DEF 14A

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

 

 

 

Filed by the Registrant

    

Filed by a Party other than the Registrant

    

Check the appropriate box:

 

   

Preliminary proxy statement

 

   

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

   

Definitive proxy statement

 

   

Definitive additional materials

 

   

Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

Global Eagle Entertainment Inc.

Payment of filing fee (Check the appropriate box):

 

   

No fee required.

 

   

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

  (1)

Title of each class of securities to which transaction applies:

 

 

 

  (2)

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  (3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

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Fee paid previously with preliminary materials.

 

   

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

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  (4)

Date filed:

 

 

 

 


LOGO

 

Notice of 2018 Annual Meeting of Stockholders and Proxy Statement


 

 

   LOGO     

 

      Global Eagle Entertainment Inc.

      6100 Center Drive, Suite 1020

      Los Angeles, California 90045

 

  

 

April 27, 2018

 

Dear Fellow Stockholders:

 

We cordially invite you to attend the 2018 Annual Meeting of Stockholders of Global Eagle Entertainment Inc. on Monday, June 25, 2018, at 12:00 p.m. (Pacific Time) at 6100 Center Drive, Third Floor, 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 2018 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 2018 Annual Meeting of Stockholders and Proxy Statement, please promptly submit your proxy or voting instructions.

 

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

 

Sincerely,

 

 

LOGO

Josh Marks

Chief Executive Officer and Director

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


LOGO

Notice of 2018 Annual Meeting of Stockholders

June 25, 2018

12:00 p.m. (Pacific Time)

The 2018 Annual Meeting of Stockholders of Global Eagle Entertainment Inc. (the “Annual Meeting”) will be held on June 25, 2018 at 12:00 p.m. (Pacific Time) at 6100 Center Drive, Third Floor, Los Angeles, California for the following purposes:

 

AGENDA:

 

  1. Elect Stephen Hasker, Jeff Leddy and Josh Marks as Class I members of our Board of Directors;  

 

  2. Approve an amendment to our 2017 Omnibus Long-Term Incentive Plan to increase the number of shares available for grant thereunder by two million shares;  

 

  3. Approve (on an advisory basis) the compensation of our named executive officers for 2017;  

 

  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, 2018; 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 April 26, 2018 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 “Other Matters—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 “Other Matters—Electronic Access to Proxy Statement and Annual Report” on page 71 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

April 27, 2018

HOW DO I VOTE?

 

LOGO   LOGO   LOGO   LOGO

INTERNET

Visit the website

listed on your proxy card

 

BY PHONE

Call the telephone number

on your proxy card

 

BY MAIL

Sign, date and return your proxy card
in the enclosed envelope

 

IN PERSON

Attend the Annual Meeting

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE 2018 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 25, 2018

This Notice of 2018 Annual Meeting and Proxy Statement and our 2017 Annual Report are available

on our website at www.globaleagle.com under “Investors—Financial Info.”


TABLE OF CONTENTS

 

INTRODUCTORY INFORMATION

 

    

 

1

 

 

 

PROPOSAL 1

 

 

Elect Class I Director Nominees (Stephen Hasker, Jeff Leddy and Josh Marks)

 

    

 

4

 

 

 

DIRECTORS AND EXECUTIVE OFFICERS

 

    

 

5

 

 

 

Directors

 

    

 

5

 

 

 

Executive Officers

 

    

 

9

 

 

 

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

    

 

11

 

 

 

EXECUTIVE COMPENSATION

 

    

 

20

 

 

 

Compensation Discussion and Analysis

 

    

 

20

 

 

 

Executive Compensation Tables

 

    

 

34

 

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

    

 

46

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

    

 

49

 

 

 

CEO PAY RATIO DISCLOSURE

 

    

 

50

 

 

 

PROPOSAL 2

 

 

Approve an Amendment to the 2017 Omnibus Long-Term Incentive Plan

 

    

 

51

 

 

 

PROPOSAL 3

 

 

Approve (on an Advisory Basis) Our Compensation to Our Named Executive Officers for 2017

 

    

 

58

 

 

 

PROPOSAL 4

 

 

Ratify (on an Advisory Basis) the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2018

 

    

 

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

 

    

 

71

 

 

 

Electronic Access to Proxy Statement and Annual Report

 

    

 

71

 

 

 

ANNEX A

 

  

 

 

 

 

A-1

 

 

 

 

Explanation of Non-GAAP Measure

 

    

 

A-1

 

 

 

ANNEX B

 

    

 

B-1

 

 

 

Proposed Amendment to the Global Eagle Entertainment Inc. 2017 Omnibus Long-Term Incentive Plan

 

    

 

B-1

 

 

 

 


PROXY STATEMENT

FOR THE 2018 ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 25, 2018

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 April 26, 2018 in connection with the solicitation by our Board of Directors (“Board”) of proxies for our 2018 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 6100 Center Drive, Third Floor, Los Angeles, California on Monday, June 25, 2018, at 12:00 p.m. (Pacific Time), or at any and all adjournments or postponements thereof, for the purposes stated in the Notice of 2018 Annual Meeting of Stockholders. This Proxy Statement and the enclosed form of proxy is being sent to our stockholders on or about May 9, 2018.

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, Third Floor, Los Angeles, California on Monday, June 25, 2018, at 12:00 p.m. (Pacific Time). We discuss how to vote in person at the Annual Meeting below under “Other Matters—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 April 26, 2018 (which is the record date for the Annual Meeting) will be entitled to vote at the Annual Meeting. On this record date, there were 90,936,719 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. We will make this list available 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.

Stockholders of Record: Shares Registered in Your Name

If at the close of business on April 26, 2018 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 Owners: Shares Registered in the Name of a Broker or Bank

If at the close of business on April 26, 2018 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 a 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.

 

LOGO  

     2018 Proxy Statement

 

 

    1

 


INTRODUCTORY INFORMATION

 

What am I voting on?

The matters scheduled for a vote are to:

 

1. Elect Stephen Hasker, Jeff Leddy and Josh Marks as Class I members of our Board (each to serve for a three-year term);

 

2. Approve an amendment (the “Amendment”) to our 2017 Omnibus Long-Term Incentive Plan (the “2017 Omnibus Plan”);

 

3. Approve (on an advisory basis) the compensation of our named executive officers for 2017, 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, 2018.

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 Stephen Hasker, Jeff Leddy and Josh Marks as Class I members of our Board (each to serve for a three-year term) (see Proposal 1);

 

  FOR the approval of the Amendment to the 2017 Omnibus Plan (see Proposal 2);

 

  FOR the approval (on an advisory basis) of the compensation of our named executive officers for 2017 (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, 2018 (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 April 26, 2018.

How many votes are needed to approve each proposal?

 

  For Proposal 1 (the election of our Class I director nominees), the three 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 the Amendment to the 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 2017) 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.

 

2    

 

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        2018 Proxy Statement

 


INTRODUCTORY INFORMATION

 

 

  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, 2018) 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—What are ‘broker non-votes’?” on page 70.) The outcome of this vote is advisory only, and will not be binding on us.

 

LOGO  

     2018 Proxy Statement

 

 

    3

 


PROPOSAL 1  ELECT CLASS I DIRECTOR NOMINEES

(STEPHEN HASKER, JEFF LEDDY AND JOSH MARKS)

Our Board currently consists of three classes (Classes I, II and III). Our stockholders elect one class of directors 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 I director nominees (Stephen Hasker, Jeff Leddy and Josh Marks), all of whom are incumbent directors. If elected, the Class I directors will each have a term expiring at the 2021 Annual Meeting of Stockholders. We set forth below on page 5 under “Directors and Executive Officers” information concerning each nominee for director. 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 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 that we proposed.

Board Recommendation

 

LOGO  

OUR BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF STEPHEN HASKER, JEFF LEDDY AND JOSH MARKS AS CLASS I MEMBERS OF OUR BOARD AS OUTLINED IN THIS PROPOSAL 1.

 

4    

 

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     2018 Proxy Statement

 


DIRECTORS AND EXECUTIVE OFFICERS

Directors

 

 

Name

 

    

Class I

(Term Expires
at Upcoming
2018 Annual
Meeting)

 

    

Class II

(Term
Expires at
2019 Annual
Meeting)

 

    

Class III

(Term
Expires at
2020 Annual
Meeting)

 

 

Jeff Leddy, Board Chair

 

     X

 

         

 

Edward L. Shapiro, Lead Independent Director

 

          X

 

    

 

Jeffrey E. Epstein*

 

     X

 

         

 

Stephen Hasker

 

     X

 

         

 

Josh Marks

 

     X

 

         

 

Robert W. Reding

 

               X

 

 

Jeff Sagansky

 

          X

 

    

 

Harry E. Sloan

 

          X

 

    

 

Eric Sondag

 

               X

 

 

Ronald Steger

 

               X

 

 

Eric Zinterhofer

 

                   X

 

 

Total directors in Class

 

     4

 

     3

 

     4

 

 

* Mr. Epstein has served on our Board since February 2013. He will not stand for re-election and will retire from our Board at the expiration of his current term at the Annual Meeting. We are grateful for his many years of service to our company.

CLASS I DIRECTORS

Terms Expiring (and nominated for re-election) at the 2018 Annual Meeting of Stockholders

 

   

 

        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 served on the board of directors of Appen Limited (ASX: APX) since April 2015, where he is a member of its Nomination and Remuneration Committee. He has been Chief Executive Officer of CAA Global since January 2018. He was previously the Global President and Chief Operating Officer of Nielsen Holdings PLC (NYSE: NLSN) from December 2015 to December 2017, and prior to that served as Nielsen’s President, Global Products from November 2009 to January 2014. 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 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 operational experience as Chief Executive Officer of CAA Global and as a public company executive at Nielsen N.V., and his overall experience with media and entertainment businesses.

 

   

 

           Jeff Leddy            

 

Age: 63

 

Director Since:

February 2013

 

Executive Chairman of the Company and Chairman of the Board Since:

April 2018

 

Board Committees:

None

 

  Jeff Leddy has been Executive Chairman of our Company and Chairman of our Board of Directors since April 2018 and has served as a member of our Board of Directors since February 2013. He served as our Chief Executive Officer from February 2017 to March 2018. Mr. Leddy 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 a 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.

 

LOGO  

     2018 Proxy Statement

 

 

    5

 


DIRECTORS AND EXECUTIVE OFFICERS

 

 

   

 

           Josh Marks            

 

Age: 41

 

Director Since:

April 2018

 

Board Committees:

None

 

  Josh Marks joined our company in August 2015 and has served as our Chief Executive Officer and as a member of our Board of Directors since April 2018. He previously served as our Executive Vice President, Connectivity from April 2017 to March 2018, as our Executive Vice President, Aviation Connectivity from July 2016 to March 2017 and 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 Director of Marks Systems, Inc. (d/b/a masFlight), an aviation big-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 Director 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 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 and an MBA from Harvard University.

 

 

We believe Mr. Marks is qualified to serve on our Board due to his broad aviation and transportation experience and extensive experience with companies in the technology and analytics industries.

CLASS II DIRECTORS

Terms Expiring at the 2019 Annual Meeting

 

   

 

           Jeff Sagansky            

 

Age: 66

 

Director Since:

May 2011

 

Board Committees:

Audit, Compensation

 

  Jeff Sagansky has been a member of our Board since January 2013. (He also served as our President from 2011—when we were formed as a special purpose acquisition company—until January 2013—when we consummated our business combination with Row 44 and Advanced Inflight Alliance AG.) Mr. Sagansky has served on the board of directors of Platinum Eagle Acquisition Corp. (Nasdaq: EAGL) since December 2017 and on the board of directors of WillScot Corporation (Nasdaq: WSC) since November 2017, where he is a member of that board’s Nominating and Corporate Governance Committee and its Compensation Committee. He served on the board of directors of Scripps Networks Interactive, Inc. (Nasdaq: SNI) from June 2008 to April 2018, and was a member of that board's Audit Committee and its Corporate Governance Committee; Videocon d2h Limited (Nasdaq: VDTH) from May 2016 to April 2018, and was a member of that board's Audit Committee; and Starz Entertainment (Nasdaq: STRZA, STRZB) from January 2013 until December 2016, and was a member of that board's Audit Committee and its Compensation Committee. Mr. Sagansky

was also previously President of Silver Eagle Acquisition Corp. (a special purpose acquisition company) from April 2013 until its business combination with Videocon in March 2015; President, CEO and a member of the board of directors of Double Eagle Acquisition Corp. (a special purpose acquisition company) from June 2015 until its business combination with WillScot in November 2017; Chairman of RHI Entertainment, Inc. from 2009 to 2011; and Co-Chairman and interim chief executive officer of Peace Arch Entertainment Group, Inc. from 2007 to 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.

 

6    

 

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     2018 Proxy Statement

 


DIRECTORS AND EXECUTIVE OFFICERS

 

 

   

 

        Edward L. Shapiro        

 

Age: 53

 

Director Since:

February 2013

 

Lead Independent Director Since:

April 2018

 

Board Committee:

Governance

 

  Edward L. Shapiro has been our Lead Independent Director since April 2018 and a member of our Board since February 2013. He served as our Board Chair from February 2013 through March 2018. 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.

