UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant þ☑ Filed by a Party other than the Registrant ¨☐
Check the appropriate box:
Preliminary Proxy Statement | ||
Confidential, for Use of the Commission Only (as permitted byRule 14a-6(e)(2)) | ||
Definitive Proxy Statement | ||
Definitive Additional Materials | ||
Soliciting Material Pursuant to |
Regional Management Corp.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required. | ||||
Fee computed on table below per Exchange ActRules 14a-6(i)(1) and0-11. | ||||
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(2) | Aggregate number of securities to which transaction applies:
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (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 ActRule 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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March 30, 2016
Dear Stockholders:Notice of 2018 Annual Meeting of Stockholders
and Proxy Statement
REGIONAL MANAGEMENT CORP.
979 Batesville Road, Suite B
Greer, South Carolina 29651
(864)You are cordially invited to attend448-7000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 25, 2018
To the 2016Stockholders of Regional Management Corp.:
We hereby give notice that the 2018 Annual Meeting of Stockholders (the “Annual Meeting”) of Regional Management Corp. (“Regional” or the “Company”), which will be held on Wednesday, April 27, 2016,25, 2018, at 11:8:00 a.m. local time, at The Westin Poinsett, 120 South Main Street, Greenville,our headquarters located at 979 Batesville Road, Suite B, Greer, SC 29601.
During the Annual Meeting, we will discuss each item of business described in the Notice of Annual Meeting of Stockholders and Proxy Statement, which we will begin mailing to stockholders on or about March 31, 2016. At the Annual Meeting, stockholders will be asked to:
(i) Elect seven nominees for director to serve until the next annual meeting of stockholders or until their successors are elected and qualified; and
(ii) Ratify the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016.
The Company’s Board of Directors unanimously recommends that you vote “FOR” the election of the director nominees and “FOR” the appointment of RSM US LLP as the Company’s independent registered public accounting firm.
Your vote is important to us. If you do not intend to be present at the Annual Meeting, we ask that you vote your shares by signing, dating, and returning the accompanying proxy card promptly so that your shares of common stock may be represented and voted at the Annual Meeting. Additional instructions regarding the different voting options that we provide are contained on the accompanying proxy card and on page 5 of the accompanying proxy statement. It is important that your shares of common stock be represented at the Annual Meeting so that a quorum may be established. Even if you plan to attend the Annual Meeting in person, please read the proxy materials carefully and then vote your shares by signing, dating, and returning the accompanying proxy card. If you attend the Annual Meeting, you may revoke your proxy and vote your shares in person.
We make available free of charge at our Investor Relations website,www.regionalmanagement.com, a variety of information for investors. Our goal is to maintain the Investor Relations website as a portal through which investors can easily find or navigate to pertinent information about us.
On behalf of the Board of Directors of the Company, thank you for your continued support and ownership of Regional Management Corp. common stock.
Sincerely,
Michael R. Dunn
Chief Executive Officer, Director
REGIONAL MANAGEMENT CORP.
509 West Butler Road
Greenville, South Carolina 29607
(864) 422-8011
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 27, 2016
To the Stockholders of Regional Management Corp.:
We hereby give notice that the Annual Meeting of Stockholders (the “Annual Meeting”) of Regional Management Corp. (“Regional” or the “Company”) will be held on Wednesday, April 27, 2016, at 11:00 a.m. local time, at The Westin Poinsett, 120 South Main Street, Greenville, SC 29601,29651, for the following purposes:
(1) | To elect the |
(2) | To ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
(3) | To hold an advisory vote to approve executive compensation; |
(4) | To hold an advisory vote on the frequency of future advisory votes to approve executive compensation; and |
To transact such other business as may properly come before the Annual Meeting or any adjournments thereof. |
We will begin mailing this Notice of Annual Meeting of Stockholders and our Proxy Statement to stockholders on or about March 23, 2018. Only stockholders whose names appear of record on our books at the close of business on March 4, 2016,February 26, 2018 will be entitled to notice of and to vote at the Annual Meeting or at any adjournments thereof.
You are cordially invited to attend the Annual Meeting. Your vote is important. Whether or not you plan to attend the Annual Meeting in person, you are urged to cast your vote promptly.promptly in order to assure representation of your shares at the meeting and so that a quorum may be established.In advance of the Annual Meeting, you may vote by Internet or by mail. If you attend the Annual Meeting, you may revoke your proxy and vote your shares in person. For specific instructions regarding how to vote, please see
To vote by Internet, please visitwww.proxyvote.com. Have the enclosed proxy card in hand when you access the website, and follow the instructions to obtain your records and to create an electronic voting instruction form. | ||||
To vote by mail, please complete, date, and sign the enclosed proxy card, and mail it in the enclosed envelope. No postage need be affixed if the proxy card is mailed in the United States. |
On behalf of our Board of Directors and our management team, we thank you for your interest in Regional and for your participation in the accompanying proxy materials.Annual Meeting.
By Order of the Board of Directors
Brian J. Fisher
Senior Vice President, General Counsel, and Secretary
Greenville,Greer, South Carolina
March 30, 201622, 2018
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER
MEETING TO BE HELD ON APRIL 27, 2016: THE PROXY STATEMENT AND THE COMPANY’S ANNUAL REPORT ON FORM 25, 2018: The Notice of Annual Meeting of Stockholders, Proxy Statement, and
Annual Report on Form10-K ARE AVAILABLE AT are available free of charge athttps://materials.proxyvote.com/75902K. and on our Investor
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD, AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
IN ACCORDANCE WITH OUR SECURITY PROCEDURES, ALL PERSONS ATTENDING THE ANNUAL MEETING WILL BE REQUIRED TO PRESENT PICTURE IDENTIFICATION.Relations website atwww.regionalmanagement.com under the “Annual Reports” tab.
REGIONAL MANAGEMENT CORP.
PROXY STATEMENT ON SCHEDULE 14A
20162018 Annual Meeting of Stockholders
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Security Ownership of Certain Beneficial Owners and Management | 58 | |||
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REGIONAL MANAGEMENT CORP.
509 West Butler979 Batesville Road, Suite B
Greenville,Greer, South Carolina 29607
(864) 422-801129651
PROXY STATEMENT
For the Annual Meeting of Stockholders to Be Held on April 27, 201625, 2018
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to Be Held on April 27, 2016:25, 2018:
The Notice of Annual Meeting of Stockholders, Proxy Statement, and Annual Report on Form10-K are available at
https://materials.proxyvote.com/75902K and on the Investor Relations website of Regional Management Corp. at
www.regionalmanagement.com.under the “Annual Reports” tab.
March 30, 201622, 2018
20162018 PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summaryIt does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting.
Annual Meeting of Stockholders
Date: | Wednesday, April | |||
Time: | 8:00 a.m. local time | |||
Place: | ||||
Regional Management Corp. Headquarters at 979 Batesville Road, Suite B, Greer, SC 29651 | ||||
Record Date: | February 26, 2018 | |||
Voting: | Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for | |||
Proxy Materials: | The Proxy Statement and the accompanying proxy card are first being |
Meeting Agenda
Proposal | Board Vote Recommendation | Page Reference
| ||||||||
Election of | FOR ALL | 54 | ||||||||
Ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, | FOR | 54 | ||||||||
Advisory vote to approve executive compensation | FOR | 55 | ||||||||
Advisory vote on the frequency of future advisory votes to approve executive compensation | 1 YEAR | 56 | ||||||||
Transact other business as may properly come before the meeting |
Election of Director Nominees
The following table provides summary information about each director nominee. The nominees receiving a plurality of the votes cast at the meeting will be elected as directors.
Director
| Committees | |||||||||||||||||||||||||||
Name | Age | Experience/Qualification | Independent | AC | CC | CGN | Age | Director Since | Experience/Qualification | Independent | Committees | |||||||||||||||||
Alvaro G. de Molina | 58 | 2012 | Leadership, Corporate Finance, Accounting Expertise, Credit Risk | X | X | X | ||||||||||||||||||||||
Name | Age | Director Since | Experience/Qualification | Independent |
AC |
CC |
CGN | |||||||||||||||||||||
✓ |
✓ | |||||||||||||||||||||||||||
Jonathan D. Brown |
33 |
2018 |
Financial Services Industry, Capital Allocation, Investor Relations
|
✓ | ||||||||||||||||||||||||
Roel C. Campos | 67 | 2012 | Leadership, Corporate Governance, Securities Compliance, Regulatory | X | X | C |
69 |
2012 |
Leadership, Cyber Security, Corporate Governance, Government Affairs, Securities Compliance, Regulatory
|
✓ |
✓ |
C | ||||||||||||||||
Maria Contreras-Sweet |
62 |
2018 |
Financial Services Industry, Leadership, Corporate Finance, Technology/Innovation, Corporate Governance, Regulatory, Public Relations, Government Affairs
|
✓ |
✓ | |||||||||||||||||||||||
Michael R. Dunn | 64 | 2014 | Leadership, Industry, Corporate Finance, Accounting Expertise, Credit Risk |
66 |
2014 |
Financial Services Industry, Leadership, Credit Risk, Corporate Finance, M&A, Risk Management, Investor Relations
| ||||||||||||||||||||||
Steven J. Freiberg | 59 | 2014 | Leadership, Industry, Corporate Finance, Accounting Expertise, Credit Risk | X | X | C |
61 |
2014 |
Financial Services Industry, Leadership, Credit Risk, Corporate Finance, Marketing, M&A, Executive Compensation, Technology, Risk Management, Investor Relations
|
✓ |
✓ |
C | ||||||||||||||||
Richard A. Godley | 67 | 1987 | Leadership, Industry | |||||||||||||||||||||||||
Peter R. Knitzer | 57 | 2015 | Leadership, Industry, Corporate Finance, Marketing Expertise, Credit Risk | X | X | X |
59 |
2015 |
Financial Services Industry, Leadership, Credit Risk, Corporate Finance, Marketing, Investor Relations
| |||||||||||||||||||
Carlos Palomares | 71 | 2012 | Leadership, Industry, Corporate Finance, Accounting Expertise, Credit Risk | X | C | X |
73 |
2012 |
Financial Services Industry, Leadership, Credit Risk, Corporate Finance, Executive Compensation, Accounting, Risk Management
|
✓ |
C |
✓ |
AC = Audit Committee | CC = Compensation Committee | CGN = Corporate Governance and Nominating Committee | C = Committee |
Ratification of Independent Registered Public Accounting Firm
As a matter of good corporate governance, we are asking our stockholders to ratify the selection of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.2018.
2015Advisory Vote to Approve Executive Compensation
As required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are providing our stockholders with the opportunity at the Annual Meeting of Stockholders to vote on anon-binding advisory resolution to approve the compensation of our named executive officers (commonly known as a“Say-on-Pay Vote”).
Advisory Vote on the Frequency of Future Advisory Votes to Approve Executive Compensation
As required by Section 14A of the Exchange Act, we are providing our stockholders with the opportunity at the Annual Meeting of Stockholders to vote on anon-binding advisory resolution on whether to have a“Say-on-Pay Vote” every one year, two years, or three years (commonly known as a“Say-on-Pay Frequency Vote”).
2017 Compensation-Related Highlights
Continued |
Performance goals are rigorousand are based almost exclusively on objective, quantitative |
2015 long-term incentive program three-year performance thresholds were not achieved as of December 31, 2017, resulting in the forfeiture of the associated performance-contingent awards |
◾ | 2017 short-term incentive program performance goals were largely achieved, resulting in annual bonus payments at 98.6% of the target bonuses |
✓ | Maintained competitive compensation and incentive program target opportunities for executives to continue to align their overall compensation with the market for executive |
Set our short-term incentive payout opportunities to provide |
Granted long-term incentives |
Compensation Program “Best Practices” Summary
✓ | ||
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ü✓ Significant share ownership guidelines for executives (5x base salary for CEO, 2x for other executive officers) ü✓ Significant share ownership guidelines for directors (3x(5x annual cash retainer)ü✓ Significant portion of compensation is variable and/or performance-based ü✓ No excessive perquisites
| Formalized clawback policy |
✓ | Double-trigger |
ü✓ Prohibition against hedging and pledging ✓ No üre-pricing No re-pricing of equity incentive awards without stockholder approvalü✓ Independent Compensation Committee ü✓ Independent compensation consultant
Fiscal 20152017 Compensation Summary
The following table sets forth the cash and other compensation that we paid to our named executive officers or that was otherwise earned by our named executive officers for their services in all employment capacities during 2015.2017. See the Summary Compensation Table of the Proxy Statement for additional information.
Name and Principal Position | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Michael R. Dunn, | 500,000 | — | 1,999,985 | 572,951 | 448,669 | 44,165 | 3,565,770 | |||||||||||||||||||||
Jody L. Anderson, | �� | 325,000 | — | 199,995 | 63,473 | 291,635 | 76,017 | 956,120 | ||||||||||||||||||||
Donald E. Thomas, | 321,391 | — | 160,687 | 397,810 | 288,396 | 24,400 | 1,192,684 | |||||||||||||||||||||
Daniel J. Taggart, | 296,712 | — | 99,990 | 99,993 | 266,251 | — | 762,946 | |||||||||||||||||||||
Brian J. Fisher, | 220,000 | 6,250 | 91,657 | 175,563 | 118,449 | 9,999 | 621,918 |
Name and Principal Position | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||
Peter R. Knitzer, President and Chief Executive Officer
|
530,000 |
— |
949,985 |
— |
522,580 |
42,552 |
2,045,117 | |||||||
John D. Schachtel, Executive Vice President and Chief Operating Officer
|
207,123 |
— |
— |
299,994 |
204,224 |
21,239 |
732,580 | |||||||
Jody L. Anderson, Former President and Chief Operating Officer
|
127,603 |
— |
172,494 |
172,493 |
125,816 |
178,350 |
776,756 | |||||||
Donald E. Thomas, Executive Vice President and Chief Financial Officer
|
342,000 |
66,667 |
170,994 |
170,995 |
337,212 |
24,900 |
1,112,768 | |||||||
Daniel J. Taggart, Senior Vice President and Chief Risk Officer
|
318,000 |
— |
105,987 |
105,998 |
313,548 |
8,810 |
852,343 | |||||||
Brian J. Fisher, Senior Vice President, General Counsel, and Secretary
|
240,000 |
50,000 |
80,000 |
79,994 |
236,640 |
10,800 |
697,434 |
20172019 Annual Meeting of Stockholders
Stockholder proposals submitted pursuant to SEC Rule14a-8 must be received by us no later than |
Notice of stockholder proposals outside of SEC Rule14a-8 must be delivered to us not earlier than December |
FREQUENTLY ASKED QUESTIONS
This proxy statement (the “Proxy Statement”) and the accompanying proxy card are first being sent on or about March 31, 2016,23, 2018, to the stockholders of Regional Management Corp., a Delaware corporation (“Regional,” the “Company,” “we,” “us,” and “our”), in connection with the solicitation of proxies by our Board of Directors (the “Board”) for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on April 27, 2016,25, 2018, at The Westin Poinsett, 120 South Main Street, Greenville,Regional’s headquarters located at 979 Batesville Road, Suite B, Greer, SC 29601,29651, at 11:8:00 a.m. local time and any postponement or adjournment thereof. Our Annual Report on Form10-K, containing financial statements for the fiscal year ended December 31, 2015,2017, is being mailed together with this Proxy Statement to all stockholders entitled to vote at the Annual Meeting.
Why did I receive a proxy card?card and Proxy Statement?
As a stockholder of record on March 4, 2016,February 26, 2018, you are entitled to vote at ourthe Annual Meeting. The accompanying proxy card is for use at the Annual Meeting if a stockholder either will be unable to attend in person or will attend but wishes to vote by proxy in advance of the Annual Meeting. Instructions as to how you may cast your vote by proxy are found on the proxy card.
The proxy card is solicited by mail by and on behalf of the Company’s Board, and the cost of soliciting proxies will be borne by the Company.us. In addition to use of the mails, proxies may be solicited in person, by telephone, or via the Internet by the Company’sour directors and officers who will not receive additional compensation for such services. The CompanyWe will request banks, brokerage houses, and other institutions, nominees, and fiduciaries to forward the soliciting material to beneficial owners and to obtain authorization for the execution of proxies. The CompanyWe will, upon request, reimburse these parties for their reasonable expenses in forwarding proxy materials to our beneficial owners.
What is the purpose of the Annual Meeting?
The purposes of the Annual Meeting are:
(i) | to elect the |
(ii) | to ratify the appointment of RSM US LLP as |
(iii) | to hold an advisory vote to approve executive compensation; |
(iv) | to hold an advisory vote on the frequency of future advisory votes to approve executive compensation; and |
to transact such other business as may properly come before the Annual Meeting or any adjournments thereof. |
Who is entitled to vote?
Only stockholders of record at the close of business on March 4, 2016February 26, 2018 (the “Record Date”), will be entitled to receive notice of and to vote at the Annual Meeting. As of the Record Date, 12,666,49211,690,602 shares of our common stock, $0.10 par value per share, of the Company were issued and outstanding. The holders of common stock are entitled to one vote per share on any proposal presented at the Annual Meeting.
Brokers that are members of certain securities exchanges and that hold shares of the Company’sour common stock in “street name” on behalf of beneficial owners have authority to vote on certain items when they have not received instructions from beneficial owners. Under the New York Stock Exchange (“NYSE”) rules and regulations governing such brokers, the proposal to ratify the appointment of RSM US LLP as the Company’sour independent registered public accounting firm is considered a “discretionary” item. This means that brokers may vote in their discretion on this proposal on behalf of beneficial owners who have not furnished voting instructions. In contrast, certain items are considered “non-discretionary,“non-discretionary,” and a “brokernon-vote” occurs when a broker or other nominee holding shares for a beneficial owner votes on one proposal but does not vote on another proposal because, with respect to such other proposal, the nominee does not have discretionary voting power and has not received instructions from the beneficial owner. The proposal regardingproposals to elect directors, to approve executive compensation, and to determine the electionfrequency of directors isfuture advisory votes to approve executive compensation are considered “non-discretionary,“non-discretionary,” and therefore, for such proposal,proposals, brokers cannot vote your shares when they do not receive voting instructions from you.
What constitutes a quorum?
As of the Record Date, there were 12,666,492 shares of common stock, $0.10 par value per share, of the Company issued and outstanding, with each share entitled to one vote. The representation in person or by proxy of at least a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum for the transaction of business. Votes withheld from any nominee, abstentions, and “brokernon-votes” are counted as present or represented for purposes of determining the presence or absence of a quorum for the Annual Meeting.
How do I vote?
Stockholders may vote in person or by proxy. Instructions as to how you may cast your vote by proxy are set forth below and are found on the accompanying proxy card.
Vote in Person:If you attend the Annual Meeting, you may vote in person even if you have previously returned your proxy card. |
Vote by Internet |
Vote by Mail:Mark, sign, and date your proxy card and promptly return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
Will other matters be voted on at the Annual Meeting?
Aside from the election of directors and the ratification of the appointment of the independent registered public accounting firm,four proposals described above, the Board knows of no other matters to be presented at the Annual Meeting. If any other matter should be presented at the Annual Meeting upon which a vote properly may be taken, shares represented by all proxies received by the Board will be voted with respect thereto in accordance with the best judgment of the persons named as proxy holders andattorneys-in-fact in the proxies.
May I revoke my proxy instructions?
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with theour Corporate Secretary, of the Company, before the taking of the vote at the Annual Meeting, a written notice of revocation bearing a later date than the proxy; (ii) duly completing a later-dated proxy card relating to the same shares and delivering it to theour Corporate Secretary of the Company before the taking of the vote at the Annual Meeting; or (iii) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy). Any written notice of revocation or subsequent proxy should be sent so as to be delivered to Regional Management Corp., 509 West Butler979 Batesville Road, Greenville, SC 29607,Suite B, Greer, South Carolina 29651, Attention: Corporate Secretary, before the taking of the vote at the Annual Meeting.
How many votes are required to approve each proposal?
With respect to the election ofproposal to elect directors (Proposal No. 1), the seven nominees named in the Proxy Statement to serve as members of the Board until the next annual meeting of stockholders or until their successors are elected and qualified, the seveneight nominees receiving the highest number of affirmative votes of the shares present or represented and entitled to vote at the Annual Meeting shall be elected as directors. With respectRegarding the proposal to the ratification ofratify the appointment of RSM US LLP as the Company’sour independent registered public accounting firm for the fiscal year ending December 31, 2016,2018 (Proposal No. 2), an affirmative vote of a majority of the shares present, in person or represented by proxy, and voting on such matter is required for approval. Abstentions are included inLikewise, the numbercompensation of executive officers (Proposal No. 3) will be approved, on an advisory basis, if a majority of the shares present, in person or represented by proxy, and voting on each matter.such matter is cast in favor of the proposal. Finally, the frequency of the advisory vote on future advisory votes to approve executive compensation (Proposal No. 4) receiving the greatest number of votes cast—one year, two years, or three years—will be deemed by us as the frequency that has been recommended by stockholders. “Brokernon-votes” are not considered voted for the particular matter, and for proposals subject to majority voting (Proposal No. 2 and Proposal No. 3), “brokernon-votes” have the effect of reducing the number of affirmative votes required to achieve a majority for such matter by reducing the total number of shares from which the majority is calculated.
Because your votes on Proposal No. 3 and Proposal No. 4 are advisory, they will not be binding on us, our Board, or our Compensation Committee. However, the Board and the Compensation Committee will consider the outcome of each of these votes when making future compensation decisions for our executive officers or decisions regarding the frequency of the advisory vote on the compensation of our executive officers.
The persons named as proxy holders andattorneys-in-fact in the proxy card, MichaelPeter R. DunnKnitzer and Brian J. Fisher, were selected by the Board and are officers of the Company. All properly executed proxies returned in time to be counted at the Annual Meeting will be voted by such persons at the Annual Meeting. Where a choice has been specified on the proxy with respect to the foregoing matters, the shares represented by the proxy will be voted in accordance with the specifications. If no such specifications are indicated, such proxies will be voted “FOR” the election of the director nominees, and “FOR” the ratification of the appointment of our independent registered public accounting firm.firm, “FOR” the advisory approval of executive compensation, and “ONE YEAR” on the advisory vote on the frequency of future advisory votes on the approval of executive compensation.
How can I correspond directly with Regional Management Corp.?
The address of our principal executive office is 509 West Butler979 Batesville Road, Greenville,Suite B, Greer, South Carolina 29607,29651, and our telephone number is(864) 422-8011.448-7000. In addition, any person interested in communicating directly with the independent Chair of our Board or with any other Board member may address such communication to our Corporate Secretary, 979 Batesville Road, Suite B, Greer, South Carolina 29651, who will forward such communication to the appropriate party.
—
ELECTIONBOARD OF DIRECTORS AND
Our AmendedCORPORATE GOVERNANCE MATTERS
The Board is responsible for directing and Restated Bylaws (the “Bylaws”) currently provide thatoverseeing the numbermanagement of directorsour business and affairs in a manner consistent with the best interests of the Company shall be fixed from timeand its stockholders. The Board has implemented written Corporate Governance Guidelines designed to timeassist the Board in fulfilling its duties and responsibilities. The Corporate Governance Guidelines address a number of matters applicable to directors, including Board composition, structure, and policies; director qualification standards; Board meetings; committees of the Board; roles and expectations of the Board and its directors; director compensation; management succession planning; and other matters. These Corporate Governance Guidelines are available on our Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com. A stockholder may request a copy of the Corporate Governance Guidelines by resolution adopted by the Board. There are presently seven directors.contacting our Corporate Secretary at 979 Batesville Road, Suite B, Greer, South Carolina 29651.
Our Corporate Governance and Nominating Committee (the “Nominating Committee”) is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board. The Nominating Committee considers minimum individual qualifications, including relevant career experience, strength of character, mature judgment, familiarity with our Board evaluatesbusiness and industry, independence of thought, and an ability to work collegially with the size and compositionother members of the Board, on at least an annual basis. In connection therewith,and all other factors it considers appropriate, which may include age, diversity of background, existing commitments to other businesses, potential conflicts of interest with other pursuits, legal considerations (such as antitrust issues), corporate governance background, financial and accounting background, executive compensation background, and the size, composition, and combined expertise of the existing Board. The Board and the Nominating Committee has nominatedmonitor the mix of specific experience, qualifications, and recommends for election asskills of its directors the seven nominees set forth below. Each nominee presently serves as a director. Directors shall be electedin order to serve until the next annual meeting of stockholders or until their successors are elected and qualified or until their earlier resignation, removal, or death.
A candidate for election as a director is nominated to stand for election based on his or her professional experience, recognized achievements in his or her respective fields, an ability to contribute to some aspect of our business, and the willingness to make the commitment of time and effort required of a director. Each of the below-listed nominees has been identified as possessing an appropriate diversity of background and experience, good judgment, deep knowledge of our industry, strength of character, and an independent mind, as well as a reputation for integrity and high personal and professional ethics. Each nominee also brings a strong and unique background and set of skills to the Board, givingassure that the Board, as a whole, competencehas the necessary tools to perform its oversight function effectively in light of our business and experiencestructure. Stockholders may also nominate directors for election at our annual stockholders’ meeting by following the provisions set forth in our Amended and Restated Bylaws (the “Bylaws”), and in such a wide variety of areas.
In selecting this slate of nominees for 2016,case, the Nominating Committee specifically consideredwill consider the background, businessqualifications of directors proposed by stockholders.
When determining whether director nominees have the experience, qualifications, attributes, and certain other information with respectprofessional and functional skills, taken as a whole, to eachenable our Board to satisfy its oversight responsibilities effectively in light of the nominees as set forth below, along with the familiarity of the nominees with our business and prospects,structure, the Nominating Committee has focused primarily on their valuable contributions to our success in recent years and on the skills, experience, and individual attributes that each director brings to the Board, including those discussed in the biographical descriptions and matrix set forth below.
The Board recognizes and embraces the value of a diverse board of directors in improving the quality of its performance and our success. Diversity promotes the inclusion of different perspectives and ideas, mitigates against groupthink, and ensures that the Board has the opportunity to benefit from all available talent. The Board also recognizes the need for its directors to understand and to be able to respond effectively to the financial needs of its diverse customer base. The promotion of a diverse Board makes prudent business sense and makes for better corporate governance.
In February 2018, the Board approved its Board Diversity Policy (the “Diversity Policy”), which has been developedis available on our Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com. The Diversity Policy establishes the Board’s approach to achieving and maintaining diversity on the Board. The Board and the Nominating Committee are committed to actively seeking out highly qualified, diverse candidates to include in the pool from which Board nominees are chosen. The Board seeks to comprise itself of talented and dedicated directors with a diverse mix of expertise in areas needed to foster our business success, as well as a resultdiversity of their servicepersonal characteristics that include, but are not limited to, gender, race, ethnicity, national origin, sexual orientation, age, and geography. The Board and the Nominating Committee implement the Diversity Policy by maintaining a director candidate list comprised of individuals qualified to fill openings on our Board. the Board, which includes candidates with useful expertise who possess diverse personal backgrounds. When director openings occur, the list will be used to assist in selecting new directors. Ultimately, the selection of new directors will be based on the Board’s judgment of the overall contributions that a candidate will bring to the Board, giving due weight to diverse personal characteristics that contribute to the Board achieving the objectives of the Diversity Policy.
The Nominating Committee believes that such familiarity will be helpfulis charged with reviewing all steps taken pursuant to the Diversity Policy on an annual basis, assessing the Board’s progress in addressingachieving diversity, and presenting its findings and assessment to the opportunities and challenges that we face infull Board for input. Because the current business environment.
Each of the seven nominees has consented to being named in this Proxy Statement and to serve asDiversity Policy is a director, if elected. In the event that any nominee withdraws, or for any reason is unable to serve as a director, the proxies will be voted for such other person as may be designated bynew policy, the Nominating Committee as a substitute nominee, buthas not yet performed an annual review and assessment of the Board’s progress in no event will proxies be voted for more than seven nominees.achieving the objectives set forth in the Diversity Policy. The Nominating Committee has, no reason to believe that any nominee will not continue to behowever, considered the current composition of the Board and assessed the diverse characteristics of its current directors, 50% of whom are Hispanic
American, one being a candidate or will not serve if elected.Hispanic American female. The Nominating Committee and the Board are proud of the diverse characteristics of its directors.
Current Directors and Director Nominees
The following is a brief descriptionBoard has the discretion to determine the size of the background, business experience, skills, qualifications, attributes,Board, the members of which are elected at each year’s annual meeting of stockholders. Our Board currently consists of eight directors: Alvaro G. de Molina, Jonathan D. Brown, Roel C. Campos, Maria Contreras-Sweet, Michael R. Dunn, Steven J. Freiberg, Peter R. Knitzer, and certain otherCarlos Palomares, with Mr. de Molina serving as Chair of the Board. Each of these individuals has also been nominated as a director candidate for election at the Annual Meeting.
Biographical information with respect toof each of our directors is provided below. In addition, following the nominees for electionbiographical information of our directors, we have provided a matrix summarizing the background, skills, experience, qualifications, and other attributes of our directors that led the Nominating Committee and the Board to the Board:conclude that such individuals would provide valuable contributions to our business and should therefore serve our company as its directors.
