number of meetings held for the Board and for the committees on which he served. Under our Board’s Corporate Governance

Guidelines, all Board members are expected to attend our annual stockholders’ meetings. All of our then directors (other than Messrs. Epstein and Sagansky) attended our 2016 annual stockholders’ meeting.

 

 

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Independent Director Meetings

 

Our non-management directors generally meet in executive session, i.e. , without management present, each time that the

Board convenes for a regularly scheduled meeting. Our Board Chair generally presides over executive sessions of our Board.

 

 

Code of Ethics

 

We have a Code of Ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Our Code of Ethics is available on our website at www.globaleagle.com under “Investors—Governance.” Our Code of Ethics has been adopted to promote honest and ethical conduct and promote compliance with applicable governmental laws, rules and regulations. If we make any amendments to our Code of Ethics (other than technical, administrative or other

non-substantive amendments), or grant any waiver (including any implicit waiver) from a provision of the Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller (or persons performing similar functions) that requires disclosure under applicable SEC or Nasdaq rules, then we will disclose the nature of that amendment or waiver on the Investor Relations section of our website.

 

 

Corporate Governance

We are committed to maintaining the highest standards of business conduct and corporate governance.

GOVERNANCE HIGHLIGHTS

 

 

Corporate Governance

 

 

Compensation

 

 

Stockholder Rights

 

 

 Eight directors, all of whom (other than our director and CEO Jeff Leddy) are independent

 

 

  Pay-for-performance compensation program, which includes performance-based annual cash bonus payments (our AIP bonuses) and equity grants (our PSU awards)

 

 

 Majority voting requirement for directors
in uncontested elections

 

 Independent Chair of the Board

 

 

 Annual “say on pay” votes, with most recent favorable “say on pay” vote over 95%

 

 

 No poison pill takeover defense plans

 

  Regular executive sessions of independent directors

 

 

  Stock ownership requirements for CEO and directors

 

 

 

  Risk oversight by the Board and its key committees

 

 

 

  Policy restricting trading, pledging and hedging of our stock

 

 

 

  All directors attended at least 75% of Board and Board committee meetings

 

   

 

  No “over-boarding” by our directors on other public-company boards

 

       

 

Our key governance policies include:

 

 

Corporate Governance Guidelines . Our Board has adopted Corporate Governance Guidelines to provide a framework for effective corporate governance at our company. These guidelines describe the principles and practices that the Board will follow in carrying out its corporate-governance responsibilities. For example, under these guidelines, our directors may not be “over-boarded,” i.e ., serve on more than five public-company boards (with service on our Board constituting one of the five) without the consent of our Corporate Governance & Nominating Committee.

 

Related Party Transactions Policy. Our Audit Committee has adopted a related party transactions policy that directs our Audit Committee to review and approve related party transactions between us and our directors, executive officers, their family members and our significant stockholders because these transactions may give rise to potential conflicts of interest. See “Related Party Transactions” beginning on page 64.

 

 

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Whistleblower Policy and Procedures. We have policies and procedures that direct our Audit Committee to investigate complaints (received directly or through management) regarding:

 

   

fraud or deliberate error in the preparation, evaluation, review or audit of our financial statements;

 

   

fraud or deliberate error in the recording and maintaining of our financial records;

 

   

deficiencies in or noncompliance with our internal accounting controls;

 

   

misrepresentations or false statement to or by our senior officers or accountants regarding a matter contained in our financial records;

 

   

our financial reports or audit reports; and

 

   

deviations from full and fair reporting of our financial condition.

To this end, we maintain an EthicsPoint whistleblower hotline (staffed by a third-party vendor) to provide all of our current and former employees, vendors, customers, stockholders and other stakeholders with an anonymous and confidential method to report misconduct by us or our personnel. The hotline is available to report concerns regarding the financial-reporting, record-keeping and control matters covered by our Whistleblower Policy and Procedures. It is also available for

compliance-related concerns; concerns regarding other inappropriate and illegal workplace conduct, such as fraud, criminal and other illegal acts; employment and human-resources complaints ( e.g ., discrimination and harassment); and concerns regarding enterprise-related risk. The hotline is reachable toll-free at (866) 422-3580 or at www.globaleagle.ethicspoint.com.

 

 

Equity Award Policy. Our Board has adopted a policy to ensure that equity awards issued under our equity incentive plans are made on a regular annual schedule, absent unusual and compelling circumstances, and duly approved by our independent Compensation Committee. Our management equity grants of traditional time-based restricted stock units and options are generally issued every year at the Compensation Committee meeting during the first fiscal quarter. In addition, the grant date must occur during an “open-window” trading period or two full business days after our next earnings release (whichever occurs first), and cannot precede the date on which the Compensation Committee actually approves the issuance of the award. Note that we currently have a “backlog” of director and employee equity awards pending issuance under our new 2017 Omnibus Long-Term Incentive Plan, subject to stockholder approval of that new plan at this Annual Meeting. We describe the proposed new 2017 Omnibus Long-Term Incentive Plan under “Summary of the 2017 Omnibus Plan” beginning on page 49. We also provide further detail on the backlog under “Equity Backlog Under New 2017 Omnibus Plan” beginning on page 56.

 

 

Information Regarding Committees of the Board of Directors

Our Board has an Audit Committee, a Compensation Committee and a Corporate Governance & Nominating Committee. (We refer to this latter committee from time to time as our “Governance Committee.”) The charter for each of our Board committees is posted on our website at www.globaleagle.com under “Investors—Governance.” The following table provides the current membership and the total number of meetings during 2016 for each of these Board committees.

 

Name

 

    

Audit

 

  

Compensation

 

  

Corporate         
Governance &          
Nominating         

 

 

Edward L. Shapiro, Board Chair

 

           X         

 

 

Jeffrey E. Epstein

 

           X         

 

 

Stephen Hasker

 

     X

 

   X

 

  

 

Jeffrey A. Leddy

 

          

 

Robert W. Reding

 

        X*

 

  

 

Jeff Sagansky

 

     X

 

   X

 

  

 

Harry E. Sloan

 

           X*         

 

 

Ronald Steger

 

     X*

 

         

 

Total meetings in 2016

 

     8

 

   4

 

   3         

 

 

  *

Committee Chair

 

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Below is a description of each committee of our Board.

Audit Committee —All members of our Audit Committee are financially literate. Two of our Audit Committee members (Ronald Steger and Stephen Hasker) also qualify as an “audit committee financial expert” as defined in applicable SEC rules because each of them meets the requirement for past employment experience in finance or accounting, has the requisite professional certification in accounting or has comparable experience. The responsibilities of our Audit Committee include:

 

 

reviewing the Company’s annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm;

 

 

appointing our independent registered public accounting firm, determining the compensation of our independent registered public accounting firm and pre-approving our engagement of our independent registered public accounting firm for audit and non-audit services to be performed by that independent registered public accounting firm and the related fees for those services;

 

 

overseeing our independent registered public accounting firm;

 

 

meeting with our independent registered public accounting firm to discuss the audit;

 

 

reviewing with our independent registered public accounting firm and management the adequacy of our internal controls over financial reporting, and any significant findings and recommendations with respect to those controls;

 

 

establishing procedures for the receipt, retention and treatment of complaints regarding internal accounting controls or auditing matters and, if applicable, submissions by employees of concerns regarding questionable accounting or auditing matters;

 

 

meeting periodically with management to review and assess our major financial risk exposures and the manner in which those risks are being monitored and controlled; and

 

 

reviewing and approving all related party transactions.

Compensation Committee —Our Compensation Committee is responsible for overseeing matters relating to the compensation of our Chief Executive Officer and other executive officers as well as the administration of our incentive-based plans for those officers and our equity-based compensation plans. The functions of our Compensation Committee include:

 

 

determining and reviewing, on an annual basis, our compensation philosophy and policies;

 

determining the compensation of our Chief Executive Officer (who is not present during that determination) and our other executive officers;

 

 

determining, or recommending to our Board for determination, the compensation of members of our Board and other committees thereof in connection with Board and committee service;

 

 

reviewing and discussing the “Compensation Discussion and Analysis” disclosure with management, recommending to the Board its inclusion in our annual proxy statement and preparing a report for inclusion in our proxy statement that certifies that the Committee has discharged this duty; and

 

 

reviewing our compensation practices and the relationship among risk, risk management and compensation in light of our objectives, including the design of compensation practices to avoid encouraging excessive risk-taking.

Compensation Committee Interlocks and Insider Participation —During 2016, none of the members of our Compensation Committee was a current or former employee of our Company. Jeff Sagansky served as our President from 2011 until 2013, as described above, and is a party to an amended and restated registration rights agreement described under “Related Party Transactions” beginning on page 64. Jeffrey A. Leddy, who became our CEO in February 2017, served on our Compensation Committee in 2016 but resigned from that role upon becoming our CEO.

No “interlocking” relationships exist between our Board or our Compensation Committee and the board of directors or the compensation committee of any other entity. This means that none of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or our Compensation Committee.

Governance Committee —Our Governance Committee is responsible for overseeing the selection of persons to be nominated to serve on our Board and for assisting our Board in developing and ensuring compliance with our foundational and corporate-governance policies and documents. The functions of our Governance Committee include:

 

 

identifying and recommending to our Board individuals qualified to serve as directors of the Company;

 

 

advising our Board with respect to its composition, procedures and committees, including establishing criteria for annual performance evaluations of our Board committees and our Board;

 

 

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advising our Board with respect to proposed changes to the Company’s certificate of incorporation, by-laws and corporate-governance policies; and

 

 

advising our Board with respect to communications with our stockholders.

 

 

Director Nominations

 

Our Governance Committee has the responsibility of identifying, assessing and recommending potential director candidates to our Board. Potential candidates are generally interviewed by our Board Chair and the Chair of our Governance Committee prior to their nomination, and may be interviewed by other directors and members of senior management. The Governance Committee then meets to consider and approve the final candidates, and makes its recommendation to the Board for a candidate’s appointment or election to the Board.

Our Governance Committee considers the following criteria when evaluating director candidates: (i) senior-level management and decision-making experience; (ii) a reputation for integrity and abiding by exemplary standards of business and professional conduct; (iii) ability to devote time and attention necessary to fulfill the duties and responsibilities of a director; (iv) a record of accomplishment in his or her respective fields, with leadership experience in a corporation or other complex organization, including government, educational and military institutions; (v) independence and the ability to represent all of our

stockholders; (vi) compliance with legal and Nasdaq listing requirements; (vii) sound business judgment; (viii) reputation for candor and integrity; (ix) judgment, skills, geography and other measures to ensure that the Board as a whole reflects a range of viewpoints, backgrounds, skills, experience and expertise; and (x) the needs of the Board. Although the Governance Committee does not have a formal policy regarding diversity in making its recommendations, the Governance Committee respects that a board of directors should reflect diversity in background, education, business experience, gender, race, ethnicity, culture, skills, business relationships and associations and other factors that will contribute to the highest standards of governance of the Company, and reviews its effectiveness in achieving that diversity when assessing the composition of the Board from time to time.

The Governance Committee also considers candidates proposed by stockholders to be potential director nominees. There were no material changes in 2016 (and there have been no material changes in 2017) to the procedures by which stockholders may recommend nominees to our Board.

 

 

Majority Voting to Elect Directors

 

In December 2016, we amended our by-laws to implement a “majority vote” requirement in uncontested elections. Under this requirement, in order for a nominee to be elected in an uncontested election, the nominee must receive the affirmative vote of a majority of the votes cast on his or her election ( i.e. , the votes cast “FOR” a nominee must exceed the votes cast as “AGAINST”). Votes to “ABSTAIN” with respect to a nominee and broker non-votes are not considered

“votes cast,” and so will not affect the outcome of the nominee’s election. See “Other Matters—What are ‘broker non-votes’?” on page 69.

The Company maintains a plurality vote standard in contested director elections ( i.e. , where the number of nominees exceeds the number of directors to be elected).

 

 

Director Resignation Policy Upon Change of Employment

 

Our Board’s Corporate Governance Guidelines require that our directors tender their resignation (subject to our Board accepting it) upon a change of their employment. The Governance Committee will then consider whether the change in employment has any bearing on the director’s

ability to serve on our Board, and will make a recommendation to the Board regarding whether to accept the tendered resignation. Our Board will then determine whether to accept or reject the tendered resignation.

 

 

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Stockholder Communications with the Board of Directors

 

Stockholders who wish to communicate with the Board or an individual director may send a written communication to the Board or such director addressed to our Corporate Secretary at 6100 Center Drive, Suite 1020, Los Angeles, CA 90045. Each communication must set forth the name and address of the stockholder on whose behalf the communication is sent and the number of our shares that are owned beneficially by the stockholder as of the date of the communication.

Our Corporate Secretary will review the communication to determine whether it is appropriate for presentation to the Board or such director. Examples of inappropriate communications include advertisements, solicitations or hostile communications. Our Corporate Secretary will submit appropriate communications to the Board through the Board Chair, or directly to the full Board or such director, on a periodic basis.

 

 

Director Compensation

 

We have an Outside Director Compensation Program. This program is intended to compensate fairly each of our outside ( i.e. , non-employee) directors with cash and equity compensation for the time and effort required to serve as a member of our Board. (Our CEO does not receive any additional compensation for his Board service while serving as CEO.) Beginning in August 2016, our Board’s Compensation Committee retained FW Cook to assist it in reviewing and assessing our outside director compensation program to help ensure that our program is competitive and that its structure is consistent with best practices.

Annual Cash Retainer and Cash Chair Fees. Under the program, each outside director receives a cash retainer (payable quarterly and prorated for partial service in a quarter) of $75,000 per calendar year for his or her service on the Board. In addition, our Board Chair receives an additional $25,000 per calendar year for his or her service as Board Chair; the Chair of our Audit Committee receives an

additional $25,000 per calendar year for his or her service as Chair of that committee; and the Chair of our Compensation Committee receives an additional $10,000 per calendar year for his or her service as Chair of that committee.

Equity Compensation. Under the program, each outside director also receives equity compensation with a grant date fair value of $100,000 per calendar year for his or her service on the Board. During 2016, half of the grant consisted of RSUs, and the other half consisted of non-qualified stock options.

In June 2017, our Compensation Committee determined that all future equity compensation for Board service (including for Board service commencing in 2017) should consist only of RSUs that cliff vest on the earlier of the one-year anniversary of the grant date and the next annual stockholders’ meeting.

 

 

The table below provides summary information concerning compensation paid or accrued by us during 2016 to or on behalf of our then outside directors for services rendered during that year. David Davis, our former CEO, was also a director during 2016, but he was not an outside director and therefore did not receive any additional compensation for his service as a director. Ronald Steger joined our Board in April 2017 and so did not receive any compensation for Board service in 2016.

 

Name

 

    

Cash
Compensation
($)

 

      

Stock

Option
Awards (3)

($)

 

      

RSU
Awards (4)
($)

 

      

Other
Compensation
($)

 

      

Total

($)

 

 

 

Louis Bélanger-Martin (1)

 

      

 

18,750

 

 

 

      

 

 

 

 

      

 

 

 

 

      

 

 

 

 

      

 

18,750

 

 

 

 

Robert W. Reding

 

      

 

75,000

 

 

 

      

 

50,000

 

 

 

      

 

50,000

 

 

 

      

 

 

 

 

      

 

175,000

 

 

 

 

Jeffrey A. Leddy (2)

 

      

 

85,000

 

 

 

      

 

50,000

 

 

 

      

 

50,000

 

 

 

      

 

 

 

 

      

 

185,000

 

 

 

 

Jeffrey E. Epstein

 

      

 

100,000

 

 

 

      

 

50,000

 

 

 

      

 

50,000

 

 

 

      

 

 

 

 

      

 

200,000

 

 

 

 

Harry E. Sloan

 

      

 

75,000

 

 

 

      

 

50,000

 

 

 

      

 

50,000

 

 

 

      

 

 

 

 

      

 

175,000

 

 

 

 

Jeff Sagansky

 

      

 

75,000

 

 

 

      

 

50,000

 

 

 

      

 

50,000

 

 

 

      

 

 

 

 

      

 

175,000

 

 

 

 

Edward L. Shapiro

 

      

 

100,000

 

 

 

      

 

50,000

 

 

 

      

 

50,000

 

 

 

      

 

 

 

 

      

 

200,000

 

 

 

 

Stephen Hasker

 

      

 

75,000

 

 

 

      

 

50,000

 

 

 

      

 

50,000

 

 

 

      

 

 

 

 

      

 

175,000

 

 

 

 

   (1)

Louis Bélanger-Martin resigned from our Board effective March 11, 2016.

 

   (2)

Jeffrey A. Leddy was an outside director during 2016 and so received compensation for his board service during that year. He became our CEO in February 2017 and ceased receiving compensation for his director service at that time.

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

 

   (3)

The stock options granted in 2016 for director compensation had a five-year term and an exercise price of $9.25 per share (the closing price of our common stock on the 2016 annual equity grant date for director compensation) and vested in four equal quarterly installments from June 2016 through June 2017.

 

   (4)

The RSUs granted in 2016 for director compensation cliff vested on April 10, 2017. Note that as previously described under “Board of Directors and Corporate Governance—Corporate Governance” beginning on page 12, we currently have a “backlog” of director and employee equity awards pending issuance under our new 2017 Omnibus Long-Term Incentive Plan, subject to stockholder approval of that new plan at this Annual Meeting. We describe the proposed new 2017 Omnibus Long-Term Incentive Plan under “Summary of the 2017 Omnibus Plan” beginning on page 49. We also provide further detail on the backlog under “Equity Backlog Under New 2017 Omnibus Plan” beginning on page 56. The backlog includes “stub” equity grants for our directors’ service on our Board from January through June 2017 under our Outside Director Compensation Program, and we have reflected those stub grants in the table above because we consider that obligation as having accrued during 2016.