 

   

 

        Harry E. Sloan        

 

Age: 68

 

Director Since:

May 2011

 

Board Committee:

Governance (Chair)

 

  Harry E. Sloan has been our Board since 2011. (He also served as our Chairman and Chief Executive Officer from 2011—when we were formed as a special purpose acquisition company—until January 2013—when we consummated our business combination with Row 44 and Advanced Inflight Alliance AG.) Mr. Sloan served on the board of directors of Videocon d2h Limited (Nasdaq: VDTH) from May 2016 to April 2018, where he was a member of that board’s Nomination, Remuneration and Compensation Committee. Mr. Sloan was also previously Chairman and Chief Executive Officer of Silver Eagle Acquisition Corp. (a special purpose acquisition company) from April 2013 through its business combination with Videocon in March 2015. From November 2010 to December 2013, Mr. Sloan served on the board of directors of Promotora De Informaciones, S.A. (NYSE: PRIS) (also known as PRISA). From 2005 to 2009, Mr. Sloan served as Chairman and Chief Executive Officer of Metro-Goldwyn-Mayer, Inc., and was its Chairman until 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 Board of Visitors of the

1990, and he served as its Executive Chairman until 2005. Mr. Sloan currently serves on the Board of Visitors of the UCLA Anderson School of Management and on the Executive Board of UCLA School of Theater, Film and Television. Mr. Sloan has a BA 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.

CLASS III DIRECTORS

Terms expiring at the 2020 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 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 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 an 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 30 years of experience in the airline industry.

 

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DIRECTORS AND EXECUTIVE OFFICERS

 

 

   

 

           Eric Sondag            

 

Age: 42

 

Director Since:

April 2018

 

Board Committees:

Audit, Governance

 

  Eric Sondag has been a member of our Board since March 2018. He is a Partner at Searchlight Capital Partners, a private equity firm, where he has worked since 2011. Mr. Sondag has served on the board of directors of Gymboree Group Inc. (OTCMKTS: GMBE) since October 2017 and on the board of directors of Cengage Learning Holdings II Inc. (OTCMKTS: CNGO) since April 2014. Mr. Sondag also serves on the board of advisors for Georgetown University’s McDonough School of Business. Prior to joining Searchlight Capital Partners, Mr. Sondag worked at GTCR Golder Rauner in Chicago in various capacities. Mr. Sondag has a BS from Georgetown University and has completed the Executive Management Program at INSEAD in Singapore.

 

 

We believe Mr. Sondag is qualified to serve on our Board due to his extensive investment experience in the media and technology industries.

 

   

 

           Ronald Steger            

 

Age: 64

 

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 will also join the board of directors of Great Lakes Dredge & Dock Corporation (Nasdaq: GLDD) in May 2018. 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.

 

   

 

           Eric Zinterhofer            

 

Age: 46

 

Director Since:

April 2018

 

Board Committee:

Compensation

 

  Eric Zinterhofer has been a member of our Board since March 2018. He is a Founding Partner at Searchlight Capital Partners, a private equity firm, where he has worked since 2010. Mr. Zinterhofer has served on the board of directors of Hemisphere Media Group, Inc. (Nasdaq: HMTV) since October 2016, and is a member of that board’s Executive Committee; on the board of directors of Charter Communications, Inc. (Nasdaq: CHTR) since November 2009, and is a member of that board’s Compensation and Benefits Committee, its Finance Committee and its Nominating and Governance Committee; on the board of directors of Liberty Latin America Ltd. (Nasdaq: LILA) since December 2017; and on the board of directors of Roots Corporation (TSE: ROOT) since December 2015. He previously served on the board of directors of Dish TV India Ltd. (NSE: DISHTV) from December 2009 to March 2017, and on the board of directors of General Communication Inc. (FRA: CG1) from March 2015 to March 2018.

 

Prior to co-founding Searchlight Capital Partners, Mr. Zinterhofer was a senior partner at Apollo Global Management in New York. Mr. Zinterhofer has a BA from the University of Pennsylvania and an MBA from Harvard Business School.

 

We believe Mr. Zinterhofer is qualified to serve on our Board due to his extensive investment experience in the media and technology industries and as a director of a large telecommunications company.

 

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DIRECTORS AND EXECUTIVE OFFICERS

 

Executive Officers

Our current executive officers are as follows:

 

 

Name

 

  

Age

 

    

Title

 

 

Jeff Leddy

 

   63

 

    

Executive Chairman of the Company

 

 

Josh Marks

 

   41

 

    

Chief Executive Officer

 

 

Paul Rainey

 

   42

 

    

Executive Vice President and Chief Financial Officer

 

 

Walé Adepoju

 

   46

 

    

Executive Vice President and Chief Strategy Officer

 

 

Stephen Ballas

 

   42

 

    

Executive Vice President, General Counsel and Corporate Secretary

 

 

Per Norén

 

   53

 

    

Executive Vice President and Chief Commercial Officer

 

 

Sarlina See

 

   47

 

    

Senior Vice President and Chief Accounting Officer

 

The following is biographical information for our current executive officers (other than our Company’s Executive Chairman Jeff Leddy and our CEO Josh Marks, who are members of our Board and whose biographical information we have provided under “Directors and Executive Officers—Directors” on page 5).

Paul Rainey

Paul Rainey joined our company as 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.

Walé Adepoju

Walé Adepoju joined our company in July 2014 and has been our Executive Vice President and Chief Strategy Officer since April 2018. He previously served as our Executive Vice President, Media & Content from September 2016 to March 2018 and as our Chief Commercial Officer from May 2014 through 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 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 our 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 that, 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

 

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DIRECTORS AND EXECUTIVE OFFICERS

 

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.

Per Norén

Per Norén joined our company in March 2017 and has served as our Executive Vice President and Chief Commercial Officer since April 2018. He previously served as our Senior Vice President, Aviation Connectivity from March 2017 to March 2018. From August 2007 to February 2017, Mr. Norén held several senior positions at The Boeing Company, including as its Chief Customer Officer for Digital Aviation from January 2016 to February 2017, as its Vice President, Digital Solutions from January 2013 to December 2015 and as its Vice President, Information Services from January 2010 to December 2012. He was previously President and Chief Executive Officer of Carmen Systems, a technology, analytics and software company for the aviation and transportation industries, from 1998 to 2007. Mr. Norén graduated from the Swedish Military Academy and the Gothenburg School of Business, Economics and Law at The University of Gothenburg, Sweden. He also has a degree from the Executive Education Program at Harvard Business School.

Sarlina See

Sarlina See joined our 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 licensed Certified Public Accountant in the State of Idaho.

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Director Independence

Pursuant to Nasdaq Listing Rules, our Board must affirmatively determine that a majority of the members of our Board qualify as “independent.” 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 affirmatively determined that each of our current directors (other than Messrs. Leddy and Marks, who are our Executive Chairman and our CEO, respectively) meets the standards of independence under applicable Nasdaq Listing Rules. In making this determination, our Board found all of our directors (other than Messrs. Leddy and Marks) 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 of its Compensation Committee is independent under Nasdaq Listing Rules applicable to service on those committees.

Board Leadership Structure

The Board annually elects a director to be chairperson of the Board. The Board Chair may or may not be an officer of the Company. The Board believes that it should decide whether to have an officer also serve as the Board Chair based on its business judgment after considering relevant factors, including the specific needs of the business and what is in the best interests of the Company’s stockholders.

If the individual elected as Board Chair is an officer of the Company, or if the Board Chair is not independent, the Board believes that a Lead Independent Director should be appointed to help ensure robust independent leadership on the Board. When this is the case, the independent directors elect the Lead Independent Director. The Board will consider rotating the Lead Independent Director, if any, at such intervals as the Board determines based on the recommendation of its Corporate Governance & Nominating Committee (the “Governance Committee”).

The Lead Independent Director will preside at any meeting of the Board at which the Board Chair is not present, including at executive sessions for independent directors, at meetings or portions of meetings on topics where the Board Chair or the Board raises a possible conflict of interest involving the Board Chair, and when requested by the Board Chair. The Lead Independent Director may call meetings of the independent directors or of the Board, at such time and place as he or she determines. In addition, the Lead Independent Director will facilitate communication between the Board Chair and the independent directors; will review and have the opportunity to provide input on meeting agendas and meeting schedules for the Board; and will perform such other duties as the Governance Committee may from time to time establish.

Currently, Mr. Leddy (who is our Company’s Executive Chairman) also serves as our Board Chair, and Mr. Shapiro serves as our Lead Independent Director.

Meetings of the Board

Our Board met six times during 2017. During 2017, 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. Hasker, Sloan and Sagansky) attended our 2017 Annual Meeting of Stockholders.

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 Lead Independent Director will generally preside over executive sessions of our independent directors.

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

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.” We adopted our Code of Ethics to promote honest and ethical conduct and compliance with applicable governmental laws, rules and regulations.

Corporate Governance

We are committed to maintaining the highest standards of business conduct and corporate governance, as set forth in the following table and description of key governance policies.

GOVERNANCE HIGHLIGHTS

 

   

•  Eleven directors, all of whom are independent (other than our Board Chair and Company’s Executive Chairman Jeff Leddy and our CEO Josh Marks)

 

  

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

 

•  Appointment of a Lead Independent Director

 

  

•  Annual “say on pay” votes, with most recent favorable “say on pay” vote over 99%

 

•  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

 

  

•  Majority voting requirement for directors in uncontested elections

•  No “over-boarding” by our directors on other public-company boards (i.e., serve on more than five public company boards)

 

 

  

•  Currently no poison pill takeover defense plans

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 Governance Committee.

 

  Related Party Transactions Policy. Our Audit Committee has a related party transactions policy whereby our Audit Committee must 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 Policy and Transactions—Related Party Transactions Policy” beginning on page 64.

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

 

  Whistleblower Policy and Procedures. Our Whistleblower Policy and Procedures 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 statements 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.

 

  Conflicts of Interest Policy. Our Governance Committee has a Conflicts of Interest Policy to address actual, potential and apparent conflicts of interest that may arise in connection with personal and professional relationships. Under this policy, directors and executive officers must disclose all conflicts of interest to the Board, which must approve any “conflicted” transaction.

 

  Equity Award Policy. Our Board has an Equity Award Policy to ensure that equity awards issued under our equity incentive plans are generally made on a regular schedule 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 Spring, and our performance-based restricted stock units are generally issued every year at the Compensation Committee meeting during the Fall. In addition, the pricing date for equity grants must generally 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.

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

Information Regarding Committees of the Board of Directors

Our Board has an Audit Committee, a Compensation Committee and a Corporate Governance & Nominating Committee. We have posted the charter for each of our Board committees on our website at www.globaleagle.com under “Investors—Governance.” The following table provides the current membership (as of April 2018) and the total number of meetings during 2017 for each of these Board committees.

 

 

Name

 

    

Audit

 

    

Compensation

 

    

Corporate
Governance &
Nominating

 

 

Jeff Leddy, Board Chair

 

              

 

Edward L. Shapiro, Lead Independent Director

 

               X  

 

 

Jeffrey E. Epstein(1)

 

               X  

 

 

Stephen Hasker

 

     X  

 

     X  

 

    

 

Josh Marks

 

              

 

Robert W. Reding

 

          X*

 

    

 

Jeff Sagansky

 

     X  

 

     X  

 

    

 

Harry E. Sloan

 

               X*

 

 

Eric Sondag

 

     X  

 

          X  

 

 

Ronald Steger

 

     X*

 

         

 

Eric Zinterhofer

 

            X  

 

      

 

Total meetings in 2017

 

     9  

 

     5  

 

     3  

 

 

* Committee Chair

 

(1)  Mr. Epstein will retire from our Board at the expiration of his current Class I term at the Annual Meeting.

Role of the Board and Its Committees in Risk Oversight

 

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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;

 

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Full Board 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. Audit Committee Our Audit Committee has the responsibility to consider and discuss our enterprise 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. Compensation Committee 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. Governance Committee 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.


BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

 

  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 and quarterly reviews;

 

  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 enterprise risk exposures and the manner in which those risks are being monitored and controlled;

 

  reviewing and approving all related party transactions;

 

  understanding the impact of our operating and control environment on our financial reporting;

 

  overseeing our implementation of new GAAP standards and use of non-GAAP financial measures; and

 

  reviewing any material charges under GAAP and the facts and circumstances supporting the relevant analysis.

Compensation Committee—Our Compensation Committee is responsible for overseeing matters relating to the compensation of our Company’s Executive Chairman, CEO and other executive officers as well as the administration of our incentive-based plans for those officers and of 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 Company’s Executive Chairman and our CEO (who are 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 Compensation 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 2017, 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 under “Directors and Executive Officers—Directors” on page 5, and is a party to a registration rights agreement described under “Related Party Transactions Policy and Transcations—Related Party Transactions” beginning on page 64. Jeff Leddy, who served as our CEO from February 2017 to March 2018 and who now serves as our Company’s Executive Chairman, served on our Compensation Committee in early 2017, but resigned from that role upon becoming our CEO.

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

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;

 

  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; (x) maritime, government and digital media experience; and (xi) 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 that our stockholders propose as potential director nominees. We did not make any material changes in 2017 or in 2018 to the procedures by which stockholders may recommend nominees to our Board.

Majority Voting to Elect Directors

Our by-laws have 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

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

“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 70.

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.

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 the 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 the stockholder beneficially owns on the date of the communication.

Our Corporate Secretary will review the communication to determine whether it is appropriate for presentation to the Board or the 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 the director, on a periodic basis.

