Item 1.01 Entry into a Material Definitive Agreement
Entry into Second Amendment to Amended & Restated Employment Agreement with the
Company's President and Chief Executive Officer
On September 27, 2020, Collectors Universe, Inc. (the "Company") entered into a
Second Amendment to the Amended and Restated Employment Agreement (the "Restated
Employment Agreement") with Joseph J. Orlando, its President and Chief Executive
Officer (CEO), extending the term of Mr. Orlando's employment under the Restated
Employment Agreement for two years, through September 30, 2022. The Second
Amendment made no other changes to the Restated Employment Agreement.
The foregoing summary is not intended to be complete and is qualified in its
entirety by the Amended and Restated Agreement, a copy of which is attached as
Exhibit 99.1 to this Current Report on Form 8-K and that Agreement is
incorporated by this reference herein.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
(e) Compensatory Arrangements of Certain Officers
Adoption of Fiscal 2021 Long-Term Equity Incentive Plan
Background
On September 27, 2020, the Compensation Committee of Board of Directors (the
"Committee") of the Company, adopted a long term equity incentive program (the
"2021 LTIP" or the "Plan") for Joseph J. Orlando, its President and Chief
Executive Officer (or CEO), and Joseph J. Wallace, its Senior Vice President and
Chief Financial Officer (or CFO) (and each, a "Participant"), consistent with
the Committee's "pay-for-performance" philosophy, which seeks to (i) closely
align the long-term financial interests of the Company's executive officers with
the long-term financial interests of the Company's stockholders by making a
significant amount of each Participant's annual compensation contingent on the
Company's annual financial performance, and (ii) to provide financial incentives
for Messrs. Orlando and Wallace to remain in the continuous service of and (ii)
provide financial incentives for each Participant to remain in the service of
the Company throughout the three fiscal years ending June 30, 2023 (the
"Performance Period").
The 2021 LTIP provides for grants to each Participant of (i)
performance-contingent restricted stock units ("PSUs"), the vesting of which is
contingent on the Company's achievement of one or more financial performance
goals established or to be established by the Committee, and (ii)
service-contingent restricted stock units ("RSUs"), the vesting of which is
dependent on the Participant's continued service with the Company for the
entirety of the Performance Period ending June 30, 2023. Upon vesting, each PSU
and each RSU will be settled by the issuance of one share of common stock.
Fiscal 2021 PSUs Grants and Financial Performance Goals
On September 27, 2020, the Committee granted Messrs. Orlando and Wallace 4,773
and 2,864 PSUs, respectively, and established threshold, target and maximum net
cash flow goals for the fiscal year ending June 30, 2021 ("FY 2021"), under the
2021 LTIP. Vesting of one-third of those PSUs granted to each Participant (i)
will require the Company to achieve increases in net cash flow (as defined
below) initially in FY 2021, and (ii) is conditioned on the continued service of
the Participant with the Company for the entirety of the three year Performance
Period ending June 30, 2023. For purposes of these grants, the term "net cash
flow" is defined as net cash generated by the Company's continuing activities,
minus the sum of capital expenditures and capitalized software costs, determined
from the Company's annual audited consolidated statements of cash flows, subject
to possible adjustment for unexpected, extraordinary or unusual events. These
grants were made under the Company's stockholder-approved equity incentive
plans.
The Committee will be establishing the financial performance goals under the
2021 LTIP for fiscal 2022 ("FY 2022") and for fiscal 2023 ("FY 2023") at future
dates. Although it is the current intention of the Committee to establish net
cash flow performance goals under the 2021 LTIP for each of FY 2022 and FY 2023,
the Committee retains the flexibility to change the nature of the financial
performance metrics and the financial performance goals for each of those fiscal
years.
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The total number of PSUs that will vest on the Company's achievement of any of
the net cash flow performance goals during the three year Performance Period
ending June 30, 2023 will be subject to a possible downward or upward adjustment
based on a comparison of the Company's annualized total stockholder return
("TSR") for that Period to the annualized TSR of the companies in the Russell
2000 Index for that same three year Period, as set forth in the following table:
If Company's Annualized TSR for the three years Adjustment to
ending June 30, 2023, is: Number of Vested PSUs
At least 12% below the Russell 2000 3-year
annualized TSR 20% Reduction
Equal to the Russell 2000 3-year annualized TSR(1) No Adjustment(1)
At least 12% above the Russell 2000 3-year
annualized TSR
20% Increase
(1) The TSR adjustment will be interpolated if the Company's three year
annualized TSR is less than 12% below, or less than 12% above, the Russell
2000 three year annualized TSR. No additional adjustment will be made if the
Company's three year annualized TSR is more than 12% below or more than 12%
above the Russell 2000 three year annualized TSR.