Outside Director Stock Ownership Requirements

 

To align the interests of our Board members with the interests of our stockholders, our Board’s Governance Committee has adopted Stock Ownership Guidelines for our Outside Directors. Under the Guidelines, each outside director must retain ownership of our stock equal to three times the value of the annual cash retainer paid for Board service pursuant to our Outside Director Compensation Program as in effect from time to time. If at any time an outside director has not satisfied these Guidelines, the director must retain 100% of the shares remaining after payment of taxes and exercise price upon exercise of stock options, upon the vesting of restricted stock or upon the settlement of vested RSUs. Shares that count toward compliance with the Guidelines include shares of our common stock that our outside director owns outright (either directly or beneficially, e.g. , through a family trust)

and vested restricted stock or RSUs held by the outside director. Shares that do not count are (i) shares held by mutual, hedge or other investment funds in which the outside director is a general partner, limited partner or investor, (ii) unexercised, outstanding stock options (whether or not vested), (iii) unvested/unearned restricted stock or RSUs and (iv) shares transferred to an outside director’s employer pursuant to such employer’s policies.

Although the Outside Director Stock Ownership Guidelines are not applicable to our CEO because he is an employee director (and as such is not an “outside director”), we have also adopted Stock Ownership Guidelines applicable to our CEO. See “Additional Elements of Our Compensation Program” beginning on page 28.

 

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

For the 2016 fiscal year, our “named executive officers” (“NEOs”) (as defined under SEC rules) included the following executive officers:

 

Name

   Title

David M. Davis

   Former Chief Executive Officer

Michael Zemetra

   Former Chief Financial Officer and Treasurer

Thomas Severson

   Former Executive Vice President and Chief Financial Officer

Abel Avellan

   Former President and Chief Strategy Officer

Walé Adepoju

   Executive Vice President, Media & Content

Stephen Ballas

   Executive Vice President, General Counsel and Corporate Secretary

With respect to the foregoing NEOs:

 

 

Mr. Davis separated from the Company effective February 20, 2017. Our current CEO Jeffrey Leddy became our CEO effective February 21, 2017 and as such is not a NEO for 2016.

 

 

Mr. Zemetra separated from the Company effective August 31, 2016. Thomas Severson became our Executive Vice President and CFO effective August 24, 2016.

 

 

Mr. Severson separated from the Company effective February 20, 2017. Our current CFO, Paul Rainey, joined as our Executive Vice President and CFO effective April 3, 2017 and as such is not a NEO for 2016.

 

 

Mr. Avellan separated from the Company’s employ effective April 18, 2017.

 

 

Mr. Ballas joined as our Executive Vice President, General Counsel and Corporate Secretary effective April 11, 2016.

Business Highlights

 

We have completed several acquisitions since our business combination with Row 44 and AIA in January 2013, and, as a result, our Company has grown and our executive compensation programs and philosophies have evolved over time. Throughout 2016, we continued to invest significant time and effort in growing our businesses, continuing to add to our capabilities (organically and through additional acquisitions), and further defining our business strategy. Key accomplishments in fiscal year 2016 included:

 

 

We recorded revenue of $530 million, net loss of $113 million and Adjusted EBITDA of $58 million, representing year-over-year increases of 24% for revenue and 15% for Adjusted EBITDA (1) .

 

 

We began the process to refinance our former credit facilities with a new $500 million senior-secured term loan and a new $85 million senior-secured revolving credit facility, which improved our balance sheet liquidity with a lower effective interest rate, and we closed on these new facilities in January 2017.

 

 

We acquired Emerging Markets Communications (“EMC”), a leading provider of connectivity to maritime and hard-to-reach land markets, in July 2016. The combination of our Company with EMC has created one of the largest providers of satellite-based connectivity in the world and enabled us to benefit from significant economies of scale and an enhanced global infrastructure covering the air, land and sea markets.

 

(1)  

Adjusted EBITDA is a non-GAAP financial measure. See Annex A (“Reconciliation of GAAP Measure to Non-GAAP Measure”) for a discussion of how we calculate Adjusted EBITDA and a reconciliation of net loss computed in accordance with GAAP to Adjusted EBITDA.

 

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EXECUTIVE COMPENSATION

 

Important Compensation Decisions for 2016

 

We believe that the compensation of our executive officers and employees should be closely tied to the performance of the Company so that their interests are aligned with those of our stockholders. As a result, key compensation decisions for fiscal year 2016 included:

 

 

Despite management achieving several strategic accomplishments that position the Company well for the future, our Compensation Committee determined in April 2017 that, based on information available at the time, our expected 2016 financial results fell short of our internal targets for 2016 that we had established in early 2016. As such, our Compensation Committee determined that none of our NEOs for 2016 would receive an Annual Incentive Plan (“AIP”) cash bonus for fiscal year 2016, irrespective of our Company’s actual financial performance relative to those internal targets.

 

 

In fiscal year 2016, we introduced performance-based restricted stock units (“PSUs”) as a third grant-type in addition to stock options and time-based restricted stock units (“RSUs”). Our PSUs are awards representing a right to receive a specified number of shares of our common stock after the grant date subject to the achievement of pre-determined performance conditions set by our Compensation Committee.

Compensation Policies and Practices

 

 

 

   Independence

  

Our Board has a Compensation Committee that is 100% independent under Nasdaq and SEC rules. The Compensation Committee engages its own independent compensation consultant (currently FW Cook) and confirms each year that the consultant has no conflicts of interest and is independent.

 

 
 

   No Hedging

  

We have a policy prohibiting all directors and employees from engaging in any hedging transactions with respect to our securities. This policy prohibits purchases of any financial instrument that would permit a director, officer or employee to own our securities but without the full risks and rewards of that ownership.

 

 
 

   Compensation Clawback Policy

  

We have a “compensation clawback policy” that permits us, subject to the discretion and approval of our Board, to recover certain performance-based cash and equity incentive compensation paid to any current or former “Section 16 officer” if there is a restatement of our financial results in certain circumstances.

 

 
 

   Director Stock Ownership Guidelines

  

We have Stock Ownership Guidelines for Outside Directors that require our outside directors to retain shares valued at three times their annual cash retainer for director service until they meet the required stock ownership threshold.

 

 
 

   CEO Stock Ownership Guidelines

  

We have Stock Ownership Guidelines for our Chief Executive Officer that require our CEO to retain shares valued at three times his or her annual base salary until he or she meets the required stock ownership threshold.

 

 
 

    Equity  Award Policy

  

We have an Equity Award Policy that is designed to maintain the integrity of our equity award process, including for the timing and value of awards. The Equity Award Policy sets the general timing of our annual equity grants and imposes stringent controls around those grants and around any award made outside of the normal annual equity grant cycle.

 

 
 

   No   “Single  Trigger” Change in Control Payments

  

None of our currently employed NEOs has “single trigger” change in control payments or benefits (including automatic accelerated vesting of equity awards upon a change in control only).

 

 
   

   No Tax Gross-Ups

  

We do not provide tax gross-ups to any of our NEOs.

 

   

 

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EXECUTIVE COMPENSATION

 

Executive Compensation Philosophy and Objectives

 

 

We operate in highly competitive industries providing content and connectivity to the worldwide aviation, maritime and hard-to-reach land markets, which are characterized by frequent technological advances, rapidly changing market requirements, and the regular emergence of new market entrants. To succeed in this environment, we must continuously develop and refine new and existing products and services, devise new business models, and demonstrate an ability to quickly identify and capitalize on new business opportunities. To achieve these objectives, we need a highly-talented and seasoned team of business professionals. We believe that the compensation of our executive officers should be closely tied to the long-term performance and growth of our Company so that their interests are aligned with those of our stockholders. Consistent with this philosophy, the following core principles provide a framework for the Company’s executive compensation philosophy:

 

 

to provide a competitive compensation package to attract and retain talented executive officers to manage and operate all aspects of our business;

 

to reward the achievement of corporate and individual objectives that promote the growth and profitability of our business; and

 

 

to align the interests of our executive officers with those of our stockholders by providing both short-term incentive compensation (our AIP cash bonus program) and long-term incentive compensation (our equity program).

We strive to balance incentives that promote long-term, sustainable performance and that discourage inappropriate risk-taking. We believe that our metrics and targets for earning performance-based incentives, such as the revenue and Adjusted EBITDA targets for our AIP program in 2016, are consistent with our business objectives and our goal of increasing stockholder value over the long-term.

 

 

Roles of Our Compensation Committee and Chief Executive Officer in Compensation Decisions

 

 

Our Compensation Committee is responsible for reviewing and approving compensation for all of our executive officers. This includes approving the goals and payouts under our AIP cash bonus program and long-term incentive program, including target compensation opportunities and actual incentive-compensation payouts for our executive officers, and the design and terms of the compensation programs in which our executive officers participate. Our CEO recommends to the Compensation Committee the compensation packages for all of our executive officers (other than for the CEO), including base salary increases, AIP bonus targets and actual AIP payouts and equity and any other incentive awards.

In carrying out its responsibilities, the Compensation Committee considers a number of factors, including:

 

 

our financial condition and available resources;

 

 

an evaluation of the competitive market based on available data and the collective experience of the members of the Compensation Committee with other similar companies, as well as based on recommendations of the Committee’s independent compensation consultant, FW Cook;

 

 

the executive officer’s experience and expertise; and

 

 

the compensation levels of our other executive officers at that time.

 

 

Compensation Committee’s Independent Compensation Consultant

 

 

Our Compensation Committee has (since Fall 2016) retained FW Cook as its independent compensation consultant. FW Cook reports directly to our Compensation Committee, attends committee meetings and provides advice to the Committee Chair and the Committee. FW Cook prepares analyses for the Committee based on its review of market data that it believes to be relevant, including compensation levels at, and the financial performance of, a comparator group of companies identified for the relevant compensation period. FW Cook meets with the Committee and with management to solicit input on job scope, performance, retention issues and other factors that it views as

relevant. FW Cook assists in the development of recommendations on compensation-program design and pay opportunities for executive officers.

FW Cook does not provide any services to us other than the services that it provides to our Compensation Committee. Our Compensation Committee has assessed the independence of FW Cook pursuant to, and based on the factors set forth in, SEC and Nasdaq rules, and determined no conflicts of interest exist in respect of its engagement of FW Cook.

 

 

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EXECUTIVE COMPENSATION

 

Compensation Benchmarking

 

On an annual basis, we review and benchmark our compensation practices that support our ability to retain and motivate our existing leadership talent and attract new leadership talent to our Company. This effort includes a review of the competitiveness of our executive compensation practices in the global markets in which we compete for talent; the historical practices of the companies that we have acquired over the past several years; a review of the consistency of pay across our company; and an assessment of how our compensation programs support our short- and long-term business objectives.

For purposes of determining our compensation for our executive officers for 2016 (which compensation was initially established in Spring 2016), our comparator group included the following companies in our industries:

 

Broadsoft, Inc.

  

Comserve, Inc.

Conversant, LLC

  

Dolby Laboratories, Inc.

DTS, Inc.

  

Gogo Inc.

Harmonic, Inc.

  

Iridium Communications Inc.

LogMeIn, Inc.

  

RealD Inc.

RLJ Entertainment, Inc.

  

TiVo Corporation

Synchronoss Technologies, Inc.

  

Our CEO utilized this comparator group in preparing his 2016 compensation proposals to the Compensation Committee in Spring 2016. Our Compensation Committee then considered this benchmarking information in reaching its determinations regarding the compensation of our executive officers for 2016.

In Fall 2016, following our EMC Acquisition and the substantial change in our company’s size, scope and complexity due to that acquisition, FW Cook reviewed the prior comparator group and then recommended changes to it. Based on this review, our Compensation Committee determined that our new comparator group would be as set forth in the table below:

 

Avid Technologies, Inc.

  

Ixia

Calix Inc.

  

Netgear Inc.

CSG Systems, Inc.

  

ShoreTel, Inc.

Gogo Inc.

  

Silver Spring Networks, Inc.

GTT Communications, Inc.

  

Synchronoss Technologies, Inc.

Harmonic, Inc.

  

TiVo Corporation

IMAX Corporation

  

ViaSat Inc.

Infinera Corporation

  

Vonage Holdings Corp.

Iridium Communications Inc.

  

FW Cook then provided a competitive analysis of target pay opportunities and incentive-program design practices among the new comparator companies.

Our Compensation Committee considered this new benchmarking information in reaching its determinations regarding the changes to compensation for our former Chief Executive Officer in October 2016 and the introduction of PSUs into our annual equity grant program in October 2016. Our Compensation Committee also used this new comparator group as one of many points of reference in determining 2017 compensation opportunities for our executive officers.

Say-on-Pay Vote Result

 

At our 2016 annual meeting of stockholders, over 95% of the votes cast on our “say-on-pay” proposal were voted in favor of our compensation paid to our named executive officers for 2015. Our Board and our Compensation Committee reviewed these vote results when evaluating our executive compensation policies and decisions during 2016, and the Compensation Committee will continue to consider the results of our “say-on-pay” votes when making future compensation decisions for our executive officers.

 

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EXECUTIVE COMPENSATION

 

Elements of Executive Compensation

 

We believe the compensation packages of our NEOs for 2016 were consistent with our compensation objectives, as outlined in the following table. This table sets forth the key elements of the 2016 compensation provided to our NEOs for 2016, along with the primary objective associated with each element of compensation.

 

Compensation Element

   Type    Primary Objective     

Base salary

 

  

Fixed annual cash payment

 

  

Attract and retain high-performing and experienced leaders at a competitive level of salary.

 

 

Annual performance-based cash compensation (short-term “at-risk” cash incentive compensation) under our Annual Cash Incentive (AIP) Program

 

   Variable annual cash bonus   

Motivate and reward executives for achieving annual “Pre-Bonus Adjusted EBITDA” (described below under “2016 Compensation Decisions—Annual Cash Incentive (‘AIP’) Compensation” beginning on page 23) and/or revenue goals and the achievement of strategic goals at the Company, department and individual level.

 

 

Long-term “at-risk” equity incentive compensation (Options, RSUs and PSUs)

 

   Equity with multi-year vesting   

Align the interests of our NEOs with stockholder interests, encourage the maximization of stockholder value and retain key executive officers over the long term.

 

   

Compensation Mix

 

For 2016, our Compensation Committee reviewed the comparator-group data described above and approved target levels and a mix of fixed and variable compensation for our executive officers. To tie our executive compensation programs to our performance, we weighted the targeted 2016 total compensation package more towards variable AIP and long-term equity incentives than towards fixed ( i.e. , base salary) compensation. The charts below show the target mix of each element of the total compensation package for (1) our former Chief Executive Officer for 2016 and (2) our former Chief Executive Officer together with the rest of our NEOs for 2016 (1) :

 

 

LOGO                                      LOGO

 

(1)  

For 2016, Messrs. Avellan and Severson—who were employees of Emerging Markets Communications and who became our employees in 2016 through the EMC Acquisition—and Mr. Ballas—who commenced employment in April 2016—each received large, up front (“front loader”) long-term equity incentive grants upon their commencement of employment with us. This included a large initial award of stock options and RSUs with the expectation that they may not receive any additional equity grants for the next several years. The “CEO & Other NEOs” chart reflects these “front loader” grants.

 

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EXECUTIVE COMPENSATION

 

2016 Compensation Decisions

 

Base Salary

We set our executive officers’ base salaries based on the scope of their responsibilities, historical job performance and individual experience. We also aim to set base salaries at levels generally comparable with those of executive officers in similar positions and with similar responsibilities at comparable companies as necessary to attract, retain and motivate our executive officers. Our Compensation Committee reviews base salaries for our executive officers at least annually, and may further adjust salaries from time to time as it determines.

The table below shows the 2016 base salary (as of December 31, 2016) for each of our NEOs for 2016:

 

Name

  

Base Salary at
December 31,
2016

($)

   Changes to Base Salary (if any) during 2016

David M. Davis

   625,000    Increased from $550,000 effective October 1, 2016.

Michael Zemetra

   358,626    Increased from $350,000 effective April 1, 2016.

Thomas Severson

   350,000    Mr. Severson commenced employment with our company in July 2016 upon our acquisition of EMC and became our CFO on August 24, 2016. He did not receive any salary adjustment during the remainder of 2016.

Abel Avellan

   350,000    Mr. Avellan commenced employment with our company in July 2016 upon our acquisition of EMC and did not receive any salary adjustment during the remainder of 2016.

Walé Adepoju

   418,055    Increased from $408,000 effective April 1, 2016.

Stephen Ballas

   335,000    Mr. Ballas commenced employment with our company on April 11, 2016 and did not receive any salary adjustment during the remainder of 2016.

Annual Cash Incentive (“AIP”) Compensation

The AIP payouts for our NEOs for 2016 were to be determined as follows:

 

 

40% of the AIP payout was to be based on achievement against a “Pre-Bonus Adjusted EBITDA” target ( i.e. , the Company’s Adjusted EBITDA adding back any AIP bonus payments for that period) set in Spring 2016, but excluding EBITDA from acquisitions consummated in 2016, e.g. , the EMC Acquisition,

 

 

30% of the AIP payout was to be based on achievement against a consolidated revenue target set in Spring 2016 (excluding revenue from acquisitions consummated in 2016, e.g. , the EMC Acquisition), and

 

 

30% of the AIP payout was to be based on achievement (based on a performance rating scaled from “1” to “5,” with a rating of “4” constituting target level of performance) against Company and individual objectives identified for each NEO set in Spring 2016.

In addition:

 

 

In Spring 2016, the Compensation Committee determined that in order for the Company to make any payouts under the AIP for 2016, the Company’s actual Pre-Bonus Adjusted EBITDA must exceed 80% of the target Pre-Bonus Adjusted EBITDA goal set by the Compensation Committee.

 

 

Our executive officers could earn from 0% to 150% of their target AIP amounts for the 2016 performance year based on actual achievement against the performance targets established for each of the three metrics outlined above.