Director Compensation

Members of our Board who are not employees (“outside directors”) are provided compensation for their service. We have an Outside Director Compensation Program that is intended to compensate fairly each outside director with cash and equity compensation for the time and effort required to serve as a member of our Board. Our Compensation Committee periodically evaluates market data provided by its independent compensation consultant, Frederic W. Cook & Co., Inc., (“FW Cook”) to determine the appropriate total compensation of our outside directors and structure of the compensation program. In addition, our equity incentive plan places an annual limit of $400,000 on cash and equity compensation that we may provide to our outside directors.

In April 2017, based on benchmarking information that FW Cook provided, our Compensation Committee determined that our total outside director compensation was near the 25th percentile of our comparator group. We discuss our comparator group under “Executive Compensation—Compensation Benchmarking” on page 23.

Annual Cash Retainer and Cash Chair Fees. Each outside director receives a cash retainer of $75,000 per calendar year for his or her service on the Board. In addition, if our Board Chair is a non-management director, he or she 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. 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. For their service from January 2017 to June 2017, each outside director received an equity grant (with a total grant date value of $50,000), half the value of which consisted of RSUs and the other half of which consisted of non-qualified stock options. In June 2017, however, our Compensation Committee

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

determined that all future equity compensation for Board service should consist only of RSUs, to be granted to each director on the date of each annual stockholders’ meeting to align with an outside director’s year of service. These RSUs vest on the earlier of the one-year anniversary of the grant date and the next annual stockholders’ meeting. Accordingly, each of our outside directors received a $100,000 equity grant in June 2017 with these vesting terms for service through the 2018 Annual Meeting.

The table below provides summary information concerning compensation paid or accrued by us during 2017 to or on behalf of our then outside directors for services rendered as directors during 2017.

 

 

Name of Outside Director

 

  

Cash
Compensation
($)

 

   

Stock

Option
Awards

($)

 

    

RSU
Awards
(5)
($)

 

    

Other
Compensation
($)

 

    

Total

($)

 

 

 

Jeff Leddy(1)

 

    

 

12,250

 

 

 

   

 

7,044

 

 

 

    

 

7,044

 

 

 

    

 

 

 

 

    

 

26,338

 

 

 

 

Robert W. Reding

 

    

 

83,583

 

(2)  

 

   

 

25,000

 

 

 

    

 

125,000

 

 

 

    

 

 

 

 

    

 

233,583

 

 

 

 

Jeffrey E. Epstein

 

    

 

87,292

 

(3)  

 

   

 

25,000

 

 

 

    

 

125,000

 

 

 

    

 

 

 

 

    

 

237,292

 

 

 

 

Harry E. Sloan

 

    

 

75,000

 

 

 

   

 

25,000

 

 

 

    

 

125,000

 

 

 

    

 

 

 

 

    

 

225,000

 

 

 

 

Jeff Sagansky

 

    

 

75,000

 

 

 

   

 

25,000

 

 

 

    

 

125,000

 

 

 

    

 

 

 

 

    

 

225,000

 

 

 

 

Edward L. Shapiro

 

    

 

100,000

 

 

 

   

 

25,000

 

 

 

    

 

125,000

 

 

 

    

 

 

 

 

    

 

250,000

 

 

 

 

Stephen Hasker

 

    

 

75,000

 

 

 

   

 

25,000

 

 

 

    

 

125,000

 

 

 

    

 

 

 

 

    

 

225,000

 

 

 

 

Ron Steger(4)

 

    

 

66,458

 

 

 

   

 

10,359

 

 

 

    

 

110,359

 

 

 

    

 

 

 

 

    

 

187,176

 

 

 

 

* The compensation listed in the table above appears higher than we describe above for the Outside Director Compensation Program because our outside directors received “stub” equity grants ($25,000 in stock options and $25,000 in RSUs) for service on our Board from January through June 2017 in order to align with our new “annual meeting to annual meeting” director equity grant cycle implemented in mid-2017. These “stub” equity grants vested in full in June 2017.

 

#  David Davis, our former CEO, was also a director during 2017, but he was not an outside director during 2017 and therefore did not receive any additional compensation for his service as a director. As such, he is not listed in the table above. Eric Sondag and Eric Zinterhofer joined our Board in 2018 and neither served as one of our directors nor received any compensation from us during 2017. Our CEO Josh Marks also joined our Board in 2018, but he is not an outside director and as such does not receive any additional compensation for his service as a director.

 

(1)  Jeff Leddy was an outside director until February 2017 (when he became CEO) and so received compensation for board service and as Chair of our Compensation Committee during early 2017. He became our CEO in February 2017 and ceased receiving compensation for his director service at that time. Mr. Leddy now serves as our Company’s Executive Chairman and so is not an outside director, and as such does not currently receive any additional compensation for his service as a director.

 

(2)  In connection with Mr. Leddy’s appointment as the Company’s CEO in February 2017, the Board reconstituted its committees and appointed Mr. Reding as Chair of the Compensation Committee at that time. Mr. Reding received a prorated fee (approximately $8,583) for his 2017 service as the Chair of our Compensation Committee.

 

(3)  In June 2017, Mr. Epstein resigned from our Audit Committee. Mr. Epstein received a prorated fee (approximately $12,292) for his 2017 service as the Chair of our Audit Committee until his resignation from that Committee. Mr. Epstein will retire from our Board at the expiration of his current Class I term of the Annual Meeting.

 

(4)  Mr. Steger joined our Board in April 2017 and received prorated cash and equity compensation for his director service during 2017. In addition, Mr. Steger received a prorated fee for service (approximately $12,708) for his service as Chair of the Audit Committee from June 2017 through the end of 2017.

 

(5)  The RSUs granted to directors in 2017 for service between July 2017 and June 2018 cliff vest on the earlier of June 30, 2018 and the date of our 2018 Annual Meeting.

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

 

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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 any exercise price upon exercise of stock options, upon the vesting of restricted stock or upon the settlement of vested RSUs. We count toward compliance with the Guidelines any shares that 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. We do not count toward Guideline compliance (i) any 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 or paid to an outside director’s employer pursuant to that 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 “Executive Compensation—Additional Elements of Our Compensation Program” beginning on page 30.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

For the 2017 fiscal year, our “named executive officers” (“NEOs”) (as defined under SEC rules) were the following executive officers:

 

 

Name

 

 

Current Title (as of April 2018)

Jeff Leddy

  Executive Chairman (former Chief Executive Officer)

David M. Davis

  Former Chief Executive Officer

Paul Rainey

  Executive Vice President and Chief Financial Officer

Thomas Severson

  Former Chief Financial Officer

Josh Marks

  Chief Executive Officer (former Executive Vice President, Connectivity)

Walé Adepoju

  Executive Vice President and Chief Strategy Officer (former Executive Vice President, Media & Content)

Stephen Ballas

  Executive Vice President, General Counsel and Corporate Secretary

With respect to the foregoing NEOs:

 

  CEO Changes.    Mr. Davis separated from the Company effective February 20, 2017. Jeff Leddy became CEO on February 21, 2017 and served as CEO through March 31, 2018. On April 1, 2018, Mr. Leddy became our Company’s Executive Chairman, and Mr. Marks became our CEO.

 

  CFO Changes.    Mr. Severson separated from the Company effective February 20, 2017. Mr. Rainey joined as our CFO on April 3, 2017.

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 2017, we continued to invest significant time and effort in growing our businesses, continuing to add to our capabilities and further defining our business strategy. Key accomplishments in 2017 included:

 

  We refinanced 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 access to capital with a lower effective interest rate.

 

  We appointed Jeff Leddy as our CEO. He provided stability to the Company by navigating us through executive turnover and guiding us through a difficult 2016 audit process. As a result, he has positioned us for long-term growth.

 

  We hired Paul Rainey as our CFO. Mr. Rainey was an important addition to our executive team because he has significant experience in our industries and a strong financial background, and he has begun the process of transforming our finance and accounting organization.

 

  We started the process to explore capital-raising transactions with value-add investors. This capital-raising effort ultimately resulted in a $150 million investment by Searchlight Capital Partners in early 2018. The investment of debt capital strengthened our liquidity so that we can fund and support our growth initiatives. In addition, we plan to leverage Searchlight’s wealth of technology, media, communications and operational expertise.

Important Compensation Decisions for 2017

2017 Annual Cash Incentive (“AIP”) Compensation

We believe that the compensation of our executive officers and employees should tie closely to the performance of our company so that their interests are aligned with those of our stockholders. Despite management achieving several strategic

 

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accomplishments in 2017 that we believe positioned us well for the future, our Compensation Committee determined in February 2018 that our expected 2017 financial results fell short of our internal targets for the year. As such, our Compensation Committee determined that none of our NEOs would receive an Annual Incentive Plan (“AIP”) cash bonus for 2017.

Replacement of our CEO and CFO in 2017

David M. Davis (former CEO)

On February 17, 2017, Mr. Davis’s employment as our CEO 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. However, our Compensation Committee subsequently determined 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 Compensation Committee also agreed to reimburse Mr. Davis for up to $10,000 for his outside legal expenses incurred in negotiating his separation from 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 his consulting period. Mr. Davis ceased providing consulting services to us in May 2017.

We also agreed to provide Mr. Davis up to one year following the end of that consulting period (i.e., until May 2018) to exercise any stock options vested through the completion of his consulting period.

Tom Severson (former CFO)

On February 20, 2017, Mr. Severson’s employment as our CFO terminated. Because we treated the separation as an involuntary termination without cause, Mr. Severson received severance in the form of continued payments of his salary for 12 months following his separation. (This severance amount equaled his contractual severance entitlement under his employment agreement.) 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. 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.

2017 Retention Bonuses

In April 2017, the Compensation Committee approved retention bonuses for some of our executive officers to incentivize them to remain with the Company. As a result, Messrs. Adepoju, Ballas and Marks received retention bonuses of $185,000, $115,000 and $175,000, respectively, payable in three equal installments on June 30, September 30 and December 30, 2017, subject to continuous employment through each date. Messrs. Adepoju, Ballas and Marks all remained continuously employed by the Company through December 30, 2017, and therefore each received the full amount of his retention bonus.

 

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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 CEO 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 equity grants and imposes controls around those grants and around any award made outside of the normal equity grant cycle.

 

   No  “Single Trigger”  Change in Control  Payments

 

  

None of our 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.

 

Executive Compensation Philosophy and Objectives

We operate in highly competitive industries providing media, content, connectivity and data analytics to markets across air, sea and land, 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 our executive compensation philosophy:

 

  to provide a competitive compensation package to attract and retain talented executive officers, who drive success for our Company, our stockholders, our customers and our employees;

 

  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).

 

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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 2017, 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/Section 16 officers. This includes approving the goals, target compensation opportunities and actual payouts for our executive/Section 16 officers under our AIP cash bonus program and long-term incentive program, and the overall design and terms of the compensation programs in which our executive/Section 16 officers participate. Our CEO recommends to the Compensation Committee the compensation packages for all of our executive/Section 16 officers (other than for our Company’s Executive Chairman and our CEO), including base salary changes, 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 historical and projected future performance;

 

  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 Compensation Committee’s independent compensation consultant, FW Cook;

 

  the executive officer’s experience and expertise;

 

  retention needs; and

 

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

Compensation Committee’s Independent Compensation Consultant

FW Cook is our Compensation Committee’s independent compensation consultant. FW Cook reports directly to our Compensation Committee, attends committee meetings and provides advice to the Compensation Committee Chair and the Compensation Committee. FW Cook prepares analyses for the Compensation Committee based on its review of market data, 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 Compensation Committee to solicit input on job scope, performance, retention issues and other factors that it views as relevant. FW Cook also 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.

Compensation Benchmarking

We review and benchmark annually 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.

 

* Adjusted EBITDA is a non-GAAP financial measure. See Annex A for a discussion of how we define Adjusted EBITDA.

 

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EXECUTIVE COMPENSATION

 

Based on recommended changes from FW Cook, for purposes of determining our compensation for our executive officers for 2017, our comparator group included the following companies:

 

Avid Technologies, Inc.    Ixia
Calix Inc.    Netgear Inc.
CSG Systems International, 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.   

This group included 17 then publicly-traded U.S. companies in the technology and media industries. FW Cook then provided a competitive analysis of target pay opportunities and incentive-program design practices based on the comparator companies. We utilized this comparator group and FW Cook’s analysis in preparing 2017 compensation proposals to the Compensation Committee in Spring 2017. Our Compensation Committee considered this benchmarking information in reaching its determinations regarding the compensation of our executive officers for 2017.

In December 2017, based on a review of other technology and media businesses with revenue and enterprise value between $200 million and $2 billion, our Compensation Committee removed Ixia and ShoreTel, Inc. from our comparator group for 2018 compensation benchmarking (because they had been taken private) and removed ViaSat (given its much larger size relative to us). Our Compensation Committee added National CineMedia, Inc. and Shutterstock to the comparator group because they are size-appropriate media-and-content-related businesses. Our new comparator group that our Compensation Committee used for 2018 executive-officer compensation benchmarking was:

 

Avid Technologies, Inc.    Infinera Corporation
Calix Inc.    Iridium Communications Inc.
National CineMedia, Inc.    Netgear Inc.
CSG Systems International, Inc.    Shutterstock, Inc.
Gogo Inc.    Silver Spring Networks, Inc.
GTT Communications, Inc.    Synchronoss Technologies, Inc.
Harmonic, Inc.    TiVo Corporation
IMAX Corporation    Vonage Holdings Corp.