Age: 60 Director Since: 2012 Chair of the Board Member of the Audit Committee and Corporate Governance and Nominating Committee | Mr. de Molina |
JONATHAN D. BROWN
Mr. Brown has served as a director of Regional since January 2018. He is a senior analyst with Basswood Capital Management L.L.C. (“Basswood”), an alternative asset manager with over $1.4 billion of assets under management. Mr. Brown joined Basswood in 2009. In his current role as senior analyst, Mr. Brown is responsible for the research and investment analysis of companies across a broad range of sectors, with a specialized focus on financial services. Prior to Basswood, Mr. Brown worked at Sandelman Partners and Goldman Sachs. Mr. Brown graduated from Emory University’s Goizueta School of Business in 2006 with a B.B.A., holding dual concentrations in Finance and Strategy & Management Consulting, as well as a minor in History. Mr. Brown is the representative of Basswood, our largest stockholder. For a description of our cooperation agreement with Basswood, pursuant to which Mr. Brown is nominated, see “Other Information – Certain Relationships and Related Person Transactions – Cooperation Agreement,” below. | ||
ROEL C. CAMPOS Age: 69 Director Since: 2012 Chair of the Corporate Governance and Nominating Committee Member of the Compensation Committee | Mr. |
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board of directors of WellCare Health Plans, Inc., a publicly-held entity which provides managed care services targeted to government-sponsored health care programs. |
MARIA CONTRERAS-SWEET
Ms. Contreras-Sweet has been a director of Regional since January 2018. She is the Managing Partner of Rockway Equity Partners, and she previously served as a member of President Obama’s cabinet as the Administrator of the U.S. Small Business Administration from April 2014 to January 2017. Since March 2017, Ms. Contreras-Sweet has served as a director and member of the audit committee of Sempra Energy, an energy-services company that invests in, develops, and operates energy infrastructure and provides electric and gas services to customers in North and South America. She was a founder of ProAmerica Bank, where she served as Executive Chairwoman from 2006 to 2014, andCo-Founder and Managing Partner of Fortius Holdings from 2003 to 2006. Prior to that, Ms. Contreras-Sweet served as the California cabinet Secretary of the Business, Transportation and Housing Agency from 1999 to 2003. Earlier in her career, she was an executive with Westinghouse Electric Company’s7-Up/RC Bottling Company. Ms. Contreras-Sweet is also a Distinguished Fellow of the LARTA Institute and serves on the Board of Directors of the Bipartisan Policy Center. | ||
MICHAEL R. DUNN Age: 66 Director Since: 2014 | Mr. |
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STEVEN J. FREIBERG
Mr. |
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Committees, and he served on the board of directors of several of Citigroup’s affiliates, including Citibank N.A., Citicorp Credit Services Inc., Citicorp Investment Services, Citicorp Insurance Group, Citibank Trust N.A., Citibank FSB, and the Citigroup Foundation. Mr. Freiberg has served on the board of directors of MasterCard Incorporated, a publicly-traded |
multinational financial services corporation, since September 2006 and currently chairs its audit committee. He also served on the former U.S. region board of MasterCard from January 2001 until May 2006 and served as Chairman of MasterCard’s United States region board from 2004 until May 2006. In addition, Mr. Freiberg serves on the board of directors or equivalent governing body of OANDA Corporation (a private company providing Internet-based forex trading and currency information services), Social Finance, Inc. (a private online personal finance company that provides student loan refinancing, mortgages, and personal loans), Fair Square Financial, LLC (a private credit card issuer that provides credit cards to “near-prime” customers), and Purchasing Power, LLC (a private specialtye-retailer offering consumer products, vacations, and online education services through payment plans). Mr. Freiberg previously served as a member of the Board of Trustees of the March of Dimes, and he currently serves on the Hofstra University Board of Trustees. |
PETER R. KNITZER
Mr. |
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CARLOS PALOMARES
Mr. |
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There are no family relationships among any of our directors or executive officers.
The Board of Directors unanimously recommends a vote “FOR” the election of each of the nominees listed above.
PROPOSAL TWOMatrix of Director Skills, Experience, and Demographic Background
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RATIFICATION OF THE APPOINTMENT OF
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
RSM US LLP (formerly known as McGladrey LLP) has served asThe following table provides our independent registered public accounting firm since 2007. Uponstockholders and other interested parties with an overview of our directors’ skills, experience, and demographic background. These qualities are of particular value to our business and led the recommendation of the Audit Committee of the Board, the Board has selected RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. The AuditNominating Committee and the Board recommendto conclude that the stockholders ratify the appointment of RSM US LLPsuch individuals would provide valuable contributions to our company and should therefore serve our company as our independent registered public accounting firm for fiscal 2016.
A representative of RSM US LLP plans to be present at the Annual Meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions. Although ratification is not required, the Board is submitting the appointment of RSM US LLP to the stockholders for ratification as a matter of good corporate governance. In the event the stockholders fail to ratify the appointment, the Audit Committee will consider whether to appoint another independent registered public accounting firm.
The following table sets forth the aggregate fees billed to us by our independent registered public accounting firm, RSM US LLP, during the fiscal years ended December 31, 2015 and 2014.its directors.
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||
Audit Fees | $ | 468,993 | $ | 423,322 | ||||||
Audit-Related Fees | $ | 78,383 | $ | 38,249 | ||||||
Tax Fees | $ | 190,790 | $ | 169,300 | ||||||
All Other Fees | $ | — | $ | 8,620 | ||||||
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Total | $ | 738,166 | $ | 639,491 | ||||||
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Alvaro G. de Molina Maria Contreras- Sweet Skills and Experience Financial Services Industry ✓ ✓ ✓ ✓ ✓ ✓ ✓ Other Public Co. Board of Directors ✓ ✓ ✓ ✓ Executive Management ✓ ✓ ✓ ✓ ✓ ✓ ✓ Entrepreneurship/Business Operations ✓ ✓ ✓ ✓ ✓ ✓ ✓ Credit Risk Management ✓ ✓ ✓ ✓ ✓ Corporate Finance and/or Capital Allocation ✓ ✓ ✓ ✓ ✓ ✓ ✓ Marketing and/or Public Relations ✓ ✓ ✓ ✓ Marketing to Hispanic Population ✓ ✓ ✓ Mergers and Acquisitions ✓ ✓ ✓ ✓ Human Resources/Executive Comp ✓ ✓ Cyber Security and/or Technology/Innovation ✓ ✓ ✓ Corporate Governance ✓ ✓ Government Affairs ✓ ✓ Regulatory and/or SEC Compliance ✓ ✓ Audit Committee Financial Expert ✓ ✓ ✓ SOX and Internal Audit ✓ ✓ Risk Management ✓ ✓ ✓ ✓ Business Ethics ✓ ✓ ✓ ✓ ✓ ✓ ✓ Investor Relations ✓ ✓ ✓ ✓ Demographic Background Board Tenure and Independence Year First Appointed or Elected 2012 2018 2012 2018 2014 2014 2015 2012 Board Independent ✓ ✓ ✓ ✓ ✓ ✓ Gender Male ✓ ✓ ✓ ✓ ✓ ✓ ✓ Female ✓ Age Years Old 60 33 69 62 66 61 59 73 Race/Ethnicity White/Caucasian ✓ ✓ ✓ ✓ Hispanic/Latino ✓ ✓ ✓ ✓ In the above table, in accordance with applicable SEC rules: Jonathan
D. Brown Roel C.
Campos Michael R.
Dunn Steven J.
Freiberg Peter R.
Knitzer Carlos
Palomares
“Audit Fees” are fees billed for professional services rendered by the independent registered public accounting firm for the audit of our annual consolidated financial statements, review of consolidated financial statements included in our Forms 10-Q, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements. The amount of Audit Fees for 2014 disclosed in the table above differs from that reported in our previous proxy statement due to an invoice received after the filing of our previous proxy statement and the reclassification of certain expenses from “All Other Fees” to “Audit Fees”.
“Audit-Related Fees” are fees billed for assurance and related services performed by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements that are not reported above under “Audit Fees.” The Audit-Related Fees incurred in 2015 include fees billed for services performed by the independent registered public accounting firm in relation to our sale of charged-off receivables and the accounting treatment and annual procedures relating to the securitization of receivables.
“Tax Fees” are fees billed for professional services rendered by the independent registered public accounting firm for tax compliance, tax advice, and tax planning. In 2014, these fees were for services performed for the filing of our 2013 tax returns and estimated payments for 2014. In 2015, these fees were for services performed for the filing of our 2014 tax returns and estimated payments for 2015.
“All Other Fees” represent fees billed for ancillary professional services that are not reported above under “Audit Fees” or “Audit Related Fees,” such as information technology vendor internal control evaluation, review of earnings per share calculations, and other professional advice.
It is the policy of the Audit Committee to pre-approve all audit and permitted non-audit services proposed to be performed by our independent registered public accounting firm. The Audit Committee reviewed and pre-approved all the services performed by RSM US LLP. The process for such pre-approval is typically as follows: Audit Committee pre-approval is sought at one of the Audit Committee’s regularly scheduled meetings following the presentation of information at such meeting detailing the particular services proposed to be performed. The authority to pre-approve non-audit services may be delegated by the Audit Committee to the Chairman of the Audit Committee, who shall present any decision to pre-approve an activity to the full Audit Committee at the first regular meeting following such decision. None of the services described above were approved by the Audit Committee pursuant to the exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X.
The Audit Committee has reviewed the non-audit services provided by RSM US LLP and has determined that the provision of such services is compatible with maintaining RSM US LLP’s independence.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
CORPORATE GOVERNANCE MATTERS
The Company’s Board is responsible for directing and overseeing the management of the business and affairs of the Company in a manner consistent with the best interests of the Company and its stockholders. The Board has implemented written Corporate Governance Guidelines designed to assist the Board in fulfilling its duties and responsibilities. The Corporate Governance Guidelines address a number of matters applicable to directors, including Board composition, structure, and policies; director qualification standards; Board meetings; committees of the Board; roles and expectations of the Board and its directors; director compensation; management succession planning; and other matters. These Corporate Governance Guidelines are available on the Company’s Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com. A stockholder may request a copy of the Corporate Governance Guidelines by contacting our Corporate Secretary at 509 West Butler Road, Greenville, South Carolina 29607.
The Company’s Board has the discretion to determine the size of the Board, the members of which are elected at each year’s annual meeting of stockholders. Our Board currently consists of seven directors: Alvaro G. de Molina, Roel C. Campos, Michael R. Dunn, Steven J. Freiberg, Richard A. Godley, Peter R. Knitzer, and Carlos Palomares, with Mr. de Molina serving as Chairman of the Board.
The biographical information of Messrs. de Molina, Campos, Dunn, Freiberg, Godley, Knitzer, and Palomares is set forth above under “Proposal One: Election of Directors.”
Ms. Contreras-Sweet and Messrs. Brown, Campos, Freiberg, Knitzer, de Molina, and Palomares are each independent in accordance with the criteria established by the NYSE for independent board members. The Board performed a review to determine the independence of its members and made a subjective determination as to each of these independent directors that no transactions, relationships, or arrangements exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director of the Company. In making these determinations, the Board reviewed the information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to the Company and its management. We define an “independent” director in accordance with Section 303A.02 of the NYSE Rules. The categorical standards that the Board has established to assist it in making independence determinations can be found in our Corporate Governance Guidelines on our Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com.
As described in the Corporate Governance Guidelines, the Board may select its ChairmanChair and the Company’sour Chief Executive Officer in any way that it considers to be in theour best interests of the Company.interests. Therefore, the Board does not have a policy on whether the roleroles of ChairmanChair and Chief Executive Officer should be separate or combined and, if it isthey are to be separate, whether the ChairmanChair should be selected from the independent directors.
Mr. de Molina currently serves as ChairmanChair of our Board. At this time, the Board believes that the separation of the roles of ChairmanChair and Chief Executive Officer promotes communication between the Board, the Chief Executive Officer, and other senior management, and enhances the Board’s oversight of management. We believe that our leadership structure provides increased accountability of our Chief Executive Officer to the Board and encourages balanced decision-making. We also separate the roles in recognition of the differences in the roles. While the Chief Executive Officer is responsible forday-to-day leadership of the Company and the setting of strategic direction, the ChairmanChair of the Board provides guidance to the Chief Executive Officer and coordinates and manages the operation of the Board and its committees.
At this time, the Board believes that our current leadership structure, with a non-employee Chairmanan independent Chair of the Board, is appropriate for the Company and provides many advantages to the effective operation of the Board. The Board will periodically evaluate and reassess the effectiveness of this leadership structure.
The Company’s Nominating Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board. The Nominating Committee considers minimum individual qualifications, including relevant career experience, strength of character, mature judgment, familiarity with the Company’s business and industry, independence of thought, and an ability to work collegially with the other members of the Board, and all other factors it considers appropriate, which may include age, diversity of background, existing commitments to other businesses, potential conflicts of interest with other pursuits, legal considerations (such as antitrust issues), corporate governance background, financial and accounting background, executive compensation background, and the size, composition, and combined expertise of the existing Board. The Board and the Nominating Committee monitor the mix of specific experience, qualifications, and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively
in light of the Company’s business and structure. Stockholders may also nominate directors for election at the Company’s annual stockholders’ meeting by following the provisions set forth in the Company’s Bylaws, and in such a case, the Nominating Committee will consider the qualifications of directors proposed by stockholders.
Mr. Godley, a member of our Board, is designated by certain of our stockholders in accordance with the Amended and Restated Shareholders Agreement, dated March 27, 2012, by and among the Company and certain other stockholders party thereto. Such stockholders with director designation rights have sought to ensure that the Board is composed of members whose particular experience, qualifications, attributes, and professional and functional skills, when taken together, will allow the Board to effectively satisfy its oversight responsibilities, and in identifying Mr. Godley for designation to the Board, have considered those factors described in the foregoing paragraph.
When determining whether the Company’s director nominees have the experience, qualifications, attributes, and professional and functional skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Company’s Nominating Committee focused primarily on their valuable contributions to our success in recent years and on the information discussed in the biographical descriptions set forth above.
The Board held 1416 meetings during the fiscal year ended December 31, 2015.2017. During fiscal 2015,2017, each incumbent director attended more than 75% of the total number of meetings of the Board and committees on which he served. In addition to formal Board meetings, our Board communicates regularlyfrom time to time via telephone, electronic mail, and informal meetings, and our Board and its committees from time to timemay act by written consent in lieu of a formal meeting. Ournon-employee directors met in executive session following each of our regular, quarterly Board meetings in 2015,2017, and the independent members of our Board also periodically met in executive session in 2015.2017. Mr. de Molina presides over each executive session of ournon-employee directors and independent directors.
Other than an expectation set forth in our Corporate Governance Guidelines that each director will make every effort to attend the annual meeting of stockholders, we do not have a formal policy regarding the directors’ attendance at annual meetings. All of our then-current directors attended our last annual meeting of stockholders held on April 22, 2015, except for C. Glynn Quattlebaum, who did not stand for re-election as a director at that annual meeting.27, 2017.
Our Board has three standing committees: the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our Board.
| Audit | Compensation | Corporate Governance and Nominating | Audit
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Jonathan D. Brown
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Roel C. Campos | ü | Chair |
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Maria Contreras-Sweet
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Steven J. Freiberg | ü | Chair |
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Peter R. Knitzer | ü | ü | ||||||||||||||
Alvaro G. de Molina | ü | ü |
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Carlos Palomares | Chair | ü |
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Number of Meetings Held in 2015: | 8 | 10 | 5 | |||||||||||||
Number of Meetings Held in 2017:
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Audit Committee
The Audit Committee is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act. The Audit Committee consists of Messrs. Palomares Campos,(Chair), Freiberg, and de Molina, with Mr. Palomares serving as Chairman.Molina. In accordance with SEC rules and NYSE rules, each of the members of our Audit Committee is an independent director in accordance with the criteria established by the NYSE for the purpose of audit committee membership independence. In addition, the Board has examined the SEC’s definition of “audit committee financial expert” and has determined that Messrs. Palomares, Freiberg, and de Molina satisfy this definition.
Pursuant to the Audit Committee’s written charter, our Audit Committee is responsible for, among other things:
selecting and hiring our independent registered public accounting firm, andpre-approving the audit andnon-audit services to be performed by our independent auditors;
assisting the Board in monitoring the quality and integrity of our financial statements and our accounting and financial reporting processes;
assisting the Board in monitoring our compliance with legal and regulatory requirements;
assisting the Board in reviewing the adequacy and effectiveness of our internal control over financial reporting processes;
assisting the Board in monitoring the performance of our internal audit function;
discussing the scope and results of the audit with the independent registered public accounting firm;
reviewing with management and our independent auditors our annual and quarterly financial statements;
establishing procedures for the receipt, retention, and treatment of complaints received by us regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by our employees and others of concerns regarding questionable accounting or auditing matters; and
preparing the audit committee report that the SEC requires in our annual proxy statement.
The Audit Committee Charter, which contains a more complete explanation of the roles and responsibilities of the Audit Committee, is posted on the Company’sour Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com. A stockholder may request a copy of the Audit Committee Charter by contacting our Corporate Secretary at 509 West Butler979 Batesville Road, Greenville,Suite B, Greer, South Carolina 29607.29651. The Audit Committee held eightsix meetings during the fiscal year ended December 31, 2015.2017. In addition to formal Audit Committee meetings, our Audit Committee communicates regularlyfrom time to time via telephone, electronic mail, and informal meetings.
Compensation Committee
Our Compensation Committee consists of Messrs. Freiberg Knitzer,(Chair), Campos, and Palomares, with Mr. Freiberg serving as Chairman.Palomares. In accordance with NYSE rules, each of the members of our Compensation Committee is an independent director in accordance with the criteria established by the NYSE for the purpose of compensation committee membership independence. Pursuant to the Compensation Committee’s written charter, our Compensation Committee is responsible for, among other things:
reviewing and approving, or making recommendations to the Board with respect to, corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluating our Chief Executive Officer’s performance in light of those goals and objectives, and either as a committee or together with the other independent directors (as directed by the Board), determining and approving our Chief Executive Officer’s compensation level based on such evaluation;
reviewing and approving the compensation of our executive officers, including annual base salary, annual incentive bonuses, specific goals, equity compensation, employment agreements, severance and change in controlchange-in-control arrangements, and any other benefits, compensation, or arrangements;
reviewing and recommending the compensation of our directors;
reviewing and discussing annually with management our “Compensation Discussion and Analysis”;
preparing the Report of the Compensation Committee; and
reviewing and making recommendations with respect to our equity compensation plans.
The Compensation Committee is entitled to delegate any or all of its responsibilities to subcommittees of the Compensation Committee. Additionally, the Compensation Committee may delegate to one or more of our officers the authority to make grants and awards of cash or options or other equity securities to any of ournon-Section 16 officers under our incentive-compensation or other equity-based plans, as the Compensation Committee deems appropriate and in accordance with the terms of such plans, provided that such delegation is in compliance with such plans and applicable law.
The Compensation Committee Charter, which contains a more complete explanation of the roles and responsibilities of the Compensation Committee, is posted on the Company’sour Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com. A stockholder may request a copy of the Compensation Committee Charter by contacting our Corporate Secretary at 509 West Butler979 Batesville Road, Greenville,Suite B, Greer, South Carolina 29607.29651. The Compensation Committee held 10 meetings during the fiscal year ended December 31, 2015.2017. In addition to formal Compensation Committee meetings, our Compensation Committee communicates regularlyfrom time to time via telephone, electronic mail, and informal meetings.
Corporate Governance and Nominating Committee
Our Nominating Committee consists of Messrs. Campos, Knitzer, and de Molina, with Mr. Campos serving as Chairman.(Chair), Ms. Contreras-Sweet, and Mr. de Molina. In accordance with NYSE rules, each of the members of our Nominating Committee is an independent director in accordance with the criteria established by the NYSE for the purpose of corporate governance and nominating committee membership independence. Pursuant to the Nominating Committee’s written charter, the Nominating Committee is responsible for, among other things:
assisting our Board in identifying prospective director nominees and recommending nominees to the Board;
overseeing the evaluation of the Board and management;
reviewing developments in corporate governance practices and developing, recommending, and maintaining a set of corporate governance guidelines; and
recommending members for each committee of our Board.
The Nominating Committee will consider a candidate for director proposed by a stockholder. A candidate must be highly qualified and be both willing to serve and expressly interested in serving on the Board. A stockholder wishing to propose a candidate for the Nominating Committee’s consideration should forward the candidate’s name and information about the candidate’s qualifications to Regional Management Corp., 509 West Butler979 Batesville Road, Greenville,Suite B, Greer, South Carolina 29607,29651, Attn: Corporate Secretary, no later than December 1, 2016, if the stockholder chooses to use the process described in Rule 14a-8 of the Exchange Act, and if the stockholder submits such nomination outside the process described in Rule 14a-8 of the Exchange Act, not earlier than December 28, 201626, 2018 nor later than January 27, 2017.25, 2019. If, following the filing and delivery of these proxy materials, the date of the 20172019 annual meeting of stockholders (the “2019 Annual Meeting”) is advanced or delayed by more than 3020 calendar days from theone-year anniversary date of the 2016 annual meeting of stockholders, the Company2018 Annual Meeting, we will, in a timely manner, provide notice to the Company’sour stockholders of the new date of the 2017 annual meeting of stockholders2019 Annual Meeting and the new dates by which stockholder proposals submitted both pursuant to and outside of SEC Rule14a-8 must be received by the Company. Such notice will be included in the earliest possible Quarterly Report on Form10-Q under Part II, Item 5.
The Nominating Committee shallwill select individuals, including candidates proposed by stockholders, as director nominees who shall have the highest personal and professional integrity, who shall have demonstrated exceptional ability and judgment, and who shallwill be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of theour stockholders. In evaluating nominees, the Nominating Committee will consider, among other things, the director qualifications described above. We do not have a formal policy with regard toabove and will apply the consideration of diversityobjectives outlined in identifying director nominees, but the Nominating Committee strives to nominate directors with a variety of complementary skills so that the Board, as a whole, will possess the appropriate talent, skills, and expertise to oversee our business.Diversity Policy.
The Nominating Committee Charter, which contains a more complete explanation of the roles and responsibilities of the Nominating Committee, is posted on the Company’sour Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com. A stockholder may request a copy of the Nominating Committee Charter by contacting our Corporate Secretary at 509 West Butler979 Batesville Road, Greenville,Suite B, Greer, South Carolina 29607.29651. The Nominating Committee held five meetings during the fiscal year ended December 31, 2015.2017. In addition to formal Nominating Committee meetings, our Nominating Committee communicates regularlyfrom time to time via telephone, electronic mail, and informal meetings.
As part of its role in risk oversight, for the Company, our Audit Committee is responsible for reviewing the Company’sour risk assessment and risk management policies, and for discussing its findings with both management and the Company’sour independent registered public accounting firm. On a quarterly basis,The Audit Committee and the Board reviewsperiodically review the risks that may potentially affect us, as identified and presented by management, including risks reflected in our periodic filings. The Board may also request supplemental information and disclosure about any other specific area of interest and concern relevant to risks it believes are faced by us and our business. The Board believes our current leadership structure enhances its oversight of risk management because our Chief Executive Officer, who is ultimately responsible for our risk management process, is in the best position to discuss with the Board these key risks and management’s response to them by also serving as a director of the Company.
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) and reviews it at least annually.. The Code of Ethics applies to all of our directors, officers, and employees and must be acknowledged in writing by our Chief Executive Officer and Chief Financial Officer. In February 2018, the Board approved certain amendments to the Code of Ethics, which were intended to update and bring the Code of Ethics more in line with current best practices. The Code of Ethics is posted on the Company’sour Investor Relations website under the “Corporate Governance” tab atwww.regionalmanagement.com. A stockholder may request a copy of the Code of Ethics by contacting our
Corporate Secretary at 509 West Butler979 Batesville Road, Greenville,Suite B, Greer, South Carolina 29607.29651. To the extent permissible under applicable law, the rules of the SEC, and NYSE listing standards, we intend to disclose on our website any amendment to our Code of Ethics, or any grant of a waiver from a provision of our Code of Ethics, that requires disclosure under applicable laws, the rules of the SEC, or NYSE listing standards.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2015,2017, Messrs. Campos, Freiberg, Knitzer, de Molina, and Palomares served on our Compensation Committee. No member of the Compensation Committee was an officer or employee of the Company or any of its subsidiaries during the fiscal year ended December 31, 2015.2017. In addition, during the fiscal year ended December 31, 2015, no2017, none of our executive officers of the Company served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officer(s) served on our Board or Compensation Committee.
Each member of the Board is receptive to and welcomes communications from our stockholders and other interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board, including, without limitation, the Chair of the Board, any independent director, or the independent directors as a group, by addressing such communications or concerns to our Corporate Secretary, 979 Batesville Road, Suite B, Greer, South Carolina, 29651, who will forward such communications to the appropriate party.
If a complaint or concern involves accounting, internal accounting controls, or auditing matters, the correspondence will be forwarded to the chair of the Audit Committee. If no particular director is named, such communication will be forwarded, depending on the subject matter, to the chair of the Audit Committee, Compensation Committee, or Nominating Committee, as appropriate.
Anyone who has concerns regarding (i) questionable accounting, internal accounting controls, and auditing matters, including those regarding the circumvention or attempted circumvention of internal accounting controls or that would otherwise constitute a violation of our accounting policies, (ii) compliance with legal and regulatory requirements, or (iii) retaliation against employees who voice such concerns, may communicate these concerns by writing to the attention of the Audit Committee as set forth above, or by calling (800)224-2330 at any time.
Qualitynon-employee directors are critical to our success. We believe that the two primary duties ofnon-employee directors are to effectively represent the long-term interests of our stockholders and to provide guidance to management. As such, our compensation program fornon-employee directors is designed to meet several key objectives:
Adequately compensate directors for their responsibilities and time commitments and for the personal liabilities and risks that they face as directors of a public company;
Attract the highest calibernon-employee directors by offering a compensation program consistent with those at companies of similar size, complexity, and business character;
Align the interests of directors with our stockholders by providing a significant portion of compensation in equity and requiring directors to own our stock;
and
Provide compensation that is simple and transparent to stockholders and reflects corporate governance best practices; and
Where possible, provide flexibility in the form and timing of payments.
The Compensation Committee, with the assistance of the Compensation Committee’s executive compensation consultant, reviews the compensation of ournon-employee directors. In benchmarking director compensation, we use the same compensation peer group that is used to benchmark compensation for our named executive officers (see “Compensation Discussion and Analysis – Executive Compensation–Compensation Objectives and Approaches – Compensation Determination Process” for information about the peer group).
In 2014, the Company awarded its non-employee directors a cash retainer, committee meeting fees, and shares of restricted common stock. In April 2015, the Board revised the non-employee director compensation program to provide that the equity-based portion of the compensation program be split evenly between restricted stock awards and nonqualified stock options, with the stock options fully vested on the grant date.
Our employees who serve as directors receive no separate compensation for service on the Board or on committees of the Board. The Company maintainsWe maintain anon-employee director compensation program structured as follows:
Board Cash Retainer: Eachnon-employee director receives an annual cash retainer of $30,000 payable in quarterly installments ($50,000 in the case of the chairmanchair or lead independent director of the Board of Directors)Board);
Committee Member Cash Retainer: Each member of the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee receives an additional annual cash retainer of $10,000 payable in quarterly installments ($20,000 in the case of the chairmanchair of each committee);
Committee Meeting Fees: Each member of the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee receives a $1,500 meeting fee for each committee meeting attended;
Board Equity-Based Award: Eachnon-employee director receives an annual equity-based award with a value equal to $90,000 ($110,000 in the case of the chairmanchair or lead independent director of the Board of Directors)Board); and
The equity-based awards are in the form of restricted stock and are granted on the fifth business day following the date of the annual stockholders’ meeting at which directors are elected. The date (rounded down to the nearest whole share). The and Corporate Governance and Nominating Committee receives an additional annual equity-based award with a value equal to $10,000 ($20,000 in the case of the chairmanchair of each committee).value of each director’s equity-based award is split evenly between nonqualified stock options and restricted stock. The number of shares subject to the nonqualified stock option award is determined by dividing the value of the award by the fair value per share of common stock on the grant date calculated using the Black-Scholes valuation model. The number of shares subject to the restricted stock award (the “RSA”) is determined by dividing the value of the award by the closing price per share of common stock on the grant date.nonqualified stock options are fully vested on the grant date and expire ten years following the grant date. The restricted stock awardRSA vests and becomesnon-forfeitable as to 100% of the underlying shares on the earlier of the first anniversary of the grant date or the date of the next annual stockholders’ meeting, subject to the director’s continued service from the grant date until the vesting date, or upon the earlier occurrence of the director’s termination of service as a director by reason of death or disability or upon a change in control of the Company. In the event of the director’s termination of service for any other reason, the director forfeits the restricted stock awardRSA immediately. Each equity-based awardThe RSA is subject to the terms and conditions of the Regional Management Corp. 2015 Long-Term Incentive Plan a nonqualified stock option agreement,(as amended and a restricted stock awardrestated, effective April 27, 2017) (the “2015 Plan”) and an RSA agreement, the formsform of which werewas previously approved by the Compensation Committee and the Board and filed with the SEC.
Under the 2015 Plan, the maximum number of shares of common stock subject to awards granted during any12-month period to anon-employee director, taken together with any cash fees paid during such12-month period to suchnon-employee director in respect of Board service, may not exceed $600,000 in total value (calculating the value of any such awards based on the fair market value per share of common stock on the grant date of the award). In the event that the service of a director as a director, committee member, or Board or committee chair commences or terminates during histhe director’s annual service to us, the Company, hisdirector’s cash compensation will be adjusted on apro-rata basis. Annual service relates to the approximately12-month period between our annual meetings of the Company’s stockholders. Each director is also reimbursed for reasonableout-of-pocket expenses incurred in connection with his or her service on our Board.
The following table provides information regarding the compensation paid to each of ournon-employee directors for their service asnon-employee directors during the fiscal year ended December 31, 2015.2017.
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | Total �� ($) | |||||||||||||||||||||
Current Directors: | ||||||||||||||||||||||||||||
Incumbent Directors:
| ||||||||||||||||||||||||||||
Roel C. Campos | 95,571 | 64,988 | 64,993 | 225,552 |
| 82,500
|
|
| 119,992
|
|
| 202,492
|
| |||||||||||||||
Michael R. Dunn
|
| 30,000
|
|
| 89,989
|
|
| 119,989
|
| |||||||||||||||||||
Steven J. Freiberg | 83,923 | 59,984 | 59,997 | 203,904 |
| 84,000
|
|
| 119,992
|
|
| 203,992
|
| |||||||||||||||
Richard A. Godley | 30,000 | 44,988 | 44,999 | 119,987 | ||||||||||||||||||||||||
Peter R. Knitzer | 28,283 | 41,734 | 41,735 | 111,752 | ||||||||||||||||||||||||
Alvaro G. de Molina | 101,071 | 69,992 | 69,997 | 241,060 |
| 86,500
|
|
| 130,000
|
|
| 216,500
|
| |||||||||||||||
Carlos Palomares | 101,675 | 64,988 | 64,993 | 231,656 |
| 101,500
|
|
| 130,000
|
|
| 231,500
|
| |||||||||||||||
Former Directors: | ||||||||||||||||||||||||||||
C. Glynn Quattlebaum | — | — | — | — | ||||||||||||||||||||||||
Richard A. Godley
|
| 16,957
|
|
| 89,989
|
|
| 106,946
|
|
(1) | Mr. |
(2) | On |
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. The Audit Committee operates under a written charter, a copy of which is available on our website,www.regionalmanagement.com, under the “Corporate Governance” tab. This report reviews the actions taken by the Audit Committee with regard to our financial reporting process during the fiscal year ended December 31, 2015, and particularly with regard to the audited consolidated financial statements as of December 31, 20152017 was: Mr. Campos, 5,755 shares; Mr. Dunn, 4,316 shares; Mr. Freiberg, 5,755 shares; Mr. de Molina, 6,235 shares; and Mr. Palomares, 6,235 shares. Due to his resignation in July 2017, Mr. Godley forfeited the RSA granted to him on May 4, 2017, and he had no stock awards outstanding as of December 31, 2014 and for the three years ended2017. In addition, as of December 31, 2015.