 

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EXECUTIVE COMPENSATION

 

The following table sets forth the full-year AIP bonus target (as a percentage of base salary and in dollar amount) for each of our NEOs for 2016 (and assumes no proration for mid-year employment start dates during 2016):

 

Name

  

2016 AIP Bonus Target

(% of Salary)

    2016 AIP Bonus Target
($)
 

David M. Davis

     100     625,000  

Michael Zemetra

     75     262,500  

Thomas Severson

     75     262,500  

Abel Avellan

     75     262,500  

Walé Adepoju

     75     313,541  

Stephen Ballas

     50     167,500  

The following table sets forth the performance metrics (at target) under the AIP for 2016 and the relative weighting of those metrics in determining AIP bonuses for our NEOs for 2016:

 

Performance Metric

   Weighting     Target
(millions) ($)
    

Pre-Bonus Adjusted EBITDA

     40   66.5  

Consolidated Revenue

     30   478.0  

Company and Individual Strategic Goals

     30   Described below
for each NEO
   

The following table sets forth the strategic/individual goals for each of our NEOs for 2016:

 

Name

   Strategic/Individual Goals

David M. Davis

  

 Onboard new clients, including major new connectivity customers

 Continue global integration and organizational alignment

 Pursue targeted M&A opportunities

 Hire and develop internal key talent

 Continue to enhance company-wide communication

Michael Zemetra

  

 Hire and develop key talent

 Improve internal financial information delivery processes

 Achieve cost reductions

 Implementation and continued development of finance-system applications

Thomas Severson

  

 Hire and develop internal key talent

 Achieve cost reductions

 Complete Finance department reorganization and development

Abel Avellan

  

 Execute on Maritime & Land Connectivity roadmap

 Meaningful progress on the integration of the EMC business into Global Eagle

 Implement a company-wide synergy program following the EMC acquisition

Walé Adepoju

  

 Retain key Media & Content customers and achieve new Media & Content customer wins

 Improve overall Media & Content customer satisfaction

 Streamline content purchasing processes and delivery

 Grow content distribution business

 Diversify lab services offerings

Stephen Ballas

  

 Strengthen corporate-governance framework and policies

 Develop Legal and Compliance Department organization structure and processes

 Development and execution of Compliance program

In April 2017, the Compensation Committee evaluated our Company’s and executive officers’ 2016 actual performance achievement as measured against the financial and strategic goals initially established for them. The Committee then considered the appropriate “actual” payout for our executive officers under the AIP for 2016. We have set forth the goals, actual performance achievement and payouts for 2016 AIP compensation in the table below. Note that after considering our Company’s then-expected performance results for 2016 and based on information available to it at the time, the Compensation Committee determined that our performance fell below expectations and as such that our NEOs for 2016 would not receive any

 

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EXECUTIVE COMPENSATION

 

AIP cash bonus for the 2016 performance year, irrespective of our Company’s actual 2016 financial performance and the NEO’s performance against his Company and individual strategic goals.

 

Performance Metric

   Weighting     Goal at
Target
(millions)
($)
   Actual
Performance
(millions) ($)
  Actual
Payout as a
% of Goal
  Actual
Payout as a
% of Target

Pre-Bonus Adjusted EBITDA

     40   66.5    Not calculated (1)   —% (1)   —% (1)

Consolidated Revenue

     30   478.0    Not calculated (1)   —% (1)   —% (1)

Company and Individual Strategic Goals

     30   Described
Above
   Not calculated (1)   Not calculated (1)   Not calculated (1)

 

  *

Minimum Funding Threshold for AIP: $53.2 million ( i.e. , 80% of Pre-Bonus Adjusted EBITDA Target of $66.5 million)

 

   (1)

As noted above this table, in April 2017, after considering our Company’s then-expected performance results for 2016 based on information available to it at the time, our Compensation Committee determined that none of our 2016 NEOs would receive an AIP cash bonus for the 2016 performance year, irrespective of our Company’s actual 2016 financial performance and the NEO’s performance against his Company and individual strategic goals.

Long-Term Incentive Compensation (Equity-Based)

We currently utilize stock options, RSUs and PSUs to reward long-term performance. We believe that providing a meaningful portion of an executive officer’s total compensation package in the form of equity awards vesting over multi-year periods aligns the long-term incentives of our executive officers with the interests of our stockholders. Our equity award program takes into consideration our pool of shares available for grant under our equity plans, the rate at which we deplete our pool of shares available for grant, our annual equity usage rates and corresponding levels of dilution to our stockholders resulting from such awards.

Time-Vesting Stock Options and Restricted Stock Units

In March 2016, our Compensation Committee approved long-term incentive grants for our NEOs for 2016 under our equity grant program that included a mix of “time-vesting” non-qualified stock options and RSUs. With respect to our “time-vesting” non-qualified stock options, 25% of the shares underlying such options generally vest on the first anniversary of the “vesting commencement date” (which is generally the date of grant) and the balance generally vests in equal monthly installments over the following 36 months (subject to continuous service on each vesting date). Our “time-vesting” RSUs generally vest in four equal annual installments, with the first installment generally vesting on the first anniversary of the vesting commencement date and the remaining installments generally vesting annually thereafter (subject to continuous service on each vesting date).

Prior to June 2016, the Company’s practice was generally to grant a large, one-time “front loader” award of stock options and RSUs upon hiring a new executive officer, with the expectation that no additional grants would be made for the next several years. However, in June 2016, the Compensation Committee transitioned to an annual grant program for all employees (including for recent hires) to align the executive team, mitigate variability across executive officers in equity grant prices (including across exercise prices on options) and provide stronger continuous executive retention.

Total Shareholder Return Performance-Based Restricted Stock Units

In October 2016, our Compensation Committee approved the terms of a new relative Total Shareholder Return (“TSR”) PSU for issuance under the Company’s existing Amended and Restated 2013 Equity Incentive Plan (the “2013 Equity Plan”). The Compensation Committee implemented the new PSU program to incorporate into our ongoing long-term incentive program a new long-term “performance-based” incentive instrument with vesting tied to our multi-year stock-price performance. The PSUs vest based on the Company’s TSR relative to the TSR of the constituents of the Russell 2000 Index over a three-year performance period commencing on the grant date. Vesting is further subject to the recipient’s continuous employment through the third anniversary of the grant date. The Company granted the PSUs as a “target” number of PSUs, with the actual number of PSUs later vesting to be based on the Company’s relative TSR percentile ranking versus the constituents of the Russell 2000 as measured at the end of the performance period, as follows:

 

TSR Percentile Ranking

   Share Payout as a
% of Target PSUs*

80 th Percentile or Greater

   150% (Maximum)

60 th Percentile

   100% (Target)

30 th Percentile or Less

   0%

 

  *

Payout percentage linearly interpolated for performance between the 30 th and 60 th percentiles and between the 60 th and 80 th percentiles.

 

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EXECUTIVE COMPENSATION

 

The table below shows the Committee’s intended grant value of RSUs, stock options and PSUs awarded to our NEOs for 2016:

 

Name

   Restricted Stock
Units ($)
     Stock Options ($)     PSUs (at Target) ($)      2016 Aggregate
Long-Term
Incentive Total ($)
 

David M. Davis

     550,000        550,000       462,500        1,562,500  

Michael Zemetra

     175,000        175,000       None        350,000  

Thomas Severson

     672,800        648,000       None        1,320,800  

Abel Avellan (1)

     3,613,500        1,395,000       None        5,008,500  

Walé Adepoju

     204,000        517,000 (2)       167,500        888,500  

Stephen Ballas

     406,250        406,250       134,000        946,500  

 

  (1)

Mr. Avellan’s equity was granted pursuant to the Company’s 2016 Inducement and Retention Stock Plan for EMC Employees (the “EMC Inducement Equity Plan”) that the Board established in connection with the EMC Acquisition. The purpose of the EMC Inducement Equity Plan was to provide equity awards to legacy EMC employees to incent them to continue their employment with the Company following the EMC Acquisition and to promote the success and enhance the value of the Company by linking the personal interests of those recipients to those of the Company’s stockholders.

 

  (2)

Mr. Adepoju received two grants of stock options (to purchase our common stock) in 2016 (totaling $517,000 in aggregate grant-date fair value), consisting of (a) a grant in March 2016 with a grant date fair value equal to $204,000 and (b) a grant in October 2016 with a grant date fair value equal to $313,000.

As described above, the Company’s practice prior to June 2016 was to grant a large, one-time “front loader” award of stock options and RSUs upon hiring a new executive officer, with the expectation that no additional grants would be made for the next several years. Messrs. Severson and Avellan received their “front loader” equity awards on their employment commencement dates (which occurred in the second half of the year) with the Company following the EMC Acquisition, and therefore did not receive any PSUs when granted in October 2016. Mr. Zemetra’s employment with the Company had already terminated at the time the Compensation Committee determined to grant PSUs in October 2016, and therefore he did not receive any PSUs.

2017 Compensation Decisions

 

David M. Davis

On February 17, 2017, Mr. Davis’s employment as our Chief Executive Officer and his service as a member of our Board terminated.

Because we treated the separation as an involuntary termination without cause, Mr. Davis received a severance payment in the form of a one-time cash payment equal to $1,094,000 (175% of his then-current annual base salary). This amount equaled his contractual severance entitlement under his employment agreement. Given that we had completed the 2016 performance year but not yet paid or determined 2016 AIP cash bonuses at the time of Mr. Davis’s separation, the Committee determined it was appropriate to provide him his 2016 AIP bonus if and when paid for the 2016 performance year and as calculated under the AIP. As described above however under “2016 Compensation Decisions—Annual Cash Incentive (‘AIP’) Compensation” on page 23, our Compensation Committee subsequently determined in April 2017 not to award any of our executive officers AIP cash bonuses for the 2016 performance year, and so Mr. Davis ultimately did not receive any 2016 AIP bonus. The Committee also agreed to reimburse Mr. Davis for up to $10,000 for his outside legal expenses incurred in negotiating his separation agreements with the Company.

On February 20, 2017, we also entered into a consulting agreement with Mr. Davis pursuant to which Mr. Davis agreed to provide consulting and advisory services to the Company for three months following his separation date. Further, that agreement provided that any equity held by Mr. Davis would continue to vest until the termination date of the consulting period. Mr. Davis ceased providing consulting services to us in May 2017.

The Company also agreed to provide Mr. Davis up to one year following the end of that consulting period to exercise any stock options vested through the completion of such consulting period.

 

26   Global Eagle Entertainment Inc. - 2017 Proxy Statement


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EXECUTIVE COMPENSATION

 

Tom Severson

On February 20, 2017, Mr. Severson’s employment as our Chief Financial Officer terminated. Because we treated the separation as an involuntary termination without cause, Mr. Severson will receive severance in the form of continued payments of his salary for 12 months following his separation on regular paycheck dates. This amount equaled his contractual severance entitlement under his employment agreement, without further enhancement. Also, as required by his employment agreement, we agreed to provide him his 2016 AIP bonus if and when paid for the 2016 performance year and as calculated under the AIP. As described above however, our Compensation Committee subsequently determined in April 2017 not to award any of our executive officers AIP bonuses for the 2016 performance year, and so Mr. Severson ultimately did not receive any 2016 AIP bonus.

All of Mr. Severson’s unvested options and restricted stock units were immediately forfeited upon his separation from the Company.

Walé Adepoju

In connection with the Company’s annual merit increase assessment process for all employees, on April 28, 2017, the Compensation Committee approved an increase to Mr. Adepoju’s salary to $428,506 (from $418,055), effective April 1, 2017. On that same date, the Compensation Committee granted Mr. Adepoju a one-time cash retention bonus of $185,000, to be paid in three equal installments on June 30, 2017, September 30, 2017 and December 30, 2017.

As noted above, also in April 2017, our Compensation Committee determined not to award any of our executive officers AIP cash bonuses for the 2016 performance year, and so Mr. Adepoju did not receive any 2016 AIP bonus.

Stephen Ballas

On April 28, 2017, the Compensation Committee approved an increase to Mr. Ballas’s salary to $350,000 (from $335,000) effective April 1, 2017, and approved an increase to Mr. Ballas’s AIP cash bonus target to 75% (from 50%) of his base salary for the 2017 (and future) performance years. On that same date, the Compensation Committee granted Mr. Ballas a one-time cash retention bonus of $115,000, to be paid in three equal installments on June 30, 2017, September 30, 2017 and December 30, 2017.

As noted above, also in April 2017, our Compensation Committee determined not to award any of our executive officers AIP cash bonuses for the 2016 performance year, and so Mr. Ballas did not receive any 2016 AIP bonus.

Michael Zemetra

On August 22, 2016, Michael Zemetra submitted his notice of resignation as our Chief Financial Officer and Treasurer, with the resignation effective on August 31, 2017. In connection therewith, the Company and Mr. Zemetra entered into a Release and Transition Services Agreement dated August 25, 2016 pursuant to which the Company agreed to pay Mr. Zemetra a lump-sum cash payment of $388,522, consisting of (a) a discretionary bonus of $358,636 and (b) a transition services fee of $29,886 for his provision of consulting services to us through September 30, 2016. In addition, we granted Mr. Zemetra until August 31, 2017 the opportunity to exercise any vested Company stock options that he held as of August 31, 2016.

Abel Avellan

On April 18, 2017, Abel Avellan submitted his notice of resignation as our President and Chief Strategy Officer, effective on the date of that notice. In connection with Mr. Avellan’s resignation, the Company and Mr. Avellan entered into a Consulting Agreement dated April 19, 2017 (the “Consulting Agreement”). Under the Consulting Agreement, the Company agreed to pay Mr. Avellan a fee of $15,000 per month for his consulting services to the Company, with Mr. Avellan dedicating 50% of his working hours to providing these services. Further, the Consulting Agreement provided that any equity held by Mr. Avellan would continue to vest until the termination date of the consulting period. The consulting period commenced on April 19, 2017 and ended in November 2017.

As noted above, in April 2017, our Compensation Committee determined not to award any of our executive officers AIP cash bonuses for the 2016 performance year, and so Mr. Avellan did not receive any 2016 AIP bonus.

 

Global Eagle Entertainment Inc. - 2017 Proxy Statement     27  


Table of Contents

EXECUTIVE COMPENSATION

 

Additional Elements of Our Compensation Program

 

 

 

No “Single Trigger” Change in Control Payments —We do not have any agreements or plans with our currently employed executive officers that provide for “single trigger” change in control payments or benefits ( i.e. , automatic accelerated vesting of equity awards upon a change of control only). In the event of a change of control of the Company prior to July 27, 2017, Mr. Avellan—our former President and Chief Strategy Officer—would have received automatic accelerated vesting of his equity awards upon a termination without cause or for good reason pursuant to his employment agreement, which he negotiated for as part of the Company’s acquisition of EMC. But, Mr. Avellan separated from our company on April 18, 2017, so this provision is no longer applicable.

 

 

Executive Severance Plan —In April 2017, our Compensation Committee approved a new Change in Control and Severance Plan for Senior Management (our “Executive Severance Plan”), in which all of our executive officers (including all currently employed 2016 NEOs) now participate. Our Compensation Committee adopted the Executive Severance Plan because it believes that the Executive Severance Plan is reflective of current compensation practices and trends and will help ensure retention and continuity of our executive officers. The Compensation Committee further believes that the Executive Severance Plan is essential to recruiting, retaining and developing high-quality executive talent in a competitive job market because it provides protection to the executive officer if the Company does not retain him or her in certain circumstances. Participants under the Executive Severance Plan are eligible to receive (i) severance benefits upon a qualifying termination of employment, including enhanced benefits for a qualifying termination that occurs within a window period surrounding a change in control of the Company, and (ii) accelerated and continued vesting in respect of equity awards held by them if they are terminated without cause. For a description of the Executive Severance Plan, please see our Current Report on Form 8-K that we filed with the Securities and Exchange Commission on April 7, 2017. Because the Executive Severance Plan was not in effect in 2016, we have not described it herein. We will provide a complete description of the Executive Severance Plan in our proxy statement for our 2018 annual stockholders’ meeting, which proxy statement will address compensation for our named executive officers for 2017.

 

 

CEO Stock Ownership Guidelines —We have Stock Ownership Guidelines for our Chief Executive Officer that require that our CEO retain shares valued at three times his or her annual base salary. If the threshold is not met, then our CEO may not sell any of his or her “net” shares ( i.e. ,

   

after permitted sales for tax withholdings) acquired upon the exercise of stock options or the settlement of vested RSUs.

 

 

No Tax Gross-Ups —We do not provide tax gross-ups to our executive officers.

 

 

No Hedging Transactions —We have a policy prohibiting all of our directors, officers and employees from engaging in hedging or monetization transactions that would permit the director, officer or employee to own Company securities but without the full risks and rewards of ownership. We adopted this policy because we believe that all of our directors, officers and employees should be aligned with our stockholders’ long-term interests, and we believe these sorts of hedging transactions would misalign their incentives in that regard.

 

 

Compensation Clawback Policy —We have a “compensation clawback policy” that permits us, subject to the discretion and approval of the Board, to recover certain performance-based cash and equity incentive compensation ( e.g. , our AIP cash bonus awards) paid to any current or former “Section 16 officer” (as so designated by the Board or its Compensation Committee under Rule 16a-1(f) of the Exchange Act) in the event of a restatement of our financial results in certain circumstances. Specifically, the policy provides that (i) if we are required to restate our financial statements due to material non-compliance by us with any financial reporting requirement under securities laws, (ii) fraud or willful misconduct contributed to the restatement and (iii) any executive officer received a recoverable incentive-based compensation award in excess of the amount that he or she would have received had the restated financial statements been in effect for the period in which the incentive-based compensation amount was awarded, our Board may elect to recover the overpayment. The policy permits clawback from any executive officer who received an award overpayment, irrespective of whether the executive officer contributed to the fraud or willful misconduct. Our Board can clawback awards subject to the clawback for up to three years after the award vests or is granted.