With these changes, the resulting comparator group for 2018 now includes 16 U.S. public companies. When our Compensation Committee determined the comparator group in December 2017, we were positioned slightly above the median by revenue relative to the comparator group, and our enterprise value ranked at the 25th percentile of the comparator group. Our Compensation Committee considered benchmarking information from this comparator group in reaching its determinations regarding the compensation of our executive officers for 2018.

Say-on-Pay Vote Result

At our 2017 Annual Meeting, over 99% of the votes cast on our “say-on-pay” proposal were voted in favor of our compensation paid to our named executive officers for 2016. Our Board and our Compensation Committee reviewed these vote results when evaluating our executive compensation policies and decisions, and our 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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Elements of Executive Compensation

We believe the compensation packages of our NEOs for 2017 were consistent with our compensation objectives, as outlined in the following table. This table sets forth the key elements of the 2017 compensation provided to our NEOs, 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 Incentive Program

 

  

Variable annual cash bonus

  

Motivate and reward executives for achieving annual “Adjusted EBITDA” and/or revenue goals and the achievement of strategic goals at the Company, department and individual level. See “Executive Compensation—Annual Cash Incentive (‘AIP’) Compensation” beginning on page 26.

 

 

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 2017, our Compensation Committee reviewed the comparator-group data as 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 2017 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 2017 total compensation package for (1) Mr. Leddy (our CEO from February 2017 to the end of that year) and (2) the rest of our 2017 NEOs that remain currently employed with us:

 

 

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* The mix of fixed and variable compensation in the charts above is based on our stock price on the date of Compensation Committee approval of the equity awards and not our stock price on December 21, 2017 (which was the date of stockholder approval of our 2017 Omnibus Long-Term Incentive Plan under which those equity awards were issued).

2017 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 and retain 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.

 

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EXECUTIVE COMPENSATION

 

The table below shows the annual base salary rate (as of December 31, 2017) for each of our 2017 NEOs:

 

Name

  

 

Annual
Base Salary
Rate at
December 31,
2017

($)

     Changes to Annual Base Salary Rate (if any) during 2017

Jeff Leddy

     625,000      None. Mr. Leddy commenced employment as our CEO on February 21, 2017 at an annual base salary rate of $625,000 and did not receive any salary adjustment during the remainder of 2017.

David M. Davis

          None. Mr. Davis ceased employment with our company on February 17, 2017.

Paul Rainey

     375,000      Mr. Rainey commenced employment as our CFO on April 3, 2017 at an annual base salary rate of $375,000 and did not receive any salary adjustment during the remainder of 2017.

Thomas Severson

          None. Mr. Severson ceased employment with our company on February 20, 2017.

Josh Marks

     385,000      Increased from $335,000 effective April 1, 2017.

Walé Adepoju

     428,506      Increased from $418,055 effective April 1, 2017.

Stephen Ballas

     350,000      Increased from $335,000 effective April 1, 2017.

Annual Cash Incentive (“AIP”) Compensation

Our Compensation Committee determined in June 2017 that the AIP payouts for our NEOs for 2017 should be structured as follows:

 

  40% of the AIP payout was to be based on achievement against an “Adjusted EBITDA” target,

 

  30% of the AIP payout was to be based on achievement against a consolidated revenue target, 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 strategic objectives identified for each NEO (as described below).

In addition, in June 2017:

 

  Our Compensation Committee determined that in order for the Company to make any payouts under the AIP for 2017, the Company’s actual Adjusted EBITDA must exceed 90% of the target Adjusted EBITDA goal set by the Compensation Committee.

 

  Our Compensation Committee determined that executive officers could earn from 0% to 150% of their target AIP amounts for the 2017 performance year based on actual achievement against the performance targets established for each of the three metrics outlined above.

 

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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 2017 (other than Messrs. Davis and Severson who did not participate in the 2017 AIP given their departure from our company in early 2017), and assumes no proration for mid-year employment start dates during 2017:

 

Name

2017 AIP Bonus Target

(% of Salary)

2017 AIP Bonus Target
($)

Jeff Leddy

  100 %   625,000

Paul Rainey

  75 %   281,250

Josh Marks

  75 %   288,750

Walé Adepoju

  75 %   321,380

Stephen Ballas

  75 %   262,500

The following table sets forth the performance metrics under the AIP for 2017 and the relative weighting of those metrics in determining AIP bonuses for our NEOs for 2017:

 

Performance Metric

   Weighting   Target
(millions) ($)

Adjusted EBITDA

   40%   —*

Consolidated Revenue

   30%   —*

Company and Individual Strategic Goals

   30%   Described below

for each NEO

 

* In February 2018, after considering our Company’s then-expected performance results for 2017, the Compensation Committee determined that our financial performance fell below expectations and as such that our NEOs for 2017 would not receive any AIP cash bonus for the 2017 performance year, irrespective of our Company’s actual 2017 financial performance.

The following table sets forth the strategic/individual goals for each of our NEOs for 2017 (other than Messrs. Davis and Severson who did not participate in the 2017 AIP given their departure from our company in early 2017):

 

Name

   Strategic/Individual Goals

Jeff Leddy

  

•  Develop strategic direction for the Company

•  Structure the company for profitable growth

•  Consolidate operations from previous acquisitions

•  Build global finance and IT leadership team

•  Continue to develop relationships with key stakeholders and customers

Paul Rainey

  

•  Build global finance and accounting leadership team

•  Support leadership to improve liquidity position

•  Develop and implement IT strategy, including unified ERP system

•  Improve and maintain compliance with SEC reporting requirements

•  Improve control environment

Josh Marks

  

•  Retain Connectivity customers and achieve new Connectivity wins across aviation, maritime and land

•  Improve the performance and cost-efficiency of our global satellite network

•  Recruit commercial, operational and engineering leaders and integrate management teams

•  Realize network infrastructure and technology synergies through consolidation of EMC business

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

  

•  Continue development of corporate-governance framework and policies

•  Continue development of Legal & Compliance Department organization structure and processes

•  Continue development and execution of compliance program

•  Execute on identified M&A initiatives in a cost-effective manner

•  Improve Legal & Compliance Department cost structure, without material diminution in client service

•  Collaborate with CFO on SEC reporting and improvement of control environment, as appropriate

 

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EXECUTIVE COMPENSATION

 

In February 2018, our Compensation Committee evaluated our Company’s and executive officers’ 2017 actual performance achievement as measured against the financial and strategic goals initially established for them.

At that time, and as noted above, after considering our Company’s then-expected performance results for 2017, the Compensation Committee determined that our financial performance fell below expectations and as such that our NEOs for 2017 would not receive any AIP cash bonus for the 2017 performance year, irrespective of our Company’s actual 2017 financial performance and the NEO’s performance against his Company and individual strategic goals.

Long-Term Incentive Compensation (Equity-Based)

We currently use 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, among other things, our pool of shares available for grant under our equity plan, the rate at which we deplete our pool of shares available for grant, our annual equity usage rates, the extent to which prior years’ grants continue to properly motivate the employee to achieve our overall goals and corresponding levels of dilution to our stockholders resulting from such awards.

Time-Vesting Stock Options and Restricted Stock Units (RSUs)

In April 2017, our Compensation Committee approved long-term incentive grants with “time-vesting” vesting requirements for our NEOs for 2017 that consisted entirely of RSUs. 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” (which is generally the date of grant) and the remaining installments generally vesting annually thereafter (subject to continuous service on each vesting date).

Our executive officers also receive our “time-vesting” non-qualified stock options from time to time. With respect to these “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).

Total Shareholder Return Performance-Based Restricted Stock Units (PSUs)

Our Compensation Committee implemented a PSU program in 2016 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.

Our PSUs granted in September 2017 vest based on the Company’s Total Shareholder Return (“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 three-year performance period, as follows:

 

TSR Percentile Ranking

   Share Payout as a
% of Target PSUs*

80th Percentile or Greater

   150% (Maximum)

60th Percentile

   100% (Target)

30th Percentile or Less

   0%

 

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

 

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The table below shows the Compensation Committee’s grant value of RSUs, stock options and PSUs awarded to our NEOs for 2017. Award values are based on our stock price on the date of Compensation Committee approval, while the amounts shown in the Summary Compensation Table reflect the grant date fair value on December 21, 2017, which was the date of stockholder approval of our 2017 Omnibus Long-Term Incentive Plan.

 

Name

Restricted Stock
Units ($)
Stock Options ($) PSUs (at Target) ($) 2017 Aggregate
Long-Term
Incentive Total ($)

Jeff Leddy(1)

  1,244,000   2,470,000     3,714,000

David M. Davis(2)

       

Paul Rainey(3)

  325,000   325,000   100,000   750,000

Thomas Severson(2)

       

Josh Marks

  577,500     192,480   769,480

Walé Adepoju

  642,759     214,231   888,500

Stephen Ballas(4)

  200,000     66,600   266,600

Our Compensation Committee approved these equity awards in early 2017. However, given the lack of remaining share availability at that time under our former equity plan, we deferred the issuance of these awards until our stockholders approved our 2017 Omnibus Long-Term Incentive Plan at our 2017 annual stockholders’ meeting on December 21, 2017. For purposes of the equity compensation disclosure above, we consider the “grant date” to be December 21, 2017, whereas the values in the table reflect the award value on the Compensation Committee approval date, as indicated in the narrative preceding the table.

 

(1)  Mr. Leddy commenced employment as our CEO on February 21, 2017 and his negotiated compensation package did not include any PSUs.

 

(2)  Messrs. Davis and Severson ceased employment on February 17 and 20, 2017, respectively, and therefore did not receive any equity awards for 2017.

 

(3)  Mr. Rainey commenced employment as our CFO on April 3, 2017 and his compensation package reflects a negotiated mix of RSUs, stock options and PSUs.

 

(4)  With respect to Mr. Ballas, 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 either no additional grant or a smaller grant would be made the following year. Mr. Ballas received his “front loader” equity award on his employment commencement date in April 2016, and therefore received a smaller total equity award during 2017.

2018 Compensation Decisions Regarding 2017 NEOs

2017 AIP Determination

As noted above, in February 2018, our Compensation Committee determined not to award any of our executive officers AIP cash bonuses for the 2017 performance year.

Jeff Leddy

In March 2018, in connection with the Board’s appointment of Mr. Leddy to the position of Executive Chairman of the Company effective April 1, 2018, the Compensation Committee determined that Mr. Leddy’s annual base salary rate would become $300,000 upon his assuming the Executive Chairman role. (This was a reduction from his then-current $625,000 annual base salary rate while CEO). In addition, or Compensation Committee determined that he would not be eligible for any AIP bonus for his service as Executive Chairman (versus his prior AIP target while CEO of 100% of his annual base salary). The Compensation Committee did not make any additional changes to Mr. Leddy’s compensation arrangements, and he continues to participate as a “Tier II participant” in the Company’s Change in Control and Severance Plan for Senior Management. For further information regarding our Change in Control and Severance Plan for Senior Management, please refer to “Executive Compensation—Executive Severance Plan” on page 30.

Josh Marks

In March 2018, in connection with the Board’s appointment of Mr. Marks as the Company’s CEO effective April 1, 2018, the Compensation Committee determined that, effective April 1, 2018, Mr. Marks’ annual base salary rate would become $500,000 upon his assuming the CEO role. (This was an increase from his previous $385,000 annual base salary rate while Executive Vice President, Connectivity). In addition, our Compensation Committee determined that his AIP bonus

 

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EXECUTIVE COMPENSATION

 

target for the 2018 performance year would be 100% of his base salary (versus his prior AIP target while Executive Vice President, Connectivity of 75% of his annual base salary). Mr. Marks continues to participate in the Company’s Change in Control and Severance Plan for Senior Management as a “Tier II participant.” The Compensation Committee also determined that Mr. Marks would be entitled to a one-time relocation expense reimbursement and temporary living expenses in Los Angeles, California through April 2018, and that if the Company terminates Mr. Marks’ employment without “Cause” or if Mr. Marks terminates his employment for “Good Reason” (each as defined in the Company’s Change in Control and Severance Plan for Senior Management), then the Company will reimburse Mr. Marks for his lease termination and relocation expenses.

Paul Rainey

In April 2018, in connection with the Company’s annual merit increase assessment process for all employees, our Compensation Committee approved an increase to Mr. Rainey’s salary to $384,375 (from $375,000), effective April 1, 2018. The Compensation Committee did not change any other elements of Mr. Rainey’s compensation.

Stephen Ballas

In April 2018, in connection with the Company’s annual merit increase assessment process for all employees, our Compensation Committee approved an increase to Mr. Ballas’s salary to $358,750 (from $350,000), effective April 1, 2018. The Compensation Committee did not change any other elements of Mr. Ballas’s compensation.

Walé Adepoju

Our Compensation Committee did not make any changes to Mr. Adepoju’s compensation in 2018.

Additional Elements of Our Compensation Program

No “Single Trigger” Change in Control Payments—We do not have any agreements or plans with our 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).

Executive Severance Plan—In April 2017, our Compensation Committee approved a Change in Control and Severance Plan for Senior Management (our “Executive Severance Plan”), in which all of our executive officers (including all currently employed 2017 NEOs) now participate. Participants in the Executive Severance Plan are not eligible to participate in any other severance plan sponsored by the Company. 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 their employment terminates without “Cause” or for “Good Reason” (each such term as defined in the Executive Severance Plan).