2017, Mr. Dunn held 32,774 shares subject to performance-contingent restricted stock unit (“RSU”) award agreements granted to him during his service as our Chief Executive Officer. The Audit Committee is composed solelytotal number of independent directors under existing New York Stock Exchange listing standards and Securities and Exchange Commission requirements. None of the committee members is or has been an officer or employee of the Company or anyshares subject tonon-qualified stock options held by each of our subsidiaries or has engaged in any business transaction or has any business or family relationship with the Company or anynon-employee directors as of our subsidiaries or affiliates. In addition, the Board of Directors has determined that Messrs. Alvaro G.December 31, 2017 was: Mr. Campos, 28,670 shares; Mr. Dunn, 148,866 shares; Mr. Freiberg, 17,941 shares; Mr. de Molina, Carlos30,166 shares; and Mr. Palomares, and Steven J. Freiberg28,670 shares. Mr. Godley had no option awards outstanding as of December 31, 2017. The outstanding equity awards held by Mr. Knitzer as of December 31, 2017 are “audit committee financial experts,” as defined by Securities and Exchange Commission rules.
Our management has the primary responsibility for our financial statements and reporting process, including the systems of internal controls. The independent auditors are responsible for performing an independent audit of our consolidated financial statements in accordance with auditing standards generally acceptedset forth in the United StatesOutstanding Equity Awards at FiscalYear-End table
that is presented elsewhere in this Proxy Statement. Mr. Brown and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes and to select annually the accountants to serve as our independent auditors for the coming year.
The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to fulfill its oversight responsibilities under the Audit Committee’s charter. To carry out its responsibilities, the Audit Committee met eight times during the fiscal year ended December 31, 2015, communicated regularly via telephone, electronic mail, and informal meetings, and from time to time acted by written consent.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, including a discussion of the quality, rather than just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee also discussed our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited consolidated financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, rather than just the acceptability, of our accounting principles, and such other matters as are required to be discussed with the Audit Committee under the applicable Public Company Accounting Oversight Board (“PCAOB”) Standards and SECRule 2-07 of Regulation S-X. In addition, the Audit Committee discussed with the auditors their independence from management and the Company, including the matters in the written disclosures and the letter required by the PCAOB regarding the independent auditors’ communications with the Audit Committee regarding independence. The Audit Committee also considered whether the provision of services during the fiscal year ended December 31, 2015, by the auditors thatMs. Contreras-Sweet were unrelated to their audit of the consolidated financial statements referred to above and to their reviews of our interim consolidated financial statements during the fiscal year is compatible with maintaining their independence.
Additionally, the Audit Committee discussed with the independent auditors the overall scope and plan for their audit. The Audit Committee met with the independent auditors, with and without management present, to discuss the results of their examination, their evaluation of our internal controls, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, for filing with the SEC. This report of the Audit Committee has been prepared bynot members of the Audit Committee. Current membersBoard on December 31, 2017 and had no stock awards or option awards outstanding as of such date.
Followingyear-end, in February 2018, our Compensation Committee increased our director stock ownership requirement from 3x to 5x the Audit Committee are:annual cash retainer, placing the ownership requirement in the 90th percentile of our peer group.
Members of the Audit Committee:
Carlos Palomares (Chairman)
Roel C. Campos
Steven J. Freiberg
Alvaro G. de Molina
The following is a brief description of the background, business experience, and certain other information with respect toregarding each of our executive officers:
MichaelPeter R. DunnKnitzer (age 64) was appointed59) has served as President and Chief Executive Officer of Regional in October 2014 andsince May 2017. From August 2016 until May 2017, Mr. Knitzer served as Chief Executive Officer of Regional. He has also been a director of Regional since July 2014.2015. Mr. Dunn’sKnitzer’s full biographical information is set forth above under “Proposal One: Election“Board of Directors.Directors and Corporate Governance Matters – Current Directors and Director Nominees.”
Jody L. AndersonJohn D. Schachtel(age 50) was appointed (age 56) has served as Executive Vice President and Chief Operating Officer of Regional effective October 1, 2014.since May 2017. Mr. Schachtel has more than 30 years of experience in consumer financial services. From 2013 until 2016, Mr. Schachtel was the Chief Operating Officer of OneMain Financial Holdings, Inc. (formerly known as CitiFinancial). As Chief Operating Officer of OneMain Financial, Mr. Schachtel’s responsibilities included management and oversight of sales, field operations, marketing, and collections. Prior to joining Regional,assuming the Chief Operating Officer role, Mr. AndersonSchachtel served since 2007for over 10 years as OneMain/CitiFinancial’s Executive Vice President, Northeast and Midwest Division. Mr. Schachtel also held various other positions at OneMain/CitiFinancial during his29-year career with the company, including Operations Director and Director of North America Operations at OneMain Financial (formerly CitiFinancial). He also previously served as CitiFinancial’sField Compensation, New Branch Development, and Project Management, before becoming Senior Vice President of North America Compliance from 2001 through 2007, Managing Director at Chesapeake Appraisal & Settlement Services (a divisionCorporate Marketing in 1999. Since March 2017, Mr. Schachtel has also served as a member of CitiFinancial) from 1999 to 2001,the Board of Directors of SilverSun Technologies, Inc., a publicly-traded business application, technology, and consulting company. He serves as the chairman of SilverSun’s compensation committee and as a Districtmember of its audit committee and Branch Manager at CitiFinancial from 1987 through 1999. Mr. Andersonits nominating and corporate governance committee. He received his M.B.A.MBA in Finance from theNew York University of Indianapolis and his B.B.A.B.S. degree in Industrial Engineering and Economics from Roanoke College.Northwestern University.
Donald E. Thomas (age 57) was appointed59) has served as Executive Vice President and Chief Financial Officer of Regional insince January 2013. Mr. Thomas has over 30 years of finance and accounting experience in public and private companies, having previously served since April 2010 as Chief Financial Officer of TMX Finance LLC, a title lending company. Prior to joining TMX Finance LLC, Mr. Thomas spent 17 years with7-Eleven, an operator of convenience stores, where he served in various capacities, including Chief Accounting Officer and Controller, acting Chief Financial Officer, Vice President of Operations, and Vice President of Human Resources. Prior to7-Eleven, Mr. Thomas spent 11 years in the audit function of Deloitte & Touche LLP and one year with the Trane Company as a financial manager. Mr. Thomas earned accounting and finance degrees from Tarleton State University and is a certified public accountant and certified global management accountant, and certified treasury professional.accountant.
Daniel J. Taggart(age 43) was appointed45) has served as Senior Vice President and Chief Risk Officer of Regional insince January 2015. Prior to joining Regional, Mr. Taggart was Executive Vice President of Agility 360, a financial services consultancy. Prior to that, he was Senior Vice President at Wingspan Portfolio Advisors, a specialty mortgage service provider, and also served as Executive Vice President of REDC Default Solutions LLC, a startup division of Auction.com, LLC, a mortgage loss mitigation subservicing company. Before joining REDC Default Solutions LLC, Mr. Taggart spent 11 years at Citigroup, where he held a variety of positions, including Senior Vice President and Senior Credit Officer of CitiMortgage Default Risk Management, Senior Vice President and Senior Credit Officer of Retail Distribution Risk Management, and Senior Vice President and Chief Credit Officer of CitiFinancial (now known as OneMain Financial). Mr. Taggart has also worked for The Associates (prior to its acquisition by Citigroup), FirstPlus Financial, and Fleet Bank in risk management and loan servicing functions. Mr. Taggart received his Bachelor of ScienceB.S. in Finance from Canisius College.
Brian J. Fisher (age 32) was appointed34) has served as Senior Vice President, General Counsel, and Secretary of Regional since February 2018. From January 2013 (when he joined Regional) until February 2018, he served as Vice President, General Counsel, and Secretary in January 2013.Secretary. Prior to joining Regional, Mr. Fisher was an attorney in the Corporate and Securities practice group of Womble Carlyle Sandridge and Rice, LLP (now known as Womble Bond Dickinson (US) LLP) from 2009 to 2013. Mr. Fisher holds a B.A. degree in Economics from Furman University and a J.D. degree from the University of South Carolina School of Law.
There are no family relationships among any of our directors or executive officers.
COMPENSATION DISCUSSION AND ANALYSIS
As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, we are not required to include a Compensation Discussion and Analysis section in our proxy statement. However, for the benefit of our stockholders, we have elected to provide an explanation of our compensation program and decisions through the following discussion, going beyond the scaled disclosure requirements applicable to emerging growth companies. The following discussion of the compensation arrangements of our executive officers should be read together with the compensation tables and related disclosures regarding our current plans, considerations, and expectations with respect to future executive compensation programs.contained elsewhere in this Proxy Statement. Actual compensation programs that we adopt following the date of this Proxy Statement may differ materially from the existing and currently planned programs summarized in this discussion.
Compensation-RelatedExecutive Summary of Compensation Programs
Company Performance and Business Highlights in 2017
We produced another set of strong operating and financial results in 2017, including double-digit growth of our loan portfolio, total revenue, and diluted earnings per share. Our loan portfolio grew by $100 million to $817 million, an increase of 14% from the prior year—our third consecutive year of double-digit portfolio growth. Our core portfolio of small and large installment loans grew by 22%, led by continued, significant expansion in our large loan category. Revenues of $272 million in 2017 were up 13% from 2016, while operating expenses as a percentage of average net receivables were down slightly. Net income for 2017 was $30 million and diluted EPS was $2.54, an increase of 25% and 28%, respectively, from 2016. Finally, our stock price at the close of 2017 was $26.31, a slight increase from our stock price at the end of 2016 and up more than 65% from our stock price of $15.81 at the end of 2014.
Our hybrid growth strategy of increasing average receivables in our existing branches coupled with some de novo branch expansion was central to delivering outstanding 2017 results. At the end of 2016, our average finance receivables per branch was $2.1 million. By the end of 2017, we grew that figure to nearly $2.4 million. The sizable increase in our large loan portfolio continued to drive our organic growth and overall performance, now comprising over 42% of our total loan portfolio.
Perhaps more importantly to our long-term success, we took significant steps to modernize our infrastructure. We have now successfully completed our transition to a new loan origination and servicing system, leaving us well-positioned to continue our top and bottom line growth. Now that we are operating on our new loan system, we have introduced electronic payments, texting and imaging capabilities, an online customer portal, improved lead management, and automated underwriting across our entire branch network. In 2014,addition, we have invested significantly in enhancing our credit function, most notably through thebuild-out of our new centralized collections team that focuses on late-stage delinquencies, allowing our branch employees to focus more of their time on sales and servicing.
We also continued to enhance our liquidity in 2017 by expanding and diversifying our funding sources. In the second quarter, we entered into a $125 million warehouse facility (expandable to $150 million) that is funded by large loan receivables. In addition, we renewed and expanded our senior revolving credit facility committed line from $585 million to $638 million, with a maturity date of June 2020.
We were pleased with our 2017 results, and we believe that the compensation paid to our named executive officers (our “NEOs”) for 2017 appropriately reflects and rewards their contributions to our performance.
Compensation Program Highlights in 2017
In 2017, our Compensation Committee, with the assistance offrom an independent compensation consultant, Veritas Executive Compensation Consultants (“Veritas”), an independent compensation consultant, significantly enhancedcarefully reviewed our executive compensation program. program to ensure that it is designed to achieve its intended objectives and continues to reflect executive compensation “best practices.” Our Compensation Committee, Board, and stockholders took a number of important actions in 2017:
Compensation Program Best Practices
The primary objectives of our executive compensation program are to attract and retain talented executives to effectively manage and lead our company and to create long-term stockholder value. We compensate our executive officers primarily through a mix of base salary, performance-based annual cash awards, and service- and performance-based long-term incentive awards. Consistent with ourpay-for-performance philosophy, a substantial portion of our executives’ compensation is at risk and linked to the assistancesuccessful performance and management of Veritas, we opted not to make any significant changes to our compensation practices, other than to introduce a key employee retention program.company against rigorous performance measures established by our Compensation Committee. Our 20152017 executive compensation program includedcontinued to include a number of best compensation practices, including the following features:following:
Alignment of executive pay with company |
|
Performance goals |
|
|
Competitive compensation and incentive program target opportunities for executives to continue to align their overall compensation with the market for executive talent |
✓ |
✓ | Granted long-term incentives |
No payment of excessive perquisites to any NEO or other key employee |
✓ | Double-triggerchange-in-control provisions included in all employment agreements and long-term incentive award agreements |
✓ | Prohibition againstre-pricing of equity incentive awards without stockholder approval under our 2015 Plan |
✓ | Stock Ownership and Retention Policy for NEOs and directors (5x base salary for CEO, 2x base salary for other |
Compensation Recoupment Policy, or “clawback policy,” for NEOs and other key |
Prohibition against hedging and pledging, as set forth in our Code of Business Conduct and Ethics |
✓ | Compensation program governed by an |
Executive SummaryAligning Pay with Performance
Fiscal 2015 Company Performance
At the end of 2014 and in 2015, under new executive leadership, we set out specific near-term objectives in an effort to reposition Regional for stability and growth. Among our objectives, we were determined to regain control of the credit qualityWe believe that a substantial portion of our portfolio, focus our top-line efforts on our smallexecutive officers’ compensation should be tied to their performance and large installment loans—our most important categories—the short- and further add to our management depth. We also sought to constructively reposition our expense structure to better align with the profit model for our company. Through these efforts, we believe we have repositioned our company for long-term sustainable and profitable growth.
Overall, fiscal 2015 was a year of solid financial and operating results with growth on both our top and bottom lines, improved credit quality, and a 15% increase in our total finance receivables, including a tripling of the size of our large loan portfolio. Our total revenue increased $12.6 million, or 6.1%, to $217.3 million in 2015, from $204.7 million in 2014. Our net income increased $8.6 million, or 57.9%, from $14.8 millioncompany.
We developed our long-term incentive program in 2014 to $23.4 million in 2015,consultation with Veritas. In 2013, our Chief Executive Officer and the majority of our NEOs did not receive any long-term incentive awards. In addition, when we appointed a new Chief Executive Officer in late October 2014, he did not receive any long-term incentive awards until we finalized his employment agreement in 2015. As a result, the annualized total direct compensation of our Chief Executive Officers who were serving at the end of 2013 and 2014 was substantially below both the median of our peer group and our diluted earnings per share rose from $1.14 incurrent Chief Executive Officer’s total direct compensation. We believe that the creation and evolution of our long-term incentive program since 2014 has been critical to $1.79 in 2015. Charge-off rates also showed improvement versusour ability to link our executives’ pay with the prior yearperformance of our company, to align our executives’ interests with those of our stockholders, and to remain competitive in the aggregate, as well as on a portfolio basis.marketplace for executive talent.
Our Annual Incentive Plan ties our executive officers’ compensation directly to our financial and operational performance based upon clearly-defined, objective performance measures. In contrast to fiscal 2014, when our performance fell well short of expectations and our executive officers were paid only 22.39% of their target annual bonuses under our Annual Incentive Plan (as amended, the “Annual Incentive Plan”), our executive officers were paid 89.73% of their target annual bonuses under our Annual Incentive Plan for fiscal 2015 as a result of our strong financial and operating results.
Changes in Executive Officers
In January 2015, we announced the appointment of Daniel J. Taggart as our Senior Vice President and Chief Risk Officer, and in April 2015, we announced that A. Michelle Masters was no longer an executive officer, with her resignation effective as of May 2015.
Aligning Pay with Performance
In 2014, we made several significant changes to our executive compensation program that were designed to morenow embodies ourpay-for-performance philosophy and closely tieties the interests of our key executives withto those of our stockholders. We believe that with these changes,heavily weight our executive officers’ compensation program now embodies our pay-for-performance philosophy more strongly than before.in performance-based short- and long-term incentive awards that are designed to reward exceptional performance. The following table describes the program design for each element of our incentive-based pay in 2015.2017.
Pay Elements | Program Design | |
|
| |
Incentive | • Consistsentirely of performance-based awards: ◇ Metrics include net income from operations, average net finance receivables, net credit losses as a percentage of average net finance receivables, total net debt/EBITDA, total general and administrative expense percentage, and an analysis by our Compensation Committee of our executives’ execution against short-term strategic objectives • Motivates our executives and brings total cash opportunities to competitive levels • Significant upside opportunity for high performance, but with a challenging threshold | |
Long-Term Incentive Program | • Consists of performance-contingent
• Provides strong incentive to meet or exceedpre-established long-term financial goals that align with long-term stockholder interests, and is utilized to attract, retain, and motivate executive |
Compensation Program “Best Practices” SummaryThe compensation packages of our Chief Executive Officer and our other NEOs are closely aligned with performance. The majority of compensation is variable and performance-based:
|
Target Pay Mix | |
|
|
Note: The Chief Executive Officer target pay mix above is that of Mr. Knitzer, who joined Regional in 2016. It reflects his aggregate target pay mix for 2016 (partial year) and 2017. The Other NEO target pay mix set forth above is for our incumbent NEOs, Messrs. Thomas, Taggart, and Fisher, and our new Executive Vice President and Chief Operating Officer, Mr. Schachtel. For incumbent NEOs, we have used 2017 compensation data, and for Mr. Schachtel, we have used his aggregate target pay mix for 2017 (partial year) and 2018, as set forth in his employment agreement and more fully described below. The presentation excludes perquisites, which are an immaterial component of our executives’ compensation.
Results of Short- and Long-Term Incentive Programs
Our short-term incentive program provides our executives with the opportunity to earn performance-based annual cash awards pursuant to our Annual Incentive Plan (as amended, the “Annual Incentive Plan”). The achievement and payment of annual cash awards in 2017 was tied directly to our financial and operational performance, based primarily (85%) on clearly-defined, objective performance measures and, to a lesser extent (15%), on our Compensation Committee’s assessment of our executive team’s achievement of its short-term strategic objectives. For 2017, our executive officers were paid 98.6% of their target annual bonuses under our Annual Incentive Plan as a result of our strong financial and operating results and the execution of certain key strategic objectives, including the successful completion of our transition to a new loan origination and servicing platform.
Our long-term incentive program provides for the delivery of long-term incentive awards through a combination of three award vehicles:(i) non-qualified stock options, (ii) performance-contingent RSUs, and (iii) cash-settled performance units. Vesting of each of the performance-contingent awards is subject to, among other things, the achievement of performance objectives over a three-year performance period that begins on January 1st of the grant year. The three-year performance period established under the 2015 long-term incentive program ended on December 31, 2017. The performance metrics for the performance-contingent RSUs and cash-settled performance units under the 2015 long-term incentive program were, respectively, cumulative EBITDA and cumulative basic net income per share over the performance period. In February 2018, as described in greater detail below, our Compensation Committee determined that we failed to meet the threshold performance goals set under the 2015 long-term incentive program, and as a result, no compensation was earned or paid pursuant to the 2015 performance-contingent RSUs or cash-settled performance units, and all shares associated with the performance-contingent RSUs were forfeited.
Stockholder Outreach and Engagement
Stockholder outreach is a central feature of our investor relations philosophy. We provide numerous opportunities for current and prospective stockholders to gain access to our management team through attendance at investor conferences,one-on-onein-person meetings, and telephone calls. Through these interactions, we are able to educate current and prospective investors about our company, learn about concerns of stockholders, and provide investors with a better understanding of our business model and philosophy. We also receive valuable feedback from investors on topics including strategy, corporate governance, and compensation, which the Board and management take into consideration in making future business and compensation decisions.
Since our 2017 annual meeting of stockholders, we reached out to institutional investors owning more than 60% of our outstanding common stock (as of September 30, 2017), specifically for the purpose of receiving their feedback regarding executive compensation practices and corporate governance matters. Based on the feedback received, we have made and will continue to make certain changes to our compensation and corporate governance practices and disclosures. For example, certain investors requested that we increase the percentage of independent directors on our Board and improve the gender diversity of our Board. In response, we added two new independent directors, including Maria Contreras-Sweet, and adopted a Board Diversity Policy. See “Board of Directors and Corporate Governance Matters – Board Diversity.” Independent directors now hold 75% of our Board seats. In addition, certain investors expressed concern that we had granted retention awards in consecutive years (2015 and 2016) to certain executives pursuant to our key employee retention program. In response, we did not grant any retention awards to executive officers in 2017.
In 2018 and beyond, we expect to continue our stockholder outreach, including by making ourselves available to hear stockholder feedback regarding executive compensation and corporate governance practices.
Executive Compensation Objectives and Approaches
Compensation Program Objectives
The primary objectives of our executive compensation program are to attract and retain talented executives to effectively manage and lead the Companyour company and to create value for our stockholders.long-term stockholder value. The compensation packages for our executive officers for 20152017 generally include a base salary, performance-based annual cash awards, time-service- and performance-based equity awards, retentionlong-term incentive awards, and other benefits. Our current compensation program for our executive officers has been designed based on our view that each component of executive compensation should be set at levels that are necessary, within reasonable parameters, to successfully attract and retain skilled executives and that are fair and equitable in light of market practices.
Base salaries are intended to provide a minimum, fixed level of cash compensation sufficient to attract and retain an effective management team when considered in combination with other components of our executive compensation program. The base salary element is meant to provide our executive officers with a stable income stream that is commensurate with their responsibilities and to compensate them for services rendered during the fiscal year.
Consistent with ourpay-for-performance strategy, our performance-based annual cash incentive program is customized to achieve specific objectives, reward increased levels of operational success, and place emphasis on appropriate levels of performance measurement. The key goals addressed by our short-term incentive program include (1) achievement of short-term financial and operational objectives, (2) increased stakeholder/stockholder value, (3) motivation and attraction of key management talent, (4) rewarding key contributors for performance against established criteria, and (5) focusfocusing on ourpay-for-performance compensation strategy. Benefits earned under our short-term incentive program are paid under our Annual Incentive Plan, which wasre-approved by our stockholders at our 2015 annual meeting of stockholders.
Our long-term incentive program, which includesnon-qualified stock options, performance-contingent RSUs, and cash-settled performance units, operates in tandem with our short-term incentive program and is consistent with ourpay-for-performance strategy. Prior to 2014, we granted only service-based stock options, but our current long-term incentive program, approved in 2014, includes, in addition to stock options, performance-contingent restricted stock units (“RSUs”) and cash-settled performance units. Performance-based long-term incentives and time-basedservice-based option awards can provide significant benefits to both our employees and stockholders. These long-term incentives generally are intended to create (1) a strong sense of ownership, (2) focus on achievement of long-term, strategic business objectives, (3) an enhanced linkage between the interests of our executives and stockholders, (4) an enhanced relationship between pay and performance, and (5) an incentive to attract and retain superior employees. Long-term incentive program benefits will beare issued under our 2015 Long-Term Incentive Plan (the “2015 Plan”), which was approved by our stockholders at our 2015 annual meeting of stockholders. No further awards may be granted understockholders andre-approved, as amended and restated, at our 2007 Management Incentive Plan (the “2007 Plan”) or our 2011 Stock Incentive Plan (the “2011 Plan” and, together with the 2007 Plan, the “Prior Plans”) after April 22, 2015. However, awards that are outstanding under the Prior Plans will continue in accordance with their respective terms.2017 annual meeting of stockholders.
The discussion below includes a review of our compensation decisions with respect to fiscal 2015.program for 2017 and a preview of certain aspects of our compensation program for 2018. Our named executive officersNEOs for fiscal 20152017 were:
Peter R. | President and Chief Executive Officer | |
John D. Schachtel | Executive Vice President and Chief Operating Officer | |
Jody L. Anderson | Former President and Chief Operating Officer | |
Donald E. Thomas | Executive Vice President and Chief Financial Officer | |
Daniel J. Taggart | Senior Vice President and Chief Risk Officer | |
Brian J. Fisher | Senior Vice President, General Counsel, and Secretary |
Compensation Determination Process
The Compensation Committee reviews and approves the compensation determinations for all of our executive officers. In setting an executive officer’s compensation package and the relative allocation among different types of compensation, we consider the nature of the position, the scope of associated responsibilities, the individual’s prior experience and skills, and the individual’s compensation expectations, as well as the compensation of our existing executive officers at the Company and our general impressions of prevailing conditions in the market for executive talent.
Engagement and Use of an Independent Compensation Consultant
The Compensation Committee has the authority to hire outside advisors and experts, including compensation consultants, to assist it with director and executive officer compensation determinations. The Compensation Committee has retained the services of Veritas Executive Compensation Consultants, an independent compensation consultant, since 2014 to ensure that our compensation practices are appropriate for our industry, to review and to make recommendations with respect to executive officer and director cash and equity compensation, and to update our peer group, in each case for the Compensation Committee’s use in setting compensation.
Veritas’ recommendations to the Compensation Committee were generally in the form of suggested ranges of compensation or descriptions of policies that Veritas currently considers “best practice” in our industry and for publicly-traded companies. The Compensation Committee used Veritas’ reports to further its understanding of executive officer cash and equity compensation practices in the market.
During 2017, Veritas worked only for the Compensation Committee and performed no additional services for us or any of our executive officers. The Compensation Committee Chair approved all work performed by Veritas. During 2017, the Compensation Committee and the Company did not use the services of any other compensation consultant. The Compensation Committee has also engaged Veritas in 2018 to provide similar services.
Our Compensation Committee has assessed the independence of Veritas, taking into account, among other things, the factors set forth in NYSE rules, and has concluded that no conflict of interest exists with respect to the work Veritas performed or performs for our Compensation Committee and that Veritas is independent under NYSE rules.
Establishment and Use of a Peer Group
We generally monitor compensation practices in the market where we compete for executive talent to obtain an overview of market practices and to ensure that we make informed decisions on executive pay packages. For 20152017 compensation decisions, to obtain a sense of the market and a general understanding of current compensation practices, we reviewed the compensation awarded by a peer group of publicly-traded companies. TheIn addition, as described in greater detail below, the vesting of certain of our executives’ long-term incentive awards is determined based upon our financial performance compared to the financial performance of our peer group over a three-year performance period.
At the outset of 2017, based upon prior peer group reviews conducted with the assistance of Veritas, our peer group consisted of the following companies were selected,companies:
• Aaron’s, Inc. • America’sCar-Mart, Inc. • Asta Funding, Inc. • Atlanticus Holdings Corp. • Consumer Portfolio Services, Inc. • Credit Acceptance Corp. • Encore Capital Group, Inc. | • EZCORP, Inc. • FBR & Co. • FirstCash, Inc. • Green Dot Corporation • JMP Group LLC • Marlin Business Services Corp. • NewStar Financial, Inc. | • Nicholas Financial, Inc. • OneMain Holdings, Inc. • PRA Group, Inc. • Rent-A-Center, Inc. • The J.G. Wentworth Company • World Acceptance Corporation |
In the third and fourth quarters of 2017, with assistance from Veritas, we reviewed our peer group using a scorecard-based approach that involved applying several filters (e.g., strong financial health, positive shareholder standing, similar in size, similar in industry classification, presence of overlapping peers, etc.),identification as a peer by a proxy advisory firm) and selecting the most qualified peer companies from a broader list of candidates:candidates. Based on the evaluation, our Compensation Committee determined to remove Aaron’s, Inc., FBR & Co.,Rent-A-Center, Inc., and The J.G. Wentworth Company from our peer group and to add Enova International, Inc., Capstead Mortgage Corporation, CYS Investments, Inc., On Deck Capital, Inc., and B. Riley Financial, Inc. to our peer group. As a result, our new peer group for 2018 consists of the following companies. As of the time that the Compensation Committee approved our new peer group, we were in the 47th percentile of the peer group based on revenue.
•
•
• • B. Riley Financial, Inc. • Capstead Mortgage Corporation
• Consumer Portfolio Services, Inc.
• Credit Acceptance Corp.
| • CYS Investments, Inc. • Encore Capital Group, Inc. • Enova International, Inc.
• EZCORP, Inc.
•
• Green Dot Corporation
• JMP Group LLC | • Marlin Business Services Corp. | • NewStar Financial, Inc.
• Nicholas Financial, Inc. • On Deck Capital, Inc.
• OneMain Holdings, Inc.
• PRA Group, Inc.
•
|
Proxy advisory firms Institutional Shareholder Services, Inc. and/or Glass, Lewis & Co. have identified 18 of these companies (or 85% of our total peer group) as peers of Regional. These companies are largely within the consumer finance industry,or specialty finance industries, are similar in size and/or scope to Regional, and/or are companies that Regional competes against for products, services, and human capital. In March 2016, the Compensation Committee reviewed the aboveSome companies included in our peer group will meet some, but not all, of these criteria. For example, OneMain Holdings, Inc. (doing business as OneMain Financial) is larger than us, but it competes directly with us in the consumer finance industry both for customers and determined to remove Actua Corporation f/k/a ICG Group, Inc. and Dollar Financial Corp. (which no longer is a publicly-traded company) from the peer group and to add Asta Funding, Inc., Atlanticus Holdings Corp., FBR & Co., and The J.G. Wentworth Company to the peer group.for human capital. In fact, two of our executive officers were previously employed by OneMain. As a result, of such actions, as of March 2016,despite being a larger company, we believe it is important to include OneMain in our peer group consiststo ensure that we maintain awareness of the following companies:our direct competition, which will assist in our efforts to retain talented executives and other employees. However, in
setting compensation levels for our executive officers, as noted below, our Compensation Committee remains cognizant that OneMain and certain other of our peer companies are larger than us.
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Consistent with our compensation objectives of attracting and retaining top executive talent, we believe that the base salaries and performance-based short- and long-term incentive compensation of our executive officers should be set at levels which are competitive with our peer group companies of comparable size, although we do not target any specific pay percentile for our executive officers. The peer group is used more as a general guide, being mindful of the following:
Appropriate base salaries for our executive officers should generally be in line with those paid by peer group companies of comparable size.
Performance-based short- and long-term incentive awards should reward exceptional performance, which can result in overall compensation that can exceed those of peer group companies of comparable size.
Total compensation for executive officers may approach the higher end of the compensation at such peer group companies of comparable size, but only if high levels of short- and long-term performance are reached.
The Compensation Committee has the authority to hire outside advisors and experts, including compensation consultants, to assist it with director and executive officer compensation determinations. The Compensation Committee retained the services of Veritas Executive Compensation Consultants, an independent compensation consultant, in fiscal 2014 and fiscal 2015 to help ensure that our compensation practices were appropriate for our industry, review and make recommendations with respect to executive officer and director cash and equity compensation, and update our peer group, in each case for the Compensation Committee’s use in setting fiscal 2015 compensation.
Veritas’ recommendations to the Compensation Committee were generally in the form of suggested ranges for compensation or descriptions of policies that Veritas currently considers “best practice” in our industry. The Compensation Committee used Veritas’ reports to further its understanding of executive officer cash and equity compensation practices in the market.
During fiscal 2015, Veritas worked only for the Compensation Committee and performed no additional services for the Company or any of its executive officers. The Compensation Committee Chairman approved all work performed by Veritas. During fiscal 2015, the Compensation Committee and the Company did not use the services of any other compensation consultant. The Compensation Committee has also engaged Veritas in 2016 to provide similar services.