 

 

Deductibility of Executive Compensation; Internal Revenue Code Section  162(m) —Section 162(m) of the Internal Revenue Code currently limits the amount that a public company may deduct from federal income taxes for remuneration paid to the chief executive officer and the three other most highly paid executive officers (other than the chief financial officer) to $1.0 million per executive officer per year, unless certain requirements are met. While our Compensation Committee is mindful of the benefit to us

 

 

28   Global Eagle Entertainment Inc. - 2017 Proxy Statement


Table of Contents

EXECUTIVE COMPENSATION

 

   

of the full deductibility of compensation, our Compensation Committee believes that it should not be constrained by the requirements of Section 162(m) where those requirements would impair flexibility in compensating our executive officers in a manner that can best promote our corporate objectives. We intend to continue to compensate our executive officers in a manner consistent with the best interests of the Company and our stockholders. We expect our new 2017 Omnibus Long-Term Incentive Plan (outlined

   

in Proposal 2 in this Proxy Statement beginning on page 48) to potentially qualify our future AIP cash awards and time-vesting RSUs for the exception to the compensation deductibility limits of Section 162(m). Notwithstanding the foregoing, we recognize that the proposed Tax Cuts and Jobs Act currently before U.S. Congress for consideration would repeal the exemption for performance-based compensation under Section 162(m). We will continue to monitor the progress of that proposed law.

 

 

Global Eagle Entertainment Inc. - 2017 Proxy Statement     29  


Table of Contents

EXECUTIVE COMPENSATION

 

Summary Compensation Table for 2016

The following table shows the compensation earned in respect of 2016, 2015, and 2014 by each of our 2016 NEOs for the years in which they were NEOs (as determined pursuant to the SEC’s disclosure requirements for executive compensation in Item 402 of Regulation S-K).

 

Name and

Current Principal Position

(unless otherwise indicated)

   Year      Salary (1)
($)
     Bonus
($)
    Stock
Awards (2)
($)
     Option
Awards (3)
($)
     Non-Equity
Incentive Plan
Compensation (4)
($)
     All Other
Compensation (5)
($)
    

Total

($)

 

 

David M. Davis (6)

Former Chief

Executive Officer

  

 

 

 

2016

 

 

     562,625              1,058,192        562,316               54,300        2,237,433  
     2015        537,671              399,997        386,790        516,313               1,840,771  
     2014        427,869                     673,000                      1,100,869  

 

Michael Zemetra (7)

Former Chief Financial

Officer and Treasurer

  

 

 

 

2016

 

 

     266,814              175,001        178,919               362,296        983,030  
     2015        350,000              75,008        72,522        240,516               738,046  
     2014        261,818        75,000       63,752        365,250                      765,820  

 

Thomas Severson (8)

Former Executive

Vice President,

Chief Financial Officer

  

 

 

 

2016

 

 

     116,667              672,800        648,000               46,400        1,483,867  
                      
                      
                                                                      

 

Abel Avellan (9)

Former President and

Chief Strategy Officer

  

 

 

 

2016

 

 

     135,417              3,613,500        1,395,000               13,000        5,150,667  
                      
                                                                      

 

Walé Adepoju

Executive Vice President,

Media & Content

     2016        415,542              387,496        521,146                      1,324,184  
     2015        406,027              199,998        193,395        280,373               1,079,793  
                                                                      

 

Stephen Ballas (10)

Executive Vice President,

General Counsel, and

Corporate Secretary

  

 

 

 

2016

 

 

     243,734        50,000 (11)       553,487        407,605                      1,253,916  
                      
                      
                                                                      

 

  *

The amounts in this table do not reflect any compensation that the NEO received at any predecessor company prior to the Company’s acquisition of that company.

 

   (1)

Amounts set forth in this column reflect the amounts actually received by the NEO as salary payments during 2016, and therefore represent a blend of the salary rates applicable to the NEO throughout the year in the event that the NEO experienced a salary change mid-year.

 

   (2)

Amounts set forth in this column represent the grant date fair value of stock-based awards granted during the year computed in accordance with Accounting Standards Codification Topic No. 718, “Compensation—Stock Compensation” (“ASC 718”). For 2016, we determined the aggregate grant date fair value of the stock awards reflected in these columns using the valuation methodology and assumptions set forth in Note 13. Common Stock, Stock-Based Awards and Warrants to our consolidated financial statements in our 2016 Annual Report on Form 10-K (“2016 Form 10-K”).

 

   (3)

Amounts set forth in this column represent the grant date fair value of stock-based awards granted during the year computed in accordance with ASC 718. For 2016, we determined the aggregate grant date fair value of the stock option awards reflected in these columns using the valuation methodology and assumptions set forth in Note 13. Common Stock, Stock-Based Awards and Warrants to our consolidated financial statements included in our 2016 Form 10-K.

 

   (4)

Amounts disclosed under the “Non-Equity Incentive Plan Compensation” column reflect the amounts earned by the NEO during the applicable year under the AIP.

 

   (5)

Amounts disclosed under “All Other Compensation” include (1) for Mr. Davis, approximately $50,000 for commuting benefits for his travel to and from his principal residence in Minnesota and our Company’s headquarters in Los Angeles, California, and $4,300 for 401(k) employer matching contributions; (2) for Mr. Zemetra, $358,636 of income from severance and $3,660 for 401(k) employer matching contributions; (3) for Mr. Severson, $41,900 for housing cost benefits associated with his temporary relocation to Los Angeles during our CFO transition in late 2016, and $4,500 for 401(k) employer matching contributions; and (4) for Mr. Avellan, approximately $13,000 for commuting benefits for his travel to and from his principal residence in Florida and our Florida office. As permitted under SEC rules, we do not separately disclose perquisites whose aggregate value is less than $10,000.

 

   (6)

Mr. Davis separated from the Company effective February 22, 2017.

 

   (7)

Mr. Zemetra separated from the Company effective August 31, 2016.

 

   (8)

Mr. Severson became the Company’s Chief Financial Officer effective August 31, 2016. Mr. Severson separated from the Company effective February 20, 2017.

 

   (9)

Mr. Avellan became our President and Chief Financial Officer effective July 27, 2016. He separated from the Company effective April 18, 2017.

 

   (10)

Mr. Ballas joined the Company as its Executive Vice President, General Counsel and Corporate Secretary effective April 11, 2016.

 

   (11)

This amount represents a $50,000 sign-on bonus that Mr. Ballas received when he joined the Company.

 

30   Global Eagle Entertainment Inc. - 2017 Proxy Statement


Table of Contents

EXECUTIVE COMPENSATION

 

Grants of Plan-Based Awards for 2016

The following table sets forth information relating to our grants in 2016 of plan-based awards to our 2016 NEOs.

 

         

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)

 

         

 

Estimated Future Number of
Shares Under Equity
Incentive Plan Awards (2)

 

   

RSUs:

Number

of Shares

of Stock

or Units

(#) (3)

 

   

Stock
Option
Awards:

Number of

Securities

Underlying

Options

(#) (4)

 

   

Exercise

or Base

Price of

Option

Awards

($/sh)

 

   

Grant Date

Fair Value

of Stock

and Option

Awards

($) (5)

 

 

   Name

 

 

Grant Date

 

   

Threshold
($)

 

   

Target
($)

 

   

Maximum
($)

 

         

Threshold
(#)

 

   

Target
(#)

 

   

Maximum
(#)

 

         

 

David M. Davis

 

   

 

3/10/2016

 

 

 

   

 

156,250

 

 

 

   

 

625,000

 

 

 

   

 

937,500

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

59,459

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

549,996

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

169,884

 

 

 

   

 

9.25

 

 

 

   

 

550,000

 

 

 

     

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

1,507

 

 

 

   

 

50,217

 

 

 

   

 

75,244

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

508,196

 

 

 

 

Michael Zemetra

   

 

3/10/2016

 

 

 

   

 

65,625

 

 

 

   

 

262,500

 

 

 

   

 

393,750

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

18,919

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

175,001

 

 

 

     

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

54,054

 

 

 

   

 

9.25

 

 

 

   

 

175,000

 

 

 

 

Thomas Severson

   

 

8/25/2016

 

 

 

   

 

65,625

 

(9)  

 

   

 

262,500

 

(9)  

 

   

 

393,750

 

(9)  

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

8/25/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

80,000

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

672,800

 

 

 

     

 

8/25/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

200,000

 

 

 

   

 

8.41

 

 

 

   

 

648,000

 

 

 

 

Abel Avellan

 

   

 

7/27/2016

 

 

 

   

 

65,625

 

 

 

   

 

262,500

 

 

 

   

 

393,750

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

7/27/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

175,000

 

(6)  

 

   

 

 

 

 

   

 

 

 

 

   

 

1,405,250

 

 

 

   

 

7/27/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

275,000

 

(7)  

 

   

 

 

 

 

   

 

 

 

 

   

 

2,208,250

 

 

 

     

 

7/27/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

450,000

 

(8)  

 

   

 

8.03

 

 

 

   

 

1,395,000

 

 

 

 

Walé Adepoju

   

 

3/10/2016

 

 

 

   

 

78,385

 

 

 

   

 

313,541

 

 

 

   

 

470,312

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

22,054

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

204,000

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

63,012

 

 

 

   

 

9.25

 

 

 

   

 

204,000

 

 

 

   

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

544

 

 

 

   

 

18,132

 

 

 

   

 

27,198

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

183,496

 

 

 

     

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

90,340

 

 

 

   

 

9.21

 

 

 

   

 

312,576

 

 

 

 

Stephen Ballas

 

   

 

4/11/2016

 

 

 

   

 

41,875

 

 

 

   

 

167,500

 

 

 

   

 

251,250

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

4/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

48,134

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

406,251

 

 

 

   

 

4/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

135,417

 

 

 

   

 

8.44

 

 

 

   

 

407,605

 

 

 

     

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

436

 

 

 

   

 

14,549

 

 

 

   

 

21,824

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

146,325

 

 

 

 

   (1)

Represents potential AIP cash bonus payouts under the 2016 Annual Incentive Plan at threshold, target and maximum levels of performance. As previously noted under “2016 Compensation Decisions—Annual Cash Incentive (‘AIP’) Compensation” beginning on page 23, none of our 2016 NEOs received an AIP bonus payment for the 2016 performance year. The “Threshold” figure however assumes that the Company achieved the minimum level of performance necessary to fund the AIP in 2016 (80% of a Pre-Bonus Adjusted EBITDA target of $66.5 million, which equaled $53.2 million), and further assumes $430.2 million in consolidated revenue for 2016 and a “2” performance rating for each executive officer for his strategic/individual goal achievement. The “Target” figure assumes that the Company achieved the target level of Pre-Bonus Adjusted EBITDA under the AIP for 2016, and further assumes the Company achieved its target of $478.0 million in consolidated revenue for 2016 and a “4” performance rating for each executive officer for his strategic/individual goal achievement. The “Maximum” figure reflects the maximum bonus that the NEO could earn for 2016 under the terms of the AIP or his employment agreement.

 

   (2)

Represents number of PSUs to be earned under the 2013 Equity Plan at threshold, target and maximum levels of performance. PSUs granted in 2016 cliff vest on the third anniversary of the grant date, based on the Company’s relative total shareholder return (“TSR”) versus the constituents of the Russell 2000 index over a three-year performance period subject to continuous employment on the vesting date. In order for any of the PSUs to be earned, relative TSR achievement during the performance period must exceed the 30 th percentile ranking amongst the Russell 2000 constituents. For purposes of calculating the threshold number of unvested PSUs outstanding under the award in this table, we have assumed that PSUs (initially awarded as a “target” number of PSUs) will be awarded at the end of their three-year performance period at the minimum performance threshold for the awards to be granted ( i.e ., achievement at the 31st relative TSR percentile ranking). Under the terms of the PSUs awards, no PSUs will be awarded for relative TSR performance below this threshold.

 

   (3)

Represents RSUs that generally vest in four equal annual installments beginning on the first anniversary of their grant date subject to continuous employment on each vesting date.

 

   (4)

Represents stock options that (i) if granted prior to June 27, 2016 have a five-year term and (ii) if granted on or after that date have a seven-year term. Stock options generally vest and become exercisable with respect 25% of the underlying shares on the first anniversary of the grant date, and vest in 36 equal monthly annual installments thereafter, subject to continuous employment on each vesting date.

 

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EXECUTIVE COMPENSATION

 

 

   (5)

Amounts reflect the grant date fair value of equity awards (using a Monte-Carlo simulation for PSU awards), computed in accordance with ASC 718, rather than grant-date fair value or amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of the equity awards in Note 13. Common Stock, Stock-Based Awards and Warrants to the consolidated financial statements included in our Form 10-K.

 

   (6)

Mr. Avellan’s inducement shares were awarded on July 27, 2016 as fully vested equity at grant.

 

   (7)

This RSU grant to Mr. Avellan was to vest in three equal annual installments beginning on the first anniversary of the grant date, subject to continuous employment on each vesting date. On April 18, 2017, Mr. Avellan submitted notice of his resignation from the Company, effective that same date. On April 19, 2017, the Company and Mr. Avellan entered into a consulting agreement for automatically renewing 12 month terms, subject to either party’s right to earlier terminate on 15 days’ notice for any reason. We agreed with Mr. Avellan that any equity held by him will continue to vest until the termination date of his consulting agreement. Mr. Avellan ceased providing consulting services to us in November 2017.

 

   (8)

Mr. Avellan’s stock option grant was to vest as follows: 150,000 options was to vest on July 27, 2017, which was the first anniversary of their grant, and then 12,500 options were to vest on the 27 th of each month from August 2017 through July 2019. On April 18, 2017, Mr. Avellan submitted notice of his resignation from the Company, effective that same date. On April 19, 2017, the Company and Mr. Avellan entered into a consulting agreement for automatically renewing 12 month terms, subject to either party’s right to earlier terminate on 15 days’ notice for any reason. We agreed with Mr. Avellan that any equity held by him would continue to vest until the termination date of his consulting agreement. Mr. Avellan ceased providing consulting services to us in November 2017.

 

   (9)

Mr. Severson’s target AIP bonus was 75% of his annual base salary, and the payouts at threshold, target and maximum levels of performance in this table reflect the full year’s target payment amount, without proration for his partial year of service in 2016. However, under the terms of his employment agreement Mr. Severson’s target AIP bonus for the 2016 performance year was to be pro-rated based on the number of days elapsed during the 2016 performance period after August 24, 2016 (the commencement date of his employment as our Chief Financial Officer). As noted in footnote 1 to this table, none of our 2016 NEOs (including Mr. Severson) received an AIP bonus payment for the 2016 performance year.

 

32   Global Eagle Entertainment Inc. - 2017 Proxy Statement


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EXECUTIVE COMPENSATION

 

Outstanding Equity Awards at 2016 Year-End

The following table sets forth the equity-based awards held by our 2016 NEOs that were outstanding on December 31, 2016, and it disregards the effect of terminations of employment (including forfeiture of outstanding equity awards) that have occurred after that date. As described under “Employment Agreements” beginning on page 35 below, Mr. Zemetra separated from our employ in 2016, and Messrs. Davis, Severson and Avellan separated from our employ in 2017.

 

          Option/Stock Appreciation Awards     Stock Awards  

Name

 

 

Grant Date

 

   

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

 

   

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

 

   

Option

Exercise

Price

($)

 

   

Option

Expiration

Date

 

   

Equity
Incentive
Awards:

Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested

(#) (4)(7)

 

   

Equity
Incentive
Awards:

Market
Value of
Unearned
Shares,
Units or
Other
Rights
Not
Vested

($) (5)

 

   

RSUs:

Number

of Shares

or Units

of Stock

That Have

Not Vested

(#) (6)

 

   

RSUs:

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($) (5)

 

 

 

David M. Davis

   

 

1/31/2013

 

 

 

   

 

675,000

 

(1)  

 

   

 

 

 

 

   

 

10.00

 

 

 

   

 

1/31/2018

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

1/13/2014

 

 

 

   

 

18,229

 

(1)  

 

   

 

6,771

 

(1)  

 

   

 

16.70

 

 

 

   

 

1/13/2019

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

7/9/2014

 

 

 

   

 

60,417

 

(1)  

 

   

 

39,583

 

(1)  

 

   

 

11.43

 

 

 

   

 

7/9/2019

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/16/2015

 

 

 

   

 

36,867

 

(1)  

 

   

 

47,401

 

(1)  

 

   

 

13.15

 

 

 

   

 

3/16/2020

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/16/2015

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

22,813

 

 

 

   

 

147,372

 

 

 

   

 

3/16/2016

 

 

 

   

 

 

 

 

   

 

169,884

 

(2)  

 

   

 

9.25

 

 

 

   

 

3/10/2021

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

59,459

 

 

 

   

 

384,105

 

 

 

     

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

1,507

 

 

 

   

 

9,732

 

 

 

   

 

 

 

 

   

 

 

 

 

 

Michael Zemetra

 

   

 

6/25/2013

 

 

 

   

 

217,709

 

(1)  

 

   

 

 

 

 

   

 

9.87

 

 

 

   

 

6/25/2018

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

10/31/2014

 

 

 

   

 

34,375

 

(1)  

 

   

 

 

 

 

   

 

12.23

 

 

 

   

 

10/30/2019

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/16/2015

 

 

 

   

 

5,596

 

 

 

   

 

 

 

 

   

 

13.15

 

 

 

   

 

3/16/2020

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

9.25

 

 

 

   

 

3/10/2021

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

Thomas Severson

 

   

 

8/25/2016

 

 

 

   

 

 

 

 

   

 

200,000

 

(1)  

 

   

 

8.41

 

 

 

   

 

8/25/2023

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

8/25/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

80,000

 

 

 

   

 

516,800

 

 

 

 

Walé Adepoju

 

   

 

9/16/2013

 

 

 

   

 

440,883

 

(1)  

 

   

 

19,167

 

(1)  

 

   

 

10.00

 

 

 

   

 

9/16/2018

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

9/16/2013

 

 

 

   

 

7,072

 

(1)  

 

   

 

 

 

 

   

 

10.00

 

 

 

   

 

9/16/2018

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

9/16/2013

 

 

 

   

 

31,261

 

(1)  

 

   

 

1,667

 

(1)  

 

   

 

10.00

 

 

 

   

 

9/16/2018

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

6/5/2014

 

 

 

   

 

62,500

 

(1)  

 

   

 

37,500

 

(1)  

 

   

 

10.57

 

 

 

   

 

6/5/2019

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/16/2015

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

11,406

 

 

 

   

 

73,683

 

 

 

   

 

3/16/2015

 

 

 

   

 

18,434

 

(1)  

 

   

 

23,700

 

(1)  

 

   

 

13.15

 

 

 

   

 

3/16/2020

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

22,054

 

 

 

   

 

142,469

 

 

 

   

 

3/10/2016

 

 

 

   

 

 

 

 

   

 

63,012

 

(2)  

 

   

 

9.25

 

 

 

   

 

3/10/2021

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

544

 

 

 

   

 

3,514

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

90,340

 

(2)  

 

   

 

9.21

 

 

 

   

 

10/11/2023

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

Abel Avellan

 

   

 

7/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

275,000

 

 

 

   

 

1,776,500

 

 

 

     

 

7/11/2016

 

 

 

   

 

 

 

 

   

 

450,000

 

(3)  

 

   

 

8.03

 

 

 

   

 

7/27/2021

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

Stephen Ballas

 

   

 

4/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

48,134

 

 

 

   

 

310,946

 

 

 

   

 

4/11/2016

 

 

 

   

 

 

 

 

   

 

135,417

 

(1)  

 

   

 

8.44

 

 

 

   

 

4/11/2021

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

10/11/2016

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

436

 

 

 

   

 

2,816

 

 

 

   

 

 

 

 

   

 

 

 

 

 

  *

The closing price of a share of our common stock on December 30, 2016 (the last Nasdaq trading day in 2016) was $6.46, and we have used that per-share price for purposes of determining market values in this table.