Each Participant has the opportunity to earn from 50% to a maximum of 200% of
the PSUs granted to him under the 2021 LTIP, depending on the extent to which
the annual net cash flow performance goals are achieved or exceeded and where
the Company's annualized TSR for the Performance Period ending June 30, 2023
ranks by comparison to the annualized TSR of the Russell 2000 companies for that
same Period.
However, for a Participant to earn any of the PSUs granted to him under the 2021
LTIP, the Company must achieve at least the threshold net cash flow performance
goal in one of the three fiscal years comprising the Performance Period. If the
Company fails to do so, none of the PSUs granted to the Participants under the
2021 LTIP will vest and, instead, all of them will be forfeited.
Additionally, if a Participant does not remain in the continuous service of the
Company through June 30, 2023, all of the PSUs granted to him will be forfeited
even if any or all of the net cash flow performance goals had been achieved for
any or all of the fiscal years during the Performance Period preceding that
cessation of his continuous service with the Company.
The following table sets forth the number of PSUs granted under the 2021 LTIP to
each of Messrs. Orlando and Wallace and their respective grant date values,
assuming that the target net cash flow performance goals are achieved in fiscal
2021, 2022 and 2023:
Number of PSUs Grant Date Value at
Name at Target(1)(2) Target(3)
Joseph J. Orlando 4,773 $ 225,000
Joseph J. Wallace 2,864 $ 135,000
(1) For the entirety of three years ending June 30, 2023.
(2) As described above, the number of PSUs that will vest will be subject to
possible downward or upward adjustment depending on where the Company's
annualized TSR for the three years ending June 30, 2023 ("3-Year TSR") would
place the Company in relation to the 3-Year TSR for the Russell 2000
companies.
(3) Determined on the basis of the average of the closing prices, as reported by
NASDAQ, of the Company's shares over a 30 trading day period that ended on
the date the PSUs were granted by the Committee.
RSUs - Retention Incentives under the FY 2021 LTIP
To create an incentive for each of the Participants to remain in the continuous
service of the Company during the three years ending June 30, 2023, the
Committee also granted Messrs. Orlando and Wallace 4,773 and 2,864 RSUs,
respectively, under the 2021 LTIP. One third of those RSUs granted to each
Participant will vest on each of June 30, 2021, June 30, 2022 and June 30, 2023,
respectively (each, a "Vesting Date"), but only if the Participant is still in
the continuous service of the Company on such Vesting Date. If a Participant's
continued service with the Company were to cease prior to any Vesting Date, the
RSUs that are unvested on the date such service ceased will be forfeited (as
would, as described above, all of his PSUs).
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Each RSU, upon vesting, will be settled by the Company's issuance of one share
of Company common stock to the Participant.
Incentive Compensation Clawback Policy
The 2021 LTIP provides that any shares of Company common stock issued in
settlement of vested PSUs will be subject to reduction or "clawback" and
recovery by the Company, in whole or in part, as and to the extent required
under the Company's "clawback policy" as in effect from time to time or under
any applicable executive compensation laws or government regulations or any
applicable securities exchange listing requirements. If a Participant has sold
any of such shares, the Company will be entitled to recover an amount equal to
net profits realized by the Participant from such sale.
The foregoing summary of the 2021 LTIP is not intended to be complete and is
qualified in its entirety by reference to the terms contained in the form of PSU
Award Agreement and form of RSU Agreement, a copy of each of which will be filed
with the Company's Quarterly Report on Form 10-Q for the fiscal quarter ending
September 30, 2020.
Performance Goals under the FY 2019 and 2020 LTIPs
As reported in a Current Report on Form 8-K that was filed by the Company with
the Securities and Exchange Commission (the "SEC") on December 10, 2018, the
Compensation Committee adopted a long term equity incentive program (the "FY
2019 LTIP" or the "FY 2019 Program"), to further the Compensation Committee's
"pay-for-performance" philosophy. The objectives of that Plan are (i) to more
closely align the long-term financial interests of the Company's executive
officers with the long-term financial interests of the Company's stockholders,
by making a significant amount of each Participant's annual compensation
contingent on the Company's financial performance, and (ii) to provide financial
incentives for Messrs. Orlando and Wallace to remain in the continuous service
of the Company for the entirety of the three years ending June 30, 2021.