Our Compensation Committee has assessed the independence of Veritas, taking into account, among other things, the factors set forth in Exchange Act Rule 10C-1 and NYSE listing standards, and has concluded that no conflict of interest exists with respect to the work Veritas performed or performs for our Compensation Committee and that Veritas is independent under Exchange Act Rule 10C-1 and NYSE listing standards.
Each executive officer is eligible to receive a balance of variable and fixed compensation. The following table describes the various forms of compensation:
Pay Elements |
| Rationale for Form of Compensation | ||
Base Salary | • Cash | • To attract and retain executive
• To provide a fixed base of compensation generally aligned to peer group | ||
Short-Term Incentive | • Performance-based annual cash bonus | • To drive the achievement of key business results on an annual
• To recognize individual executives based on their specific and measurable
• To structure a meaningful amount ofat-risk, performance-based annual compensation | ||
Long-Term Incentive | • Performance-based long-term incentives:
•
| • To drive the sustainable achievement of key long-term business
• To align the interests of executives with
• To structure a meaningful amount ofat-risk, performance-based long-term compensation
• To attract, retain, and motivate executive |
Base SalariesSalary
Annual base salaries are established on the basis of market conditions at the time we hire an executive, as well as by taking into account the particular executive’s level of qualifications and experience. The Compensation Committee reviews the base salaries of our executive officers annually, and any subsequent modifications to annual base salaries are made in consideration of the appropriateness of each executive officer’s compensation, both individually and relative to the other executive officers, the individual performance of each executive officer, and any significant changes in market conditions. We do not apply specific formulas to determine increases.
The Compensation Committee approved executive officer annual base salaries for 20152017 and 20162018 as follows:described in the following table.
Name | 2014 Salary | 2015 Salary | 2016 Salary | |||
Michael R. Dunn | $500,000 | $500,000 | $520,000 | |||
Jody L. Anderson | $325,000 | $325,000 | $335,000 | |||
Donald E. Thomas | $309,000 | $321,391 | $332,000 | |||
Daniel J. Taggart | N/A | $300,000 | $308,000 | |||
Brian J. Fisher | $180,000 | $220,000 | $230,000 |
Name
| 2017 Base Salary
| 2018 Base Salary
| ||||||||
Peter R. Knitzer, President and Chief Executive Officer
| $530,000
| $550,000
| ||||||||
John D. Schachtel, Executive Vice President and Chief Operating Officer
| $350,000
| $360,000
| ||||||||
Jody L. Anderson Former President and Chief Operating Officer
| $345,000
| N/A
| ||||||||
Donald E. Thomas, Executive Vice President and Chief Financial Officer
| $342,000
| $355,000
| ||||||||
Daniel J. Taggart, Senior Vice President and Chief Risk Officer
| $318,000
| $330,000
| ||||||||
Brian J. Fisher, Senior Vice President, General Counsel, and Secretary
| $240,000
| $300,000
|
Annual base salaries areNote:pro-rated for any partial year. In February 2018, in recognition of his performance and service to our company, the Board promoted Mr. Taggart began serving asFisher from Vice President to Senior Vice President and Chief Risk Officer on January 5, 2015. The Company paid Mr. Taggart $296,712 inincreased his base salary on accountaccordingly. Following the increase, Mr. Fisher’s base salary remains below the 25th percentile relative to 5th-ranked NEOs in our peer group. Our
Compensation Committee believes that it has set base salaries at appropriate levels to attract and retain effective executives and that base salaries, when combined with short- and long-term incentives, are an important component of service in 2015.
Performance-Based Annual Cash Awards
Our annual incentive program is designed to drive achievement of annual corporate goals, including key financial and operating results and strategic goals that create value for stockholders.long-term stockholder value. Our executive officers are eligible for performance-based annual cash awards linked to our performance in relation to performance targets set by our Compensation Committee.
Components of Annual Incentive Program
The awards for fiscal 20152017 were based primarily (85%) on our performance with respect to the metrics in the following table. TheseThe metrics in the table below drive the overall performance of our business from year to year and are elements of our historical financial success. Our annual incentive program in fiscal 2016 also will utilize the metrics in the following table. In addition, new for fiscal 2016, our Compensation Committee, upon the advice of Veritas, has elected to base a portion (15%) of the annual cash award opportunity on our Compensation Committee’s qualitative assessment of our executive team’s achievement of its short-term strategic objectives.
Performance Metric | What it Measures | Rationale for Metric | ||
Net Income from Operations |
| • Measures the effectiveness of our management team’s execution of our strategic and operational
• Reflects business variables and factors that are within management’s control or influenced by decisions made by | ||
|
|
| ||
|
| • We seek to continually grow our business on a consistent and sound
• We establish annual growth objectives for our management team for loans that we originate and | ||
Net Credit Losses as a Percentage of Average
Finance Receivables |
| • Measures the control our management team exerts on
• It is ultimately a measure of the quality of underwriting policies and
• We guide our management team to specific aggregate net | ||
Total
| Leverage ratio | • Measures reliance on our credit facilities to produce cash flow • Holds management accountable for the responsible use of credit to fund our business | ||
Total General and Administrative Expense Percentage | Expense control | • Measures the effectiveness with which our management team utilizes our corporate resources and minimizes our corporate |
TargetNote: We calculate EBITDA as consolidated net income from operations before interest expense, income taxes, depreciation, and amortization, each as calculated in accordance with GAAP and as set forth in our audited financial statements.
Our 2017 annual incentive levels and actual performance-based annual cash awards for eachwere based to a lesser extent (15%) on our Compensation Committee’s assessment of our executive officers for fiscal 2015 are detailed below. Based on fiscal 2015 financial performance, actualteam’s achievement of its short-term incentive payouts were 89.73%strategic objectives. In light of target. In calculatingongoing, significant strategic projects and initiatives, our Compensation Committee believes it is important to appropriately incentivize the payout amount,achievement of strategic objectives (which often cannot be measured quantitatively) by linking their achievement (and the quality thereof) to our executives’ compensation. For 2017, the Compensation Committee electedidentified the successful implementation of and transition to adjust fiscal 2015 actual results in an equitable manner to accounta new loan origination and servicing platform as our executive team’s primary short-term strategic objective.
Annual Incentive Program Performance Targets, Results, and Payouts
The following table provides for certain unbudgeted Board-approved one-time expenses2017 detail regarding the threshold and deviations from the fiscal 2015 plan.
| 2015 Eligible | 2015 Target Incentive |
|
| ||||
Name | Base Salary | as Percentage of Salary | Target Award | Actual Award | ||||
Michael R. Dunn | $500,000 | 100% | $500,000 | $448,669 | ||||
Jody L. Anderson | $325,000 | 100% | $325,000 | $291,635 | ||||
Donald E. Thomas | $321,391 | 100% | $321,391 | $288,396 | ||||
Daniel J. Taggart | $296,712 | 100% | $296,712 | $266,251 | ||||
Brian J. Fisher | $220,000 | 60% | $132,000 | $118,449 |
Note: Mr. Taggart began serving as Senior Vice President and Chief Risk Officer on January 5, 2015.
The percentages described in the table were determinedtarget levels of performance set by the Compensation Committee and are not reflected in the employment offer letter agreement of Mr. Fisher. They are calibrated so that the total compensation opportunity for each executive officer is commensurate with that executive’s roleperformance metric, the weighting applied to each metric, our actual annual performance pursuant to each metric, and responsibilities with us. An executive must be employed by us on the last day of the performance year in order to be eligible to receive payment in respect of a performance-based annual cash award.
Target fiscal 2016 incentive levelspercentage payout for each of our executive officers, as established by our Compensation Committee, are describedmetric and in the table below.total. A threshold level of performance must be exceeded in order to earn any award, and each executive is eligible to earn up to 150% of his target award based upon the achievement of the performance goals established by the Compensation Committee.
|
| 2016 Target Incentive |
| |||
Name | 2016 Base Salary | as Percentage of Salary | Target Award | |||
Michael R. Dunn | $520,000 | 100% | $520,000 | |||
Jody L. Anderson | $335,000 | 100% | $335,000 | |||
Donald E. Thomas | $332,000 | 100% | $332,000 | |||
Daniel J. Taggart | $308,000 | 100% | $308,000 | |||
Brian J. Fisher | $230,000 | 60% | $138,000 |
Performance Metric
|
Threshold Performance
|
Target Performance
|
Actual Performance
|
Percentage
Weight
|
Percentage
Payout
| |||||
Net Income from Operations
|
$19,866,782
|
$28,381,117
|
$29,963,525
|
30.0%
|
29.6%
| |||||
Average Net Finance Receivables
|
$682,053,188
|
$757,836,875
|
$744,200,456
|
20.0%
|
18.2%
| |||||
Net Credit Losses Percentage
|
10.30%
|
8.96%
|
9.36%
|
15.0%
|
12.7%
| |||||
Total Debt / EBITDA
|
8.10x
|
6.75x
|
7.24x
|
10.0%
|
9.7%
| |||||
Total G&A Expense Percentage
|
51.76%
|
48.15%
|
48.06%
|
10.0%
|
10.4%
| |||||
Achievement of Strategic Objectives |
N/A |
N/A |
N/A |
15.0% |
18.0% | |||||
| ||||||||||
100.0%
|
98.6%
| |||||||||
|
Discretionary Cash Bonuses
OurNote: In calculating the percentage payout, the Compensation Committee hasadjusted actual results to account for certain unbudgeted tax benefits and the discretionimpact of the 2017 hurricane events. Had the Compensation Committee not made such adjustments, the total percentage payout would have been higher (101.4% of target).
As described above, 15% of the total annual incentive program award opportunity is linked to make periodic cash paymentsour Compensation Committee’s assessment of our executive team’s achievement of its short-term strategic objectives. For 2016, our Compensation Committee elected not to executive officers in recognitionpay any portion of various specific projects and exceptional achievements. There is no formula or schedule for such discretionary payments. No discretionary payments were madethis award opportunity to our executive officers primarily due to the status as of the end of 2016 of our company’s efforts to implement and transition to a new loan origination and servicing platform. By contrast, for performance in fiscal 2014 or 2015.
As noted in2017, our previous proxy statement, and included under fiscal 2013 compensation, in March 2014, the Compensation Committee elected to pay 120% of this award opportunity in recognition of our company’s outstanding execution of its short-term strategic objectives, including the implementation of the new loan origination and servicing platform in each of our branches, the diversification of our funding sources, and the continued improvements to our compliance management system and enterprise risk management efforts.
Target annual incentive levels and actual performance-based annual cash awards for each of our NEOs for fiscal 2017 are detailed below, based upon the 98.6% performance achievement detailed above.
Name
| 2017 Eligible
Base Salary
| 2017 Target Incentive as
Percentage of Salary
| Target Award
| Actual Award
| ||||||||||||||||
Peter R. Knitzer
|
$530,000
|
100%
|
$530,000
|
$522,580
| ||||||||||||||||
John D. Schachtel
|
$207,123
|
100%
|
$207,123
|
$204,224
| ||||||||||||||||
Jody L. Anderson
|
$127,603
|
100%
|
$127,603
|
$125,816
| ||||||||||||||||
Donald E. Thomas
|
$342,000
|
100%
|
$342,000
|
$337,212
| ||||||||||||||||
Daniel J. Taggart
|
$318,000
|
100%
|
$318,000
|
$313,548
| ||||||||||||||||
Brian J. Fisher
|
$240,000
|
100%
|
$240,000
|
$236,640
|
Note: Mr. Anderson’s employment terminated on May 15, 2017, and Mr. Schachtel’s employment commenced on May 30, 2017. Therefore, their base salaries and target award opportunities werepro-rated.
The target award percentages described above were determined by the Compensation Committee and are calibrated so that the total compensation opportunity for each executive officer is commensurate with that executive’s role and responsibilities with us. If an executive voluntarily terminates his employment during the performance year, he becomes ineligible to receive payment of a performance-based annual cash award.
Annual Incentive Program Opportunities in 2018
Our annual incentive program in 2018 will be structured in a manner similar to the 2017 program. Target 2018 incentive levels for each of our executive officers, discretionary bonuses for services performed in 2013. Messrs. Thomas and Fisher were awarded discretionary cash bonusesas established by our Compensation Committee, are described in the amount of $35,677 and $11,425, respectively. Thetable below.
Name
| 2018 Base Salary
|
2018 Target Incentive as
Percentage of Salary
| Target Award
| ||||||||||||
Peter R. Knitzer
|
$550,000
|
100%
|
$550,000
| ||||||||||||
John D. Schachtel
|
$360,000
|
100%
|
$360,000
| ||||||||||||
Donald E. Thomas
|
$355,000 |
100%
|
$355,000
| ||||||||||||
Daniel J. Taggart
|
$330,000
|
100%
|
$330,000
| ||||||||||||
Brian J. Fisher
|
$300,000
|
100%
|
$300,000
|
Our Compensation Committee awarded the discretionary bonuses based on the Compensation Committee’s qualitative assessmentbelieves that our short-term incentive program is effective in motivating our executives to achieve short-term financial and operational objectives, in furtherance of each executive officer’s performance during 2013 and the executive officers’ leadership during 2013 with respect to the creation of stockholder value, the opening of 41 de novo branches, the increase in the average loans per branch, the increase in portfolio yield, support with respect to the exit of the Company’s prior private equity sponsors through two secondary public offerings, implementation of compliance with the Sarbanes-Oxley Act of 2002, and expansion of the Company’s credit facility.ourpay-for-performance compensation strategy.
Long-Term Incentive Awards
In recent years, Regional has not consistently granted long-term incentives:
In 2007 and 2008, our Board granted options to certain executive officers pursuant to our 2007 Plan.
Our Board did not grant any equity awards during 2009, 2010, or 2011.
On March 27, 2012, pursuant to our 2011 Plan and in connection with our initial public offering, the Compensation Committee granted nonqualified stock options to certain executive officers.
On January 2, 2013 and December 31, 2013, pursuant to our 2011 Plan and consistent with his employment offer letter agreement, the Compensation Committee granted nonqualified stock options to Mr. Thomas for 100,000 shares and 26,500 shares, respectively.
Theselong-term incentive award grants wereare intended to directly align the interests of suchour executive officers with those of our stockholders, to give suchour executive officers a strong incentive to maximize stockholder returns on a long-term basis, and to aid in our recruitment and retention of key executive talent necessary to ensure our continued success.
Following the “refresh”Components of ourLong-Term Incentive Program; Participation by NEOs
In 2014, we developed and implemented a “refreshed” long-term incentive program developed and implemented in 2014 with assistance from Veritas, ourVeritas. Our current long-term incentive program provides for the delivery of long-term incentive awards are delivered through a combination of three equityaward vehicles:(i) non-qualified stock options, (ii) performance-contingent restricted stock units,RSUs, and (iii) cash-settled performance units. Vesting of each of the performance-contingent awards is subject to, among other things, the achievement of performance objectives over a three-year performance period that begins on January 1st of the grant year. Long-term incentive awards are scheduled to occur in the first quarter of each year.
In 2015,2017, as part of the long-term incentive program, and with assistance from Veritas, the Companywe granted the following awards in the first quarter of 2017 to executivesMessrs. Knitzer, Anderson, Thomas, Taggart, Fisher, and other key employees:
LTI Vehicle | ||||||||
Principal Performance Metric
| Performance Period | Weighting | Recipients | |||||
Non-Qualified Stock Options | Built-in metric of stock price growth |
| ||||||
|
|
|
|
| ||||
|
|
award |
employees | |||||
Performance-Contingent Restricted Stock Units | Compound annual growth rate of net income compared to a peer group
|
| One-third of total target award | Executive officers and several other keyC-suite employees | ||||
Cash-Settled Performance Units |
Compound annual |
| ||||||
|
2019 |
award |
employees |
In March 2016, the Compensation Committee determined to change the performance metrics for
Vesting of the performance-contingent RSUs and cash-settled performance units from cumulative EBITDA and cumulative net income per share, respectively, tois based primarily (90%) upon our performance over the compound annual growth rates of net income and earnings per share, respectively,three-year performance period compared to our peer group, as described in the Company’s peer group. In addition, newtable below. Failure to meet the threshold level of performance results in the forfeiture of the associated award.
LTI Vehicle | Principal Performance Metric | Performance Level | Required Performance | Percentage of Target Award Earned and Vested | ||||
Performance- Contingent Restricted Stock Units | Compound annual growth rate of net income compared to our peer group for the period from January 1, 2017 through December 31, 2019 | Threshold Performance | Meets or Exceeds Peer Group Performance at the 50th Percentile | 50% | ||||
Target Performance | Meets or Exceeds Peer Group Performance at the 60th Percentile | 100% | ||||||
Maximum Performance | Meets or Exceeds Peer Group Performance at the 75th Percentile | 150% | ||||||
Cash-Settled Performance Units | Compound annual growth rate of basic earnings per share compared to our peer group for the period from January 1, 2017 through December 31, 2019 | Threshold Performance | Meets or Exceeds Peer Group Performance at the 50th Percentile | 50% | ||||
Target Performance | Meets or Exceeds Peer Group Performance at the 60th Percentile | 100% | ||||||
Maximum Performance | Meets or Exceeds Peer Group Performance at the 75th Percentile | 150% |
To a lesser extent (10%), vesting of the performance-contingent RSUs and cash-settled performance units granted in fiscal 2016, our Compensation Committee elected to base a portion (10%) of the award opportunitiesis based on our Compensation Committee’s qualitative assessment of our executive team’s achievement of its long-term strategic objectives. We made eachobjectives over the same performance period. In light of these changesongoing, significant strategic projects and initiatives, our Compensation Committee believes it is important to appropriately incentivize the performance metricsachievement of strategic objectives (which often cannot be measured quantitatively) by linking their achievement (and the quality thereof) to our executives’ compensation. Our long-term incentive program following consultationin 2018 is structured in a manner similar to the 2017 program described above.
Mr. Schachtel became our Executive Vice President and Chief Operating Officer effective as of May 30, 2017. Mr. Schachtel’s employment agreement establishes his aggregate long-term incentive compensation opportunity level for 2017 and 2018, and provides that he will be granted long-term incentive award opportunities through a combination of the three award vehicles describedabove—non-qualified stock options, performance-contingent RSUs, and cash-settled performance units. The aggregate grant date target value of Mr. Schachtel’s 2017 and 2018 long-term incentive compensation opportunities is $850,000 (calculated as approximately $525,000 per year on an annualized basis for the period commencing on Mr. Schachtel’s first day of employment, May 30, 2017, through the end of 2018).
Mr. Schachtel’s long-term incentive compensation for 2017 and 2018 is split amongnon-qualified stock options, performance-contingent RSUs, and cash-settled performance units having a grant date target value of $300,000, $275,000, and $275,000, respectively. Because Mr. Schachtel’s employment commenced more than 90 days after the beginning of the performance period associated with Veritas.the performance-contingent RSUs and cash-settled performance units that we granted under our 2017 long-term incentive program, Mr. Schachtel’s participation in the 2017 program with respect to performance-contingent RSUs and cash-settled performance units would have resulted in the payment of compensation (if any) that would not have qualified for the performance-based compensation exemption available pursuant to Code Section 162(m). Therefore, in an effort to preserve, to the extent practicable, the future tax deductibility of Mr. Schachtel’s compensation, the Compensation Committee approved Mr. Schachtel’snon-qualified stock option award with a grant date of May 30, 2017, the date he commenced employment, and determined that the award of Mr. Schachtel’s performance-contingent RSUs and cash-settled performance units should occur as part of the 2018 long-term incentive program.
Long-Term Incentive Award Levels in 2017 and 2018
For 20152017 and 2016,2018, the grant date target values for awards granted to our NEOs are detailed in the following tables. For the performance-contingent RSUs and cash-settled performance units, a threshold level of performance must be exceeded for the awards to have any value, and participants are eligible to earn up to 150% of their target award based upon the achievement of the performance goals established by the Compensation Committee. For thenon-qualified stock options, the Companyour stock price must exceed the exercise price (which is set at our closing stock price on the grant pricedate) for the options to have any value.
2015 Target Grant Date Fair Value
| ||||||||||||||||
Performance- | Performance | Non-Qualified | ||||||||||||||
Name | Total | Contingent RSUs | Units | Stock Options |
2017 Target Grant Date Value
| |||||||||||
Michael R. Dunn | $1,500,000 | $500,000 | $500,000 | $500,000 | ||||||||||||
Name
| Total
|
Performance- Contingent RSUs
|
Cash-Settled
|
Non-Qualified Stock
| ||||||||||||
td,900,000
| $950,000
| $950,000
| N/A
| |||||||||||||
John D. Schachtel
| $300,000
| N/A
| N/A
| $300,000
| ||||||||||||
Jody L. Anderson | $400,000 | $200,000 | $200,000 | N/A | $517,500
| $172,500
| $172,500
| $172,500
| ||||||||
Donald E. Thomas | $482,100 | $160,700 | $160,700 | $160,700 | $513,000
| $171,000
| $171,000
| $171,000
| ||||||||
Daniel J. Taggart | $300,000 | $100,000 | $100,000 | $100,000 | $318,000
| $106,000
| $106,000
| $106,000
| ||||||||
Brian J. Fisher | $275,000 | $91,667 | $91,666 | $91,667 | $240,000
| $80,000
| $80,000
| $80,000
| ||||||||
Name
|
2018 Target Grant Date Value
| |||||||||||||||
Total
|
Performance- Contingent RSUs
|
Cash-Settled
|
Non-Qualified Stock
| |||||||||||||
Peter R. Knitzer
| $2,200,000
| $733,333
| $733,333
| $733,334
| ||||||||||||
John D. Schachtel
| $550,000
| $275,000
| $275,000
| N/A
| ||||||||||||
Donald E. Thomas
| $532,500
| $177,500
| $177,500
| $177,500
| ||||||||||||
Daniel J. Taggart
| $330,000
| $110,000
| $110,000
| $110,000
| ||||||||||||
Brian J. Fisher
| $300,000
| $100,000
| $100,000
| $100,000
|
Note: PursuantThe number of shares subject to Mr. Anderson’s employment agreement, executed September 19, 2014, Mr. Anderson received a nonqualified stock option award on October 1, 2014, timed to coincide with his first day of employment. The nonqualified stock option award had a grant date fairthe performance-contingent RSU awards is determined by dividing the value of approximately $200,000.
Additionally, upon signing his new employment agreement on January 12, 2015, Mr. Dunn was granted athe award by the closing price per share of common stock award for 99,337 restricted shares with a fair value of approximately $1,500,000. These shares vested on the grant date but are(rounded down to the nearest whole share). The number of shares subject to thenon-qualified stock option awards is determined by dividing the value of the award by the fair value per share of common stock on the grant date calculated using the Black-Scholes valuation model (rounded down to the nearest whole share).
Mr. Anderson’s employment terminated on May 15, 2017. As a holdingresult, in accordance with the award agreements associated with Mr. Anderson’s 2017 long-term incentive awards, he remains eligible to vest in only apro-rata portion of the performance-contingent RSUs and cash-settled performance units, subject to our performance over the three-year performance period. In addition, effective as of his termination date, Mr. Anderson vested in apro-rata portion of the shares subject to thenon-qualified stock option award and forfeited the balance of the unvested shares.
Our Compensation Committee believes that our long-term incentive program furthers ourpay-for-performance objectives, creates a compelling recruitment and retention tool, appropriately focuses our executives on the achievement of long-term financial and business goals, and strengthens the alignment of our executives’ interests with those of our stockholders.
2015 Long-Term Incentive Program Performance Targets, Results, and Payouts
In 2015, we made awards to our then-current executive officers ofnon-qualified stock options, performance-contingent RSUs, and cash-settled performance units. Messrs. Anderson, Thomas, Taggart, and Fisher were employed by us in 2015 and participated in the 2015 long-term incentive program.
The three-year performance period untilestablished under the 2015 long-term incentive program ended on December 31, 2016, regardless of whether Mr. Dunn remains employed2017. The performance metrics for the performance-contingent RSUs and cash-settled performance units under the 2015 long-term incentive program were cumulative EBITDA and cumulative basic net income per share over the performance period, respectively, with threshold and target performance goals established at the following levels:
EBITDA (in thousands)
| Basic Net Income Per Share
| |||
Threshold Performance Goal
| $199,698
| $6.46
| ||
Target Performance Goal
| $249,623
| $8.07
| ||
2015 Actual Results
| $57,791
| $1.82
| ||
2016 Actual Results
| $63,814
| $2.03
| ||
2017 Actual Results
| $69,722
| $2.59
| ||
Cumulative Results
| $191,327
| $6.44
| ||
Amount Short of Threshold Goal
| $8,371
| $0.02
| ||
Payout
| 0.00%
| 0.00%
|
Note: We calculate cumulative EBITDA as consolidated net income from operations before interest expense, income taxes, depreciation, and amortization during the three-year performance period, each as calculated in accordance with GAAP and as set forth in our audited financial statements.
In February 2018, the Compensation Committee determined that we failed to meet the threshold performance goals set under the 2015 long-term incentive program. Actual results are set forth in the table above. As a result, no compensation was earned or paid pursuant to the 2015 performance-contingent RSUs or cash-settled performance units, and all shares associated with the Company until such date.performance-contingent RSUs were forfeited.
2016 Target Grant Date Fair Value
| ||||||||
Performance- | Performance | Non-Qualified | ||||||
Name | Total | Contingent RSUs | Units | Stock Options | ||||
Michael R. Dunn | $1,560,000 | $520,000 | $520,000 | $520,000 | ||||
Jody L. Anderson | $502,500 | $167,500 | $167,500 | $167,500 | ||||
Donald E. Thomas | $498,000 | $166,000 | $166,000 | $166,000 | ||||
Daniel J. Taggart | $308,000 | $102,666 | $102,667 | $102,667 | ||||
Brian J. Fisher | $287,500 | $95,834 | $95,833 | $95,833 |
Key Employee Retention Program
In 2014, even when including the increased target value of the short- and long-term incentive awards, total compensation levels for our executive officers were below the median of our peer group. Further, because the 2014 short-term incentive awards paid out substantially below target and the 2014 three-year long-term incentive performance goals are unlikely to be achieved due to poor company performancedifficulties we faced in 2014 there may beresulted in a significant deficit in terms of realized compensation. As a result, in 2015, our Compensation Committee, in consultation with Veritas, determined to implement a key employee retention program as an incentive and retention vehicle for certain Companycritical executives.
Pursuant to the key employee retention program, the Compensation Committee granted the following awards to executive officers in 2015:(i) nonqualifiednon-qualified stock options, which are subject to the terms of the Regional Management Corp. 2011 Stock Incentive Plan (as amended, the “2011 Plan”), and (ii) a cash retention award. The Compensation Committee granted Messrs. Dunn, Anderson, Thomas, and Fisher nonqualifiednon-qualified stock options to purchase 10,000 shares; 8,700 shares;shares, 32,500 shares;shares, and 11,500 shares, respectively, of the Company’sour common stock. The options vestvested in three equal installments or as otherwise provided in the applicable award agreement on each of December 31, 2015, December 31, 2016, and December 31, 2017 subject(subject to proration, in the executive’s continued employment.case of Mr. Anderson). In addition, the Compensation Committee granted Mr. Fisher a cash retention award of $25,000, which is payablewas paid as follows: 25% on or about 180 days following the date of the retention award; 25% on or about 360 days following the date of the retention award; and 50% on or about 540 days following the date of the retention award, subject to Mr. Fisher’s continued employment.award.
In March 2016, the Compensation Committee elected to continue the key employee retention program with grants of the following awards to certain executive officers: (i) restricted stock awards,RSAs, which are subject to the terms of the 2015 Plan, and (ii) cash retention awards. The Compensation Committee granted Messrs. Thomas and Fisher 5,854 shares and 4,391 shares, respectively, of restricted common stock. The restricted stock vestsvested on September 29, 2017 or as otherwise provided in the applicable award agreement, subject to the executive’s continued employment.2017. In addition, the Compensation Committee granted Messrs. Thomas and Fisher cash retention awards of $100,000 and $75,000, respectively,one-third of which is payablewas paid on each of the six-month, 12-month,six-month,12-month, and18-month anniversaries of the grant date, subjectdate.
We did not grant any retention awards to the executive’s continued employment.our executive officers in 2017.
Perquisites
We also provide various other limited perquisites and other personal benefits to our executive officers that are intended to be part of a competitive compensation program. For 2015,2017, these benefits included:
401(k) plan matching contributions for certain of our executive officers.
Monthly automobile allowances of $1,150 forto Messrs. Anderson and Thomas.
Reimbursement of relocation expenses for Mr. Anderson.
Payment of Mr. Dunn’s commutingKnitzer’s and Mr. Schachtel’s travel expenses to and from his hometheirout-of-state personal residences;
The BoardCompensation Committee believes that these benefits are comparable to those offered by other companies that compete with us for executive talent and are consistent with our overall compensation program. Perquisites are not a material part of our compensation program.
We also provideoffer our executive officers with benefits that are generally available to all of our employees, including 401(k) plan matching contributions, health insurance, disability insurance, dental insurance, vision insurance, life insurance, paid time off, and the reimbursement of qualified business expenses.
Deductibility of Executive Compensation
Code Section 162(m) limits the ability of the Company to deduct for tax purposes compensation over $1,000,000 to In 2018, we will also provide our principal executive officer or any one of our three highest paid executive officers, other than our principal executive officer or principal financial officer, who are employed by us on the last day of our taxable year, unless, in general, the compensation is paid pursuant to a planexecutives with supplemental disability insurance that is performance related, non-discretionary, and has been approved byintended, in part, to insure against our stockholders. The Compensation Committee will review and consider the deductibility of executive compensation under Code Section 162(m) and may authorize certain payments that will be in excess of the $1,000,000 limitation. The Compensation Committee believes that it needs to balance the benefits of designing awards that are tax-deductible with the need to design awards that attract, retain, and reward executives responsible for the success of the Company. While mindful of the benefit to us of the full deductibility of compensation, the Compensation Committee believes that it should not be constrained by the requirements of Code Section 162(m) where those requirements would impair flexibility in compensating our executive officers in a manner that can best promote our corporate objectives, which the Compensation Committee believes aligns our executive officers’ interests with our stockholders’ interests, and thus is in the best interests of our stockholders.
Payments Upon Termination and Change in Control
Pursuant to the terms of each of their employment agreements, Messrs. Dunn and Anderson are entitled to certain benefits upon the termination of their employment with us, the terms of which are described below under “Agreements with Current Executive Officers.” In addition, pursuant to the terms of nonqualified stock option agreements associated with option awards to Mr. Thomas in 2012 and 2013, and pursuant to the terms of nonqualified stock option agreements associated with option awards to our executive officers in 2014 and March 2015,severance obligations in the event of a disability termination of their employment by the Company without cause or by them with good reason during the six month period following a change in control, the option awards shall become fully vested and exercisable effective as of the termination date. Pursuant to the terms of performance-contingent restricted stock unit award agreements, cash-settled performance unit award agreements, and restricted stock award agreements associated with long-term incentive awards to our executive officers in 2014, in the event of a termination of their employment by the Company without cause or by them with good reason during the six month period following a change in control, the awards shall be deemed earned at target and/or fully vested, effective as of the termination date. The award agreements associated with long-term incentive awards to our executive officers in 2014 provide for continued or pro-rata vesting in the event of certain qualifying terminations of employment.