 

   (1)

Represents stock options that vest and become exercisable with respect to 25% of their underlying shares on the first anniversary of their grant date and vest with respect to the remaining 75% of their underlying shares on a monthly basis over the following three years until fully vested, subject to continuous employment on each vesting date.

 

Global Eagle Entertainment Inc. - 2017 Proxy Statement     33  


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EXECUTIVE COMPENSATION

 

   (2)

Represents stock options that vest and become exercisable in four equal annual installments beginning on the first anniversary of their grant date, subject to continuous employment on each vesting date.

 

   (3)

Mr. Avellan’s stock options were to vest and become exercisable with respect to one-third of their underlying shares on the first anniversary of their grant date and vest with respect to the remaining two-thirds of their underlying shares on a monthly basis over the following two years until fully vested, subject to continuous employment on each vesting date.

 

   (4)

Represents PSUs that cliff vest on the third anniversary of the grant date, based on our relative total shareholder return versus the constituents of the Russell 2000 index over a three-year performance period, and subject to continuous employment on the vesting date.

 

   (5)

The market values of both the RSUs and PSUs were calculated by multiplying $6.46 (the closing price of a share of our common stock on December 30, 2016) by the number of unvested RSUs and unearned PSUs. In respect of the PSUs, see also footnote 7 to this table.

 

   (6)

Other than with respect to Mr. Avellan’s awards, these awards represent RSUs that vest in four equal annual installments beginning on the first anniversary of their grant date, subject to continuous employment on each vesting date. Mr. Avellan’s awards were to vest in three equal annual installments on each anniversary of their grant date, subject to continuous employment on each vesting date.

 

   (7)

This column includes the number of unvested PSUs assuming actual performance for the performance period is achieved at the “Threshold” level as indicated in the table under “Grants of Plan-Based Awards for 2016” on page 31. For purposes of calculating the threshold number of unvested PSUs outstanding under the award, we have assumed that PSUs (initially awarded as a “target” number of PSUs) will be awarded at the end of their three-year performance period at the minimum performance threshold for the awards to be granted ( i.e ., achievement at the 31st relative TSR percentile ranking). Under the terms of the PSUs awards, no PSUs will be awarded for relative TSR performance below this threshold.

 

34   Global Eagle Entertainment Inc. - 2017 Proxy Statement


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EXECUTIVE COMPENSATION

 

Option Exercises and Stock Vested

The following table provides information regarding all exercises of our stock options and the vesting of RSUs (during the year ended December 31, 2016) held by our 2016 NEOs.

 

     Option Awards      Stock Awards  
     

Number of

Shares Acquired

on Exercise

(#)

    

Value Realized

on Exercise

($) (1)

    

Number of

Shares Acquired

on Vesting (#)

    

Value Realized

on Vesting (2)

($)

 

David M. Davis

                   7,605        62,817  

Michael Zemetra

                   1,426        11,779  

Thomas Severson

                           

Walé Adepoju

                   3,803        31,413  

Abel Avellan

                   175,000        1,405,250  

Stephen Ballas

                           

 

   (1)

Value Realized on Exercise would represent the difference between the market price of the underlying common stock on the exercise date and the exercise price of the options. However, none of the NEOs exercised options in 2016.

 

   (2)

Value Realized on Vesting is based on the closing price of the Company’s common stock on the vest date.

Employment Agreements

 

We have (or had) employment agreements with each of our 2016 NEOs, as summarized below:

David M. Davis, Former Chief Executive Officer

We entered into an employment agreement with Mr. Davis on July 9, 2014, in connection with his then appointment as Chief Executive Officer. Under that agreement, Mr. Davis initially received an annual base salary of $500,000. Mr. Davis was also entitled to an AIP cash bonus with an initial target of 75% of his base salary. We amended the agreement on April 12, 2015 to increase Mr. Davis’s base salary to $550,000 and to increase his AIP cash bonus target to 100% of his annual base salary. We amended the agreement again on March 10, 2016 to provide for reimbursement of commuting expenses for Mr. Davis to and from his principal residence in Minnesota and our Company headquarters in Los Angeles. In October 2016, we increased Mr. Davis’s salary to $625,000. Mr. Davis’s employment agreement also provided for severance and change in control benefits as described below under “Potential Payments upon Termination or Change in Control.”

On February 17, 2017, Mr. Davis’ employment as CEO and service as a member of our Board terminated. For a description of the agreements that we entered into with Mr. Davis upon his separation from us, see “2017 Compensation Decisions” beginning on page 26.

Mike Zemetra, Former Chief Financial Officer and Treasurer

We entered into an employment agreement with Mr. Zemetra on November 3, 2014, in connection with his then appointment as our Chief Financial Officer and Treasurer. The agreement provided for an initial annual base salary of $350,000, which we increased to $358,626 in April 2016. Under the agreement, Mr. Zemetra was also entitled to an AIP cash bonus with an initial target of 50% and not to exceed 100% of Mr. Zemetra’s annual base salary. As noted above under 2016 Compensation Decisions—Annual Cash Incentive (‘AIP’) Compensation” beginning on page 23, Mr. Zemetra’s AIP target was 75% of his annual base salary for the 2016 performance year. Mr. Zemetra’s employment agreement also provided for severance and change in control benefits as described under “Potential Payments upon Termination or Change in Control” beginning on page 37.

Mr. Zemetra delivered notice of his intent to terminate his employment on August 22, 2016, and we entered into a release and transition services agreement with him on August 25, 2016. Pursuant to that agreement, Mr. Zemetra’s employment with the Company terminated effective August 31, 2016. For a description of the agreements that we entered into with Mr. Zemetra upon his separation from us, see “2017 Compensation Decisions” beginning on page 26.

 

 

Global Eagle Entertainment Inc. - 2017 Proxy Statement     35  


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EXECUTIVE COMPENSATION

 

Walé Adepoju, Executive Vice President, Media & Content

We entered into an employment agreement with Mr. Adepoju on July 30, 2014 in connection with his then appointment as our Executive Vice President and Chief Commercial Officer. The agreement provided for an initial annual base salary of $400,000. Under that agreement, Mr. Adepoju was also entitled to an AIP cash bonus with an initial target of 50% of his base salary. In April 2015, we increased Mr. Adepoju’s base salary to $408,000 and his AIP cash bonus target to 75% of his annual base salary. In April 2016, we increased his base salary to $418,055, and in April 2017, we increased it to $428,506. Mr. Adepoju’s agreement also provided for severance protection benefits as described below under “Potential Payments upon Termination or Change in Control.” Those severance benefits were in effect during 2016 (the period covered by this Proxy Statement), but have since been superseded by our Executive Severance Plan in which Mr. Adepoju participates. See “Additional Elements of Our Compensation Program” beginning on page 28.

Tom Severson, Former Chief Financial Officer

We entered into an employment agreement with Mr. Severson on August 25, 2016 in connection with his then appointment as our Chief Financial Officer. Under that agreement, Mr. Severson received an initial annual base salary of $350,000, which remained his annual base salary through his termination of employment in February 2017. Mr. Severson was also entitled to an AIP cash bonus with an initial target of 75% of his annual base salary (prorated based on his period of service as CFO in 2016). Pursuant to his employment agreement, Mr. Severson also received an initial equity grant (consisting of RSUs and options) with a grant date fair value equal to $1,320,800 vesting over a four-year period, subject to continuous employment on each vesting date. Mr. Severson received a temporary housing stipend in Los Angeles, California for up to six months (associated with his temporary relocation to Los Angeles during our CFO transition in late 2016) and a relocation allowance of up to $25,000 in connection with his then anticipated relocation to Los Angeles. Mr. Severson’s agreement also provided for severance protection benefits as described below under “Potential Payments upon Termination or Change in Control” beginning on page 37.

On February 20, 2017, Mr. Severson’s employment as CFO terminated. See “2017 Compensation Decisions” beginning on page 26.

Abel Avellan, Former President and Chief Strategy Officer

We entered into an employment agreement with Mr. Avellan on July 27, 2016 in connection with his then appointment as

our President and Chief Strategy Officer upon the EMC Acquisition. Under the employment agreement, Mr. Avellan received an initial annual base salary of $325,000, which remained his annual base salary through his termination of employment in April 2017. Mr. Avellan was also entitled to an AIP cash bonus with an initial target of 75% of his annual base salary. Pursuant to his employment agreement, Mr. Avellan received an initial equity grant with a grant date value equal to $5,008,500, consisting of (1) immediately vested shares with a grant date value of $1,405,250 and (2) the remainder (consisting of RSUs and options) vesting over a three-year period, subject to continuous employment on each vesting date. Mr. Avellan’s agreement also provided for severance and change in control protection benefits as described below under “Potential Payments upon Termination or Change in Control” beginning on page 37.

On April 18, 2017, Mr. Avellan resigned as our President and Chief Strategy Officer effective that same date. For a description of the agreements that we entered into with Mr. Avellan upon his separation from us, see “2017 Compensation Decisions” beginning on page 26.

Stephen Ballas, Executive Vice President, General Counsel & Corporate Secretary

We entered into an employment agreement with Mr. Ballas on March 11, 2016 in connection with his then appointment as our General Counsel and Corporate Secretary. Under the employment agreement, Mr. Ballas received an initial annual base salary of $335,000, which we increased in 2017 as described in the following paragraph. Mr. Ballas was also entitled to an AIP cash bonus with an initial target of 50% of his annual base salary and without proration for his mid-year start date in 2016, which we increased in 2017 as described in the following paragraph. Pursuant to his employment agreement, Mr. Ballas also received a $50,000 sign-on bonus and an initial equity grant (consisting of RSUs and options) with a grant date value equal to $812,500 vesting over a four-year period, subject to continuous employment on each vesting date. In October 2016, we granted him an additional equity grant (consisting of PSUs) with a grant date value of $134,000, cliff vesting in October 2019 subject to his continuous employment through the vesting date. Mr. Ballas’s employment agreement provided for severance and change in control protection benefits as described below under “Potential Payments upon Termination or Change in Control” beginning on page 37. Those benefits were in effect during 2016 (the period covered by this Proxy Statement), but have since been superseded by our Executive Severance Plan in which Mr. Ballas participates. See “Additional Elements of Our Compensation Program” beginning on page 28.

 

 

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In April 2017, we increased Mr. Ballas’s base salary to $350,000 and his AIP cash bonus target to 75% of his annual base salary.

We also have employment agreements with our current CEO and CFO, who were not NEOs for 2016 (because they were not employed by us during that year), but who will be NEOs for 2017 when we publish our proxy statement for our 2018 annual stockholders’ meeting:

Jeffrey A. Leddy, Chief Executive Officer

We entered into an employment agreement with Mr. Leddy on February 21, 2017, in connection with his appointment as our Chief Executive Officer. Under his employment agreement, Mr. Leddy receives an initial annual base salary of $625,000. Mr. Leddy is also entitled to an AIP cash bonus with an initial target of 100% of his annual base salary. Pursuant to his employment agreement, if our stockholders approve our new 2017 Omnibus Long-Term Incentive Plan (see Proposal 2 beginning on page 48), then Mr. Leddy will also receive an initial equity grant consisting of (a) an option (to be fully vested at grant) representing the right to purchase 350,000 shares of our common stock, (b) an additional option representing the right to purchase 650,000 shares of our common stock vesting over a three-year period, subject to continuous service on each vesting date, and (c) RSUs representing 200,000 shares of our common stock vesting over a three-year period, subject to continuous service on each vesting date. The exercise price of the stock options will be equal to $6.22, which was the closing price of our common stock on Nasdaq on February 17, 2017 (which was the date that our Compensation Committee approved his employment agreement). In addition, under Mr. Leddy’s employment agreement, we agreed to reimburse him for travel and to and from his principal residence to the Company’s office locations and for accommodations while traveling.

Mr. Leddy’s agreement also provided for severance and change in control protection benefits under our Executive Severance Plan. See “Additional Elements of Our Compensation Program” beginning on page 28.

Paul Rainey, Executive Vice President and Chief Financial Officer

We entered into an employment agreement with Mr. Rainey on April 7, 2017, in connection with his appointment as our Executive Vice President and Chief Financial Officer. Under his employment agreement, Mr. Rainey receives an initial annual base salary of $375,000. Mr. Rainey is also entitled to an AIP cash bonus with an initial target of 75% of his annual base salary (prorated for the 2017 performance year for the number of full months elapsed in 2017 after his employment commencement date). Pursuant to his employment agreement, if our stockholders approve our new 2017 Omnibus Long-Term Incentive Plan at this Annual Meeting, then Mr. Rainey will also receive an initial equity grant with a grant-date fair value of $750,000, consisting of (1) options and RSUs vesting over a four-year period (with a grant date fair value of $650,000) and (2) PSUs cliff vesting in October 2020 (with a grant date fair value of $100,000), subject to his continuous employment on each vesting date. The exercise price of the stock options will be equal to $3.21, which was our Nasdaq closing price on October 20, 2017 (which was the date that was two full business days after we released our unaudited fourth-quarter 2016 financial results and as such the “pricing date” under our Equity Award Policy).

Mr. Rainey’s agreement also provided for severance and change in control protection benefits under our Executive Severance Plan. See “Additional Elements of Our Compensation Program” beginning on page 28.

 

 

Potential Payments upon Termination or Change in Control

 

We believe that severance and change in control protections are important components of our executive officers’ compensation packages because these protections provide security and stability that enable our executive officers to focus on their duties and responsibilities to the Company and to act with the best interests of the Company and its stockholders in mind at all times, even under circumstances that may be adverse to the executive officer’s job security.

The following narrative summarizes the payments and benefits that our 2016 NEOs would have been entitled to receive upon certain terminations of employment and/or a change in control, assuming those events occurred on December 31, 2016 and applying their severance and change

in control protection benefits as in effect on December 31, 2016. As previously noted, Messrs. Davis, Zemetra, Severson and Avellan are no longer employed by us, with Messrs. Davis, Severson and Avellan having separated from our employ in early 2017 and with Mr. Zemetra having separated in mid-2016.

Note that we adopted a new Executive Severance Plan in 2017 in which all of our executive officers now participate and which superseded the termination and change in control benefits previously in effect as of December 31, 2016. See “Additional Elements of Our Compensation Program” beginning on page 28.

 

 

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Death, Disability or Retirement.

 

 

Regarding Messrs. Davis, Zemetra, Severson and Avellan . As previously noted, Messrs. Davis, Zemetra, Severson and Avellan are no longer employed by us, with Messrs. Davis, Severson and Avellan having separated from our employ in early 2017 and with Mr. Zemetra having separated in mid-2016. The actual severance payments and agreements related to their employment termination are described under “2017 Compensation Decisions” beginning on page 26.

 

 

Regarding Messrs. Adepoju and Ballas. Messrs. Adepoju and Ballas would not have received any cash benefits upon death, disability or retirement, but our RSU and option award agreements (including for the equity grants made in 2016 to Messrs. Adepoju and Ballas) provide for continued or accelerated vesting of the unvested portion of those awards in the event of termination of employment due to death or disability. Under the equity award agreement for the PSUs (including for those grants made to Messrs. Adepoju and Ballas), if a PSU recipient dies or becomes disabled prior to the end of the performance period, the Company would waive the continuous-employment vesting requirement, and the PSU award would vest at the applicable TSR performance level as measured at the end of the three-year performance period.

Termination without a Change in Control.

 

 

Regarding Messrs. Davis, Zemetra, Severson and Avellan. As previously noted, Messrs. Davis, Zemetra, Severson and Avellan are no longer employed by us, with Messrs. Davis, Severson and Avellan having separated from our employ in early 2017 and with Mr. Zemetra having separated in mid-2016. The actual severance payments and agreements related to their employment termination are described under “2017 Compensation Decisions” beginning on page 26.

 

 

Regarding Mr.  Adepoju. If Mr. Adepoju’s employment had been terminated by the Company without “cause” or by Mr. Adepoju for “good reason,” then Mr. Adepoju would have been (as of December 31, 2016) entitled to receive continuation of his then existing health and welfare benefits and his base salary for a period of six months following his termination, subject to his execution of a general release in favor of the Company. Additionally, he would have remained eligible to vest in a pro-rata portion of his PSU award based on the applicable relative TSR performance level as measured at the end of the three-year performance period, prorated based on the portion of the performance period that he had remained employed ( e.g ., if terminated on December 31, 2016, approximately three-months into the 36-month performance period for the PSUs granted in October 2016, then he would have remained eligible for

   

3/36ths of that PSU award), subject to his compliance with confidentiality, non-competition and non-solicitation restrictive conditions through the end of the performance period.