Pursuant to the FY 2019 LTIP, the Committee granted 12,795 and 7,677 PSUs to
Messrs. Orlando and Wallace, respectively.
Similarly, as reported in a Current Report on Form 8-K that was filed by the
Company with the SEC on September 24, 2019, the Compensation Committee adopted a
long term equity incentive program (the "FY 2020 LTIP" or the "FY 2020
Program"), consistent with the Compensation Committee's "pay-for-performance"
philosophy, with the same objectives as those of the FY 2019 LTIP: (i) to more
closely align the long-term financial interests of the Company's executive
officers with the long-term financial interests of the Company's stockholders
and (ii) to provide financial incentives for Messrs. Orlando and Wallace to
remain in the continuous service of the Company throughout the three year period
ending June 30, 2022. Pursuant to the FY 2020 LTIP, the Compensation Committee
granted Mr. Orlando and Mr. Wallace 7,345 and 4,407 PSUs, respectively.
On September 27, 2020, the Committee established new threshold, target and
maximum net cash flow goals for the year ending June 30, 2021, which is year 3
of the FY 2019 LTIP and for the year ending June 30, 2021, which is year 2 of
the FY 2020 LTIP. Like the FY 2021 LTIP, the vesting of PSUs in year-3 of the FY
2019 LTIP and in year-2 of the FY 2020 LTIP (i) will require the Company's to
achieve at least the threshold net cash flow goal for FY 2021 (ii) will be
conditioned on the continued service of the Participant with the Company for the
entirety of the three year Performance Periods ending June 30, 2021 and June 30,
2022, respectively, and (iii) will be subject to possible downward or upward
adjustment based on a comparison of the Company's annualized 3-year TSR to the
annualized TSR for Russell 2000 companies for the three year periods ending June
30, 2021 and June 30, 2022, respectively. Each PSU that becomes vested in FY
2021 under the FY 2019 LTIP and in FY 2022 under the 2020 LTIP will be settled
by the issuance of one share of common stock to the Participant.
RSUs Grants. Messrs. Orlando and Wallace also were granted 12,792 and 7,675
RSUs, respectively, under the FY 2019 LTIP, and 7,345 and 4,407 RSUs,
respectively, under the FY 2020 LTIP. One third of the RSUs granted to each
Participant under the FY 2019 LTIP will vest on June 30, 2021, and one-third of
the RSUs granted under the FY 2020 LTIP will vest on June 30, 2021 (each, a
"Vesting Date"), but only if the Participant is still in the continuous service
of the Company on such Vesting Date. If a Participant's continued service with
the Company were to cease prior to any Vesting Date, the RSUs that are unvested
on the date of the cessation of such service will be forfeited (as would, as
described above, all of his PSUs granted under the applicable LTIP). Each RSU,
upon vesting, will be settled by the Company's issuance of one share of Company
common stock to the Participant.
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Clawback Policy. The Company's Incentive Compensation Policy described above
also applies to the FY 2019 LTIP and the FY 2020 LTIP.
The foregoing summaries of the FY 2019 LTIP and the FY 20201 LTIP are not
intended to be complete and are qualified in their entirety by reference to the
Company's Current Report on Form 8-K filed with the SEC on December 10, 2018 and
the Company's Current Report on Form 8-K filed with the SEC on September 24,
2019, respectively.
Fiscal 2021 Financial Performance Goals for PSUs granted to Mr. Orlando in March
2020
As previously reported in a Current Report on Form 8-K filed by the Company with
the SEC on March 20, 2020, the Compensation Committee adopted a long term equity
incentive program pursuant to which it granted Mr. Orlando 20,172 PSUs (at
maximum), with one-third of the PSUs to vest on June 30, 2020, 2021 and 2022,
respectively contingent on the Company's achievement of pre-established annual
threshold, target and maximum revenue goals. At the time of that grant the
Committee established the revenue goals for fiscal 2020. On September 27, 2020,
the Committee established the fiscal 2021 threshold, target and maximum revenue
. . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
99.1 Second Amendment, dated as of September 27, 2020, to Amended &
Restated Employment Agreement between the Company and its President
& CEO.
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