In addition, pursuant to the terms of nonqualified stock option agreements associated with option awards to our executive officers in 2015, in the event of a termination of their employment by the Company without cause or by them with good reason during the six month period prior to or the one year period following a change in control, the option awards shall become fully vested and exercisable effective as of the termination date. Pursuant to the terms of performance-contingent restricted stock unit award agreements and cash-settled performance unit award agreements associated with long-term incentive awards to our executive officers in 2015, in the event of a termination of their employment by the Company without cause or by them with good reason during the six month period prior to or the one year period following a change in control, the awards shall be deemed earned at target and/or fully vested, effective as of the termination date. The award agreements associated with long-term incentive awards to our executive officers in 2015 provide for continued or pro-rata vesting in the event of certain qualifying terminations of employment. See “2015 Long-Term Incentive Plan” below.
These benefits are intended to alleviate concerns that may arise in the event ofunder an executive’s separation from service with usemployment agreement.
Other Compensation Policies, Practices, and enable executives to focus fully on their duties to us while employed by us.Matters
Stock Ownership and Retention Policy
In 2014, Regional adopted a Stock Ownership and Retention Policy. The Compensation Committee believes that significant ownership of common stock by our executives and directors directly aligns their interests with those of our stockholders and also helps balance the incentives for risk-taking inherent in equity-based awards made to executives. Under the policy, executives and directors are subject to the following ownership guidelines:
Covered Person | Ownership Guideline | |
Chief Executive Officer | 5x annual base salary | |
Other covered employees (including NEOs) | 2x annual base salary | |
Directors | 5x annual cash retainer |
In February 2018, our Compensation Committee increased our director stock ownership requirement from 3x to 5x the annual cash retainer, placing the ownership requirement in the 90th percentile of our peer group. Persons covered by the policy are expected to utilize grants under equity compensation plans to reach the levels of ownership expected by the policy. The policy also incorporates a retention element requiring such persons to retain 50% of the net shares resulting from the vesting or exercise of equity awards to obtain the required ownership under the policy.
Clawback Policy
In 2014, Regional also adopted a Compensation Recoupment Policy, or “clawback policy.” Under the clawback policy, the Chief Executive Officer, the Chief Financial Officer, any other person who is an executive officer, the Corporate Controller,Chief Accounting Officer, and such other persons (each, a “Covered Person”) as may be determined by the Board of Directors or the Compensation Committee (the “Administrator”), may be required to return to the Companyus and/or forfeit all or a portion of any cash-based incentive compensation and/or equity-based incentive compensation received by such Covered Person.
Such a return or forfeit is required, unless the Administrator determines otherwise, if (i) compensation is received based on financial statements that are subsequently restated in a way that would decrease the amount of the award to which such person was entitled and the restatement is based in whole or in part on the misconduct of the Covered Person, (ii) such compensation was received by the Covered Person and the Administrator determines that such person has violated anon-competition,non-solicitation, confidentiality, or other restrictive covenant applicable to such person, or (iii) recoupment is otherwise required under applicable law.
Prohibition Against Hedging and Pledging
As stated in our Code of Conduct, directors, officers, and employees may not engage in activities that are designed to profit from trading activity or hedge against decreases in the value of our securities. This includes purchasing any financial instrument or contract, including prepaid variable forward contracts, equity swaps, collars, and exchange traded funds, which is designed to hedge or offset any risk of decrease in the market value of our common stock. These prohibitions apply regardless of whether the equity securities have been granted to the directors, executive officers, or other employees by the Company as part of their compensation or are held, directly or indirectly, by such persons.
No Excise TaxGross-Ups
We did not provide any of our executive officers with a “gross-up”“gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Code Sections 280G, 4999, or 409A during 2015,2017, and we have not agreed and are not otherwise obligated to provide any named executive officerNEO with such a “gross-up”“gross-up” or other reimbursement.
Deductibility of Executive Compensation
Code Section 162(m) limits our ability to deduct for tax purposes compensation over $1,000,000 to our principal executive officer or any one of our three highest paid executive officers, other than our principal executive officer or principal financial officer, who are employed by us on the last day of our taxable year, unless, in general and under certain circumstances, the compensation is paid pursuant to a plan that is performance related,non-discretionary, and has been approved by our stockholders. The Compensation Committee will review and consider the deductibility of executive compensation under Code Section 162(m) and may authorize certain payments that will be in excess of the $1,000,000 limitation. The Compensation Committee believes that it needs to balance the benefits of designing awards that aretax-deductible with the need to design awards that attract, retain, and reward executives responsible for our success. While mindful of the benefit to us of the full deductibility of compensation, the Compensation Committee believes that it should not be constrained by the requirements of Code Section 162(m) where those requirements would impair flexibility in compensating our executive officers in a manner that can best promote our corporate objectives, which the Compensation Committee believes aligns our executive officers’ interests with our stockholders’ interests, and thus is in the best interests of our stockholders.
As part of the United States tax reform legislation enacted on December 22, 2017, the exemption from Code Section 162(m)’s deduction limitation for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. As a result, compensation paid to certain of our executive officers in excess of $1,000,000 will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Despite the Compensation Committee’s efforts to preserve the deductibility of compensation under Code Section 162(m), because of ambiguities and uncertainties as to the application and interpretation of Code Section 162(m) and related Treasury regulations under the tax reform legislation, including the uncertain scope of the transition relief, no assurance can be given that any compensation will satisfy the requirements for deductibility under Code Section 162(m). The Compensation Committee reserves the right to modify compensation that was initially intended to be deductible under Code Section 162(m) if it determines that such modifications are consistent with our business needs.
Payments Upon Termination andChange-in-Control
As described above, Mr. Anderson’s employment terminated effective May 15, 2017. We subsequently entered into a separation agreement with Mr. Anderson, the terms of which are described below under “Summary of Employment Arrangements with Executive Officers – Agreements with Former Executive Officer.” Pursuant to the terms of each of their employment agreements and certain long-term incentive award agreements, our other NEOs are entitled to certain benefits upon the termination of their employment with us, the terms of which are described below under “Summary of Employment Arrangements with Executive Officers – Employment Agreements with Current Executive Officers” and “Summary of Employment Arrangements with Executive Officers – Potential Payments Upon Termination orChange-in-Control.”
CEO Pay Ratio
We are not required to disclose the ratio of the annual total compensation of our CEO and the median of the annual total compensation of all of our employees (commonly known as “pay ratio disclosure”) under applicable SEC rules because we only ceased to be an emerging growth company under the Jumpstart Our Business Startups Act at the outset of our fiscal year beginning on January 1, 2018. We will provide the pay ratio disclosure when first required in our proxy statement for our 2019 Annual Meeting.
Risk Assessment of Compensation Policies and Practices
We have assessed our compensation programs for all employees and have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on our company. We believe that our compensation programs reflect an appropriate mix of compensation elements and balance current and long-term performance objectives, cash and equity compensation, and risks and rewards. During 2017, the Compensation Committee reviewed our compensation policies and practices for all employees, including our NEOs, particularly as they relate to risk management practices and risk-taking incentives. As part of its review, the Compensation Committee discussed with management the ways in which risk is effectively managed or mitigated as it relates to our compensation programs and policies.
Based on this review, the Compensation Committee believes that our compensation programs do not encourage excessive risk but instead encourage behaviors that support sustainable value creation. The following features of our executive compensation program illustrate this point.
• | Review by Independent Compensation Consultant. Our executive compensation programs have been designed and reviewed by an independent compensation consultant. |
• | Compensation Committee Oversight. Our executive compensation programs are regularly reviewed and overseen by an independent Compensation Committee that retains the discretion to reduce compensation based on corporate and individual performance and other factors. |
• | Mix of Incentives. Our compensation programs provide an appropriate mix of short-term and long-term incentives, as well as cash and equity opportunities. |
• | Mix of Performance Metrics. The performance metrics associated with our incentive programs incorporate a variety of drivers of the business over both annual and three-year time horizons. |
• | Strong Link to Stockholder Interests. Equity components and long-term performance metrics create a strong alignment between our executives’ interests and our stockholders’ interests. Because long-term incentives typically vest over a three-year period, our executives will always have unvested awards that could decrease in value if our business is not well-managed for the long term. |
• | Alignment with Annual Plan and Long-Term Strategic Plan. Performance metrics in our short- and long-term incentive programs are aligned with both our annual budget and our long-term strategic plan. |
• | Appropriate Policies. We have adopted a “clawback” policy, a stock ownership and retention policy, and prohibitions against hedging and pledging, thereby creating additional protections for the Company and encouraging an alignment of our executives’ and stockholders’ interests. |
• | Field Incentive Plan. Our operations field incentive plan is focused on growth, control, and profit—the three primary drivers of success in our branches. This creates appropriate alignment of employee incentive opportunities with company goals. |
• | Administration and Disclosure. Administrative procedures, communication, and disclosure processes closely align with “best practices.” |
• | Securities Trading Policy. Officers must obtain permission from the General Counsel before the purchase or sale of any shares, even during an open trading period. |
Based on the factors above, we believe that our NEOs and other employees are encouraged to manage our company in a prudent manner and that our incentive programs are not designed to encourage our NEOs or other employees to take excessive risks or risks that are inconsistent with the Company’s and our stockholders’ best interests. In addition, we have in place various controls and management processes that help mitigate the potential for incentive compensation plans to materially and adversely affect the Company.
The Compensation Committee has reviewed and discussed the foregoing “Compensation Discussion and Analysis” with management. Based on thisupon such review, the related discussions, and discussion,such other matters deemed relevant and appropriate to the Compensation Committee, the Compensation Committee has recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and in our Annual Report on Form10-K for the fiscal year ended December 31, 2015 and2017 through incorporation by reference to this Proxy Statement for filing with the Securities and Exchange Commission.Statement.
Members of the Compensation Committee:
Steven J. Freiberg (Chairman)(Chair)
Roel C. Campos
Carlos Palomares
Peter R. Knitzer
ThisThe Compensation Committee report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference byinto any general statement incorporating by reference this proxy statement into anyother filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act, of 1934, as amended, and shall not otherwise be deemed filed under such acts.except to the extent that we specifically incorporate the Compensation Committee report by reference therein.
SELECTED EXECUTIVE COMPENSATION TABLES
2015 Summary Compensation Table
The following table sets forth the cash and other compensation that we paid to our named executive officers or that was otherwise earned by our named executive officers for their services in all employment capacities during the fiscal years ended December 31, 2015, December 31, 2014,2017, 2016, and December 31, 2013.2015.
Name and Principal Position(1) | Year | Salary ($)(3) | Bonus ($)(4) | Stock Awards ($)(5) | Option Awards ($)(6) | Non-Equity Incentive Plan Compensation ($)(7) | All Other Compensation ($)(8) | Total ($) | ||||||||
Peter R. Knitzer,(2) |
2017 |
530,000 |
— |
949,985 |
— |
522,580 |
42,552 |
2,045,117 | ||||||||
President and Chief Executive Officer | 2016 | 221,557 | — | — | 949,997 | 221,557 | 30,114 | 1,423,225 | ||||||||
2015
| —
| —
| —
| —
| —
| —
| —
| |||||||||
John D. Schachtel, | 2017 | 207,123 | — | — | 299,994 | 204,224 | 21,239 | 732,580 | ||||||||
Executive Vice President and Chief Operating Officer
| 2016 | — | — | — | — | — | — | — | ||||||||
2015
| —
| —
| —
| —
| —
| —
| —
| |||||||||
Jody L. Anderson, | 2017 | 127,603 | — | 172,494 | 172,493 | 125,816 | 178,350 | 776,756 | ||||||||
Former President and Chief Operating Officer
| 2016 | 335,000 | — | 167,486 | 167,500 | 252,528 | 27,140 | 949,654 | ||||||||
2015
| 325,000
| —
| 199,995
| 63,473
| 291,635
| 76,017
| 956,120
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Donald E. Thomas, | 2017 | 342,000 | 66,667 | 170,994 | 170,995 | 337,212 | 24,900 | 1,112,768 | ||||||||
Executive Vice President and Chief Financial Officer
| 2016 | 332,000 | 33,333 | 265,970 | 165,998 | 250,267 | 27,250 | 1,074,818 | ||||||||
2015
| 321,391
| —
| 160,687
| 397,810
| 288,396
| 24,400
| 1,192,684
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Daniel J. Taggart, | 2017 | 318,000 | — | 105,987 | 105,998 | 313,548 | 8,810 | 852,343 | ||||||||
Senior Vice President and Chief Risk Officer | 2016 | 308,000 | — | 102,651 | 102,661 | 232,175 | 900 | 746,387 | ||||||||
2015
| 296,712
| —
| 99,990
| 99,993
| 266,251
| 900
| 763,846
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Brian J. Fisher, | 2017 | 240,000 | 50,000 | 80,000 | 79,994 | 236,640 | 10,800 | 697,434 | ||||||||
Senior Vice President, General Counsel, and Secretary | 2016 | 230,000 | 43,750 | 170,817 | 95,826 | 104,026 | 12,390 | 656,809 | ||||||||
2015 | 220,000 | 6,250 | 91,657 | 175,563 | 118,449 | 9,999 | 621,918 |
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(1) | Messrs. |
(2) |
(3) | The amounts represent annual base salaries, |
For |
For |
For 2015, the amount represents a |
For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Key Employee Retention Program.” |
(5) | Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 31, |
In 2017, Messrs. Knitzer, Anderson, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the following grant date fair values: Mr. Knitzer, $949,985; Mr. Anderson, $172,494; Mr. Thomas, $170,994; Mr. Taggart, $105,987; and Mr. Fisher, $80,000 (and a maximum potential value of $1,424,967; $258,731; $256,492; $158,980; and $120,000, respectively). The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units, based primarily (90%) on our compound annual growth rate of net income compared to our peer group over the performance period, January 1, 2017 through December 31, 2019, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period.
In 2016, Messrs. Anderson, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the following grant date fair values: Mr. Anderson, $167,486; Mr. Thomas, $165,983; Mr. Taggart, $102,651; and Mr. Fisher, $95,819 (and a maximum potential value of $251,230; $248,975; $153,976; and $143,728, respectively). The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units, based primarily (90%) on our compound annual growth rate of net income compared to our peer group over the performance period, January 1, 2016 through December 31, 2018, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. In addition, Mr. Thomas and Mr. Fisher each were granted a service-based RSA with grant date fair values of $99,986 and $74,998, respectively. The RSAs vested on September 29, 2017.
In 2015, Messrs. Anderson, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the following grant date fair values: Mr. Anderson, $199,995; Mr. Thomas, $160,687; Mr. Taggart, $99,990; and Mr. Fisher, $91,657 (and a maximum potential value of $299,986; $241,030; $149,978; and $137,485, respectively). The actual number of RSUs, if any, that may have been earned ranged from 0% to 150% of the target number of units, based on achievement of cumulative EBITDA over the performance period, January 1, 2015 through December 31, 2017. In February 2018, our Compensation Committee determined that we did not achieve the three-year cumulative EBITDA performance thresholds, resulting in the forfeiture of the associated 2015 performance-contingent RSUs.
In each case, the performance-contingent RSUs are subject to further terms and conditions, including as to vesting, as set forth in an award agreement. As a result of his termination, Mr. Anderson remains eligible to vest in only apro-rata portion of each of his performance-contingent RSUs, subject to our performance over the three-year performance period. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards,” “Compensation Discussion and Analysis – Elements of Compensation – Key Employee Retention Program,” and “Summary of Employment Arrangements with Executive Officers – Potential Payments Upon Termination orChange-in-Control.”
(6) | Amounts shown are the aggregate grant date fair value of awards |
For 2017, the option awards granted pursuant to our long-term incentive program on March 15, 2017 to Messrs. Anderson, Thomas, Taggart, and Fisher vest in three equal installments on each of December 31, 2017, 2018, and 2019. The option award granted pursuant to our long-term incentive program on May 30, 2017 to Mr. Schachtel vests on December 31, 2017 (20%), December 31, 2018 (40%), and December 31, 2019 (40%).
For 2016, the option awards granted pursuant to our long-term incentive program on March 29, 2016 to Messrs. Anderson, Thomas, Taggart, and Fisher vest in three equal installments on each of December 31, 2016, 2017, and 2018. The option award granted pursuant to our long-term incentive program on August 1, 2016 to Mr. Knitzer vests on December 31, 2016 (20%), December 31, 2017 (40%), and December 31, 2018 (40%).
For 2015, the option awards granted pursuant to our long-term incentive program on January 5, 2015 to Mr. Taggart and on April 22, 2015 to Messrs. Thomas and Fisher vested on December 31, 2017. The option awards granted pursuant to our key employee retention program on March 11, 2015 to Messrs. Anderson, Thomas, and Fisher vested in three equal installments on each of December 31, 2015, 2016, and 2017.
In each case, the option awards are subject to further terms and conditions, including as to vesting, as set forth in an award agreement. Effective as of his termination date, Mr. Anderson vested in apro-rata amount of the unvested portion of each of hisnon-qualified stock option awards and forfeited the balance of the unvested awards. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards,” “Compensation Discussion and Analysis – Elements of Compensation – Key Employee Retention Program,” and “Summary of Employment Arrangements with Executive Officers – Potential Payments Upon Termination orChange-in-Control.”
Represents performance-based annual cash awards earned in |
(8) |
Outstanding Equity Awards at Fiscal Year-End
The following table provides information concerning equity awards that were outstanding as of December 31, 2015, for each of our named executive officers.
| 401(k) Plan Match ($) | Travel Expense to/from Personal Residence ($) | Optional Annual Health Screening ($) | Automobile Allowance ($) | Mobile Phone Allowance ($) | Legal Expenses ($) | Spousal Travel ($) | Relocation Benefits ($) | Severance Benefits ($) | |||||||||||||||||
Peter R. Knitzer | 2017 2016 2015 | 8,969 — — |
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| — — — | — — — | 375 — | 10,000 — | — — — | — 1,173 — | — — — | ||||||||||||||
John D. Schachtel | 2017 2016 2015 | — — — | 18,327 — — | — — — | — — — | 525 — — | 2,387 — — | — — — | — — — | — — — | ||||||||||||||||
Jody L. Anderson |
2015 |
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| — — — | — 2,740 — | 13,800 13,800 | — — | — — — | 2,340 — — | — — 58,579 | 166,785 — — | ||||||||||||||
Donald E. Thomas | 2016 2015 | 10,800 10,600 10,600 | —
— |
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— |
— | — — — | |||||||||||||||
Daniel J. Taggart | 2017 2016 2015 | 6,605 — — | — | — — | — — — | — — — | 900 900 | — — | — — — | — — — | — — — | |||||||||||||||
Brian J. Fisher |
2015 | 10,800 10,600 9,999 | — — — |
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— | — — | — — — | — — — |
The following table provides information concerning annual and long-term incentive awards granted in 2017 to each of our named executive officers pursuant to our Annual Incentive Plan and our 2015 Plan.
Name | Award Type(1) | Grant Date |
Estimated Future Payouts Under |
Estimated Future Payouts Under | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(3) | |||||||||||||||||
Approval Date | Threshold ($)(2) | Target ($) | Maximum ($) | Threshold (#)(2) | Target (#) | Maximum (#) | ||||||||||||||||||
Peter R. Knitzer | Annual | 03/14/17 | 03/14/17 | — | 530,000 | 795,000 | ||||||||||||||||||
RSU | 03/14/17 | 03/15/17 | 21,385 | 47,523 | 71,284 | 949,985 | ||||||||||||||||||
CSPU | 03/14/17 | 03/15/17 | 427,500 | 950,000 | 1,425,000 | |||||||||||||||||||
John D. Schachtel | Annual | 05/12/17 | 05/30/17 | — | 207,123 | 310,685 | ||||||||||||||||||
NQSO | 05/12/17 | 05/30/17 | 34,403 | 20.00 | 299,994 | |||||||||||||||||||
Jody L. Anderson(4) | Annual | 03/14/17 | 03/14/17 | — | 345,000 | 517,500 | ||||||||||||||||||
NQSO | 03/14/17 | 03/15/17 | 19,230 | 19.99 | 172,493 | |||||||||||||||||||
RSU | 03/14/17 | 03/15/17 | 3,883 | 8,629 | 12,943 | 172,494 | ||||||||||||||||||
CSPU | 03/14/17 | 03/15/17 | 77,625 | 172,500 | 258,750 | |||||||||||||||||||
Donald E. Thomas | Annual | 03/14/17 | 03/14/17 | — | 342,000 | 513,000 | ||||||||||||||||||
NQSO | 03/14/17 | 03/15/17 | 19,063 | 19.99 | 170,995 | |||||||||||||||||||
RSU | 03/14/17 | 03/15/17 | 3,849 | 8,554 | 12,831 | 170,994 | ||||||||||||||||||
CSPU | 03/14/17 | 03/15/17 | 76,950 | 171,000 | 256,500 | |||||||||||||||||||
Daniel J. Taggart | Annual | 03/14/17 | 03/14/17 | — | 318,000 | 477,000 | ||||||||||||||||||
NQSO | 03/14/17 | 03/15/17 | 11,817 | 19.99 | 105,998 | |||||||||||||||||||
RSU | 03/14/17 | 03/15/17 | 2,385 | 5,302 | 7,953 | 105,987 | ||||||||||||||||||
CSPU | 03/14/17 | 03/15/17 | 47,700 | 106,000 | 159,000 | |||||||||||||||||||
Brian J. Fisher | Annual | 03/14/17 | 03/14/17 | — | 240,000 | 360,000 | ||||||||||||||||||
NQSO | 03/14/17 | 03/15/17 | 8,918 | 19.99 | 79,994 | |||||||||||||||||||
RSU | 03/14/17 | 03/15/17 | 1,800 | 4,002 | 6,003 | 80,000 | ||||||||||||||||||
CSPU | 03/14/17 | 03/15/17 | 36,000 | 80,000 | 120,000 |
(1) | “Annual” refers to performance-based annual cash incentive award opportunities granted under our Annual Incentive Plan. “NQSO” refers to |
(2) | The threshold number of shares indicated will be earned only if a threshold level of performance is achieved. |
(3) | Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 31, 2017. For performance-contingent RSUs, the grant date fair value is calculated using the target number of shares. |
(4) | Mr. Anderson’s employment terminated on May 15, 2017. As a result, he remains eligible to vest in only a pro-rata portion of the performance-based awards, subject to our performance over the applicable performance periods. In addition, effective as of his termination date, Mr. Anderson vested in a pro-rata portion of the shares subject to the non-qualified stock option award and forfeited the balance of the unvested shares. |
Outstanding Equity Awards at FiscalYear-End
The following table provides information concerning equity awards that were outstanding as of December 31, 2017, for each of our named executive officers.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)(1) | ||||||||
Peter R. Knitzer | 5,111 | — | 19.42 | 07/28/25 | — | — | 47,523(10) | 1,250,330 | ||||||||
8,422 | — | 15.89 | 05/04/26 | |||||||||||||
68,181 | 45,455(2) | 18.90 | 08/01/26 | |||||||||||||
John D. Schachtel | 6,880 | 27,523(3) | 20.00 | 05/30/27 | ||||||||||||
Jody L. Anderson | 19,809 | — | 17.76 | 05/15/22 | — | — | 10,713(8) | 281,859 | ||||||||
8,050 | — | 15.06 | 05/15/22 | 4,482(9) | 117,921 | |||||||||||
14,799 | — | 17.08 | 05/15/22 | 1,063(10) | 27,968 | |||||||||||
2,353 | — | 19.99 | 05/15/22 | |||||||||||||
Donald E. Thomas | 80,000 | 20,000(4) | 16.73 | 01/02/23 | — | — | 10,894(8) | 286,621 | ||||||||
21,200 | 5,300(5) | 33.93 | 12/31/23 | 9,718(9) | 255,681 | |||||||||||
19,867 | — | 17.76 | 10/01/24 | 8,554(10) | 225,056 | |||||||||||
32,500 | — | 15.06 | 03/11/25 | |||||||||||||
23,042 | — | 14.75 | 04/22/25 | |||||||||||||
14,296 | 7,148(6) | 17.08 | 03/29/26 | |||||||||||||
6,354 | 12,709(7) | 19.99 | 03/15/27 | |||||||||||||
Daniel J. Taggart | 13,194 | — | 15.24 | 01/05/25 | — | — | 6,779(8) | 178,355 | ||||||||
8,840 | 4,422(6) | 17.08 | 03/29/26 | 6,010(9) | 158,123 | |||||||||||
3,939 | 7,878(7) | 19.99 | 03/15/27 | 5,302(10) | 139,496 | |||||||||||
Brian J. Fisher | 9,644 | — | 17.76 | 10/01/24 | — | — | 6,214(8) | 163,490 | ||||||||
11,500 | — | 15.06 | 03/11/25 | 5,610(9) | 147,599 | |||||||||||
13,143 | — | 14.75 | 04/22/25 | 4,002(10) | 105,293 | |||||||||||
8,252 | 4,127(6) | 17.08 | 03/29/26 | |||||||||||||
2,972 | 5,946(7) | 19.99 | 03/15/27 |
(1) |
(2) | This option vests on December 31, 2016 (20%), December 31, 2017 (40%), and December 31, 2018 (40%). |
(3) | This option vests on December 31, 2017 (20%), December 31, 2018 (40%), and December 31, 2019 (40%). |
(4) | This option vests in five equal annual installments on each of January 2, 2014, 2015, 2016, 2017, and 2018. |
(5) | This option vests in five equal annual installments on each of December 31, 2014, 2015, 2016, 2017, and 2018. |
(6) | This option vests in three equal annual installments on each of December 31, 2016, 2017, and 2018. |
(7) | This option vests in three equal annual installments on each of December 31, 2017, 2018, and 2019. |
(8) | This amount represents a performance-contingent |
(9) |
This amount represents a performance-contingent RSU, assuming an |
continued employment of the executive through December 31, 2018, or as otherwise provided in the applicable award agreement. |
(10) | This amount represents a performance-contingent RSU, assuming an achievement level at target. The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units set forth in the table above, based primarily (90%) on our compound annual growth rate of net income compared to our peer group over the performance period, January 1, 2017 through December 31, 2019, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. Vesting is also contingent upon the continued employment of the executive through December 31, |
Option Exercises and Stock Vested
The following table summarizes the exercise of options and the vesting of stock awards by each of our named executive officers during the fiscal year ended December 31, 2017.
Option Awards | Stock Awards | |||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||
Peter R. Knitzer | — | — | 3,461(1) | 69,947 | ||||
John D. Schachtel | — | — | — | — | ||||
Jody L. Anderson | — | — | — | — | ||||
Donald E. Thomas | — | — | 5,854(2) | 141,725 | ||||
Daniel J. Taggart | — | — | — | — | ||||
Brian J. Fisher | — | — | 2,517(3) 4,391(2) | 53,939 106,306 |
This |
This |
(3) | This RSA vested on February 15, 2017. The closing price of our common stock on the vesting date was $21.43. |
Equity Compensation Plan Information
The following table givesprovides information aboutconcerning the common stock that may be issued upon the exercise of options, warrants, and rights under all of our existing equity compensation plans as of December 31, 2015.2017. At that date, there were a total of 11,659,238 shares of our common stock outstanding.
Plan Category | (a) Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | (b) Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights ($) | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | (a) Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | (b) Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights ($) | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | ||||||||||||||||||
Equity Compensation Plans Approved by Security Holders | ||||||||||||||||||||||||
2007 Management Incentive Plan(1) | 287,527 | 5.46 | — | |||||||||||||||||||||
2011 Stock Incentive Plan(2) | 590,416 | (4) | 16.75 | (5) | — | |||||||||||||||||||
2015 Long-Term Incentive Plan(3) | 351,338 | (6) | 15.33 | (5) | 560,860 | |||||||||||||||||||
2011 Stock Incentive Plan(1) | 349,332(3) | 17.68 |
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2015 Long-Term Incentive Plan(2) | 996,406(4) | 17.22(5) | 1,274,593 | |||||||||||||||||||||
Equity Compensation Plans Not Approved by Security Holders | — | — | — | — | — | — | ||||||||||||||||||
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Total: | 1,229,281 | 13.36 | 560,860 | 1,345,738 | 17.39 | 1,274,593 | ||||||||||||||||||
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(1) |
Regional Management Corp. 2011 Stock Incentive |
Regional Management Corp. 2015 Long-Term Incentive Plan. As of March |
(3) | This amount represents 349,332 shares of common stock underlyingnon-qualified stock option awards. |
(4) |
(5) | Calculation excludes shares subject to |
SUMMARY OF EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
Employment Agreement withIn 2017, the following individuals served as our executive officers:
Messrs. Knitzer, Anderson, Thomas, Taggart, and Fisher served as our executive officers at the beginning of 2017. Mr. DunnAnderson’s employment terminated on May 15, 2017, Mr. Knitzer assumed the title of President on May 15, 2017, and Mr. Schachtel’s employment commenced on May 30, 2017.
We entered into an employment agreementagreements with Mr. Dunn, our Chief Executive Officer, onMessrs. Knitzer and Schachtel shortly before each commenced employment with us in August 2016 and May 2017, respectively. Similarly, we entered into employment letter agreements with Messrs. Thomas, Taggart, and Fisher shortly before each commenced employment with us in January 12, 2015 (the “Dunn Agreement”), pursuant to which Mr. Dunn will continue to serve as our Chief Executive Officer following his appointment as the Company’s Interim Chief Executive Officer on October 30, 2014. The Dunn Agreement provides for an approximate two-year term that began on2013, January 12, 2015, and will endJanuary 2013, respectively. In August 2017, we entered into employment agreements with Messrs. Thomas, Taggart, and Fisher that superseded each executive’s prior employment letter agreement. In addition, we amended the employment agreements of Messrs. Knitzer and Schachtel in August 2017.
We describe below the material terms of our executives’ employment agreements and prior employment letter agreements. We also describe the material terms of Mr. Anderson’s separation agreement. Additional information regarding the compensation that our executive officers are eligible for, earned, and were paid is set forth elsewhere in this Proxy Statement, including in the Compensation Discussion and Analysis and the Executive Compensation Tables set forth above.