 

 

Regarding Mr.  Ballas . If Mr. Ballas’s employment had been terminated by the Company without “cause,” then Mr. Ballas would have been (as of December 31, 2016) entitled to receive continuation of his then existing health and welfare benefits and his base salary for a period of 12 months following his termination, subject to his execution of a general release in favor of the Company. Additionally, including if he had terminated his employment for “good reason,” he would have remained eligible to vest in a pro-rata portion of his PSU award based on the applicable relative TSR performance level as measured at the end of the three-year performance period, prorated based on the portion of the performance period that he had remained employed ( e.g. , if terminated on December 31, 2016, approximately three-months into the 36-month performance period for the PSUs granted in October 2016, then he would have remained eligible for 3/36ths of that PSU award), subject to his compliance with confidentiality, non-competition and non-solicitation restrictive conditions through the end of the performance period.

Termination with a Change in Control.

 

 

Regarding Messrs. Davis, Zemetra, Severson and Avellan. As previously noted, Messrs. Davis, Zemetra, Severson and Avellan are no longer employed by us, with Messrs. Davis, Severson and Avellan having separated from our employ in early 2017 and with Mr. Zemetra having separated in mid-2016. The actual severance payments and agreements related to their employment termination are described under “2017 Compensation Decisions” beginning on page 26.

 

 

Regarding Messrs. Adepoju and Ballas. If we had experienced a “change in control” (as defined in our 2013 Equity Plan) and if Messrs. Adepoju and Ballas were terminated without “cause” within one year following the change in control, then in addition to the severance entitlements described above under “Termination without a Change in Control,” Messrs. Adepoju and Ballas would also have been (as of December 31, 2016) entitled to accelerated vesting of all outstanding and unvested stock option and RSU awards previously granted to them and held by them upon their termination. In addition, if we had experienced a “change in control” as of December 31, 2016, but Messrs. Adepoju and Ballas continued in employment following such “change in control,” then, with respect to their PSUs, our relative TSR performance level would have been measured as of the change-in-control date, and the resulting PSUs would have then been converted to “time-vesting” RSUs without any remaining performance condition. In this

 

 

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case, if the successor entity had assumed, converted or replaced the RSUs with publicly-traded equity (having an equivalent value and vesting schedule), then the resulting “time vesting” RSUs would have vested on their original vesting date ( i.e ., the third anniversary of the October 2016 grant date), subject to continuous employment through that date. If the successor entity did not so assume, convert or replace the PSUs with publicly-traded equity (having an equivalent value and vesting schedule), then the PSUs would have vested on the date of the change of control based on relative TSR performance as measured on the date of the change of control. In addition, vesting would have

   

accelerated for the PSUs if the Company terminated Messrs. Adepoju’s or Ballas’s employment without cause or if they had resigned for good reason within four months prior to or within 24 months following the change of control, using relative TSR performance as measured on the change-of-control date.

Excise taxes can be triggered in a change in control, but we do not provide excise tax “gross-ups” to any of our executive officers. See also footnote 4 to the table below in this subsection.

 

 

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EXECUTIVE COMPENSATION

 

The following table shows the payments and benefits that our 2016 NEOs would have been entitled to receive upon qualifying terminations of employment and/or a change in control, assuming those events occurred on December 31, 2016 and applying their severance and change in control protection benefits as in effect on December 31, 2016. With respect to this table:

 

 

As previously noted, Messrs. Davis, Zemetra, Severson and Avellan are no longer employed by us, with Messrs. Davis, Severson and Avellan having separated from our employ in early 2017 and with Mr. Zemetra having separated in mid-2016. The actual severance payments and agreements related to their employment termination are described above under “2017 Compensation Decisions” beginning on page 26.

 

 

As previously noted, we adopted a new Executive Severance Plan in 2017 in which all of our current executive officers now participate. See “Additional Elements of Our Compensation Program” beginning on page 28. The figures in the table below disregard the Executive Severance Plan because the Plan was not in effect as of December 31, 2016. But, our Executive Severance Plan has since superseded the termination and change in control benefits previously in effect on December 31, 2016.

 

 

Amounts shown do not include (i) accrued but unpaid salary through the date of termination, and (ii) other benefits earned or accrued by the NEO during his employment that are available to all salaried employees, such as accrued vacation.

 

 

Because Messrs. Davis, Severson and Avellan terminated employment after December 31, 2016, the table below shows the payments and benefits that Messrs. Davis, Severson and Avellan–who were employed on December 31, 2016–would have been entitled to on December 31, 2016 had they been terminated on that date. But, we have not presented similar information for Mr. Zemetra because his termination occurred prior to December 31, 2016.

 

Executive

   Benefit   

Termination
for Cause or
without
Good Reason

($)

      

Termination
without
Cause or for
Good Reason,
without a
Change of
Control

($)

   

Termination for
Good Reason or
Without Cause
following a
Change in Control

($)

 

David M. Davis (7)

  

Severance (1)

              1,093,750 (6)       2,187,500 (6)  
  

Benefits continuation (2)

              6,540       6,540  
  

Accelerated equity awards (3)

                    435,449  
  

Total

              1,100,290       2,629,489 (4)  

Michael Zemetra (5)

  

Severance (1)

                     
  

Benefits continuation (2)

                     
  

Accelerated equity awards (3)

                     
  

Total

                     

Thomas Severson (7)

  

Severance (1)

              350,000 (6)       533,200 (6)  
  

Benefits continuation (2)

              6,540       6,540  
  

Accelerated equity awards (3)

                    516,800  
  

Total

              356,540       1,056,540 (4)  

Walé Adepoju

  

Severance (1)

              209,028       209,028  
  

Benefits continuation (2)

              3,270       3,720  
  

Accelerated equity awards (3)

                    216,158  
  

Total

              212,298       428,456 (4)  

Abel Avellan (8)

  

Severance (1)

                     
  

Benefits continuation (2)

                     
  

Accelerated equity awards (3)

                     
  

Total

                     

Stephen Ballas

  

Severance (1) (9)

              335,000       335,000  
  

Benefits continuation (2)

              6,540       6,540  
  

Accelerated equity awards (3)

                    310,946 (10)  
    

Total

              341,540       652,486 (4)  

 

   (1)

Represents cash severance provided under each NEO’s employment agreement as in effect on December 31, 2016.

 

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   (2)

Represents the cost of Company-subsidized continued health and welfare benefits for the payout period provided under each NEO’s employment agreement as in effect on December 31, 2016, based on our then-applicable costs to provide such coverage as of December 31, 2016. We anticipate that we would have provided COBRA benefits to Mr. Severson if a termination without cause or for good reason had occurred even though his employment agreement did not provide for this benefit, and so the figure for Mr. Severson in this table reflects that COBRA benefit.

 

   (3)

Represents the aggregate value of the NEO’s unvested stock options, PSUs and RSUs that would have vested (partially or in full, as described in the narrative preceding this table) on an accelerated basis, determined by multiplying the number of accelerating option shares, RSUs and PSUs by the Nasdaq trading price of our common stock on December 30, 2016 ($6.46), which was the last Nasdaq trading day in 2016, and subtracting any applicable exercise prices for the options. As noted in the narrative above this table, the NEOs would only have been entitled to payments on any accelerated PSUs based on actual relative-TSR performance. We have not ascribed any value to the PSUs in the table above because, as of December 31, 2016, the minimum relative-TSR performance criteria would not have been achieved and as such the “actual” number of PSUs awarded would have been zero. Similarly, because the closing price of our stock on December 30, 2016 was less than the exercise price of any applicable accelerated options, no value is reported in the table above with respect to any options.

 

   (4)

These severance amounts disregard any potential consequence of a “parachute payment” and related exercise tax under Internal Revenue Code Sections 280G and 4999 upon a change in control. Some of our 2016 NEOs’ employment agreements provided that in the event that a change in control of the Company occurred and any severance payment to the NEO constituted a “parachute payment” under Section 280G, then the Company was to either (a) reduce the amount of the payment so that the payment would not be subject to the excise tax under Section 4999, or alternatively (b) pay the full amount of such payment to the NEO (with such executive being personally responsible for payment of any associated excise taxes), whichever produced the better after-tax result for the NEO.

 

   (5)

Pursuant to a release and transition services agreement dated August 25, 2016, Mr. Zemetra’s employment with the Company terminated effective August 31, 2016. For the terms of Mr. Zemetra’s severance package, see “2017 Compensation Decisions” and “Employment Agreements” beginning on pages 26 and 35, respectively. Pursuant to applicable SEC guidance, we need not disclose the potential payments regarding a hypothetical termination for Mr. Zemetra on December 31, 2016 because he was not employed on that date.

 

  (6)

As previously discussed under “2017 Compensation Decisions” beginning on page 26, we did not pay any AIP cash bonuses to our executive officers for the 2016 performance year, and so the severance amount reflected in this table for Messrs. Davis and Severson does not include any amount for their 2016 AIP cash bonuses.

 

  (7)

Amounts listed for Messrs. Davis and Severson in this table disregard the actual benefits paid to them upon their actual termination because this table represents benefit amounts as of December 31, 2016, which was before they terminated employment with the Company. For a description of the agreements (and related actual severance benefits) that we entered into with Messrs. Davis and Severson upon their separation from us, see “2017 Compensation Decisions” and “Employment Agreements” beginning on pages 26 and 35, respectively.

 

  (8)

On April 18, 2017, Mr. Avellan delivered notice of his resignation and his employment with us terminated on that same day. For a description of the agreement (and related actual severance benefits) that we entered into with Mr. Avellan upon his separation from us, see “2017 Compensation Decisions” beginning on page 26. Pursuant to applicable SEC guidance, we need not disclose the potential payments regarding a hypothetical termination for Mr. Avellan on December 31, 2016.

 

  (9)

On December 31, 2016, other than in connection with a change in control, Mr. Ballas would only have been entitled to cash severance in the event of a termination of his employment by us without cause.

 

  (10)

On December 31, 2016, Mr. Ballas would have been entitled to accelerated vesting of stock options, PSUs and RSUs granted in 2016 if his employment had been terminated in connection with a change in control. As noted under footnote (3) above in this table however, we have assumed for purposes of this table that the actual number of PSUs awarded would have been zero.

Equity Compensation Plan Information

The following table provides certain information (as of December 31, 2016) with respect to all of our equity compensation plans in effect as of December 31, 2016:

 

      Number of
securities to be
issued upon exercise
of outstanding options,
warrants and rights
    Weighted-average
exercise price of
outstanding options
    Number of
securities remaining
available for future
issuance under
equity compensation
plans (excluding
securities reflected
in first column)
 

Equity Compensation Plans Approved by Stockholders (1)

     8,602,906 (3)     $ 10.37 (4)       1,795,449  

Equity Compensation Plans Not Approved by Stockholders (2)

     823,700 (5)     $ 8.03 (6)       (2)  

 

  (1)

Represents the Global Eagle Entertainment Inc. Amended and Restated 2013 Equity Incentive Plan (as amended).

 

  (2)

Represents the Global Eagle Entertainment Inc. 2016 Inducement and Retention Stock Plan for EMC Employees (as amended). See Note 13. Common Stock, Stock-Based Awards and Warrants to our consolidated financial statements in our 2016 Form 10-K for more information regarding this plan. We do not plan to issue any further shares under this plan.

 

   (3)

Consists of 1,880,256 unvested RSU awards (of which 235,188 constitute PSU awards) and 6,722,650 stock option awards outstanding as of December 31, 2016.

 

   (4)

Based on 6,722,650 stock options outstanding as of December 31, 2016.

 

   (5)

Consists of 331,650 RSU awards and 492,050 stock option awards outstanding as of December 31, 2016.

 

   (6)

We granted all stock options under the Global Eagle Entertainment Inc. 2016 Inducement and Retention Stock Plan for EMC Employees at this exercise price.

 

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SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to us regarding beneficial ownership of shares of our common stock as of November 20, 2017 (the “Beneficial Ownership Table”) by:

 

 

each person who is known to us to be the beneficial owner of more than 5% of the outstanding shares of our common stock;

 

 

each NEO for 2016;

 

 

each current director;

 

 

our current CEO and CFO; and

 

 

all of our current executive officers and directors as a group.

We report the amounts and percentages of shares beneficially owned on the basis of SEC regulations governing the determination of beneficial ownership of securities. SEC rules deem a person to be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. SEC rules also deem a person to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

Beneficial ownership of our common stock is based on 90,770,478 shares of our common stock issued and outstanding as of November 20, 2017 (excluding 3,053,634 shares of our common stock held by our wholly-owned subsidiary on that date).

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock. Unless otherwise indicated, the address of each individual in the following table is 6100 Center Drive, Suite 1020, Los Angeles, California 90045. Addresses for the other beneficial owners are set forth in the footnotes to the table.

 

Name and Address of Beneficial Owner

   Number of
Shares of
Common Stock (1)
     Percent of
Outstanding
Common Stock
 

PAR Investment Partners, L.P. (2)

     28,971,072        31.9

ABRY Partners, LLC (3)

     9,637,955        10.6

Frontier Capital Management Co., LLC (4)

     7,534,133        8.3

Nantahala Capital Management, LLC (5)

     7,405,166        8.2

Putnam Investment Management, LLC (6)

     5,989,860        6.6

Abrams Capital Management, LLC (7)

     5,000,000        5.5

Franklin Advisors, Inc. (8)

     4,711,097        5.2

Walé Adepoju (9)

     689,054        *  

Abel Avellan (10)

     873,592        *  

Stephen Ballas (11)

     66,039        *  

David M. Davis (12)

     905,954        *  

Jeffrey E. Epstein (13)(+)

     72,044        *  

Stephen Hasker (14)(+)

     23,344        *  

Jeffrey A. Leddy (15)(+)

     72,044        *  

Robert W. Reding (16)(+)

     72,044        *  

Jeff Sagansky (17)(+)

     812,884        *  

Edward L. Shapiro (18)(+)

     77,449        *  

Harry E. Sloan (19)(+)

     172,043        *  

Michael Zemetra

     22,907        *  

Paul Rainey

            *  

Thomas Severson

            *  

Ronald Steger (+)

            *  

All current executive officers and directors as a group (13 individuals) (20)

     2,190,258        2.4

 

  *

Less than 1%

 

  +

The table above does not include RSU and option awards granted to our directors for their Board service for the “stub” period between January 1, 2017 through June 30, 2017 ( i.e. , the approximate date of the Company’s annual stockholders’ meeting in a typical year) because we will issue those awards under our 2017 Omnibus Plan, which remains subject to our stockholders’ approval at the Annual Meeting. Assuming that our stockholders approve the 2017 Omnibus Plan, our directors will immediately receive (in the aggregate) 52,149 shares of our common stock and options representing the right to acquire 114,483 shares of our common stock (with an option exercise price of $3.21) relating to these “stub” period awards. These awards will be fully vested upon issuance.

 

  (1)

Represents shares of the Company’s common stock held, options and warrants held that were vested and/or exercisable at the Beneficial Ownership Table Date and any such securities that will vest and/or become exercisable within 60 days thereafter (without reduction for any shares that we may later “withhold to cover” for tax purposes).

 

  (2)

According to a Schedule 13D/A filed with the SEC on January 5, 2017 and its “5%+ Stockholder Questionnaire” submitted to the Company on January 18, 2017, all shares are held directly by PAR Investment Partners, L.P. (“PIP”). PAR Capital Management, Inc. (“PCM”), as the general partner of PAR Group, L.P., which is the general partner of PAR, has investment discretion and voting control over shares held by PIP. No stockholder, director, officer or employee of PCM has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of any shares held by PIP. The business address of PAR Capital Management, Inc. is 200 Clarendon Street, 48 th Floor, Boston, MA 02116.

 

  (3)

According to a Schedule 13G/A filed with the SEC on August 8, 2017 on behalf of ABRY Partners VII, L.P., a Delaware corporation (“ABRY Partners”), ABRY Partners VII Co-Investment Fund, L.P., a Delaware corporation (“ABRY Fund”), ABRY Investment Partnership, L.P., a Delaware corporation (“ABRY Partnership”), EMC Holdco 2 B.V., a Netherlands company (“EMC Holdco 2”), Jay Grossman, an individual and a U.S. Citizen, and Peggy Koenig, an individual and a U.S. citizen. ABRY Partners, ABRY Fund, ABRY Partnership, EMC, Jay Grossman and Peggy Koenig hold shared voting and shared dispositive power with respect to 9,637,955 shares of the Company’s common stock, and EMC Acquisition Holdings LLC (“EMC Acquisition Holdings”) hold shared voting and shared dispositive power with respect to 5,080,049 shares of the Company’s common stock. EMC Holdco 2 is the direct owner of 83.3% of the common stock of EMC Acquisition Holdings and may be deemed to share and may be deemed to share voting and dispositive power with respect to any shares beneficially owned by EMC Acquisition Holdings. EMC Holdco 1 Coöperatief U.A., a cooperative entity organized and existing under the laws of the Netherlands (“EMC Holdco 1”), is the sole owner of EMC Holdco 2 and may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2. EMC Aggregator, LLC, a Delaware limited liability company, is the direct owner of 99.0% of the common stock of EMC Holdco 1, and EMC Aggregator Sub, LLC, a wholly owned subsidiary of EMC Aggregator, LLC and a Delaware limited liability company, is the direct owner of 1.0% of the common stock of EMC Holdco 1. Each of EMC Aggregator, LLC and EMC Aggregator Sub, LLC may be deemed to share voting and dispositive power with respect to any of our shares beneficially

 

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owned by EMC Holdco 1. As the direct owner of 96.72429% of the equity interests of EMC Aggregator, LLC, ABRY Partners also may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2. As the direct owner of 3.19196% of the equity interests of EMC Aggregator, LLC, ABRY Fund also may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2. As the direct owner of 0.08375% of the equity interests of EMC Aggregator, ABRY Partnership also may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2. Each of C.J. Brucato, Tomer Yosef-Or, and James Scola are members of the board of directors of each of EMC Aggregator, LLC and EMC Aggregator Sub, LLC and may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2, but disclaims beneficial ownership of such shares. EMC Holdco 1, EMC Aggregator, LLC, EMC Aggregator Sub, LLC, ABRY Partners VII, L.P., ABRY Partners VII Co-Investment Fund, L.P., and ABRY Investment Partnership, L.P. each disclaim beneficial ownership of such shares beneficially owned by EMC Holdco 2. ABRY Partners VII Co-Investment GP, LLC, a Delaware limited liability company, the general partner of ABRY Partners, may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2, but disclaims beneficial ownership of such shares. ABRY VII Capital Partners, L.P., a Delaware limited partnership, the general partner of ABRY Partners, may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2, but disclaims beneficial ownership of such shares. ABRY Partners Capital Investors, LLC, a Delaware limited liability company, the general partner of each of ABRY Partners VII Co-Investment GP, LLC and ABRY VII Capital Partners, L.P., may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2, but disclaims beneficial ownership of such shares. ABRY Investment GP, LLC, a Delaware limited liability company, the general partner of ABRY Investment Partnership, L.P., may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2, but disclaims beneficial ownership of such shares. ABRY Partners Capital Investors, LLC, a Delaware limited liability company, the general partner of each of ABRY Partners VII Co-Investment GP, LLC and ABRY VII Capital Partners, L.P., may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2, but disclaims beneficial ownership of such shares. Each of Jay Grossman and Peggy Koenig, equal members and managers of each of ABRY Investment GP, LLC and ABRY Partners Capital Investors, LLC, may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Holdco 2, but each of them disclaims beneficial ownership of such shares. The business address of ABRY Partners, ABRY Fund, ABRY Partnership, EMC Holdco 2, EMC Acquisition Holdings, Jay Grossman, and Peggy Koenig is c/o ABRY Partners, 111 Huntington Avenue, 29th Floor, Boston, MA 02199.