Participants are eligible to receive severance and vesting benefits based on being designated a “Tier I, II or III” participant under the plan. Although Mr. Leddy was entitled to be designated as a “Tier I” participant under the plan upon becoming our CEO, he elected to be treated as a “Tier II” participant. Mr. Marks made a similar election upon becoming our CEO in April 2018 and is also a “Tier II” participant. All of our other executive officers may be designated as “Tier II” or “Tier III” participants under the plan. All of our other currently-employed 2017 NEOs are designated as Tier II participants.

The Executive Severance Plan provides participants with the following severance payments and benefits upon a termination of employment either (1) by the Company other than for “Cause” or (2) by the participant for “Good Reason” (each such capitalized term as defined in the Executive Severance Plan) (a “Qualifying Termination”):

 

  if the Qualifying Termination occurs at any time outside of the Change in Control Protection Period (as defined below):

 

    a lump-sum cash payment equal to (a) 1.75 for the Tier I participant, 1.0 for Tier II participants or 0.5 for Tier III participants, multiplied by (b) the participant’s annual base salary; and

 

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    payment of a pro-rated portion of the participant’s annual cash bonus award for the year of termination (with the bonus calculated based on “actual” performance);

 

  if the Qualifying Termination occurs upon, within 120 days prior to or within two years following, a Change in Control (as defined in the Executive Severance Plan) (the “Change in Control Protection Period”):

 

    a lump-sum cash payment equal to (a) 2.0 for the Tier I participant, 1.0 for Tier II participants or 0.5 for Tier III participants, multiplied by (b) the sum of (1) the participant’s annual base salary plus (2) his or her target annual cash bonus award; and

 

    payment of a pro-rated portion of the participant’s annual cash bonus award for the year of termination (with the bonus calculated based on the greater of (a) the “actual” annual bonus such participant would have earned and (b) the participant’s target annual cash bonus);

 

  payment of any unpaid annual bonus in respect of a prior fiscal year (or performance period already completed) that ended on or before the date of termination (without any requirement to remain employed through the payment date to earn such bonus);

 

  continued health care coverage for up to 12 months post-termination for Tier I and Tier II participants, and for up to 6 months for Tier III participants, with the participant paying his or her side of the premiums;

 

  outplacement assistance for up to 12 months post-termination for Tier I and Tier II participants, and for up to 6 months for Tier III participants; and

 

  with respect to Tier I and Tier II Participants, vesting of equity awards as follows (unless the underlying equity award agreement provides for more favorable vesting, in which case such agreement shall control):

 

    with respect to any outstanding time-vesting equity awards held by the participant:

 

    if the Qualifying Termination occurs at any time outside of the Change in Control Protection Period, accelerated vesting of a pro-rated portion of all outstanding and unvested equity awards based on (i) the number of days employed from the grant date through the date of termination plus (ii) 365 days; or

 

    if the Qualifying Termination occurs within the Change in Control Protection Period, immediate and fully accelerated vesting of all outstanding and unvested equity awards (or their as-assumed, -converted or -replaced awards as described below under “Treatment of Equity Awards Held by Non-Terminated Participants upon a Change in Control”); and

 

    with respect to any outstanding performance-vesting equity awards held by the participant, unvested shares subject thereto will be eligible to vest and, if applicable, become exercisable in accordance with the terms of the applicable award agreement evidencing such award.

The participant’s receipt of severance payments and benefits under the Executive Severance Plan is conditioned upon his or her execution of an effective release of claims against the Company and compliance with restrictive conditions set forth in the Executive Severance Plan, including a condition prohibiting the solicitation of the Company’s customers and employees that remains in effect for a restricted period following termination. This restricted period is 21 months for the Tier I participant, 12 months for the Tier II participants and 6 months for the Tier III participants, as such period may be reduced or eliminated (x) by the Compensation Committee or (y) if and to the extent required to comply with the laws of the jurisdiction in which the participant was primarily providing services to the Company immediately prior to such termination.

 

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EXECUTIVE COMPENSATION

 

Treatment of Equity Awards Held by Non-Terminated Participants upon a Change in Control

The Executive Severance Plan provides that if the participant remains employed on the date on which a Change in Control occurs, then:

 

  with respect to any outstanding time-vesting equity awards held by the participant:

 

    if the Company’s successor does not assume, convert or replace such awards with publicly-traded equity securities (or their equivalent) having an equivalent value (and vesting schedule), the awards, to the extent unvested, will immediately vest in full; or

 

    if the Company’s successor so assumes, converts or replaces such awards, the awards will remain subject to vesting in accordance with their terms (including the provisions described above regarding the treatment of such award upon a Qualifying Termination); and

 

  with respect to any outstanding performance-vesting equity awards held by the participant, unvested shares subject thereto will be eligible to vest and, if applicable, become exercisable in accordance with the terms of the applicable award agreement evidencing such award.

CEO Stock Ownership Guidelines—We have Stock Ownership Guidelines for our CEO 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.

Tax Deductibility and Accounting Implications—As a general matter, our Compensation Committee takes into account the various tax and accounting implications and costs of compensation to our executive officers. Although our incentive compensation programs was intended to allow the company to make awards to executive officers that are deductible under Section 162(m) of the Internal Revenue Code, U.S. tax laws have recently changed in this regard. Commencing with the 2018 fiscal year, the performance-based compensation exception to the deductibility limitations under Section 162(m) will no longer apply, and the deduction limitation under Section 162(m) will instead apply to compensation paid to our named executive officers. Our Compensation Committee may seek ways to limit the impact of these changes to Section 162(m) of the Internal Revenue Code, but our Compensation Committee believes that the new tax deduction limitation should not compromise our ability to establish and implement compensation and incentive programs that support the compensation objectives described above under “Executive Compensation Philosophy and Objectives.” Achieving these objectives and maintaining required flexibility in this regard may result in compensation that is not deductible for federal income tax purposes.

 

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EXECUTIVE COMPENSATION

 

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

Eric Zinterhofer

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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EXECUTIVE COMPENSATION

 

Executive Compensation Tables

Summary Compensation Table

The following table shows the compensation earned in respect of 2017, 2016, and 2015 by each of our 2017 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(2)
($)

 

   

Stock
Awards
(3)
($)

 

   

Option
Awards
(4)
($)

 

   

Non-Equity
Incentive Plan
Compensation
(5)
($)

 

   

All Other
Compensation
(6)
($)

 

   

Total

($)

 

 

Jeff Leddy(7)

Executive Chairman of the

Company, Former CEO

    2017       535,256             519,639       584,630             44,875       1,684,400 (14) 
               
                                                               

David M. Davis(8)

Former CEO

    2017       85,336                               1,103,750       1,189,086  
    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

 

 

 

Paul Rainey(9)

CFO

    2017       280,047             342,132       236,667                   858,846  
                                                               

Thomas Severson(10)

Former CFO

    2017       47,788                               302,935       350,723  
   

 

2016

 

 

 

   

 

116,667

 

 

 

   

 

 

 

 

   

 

672,800

 

 

 

   

 

648,000

 

 

 

   

 

 

 

 

   

 

46,400

 

 

 

   

 

1,483,867

 

 

 

Josh Marks(11)

CEO, Former Executive Vice

President, Connectivity

    2017       372,500       175,000       620,058                   57,492       1,225,050  
               
                                                               

Walé Adepoju(12)

Chief Strategy Officer,

Former Executive Vice

President, Media & Content

    2017       425,893       185,000       690,128                   2,075       1,303,096  
    2016       415,542             387,496       521,146                   1,324,184  
    2015       406,027             199,998       193,395       280,373             1,079,793  

Stephen Ballas

Executive Vice President,

General Counsel, and

Corporate Secretary

    2017       346,250       115,000       214,739                   1,724       677,713  
    2016       243,734       50,000 (13)      553,487       407,605                   1,253,916  
   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

(1)  Amounts set forth in this column reflect the amounts actually received by the NEO as salary payments during 2017, and therefore represent a blend of the salary rates applicable to the NEO throughout the year where the NEO experienced a salary change mid-year.

 

(2)  Amounts set forth in this column reflect the amounts earned by the NEO during 2017 as cash retention bonuses described under “Executive Compensation—2017 Retention Bonuses” on page 21. The amount for Mr. Ballas for 2016 reflects a $50,000 sign-on bonus when he joined the Company. See also footnote 13 to this table below.

 

(3)  Amounts set forth in this column represent the grant date fair value of stock-based awards (RSUs and PSUs) granted during the year computed in accordance with Accounting Standards Codification Topic No. 718, “Compensation—Stock Compensation” (“ASC 718”). For 2017, 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 12. Common Stock, Stock-Based Awards and Warrants to our consolidated financial statements in our 2017 Annual Report on Form 10-K (“2017 Form 10-K”).

 

(4)  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 2017, 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 our 2017 Form 10-K.

 

(5)  Amounts set forth in this column reflect the amounts earned by the NEO during the applicable year as payments under the AIP.

 

(6) 

Amounts set forth in this column for 2017 include: (1) for Mr. Leddy, approximately $12,042 for outside director cash compensation related to his service as an outside director from January 2017 to February 2017, approximately $27,000 for commuting expenses between Mr. Leddy’s primary residence and the Company’s Los Angeles, California headquarters and approximately $5,833 for 401(k) employer matching contributions; (2) for Mr. Davis, approximately $1,093,750 as severance, approximately $9,000 for commuting expenses between Mr. Davis’ primary residence and the Company’s Los Angeles, California headquarters and approximately $1,000 for 401(k) employer matching contributions; (3) for Mr. Severson,

 

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  approximately $302,211 as severance and approximately $724 for 401(k) employer matching contributions; (4) for Mr. Marks, approximately $56,818 for relocation benefits for his relocation to Miramar, Florida so that he could work principally out of our Miramar, Florida offices and approximately $674 for 401(k) employer matching contributions; (5) for Mr. Adepoju, approximately $2,075 for 401(k) employer matching contributions; and (6) for Mr. Ballas, approximately $1,723 for 401(k) employer matching contributions. Amounts set forth in this column for 2016 include: (1) for Mr. Davis, approximately $50,000 for commuting expenses between his primary residence and the Company’s Los Angeles, California headquarters and $4,300 for 401(k) employer matching contributions; and (2) 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.

 

(7)  Mr. Leddy became our CEO on February 21, 2017 and ceased serving in that role in March 2018. He became Executive Chairman of the Company on April 1, 2018.

 

(8)  Mr. Davis separated from the Company effective February 20, 2017.

 

(9)  Mr. Rainey became our CFO on April 3, 2017.

 

(10)  Mr. Severson became our CFO in August 2016 and separated from the Company on February 20, 2017.

 

(11) Mr. Marks was our Executive Vice President, Connectivity from April 2017 to March 2018. He became our CEO on April 1, 2018.

 

(12)  Mr. Adepoju was our Executive Vice President, Media & Content from September 2016 to March 2018. He became our Chief Strategy Officer on April 1, 2018.

 

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

 

(14)  As noted in footnote 6 to this table, the compensation reported for Mr. Leddy includes compensation related to his service as an outside director from January 2017 to February 2017.

 

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Grants of Plan-Based Awards in 2017

The following table sets forth information relating to our grants in 2017 of plan-based awards in 2017 to our 2017 NEOs. Messrs. Davis and Severson did not receive any grants in 2017 because they separated from the Company in February 2017 before our Compensation Committee had approved any awards for the year. Our Compensation Committee approved these Equity Awards in early 2017. However, given the lack of remaining share availability at that time under our former equity plan, we deferred the issuance of these Awards until our stockholders approved our 2017 Omnibus Long-Term Incentive Plan at our 2017 annual stockholders’ meeting on December 21, 2017. For purposes of the equity compensation disclosure below, we consider the “grant date” to be December 21, 2017.

 

         

 

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
(#)

 

         

 

Jeff Leddy

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

2,194

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

5,639

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

5,029

 

 

 

   

 

3.21

 

 

 

   

 

5,130

 

 

 

   

 

2/17/2017

 

 

 

   

 

156,250

 

 

 

   

 

625,000

 

 

 

   

 

937,500

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

200,000

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

514,000

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

350,000

 

 

 

   

 

6.22

 

 

 

   

 

202,825

 

 

 

     

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

650,000

 

 

 

   

 

6.22

 

 

 

   

 

376,675

 

 

 

 

David M. Davis

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

Paul Rainey

 

   

 

4/3/2017

 

 

 

   

 

93,750

 

 

 

   

 

187,500

 

 

 

   

 

562,500

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

101,246

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

260,202

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

232,026

 

 

 

   

 

3.21

 

 

 

   

 

236,667

 

 

 

     

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

1,038

 

 

 

   

 

31,152

 

 

 

   

 

46,728

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

81,930

 

 

 

 

Thomas Severson

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

Josh Marks

 

   

 

4/28/2017

 

 

 

   

 

96,250

 

 

 

   

 

288,750

 

 

 

   

 

577,500

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

179,906

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

462,358

 

 

 

     

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

1,998

 

 

 

   

 

59,962

 

 

 

   

 

89,943

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

157,700

 

 

 

 

Walé Adepoju

 

   

 

4/28/2017

 

 

 

   

 

107,127

 

 

 

   

 

321,380

 

 

 

   

 

642,759

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

200,236

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

514,607

 

 

 

     

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

2,224

 

 

 

   

 

66,738

 

 

 

   

 

100,107

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

175,521

 

 

 

 

Stephen Ballas

 

   

 

4/28/2017

 

 

 

   

 

87,500

 

 

 

   

 

262,500

 

 

 

   

 

525,000

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

62,305

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

160,124

 

 

 

     

 

12/21/2017

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

           

 

692

 

 

 

   

 

20,768

 

 

 

   

 

31,152

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

54,615

 

 

 

 

(1)  Represents potential 2017 AIP cash bonus payouts under the AIP at threshold, target and maximum levels of performance. As previously noted under “2017 Executive Compensation—Annual Cash Incentive (‘AIP’) Compensation” beginning on page 26, none of our 2017 NEOs received an AIP bonus payment for the 2017 performance year. The “Threshold” figure however assumes that the Company achieved the minimum level of performance necessary to fund the AIP in 2017, and further assumes that the Company achieved a threshold level of consolidated revenue for 2017 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 Adjusted EBITDA under the AIP for 2017, and further assumes the Company achieved its target consolidated revenue for 2017 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 2017 under the terms of the AIP.