Employment Agreements with Current Executive Officers
The employment agreements of Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher provide for a three-year term. The three-year term ends on December 31, 2016.August 1, 2019 and May 30, 2020 in the case of Messrs. Knitzer and Schachtel, respectively, and on August 30, 2020 in the case of Messrs. Thomas, Taggart, and Fisher. The employment agreements generally provide for compensation to our executives in the form of annual base salaries, annual cash incentive opportunities, long-term incentive opportunities, and various other limited perquisites and personal benefits. Our executives have also agreed to certain restrictive covenants set forth in the employment agreements, including a covenant not to compete.
Mr. Dunn is currentlyPursuant to their employment agreements, Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher are entitled to receive an annual base salary of $520,000, subject to annual review.no less than $530,000; $350,000; $342,000; $318,000; and $240,000, respectively,pro-rated for any partial year. For each calendar year during the employment term, Mr. Dunneach executive is also eligible to earn an annual bonus award under theour Annual Incentive Plan based upon the achievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 100% of the executive’s base salary(pro-rated for any partial year). The employment agreements of Messrs. Knitzer and Schachtel provide that each such executive is entitled to receive anon-qualified stock option award, a performance-contingent RSU award, and a cash-settled performance unit award within his first year of employment, with the vesting of each such award subject to continued employment through the vesting date and, in the case of the performance-contingent RSU award and the cash-settled performance unit award, the achievement of performance objectives established by our Compensation Committee. Each executive is otherwise eligible to participate in our long-term incentive program at the sole discretion of our Compensation Committee and our Board.
Commencing in 2018 (or 2019, in the case of Mr. Schachtel), Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher will be eligible to receive an annual base salary, annual cash incentive opportunity, and long-term incentive opportunity totaling in the aggregate at least $3,000,000; $1,225,000; $1,197,000; $954,000; and $720,000, respectively. Each executive’s annual total compensation opportunity is subject to our Compensation Committee’s discretion to adjust base salary, determine allocations between cash and equity compensation opportunities, establish performance and/or multi-year service criteria, and determine if and to the extent any incentive compensation is earned and payable based on the attainment of performance criteria and other terms and conditions established by our Compensation Committee, and further subject to the terms and conditions of the applicable incentive plan and related award agreements (including, if applicable under any such plan or award agreement, multi-year vesting). Long-term incentive awards are subject to the terms of the 2015 Plan and the related award agreements.
We also provide our executives with benefits generally available to our other employees, including medical and retirement plans. In addition, we provide our executives with the use of a mobile phone (or the provision of a stipend for a mobile phone), disability insurance policies (beginning in 2018), and reasonable travel expenses. In the case of Messrs. Knitzer and Schachtel, we pay
for reasonable expenses associated with their travel to and from their personal residences to our headquarters in South Carolina. In the case of Mr. Thomas, we provide a car allowance of $1,150 per month.
Our executive employment agreements and long-term incentive award agreements also provide for certain severance benefits following an executive’s termination by us without cause, by the executive as a result of good reason, due to the executive’s disability, due to the executive’s death, or following a “double-trigger”change-in-control event. A “double trigger”change-in-control event requires both (1) achange-in-control and (2) an executive’s termination by us without cause or by the executive as a result of good reason within certain timeframes. The terms “cause,” “good reason,” “disability,” and“change-in-control” are defined in the 2011 Plan, the 2015 Plan, and/or each executive’s employment agreement and/or long-term incentive award agreements, as applicable. The severance benefits are described in “Summary of Employment Arrangements with Executive Officers – Potential Payments Upon Termination orChange-in-Control,” below. An executive’s receipt of severance benefits will be subject to the executive’s execution of a release of claims within the time period specified in the employment agreement and the continued compliance with the restrictive covenants described below.
Each executive is also subject to various restrictive covenants, and his entitlement to certain benefits is contingent upon his compliance with such covenants. Specifically, each executive is subject to a covenant not to disclose our confidential information during his employment and at all times thereafter, a covenant not to compete during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following his termination of employment, a covenant not to solicit competitive “business services” through or from “loan sources” (each as defined in the employment agreements) during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following his termination of employment, a covenant not to solicit or hire our employees during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following his termination of employment, and anon-disparagement covenant effective during the employment term and at all times thereafter. Each executive’s covenant not to compete is limited to an area within 25 miles of any of our branches or other offices.
In addition, each executive must abide by any equity retention policy, compensation recovery policy, stock ownership guidelines, or other similar policies that we maintain.
Prior Agreements with Current Executive Officers
The following employment letter agreements of Messrs. Thomas, Taggart, and Fisher were in effect at the beginning of 2017. They were superseded by and of no force or effect following the execution of employment agreements, effective August 2017.
Prior Employment Letter Agreement with Mr. Thomas
We entered into a letter agreement with Mr. Thomas, dated December 12, 2012 and amended on October 1, 2014. Pursuant to the letter agreement, Mr. Thomas was entitled to receive an annual base salary, subject to annual review (set at $342,000 in 2017). In addition, Mr. Thomas was eligible to earn an annual bonus award under our Annual Incentive Plan based upon the achievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 100% of his base salary. The Dunn Agreement providesletter agreement entitled Mr. Thomas to receive certainnon-qualified stock option awards in 2013. On October 1, 2014, the letter agreement was amended in an effort to more effectively link Mr. Thomas’s compensation to the successful achievement of our strategic business objectives. The amendment provided that Mr. Dunn will be eligible for a proratedThomas would forego certain rights to additional annual bonus award during calendar year 2014, in addition to any other partial year. In addition, Mr. Dunn will be eligible to earn a cash bonus instock option grants provided under the amount of up to $500,000, subject to his continued employmentoriginal letter agreement and would instead, consistent with the Company as its Chief Executive Officer through December 31, 2016 (the “Completion Bonus”). The Completion Bonus is payable solely at the discretionincentive compensation structure applicable to other executives, in 2014 be granted a combination of the Compensation Committee based upon a review of Mr. Dunn’s performance, taking into account such factors as the Compensation Committee may establish or otherwise deem relevant, including but not limited to Mr. Dunn’s contributions to the Company’s financial performance and the accomplishment of the Company’s short-term and long-term strategic objectives.
Mr. Dunn will also receive equity compensation opportunities in the following forms: an initial stock award, a nonqualified stock option award, aoptions, performance-contingent restricted stock unit award, and a cash-settled performance unit award.
Pursuant to the Dunn Agreement, Mr. Dunn received an initial stock award for 99,337 fully vested shares of Company common stock on January 12, 2015. The net shares (as defined below) subject to the stock award are subject to a holding period ending December 31, 2016, regardless of whether Mr. Dunn remains employed with the Company until such date. During the holding period, Mr. Dunn may not transfer the net shares subject to the stock award. The “net shares” means the total number of shares of the Company’s common stock subject to the stock award less such number of shares as may be withheld to satisfy applicable withholding taxes as determined at minimum statutory withholding rates.
Pursuant to the Dunn Agreement, Mr. Dunn received a nonqualified stock option to purchase 71,692 shares of Company common stock on April 22, 2015 at an exercise price per share equal to $14.75. The option will vest on December 31, 2017, subject to Mr. Dunn’s continued employment with the Company through the vesting date or as otherwise provided in the applicable award agreement. The option has a ten-year term.
Pursuant to the Dunn Agreement, on April 22, 2015 Mr. Dunn received performance-contingent restricted stock units (“RSUs,”) with a grant date fair value of $500,000 and cash-settled performance units (“performance units”) with aan aggregate target cash settlement value of 1.5 times his base salary. Commencing in 2015, Mr. Thomas was eligible to participate in our long-term incentive program at vesting equal to $500,000. The RSUs and performance units will be eligible for vesting on December 31, 2017, based on the achievement, if at all,sole discretion of performance criteria established by theour Compensation Committee and our Board. The letter agreement also provided Mr. Dunn’s continued employment from the grant date until the vesting date or as otherwise provided in the applicable award agreement.
Each of the stock award, the option, the performance-contingent restricted stock unit award, and the cash-settled performance unit award will be subject to the terms of the 2011 Plan, or any successor plan, and each applicable award agreement. For fiscal 2016, and subject to his continued employment from the effective date of the Dunn Agreement until the applicable grant date, Mr. Dunn is eligible to receive one or more long-term incentive awards valued in the aggregate at $1,500,000, subject to the terms of the 2011 Plan, or any successor plan, and applicable equity award agreements, at the discretion of the Board or Compensation Committee.
The Company will also provide Mr. DunnThomas with benefits generally available to itsour other employees, including medical and retirement plans, in addition to the use of a cellmobile phone and reasonable attorneys’ fees and expenses nota car allowance of $1,150 per month.
Prior Employment Letter Agreement with Mr. Taggart
We entered into a letter agreement with Mr. Taggart, effective January 5, 2015. Pursuant to exceed $7,500 in connection with the negotiation of the Dunn Agreement.
Ifletter agreement, Mr. Dunn’s employment is terminated by the Company without “cause” or by Mr. Dunn as a result of “involuntary termination,” Mr. Dunn will beTaggart was entitled to receive: (1) accrued but unpaid salary through his termination date; (2) continued payment of hisreceive an annual base salary, for a period of 12 months following his termination date (unlesssubject to annual review (set at $318,000 in 2017). In addition, Mr. Dunn isTaggart was eligible to receive the Completion Bonus and/or his employment terminates after December 31, 2016); (3) the pro-rata portion of anyearn an annual bonus foraward under our Annual Incentive Plan based upon the yearachievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 100% of his base salary. Mr. Taggart’s letter agreement entitled him to receive certain equity compensation opportunities in the form of anon-qualified stock option award, a performance-contingent RSU award, and a cash-settled performance unit award, all of which termination occurs,were awarded in 2015. Commencing in 2016, Mr. Taggart was eligible to participate in our long-term incentive program at the sole discretion of our Compensation Committee and our Board. The letter agreement also provided Mr. Taggart with benefits generally available to our other employees, including medical and retirement plans, in addition to the extent earned, plus, if his termination occurs after year-end but beforeuse of a mobile phone.
Prior Employment Letter Agreement with Mr. Fisher
We entered into a letter agreement with Mr. Fisher, dated December 12, 2012. Pursuant to the annual bonus for the preceding year is paid, the annual bonus for the preceding year; (4) reimbursement of COBRA premiums for continuation coverage under the Company’s group medical plan for 12 months following his termination date, so long as he is notletter agreement, Mr. Fisher was entitled to obtain insurance from a subsequent employer; and (5) reimbursement of expenses incurred prior to termination.
If Mr. Dunn’s employment terminates due to his death or “disability” (as defined by the Dunn Agreement), Mr. Dunn will be entitled to receive: (1) accrued but unpaid salary prior to his death or disability; (2) reimbursement of expenses incurred prior to his death or disability; and (3) the pro-rata portion of any annual bonus for the year in which his death or termination due to disability occurs, to the extent earned, plus, if his death or termination due to disability occurs after year-end but before the annual bonus for the preceding year is paid, the annual bonus for the preceding year. In addition, in the event Mr. Dunn’s employment is terminated due to disability, he is entitled to continued payment of hisreceive an annual base salary, until 12 months aftersubject to annual review (set at $240,000 in 2017). In addition, Mr. Fisher was eligible to
earn an annual bonus award under our Annual Incentive Plan based upon the achievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 25% of his termination date, reduced bybase salary. Mr. Fisher was also eligible to participate in our long-term incentive program at the amounts payable under any disability insurance, plan or policy maintained by the Company. However,sole discretion of our Compensation Committee and our Board. The letter agreement also provided Mr. Dunn is not entitledFisher with benefits generally available to our other employees, including medical and retirement plans, in addition to the severance payment in the preceding sentence if he is eligible to be paid the Completion Bonus and/or his employment terminates after December 31, 2016.use of a mobile phone.
If the Company terminates Mr. Dunn’s employmentAgreements with “cause” or if Mr. Dunn voluntarily terminates his employment, he is entitled to accrued but unpaid salary and expense reimbursements through his termination date. In the case of voluntary termination of employment, if termination occurs after year-end but before the annual bonus for the preceding year is paid, Mr. Dunn is also entitled to payment of the annual bonus for the preceding year.Former Executive Officer
For purposes of the Dunn Agreement, “cause” includes: (1) the willful or grossly negligent material failure to perform duties; (2) conviction or entering into a plea bargain or plea of nolo contendere of any felony or certain other crimes; (3) certain acts of fraud, embezzlement or misappropriation; (4) certain failures to comply with any Company written policy or certain other actions that materially interfere with Mr. Dunn’s ability to discharge his duties, responsibilities or obligations; (5) the knowing misstatement of Company financial records; (6) the material breach by Mr. Dunn of any of the terms of the Agreement; (7) habitual drunkenness or substance abuse; (8) the failure to disclose material financial or other informationPrior to the Board; or (9) engagement in conduct that results in Mr. Dunn’s obligation to reimburse the Company for the amount of any bonus or other compensation under the Sarbanes-Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act.
For purposes of the Dunn Agreement, “involuntary termination” means termination of Mr. Dunn’sAnderson’s employment which is dueas our President and Chief Operating Officer on May 15, 2017, we were party to a material diminutionthree-year employment agreement with Mr. Anderson, dated September 19, 2014. Immediately prior to the termination of Mr. Anderson’s employment, he was entitled to receive an annual base salary of $345,000, subject to annual review. For each calendar year during the employment term, Mr. Anderson was also eligible to earn an annual bonus award under our Annual Incentive Plan based upon the achievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 100% of his responsibilities, position, authority or duties or a material adverse changebase salary. The employment agreement also entitled Mr. Anderson to receive certain equity compensation opportunities in the terms or statusform of anon-qualified stock option award (awarded in 2014), a performance-contingent RSU award (awarded in 2015), and a cash-settled performance unit award (awarded in 2015). Commencing in 2016, Mr. Anderson was eligible to participate in our long-term incentive program at the sole discretion of the Dunn Agreement orCompensation Committee and the Board. Mr. Anderson also received benefits generally available to our other employees, including medical and retirement plans, in addition to a material reduction incar allowance of $1,150 per month and the use of a mobile phone.
Under his employment agreement, Mr. Dunn’s compensation package, in each case without Mr. Dunn’s written consent.
Mr. Dunn isAnderson was also subject to a covenant not to disclose the Company’sour confidential information during his employment term and at all times thereafter, a covenant not to compete during his employment and for a period of two years following his termination of employment, a covenant not to solicit competitive consumer finance loans through “loan sources” (as defined in the Dunn Agreement)employment agreement) during his employment and for a period of two years following his termination of employment, a covenant not to solicit or hire Companyour employees during his employment and for a period of two years following his termination of employment, and anon-disparagement covenant effective during the employment term and at all times thereafter. Mr. Dunn’s Anderson’snon-compete is was limited to an area within twenty-five25 miles of any Company office.of our branches or other offices.
Employment AgreementIn connection with the termination of Mr. Anderson
WeAnderson’s employment, we entered into an employmenta separation agreement with Mr. Anderson, our Presidenteffective June 14, 2017. The separation agreement provides for benefits to, and Chief Operating Officer, on September 19, 2014 (the “Anderson Agreement”), pursuant to whichimposes certain obligations upon, Mr. Anderson will serve as our Presidentin accordance with his employment agreement. Specifically, subject to his execution and Chief Operating Officer. The Anderson Agreement provides fornon-revocation of a three-year term.
release of claims and his compliance with his employment agreement and separation agreement (including, but not limited to, the restrictive covenants contained therein), Mr. Anderson is currently entitled to receive an annual base salary of $335,000, subject to annual review. For each calendar year during the employment term, Mr. Anderson is also eligible to earn an annual bonus awardfollowing payments and benefits under the Annual Incentive Plan based upon the achievement of performance targets established by the Compensation Committee, withseparation agreement: (1) a target bonuspayment equal to no less than 100%30 days of his base salary. The Anderson Agreement provides that Mr. Anderson will be eligible for a prorated annual bonus award during calendar year 2014,salary in addition to any other partial year.
Mr. Anderson will also receive equity compensation opportunities in the following forms: a nonqualified stock option award, a performance-contingent restricted stock unit award, and a cash-settled performance unit award.
Pursuant to the Anderson Agreement, Mr. Anderson received a nonqualified stock option to purchase 24,566 shares of Company common stock on October 1, 2014 at an exercise price per share equal to $17.76. The option will vest on December 31, 2017, subject to Mr. Anderson’s continued employment with the Company through the vesting date or as otherwise provided in the applicable award agreement. The option has a ten-year term.
Pursuant to the Anderson Agreement, on April 22, 2015 Mr. Anderson received RSUs with a grant date fair value of $200,000 and performance units with a target cash settlement value at vesting equal to $200,000. The RSUs and performance units will be eligible for vesting on December 31, 2017, basedeffect on the achievement, if at all,date of performance criteria established by the Compensation Committee and Mr. Anderson’s continued employment from the grant date until the vesting date or as otherwise provided in the applicable award agreement.
Eachtermination (in lieu of the option, the performance-contingent restricted stock unit award and the performance unit award will be subject to the terms of the 2011 Plan, or any successor plan, and each applicable award agreement. For fiscal 2016, and subject torequirement in his continued employment from the effective date of the Anderson Agreement until the applicable grant date, Mr. Anderson is eligible to receive one or more long-term incentive awards, subject to the terms of the 2011 Plan or any successor plan and applicable equity award agreements at the discretion of the Board or Compensation Committee.
The Company will alsoagreement that we provide Mr. Anderson with benefits generally available30 days’ notice of our decision to its other employees, including medical and retirement plans,terminate his employment without cause); (2) payment of an amount equal to 12 months of his base salary in additioneffect on the date of termination, paid in equal installments over a period of 18 months (modified from 12 months in the employment agreement) in accordance with our ordinary payroll practices; (3) payment of apro-rated portion of his annual short-term incentive program target bonus for 2017, but only to a car allowancethe extent such bonus is earned based on performance goals established for 2017 under our Annual Incentive Plan; (4) reimbursement of $1,150 per month, the use of a cell phone, reasonable relocation expenses, and reasonable attorneys’ fees and expenses not to exceed $7,500incurred in connection with the negotiation and preparation of the Anderson Agreement.
Ifseparation agreement, not to exceed $5,000; (5) reimbursement of the cost of COBRA continuation premiums for continued health insurance coverage for Mr. Anderson’s employment is terminated by the Company without “cause” or by Mr. Anderson as a result of “involuntary termination,” Mr. Anderson will be entitled to receive: (1) accrued but unpaid salary through his termination date; (2) continued payment of his annual base salary for a period of 12 months following the date of termination (or until Mr. Anderson becomes eligible for coverage from a subsequent employer); and (6) executive outplacement services in an aggregate amount not to exceed $10,000 for a period of 6 months following the date of termination, through a provider to be designated by us. Mr. Anderson also reaffirmed his obligations under the restrictive covenants set forth in his employment agreement, with the exception that the duration of his covenant not to compete was reduced from two years to one year.
Potential Payments Upon Termination orChange-in-Control
Under their employment agreements and long-term incentive award agreements, our executive officers are entitled to certain severance benefits following termination by us without cause, by the executive as a result of good reason, due to the executive’s disability, due to the executive’s death, and following a “double-trigger”change-in-control. These benefits ensure that our executives are motivated primarily by the needs of our business, rather than circumstances that are outside of the ordinary course of business (such as circumstances that might lead to the termination of an executive’s employment or that might lead to achange-in-control). Severance benefits provide for a level of continued compensation if an executive’s employment is adversely affected in these circumstances, subject to certain conditions. We believe that these benefits enable executives to focus fully on their duties while employed by us, ensure that our executives act in the best interests of our stockholders, even if such actions are otherwise contrary to our executives’ personal interests, and alleviate concerns that may arise in the event of an executive’s separation from service with us. We believe that these severance benefits are in line with current market practices.
The rights to and level of benefits are determined by the type of termination event. Our executive employment agreements provide for the following cash and other benefits:
Termination Event | Severance Benefits | |
By the Company Without Cause or by the Executive | (1) Payment in Lieu of 30 Days’ Notice. At our election, 30 days’ base salary in lieu of allowing the executive to work through any required30-day termination notice period. (2) Base Salary Continuation.In the case of Mr. Knitzer, an amount equal to two times his salary in effect on the termination date, payable over a period of 24 months following his termination date, and in the case of each other executive, an amount equal to his salary in effect on the termination date, payable over a period of 12 months following his termination date. (3) Average Bonus. In the case of Mr. Knitzer, an amount equal to two times his average bonus determined as of the termination date, payable over a period of 24 months following his termination date, and in the case of each other executive, an amount equal to his average bonus determined as of the termination date, payable over a period of 12 months following his termination date. An executive’s “average bonus” is defined in his employment agreement, generally as the average annual bonus paid for the three fiscal years prior to the year of termination or such lesser number of full fiscal years that the executive has been employed. If employment is terminated before the last day of the executive’s first full fiscal year, the average bonus is calculated as the executive’s target bonus. (4) Annual Incentive Compensation. Thepro-rata portion of any bonus for the year in which termination occurs, to the extent earned, plus, if termination occurs afteryear-end but before the bonus for the preceding year is paid, the bonus for the preceding year. (5) Health Benefits Continuation Coverage. Reimbursement of COBRA premiums for continuation coverage under our group medical plan for 24 months (in the case of Mr. Knitzer) or 12 months (in the case of each other executive) following his termination date, so long as he is not entitled to obtain insurance from a subsequent employer. (6) Outplacement Services. Reasonable outplacement service expenses for 24 months (in the case of Mr. Knitzer) or 12 months (in the case of each other executive) following the termination date, not exceeding $25,000 per year. | |
“Double-Trigger” Change-in-Control | For each executive other than Mr. Knitzer, if employment is terminated by us without cause or by the executive as a result of good reason, and such termination occurs within six months before or one year after the effective date of achange-in-control, then the executive is entitled to the benefits described immediately above, plus the additional benefit that the amounts described in items (2) and (3) will be increased by a factor of 100% (for a total of two times salary and average bonus). | |
Disability | If employment is terminated due to the executive’s disability, he will be entitled to the same benefits as if employment were terminated by us without cause or by the executive as a result of good reason, except that he is not entitled to 30 days’ notice of termination (or payment in lieu thereof). The disability severance benefits will be reduced by the amount of any disability benefits paid to the executive pursuant to any disability insurance, plan, or policy provided by us to or for the benefit of the executive. If any disability benefits paid to an executive pursuant to any disability insurance, plan, or policy provided by us are not subject to local, state, or federal taxation, then our severance obligations in the event of termination due to the executive’s disability will be reduced by an amount equal to the gross taxable amount that we would have been required to pay in order to yield the net,after-tax benefit that the executive actually received pursuant to such disability insurance, plan, or policy. | |
Death | Annual Incentive Compensation. Thepro-rata portion of any bonus for the year in which death occurs, to the extent earned, plus, if death occurs afteryear-end but before the bonus for the preceding year is paid, the bonus for the preceding year (paid to the executive’s designated beneficiary or estate, as applicable). | |
Voluntary Termination | Annual Incentive Compensation. If termination occurs afteryear-end but before the bonus for the preceding year is paid, the bonus for the preceding year (the executive is not entitled to any bonus for the year during which voluntary termination occurs). | |
Cause | None. |
In addition to the benefits provided for under our executive employment agreements, our long-term incentive award agreements provide for the following treatment of awards following termination:
Termination Event | Award Treatment | |
By the Company Without Cause, by the Executive for Good Reason, Due to Disability, or Due to Death | • Non-Qualified Stock Option Awards: For options awarded in 2013, forfeiture of any unvested shares. For options awarded since 2014,pro-rata accelerated vesting of any unvested shares. • Performance-Contingent RSUs: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. • Cash-Settled Performance Units: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. | |
“Double-Trigger” Change-in-Control | • Non-Qualified Stock Option Awards: For options awarded in 2013, full accelerated vesting in the event of a termination of employment by us without cause or by the executive as a result of good reason during thesix-month period following achange-in-control. For options awarded since 2014, full accelerated vesting in the event of a termination of employment by us without cause or by the executive as a result of good reason within six months before or one year after the effective date of achange-in-control. • Performance-Contingent RSUs: Full accelerated vesting at target in the event of a termination of employment by us without cause or by the executive as a result of good reason within six months before or one year after the effective date of achange-in-control. • Cash-Settled Performance Units: Full accelerated vesting at target in the event of a termination of employment by us without cause or by the executive as a result of good reason within six months before or one year after the effective date of achange-in-control. | |
Retirement | • Non-Qualified Stock Option Awards: For options awarded since 2014, continued vesting as if the executive remained employed. • Performance-Contingent RSUs: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. • Cash-Settled Performance Units: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. An executive is eligible for “Retirement” when he (i) is 65 or older at the time of termination, or (ii) is 55 or older at the time of termination and has completed ten (10) years of service to Regional. |
The following table provides information concerning the payments and the value of other benefits that Mr. Anderson has received or will receive as a result of his termination date; (3)in 2017 and that our other NEOs would have been eligible to receive if their employment had been terminated under the pro-rata portiondescribed circumstances. Our obligation to provide the payments and other benefits described in the table are found in each NEO’s employment agreement, in long-term incentive award agreements, and in a separation agreement (in the case of Mr. Anderson), in each case as described above.
In calculating the amounts included in the table for Mr. Anderson, we have used our closing share price of $21.00 on May 15, 2017, the date of his termination. In calculating the amounts in the table for our other NEOs, we have assumed (i) that the termination event and/orchange-in-control occurred on December 31, 2017, (ii) a share price of $26.31 (our closing share price on December 29, 2017, the last trading day of 2017), and (iii) the following:
“Long-Term Incentive Award Vesting”: The value associated with acceleratednon-qualified stock option awards has been calculated by multiplying the number of accelerated shares by the amount by which termination occurs,our stock price as of December 31, 2017 exceeded (if at all) the exercise price of the option. For any performance-contingent long-term incentive award where vesting remains subject to actual performance over a performance period, (1) we have calculated the extent earned, plus, if his termination occurs after year-end but before the annual bonus for the preceding year is paid, the annual bonus for the preceding year; (4)value (if any) of awards associated with performance periods ending in 2017 based on actual performance, and (2) we have ascribed no value
to awards associated with performance periods ending after 2017 because there is no guarantee that we will meet the threshold performance criteria required for these awards to vest and be paid. |
Termination Event
| ||||||||||||
Name | Type of Payment or Benefit | Termination by the Company Without Cause or by the Executive for Good Reason | Termination by the Company Without Cause or by the Executive for Good Reason in Connection with a Change in Control | Termination Due to the Executive’s Disability | Termination Due to Death | Voluntary Termination by the Executive(1) | ||||||
Peter R. Knitzer | Payment in Lieu of 30 Days’ Notice | 43,562 | 43,562 | — | — | — | ||||||
Severance Payment | 2,105,160 | 2,105,160 | 2,105,160 | — | — | |||||||
Annual Incentive Compensation | 522,580 | 522,580 | 522,580 | 522,580 | — | |||||||
Long-Term Incentive Award Vesting(2) | 197,588 | 2,537,152 | 197,588 | 197,588 | — | |||||||
Other Benefits | 50,000 | 50,000 | 50,000 | — | — | |||||||
Total
|
2,918,890 |
5,258,454 |
2,875,328 |
720,168 | —
| |||||||
Jody L. Anderson | Payment in Lieu of 30 Days’ Notice | 28,356 | — | — | — | — | ||||||
Severance Payment | 345,000 | — | — | — | — | |||||||
Annual Incentive Compensation | 125,816 | — | — | — | — | |||||||
Long-Term Incentive Award Vesting | 109,664 | — | — | — | — | |||||||
Other Benefits | 12,402 | — | — | — | — | |||||||
Total
|
621,238 |
— |
— |
— | —
| |||||||
John D. Schachtel | Payment in Lieu of 30 Days’ Notice | 28,767 | 28,767 | — | — | — | ||||||
Severance Payment | 700,000 | 1,400,000 | 700,000 | — | — | |||||||
Annual Incentive Compensation | 204,224 | 204,224 | 204,224 | 204,224 | — | |||||||
Long-Term Incentive Award Vesting(2) | 52,102 | 173,670 | 52,102 | 52,102 | — | |||||||
Other Benefits | 44,940 | 44,940 | 44,940 | — | — | |||||||
Total
|
1,030,033 |
1,851,601 |
1,001,266 |
256,326 | —
| |||||||
Donald E. Thomas | Payment in Lieu of 30 Days’ Notice | 28,110 | 28,110 | — | — | — | ||||||
Severance Payment | 544,616 | 1,089,232 | 544,616 | — | — | |||||||
Annual Incentive Compensation | 337,212 | 337,212 | 337,212 | 337,212 | — | |||||||
Long-Term Incentive Award Vesting(2) | 71,399 | 1,602,955 | 71,399 | 71,399 | — | |||||||
Other Benefits | 38,915 | 38,915 | 38,915 | — | — | |||||||
Total
|
1,020,252 |
3,096,424 |
992,142 |
408,611 | —
| |||||||
Daniel J. Taggart | Payment in Lieu of 30 Days’ Notice | 26,137 | 26,137 | — | — | — | ||||||
Severance Payment | 550,175 | 1,100,350 | 550,175 | — | — | |||||||
Annual Incentive Compensation | 313,548 | 313,548 | 313,548 | 313,548 | — | |||||||
Long-Term Incentive Award Vesting(2) | 44,199 | 875,245 | 44,199 | 44,199 | — | |||||||
Other Benefits | 44,940 | 44,940 | 44,940 | — | — | |||||||
Total
|
978,999 |
2,360,220 |
952,862 |
357,747 | —
| |||||||
Brian J. Fisher | Payment in Lieu of 30 Days’ Notice | 19,726 | 19,726 | — | — | — | ||||||
Severance Payment | 322,219 | 644,438 | 322,219 | — | — | |||||||
Annual Incentive Compensation | 236,640 | 236,640 | 236,640 | 236,640 | — | |||||||
Long-Term Incentive Award Vesting(2) | 38,001 | 759,552 | 38,001 | 38,001 | — | |||||||
Other Benefits | 31,822 | 31,822 | 31,822 | — | — | |||||||
Total
|
648,408 |
1,692,178 |
628,682 |
274,641 | —
|
If Mr. Anderson’s employment terminates due to his death or “disability” (as defined by
(1) | A voluntary termination that is treated as a “retirement” may result inpro-rata or continued vesting of certain long-term incentive awards. None of our NEOs were eligible for “retirement” as of December 31, 2017. |
(2) | See “Executive Compensation Tables – Outstanding Equity Awards at FiscalYear-End” for a summary of equity-based long-term incentive awards outstanding as of December 31, 2017. As of December 31, 2017, in addition to equity-based long-term incentive awards, Messrs. Knitzer, Thomas, Taggart, and Fisher held one or more cash-settled performance unit awards having an aggregate target value of $950,000, $497,700, $308,667, and $267,499, respectively. |
The amounts shown in the Anderson Agreement), Mr. Anderson will be entitled to receive: (1) accrued but unpaid salary prior to his death or disability; (2) reimbursement of expenses incurred prior to his death or disability;table do not include payments and (3) the pro-rata portion of any annual bonus for the year in which his death or termination due to disability occurs,benefits to the extent earned, plus, if his death or termination duethey are provided generally to disability occurs after year-end but before the annual bonus for the preceding year is paid, the annual bonus for the preceding year. In addition, in the event Mr. Anderson’s employment is terminated due to disability, he is entitled to continued payment of his annual base salary until 12 months after his termination date, reduced by the amounts payable under any disability insurance, plan or policy maintained by the Company.