 

  (4)

According to a Schedule 13G/A filed with the SEC on February 10, 2017, Frontier Capital Management Co., LLC holds sole voting power with respect to 4,344,099 shares of the Company’s common stock and sole dispositive power with respect to 7,534,133 shares of the Company’s common stock. The business address of Frontier Capital Management Co., LLC is 99 Summer Street, Boston, MA 02110.

 

  (5)

According to its “5%+ Stockholder Questionnaire” submitted to the Company on August 28, 2017 (providing information as of August 25, 2017), Nantahala Capital Management, LLC may be deemed the beneficial owner of 7,405,166 shares of the Company’s common stock held by funds and separately managed accounts under its control. Messrs. Wilmot B. Harvey and Daniel Mack are control persons in respect of shares beneficially by Nantahala Capital Management, LLC. As managing members of Nantahala Capital Management, LLC, each of Messrs. Harvey and Mack may be deemed a beneficial owner of these shares. Nantahala Capital Partners SI, LP, a fund advised by Nantahala Capital Management, LLC, has delegated voting and investment power for its shares to Nantahala Capital Management, LLC, but has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, approximately 4.8 million shares of the Company’s common stock. The business address of Nantahala Capital Management, LLC is 19 Old Kings Highway S, Suite 200, Darien, CT 06820.

 

  (6)

According to Schedules 13G/A filed with the SEC on February 14, 2017 on behalf of Putnam Investments, LLC d/b/a Putnam Investments (“PI”), Putnam Investment Management, LLC (“PIM”) and The Putnam Advisory Company, LLC (“PAC”), PIM and PI hold sole dispositive power with respect to 5,989,860 shares of the Company’s common stock. PI wholly owns two registered investment advisers, PIM, which is the investment adviser to the PI family of mutual funds and PAC, which is the investment adviser to PI’s institutional clients. Both PIM and PAC have dispositive power over the shares as investment managers. In the case of shares held by the PI mutual funds managed by PIM, the mutual funds, through their boards of trustees, have voting power. PAC has sole voting power over the shares held by its institutional clients. The Company has entered into a Voting Rights Waiver Agreement (the “Voting Rights Waiver Agreement”) with PIM pursuant to which PIM and certain other entities and individuals affiliated with PIM and other PI companies (the “Other Putnam Investors”) agreed to waive all voting rights that they may have in respect of any voting securities issued by the Company that exceed, in the aggregate, 4.99% of the total voting rights exercisable by the Company’s outstanding voting securities. The Voting Rights Waiver Agreement provides that any voting rights waived by PI, PIM or the Other Putnam Investors will be apportioned among those parties on a pro rata basis based upon their relative holdings of the Company’s voting securities. The Voting Rights Waiver Agreement will expire at the time that the Other Putnam Investors that are investment companies registered under the Investment Company Act of 1940, as amended, no longer own any of the Company’s voting common stock, at which time the remaining Other Putnam Investors will be entitled to any and all voting rights pertaining to their voting securities. The business address of PIM, PAC and PI is One Post Office Square, Boston, MA 02109.

 

  (7)

According to a Schedule 13G/A filed with the SEC on February 13, 2015 on behalf of Abrams Capital Partners II, L.P., a Delaware limited partnership (“Abrams II”); Abrams Capital, LLC, a Delaware limited liability company (“Abrams Capital”); Abrams Capital Management, LLC, a Delaware limited liability company (“Abrams CM LLC”); Abrams Capital Management, L.P., a Delaware limited partnership (“Abrams CM LP”); and David Abrams, an individual and a U.S. citizen, Abrams II holds shared voting and shared dispositive power with respect to 4,022,990 shares of the Company’s common stock, Abrams Capital holds shared voting and shared dispositive power with respect to 4,732,160 shares of the Company’s common stock, and each of Abrams CM LLC, Abrams CM LP and Mr. Abrams holds shared voting and shared dispositive power with respect to 5,000,000 shares of the Company’s common stock. The shares of the Company’s common stock over which Abrams Capital holds shared voting and shared dispositive power are beneficially owned by Abrams II and other private investment funds for which Abrams Capital serves as general partner. The shares of the Company’s common stock over which Abrams CM LLC and Abrams CM LP hold shared voting and shared dispositive power include the shares that are beneficially owned by Abrams Capital and shares beneficially owned by another private investment fund for which Abrams CM LP serves as investment manager. Abrams CM LLC is the general partner of Abrams CM LP. The shares of the Company’s common stock over which Mr. Abrams holds shared voting and shared dispositive power include the shares that are beneficially owned by Abrams Capital and Abrams CM LLC. Mr. Abrams is the managing member of Abrams Capital and Abrams CM LLC. The address of this stockholder is c/o Abrams Capital Management, L.P., 222 Berkeley Street, 21st Floor, Boston, MA 02116.

 

  (8)

According to a Schedule 13G/A filed with the SEC on February 7, 2017 on behalf of Franklin Resources, Inc., a Delaware corporation (“Franklin Resources”), Franklin Advisers, Inc., a California corporation (“Franklin Advisers”), Charles B. Johnson, an individual and a U.S. Citizen, and Rupert H. Johnson, Jr., an individual and a U.S. citizen, Franklin Advisers holds sole voting and sole dispositive power with respect to 4,711,097 shares of the Company’s common stock, and Fiduciary Trust Company International holds sole voting power with respect to 41,200 shares of the Company’s common stock. The 4,752,297 shares of the Company’s common stock reported on the Schedule 13G are beneficially owned by one or more open- or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of Franklin Resources (the “investment management subsidiaries”). Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding common stock of Franklin Resources and are the principal stockholders of Franklin Resources. Franklin Resources, Charles B. Johnson and Rupert H. Johnson, Jr. may be deemed to be the beneficial owners of shares of the Company’s common stock held by persons and entities for whom or for which Franklin Resources’ subsidiaries provide investment management

 

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services. Franklin Resources, Charles B. Johnson, Rupert H. Johnson, Jr. and the investment management subsidiaries disclaim beneficial ownership of the shares of the Company’s common stock. The business address of Franklin Resources, Franklin Advisers, Charles B. Johnson and Rupert H. Johnson, Jr. is One Franklin Parkway, San Mateo, CA 94403.

 

  (9)

Includes 664,229 shares of the Company’s common stock that Mr. Adepoju has the right to acquire by exercise of vested stock options and 12,312 shares of the Company’s common stock that Mr. Adepoju will have the right to acquire by exercise of stock options which are scheduled to vest within 60 days of the Beneficial Ownership Table Date. The remaining amount in the table above for Mr. Adepoju represents shares of our common stock held by him.

 

  (10)

Includes 186,188 shares of the Company’s common stock that Mr. Avellan has the right to acquire by exercise of vested stock options. The remaining amount in the table above for Mr. Avellan represents shares of our common stock held by him.

 

  (11)

Includes 53,603 shares of the Company’s common stock that Mr. Ballas has the right to acquire by exercise of vested stock options and 5,642 shares of the Company’s common stock that Mr. Ballas will have the right to acquire by exercise of stock options which are scheduled to vest within 60 days of the Beneficial Ownership Table Date. The remaining amount in the table above for Mr. Ballas represents shares of our common stock held by him.

 

  (12)

Includes 861,861 shares of the Company’s common stock that Mr. Davis has the right to acquire by exercise of vested stock options. The remaining amount in the table above for Mr. Davis represents shares of our common stock held by him.

 

  (13)

Includes 72,044 shares of the Company’s common stock that Mr. Epstein has the right to acquire by exercise of vested stock options, but excludes (x) 3,685 RSUs that are vested but for which he has deferred the receipt until May 2046 and (y) 5,405 RSUs that are vested but for which Mr. Epstein has deferred the receipt until April 2046.

 

  (14)

Includes 23,344 shares of the Company’s common stock that Mr. Hasker has the right to acquire by exercise of vested stock options, but excludes (x) 2,764 RSUs that are vested but for which he has deferred the receipt until May 2021 and (y) 5,405 RSUs that are vested but for which he has deferred the receipt until April 2022.

 

  (15)

Includes 72,044 shares of the Company’s common stock that Mr. Leddy has the right to acquire by exercise of vested stock options, but excludes (x) 3,685 RSUs that are vested but for which he has deferred the receipt until May 2021 and (y) 5,405 RSUs that are vested but for which he has deferred the receipt until April 2022.

 

  (16)

Includes 72,044 shares of the Company’s common stock that Mr. Reding has the right to acquire by exercise of vested stock options, but excludes (x) 3,685 RSUs that are vested but for which he has deferred the receipt until May 2021 and (y) 5,405 RSUs that are vested but for which he has deferred the receipt until April 2022.

 

  (17)

Includes 72,044 shares of the Company’s common stock that Mr. Sagansky has the right to acquire by exercise of vested stock options, but excludes (x) 3,685 RSUs that are vested but for which he has deferred the receipt until May 2021 and (y) 5,405 RSUs that are vested but for which he has deferred the receipt until April 2022. The remaining amount in the table above for Mr. Sagansky represents shares of our common stock held by him.

 

  (18)

Includes 72,044 shares of the Company’s common stock that Mr. Shapiro has the right to acquire by exercise of vested stock options, but excludes 3,685 RSUs that are vested but for which he has deferred the receipt until May 2021. The remaining amount in the table above for Mr. Shapiro represents shares of our common stock held by him.

 

  (19)

Includes 72,044 shares of the Company’s common stock that Mr. Sloan has the right to acquire by exercise of vested stock options, but excludes (x) 3,685 RSUs that are vested but for which he has deferred the receipt until May 2021 and (y) 5,405 RSUs that are vested but for which he has deferred the receipt until April 2022. The remaining amount in the table above for Mr. Sloan represents shares of our common stock held by him.

 

  (20)

Includes Walé Adepoju, Stephen Ballas, Jeffrey E. Epstein, Stephen Hasker, Jeffrey A. Leddy, Joshua Marks, Robert W. Reding, Jeff Sagansky, Sarlina See, Edward L. Shapiro, Harry E. Sloan, Paul Rainey and Ronald Steger.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and beneficial owners of more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. SEC regulations require directors, executive officers and greater than ten percent stockholders to furnish us with copies of all Section 16(a) forms that they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required during 2016, our directors, executive officers and greater than ten percent beneficial owners complied with all Section 16(a) filing requirements applicable to them, except as follows:

 

 

a late Form 3 was filed on March 21, 2016 on behalf of Michael Zemetra, our former Chief Financial Officer and Treasurer, reporting prior grants to him of 54,054 stock options and 18,919 of our restricted stock units on March 10, 2016;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Harry Sloan reporting prior grants to him of 15,444 stock options and 5,405 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Walé Adepoju reporting prior grants to him of 63,012 stock options and 22,054 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of David M. Davis, our former Chief Executive Officer, reporting prior grants to him of 169,884 stock options and 59,459 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Stephen Hasker reporting prior grants to him of 15,444 stock options and 5,405 of our restricted stock units;

 

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a late Form 4 was filed on March 21, 2016 on behalf of Edward Shapiro reporting prior grants to him of 15,444 stock options and 5,405 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Jay Itzkowitz, our former General Counsel, reporting prior grants to him of 47,876 stock options and 16,757 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Jeffrey A. Leddy reporting prior grants to him of 15,444 stock options and 5,405 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Robert Reding reporting prior grants to him of 15,444 stock options and 5,405 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Jeffrey Epstein reporting prior grants to him of 15,444 stock options and 5,405 of our restricted stock units;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Jeffrey Sagansky reporting prior sales by him of 2,504 shares, 51 shares and 1,421 shares, and grants to him of 15,444 stock options and 5,405 of our restricted stock units on March 10, 2016;

 

 

a late Form 4 was filed on March 21, 2016 on behalf of Michael Zemetra reporting 1,857 shares withheld for taxes due upon vest for one of his restricted unit grants and 535 shares withheld for taxes due upon vest for another one of his restricted stock unit grants;

 

 

a late Form 4 was filed on May 13, 2016 on behalf of Walé Adepoju reporting of 2,880 shares withheld for taxes due upon vest for one of his restricted stock unit grants and 1,429 shares withheld for taxes due upon vest for another of his restricted stock unit grants;

 

 

a late Form 4 was filed on May 13, 2016 on behalf of David M. Davis reporting 2,555 shares withheld for taxes due upon vest for one of his restricted stock unit grants;

 

 

a late Form 4 was filed on May 13, 2016 on behalf of Jay Itzkowitz reporting 524 shares withheld for taxes due upon vest for one of his restricted unit grants and 21,035 shares forfeited by him upon termination of his employment; and

 

 

a late Form 4 was filed on May 13, 2016 on behalf of Aditya Chatterjee, our former Chief Technology Officer, reporting 1,227 shares withheld for taxes due upon vest for one of his restricted stock unit grants and 443 shares withheld for taxes due upon vest for another one of his restricted stock unit grants.

 

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Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the foregoing Compensation Discussion and Analysis contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Respectfully submitted,

COMPENSATION COMMITTEE

Robert W. Reding, Chair

Stephen Hasker

Jeff Sagansky

This Compensation Committee Report is not “soliciting material,” is furnished to, but not deemed “filed” with, the SEC and is not deemed to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, whether made before or after the filing date hereof and irrespective of any general incorporation language in any such filing.

 

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PROPOSAL 2 APPROVE A NEW 2017 OMNIBUS LONG-TERM INCENTIVE PLAN

 

We are asking our stockholders to approve a new 2017 Omnibus Long-Term Incentive Plan (the “2017 Omnibus Plan”) so that we have sufficient shares available in the future for our customary annual long-term incentive awards and other equity awards to attract, retain and motivate our directors and key employees. In addition, we intend for this new 2017 Omnibus Plan to allow us to grant AIP cash bonuses and time-vesting RSU equity compensation that could potentially qualify for deductibility under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), which could increase our tax deductions for these forms of compensation and thereby reduce our tax obligations, which would benefit the Company and its stockholders. This potential tax deductibility is a new feature of the 2017 Omnibus Plan that does not exist under our existing 2013 Equity Plan.

If approved by our stockholders, the 2017 Omnibus Plan would replace our existing 2013 Equity Plan for all future grants, and we would no longer issue awards under the 2013 Equity Plan. Awards previously granted under the 2013 Equity Plan would be unaffected by the adoption of the 2017 Omnibus Plan, and they would remain outstanding under the terms pursuant to which we originally granted them.

As of November 20, 2017, there were a total of 11,000,000 shares of our common stock authorized and reserved for awards pursuant to the 2013 Equity Plan, and we had 2,097,846

remaining shares available for issuance thereunder as of that date. These remaining shares would be rolled into the 2017 Omnibus Plan and become available for grant thereunder. The 2017 Omnibus Plan would separately make available 6,500,000 shares of our common stock for issuance thereunder, in addition to those rolled over from the 2013 Equity Plan.

Our Compensation Committee approved the new 2017 Omnibus Plan on September 18, 2017, and our Board adopted it on September 19, 2017, subject in each case to stockholder approval at this Annual Meeting. If our stockholders now approve the new 2017 Omnibus Plan, then the 2017 Omnibus Plan would become retroactively effective on the date of the Board’s adoption and immediately become available for equity issuances thereunder. If our stockholders do not approve the new 2017 Omnibus Plan, then we will continue to have available the 2013 Equity Plan, but the amount of remaining shares thereunder is insufficient to meet our equity-compensation needs for our directors and employees for 2017 and in the future. That will in turn impair our ability to recruit and retain talent necessary to maintain and grow our business.

Note that we currently have a “backlog” of director and employee equity awards pending issuance under our new 2017 Omnibus Plan, subject to stockholder approval of the new plan at this Annual Meeting. We provide further detail on this backlog under “Equity Backlog under New 2017 Omnibus Plan” beginning on page 56.

 

 

Required Vote

In order to be approved, this Proposal must receive the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the Annual Meeting and entitled to vote on this Proposal, i.e ., the votes cast “FOR” this Proposal must exceed the votes cast as “AGAINST.” Shares represented by executed proxies (but with no marking indicating “FOR” or “AGAINST”) will be voted “FOR” the approval of the 2017 Omnibus Plan proposal. Votes to “ABSTAIN” and broker non-votes are not considered “votes cast,” and so will have no effect on the outcome of this Proposal.

Board Recommendation

OUR BOARD RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF A NEW 2017 OMNIBUS LONG-TERM INCENTIVE PLAN AS OUTLINED IN THIS PROPOSAL 2.

 

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PROPOSAL 2 APPROVE A NEW 2017 OMNIBUS LONG-TERM INCENTIVE PLAN

 

 

Summary of the 2017 Omnibus Plan

 

We qualify the summary of the 2017 Omnibus Plan that follows in its entirety by the actual provisions of the 2017 Omnibus Plan, which we have attached as Annex B to this Proxy Statement.