 

(2) 

Represents number of PSUs granted in 2017 at threshold, target and maximum levels of performance. PSUs granted in 2017 cliff vest in September 2020, based on the Company’s relative total shareholder return (“TSR”) versus the constituents of the Russell 2000 index over a three-year performance period from September 2017 to September 2020 subject to continuous employment on the vesting date. In order for any of the PSUs to be

 

36    

 

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EXECUTIVE COMPENSATION

 

  earned, relative TSR achievement during the performance period must exceed the 30th 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)  For all recipients (other than Mr. Leddy): Represents RSUs that generally vest in four equal annual installments (with the first installment vesting in April 2018) subject to continuous employment on each vesting date. For Mr. Leddy, his RSUs vest in three equal installments on the first, second and third anniversary of employment commencement date (which was February 21, 2017), subject to continuous service through the applicable vesting date.

 

(4)  Represents non-qualified stock options that have a seven-year term. For all recipients (other than Mr. Leddy): Stock options generally vest and become exercisable with respect 25% of the underlying shares in April 2018, and vest in 36 equal monthly annual installments thereafter, subject to continuous employment on each vesting date. For Mr. Leddy, his stock options consist of (a) a fully-vested option representing the right to purchase 350,000 shares and (b) an option representing the right to purchase 650,000 shares, vesting in equal monthly installments commencing on February 21, 2017 (with the first installment vesting on March 21, 2017) over the following three years, subject to continuous service through the applicable vesting date.

 

(5)  Amounts reflect the grant date fair value of equity awards using a Monte-Carlo simulation computed in accordance with ASC 718. We provide information regarding the assumptions used to calculate the value of the equity awards in Note 12. Common Stock, Stock-Based Awards and Warrants to our consolidated financial statements in our 2017 Form 10-K.

Outstanding Equity Awards at 2017 Year-End

The following table sets forth the equity-based awards held by our 2017 NEOs that were outstanding on December 31, 2017.

As described under “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20, Messrs. Davis and Severson separated from our employ in February 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

(#)(10)

   

Equity
Incentive
Awards:

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

($)(11)(12)

   

RSUs:

Number

of Shares

or Units

of Stock

That Have

Not Vested

(#)

   

RSUs:

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)(11)

 

 

Jeff Leddy

    2/19/2013       25,000 (4)            10.00       2/19/2018                          
    3/16/2015       21,067 (4)            13.15       3/16/2020                          
    3/16/2015       10,533 (4)            13.15       3/16/2020                          
    3/10/2016       15,444 (4)            9.25       3/10/2021                          
    12/21/2017 (1)      5,029 (4)            3.21       4/3/2024                          
    12/21/2017 (1)      350,000 (5)            6.22       2/21/2024                          
    12/21/2017 (1)      180,556 (6)      469,444 (6)      6.22       2/21/2024                          
      12/21/2017 (1)                                          200,000 (8)      458,000

David M. Davis

    1/31/2013       675,000 (7)            10.00       1/31/2018                          
    1/13/2014       20,833 (7)            16.70       1/13/2019                          
    7/9/2014       70,833 (7)            11.43       7/9/2019                          
    3/16/2015       45,645 (7)            13.15       3/16/2020                          
    3/16/2016       49,550 (7)            9.25       3/10/2021                          
      10/11/2016                               293 (13)      3671              

 

Paul Rainey

    12/21/2017 (2)                                          101,246 (9)      231,853  
    12/21/2017 (2)      232,026 (7)            3.21       4/3/2024                          
      12/21/2017 (2)                              934     2,139              

 

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        2018 Proxy Statement

 

 

    37

 


EXECUTIVE COMPENSATION

 

          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

(#)(10)

   

Equity
Incentive
Awards:

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

($)(11)(12)

   

RSUs:

Number

of Shares

or Units

of Stock

That Have

Not Vested

(#)

   

RSUs:

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)(11)

 

 

Thomas Severson

                                                     

 

Josh Marks

    8/3/2015                                           32,500 (9)      74,425  
    8/3/2015       77,083 (7)      107,917 (7)      12.51       8/3/2020                          
    10/11/2016                               1,140     2,611              
    12/21/2017 (3)                                          179,906 (9)      411,985  
      12/21/2017 (3)                              1,798     4,117              

Walé Adepoju

    9/16/2013       460,000 (7)            10.00       9/16/2018                          
    9/16/2013       7,072 (7)            10.00       9/16/2018                          
    9/16/2013       32,928 (7)            10.00       9/16/2018                          
    6/5/2014       87,500 (7)      12,500 (7)      10.57       6/5/2019                          
    3/16/2015                                           7,604 (9)      17,413  
    3/16/2015       28,697 (7)      13,167 (7)      13.15       3/16/2020                          
    3/10/2016                                           16,540 (9)      37,877  
    3/10/2016       27,568 (7)      35,444 (7)      9.25       3/10/2021                          
    10/11/2016                               544     1,246              
    10/11/2016       26,349 (7)      63,991 (7)      9.21       10/11/2023                          
    12/21/2017 (3)                                          200,236 (9)      458,540  
      12/21/2017 (3)                              2,002     4,585              

Stephen Ballas

    4/11/2016                                           36,100 (9)      82,669  
    4/11/2016       56,424 (7)      78,993 (7)      8.44       4/11/2021                          
    10/11/2016                               436     998              
    12/21/2017 (3)                                          62,305 (9)(14)      142,678  
      12/21/2017 (3)                              622     1,424              

 

* The closing price of a share of our common stock on December 29, 2017 (the last Nasdaq trading day in 2017) was $2.29, and we have used that per-share price for purposes of determining market values in this table.

 

(1) Our Compensation Committee approved this equity award in early 2017. However, given the lack of remaining share availability at that time under our former equity plan, we deferred the issuance of this award until our stockholders approved our 2017 Omnibus Long-Term Incentive Plan at our 2017 annual stockholders’ meeting on December 21, 2017. The vesting commencement date for this equity award was February 21, 2017, which was Mr. Leddy’s employment commencement date.

 

(2) Our Compensation Committee approved this equity award in early 2017. However, given the lack of remaining share availability at that time under our former equity plan, we deferred the issuance of this award until our stockholders approved our 2017 Omnibus Long-Term Incentive Plan at our 2017 annual stockholders’ meeting on December 21, 2017. The vesting commencement date for this equity award was April 3, 2017, which was Mr. Leddy’s employment commencement date.

 

(3) Our Compensation Committee approved this equity award in early 2017. However, given the lack of remaining share availability at that time under our former equity plan, we deferred the issuance of this award until our stockholders approved our 2017 Omnibus Long-Term Incentive Plan at our 2017 annual stockholders’ meeting on December 21, 2017. The vesting commencement date for this equity award was April 28, 2017, which was the date that the Compensation Committee approved this award.

 

(4) Represents stock options that Mr. Leddy received as an outside director. Mr. Leddy ceased receiving equity awards under our Outside Director Compensation Program when he became our CEO on February 21, 2017.

 

(5) Represents stock options that were granted to Mr. Leddy in connection with his assuming the CEO position on February 21, 2017 and that were fully vested on his employment commencement date.

 

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(6) Represents stock options that vest and become exercisable on a monthly basis over a three-year period following February 21, 2017 until fully vested, subject to continuous employment on each vesting date.

 

(7) 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. However, for the equity grant to Mr. Rainey that was subject to our stockholders’ approval of the Company’s new 2017 Omnibus Long-Term Incentive Plan (which our stockholders approved on December 21, 2017), these stock options vest and become exercisable with respect to 25% of their underlying shares on April 3, 2018 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.

 

(8) Represents restricted stock units that vest and become exercisable in three equal annual installments beginning on February 21, 2017, subject to continuous employment on each vesting date.

 

(9) Represents restricted stock units 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. However, for the equity grants that were subject to our stockholders’ approval of the Company’s new 2017 Omnibus Long-Term Incentive Plan (which our stockholders approved on December 21, 2017), these restricted stock units vest and become exercisable in four equal installments beginning on April 3, 2018 for Mr. Rainey and on April 28, 2018 for Messrs. Marks, Adepoju and Ballas, subject to continuous employment on each vesting date.

 

(10)  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. However, for the equity grants that were subject to our stockholders’ approval of the Company’s new 2017 Omnibus Long-Term Incentive Plan (which our stockholders approved on December 21, 2017), these PSUs cliff vest in September 2020, based on our relative total shareholder return versus the constituents of the Russell 2000 index over the three-year performance period, and subject to continuous employment on the vesting date.

 

(11)  The market values of both the RSUs and PSUs were calculated by multiplying $2.29 (the closing price of a share of our common stock on December 29, 2017) by the number of unvested RSUs and unearned PSUs. In respect of the PSUs, see also footnote 9 to this table.

 

(12)  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 “Executive Compensation—Grants of Plan-Based Awards in 2017” on page 36. 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.

 

(13)  Mr. Davis separated from our employ on February 17, 2017. Under the terms of his PSU award agreement, Mr. Davis will receive a pro rata payout based on actual relative TSR performance after the end of the performance period for these PSUs (i.e., October 2019), with proration based on the number of full months he was employed (including his consulting period with us from February 2017 through May 2017) during the three-year performance period. Accordingly, he will receive 7/36ths of the ultimate payout of this award (for his seven full months of service between October 2016 and May 2017) based on actual relative TSR performance at the end of the performance period.

 

(14) With respect to Mr. Ballas, 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 either no additional grant or a smaller grant would be made the following year. Mr. Ballas received his “front loader” equity award on his employment commencement date in April 2016, and therefore received a smaller total equity award during 2017.

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, 2017) held by our 2017 NEOs during that period.

 

     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)

($)

 

Jeff Leddy

     —                    —                   —                 —        

David M. Davis

     —                    —                   22,470                 92,200        

Paul Rainey

     —                    —                   —                 —        

Thomas Severson

     —                    —                   —                 —        

Josh Marks

     —                    —                   16,250                 49,400        

Walé Adepoju

     —                    —                   9,316                 38,213        

Stephen Ballas

     —                    —                   12,034                 37,666        

 

* Amounts above do not reflect the withholding of any shares on vest to satisfy the NEO’s tax obligations.

 

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EXECUTIVE COMPENSATION

 

 

(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 our NEOs exercised options in 2017.

 

(2)  Value Realized on Vesting is based on the closing price of our common stock on the vest date.

Employment Agreements

We have (or had) employment agreements with each of our 2017 NEOs, as summarized below:

Jeff Leddy

We entered into an employment agreement with Mr. Leddy on February 21, 2017, in connection with his then appointment as our CEO. Under that employment agreement, Mr. Leddy received an initial annual base salary of $625,000. Mr. Leddy was also entitled to an AIP cash bonus with an initial target of 100% of his annual base salary. Pursuant to his employment agreement, Mr. Leddy received an initial equity grant consisting of (a) an option (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 (the “Initial Option Award”) vesting over a three-year period, and (c) RSUs representing 200,000 shares of our common stock (the “Initial RSU Award”) vesting over a three-year period, subject to continuous service on each vesting date. The exercise price of the stock options was $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 initial employment agreement).

In addition, we agreed to reimburse Mr. Leddy for travel to and from his principal residence to the Company’s office locations and for accommodations while traveling. Mr. Leddy’s agreement also provides for severance and change in control protection benefits under our Executive Severance Plan, and he is a “Tier II” participant in that Plan. See “Executive Compensation—Executive Severance Plan” beginning on page 30. In addition to the benefits provided under the Executive Severance Plan, if we terminate Mr. Leddy without Cause (as defined in the employment agreement) (i) the unvested portions of his Initial Option Award and Initial RSU Award shall become fully vested and (ii) all options granted under his employment agreement that are vested shall remain exercisable for one year after his termination of service.

On March 29, 2018, we amended and restated Mr. Leddy’s employment agreement in connection with his new appointment as our Company’s Executive Chairman effective April 1, 2018. As described under “Executive Compensation—2018 Compensation Decisions Regarding 2017 NEOs” beginning on page 29, under this new employment agreement, Mr. Leddy now receives an annual base salary of $300,000 and is no longer entitled to receive an AIP cash bonus for his service as Executive Chairman.

David M. Davis

On February 17, 2017, Mr. Davis’ employment as our 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 “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20.

