Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
In February, 2022, the Compensation Committee (the "Compensation Committee") of
the Board of Directors (the "Board") of REX American Resources Corporation (the
"Company") engaged Pearl Meyer & Partners LLC ("Pearl Meyer") to assess the
compensation payable to the Company's named executive officers and non-employee
directors and make recommendations for market-based adjustments.
Following its review of Pearl Meyer's recommendations, on May 24, 2022, the
Compensation Committee approved and recommended to the Board for approval, and
the Board approved: (i) changes to the employment agreements (which had not been
modified since 2018) between the Company and Stuart A. Rose, the Company's
Executive Chairman of the Board, Zafar A. Rizvi, the Company's Chief Executive
Officer, and Douglas L. Bruggeman, the Company's Vice President Finance, Chief
Financial Officer and Treasurer, effective as of February 1, 2022, (ii) the
grant to Messrs. Rizvi and Bruggeman of performance-based long-term incentive
awards under the Company's 2015 Incentive Plan (the "Plan") in the form of
restricted stock units (the "2022 TSR Awards"), with vesting and payment based
on total shareholder return of the Company, and (iii) updated the Company's
compensation arrangements for its non-employee directors effective as of
February 1, 2022.
The changes to the employment agreements with Messrs. Rizvi, Bruggeman and Rose,
the long-term performance-based incentive awards granted to Messrs. Rizvi and
Bruggeman and the changes in the compensation program for the non-employee
directors are briefly described below.
Amended Employment Agreements
Mr. Rizvi's employment agreement was amended to increase his annual base salary
from $225,000 to $275,000, to increase the percentage of the Company's adjusted
net income on which his annual incentive bonus is based from 3% to 4.5% and to
increase the annual cap on the bonus from $2,000,000 to $5,000,000. In addition,
the minimum amount of the incentive bonus Mr. Rizvi will be entitled to receive
in the event his employment is terminated by the Company without cause or,
following a change in control, for good reason (which will be calculated without
regard to the normal annual cap and paid in cash), was increased from $500,000
to $1,000,000, with the amount of such bonus capped at $6,000,000.
Mr. Bruggeman's employment agreement was amended to increase his annual base
salary from $275,700 to $300,000, to increase the percentage of the Company's
adjusted net income on which his annual incentive bonus is based from 1.5% to
2.25% and to increase the annual cap on the bonus from $1,500,000 to $2,500,000.
In addition, the minimum amount of the incentive bonus Mr. Bruggeman will be
entitled to receive in the event his employment is terminated by the Company
without cause or, following a change in control, for good reason (which will be
calculated without regard to the normal annual cap and paid in cash), was
increased from $500,000 to $1,000,000, with the amount of such bonus capped at
$3,000,000.
Mr. Rose's employment agreement was amended to increase his annual base salary
from $154,500 to $225,000, to increase the percentage of the Company's adjusted
net income on which his annual incentive bonus is based from 2.2% to 2.5% and to
increase the annual cap on the bonus from $1,500,000 to $2,500,000. In addition,
the minimum amount of the incentive bonus Mr. Rose will be entitled to receive
in the event his employment is terminated by the Company without cause or,
following a change in control, for good reason (which will be calculated without
regard to the normal annual cap and paid in cash), was increased from $500,000
to $1,000,000, with the amount of such bonus capped at $3,000,000.
In addition, each of the amended employment agreements provides that: (i) any
losses incurred by the Company related to the Company's proposed carbon
sequestration project, or any other new investment in an operating entity, for
the period through the end of the second year after commencement of operations,
will not reduce the bonus calculation, (ii) 50% of pre-tax losses of the Company
in any year must be recouped in the following years before any incentive bonus
is paid, and (iii) 25% of each annual incentive bonus earned will be paid in
restricted stock issued under the Plan and the remainder in cash,
The foregoing description is only a brief summary of the changes made to the
employment agreements between each of Messrs. Rizvi, Bruggeman and Rose and the
Company and is qualified in its entirety by reference to the amended employment
agreements, which are included as Exhibits 10.1, 10.2 and 10.3 to this Current
Report on Form 8-K, respectively, and are incorporated herein by reference.
Performance-Based Long-Term Incentive Awards
The 2022 TSR Awards granted to Messrs. Rizvi and Bruggeman on May 24, 2022 were
granted under the Plan in the form of restricted stock units, each of which
represents the right of the recipient to receive one share of common stock of
the Company on vesting.