Background

We intend the 2017 Omnibus Plan to: (i) to promote the growth and success of the Company by linking a significant portion of compensation to the increase in value of our common stock; (ii) to attract and retain top quality, experienced executive officers, employees, directors and other service providers by offering a competitive incentive compensation program; (iii) to reward innovation and outstanding performance as important contributing factors to the Company’s growth and progress; (iv) to align the interests of our executive officers, employees, directors and other service providers with those of our stockholders by reinforcing the relationship between compensation and stockholder gains obtained through the achievement by award recipients of short-term objectives and long-term goals; and (v) to encourage our executive officers, employees, directors and other service providers to obtain and maintain an equity interest in the Company.

We may grant awards under the 2017 Omnibus Plan that consist of stock options, restricted stock, restricted stock units (RSUs), performance stock, performance units, stock appreciation rights (SARs), cash incentive (such as our AIP cash bonuses) and other stock-based awards to executive officers, employees, directors and other service providers of the Company. Generally, all of our employees are eligible to participate in the 2017 Omnibus Plan, but historically we have only granted equity awards to our senior employees. For example, in 2017, we awarded equity to approximately 140 employees with the title “Director” and above, out of our total personnel population of approximately 1,500. This included equity grants to six executive/Section 16 officers and seven non-employee directors. We may however choose to broaden our grant pool in the future to include more junior personnel.

Key Features Protecting Stockholder Interests and Promoting Effective Corporate Governance.

The 2017 Omnibus Plan includes the following features to protect our stockholders’ interests and to help ensure effective corporate governance:

 

 

Potential qualification of select performance awards as tax deductible under Section  162(m) . The 2017 Omnibus Plan may permit us to qualify our AIP cash bonuses and time-vesting RSUs as tax-deductible performance-based compensation under Section 162(m). As previously noted,

 

this is a new feature of the 2017 Omnibus Plan that does not exist in our current 2013 Equity Plan. This could potentially increase our tax deductions for these forms of compensation and thereby reduce our tax obligations, which would benefit us and our stockholders. We explain Section 162(m) in further detail below in this section under “Internal Revenue Code Section 162(m).”

 

 

No evergreen formula. The 2017 Omnibus Plan does not contain an “evergreen” formula for calculating the number of shares of our stock available for issuance under the plan. These formulas automatically “refresh” a stock plan each year with new available shares in certain instances, and we believe that these sorts of formulas represent a poor compensation and corporate-governance practice.

 

 

No discounted stock options. The 2017 Omnibus Plan prohibits us from granting stock options or SARs with an exercise price less than the fair market value of our common stock on the grant date.

 

 

No repricing of stock options. The 2017 Omnibus Plan prohibits the repricing of stock options or SARs either by payment in cash, amendment of an award agreement or by substitution of a new option award at a lower price, in each case without stockholder approval.

 

 

No stock option reloads . The 2017 Omnibus Plan prohibits the grant of stock option “reloads.” An option reload allows a participant to exercise a stock option using already owned shares to pay for the exercise price, with the plan then issuing new options back to the participant equal to the total shares surrendered to pay for the exercise price.

 

 

Director compensation limit . The 2017 Omnibus Plan provides for a $400,000 maximum limit on outside director compensation (both cash and equity awards) for any board compensation year, which runs between the dates of each annual stockholders’ meeting. (As previously noted under “Director Compensation” beginning on page 16, our current outside director compensation program provides for a $75,000 annual cash retainer and a $100,000 annual RSU grant.)

 

 

No liberal “change of control” definition. The 2017 Omnibus Plan does not contain a “liberal” definition of change of control, e.g ., one in which a change of control is triggered upon an announcement or commencement of a tender or exchange offer for a company’s common stock. Instead, a change of control under the 2017 Omnibus Plan generally includes only a consummated merger or acquisition involving more than 50% of our common stock or a liquidation or dissolution of the Company or other similar corporate transaction.

 

 

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PROPOSAL 2 APPROVE A NEW 2017 OMNIBUS LONG-TERM INCENTIVE PLAN

 

 

No “single trigger” vesting on a change of control where awards are assumed. The 2017 Omnibus Plan does not accelerate vesting of unvested awards upon a change of control unless the successor/acquirer does not honor, assume or substitute predecessor-company awards with successor/acquirer-company awards equal in value to awards outstanding at the time of the change in control. If the successor/acquirer honors, assumes or substitutes the awards, then accelerated vesting occurs only upon involuntary termination without cause or constructive termination within two years after the change of control.

 

 

No dividend equivalents on stock options or unvested awards . The 2017 Omnibus Plan prohibits the payment of dividend equivalents on stock options and SARs. The Plan permits payments of dividends or dividend equivalents on unvested awards only after the vesting of the underlying award.

 

 

Independent committee administration . The 2017 Omnibus Plan is administered by our Compensation Committee, whose members are independent under Nasdaq rules and satisfy the “non-employee director” requirements of Rule 16b-3 of the Exchange Act and the “outside director” requirements of Section 162(m).

Internal Revenue Code Section 162(m)

Section 162(m) places a limit of $1,000,000 on the amount that a publicly-traded company may deduct in any year for compensation paid to its CEO and three other most highly-compensated executive officers (other than the CEO). There is an exception to this limit for certain performance-based compensation if the company’s stockholders approve some of the material terms of the incentive plan under which the awards are to be provided and then re-approve those terms every five years. Those material terms are required to be disclosed to and reapproved by stockholders at least once every five years and consist of (i) the list of performance criteria upon which awards may be based under the incentive plan, (ii) a description of the classes of eligible participants under the incentive plan, and (iii) the annual limit on awards under the incentive plan. We provide summaries of each of these material terms below, and we seek our stockholder approval at this time so that we can qualify our new 2017 Omnibus Plan under Section 162(m). This could potentially increase our tax deductions for these forms of awards and thereby reduce our tax obligations, which would benefit us and our stockholders. We will endeavor to seek stockholder re-approval every five years as and if required in order to maintain the benefit of the Section 162(m) qualification for the 2017 Omnibus Plan.

We recognize that the proposed Tax Cuts and Jobs Act currently under consideration by U.S. Congress would limit

the exemption for performance-based compensation under Section 162(m). We will continue to monitor the progress of that proposed law.

Share reserve and award limits

The 2017 Omnibus Plan would authorize 6,500,000 new shares for grants of equity awards, which would be in addition to the available shares remaining under the 2013 Equity Plan (which was 2,097,846 as of November 20, 2017). In total ( i.e ., counting both the new authorization under the 2017 Omnibus Plan plus the remaining available shares under the 2013 Equity Plan as of November 20, 2017), this would represent approximately 9.5% of our total outstanding shares of common stock as of November 20, 2017.

The new 2017 Omnibus Plan further provides that:

 

 

We may not issue more than 500,000 shares in the form of incentive stock options (ISOs) under the plan, and only employees may receive ISOs.

 

 

Shares issued under the 2017 Omnibus Plan may be authorized shares that may have been previously unissued or reacquired.

 

 

Any shares covered by an award, or portion of an award, that is forfeited, cancelled, expired or otherwise terminated without the issuance of shares will again be available for the grant of awards.

 

 

We can issue replacement awards to employees of companies acquired by us, and those replacement awards do not count against the shares available for grant.

 

 

We may not grant to any individual (i) options, SARs or other awards based solely on the increase in value of our shares of common stock covering more than 1,000,000 shares in any calendar year (subject to the general limitation on awards of ISOs above), (ii) performance shares, shares of performance-based restricted stock, performance-based restricted stock units or performance-based dividend equivalents covering more than 1,000,000 shares in any calendar year, and (iii) performance units or any other performance-based award settled in cash to any participant in any calendar year with a value of more than $3,000,000 per year.

 

 

As we describe above in this section under “Key Features Protecting Stockholder Interests and Promoting Effective Corporate Governance—Director compensation limit,” no non-employee director may receive awards and cash fees for services as a director in excess of $400,000 in value in any calendar year.

 

 

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Administration

If approved by our stockholders, our Compensation Committee will administer the 2017 Omnibus Plan. Our Compensation Committee has the authority to select the persons to whom we make awards, to determine or modify the form, amount, terms, conditions, restrictions, and limitations of awards (including vesting provisions, terms of exercise of an award and expiration dates) and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2017 Omnibus Plan. To the extent permitted by law and the provisions of the 2017 Omnibus Plan, our Compensation Committee may delegate to any officer of the Company authority to administer and interpret procedural aspects of the plan and to grant awards to employees other than executive officers.

Participant Eligibility

We may grant awards under the 2017 Omnibus Plan to individuals who are our then directors, executive officers, employees or service providers. As of the date of this Proxy Statement, we have seven non-employee directors, six executive/Section 16 officers and approximately 1,500 other personnel that are eligible to participate in the 2017 Omnibus Plan. However, as previously noted, we have historically only granted equity to our senior employees. For example, in 2017, we awarded equity to approximately 140 employees with the title “Director” and above, out of our total personnel population (as of the date of the Proxy Statement) of approximately 1,500. This included equity grants to six executive/Section 16 officers and seven non-employee directors. We may however choose to broaden our grant pool in the future to include more junior personnel.

Each director, executive officer, employee and other service provider who participates in the 2017 Omnibus Plan will be considered to be critical to the long-term success of the Company.

Types of Awards

The 2017 Omnibus Plan provides that our Compensation Committee may grant stock options, restricted stock, RSUs, performance stock, performance units, stock appreciation rights (SARs), dividend equivalents, cash incentive (such as our AIP cash bonuses) and other stock-based awards. Each award will be subject to a separate award agreement that indicates the type, terms and conditions of the award. The following is a brief description of the types of equity awards that may be issued under the Omnibus Plan.

 

 

Nonqualified stock options . These awards provide for the right to purchase shares of our common stock at a specified

 

exercise price, which may not be less than fair market value on the date of grant, and usually become exercisable (at the discretion of our Compensation Committee) in one or more installments after the grant date, subject to applicable vesting conditions. Nonqualified stock options may be granted for any term specified by the Compensation Committee, but may not exceed ten years.

 

 

Incentive Stock Options, or ISOs . These awards are subject to certain additional restrictions that do not apply to nonqualified stock options. Among such restrictions, incentive stock options may only be granted to employees, and in the case of an incentive stock option granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and that the incentive stock option must not be exercisable after a period of five years measured from the date of grant. If the aggregate fair market value of the shares subject to the option (as determined on the date of grant) that becomes exercisable during a calendar year exceeds $100,000, then the stock option is treated as a nonqualified stock option to the extent the $100,000 limitation is exceeded.

 

 

Restricted stock . These awards consist of shares of our common stock, which are subject to vesting conditions, as may be determined by the Compensation Committee.

 

 

Restricted Stock Units, or RSUs . These awards represent the right to receive a number of shares, or an amount of cash equal to the value of that number of shares, corresponding to the number of RSUs granted to a participant. RSUs may be subject to vesting conditions as may be determined by the Compensation Committee. Any dividend equivalents with respect to dividends paid in stock will generally be subject to the same restrictions as the underlying award. Unvested RSUs will typically be forfeited on a termination of services to us.

 

 

Performance stock . These awards represent a right to receive a specified number of shares of our common stock after the grant date subject to the achievement of performance-based vesting conditions, as determined by our Compensation Committee. Our Compensation Committee will determine at the time of grant whether a performance award is intended to qualify as performance-based compensation under Section 162(m) at the time of grant.

 

 

Performance units . These awards represent the right to receive a share of our common stock or the equivalent cash value of a share of our common stock, subject to the achievement of performance-based vesting conditions, as determined by our Compensation Committee. As with

 

 

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performance shares, our Compensation Committee will determine at time of grant whether a performance award is intended to qualify as performance-based compensation under Section 162(m) at the time of grant.

 

 

Stock appreciation rights, or SARs . These awards represent the right to a payment, in cash, shares of our common stock, or a combination of cash and shares, equal to the amount by which the market value of a share of our common stock exceeds the exercise price of the SAR. SARs may be granted in tandem with stock options or on their own. Tandem SARs will generally have terms and conditions substantially similar to the options with which they are granted.

 

 

Dividend equivalents . These awards represent the right to receive payments in cash or in stock, based on dividends paid with respect to shares of our common stock. In general, dividend equivalents may be granted in tandem with another award or as freestanding awards at such time and on such terms and conditions as the Compensation Committee determines, provided that no dividend equivalent may be paid on stock options or unvested awards. Dividend equivalents will be forfeited if the holder resigns or is discharged from the employ of the Company or a Subsidiary before the award vests. Currently, the Company does not pay dividends.

 

 

Cash Incentive Awards . These awards are cash-based incentive awards that may be earned based on the achievement of specified performance goals. For example, we may choose to award our AIP cash bonuses under the 2017 Omnibus Plan in order to potentially qualify them as tax-deductible performance-based compensation under Section 162(m). We explain Section 162(m) in further detail above in this section under “Internal Revenue Code Section 162(m).”

Our Compensation Committee may make other equity-based or equity-related awards not otherwise expressly described as types of awards available under the 2017 Omnibus Plan.

Performance Goals and Minimum/Maximum Thresholds

The Compensation Committee may grant awards that a participant may earn in whole or in part based on the attainment of one or more of the following performance goals outlined below for our Company on a consolidated basis or for any of our segments, services lines, businesses, products or geographies or any other category or sub-category of our company that the Compensation Committee deems appropriate:

 

 

Net or operating income (before or after taxes); earnings before taxes, interest, depreciation, and/or amortization (“EBITDA”)

 

EBITDA excluding charges for stock-based compensation, acquisition, integration and corporate realignment expenses, extraordinary professional fees, employee severance, termination and retention benefits, settlement fees and loss-contingency reserves, non-cash GAAP purchase accounting adjustments, restructurings and impairments (“Adjusted EBITDA”)

 

 

Operating leverage

 

 

Adjusted EBITDA growth/sales growth

 

 

Basic or diluted earnings per share or improvement in basic or diluted earnings per share

 

 

Sales (including, but not limited to, total sales, net sales, revenue growth, or sales growth in excess of market growth)

 

 

Net operating profit

 

 

Financial return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue)

 

 

Cash flow measures (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, cash flow return on investment, cash conversion, or pre-tax, pre-interest cash flow/Adjusted EBITDA)

 

 

Productivity ratios (including but not limited to measuring liquidity, profitability or leverage) and synergies achievements

 

 

Share price (including, but not limited to, growth measures and total stockholder return); expense/cost management targets

 

 

Margins (including, but not limited to, operating margin, net income margin, cash margin, gross, net or operating profit margins, EBITDA margins, Adjusted EBITDA margins)

 

 

Operating efficiency

 

 

Market share or market penetration

 

 

Customer targets (including, but not limited to, customer growth or customer satisfaction)

 

 

Working capital targets or improvements

 

 

Economic value added

 

 

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Balance sheet metrics (including, but not limited to, inventory, inventory turns, receivables turnover, net asset turnover, debt reduction, retained earnings, year-end cash, cash conversion cycle, ratio of debt to equity or to EBITDA or Adjusted EBITDA)

 

 

Workforce targets (including but not limited to diversity goals, employee engagement or satisfaction, employee retention, and workplace health and safety goals)

 

 

Implementation, completion or attainment of measurable objectives with respect to research and development, key products or key projects, lines of business, acquisitions and divestitures and strategic plan development and/or implementation

 

 

Comparisons with various stock market indices, peer companies or industry groups or classifications with regard to one or more of these criteria

 

 

Tax savings

 

 

For any period of time in which Section 162(m) is not applicable to the Company and the 2017 Omnibus Plan, or at any time in the case of (i) persons who are not “covered employees” under Section 162(m) or (ii) awards (whether or not to “covered employees”) not intended to qualify as performance-based compensation under Section 162(m), such other criteria as may be determined by the Compensation Committee.

The Compensation Committee may provide for a threshold level of performance below which no shares or compensation will be granted or paid in respect of performance shares or performance units, and a maximum level of performance above which no additional shares or compensation will be granted or paid in respect of performance shares or performance units. When establishing performance goals for a performance period, the Compensation Committee may determine that any or all unusual and/or infrequently occurring or nonrecurring items as determined under U.S. generally accepted accounting principles and as identified in the financial statements, notes to the financial statements or management’s discussion and analysis in the Company’s Annual Report on Form 10-K will be excluded from the determination as to whether the performance goals have been met. Examples of these items include, the charges or costs associated with restructurings of the Company, discontinued operations, extraordinary items, capital gains and losses, dividends, share repurchase, other unusual or non-recurring items, and the cumulative effects of accounting changes. Except in the case of awards to “covered employees” intended to be performance-based compensation under Section 162(m), the Compensation Committee may also

adjust the performance goals for any performance period as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Compensation Committee may determine.

Termination of Service

In general, except as otherwise determined by the Compensation Committee or set forth in the applicable award agreement, in the event the participant’s service terminates for any reason other than “cause,” as defined in the 2017 Omnibus Plan, all unvested awards will be forfeited and all options and stock appreciation rights that are vested and exercisable will remain exercisable until (i) the 180 th calendar day following the termination date, in the case of death, disability or retirement, or (ii) the 90 th calendar day following the termination date in the case of any other termination (or the expiration of the award’s term, whichever is earlier). If exercise of an award is prohibited by law or Company policy, such as insider trading laws, the expiration of an option or SAR may be extended for 30 days beyond the lapse of any such prohibitions.

In the event of termination for “cause,” except as otherwise provided by the Compensation Committee or set forth in the applicable award agreement, all options and SARs, whether vested or unvested, and all other awards that are unvested or unexercisable or otherwise unpaid (or were unvested or unexercisable or unpaid at the time of occurrence of cause) will be forfeited and canceled as of the date of the termination of service.

Change of Control

The 2017 Omnibus Plan generally provides for double-trigger vesting upon a change in control. If outstanding awards are assumed or substituted, accelerated vesting would occur only upon involuntary termination without cause or constructive termination within two years after the change in control.

If the outstanding awards are not assumed or substituted by the acquiring entity or successor, then (a) each unvested option or SAR shall b