Paul Rainey, CFO

We entered into an employment agreement with Mr. Rainey on April 7, 2017, in connection with his appointment as our CFO. Under his employment agreement, Mr. Rainey received 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. Pursuant to his employment agreement, Mr. Rainey received 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 was $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 provides for severance and change in control protection benefits under our Executive Severance Plan, and he is a Tier II participant in that Plan. See “Executive Compensation—Additional Elements of Our Compensation Program” beginning on page 30.

 

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In April 2018, we increased Mr. Rainey’s annual base salary in connection with our 2018 annual merit increase process, and he now receives an annual base salary of $384,375. See “Executive Compensation—2018 Compensation Decisions Regarding 2017 NEOs” beginning on page 29.

Tom Severson

On February 20, 2017, Mr. Severson’s employment as our CFO terminated. For a description of the severance that we paid to Mr. Severson upon his separation from us, see “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20.

Josh Marks, CEO

We entered into an employment agreement with Mr. Marks on August 4, 2015 in connection with his then appointment as our Senior Vice President Operations Solutions. The agreement provided for an initial annual base salary of $275,000. Under that agreement, Mr. Marks was entitled to an AIP cash bonus with an initial target of 50% of his base salary. On August 9, 2016, we entered into an amended and restated employment agreement with Mr. Marks in connection with his then appointment as our Executive Vice President, Aviation Connectivity. Under this amended and restated employment agreement, his base salary became $335,000 and his AIP cash bonus target became 75% of his annual base salary. In April 2017, we again increased Mr. Marks’ base salary to $385,000.

On March 23, 2018, we again amended and restated Mr. Marks’ employment agreement in connection with his appointment as our CEO effective April 1, 2018. As described under “Executive Compensation—2018 Compensation Decisions Regarding 2017 NEOs” beginning on page 29, under this new employment agreement, Mr. Marks now receives an annual base salary of $500,000 and has an AIP bonus target that is 100% of his base salary. Mr. Marks will also receive a one-time relocation expense reimbursement and temporary living expenses in Los Angeles, California for up to one year.

Mr. Marks’s new employment agreement also provides for severance and change in control protection benefits under our Executive Severance Plan, and Mr. Marks has agreed to be designated as a “Tier II” participant in that Plan. See “Executive Compensation—Executive Severance Plan” beginning on page 30. In addition, if the Company terminates his employment without “Cause” or if Mr. Marks terminates his employment for “Good Reason” (each as defined in the Executive Severance Plan), then we will also reimburse Mr. Marks for lease termination penalties related to his Los Angeles apartment (if he is still renting an apartment at the time of termination) and transportation expenses for Mr. Marks to relocate from Los Angeles to Washington, D.C.

Walé Adepoju

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. In April 2017, we increased it again to $428,506, and this remains his current base salary.

Mr. Adepoju also has severance and change in control protection benefits under our Executive Severance Plan, and he is a “Tier II” participant in that Plan. See “Executive Compensation—Executive Severance Plan” beginning on page 30.

Stephen Ballas

We entered into an employment agreement with Mr. Ballas on March 11, 2016 in connection with his appointment as our General Counsel and Corporate Secretary. Under the employment agreement, Mr. Ballas received an initial annual base salary of $335,000. Mr. Ballas was also entitled to an AIP cash bonus with an initial target of 50% of his annual base salary. 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.

 

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EXECUTIVE COMPENSATION

 

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. In April 2018, we increased his annual base salary in connection with our 2018 annual merit increase process, and he now receives an annual base salary of $358,750. See “Executive Compensation—2018 Compensation Decisions Regarding 2017 NEOs” beginning on page 29.

Mr. Ballas also has severance and change in control protection benefits under our Executive Severance Plan, and he is a “Tier II” participant in that Plan. See “Executive Compensation—Executive Severance Plan” beginning on page 30.

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. To that end, we have adopted an Executive Severance Plan, which we describe further under “Executive Compensation—Executive Severance Plan” beginning on page 30.

The following narrative summarizes the payments and benefits that our 2017 NEOs would have been entitled to receive under the Executive Severance Plan upon certain terminations of employment and/or a change in control, assuming those events occurred on December 31, 2017 and applying their severance and change in control protection benefits as in effect on December 31, 2017.

Death, Disability or Retirement.

 

  Regarding Messrs. Davis and Severson. As previously noted, Messrs. Davis and Severson separated from our employ in early 2017. The actual severance payments and agreements related to their employment termination are described under “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20.

 

  Regarding Messrs. Leddy, Rainey, Marks, Adepoju and Ballas. Messrs. Leddy, Rainey, Marks, Adepoju and Ballas would not have received any cash benefits upon death, disability or retirement, but our RSU and option award agreements 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, if a PSU recipient dies or becomes disabled prior to the end of the performance period, the Company will waive the continuous-employment vesting requirement, and the PSU award will vest at the applicable TSR performance level as measured at the end of the three-year performance period.

Termination outside a Change in Control Protection Period.

 

  Regarding Messrs. Davis and Severson. As previously noted, Messrs. Davis and Severson separated from our employ in early 2017. The actual severance payments and agreements related to their employment termination are described under “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20.

 

  Regarding Messrs. Leddy, Rainey, Marks, Adepoju and Ballas. As of December 31, 2017, Messrs. Leddy, Rainey, Marks, Adepoju and Ballas participated in the Executive Severance Plan as Tier II participants. If their employment had been terminated by the Company without “Cause” or by them for “Good Reason” (each as defined in the Executive Severance Plan) (a “Qualifying Termination”) other than during the period that is within 120 days prior to or within 2 years following a “Change in Control” (as defined in the Executive Severance Plan) (the “Change in Control Protection Period”), then each would have received (subject to execution of an effective release of claims against the Company and compliance with restrictive conditions set forth in the Executive Severance Plan):

 

    a lump-sum cash payment equal to 1.0x his annual base salary;

 

    a pro-rated portion of his annual cash bonus award for the 2017 performance year, with the bonus calculated based on “actual” performance (which the Compensation Committee determined in February 2018 to be zero for the 2017 performance year);

 

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    payment of any unpaid annual bonus in respect of a prior fiscal year (or performance period already completed) that ended on or before the date of termination (without any requirement to remain employed through the payment date to earn such bonus);continued subsidized health care coverage for up to 12 months following termination;

 

    outplacement assistance for up to 12 months following termination;

 

    with respect to any outstanding time-vesting equity awards, accelerated vesting of a pro-rated portion of all outstanding and unvested equity awards based on (i) the number of days employed from the grant date through December 31, 2017 plus (ii) 365 days; and

 

    with respect to any outstanding performance-vesting equity awards, vesting as provided in the relevant award agreement, which currently provide for the PSU award to vest 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 employed (e.g., if terminated on December 31, 2017, approximately three full months into the 36-month performance period for the PSUs granted in September 2017, then the individual would have remained eligible for 3/36ths of that PSU award).

In addition to the above, Mr. Leddy is entitled to full acceleration of his unvested RSUs and stock options.

Termination within a Change in Control Protection Period.

 

  Regarding Messrs. Davis and Severson. As previously noted, Messrs. Davis and Severson separated from our employ in early 2017. The actual severance payments and agreements related to their employment termination are described under “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20.

 

  Regarding Messrs. Leddy, Rainey, Marks, Adepoju and Ballas. As described above, Messrs. Leddy, Rainey, Marks, Adepoju and Ballas participated in the Executive Severance Plan as Tier II participants as of December 31, 2017. If their employment had been terminated by the Company due to a Qualifying Termination within the “Change in Control Protection Period” described above, then each would have received (subject to execution of an effective release of claims against the Company and compliance with restrictive conditions set forth in the Executive Severance Plan):

 

    a lump-sum cash payment equal to 1.0x the sum of his annual base salary and target annual cash bonus award;

 

    a pro-rated portion of the annual cash bonus award for the 2017 performance year, with the bonus calculated based on the greater of “actual” performance and “target” performance;

 

    payment of any unpaid annual bonus in respect of a prior fiscal year (or performance period already completed) that ended on or before the date of termination (without any requirement to remain employed through the payment date to earn such bonus);continued subsidized health care coverage for up to 12 months following termination;

 

    outplacement assistance for up to 12 months following termination;

 

    with respect to any outstanding time-vesting equity awards, immediate and fully accelerated vesting of all outstanding and unvested equity awards and a limited exercise continuation period; and

 

    with respect to any outstanding performance-vesting equity awards, vesting as provided in the relevant award agreement, which currently provide for vesting to fully accelerate for the PSUs based on the relative TSR performance as measured on the change-of-control date.

 

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EXECUTIVE COMPENSATION

 

The following table shows the payments and benefits that our 2017 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, 2017 and applying their severance and change in control protection benefits as in effect on December 31, 2017. With respect to this table:

 

  As previously noted, Messrs. Davis and Severson separated from our employ in early 2017. The actual severance payments and agreements related to their employment termination are described above under “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20. We have not presented the payments and benefits that Messrs. Davis and Severson would have been entitled to on December 31, 2017 because their terminations occurred prior to that date.

 

  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.

 

NEO

   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

($)

 

Jeff Leddy

   Severance(1)             625,000        1,250,000  
   Benefits continuation(2)             3,171        3,171  
   Accelerated equity awards(3)             458,000        458,000  
   Total             1,086,171        1,711,171  

David M. Davis(4)

   Severance                     
   Benefits continuation                     
   Accelerated equity awards                     
   Total                     

Paul Rainey

   Severance(1)             375,000        750,000  
   Benefits continuation(2)             7,097        7,097  
   Accelerated equity awards(3)             57,964        231,853  
   Total             440,061        988,950  

Thomas Severson(4)

   Severance                     
   Benefits continuation                     
   Accelerated equity awards                     
   Total                     

Josh Marks

   Severance(1)             385,000        770,000  
   Benefits continuation(2)             12,981        12,981  
   Accelerated equity awards(3)             140,209        486,410  
   Total             538,190        1,269,391  

Walé Adepoju

   Severance(1)             428,506        857,012  
   Benefits continuation(2)             6,623        6,623  
   Accelerated equity awards(3)             135,969        513,830  
   Total             571,098        1,377,465  

Stephen Ballas

   Severance(1)             350,000        700,000  
   Benefits continuation(2)             2,600        2,600  
   Accelerated equity awards(3)             63,229        225,347  
     Total             415,829        927,947  

 

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(1)  Represents cash severance provided under the Executive Severance Plan, as described in the narrative preceding this table.

 

(2)  Represents the cost of Company-subsidized continued health and welfare benefits for 12 months following termination under our Executive Severance Plan, based on our estimated costs to provide such coverage to each NEO as of December 31, 2017. There is no separate cost to the Company for offering outplacement services to each executive officer.

 

(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 29, 2017 ($2.29), which was the last Nasdaq trading day in 2017, 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, 2017, 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 29, 2017 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)  As previously noted, Messrs. Davis and Severson separated from our employ in early 2017. The actual severance payments and agreements related to their employment termination are described above under “Executive Compensation—Important Compensation Decisions for 2017” beginning on page 20. We have not presented the payments and benefits that Messrs. Davis and Severson would have been entitled to on December 31, 2017 because their terminations occurred prior to that date.

Equity Compensation Plan Information

The following table provides information (as of December 31, 2017) with respect to all of our equity compensation plans in effect as of December 31, 2017:

 

     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

      

Global Eagle Entertainment Inc. Amended and Restated 2013 Equity Incentive Plan

     7,243,506 (2)    $ 9.63 (3)      (4) 

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

     4,855,387 (5)    $ 5.39 (6)      3,858,852  

Equity Compensation Plans Not Approved by Stockholders(1)

     252,513 (7)    $ 8.03 (8)       

 

(1)  Represents the Global Eagle Entertainment Inc. 2016 Inducement and Retention Stock Plan for EMC Employees. We do not plan to issue any further shares under this plan.

 

(2)  Consists of 1,762,049 unvested RSU awards (of which 337,823 constitute PSU awards) and 5,481,457 stock option awards outstanding as of December 31, 2017.

 

(3)  Based on 5,481,457 stock options outstanding as of December 31, 2017.

 

(4)  The 2017 Omnibus Long-Term Incentive Plan replaced the Global Eagle Entertainment Inc. Amended and Restated 2013 Equity Incentive Plan. The awards granted under the Global Eagle Entertainment Inc. Amended and Restated 2013 Equity Incentive Plan remain outstanding under the terms of that plan, but we will not issue any further shares under that plan.

 

(5)  Consists of 3,477,077 unvested RSU awards (of which 345,497 constitute PSU awards) and 1,378,310 stock option awards outstanding as of December 31, 2017.

 

(6)  Based on 1,378,310 stock options outstanding as of December 31, 2017.

 

(7)  Consists of 34,975 RSU awards and 217,538 stock option awards outstanding as of December 31, 2017.