If the Company terminates Mr. Anderson’s employment with “cause” or if Mr. Anderson voluntarily terminates his employment, he is entitled to accrued but unpaid salary and expense reimbursements through his termination date. In the case of voluntary termination of employment, if termination occurs after year-end but before the annual bonus for the preceding year is paid, Mr. Anderson is also entitled to payment of the annual bonus for the preceding year.
For purposes of the Anderson Agreement, “cause” includes: (1) the willful or grossly negligent material failure to perform duties; (2) conviction or entering into a plea bargain or plea of nolo contendere of any felony or certain other crimes; (3) certain acts of fraud, embezzlement or misappropriation; (4) certain failures to comply with any Company written policy or certain other actions that materially interfere with Mr. Anderson’s ability to discharge his duties, responsibilities or obligations; (5) the knowing misstatement of Company financial records; (6) the material breach by Mr. Anderson of any of the terms of the Agreement; (7) habitual drunkenness or substance abuse; (8) the failure to disclose material financial or other information to the Board; or (9) engagement in conduct that results in Mr. Anderson’s obligation to reimburse the Company for the amount of any bonus or other compensation under the Sarbanes-Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act.
For purposes of the Anderson Agreement, “involuntary termination” means termination of Mr. Anderson’s employment which is due to a material diminution of his responsibilities, position, authority, duties or in the terms or status of the Anderson Agreement or a reduction in Mr. Anderson’s compensation package, in each case without Mr. Anderson’s written consent.
Mr. Anderson is also subject to a covenant not to disclose the Company’s confidential information during his employment term and at all times thereafter, a covenant not to compete during his employment and for a period of two years following his termination of employment, a covenant not to solicit competitive consumer finance loans through “loan sources” (as defined in the Anderson Agreement) during his employment and for a period of two years following his termination of employment, a covenant not to solicit or hire Companysalaried employees during his employment and for a period of two years following hisupon termination of employment and a non-disparagement covenant effective during the employment term and at all times thereafter. Mr. Anderson’s non-compete is limited to an area within twenty-five miles of any Company office.
Employment Letter Agreement with Mr. Thomas
Effective January 2, 2013, Mr. Thomas was appointed as our Executive Vice President and Chief Financial Officer. We entered into a letter agreement with Mr. Thomas, effective as of December 12, 2012, as amended on October 1, 2014. Mr. Thomas is currently entitled to receive an annual base salary of $332,000, subject to annual review. With respect to each calendar year during the employment term, the letter agreement provides that Mr. Thomas is also eligible for a performance-based annual cash award pursuant to our Annual Incentive Plan, with a target bonus equal to 100% of his base salary, based upon the achievementdo not discriminate in scope, terms, or operation in favor of our performance targets for Mr. Thomas, as established by our Compensation Committee.
Mr. Thomas was paid a sign-on bonus of $75,000NEOs. Because the amounts in one lump sum within three days of the commencement of his employment, and we granted Mr. Thomas a stock option award (the “Initial Equity Grant”) for the purchase of 100,000 shares of our common stock, with the grant occurring on January 2, 2013, the date that Mr. Thomas began his employment. The exercise price of the Initial Equity Grant is $16.73, which is equal to the closing price of our common stock on the grant date. The Initial Equity Grant istable are calculated subject to the termsassumptions provided and conditions describedon the basis of the occurrence of a termination as of a particular date and under a particular set of circumstances, the actual amount to be paid to each of our NEOs (other than Mr. Anderson) upon a termination or change in control may vary significantly from the amounts included in the applicable award agreement and will vest in five tranches, one-fifth on eachtable. Factors that could affect these amounts include the timing during the year of the anniversaries of the grant date, as long as Mr. Thomas has been continuously employed by us through the vesting dates.
On October 1, 2014, the letter agreement was amended in an effort to more effectively link Mr. Thomas’s compensation to the successful achievement of our strategic business objectives. The amendment provided that Mr. Thomas would forego certain rights to annual stock option grants under the letter agreement and would instead, consistent with the incentive compensation structure applicable to certain other executives, in 2014 be granted a combination of stock options, performance-contingent restricted stock units, and performance units with an aggregate target value of 1.5 times his base salary, and that in 2015, Mr. Thomas will be eligible to participate in the Company’s long-term incentive program in the sole discretion of the Compensation Committee or the Board.
We will also provide Mr. Thomas with health insurance, short- and long-term disability insurance, life insurance, access to our 401(k) plan, 25 days of paid time off, and a car allowance of $1,150 per month. Mr. Thomas’s employment is at-will.
Employment Letter Agreement with Mr. Taggart
Effective January 5, 2015, Mr. Taggart was appointed as our Senior Vice President and Chief Risk Officer. We entered into a letter agreement with Mr. Taggart, effective as of January 5, 2015. Mr. Taggart is currently entitled to receive an annual base salary of $308,000, subject to annual review, and will be eligible to earn an annual cash incentive award with a target opportunity equal to 100% of his base salary, based upon achievement of certain performance targets. Mr. Taggart will also receive compensation in the following forms: a nonqualified stock option award; a performance-contingent restricted stock unit award; and a cash-settled performance unit award.
Pursuant to his letter agreement, Mr. Taggart received a nonqualified stock option to purchase 13,194 shares of Company common stock on January 5, 2015 at an exercise price per share equal to $15.24. The option will vest on December 31, 2017, subject to Mr. Taggart’s continued employment with the Company through the vesting date or as otherwise provided in the award agreement. The option has a ten-year term.
Pursuant to his letter agreement, on April 22, 2015 Mr. Taggart received RSUs with a grant date fair value of $100,000 and performance units with a target cash settlement value at vesting equal to $100,000. The RSUs and performance units will be eligible for vesting on December 31, 2017, based on the achievement, if at all, of performance criteria established by the Compensation Committee and Mr. Taggart’s continued employment from the grant date until the vesting date or as otherwise provided in the applicable award agreement.
Each of the option award, the performance-contingent restricted stock unit award,termination event and the cash-settled performance unit award will be subject to the termstype of the 2011 Plan, or any successor plan, and each applicable award agreement. Commencing in 2016, Mr. Taggart will be eligible to participate in long-term incentive awards under the 2011 Plan or any successor plan as determined by the Compensation Committee. The Company will also provide Mr. Taggart with benefits generally available to its other employees, including medical and retirement plans, in addition to the use of a cell phone.termination event that occurs.
Employment Letter Agreement with Mr. Fisher
Effective January 14, 2013, Mr. Fisher was appointed as our Vice President, General Counsel, and Secretary. We entered into a letter agreement with Mr. Fisher, effective as of December 12, 2012.
Mr. Fisher is currently entitled to receive an annual base salary of $230,000, subject to annual review. With respect to each calendar year during the employment term, the letter agreement provides that Mr. Fisher is also eligible for a performance-based annual cash award pursuant to our Annual Incentive Plan, with a target bonus equal to a minimum of 25% of his base salary, based upon the achievement of our performance targets for Mr. Fisher, as established by our Compensation Committee. We will also provide Mr. Fisher with health insurance, short- and long-term disability insurance, life insurance, and access to our 401(k) plan. Mr. Fisher’s employment is at-will.
SUMMARY OF COMPANY INCENTIVE PLANS
The discussion that follows describes thecertain material terms of our principal equitylong-term incentive plans and our principal cash incentive plan in which our executive officers participate.plan.
2015 Long-Term Incentive Plan
PurposesThe 2015 Plan became effective April 22, 2015, and Eligibility; Term.was amended and restated effective April 27, 2017. The purposes of the 2015 Plan are (i) to encourage and enable selected employees, directors, and consultants of Regional and its affiliates to acquire or increase their holdings of our common stock and other equity-based interests in Regional and/or to provide other incentive awards in order to promote a closer identification of their interests with our interests and those of Regional and our stockholders, and (ii) to provide us with flexibility to Regional in its ability to motivate, attract, and retain the services of participants upon whose judgment, interest, and special effort the successful conduct of itsour operation largely depends. The effective date ofAwards granted under the 2015 Plan is April 22, 2015, andmay be in the form of incentive ornon-qualified stock options, SARs (including related or freestanding SARs), RSAs, RSU awards, canperformance share awards, performance unit awards, phantom stock awards, other stock-based awards, and/or dividend equivalent awards. Awards may be granted under the 2015 Plan until April 21, 2025 or the Plan’splan’s earlier termination by the Board.
Share Limitations.The 2015 Plan is administered by the Compensation Committee, subject to Board oversight. The maximum aggregate number of shares of common stock that we may issue pursuant to awards granted under the 2015 Plan may not exceed the sum of (i) 350,0001,550,000 shares, plus (ii) any shares (A) remaining available for grant as of the effective date of the 2015 Plan under any prior plan and/or (B) subject to an award granted under a prior plan, which award is forfeited, canceled, terminated, expires, or lapses for any reason. reason without the issuance of shares or pursuant to which such shares are forfeited. In addition, shares subject to certain awards will again be available for issuance (or otherwise not counted against the maximum number of available shares) under the 2015 Plan, including unissued or forfeited shares subject to awards that are canceled, terminate, expire, are forfeited, or lapse for any reason; awards settled in cash; dividends (including dividends paid in shares) or dividend equivalents paid in cash in connection with outstanding awards; and shares subject to an award other than an option or SAR that are not issued for any reason (including failure to achieve maximum performance criteria). Further, the following will not reduce the maximum number of shares available under the 2015 Plan: (i) shares issued under the 2015 Plan through the settlement, assumption, or substitution of outstanding awards granted by another entity or obligations to grant future awards in connection with a merger or similar transaction that involves our acquisition of another entity, and (ii) available shares under a shareholder approved plan of an acquired company (as adjusted to reflect the transaction) that are used for awards under the 2015 Plan, in each case, subject to NYSE listing requirements.
The maximum aggregate number of shares of common stock that may be issued under the 2015 Plan pursuant to the grant of incentive options may not exceed 350,0001,550,000 shares.
Under Further, under the 2015 Plan, in any12-month period, (i) no participant may be granted options and SARs that are not related to an option for more than 450,000 shares of common stock (or the equivalent value thereof based on the fair market value per share of the common stock on the date of grant of an award); (ii) no participant may be granted awards other than options or SARs that are settled in shares of common stock for more than 450,000 shares of common stock; and (iii) the maximum amount of awards that are settled in cash that can be granted to any one participant will beis $2,500,000. Notwithstanding the foregoing, the maximum number of shares of common stock subject to awards granted during any12-month period to anon-employee director, taken together with any cash fees paid during such12-month period to suchnon-employee director in respect of Board service, may not exceed $600,000 in total value (calculating the value of any such awards based on the fair market value per share of common stock on the grant date of such award).
The number of shares reserved for issuance under the 2015 Plan, the participant award limitations, and the terms of awards may be adjusted in the event of an adjustment in theour capital structure of Regional (due to a merger, recapitalization, stock split, stock dividend, or similar event).
Administration; Amendment and Termination.The 2015 Plan provides that the plan will be administered by the Board or, upon its delegation, by the Compensation Committee. As a matter of practice, the Compensation Committee will administer the 2015 Plan, following Board delegation, subject to Board oversight. Each member of the Compensation Committee is intended to be independent under applicable Code Section 162(m), SEC Rule 16b-3 and NYSE listing standards. The Board and the Compensation Committee are referred to in this discussion collectively as the “Administrator.”
Subject to the terms of the 2015 Plan, the Administrator’s authority includes but is not limited to the authority to: (i) determine all matters relating to awards; (ii) prescribe the form or forms of agreements evidencing awards granted under the 2015 Plan; (iii) establish, amend and rescind rules and regulations for the administration of the 2015 Plan; (iv) correct any defect, supply any omission or reconcile any inconsistency in the 2015 Plan or in any award or award agreement; and (v) construe and interpret the 2015 Plan, awards and award agreements made under the 2015 Plan, interpret rules and regulations for administering the 2015 Plan and make all other determinations deemed necessary or advisable for administering the 2015 Plan.
The 2015 Plan and awards may be amended or terminated at any time by the Board, subject to the following: (i) stockholder approval is required of any 2015 Plan amendment if stockholder approval is required by applicable laws, rules or regulations and (ii) an amendment or termination of an award may not materially adversely affect the rights of a participant without the participant’s consent. In addition, stockholder approval is required take any action with respect to options or SARs that would be treated as a repricing under the rules of the principal stock exchange on which shares of our common stock are listed. The Administrator has unilateral authority to amend the 2015 Plan and any award to the extent necessary to comply with applicable laws, rules or regulations, or changes thereto. The Administrator may also adjust awards upon the occurrence of certain unusual or nonrecurring events, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2015 Plan or necessary or appropriate to comply with applicable laws, rules or regulations.
Options.The Administrator may grant incentive options and nonqualified options, both of which are exercisable for shares of our common stock, although incentive options may only be granted to our employees. The option price must be no less than 100% of the fair market value per share of our common stock on the date of grant, (except for certain options assumed or substituted in a merger or other transaction). Unless an individual award agreement provides otherwise, the option price may be paid in the form of cash or cash equivalent; in addition, except where prohibited by the Administrator or applicable laws, rules and regulations, payment may also be
made by: (i) delivery of shares of common stock owned by the participant; (ii) shares of common stock withheld upon exercise; (iii) delivery to a broker of irrevocable instructions to promptly deliver to Regional the amount of sale or loan proceeds to pay the option price; (iv) such other payment methods as may be approved by the Administrator; or (v) any combination of these methods. The option term may not exceed 10 years.
Stock Appreciation Rights. The Administrator may grant SARs independent of or in connection with an option. The exercise price per share of SAR will be an amount determined by the Administrator, but in no event will such amount be less than 100% of the fair market value of a share on the date the SAR is granted (other than in the case of SARs granted in substitution of previously granted awards). Generally, each SAR will entitle the holder upon exercise to an amount equal to the product of (1) the excess of (A) the fair market value on the exercise date of one share of common stock, over (B) the exercise price per share, times (2) the numbers of shares of common stock covered by the SAR.
Other Stock-Based Awards (Including Performance-Based Awards). In addition to stock options and SARs, the Administrator may grant or sell awards of shares, restricted shares, restricted stock units, and awards that are valued in whole or in part by reference to, or otherwise based on, the fair market value of shares, including performance-based awards. The Administrator, in its sole discretion, may grant awards which are denominated in shares or cash (such awards, “Performance-Based Awards”), which awards may, but are not required to, be granted in a manner which is intended to be deductible by us under Code Section 162(m). Such Performance-Based Awards will be in such form, and dependent on such conditions, as the Administrator will determine, including, without limitation, the right to receive, or vest with respect to, one or more shares or the cash value of the award upon the completion of a specified period of service, the occurrence of an event, and/or the attainment of performance objectives.
Change of Control.If there is a change of control (as defined in the 2015 Plan), to the extent that the successor or surviving company in the change of control event does not assume, substitute for or continue an award on substantially similar terms or with substantially equivalent economic benefits as awards outstanding under the 2015 Plan (as determined by the Administrator), all outstanding options and SARs will become fully vested and exercisable, and any restrictions applicable to any award other than options or SARs will be deemed to have been met, and such awards will become fully vested, earned and payable to the fullest extent of the original award (or, in the case of performance-based awards, the earning of which is based on attaining a target level of performance, such awards will be deemed earned at target). In addition, in the event that an award is assumed, substituted or continued, the award will become vested (and, in the case of options and SARs, exercisable) in full and any restrictions applicable to any outstanding award other than options or SARs will be deemed to have been met and such awards will become fully vested, earned and payable to the fullest extent of the original award (or, in the case of performance-based awards, the earning of which is based on attaining a target level of performance, such awards will be deemed earned at target), if the employment or service of the participant is terminated within six months before or one year (or such other period after a change of control asmay be stated in a participant’s employment agreement or similar agreement) after the effective date of a change of control if such termination of employment or service is by Regional not for cause or by the participant for good reason.
Transferability.Incentive options are not transferable other than by will or the laws of intestate succession or, in the Administrator’s discretion, as may otherwise be permitted in accordance with Code Section 422 and related regulations. Nonqualified options and SARs generally are not transferable other than by will or the laws of intestate succession, except for transfers if and to the extent permitted by the Administrator in a manner consistent with the registration provisions of the Securities Act. Restricted awards, performance awards, phantom stock awards and other stock-based awards that have not vested and/or been earned generally are not transferable other than transfers by will or the laws of intestate succession, and participants may not sell, transfer, assign, pledge or otherwise encumber shares subject to an award until the award has vested and/or been earned and all other conditions established by the Administrator have been met.
Forfeiture, Recoupment and Stock Retention.The 2015 Plan authorizes the Administrator to require forfeiture and/or recoupment of plan benefits if a participant engages in certain types of detrimental conduct and to require that a participant comply with Regional’s Compensation Recovery Policy and Stock Ownership and Retention Policy and/or other similar policies that may apply to the participant or be imposed under applicable laws.
Code Section 409A. Awards granted under the 2015 Plan may be subject to Code Section 409A and related regulations and other guidance. If Code Section 409A applies to the 2015 Plan or any award, and the 2015 Plan and award do not, when considered together, satisfy the requirements of Code Section 409A during a taxable year, the participant will have ordinary income in the year of non-compliance in the amount of all deferrals subject to Code Section 409A to the extent that the award is not subject to a substantial risk of forfeiture. The participant will be subject to an additional tax of 20% on all amounts includable in income and may also be subject to interest charges under Code Section 409A. We do not have any responsibility to take, or to refrain from taking, any actions in order to achieve a certain tax result for any participant.
Performance-Based Compensation – Section 162(m) Requirements. The 2015 Plan is structured with the intent of allowing the Compensation Committee to pay compensation to “covered employees” (as described above, the chief executive officer and the three
next highest compensated named executive officers other than the chief financial officer) that may be exempt from Code Section 162(m). The Compensation Committee has the discretion to grant performance awards that are not intended to satisfy the requirements for “performance-based” compensation under Code Section 162(m). Code Section 162(m) generally denies a public corporation a deduction for compensation in excess of $1,000,000 paid to any covered employee unless the compensation is exempt from the $1,000,000 limitation because it qualifies as performance-based compensation. In order to qualify as performance-based compensation, the compensation paid under a plan to covered employees must be paid under pre-established objective performance goals determined and certified by a committee comprised of outside directors. All of the members of our Compensation Committee are intended to qualify as outside directors under Code Section 162(m) standards.
With respect to awards granted to covered employees that are intended to qualify for the performance-based compensation exception under Code Section 162(m), the performance goals must be objective and must be based upon one or more of the following criteria, as determined by the Compensation Committee: (i) the employees eligible to receive compensation; (ii) a description of the business criteria on which the performance goal is based; and (iii) either the maximum amount of the compensation to be paid if the performance goal is met or the formula used to calculate the amount of compensation if the performance goal is met. The eligibility and participant award limitations are described above under “Purposes and Eligibility; Term” and “Share Limitations.” With respect to awards payable to covered employees that are intended to qualify for the compensation deduction limitation exception under Code Section 162(m), to the extent required under Code Section 162(m), the performance measures are limited to one or more of the following: (i) consolidated income before or after taxes (including income before interest, taxes, depreciation and amortization); (ii) EBITDA; (iii) adjusted EBITDA; (iv) operating income; (v) net income; (vi) adjusted cash net income; (vii) adjusted cash net income per share; (viii) net income per share and/or earnings per share (in each case, on a basic and/or diluted basis); (ix) book value per share; (x) return on members’ or stockholders’ equity; (xi) expense management (including, without limitation, total general and administrative expense percentages); (xii) return on investment; (xiii) improvements in capital structure; (xiv) profitability of an identifiable business unit or product; (xv) maintenance or improvement of profit margins; (xvi) stock price; (xvii) market share; (xviii) revenue or sales (including, without limitation, net loans charged off, average finance receivables, net loans charged off as percent of average net finance receivables, and net finance receivables); (xix) costs (including, without limitation, total general and administrative expense percentage); (xx) cash flow; (xxi) working capital; (xxii) multiple of invested capital; (xxiii) total debt (including, without limitation, total debt as a multiple of EBITDA); and (xxiv) total return.
2011 Stock Incentive Plan
The 2011 Stock Incentive Plan provides for the issuance of a maximum of 950,000 shares of common stock pursuant to awards granted under the plan. Awards may include incentive ornon-qualified stock options, incentiveSARs (including related or freestanding SARs), other stock-based awards (including shares of common stock, options, stock appreciation rights, shares, restricted shares, restricted stock unitsRSUs, and other stock-basedawards that are valued in whole or in part by reference to, or are otherwise based on, the fair market value of our common stock), and/or performance-based awards to our and our subsidiaries’ key employees, executive officers, non-employee directors, consultants, or other service providers. The number of shares reserved for issuance under the plan and the terms of awards may be adjusted upon certain events affecting our capitalization. The 2011 Plan is also administered by the Compensation Committee and was replaced by the 2015 Plan. Awards may no longer be granted under the 2011 Plan, and any shares that remained available for grant have been rolled over to the 2015 Plan. However, awards that remain outstanding under the 2011 Plan will continue in accordance with their respective terms.
2007 Management Incentive Plan
The 2007 Management Incentive Plan provides for the issuance of a maximum of 1,037,412 shares of common stock (as adjusted to reflect stock splits) pursuant to awards granted under the plan. Awards may include incentive ornon-qualified stock options and incentive stock optionsgranted to our and our subsidiaries’ key employees, executive officers,non-employee directors, consultants, or other independent advisors. The number of shares reserved for issuance under the plan and the terms of awards may be adjusted upon certain events affecting our capitalization. The 2007 Plan is also administered by the Compensation Committee and was replaced by the 20112015 Plan. Awards may no longer be granted under the 2007 Plan, and any shares that remained available for grant have been rolled over to the 2015 Plan. The last remaining options outstanding under the 2007 Plan were exercised in January 2017.
Purpose.Our Board has adopted, and our stockholders have approved, the Annual Incentive Plan. The purpose of the Annual Incentive Plan is to enable Regional to attract, retain, motivate and reward selected officers and other employees of Regional and its affiliates by providing them with the opportunity to earn annual incentive compensation awards based on attainment of performance objectives.
Administration.The Annual Incentive Plan is administered by the Compensation Committee.
Eligibility; Awards.Awards may be granted to our officersCommittee and employees in the sole discretion of the Compensation Committee. The Annual Incentive Plan provides for the payment of incentive bonuses based on the attainment of performance objectives in the form of cash or, at the discretion of the Compensation Committee, in awards of shares under the 2015 Plan. For performance-based bonuses intended to comply with the performance-based compensation exception under Code Section 162(m), the Compensation Committee will establish such target
incentive bonuses for each individual participant in the Annual Incentive Plan. However, the Compensation Committee may in its sole discretion grant such bonuses, if any, to such participants as the Compensation Committee may choose, in respectThe purpose of any given performance period, that are not intended to comply with the performance-based compensation exception under Code Section 162(m). No participant may receive a bonus under the Annual Incentive Plan is to enable us to attract, retain, motivate, and reward selected officers and other employees by providing them with respectthe opportunity to earn annual incentive compensation awards based on the attainment of any fiscal year, in excess of $2,500,000.
Performance Objectives.certain performance objectives. The Compensation Committee will establish the performance periods over which performance objectives will be measured. A performance period may be for a fiscal year or a shorter period, as determined by the Compensation Committee, and performance periods may overlap. For a given performance period, the Compensation Committee will establish (i) the performance objective or objectives that must be achieved for a participant to be eligible to receive a bonus for such performance period, and (ii) the target incentive bonus for each participant. The performance objectives may be based on individual, business unit/function and/or corporate performance measures. With respect to awards granted to covered employees that are intended to qualify for the performance-based compensation exception under Code Section 162(m), the performance goals must be objective and must be based upon one or more of the following criteria, as determined by the Compensation Committee: (i) consolidated income before or after taxes (including income before interest, taxes, depreciation and amortization); (ii) EBITDA; (iii) adjusted EBITDA; (iv) operating income; (v) net income; (vi) adjusted cash net income; (vii) adjusted cash net income per share; (viii) net income per share and/or earnings per share (in each case, on a basic and/or diluted basis); (ix) book value per share; (x) return on members’ or stockholders’ equity; (xi) expense management (including, without limitation, total general and administrative expense percentages); (xii) return on investment; (xiii) improvements in capital structure; (xiv) profitability of an identifiable business unit or product; (xv) maintenance or improvement of profit margins; (xvi) stock price; (xvii) market share; (xviii) revenue or sales (including, without limitation, net loans charged off, average finance receivables, net loans charged off as percent of average net finance receivables, and net finance receivables); (xix) costs (including, without limitation, total general and administrative expense percentage); (xx) cash flow; (xxi) working capital; (xxii) multiple of invested capital (xxiii) total debt (including, without limitation, total debt as a multiple of EBITDA), and (xxiv) total return. The foregoing criteria may relate to us, one or more of our subsidiaries or other affiliates or one or more of our divisions, departments or units, or any combination of the foregoing, and may be applied on an absolute basis, in relation to performance in a prior period and/or in relation to one or more peer group companies or indices, or any combination thereof, all as the Compensation Committee will determine. The Compensation Committee may adjust awards as appropriate for partial achievement of goals or other factors, and may interpret and make necessary and appropriate adjustments to performance goals and the manner in which goals are evaluated, although generally no such adjustment may be made with respect to an award granted to a covered employee if the award would not comply with Code Section 162(m) except in the event of a change of control or as otherwise permitted under Code Section 162(m).
Earning and Payment of Awards.As soon as practicable after the applicable performance period ends, the Compensation Committee will (i) determine (A) whether and to what extent any of the performance objective(s) established for such performance period have been satisfied and certify to such determination, and (B) for each participant employed as of the last day of the applicable performance period, unless otherwise determined by the Compensation Committee, the actual bonus to which such participant will be entitled, taking into consideration the extent to which the performance objective(s) have been met and such other factors as the Compensation Committee may deem appropriate and (ii) cause such bonus to be paid to such participant. All payments thus made will be structured in a manner intended to be in accordance with or exempt from the requirements of Code Section 409A. The Compensation Committee has absolute discretion to reduce or eliminate the amount of an award granted to a participant, including an award otherwise earned and payable under the Annual Incentive Plan, and to establish rules or procedures that have the effect of limiting the amount payable to each participant to an amount that is less than the maximum amount otherwise authorized as that participant’s target incentive bonus.
Forfeiture and Recoupment.The Compensation Committee No participant may in its discretion at any time provide that an award or benefits related to an award shall be forfeited and/or recouped if the participant, during employment or service or following termination of employment or service for any reason, engages in certain specified conduct, including but not limited to violation of our policies, breach of non-solicitation, noncompetition, confidentiality or other restrictive covenants, or other conduct by the participant that is determined by the Compensation Committee to be detrimental to the business or reputation of Regional. In addition, the Compensation Committee may at any time require thatreceive a participant agree to abide by any equity retention policy, stock ownership guidelines, compensation recovery policy, recoupment, forfeiture and/or other policies adopted by Regional.
Change in Control.If there is a change in control (as defined in the Annual Incentive Plan), the Compensation Committee, as constituted immediately prior to the change in control, will determine in its sole discretion whether and to what extent the performance criteria have been met or will be deemed to have been met for the year in which the change in control occurs and for any completed performance period for which a determinationbonus under the Annual Incentive Plan, with respect to any fiscal year, in excess of $2,500,000.
We are seeking stockholder action on the following four proposals, which are described in greater detail below:
1. | The election of the eight nominees named in this Proxy Statement to serve as members of the Board until the next annual meeting of stockholders or until their successors are elected and qualified; |
2. | The ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018; |
3. | The approval, on an advisory basis, of our executive compensation; and |
4. | The approval, on an advisory basis, of the frequency of future advisory votes to approve executive compensation. |
Proposal No. 1: Election of Directors
Our Bylaws currently provide that the number of directors of the Company shall be fixed from time to time by resolution adopted by the Board. There are presently eight directors.
The Nominating Committee evaluates the size and composition of the Board on at least an annual basis. In connection therewith, the Nominating Committee has not been made.nominated and recommends for election as directors the following eight nominees: Jonathan D. Brown, Roel C. Campos, Maria Contreras-Sweet, Michael R. Dunn, Steven J. Freiberg, Peter R. Knitzer, Alvaro G. de Molina, and Carlos Palomares. Each nominee presently serves as a director. Directors shall be elected to serve until the next annual meeting of stockholders or until their successors are elected and qualified or until their earlier resignation, removal, or death.
TerminationA candidate for election as a director is nominated to stand for election based on his or her professional experience, recognized achievements in his or her respective fields, an ability to contribute to some aspect of Employment.Ifour business, and the willingness to make the commitment of time and effort required of a participant dies or becomes disabled priordirector. A description of the background, business experience, skills, qualifications, attributes, and certain other information with respect to each of the nominees for election to the dateBoard can be found above in the “Board of Directors and Corporate Governance Matters” section of this Proxy Statement. Each of the above-listed nominees has been identified as possessing an appropriate diversity of background and experience, good judgment, deep knowledge of our industry, strength of character, and an independent mind, as well as a reputation for integrity and high personal and professional ethics. Each nominee also brings a strong and unique background and set of skills to the Board, giving the Board, as a whole, competence and experience in a wide variety of areas.
In selecting this slate of nominees for 2018, the Nominating Committee specifically considered the background and business experience of each of the nominees, along with the familiarity of the nominees with our business and prospects, which has been developed as a result of their service on which bonuses underour Board. The Nominating Committee believes that such familiarity will be helpful in addressing the opportunities and challenges that we face in the current business environment.
Each of the eight nominees has consented to being named in this Proxy Statement and to serve as a director, if elected. In the event that any nominee withdraws, or for any reason is unable to serve as a director, the proxies will be voted for such other person as may be designated by the Nominating Committee as a substitute nominee, but in no event will proxies be voted for more than eight nominees. The Nominating Committee has no reason to believe that any nominee will not continue to be a candidate or will not serve if elected.
The Board unanimously recommends a vote “FOR” the election of each of the nominees listed above.
Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm
RSM US LLP has served as our independent registered public accounting firm since 2007. The Audit Committee has selected RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018, and the Audit Committee and the Board recommend that the stockholders ratify the appointment of RSM US LLP as our independent registered public accounting firm for fiscal 2018.
A representative of RSM US LLP plans to be present at the Annual Incentive PlanMeeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions. Although ratification is not required, the Board is submitting the appointment of RSM US LLP to the stockholders for ratification as a matter of good corporate governance. In the event that the stockholders fail to ratify the appointment, the Audit Committee will consider whether to appoint another independent registered public accounting firm.