The number of restricted stock units subject to each 2022 TSR Award that may
vest at the end of the three year performance period, which commenced January 1,
2022, ranges from 0% to 200% of the specified target number of restricted stock
units subject to the award, based on the Company's total shareholder return
("TSR") in comparison to the TSR of the companies that comprise the Russell 2000
Index during the performance period, provided that the recipient of the award
remains a full-time employee of the Company during the entire performance
period. The percentage of the target number of restricted stock units that will
vest at the end of the performance period of the 2022 TSR Awards will be 100% if
the Company's TSR ranks above the 50th percentile of the index group's TSR, with
decreasing percentages of the target number of restricted stock units vesting
for performance at or below the 50th percentile (down to 0% for Company TSR
performance below the 40th percentile of the index group) and with increasing
percentages of the target number of restricted stock units vesting for
performance above the 50th percentile (up to a maximum of 200% for Company TSR
performance at the 90th percentile of the index group or above), all as set
forth in the award agreement. If the Company's TSR is negative during the
performance period, the maximum number of restricted stock units that can vest
is 100%, even for performance above the 60th percentile of the index group.
In the event that, during the three year performance period for the 2022 TSR
Awards (but prior to any change in control), the employment of Mr. Rizvi or Mr.
Bruggeman is terminated by the Company without cause or by him for good reason,
the performance goals on which the achievement of the restricted stock units
subject to the awards are based will be deemed satisfied at the greater of the
100% level of performance or the Company's actual TSR performance as of the date
of the occurrence of such event relative to the index group, and will be paid
within 30 days after the occurrence of such event. In the event that, during
such period, Mr. Rizvi or Mr. Bruggeman dies or becomes totally disabled, the
performance goals on which the achievement of the restricted stock units subject
to the awards are based will be deemed satisfied at the 100% level of
performance, and will be paid within 30 days after the occurrence of such event.
In the event of a change in control (as defined in the Plan) of the Company
during the performance period for the 2022 TSR Awards, the performance goals on
which the achievement of the restricted stock units subject to the award are
based will be deemed satisfied at the greater of the 150% level of performance
or the Company's actual TSR performance as of the date of the change in control
relative to the index group. If the 2022 TSR Award is assumed or substituted by
the acquirer or a specified related party in connection with the change in
control, the award will vest and become payable if the executive remains
employed through the end of the three year performance period (or his earlier
death or disability or the termination of his employment by the Company without
cause or by him for good reason). If the 2022 TSR Award is not so assumed or
substituted in connection with the change of control, the award will become
fully vested as of the date of the change in control and will be paid within 30
days thereafter.
The target number of restricted stock units subject to the 2022 TSR Awards
granted to Messrs. Rizvi and Bruggeman are 15,000 units and 7,500 units,
respectively.
The foregoing description of the 2022 TSR Awards is only a brief summary of the
terms of the awards and is qualified in its entirety by reference to the full
form of Restricted Stock Unit Award Agreement, which is attached as Exhibit 10.4
to this Current Report on Form 8-K and is incorporated herein by reference.
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Director Compensation Arrangements
Under the updated compensation arrangements approved by the Board for the
Company's directors who are not officers or employees of the Company, which are
effective as of February 1, 2022, the annual retainer was increased from $45,000
to $70,000, and the Chairs of the Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee will receive additional annual
cash retainers of $20,000, $10,000 and $10,000, respectively. The directors who
are not officers or employees of the Company also will continue to be reimbursed
for reasonable travel expenses and will receive an additional $5,000 if the
director serves on one or more Board committees.
In addition, each director who is not an employee of the Company will receive an
annual $50,000 grant of restricted stock under the Plan (increased from the
previous $25,000) based on the closing price of the Company's common stock on
the date of grant, which will continue to vest in one-third installments on the
first three anniversaries of the grant. In addition the Lead Director will
receive an additional $25,000 (increased from the previous $12,500) grant of
restricted stock with the same three-year vesting.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
The following exhibits are filed with this Current Report on Form 8-K:
Exhibit No. Description
10.1 Employment Agreement dated as of May 24, 2022 between Rex Radio and
Television, Inc. (a subsidiary of the Company) and Zafar A. Rizvi.*
10.2 Employment Agreement dated as of May 24, 2022 between Rex Radio and
Television, Inc. (a subsidiary of the Company) and Douglas L.
Bruggeman.*
10.3 Employment Agreement dated as of May 24, 2022 between Rex Radio and
Television, Inc. (a subsidiary of the Company) and Stuart A. Rose.*
10.4 Form of REX American Resources Corporation Restricted Stock Unit
Award Agreement (Employee-Performance Based Vesting Award).*
* Filed herewith.
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