 

(8)  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 April 16, 2018 (the “Beneficial Ownership Table Date”) 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 2017;

 

  each of our current directors; 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 90,936,719 shares of our common stock issued and outstanding as of April 16, 2018 (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 the footnotes to the table below, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of our common stock. Unless otherwise indicated, the address of each individual in the following table is c/o Global Eagle Entertainment, 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 %

Nantahala Capital Management, LLC(4)

  8,700,979   9.6 %

Frontier Capital Management Co., LLC(5)

  8,058,820   8.9 %

Abrams Capital Management, LLC(6)

  7,000,000   7.7 %

Walé Adepoju(7)

  769,242   *

Stephen Ballas(8)

  100,016   *

David M. Davis(9)

  905,954   *

Jeffrey E. Epstein(10)

  103,832   *

Stephen Hasker(11)

  80,132   *

Josh Marks

  193,306   *

Jeff Leddy(12)

  714,684   *

Robert W. Reding(13)

  103,832   *

Jeff Sagansky(14)

  844,672   *

Edward L. Shapiro(15)

  109,237   *

Harry E. Sloan(16)

  203,831   *

Paul Rainey

  87,051   *

Thomas Severson

    *

Eric Sondag

    *

Ronald Steger

  41,774   *

Eric Zinterhofer

    *

All current executive officers and directors as a group (16 individuals)(17)

  3,423,266   3.7 %

 

* Less than 1%

 

(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, 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 PIP, 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, 48th Floor, Boston, MA 02116.

 

(3) 

According to a Schedule 13G/A filed with the SEC on February 14, 2018 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 Aggregator, LLC, a Delaware limited liability company (“EMC Aggregator”), EMC Acquisition Holdings LLC (“EMC Acquisition Holdings”), 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 Aggregator, 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 holds shared voting and shared dispositive power with respect to 5,080,049 shares of the Company’s common stock. EMC Aggregator is the direct owner of 84.3% of the member interests of EMC Acquisition Holdings and may be deemed to share voting and dispositive power with respect to any shares beneficially owned by EMC Acquisition Holdings. As the direct owner of 96.72429% of the equity interests of EMC Aggregator, ABRY Partners also may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Aggregator. As the direct owner of 3.19196% of the equity interests of EMC Aggregator, ABRY Fund also may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

  EMC Aggregator. 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 Aggregator. Each of C.J. Brucato, Tomer Yosef-Or, and James Scola is a member of the board of directors of EMC Aggregator and may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Aggregator, but disclaims beneficial ownership of such shares. ABRY Partners, ABRY Fund and ABRY Partnership, each disclaim beneficial ownership of such shares beneficially owned by EMC Aggregator. ABRY Partners VII Co-Investment GP, LLC, a Delaware limited liability company (“ABRY Co-Investment”), the general partner of ABRY Fund, may be deemed to share voting and dispositive power with respect to any shares beneficially owned by EMC Aggregator, but disclaims beneficial ownership of such Shares. ABRY VII Capital Partners, L.P., a Delaware limited partnership (“ABRY VII Capital”), the general partner of ABRY VII Capital and member of ABRY Co-Investment, may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Aggregator, but disclaims beneficial ownership of such shares. ABRY Partners Capital Investors, LLC, a Delaware limited liability company, the general partner of each of ABRY Co-Investment and ABRY Partners, may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Aggregator, but disclaims beneficial ownership of such shares. ABRY GP, a Delaware limited liability company, the general partner of ABRY Partnership, may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Aggregator, but disclaims beneficial ownership of such shares. Each of Jay Grossman and Peggy Koenig, equal members and managers of each of ABRY GP and ABRY VII Capital LLC, may be deemed to share voting and dispositive power with respect to any of our shares beneficially owned by EMC Aggregator, but each of them disclaims beneficial ownership of such shares. The business address of ABRY Partners, ABRY Fund, ABRY Partnership, EMC Aggregator, EMC Acquisition Holdings, Jay Grossman, and Peggy Koenig is c/o ABRY Partners, 888 Boylston Street, 16th Floor, Boston, MA 02199.

 

(4)  According to a Schedule 13G filed with the SEC on February 14, 2018, Nantahala Capital Management, LLC (“Nantahala”), Wilmot B. Harkey and Dan Mack may be deemed to share voting and dispositive power over 8,700,979 shares of the Company’s common stock held by funds and separately managed accounts under Nantahala’s control. As managing members of Nantahala, 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, has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, approximately 6.3% of the outstanding shares of common stock beneficially owned by Nantahala. The business address of Nantahala is 19 Old Kings Highway S, Suite 200, Darien, CT 06820.

 

(5)  According to a Schedule 13G/A filed with the SEC on February 7, 2018, Frontier Capital Management Co., LLC holds sole voting power with respect to 4,482,360 shares of the Company’s common stock and sole dispositive power with respect to 8,058,820 shares of the Company’s common stock. The business address of Frontier Capital Management Co., LLC is 99 Summer Street, Boston, MA 02110.

 

(6)  According to a Schedule 13G/A filed with the SEC on February 14, 2018 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 5,629,056 shares of the Company’s common stock, Abrams Capital holds shared voting and shared dispositive power with respect to 6,625,709 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 7,000,000 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.

 

(7)  Includes 688,852 shares of the Company’s common stock that Mr. Adepoju has the right to acquire by exercise of vested stock options and 12,310 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.

 

(8)  Includes 64,888 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.

 

(9)  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.

 

(10)  Includes 64,892 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. The remaining amount in the table above for Mr. Epstein represents shares of our common stock held by him and 31,152 RSUs that will vest in full in the next 60 days.

 

(11)  Includes 41,192 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. The remaining amount in the table above for Mr. Hasker represents shares of our common stock held by him and 31,152 RSUs that will vest in full in the next 60 days.

 

(12)  Includes 618,740 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. The remaining amount in the table above for Mr. Leddy represents shares of our common stock held by him.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

(13)  Includes 64,892 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. The remaining amount in the table above for Mr. Reding represents shares of our common stock held by him and 31,152 RSUs that will vest in full in the next 60 days.

 

(14)  Includes 64,892 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 and 31,152 RSUs that will vest in full in the next 60 days.

 

(15)  Includes 64,892 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 and 31,152 RSUs that will vest in full in the next 60 days.

 

(16)  Includes 64,892 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 and 31,152 RSUs that will vest in full in the next 60 days.

 

(17)  Includes Walé Adepoju, Stephen Ballas, Jeffrey E. Epstein, Stephen Hasker, Jeff Leddy, Josh Marks, Per Norén, Robert W. Reding, Jeff Sagansky, Sarlina See, Edward L. Shapiro, Harry E. Sloan, Eric Sondag, Paul Rainey, Ronald Steger and Eric Zinterhofer.

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 2017, our directors, executive officers and greater than ten percent beneficial owners complied with all Section 16(a) filing requirements applicable to them.

 

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CEO PAY RATIO DISCLOSURE

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and by Item 402(u) of Regulation S-K, we provide the following “CEO Pay-Ratio Disclosure.” This presents information about the relationship of (a) the annual total compensation of our employees (based on compensation of a “median employee”) and (b) the annual total compensation of our former CEO Jeff Leddy for 2017. Mr. Leddy became our Company’s Executive Chairman in April 2018. The pay ratio below is a reasonable estimate calculated in good faith, in a manner consistent with Item 402(u) of Regulation S-K.

For 2017:

 

  The annual total compensation of our median employee was $57,400; and

 

  Mr. Leddy’s annual total compensation (as calculated under SEC rules for CEO Pay Ratio Disclosure purposes) was $1,774,144.

 

  Based on this information, we estimate that Mr. Leddy’s annual total compensation was 31 times that of the annual total compensation of our “median employee.”

We used the following methodology, assumptions, adjustments and estimates to identify our “median employee” (based on annual total compensation) as well as to determine the annual total compensation of that “median employee”:

 

  We determined that, as of December 31, 2017, our employee population consisted of approximately 1,340 individuals, with 46% of these individuals located in the United States, 24% located in Europe, 7% located in Asia and 10% located in Central and South America.

 

  Our employee population, after taking into consideration the adjustments permitted by SEC rules, consisted of approximately 1,270 individuals. We excluded from the employee population our employees located in Brazil (25 employees), Kenya (14 employees) and Singapore (31 employees), the number of which in the aggregate represents less than 5% of our total employee population.

 

  To identify our “median employee” from our employee population, we used base pay and actual 2017 AIP bonus payments as our consistently applied compensation measure. (We did not award any AIP bonuses for 2017.)

 

  Using this methodology, we determined that our “median employee” was a full-time, hourly employee located in the United States.

 

  With respect to the annual total compensation of the “median employee,” we identified and calculated the elements of that employee’s compensation for 2017 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation for our “median employee” of $57,400.

 

  With respect to the annual total compensation of Mr. Leddy, his compensation for purposes of this CEO pay-ratio analysis is different than the compensation figure that we present for him in the Summary Compensation Table on page 34 of this Proxy Statement. This is because the SEC’s calculation methodologies for CEO pay-ratio disclosure are different than those required for the Summary Compensation Table, and we have annualized Mr. Leddy’s 2017 base salary for purposes of the pay-ratio analysis whereas the Summary Compensation Table only reflects base salary amounts actually received by him during the portion of 2017 in which we employed him.

We believe that our methodology results in a reasonable estimate of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other employees. However, given the different methodologies that public companies will use to determine an estimate of their CEO pay ratio, you should not use our estimated CEO pay ratio reported above as a basis for comparison between us and other companies.

 

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PROPOSAL 2  APPROVE AN AMENDMENT TO OUR 2017 OMNIBUS LONG-TERM INCENTIVE PLAN

We are asking our stockholders to approve an amendment (the “Amendment”) to our 2017 Omnibus Long-Term Incentive Plan (the “2017 Omnibus Plan”) to increase the number of shares available for grant thereunder by two million shares.

We show the proposed Amendment on page B-10 as part of the full 2017 Omnibus Plan that we have included as Annex B to this Proxy Statement. We are only asking our stockholders to approve the Amendment and are not asking stockholders to approve the 2017 Omnibus Plan, which our stockholders already approved at our last Annual Meeting on December 21, 2017.

We use the 2017 Omnibus Plan for our customary annual long-term incentive and other equity awards to attract, retain and motivate our directors and key employees. As of April 16, 2018, there were a total of 10,228,402 shares of our common stock authorized and reserved for outstanding awards pursuant to the 2017 Omnibus Plan, and we had 5,629,681 remaining shares available for issuance thereunder as of that date. We believe the remaining shares of common stock available for grant under the 2017 Omnibus Plan will be insufficient to meet our targeted equity compensation needs for 2018 and in the future. Accordingly, we are asking our stockholders to approve the Amendment to the 2017 Omnibus Plan to increase the number of shares of common stock available for grant by 2,000,000 shares. If the Amendment is approved, a total of 7,629,681 shares of common stock will now be available for grant under the 2017 Omnibus Plan.

Our Compensation Committee approved the Amendment on April 13, 2018, subject to stockholder approval at this Annual Meeting. If our stockholders now approve the Amendment, then the Amendment will become effective as of the date of the Annual Meeting, and the new additional shares will immediately become available for equity issuances thereunder. If our stockholders do not approve the Amendment, then we will continue to have available the 2017 Omnibus Plan, but as noted above, the amount of remaining shares thereunder will be insufficient to meet our equity-compensation targets for our directors and key employees for 2018 and in the future. We believe that will in turn immediately impair our ability to recruit and retain talent necessary to maintain and grow our business.

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 Amendment. 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

 

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

 

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PROPOSAL 2 APPROVE AN AMENDMENT TO OUR 2017 OMNIBUS LONG-TERM INCENTIVE PLAN

 

Summary of the Amended Plan

The following is only a summary of our 2017 Omnibus Plan (giving effect to the Amendment, the “Amended Plan”) and should not be read in lieu of the actual provisions of the Amended Plan, which we have attached as Annex B to this Proxy Statement. We have indicated the proposed Amendment in a bolded box on page B-10 of Annex B to this Proxy Statement. Note that we are only asking stockholders to approve the Amendment and not the full Amended Plan. We have provided this summary of the full Amended Plan for convenience only.

Background

We designed the Amended 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 Amended 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 Amended Plan, but historically we have only granted equity awards to our senior employees. For example, in 2017, we awarded equity to approximately 150 employees with the title “Director” and above, out of our total personnel population (as of December 31, 2017) of approximately 1,500. This included equity grants to seven executive/Section 16 officers and seven non-employee directors during that period. We may broaden our grant pool in the future to include more junior personnel.

Key Features Protecting Stockholder Interests and Promoting Effective Corporate Governance.

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

 

  No evergreen formula. The Amended 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 Amended 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 Amended 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 Amended 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 Amended 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 “Board of Directors and Corporate Governance—Director Compensation” beginning on page 17, our current outside director compensation program provides for a $75,000 annual cash retainer and a $100,000 annual RSU grant, plus additional cash compensation for outside directors for their service as Board Chair or as chair of select Board committees.)

 

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PROPOSAL 2 APPROVE AN AMENDMENT TO OUR 2017 OMNIBUS LONG-TERM INCENTIVE PLAN

 

 

  No liberal “change of control” definition. The Amended 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 Amended 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.

 

  No “single trigger” vesting on a change of control where awards are assumed. The Amended 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 Amended 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 Amended 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), as applicable.

Share reserve and award limits

The proposed Amendment would authorize 2,000,000 new shares for grants of equity awards, which would be in addition to the available shares remaining under the 2017 Omnibus Plan (which was 5,629,681 as of April 16, 2018). In total (i.e., counting both the new authorization under the proposed Amendment plus the remaining available shares under the 2017 Omnibus Plan as of April 16, 2018), the remaining shares available under the Amended Plan would represent approximately 8.4% of our total outstanding shares of common stock as of April 16, 2018.

The Amended Plan further provides that:

 

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

 

  Shares issued under the Amended 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.