The following table sets forth the aggregate fees billed to us by our independent registered public accounting firm, RSM US LLP, during the fiscal years ended December 31, 2017 and 2016.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Audit Fees | $ | 702,990 | $ | 457,416 | ||||
Audit-Related Fees | — | 82,850 | ||||||
Tax Fees | 202,101 | 147,920 | ||||||
All Other Fees | — | — | ||||||
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Total | $ | 905,091 | $ | 688,186 | ||||
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In the above table, in accordance with applicable SEC rules:
It is the policy of the Audit Committee topre-approve all audit and permittednon-audit services proposed to be performed by our independent registered public accounting firm. The Audit Committee reviewed andpre-approved all of the services performed by RSM US LLP. The process for suchpre-approval is typically as follows: Audit Committeepre-approval is sought at one of the Audit Committee’s regularly scheduled meetings following the presentation of information at such meeting detailing the particular services proposed to be performed. The authority topre-approvenon-audit services may be delegated by the Audit Committee to the participant based on actual company performanceChair of the Audit Committee, who shall present any decision topre-approve an activity to the full Audit Committee at the first regular meeting following such decision. None of the services described above were approved by the Audit Committee pursuant to the exception provided by Rule2-01(c)(7)(i)(C) under RegulationS-X.
The Audit Committee has reviewed thenon-audit services provided by RSM US LLP and has determined that the provision of such services is compatible with maintaining RSM US LLP’s independence.
The Board unanimously recommends a vote “FOR” the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the applicable performance period or, if determined by
Proposal No. 3: Advisory Vote to Approve Executive Compensation
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our stockholders have the opportunity to cast an advisory vote to approve the compensation of our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables (a “Say-on-Pay Vote”).
The Compensation Committee based upon achieving targeted performance objectives, pro-ratedoversees the development of a compensation program designed to attract, retain, and motivate executives who enable us to achieve our strategic and financial goals. The Compensation Discussion and Analysis, the compensation tables, and the accompanying narrative disclosure illustrate the trends in compensation and the application of our compensation philosophies and practices for the daysyears presented. We encourage stockholders to read the Compensation Discussion and Analysis, beginning on page 19 of employment duringthis Proxy Statement, which describes the performance period. Unless otherwise determineddetails of our executive compensation program and the decisions made by the Compensation Committee if a participant’s employment terminates for any other reason, such participant will not receive a bonus.in 2017.
Amendment and Termination.The Board or the Compensation Committee may at any time amend, suspend, discontinue or terminate the Annual Incentive Plan and any awards granted under the Annual Incentive Plan, subject to stockholder approval of any amendments if required by applicable laws, rules or regulations. The Compensation Committee has unilateral authority to amendbelieves that our executive compensation program achieves an appropriate balance between fixed compensation and variable incentive compensation, pays for performance, and promotes an alignment between the interests of our named executive officers and our stockholders. Accordingly, we are asking our stockholders at the Annual Incentive Plan and any award (without participant consent)Meeting to vote “FOR” the
non-binding advisory resolution approving the extent necessary to comply with applicable laws, rules or regulations or changes to applicable laws, rules and regulations and to reduce or eliminate an award. The Compensation Committee also has the authority to make adjustments to awards and performance objectives upon the occurrencecompensation of certain unusual or infrequent events, changes in applicable law or other similar circumstances,our named executive officers, including as described in the Annual Incentive Plan.Compensation Discussion and Analysis, compensation tables, and the accompanying narrative discussion.
Because your vote is advisory, it will not be binding upon us, the Compensation Committee, or the Board. However, the Compensation Committee and the Board value the opinions of our stockholders and will take the outcome of the vote into account when considering future executive compensation arrangements.
The Board unanimously recommends a vote “FOR” the advisory vote to approve the compensation of our named executive officers.
Proposal No. 4: Advisory Vote on Frequency of Future Advisory Votes to Approve Executive Compensation
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our stockholders have the opportunity to cast an advisory vote with respect to the frequency of theSay-on-Pay Vote. Specifically, stockholders may vote to have aSay-on-Pay Vote every year, every two years, or every three years (commonly known as the “Say-on-Pay Frequency Vote”). Stockholders may also abstain from making a choice. After such initial vote is held, Section 14A requires all public companies to submit theSay-on-Pay Frequency Vote to their stockholders no less often than every six years.
As discussed above, the Board believes that our executive compensation program is designed to secure and retain the services of high quality executives and to provide compensation to our executives that is aligned with our performance. The Board believes that our compensation philosophies and practices advance both the short-term and long-term interests of our company and our stockholders. The Board believes that theSay-on-Pay Frequency Vote should be conducted every year because it provides stockholders with the opportunity to provide regular direct input to the Board and its Compensation Committee regarding our executive compensation program.
TheSay-on-Pay Frequency Vote is an advisory vote and will not be binding on us, the Compensation Committee, or the Board. The Board may determine that it is in the best interests of our stockholders and the Company to hold aSay-on-Pay Vote more or less frequently than may be indicated by this advisory vote of our stockholders. Nonetheless, the Compensation Committee and the Board will take into account the outcome of this advisory vote when considering how frequently to hold aSay-on-Pay Vote in future years.
While the Board recommends that aSay-on-Pay Vote be held every year, you are not voting to approve or disapprove of the Board’s recommendation. Rather, you will be able to specify one of four choices for theSay-on-Pay Frequency Vote, as follows: (i) one year, (ii) two years, (iii) three years, or (iv) abstain.
The Board unanimously recommends a vote for “ONE YEAR” on the advisory vote on the frequency of future advisory votes to approve executive compensation.
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. The Audit Committee operates under a written charter, a copy of which is available on our Investor Relations website,www.regionalmanagement.com, under the “Corporate Governance” tab. This report reviews the actions taken by the Audit Committee with regard to our financial reporting process during the fiscal year ended December 31, 2017, and particularly with regard to the audited consolidated financial statements as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016, and 2015.
The Audit Committee is composed solely of independent directors under existing New York Stock Exchange listing standards and Securities and Exchange Commission requirements. None of the committee members is or has been an officer or employee of the Company or any of our subsidiaries or has engaged in any business transaction or has any business or family relationship with the Company or any of our subsidiaries or affiliates. In addition, the CompensationBoard of Directors has determined that Messrs. Steven J. Freiberg, Alvaro G. de Molina, and Carlos Palomares are “audit committee financial experts,” as defined by Securities and Exchange Commission rules.
Our management has the primary responsibility for our financial statements and reporting process, including the systems of internal controls. The independent auditors are responsible for performing an independent audit of our consolidated financial statements in accordance with auditing standards generally accepted in the United States and issuing a report thereon. The Audit Committee’s authorityresponsibility is to grant awardsmonitor and authorize paymentsoversee these processes and to select annually the accountants to serve as our independent auditors for the coming year.
The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to fulfill its oversight responsibilities under the Audit Committee’s charter. To carry out its responsibilities, the Audit Committee met six times during the fiscal year ended December 31, 2017.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited consolidated financial statements in our Annual Incentive Plan does not restrict its authorityReport on Form10-K for the fiscal year ended December 31, 2017, including a discussion of the quality, rather than just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee also discussed our audited consolidated financial statements in our Annual Report on Form10-K for the fiscal year ended December 31, 2017, with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited consolidated financial statements with accounting principles generally accepted in the United States, their judgments as to grant compensationthe quality, rather than just the acceptability, of our accounting principles, and such other matters as are required to employeesbe discussed with the Audit Committee under other Regional compensation plans or programs.the applicable Public Company Accounting Oversight Board (the “PCAOB”) Standards and SEC Rule2-07
Additionally, the Audit Committee discussed with the independent auditors the overall scope and plan for their audit. The Audit Committee met with the independent auditors, with and without management present, to discuss the results of their examination, their evaluation of our internal controls, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our Annual Report onForm 10-K for the fiscal year ended December 31, 2017, for filing with the SEC. This report of the Audit Committee has been prepared by members of the Audit Committee.
Members of the Audit Committee:
Carlos Palomares (Chair)
Steven J. Freiberg
Alvaro G. de Molina
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSecurity Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of our common stock as of the close of trading on March 4, 2016,16, 2018, of: (i) each person known by us to beneficially own more than five percent of our common stock; (ii) each of our directors; (iii) each of our named executive officers (who are all of our executive officers);officers; and (iv) all of our directors and executive officers, as a group.
Shares Beneficially Owned(1) | ||||
Name | Number | Percentage | ||
Shareholders Agreement Group(2) | 1,049,032 | 8.1% | ||
Wellington Management Group LLP and affiliates(3) | 1,229,312 | 9.7% | ||
Second Curve Capital, LLC(4) | 1,245,557 | 9.8% | ||
Basswood Capital Management, L.L.C.(5) | 1,085,352 | 8.6% | ||
Cannell Capital LLC(6) | 669,431 | 5.3% | ||
Roel C. Campos(7) | 36,806 | * | ||
Michael R. Dunn(8) | 183,546 | 1.4% | ||
Steven J. Freiberg(9) | 137,386 | 1.1% | ||
Richard A. Godley(10) | 147,832 | 1.2% | ||
Alvaro G. de Molina(11) | 44,323 | * | ||
Carlos Palomares(12) | 36,079 | * | ||
Peter R. Knitzer(13) | 19,260 | * | ||
Jody L. Anderson(14) | 2,900 | * | ||
Donald E. Thomas(15) | 89,433 | * | ||
Daniel J. Taggart | 6,551 | * | ||
Brian J. Fisher(16) | 8,350 | * | ||
All directors and executive officers, as a group (11 persons) | 712,466 | 5.6% |
Shares Beneficially Owned(1) | ||||
Name | Number | Percentage | ||
Basswood Capital Management, L.L.C.(2) | 1,512,794 | 12.9% | ||
Wellington Management Group LLP and affiliates(3) | 1,139,225 | 9.7% | ||
Second Curve Capital, LLC(4) | 1,078,034 | 9.2% | ||
Dimensional Fund Advisors LP(5) | 869,773 | 7.4% | ||
LSV Asset Management(6) | 637,299 | 5.4% | ||
The Vanguard Group, Inc.(7) | 627,662 | 5.3% | ||
BlackRock, Inc.(8)
| 618,346 | 5.3% | ||
Jonathan D. Brown(9) | 799 | * | ||
Roel C. Campos(10) | 59,924 | * | ||
Maria Contreras-Sweet | 888 | * | ||
Michael R. Dunn(11) | 236,003 | 2.0% | ||
Steven J. Freiberg(12) | 156,104 | 1.3% | ||
Alvaro G. de Molina(13) | 56,602 | * | ||
Carlos Palomares(14) | 57,277 | * | ||
Peter R. Knitzer(15) | 99,324 | * | ||
John D. Schachtel(16) | 14,880 | * | ||
Donald E. Thomas(17) | 229,102 | 1.9% | ||
Daniel J. Taggart(18) | 29,324 | * | ||
Brian J. Fisher(19) | 52,068 | * | ||
Jody L. Anderson | — | — | ||
All directors and executive officers, as a group (12 persons) | 992,295 | 8.0% |
* | Amount represents less than 1.0% |
(1) | Applicable percentage of ownership is based upon |
(2) |
The information reported is based on a Schedule |
Section 16 of the Exchange Act. Pursuant to Rule16a-1 of the Exchange Act, Basswood may be deemed to be a beneficial owner of the shares of common stock issued to Mr. Brown. The business address of Basswood is 645 Madison Avenue, 10th Floor, New York, NY 10022. |
(3) | The information reported is based on two Schedule 13G/As, each filed with the SEC on February 8, 2018, reporting: (i) shared power of Wellington Management Group LLP (“WMG”) to vote or direct the vote of |
direct the vote of |
(4) | The information reported is based on a Schedule 13G/A filed with the SEC on |
(5) | The information reported is based on a Schedule 13G/A filed with the SEC on February |
(6) | The information reported is based on a Schedule 13G filed with the SEC on February |
(7) | The information reported is based on a Schedule 13G filed with the SEC on February 9, 2018, reporting sole power of The Vanguard Group, Inc. (“Vanguard”) to vote or direct the vote of 11,072 shares, the sole power of Vanguard to dispose or direct the disposition of 616,590 shares, and the shared power of Vanguard to dispose or direct the disposition of 11,072 shares. The business address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. |
(8) | The information reported is based on a Schedule 13G/A filed with the SEC on January 23, 2018, reporting the sole power of BlackRock, Inc. (“BlackRock”) to vote or direct the vote of 609,390 shares and the sole power of BlackRock to dispose or direct the disposition of 618,346 shares. The business address of BlackRock is 55 East 52nd Street, New York, NY 10055. |
(9) | Mr. Brown is a senior analyst at Basswood, serving on the Board pursuant to the Cooperation Agreement described in detail below in the section entitled “Other Information – Certain Relationships and Related Person Transactions.” As a result, Basswood is a“director-by-deputization” solely for the purposes of Section 16 of the Exchange Act. Pursuant to Rule16a-1 of the Exchange Act, Basswood may be deemed to be a beneficial owner of the shares of common stock issued to Mr. Brown. |
(10) | The amount stated |
The amount stated |
Mr. Freiberg holds |
The amount stated |
The amount stated |
The amount stated |
described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. |
Mr. Thomas holds 3,843 shares directly. An additional 8,000 shares stated are owned by The Donald Eugene Thomas and Jeanine Leigh Thomas Joint Revocable Living Trust. Mr. Thomas and his wife, Jeanine Leigh Thomas, are the trustees of The Donald Eugene Thomas and Jeanine Leigh Thomas Joint Revocable Living Trust. The amount stated |
The amount stated |
(19) | The amount stated includes 45,511 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018, over which Mr. Fisher will not have voting or investment power until the options are exercised. |
SECTIONSection 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than ten percent of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Our directors, executive officers, and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports 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 the fiscal year ended December 31, 2015,2017, all Section 16(a) filing requirements applicable to directors, executive officers, and greater than ten percent beneficial owners were timely complied with by such persons.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONSCertain Relationships and Related Person Transactions
Cooperation Agreement
On January 26, 2018, we entered into a Cooperation Agreement (the “Cooperation Agreement”) with Basswood, pursuant to which we appointed Jonathan D. Brown to the Board, effective January 26, 2018. We also agreed that, subject to the conditions set forth in the Cooperation Agreement, the Board will nominate Mr. Brown for election to the Board at the Annual Meeting.
Pursuant to the Cooperation Agreement, Mr. Brown is required to, at all times while serving as a member of the Board, comply with all policies, procedures, processes, codes, rules, standards, and guidelines applicable tonon-employee Board members. In addition, the Cooperation Agreement provides that Mr. Brown must offer to resign from the Board if (i) Basswood and its affiliates, collectively, no longer beneficially own an aggregate “net long position” of at least 874,705 shares of our common stock (subject to adjustment for stock splits, reverse stock splits, stock dividends, and similar adjustments), or (ii) Basswood fails to comply with or breaches any of the terms of the Cooperation Agreement in any material respect and, if capable of being cured, such material breach or failure has not been cured within 15 days after receipt by Basswood of written notice from us specifying such material breach or failure, provided that we are not in material breach of the Cooperation Agreement at such time (each, a “Resignation Trigger”). The Cooperation Agreement also provides that, if requested by Basswood, we are obligated to appoint Mr. Brown to any existing or newly created committee of the Board that may be designated to oversee or review strategic alternatives (including an extraordinary transaction).
In the Cooperation Agreement, in addition to certain confidentiality andnon-disparagement provisions, Basswood has agreed to various customary standstill provisions for the duration of the Standstill Period (as defined below), which provide, among other things, that Basswood and its affiliates will not (i) acquire beneficial ownership of 19.9% or more of the outstanding shares of our common stock; (ii) participate in a proxy solicitation with respect to the voting of any shares of our common stock; (iii) submit a proposal for or offer of any extraordinary transaction or propose a change in the structure, size, or composition of the Board or executive officers of the Company; or (iv) subject to certain exceptions for open market and underwritten transactions, sell shares of our common stock to a third party or group that to Basswood’s knowledge would result in such third party or group owning 5% or more of the outstanding shares of our common stock.
Basswood has also agreed that, during the Standstill Period, it shall cause the shares of our common stock beneficially owned by it and its affiliates to be voted (i) in favor of each director nominated by the Board for election, and (ii) in accordance with the Board’s recommendations on all other matters; provided that Basswood and its affiliates may vote their shares of our common stock in their sole discretion with respect to (a) a proposal to authorize or approve an extraordinary transaction, (b) matters related to the implementation of takeover defenses, (c) new or amended incentive compensation plans submitted for stockholder approval, or (d) any other proposal if either Institutional Shareholder Services Inc. or Glass Lewis & Co., LLC do not recommend voting in accordance with the Board’s recommendation with respect to such proposal (other than with respect to the election or removal of directors) at any annual or special meeting of stockholders.
Pursuant to the Cooperation Agreement, the “Standstill Period” is defined to mean the period commencing on January 26, 2018 and ending on the earliest of (i) 12:01 a.m. (New York time) on the date that is 20 days prior to the nomination deadline for the 2019 Annual Meeting, (ii) if we fail to comply with or breach any of the terms of the Cooperation Agreement in any material respect and, if capable of being cured, such material breach or failure has not been cured within 15 days after receipt by us of written notice from Basswood specifying such material breach or failure, provided that Basswood is not in material breach of the Cooperation Agreement at such time, (iii) the consummation of an extraordinary transaction following which consummation the director designated by Basswood no longer serves on the Board, and (iv) a reorganization of the Company under any federal or state law relating to bankruptcy or insolvency. If we provide written notice to Basswood that we will nominate a director designated by Basswood for election to the Board at the 2019 Annual Meeting or for any annual meeting of stockholders of the Company subsequent thereto (each, an “Applicable Meeting”) at least 20 days prior to the nomination deadline for such Applicable Meeting and Basswood has agreed in advance to such nomination, then the Standstill Period will be automatically extended until the date that is 20 days prior to the nomination deadline for the annual stockholders meeting subsequent to such Applicable Meeting.
The Cooperation Agreement terminates upon the expiration of the Standstill Period (subject to any extensions as provided in the Cooperation Agreement), provided that the confidentiality provisions of the Cooperation Agreement will survive for a period of eighteen months following the date upon which no director designated by Basswood serves as a director of the Company.
Shareholders Agreement
In March 2007, we entered into a shareholders agreement, which was amended and restated on March 27, 2012, by that certain Amended and Restated Shareholders Agreement (the “Shareholders Agreement”), by and among the Company, Parallel 2005 Equity Fund, LP (collectively with its affiliates, “(“Parallel”), Palladium Equity Partners III, L.P. (collectively with its affiliates, “(“Palladium”), and certain other stockholders party thereto (such stockholders referred to in this “Certain Relationships and Related Person Transactions” section as the “individual owners”).thereto. In fiscal 2015,prior years, the stockholders party to the Shareholders Agreement were related persons due to their greater than five percent equity ownership in the Company, in the aggregate, and their participation in the Shareholders Agreement, which qualifiesqualified them as a “group” under Section 13(d) of the Exchange Act. The
In July 2017, former director Richard A. Godley provided notice to the Board of his decision to enter retirement. In connection with Mr. Godley’s retirement, we entered into an Amended and Restated Shareholders Agreement includesTermination (the “Termination Agreement”) with the following voting agreement:
if the partiesremaining stockholders party to the Shareholders Agreement. Mr. Godley had been designated to the Board by certain stockholders in accordance with the Shareholders Agreement. The Termination Agreement hold more than 50% of our outstanding stock entitled to vote for the election of directors, then such parties will collectively have the right to designate the smallest whole number of directors that constitutes a majority of the Board;
if the parties toterminated the Shareholders Agreement hold 50%and any remaining obligations or less, but more than 25%, of our outstanding stock entitled to vote for the election of directors, then such parties will collectively have the right to designate the number of directors that is one fewer than the smallest whole number of directors that constitutes a majorityliabilities of the Board;parties thereto, and
if as a result, the parties to the Shareholders Agreement hold 25% or less of our outstanding stock entitled to vote for the election of directors, such parties will have no right to designate directors except that each of (1) Palladium, (2) Parallel, and (3) a representative of the individual ownersstockholders party to the Shareholders Agreement will have the right to designate one director if such stockholder or group of stockholders holds at least 5%no longer qualify as related persons under Section 13(d) of the outstanding stock entitled to vote for the election of directors.
Mr. Godley has served on the Board as a director designee of the individual owners and is a director nominee standing for reelection at the Annual Meeting. As of March 4, 2016, the individual owners retain the right to designate one director for election to the Company’s Board pursuant to the terms of the Shareholders Agreement. In September 2013 and December 2013, Palladium and Parallel closed secondary public offerings pursuant to which each sold its equity ownership in the Company, and as a result, neither Palladium nor Parallel retains any right to designate directors of the Company in the future pursuant to the terms of the Shareholders Agreement.Exchange Act.
The Shareholders Agreement further provides that, in certain circumstances, parties to the Shareholders Agreement that have designated a director who is then serving on our Board may not make a significant investment in one of our competitors unless such party has first presented the investment opportunity to us. The Shareholders Agreement is filed as an exhibit to our Annual Report on Form 10-K, and the foregoing description is qualified by reference thereto.
Statement of Policy Regarding Transactions with Related Persons
Our Board has adopted a written statement of policy regarding transactions with related persons, which we refer to as our “related person policy.” Our related person policy requires that a “related person” (as defined in paragraph (a) of Item 404 of RegulationS-K) must promptly disclose to our general counsel, or other person designated by our Board, any “related person transaction” (defined as any transaction that is anticipated and would be reportable by us under Item 404(a) of RegulationS-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. The general counsel, or such other person, will then promptly communicate that information to our Board. No related person transaction will be executed without the approval or ratification of our Board or a committee of the Board. It is our policy that directors interested in a related person transaction will recuse themselves from any vote of a related person transaction in which they have an interest and provide all material information he or she has concerning the related person transaction to the Board. Our policy does not specify the standards to be applied by directors in determining whether or not to approve or ratify a related person transaction, and we accordingly anticipate that these determinations will be made in accordance with principles of Delaware law generally applicable to directors of a Delaware corporation. In determining whether to approve or ratify a related person transaction, the Board may consider such facts and circumstances as it deems appropriate, including (i) the benefits to us; (2) the availability of other sources for comparable products or services; (3) the terms of the proposed related person transaction; and (4) the terms available to unrelated third parties or to employees generally in an arms-length negotiation.
Indemnification of Directors, Officers, and Certain Current and Former Stockholders
Our Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”). In addition, our Amended and Restated Certificate of Incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL. Further, in connection with the September 2013 and December 2013 secondary public offerings described above, we agreed to indemnify Palladium, Parallel, and certain other selling stockholders for certain losses, claims, damages, liabilities, and expenses arising out of such secondary public offerings.
On May 30, 2014, a securities class action lawsuit was filed in the United States District Court for the Southern District of New York (the “District Court”) against the Companyus and certain of itsour current and former directors, executive officers, and stockholders (collectively, the “Defendants”). The complaint alleged violations of the Securities Act of 1933 (“(the “1933 Act Claims”) and sought unspecified compensatory damages and other relief on behalf of a purported class of purchasers of the Company’sour common stock in the September 2013 and December 2013 secondary public offerings. On August 25, 2014, Waterford Township Police & Fire Retirement System and City of Roseville Employees’ Retirement System were appointed as lead plaintiffs (collectively, the “Plaintiffs”). An amended complaint was filed on November 24, 2014. In addition to the 1933 Act Claims, the amended complaint also added claims for violations of the Securities Exchange Act of 1934 (“(the “1934 Act Claims”) seeking unspecified compensatory damages on behalf of a purported class of purchasers of the Company’sour common stock between May 2, 2013 and October 30, 2014, inclusive.
On January 26, 2015, the Defendants filed motionsa motion to dismiss the amended complaint in its entirety. In response, the Plaintiffs sought and were granted leave to file an amended complaint. On February 27, 2015, the Plaintiffs filed a second amended complaint. Like the prior amended complaint, the second amended complaint asserts 1933 Act Claims and 1934 Act Claims and seeks unspecified compensatory damages. The Defendants’ motionsDefendants filed a motion to dismiss the second amended complaint were filed on April 28, 2015, and on March 30, 2016, the District Court granted the Defendants’ motion to dismiss the second amended complaint in its entirety. On May 23, 2016, the Plaintiffs moved for leave to file a third amended complaint. On January 27, 2017, the District Court denied the Plaintiffs’ opposition wasmotion for leave to file a third amended complaint and directed entry of final judgment in favor of the Defendants. On January 30, 2017, the District Court entered final judgment in favor of the Defendants.
On March 1, 2017, the Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit (the “Appellate Court”). After hearing oral arguments on June 12, 2015, andNovember 17, 2017, the Defendants’ reply was filedAppellate Court issued a summary order on July 13, 2015.January 26, 2018 affirming the District Court’s order denying Plaintiffs leave to file a third amended complaint. The motions remain under consideration bydeadline for Plaintiffs to file a petition for a writ of certiorari with the court. The Company believes that the claims against it are without merit and intends to defend against the litigation vigorously.United States Supreme Court is April 26, 2018.
Pursuant to the Company’sour indemnification obligations, the Company iswe are bearing, and expectsexpect to continue to bear, the costs associated with defending the following current and former directors, executive officers, and stockholders against the claims asserted in the securities class action lawsuit: Palladium, Parallel, Thomas F. Fortin, C. Glynn Quattlebaum, Donald E. Thomas, David Perez, Roel C. Campos, Richard T. Dell’Aquila, Richard A. Godley, Jared L. Johnson, Alvaro G. de Molina, Carlos Palomares, and Erik Scott. As of the date of this Proxy Statement, our defense counsel for the Company also represents such current and former directors, executive officers, and stockholders, and as a result, the Company believeswe believe that any incremental cost that it haswe have incurred in providing a defense to them has been immaterial.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
Each member of the Board is receptive to and welcomes communications from our stockholders. Stockholders and other interested parties may contact any member (or all members) of the Board, including, without limitation, the Chairman of the Board or the independent directors as a group,Proposals by addressing such communications or concerns to the Corporate Secretary of the Company, 509 West Butler Road, Greenville, SC 29607, who will forward such communications to the appropriate party.
If a complaint or concern involves accounting, internal accounting controls, or auditing matters, the correspondence will be forwarded to the chair of the Audit Committee. If no particular director is named, such communication will be forwarded, depending on the subject matter, to the chair of the Audit Committee, Compensation Committee, or Nominating Committee, as appropriate.
Anyone who has concerns regarding (i) questionable accounting, internal accounting controls, and auditing matters, including those regarding the circumvention or attempted circumvention of internal accounting controls or that would otherwise constitute a violation of the Company’s accounting policies, (ii) compliance with legal and regulatory requirements, or (iii) retaliation against employees who voice such concerns, may communicate these concerns by writing to the attention of the Audit Committee as set forth above, or by calling (800) 224-2330 at any time.
PROPOSALS BY STOCKHOLDERSStockholders
Under certain conditions, stockholders may request that we include a proposal at a forthcoming meeting of theour stockholders of the Company in theour proxy materials of the Company for such meeting. Under SEC Rule14a-8, any stockholders desiring to present such a proposal to be acted upon at the 2017 annual meeting of stockholders2019 Annual Meeting and included in the proxy materials must ensure that we receive the proposal at our principal executive office in Greenville,Greer, South Carolina by December 1, 2016November 23, 2018, in order for the proposal to be eligible for inclusion in our proxy statement and proxy card relating to such meeting.
If a stockholder desires to propose any business at an annual meeting of stockholders, even if the proposal or proposed director candidate is not to be included in our proxy statement, our Bylaws provide that the stockholder must deliver or mail timely advance written notice of such business to our principal executive office. Under our Bylaws, to be timely, a stockholder’s notice generally must be delivered to our Corporate Secretary at theour principal executive offices of the Company not later than the 90th90th day before the first anniversary of the date of the preceding year’s annual meeting and no earlier than the 120th120th day prior to such date. However, in the event that the date of the annual meeting is advanced by more than twenty (20) days or delayed by more than seventy (70) days from such anniversary date, notice by the stockholder to be timely must be delivered not earlier than the 120th120th day prior to such annual meeting and not later than the close of business on the later of the 90th90th day prior to such annual meeting or the tenth10th day following the day on which public announcement of the date of such meeting is first made. Each item of business must be made in accordance with, and must include the information required by, our Bylaws, our Corporate Governance Guidelines, and any other applicable law, rule, or regulation. Assuming that the date of the 2017 annual meeting of stockholders2019 Annual Meeting is not advanced or delayed in the manner described above, the required notice for the 2017 annual meeting of stockholders2019 Annual Meeting would need to be provided to us not earlier than December 28, 201626, 2018 and not later than January 27, 2017.25, 2019.
If, following the filing and delivery of these proxy materials, the date of the 2017 annual meeting of stockholders2019 Annual Meeting is advanced or delayed by more than 30twenty (20) calendar days from theone-year anniversary date of the 2016 annual meeting of stockholders, the Company2018 Annual Meeting, we will, in a timely manner, provide notice to the Company’sour stockholders of the new date of the 2017 annual meeting of stockholders2019 Annual Meeting and the new dates by which stockholder proposals submitted both pursuant to and outside of SEC Rule14a-8 must be received by the Company.us. Such notice will be included in the earliest possible Quarterly Report on Form10-Q under Part II, Item 5.
HOUSEHOLDING OF ANNUAL MEETING MATERIALSHouseholding of Annual Meeting Materials
Some banks, brokers, and other nominee record holders may be participating in the practice of “householding” annual reports and proxy statements. This means that only one copy of our Annual Report on Form10-K and Proxy Statement, as applicable, may have been sent to multiple stockholders in the same household. We will promptly deliver a separate copy of our Annual Report on Form10-K and Proxy Statement, as applicable, to any stockholder upon request submitted in writing to the Companyus at the following address: Regional Management Corp., 509 West Butler979 Batesville Road, Greenville,Suite B, Greer, South Carolina, 29607,29651, Attention: Corporate Secretary, or by calling(864) 422-8011.448-7000. Any stockholder who wants to receive separate copies of our Annual Report on Form10-K and Proxy Statement in the future, or who is currently receiving multiple copies and would like to receive only one copy for his or her household, should contact his or her bank, broker, or other nominee record holder, or contact the Companyus at the above address and telephone number.
The Board is not aware of any matters, other than those specified above, to come before the Annual Meeting for action by the stockholders. However, if any matter requiring a vote of the stockholders should be duly presented for a vote at the Annual Meeting, then the persons named in the form of proxy intend to vote such proxy in accordance with their best judgment.
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REGIONAL MANAGEMENT CORP. 979 Batesville Road, Suite B Greer, SC 29651 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the website, and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards, and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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