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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
 
 
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Check the appropriate box:
 
Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Pursuant to
§240.14a-12
MARCUS & MILLICHAP, INC.
(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 all boxes that apply):
 
No fee required
 
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11
 
 
 


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LOGO

Notice of 2024 Annual Meeting of Stockholders and Proxy Statement

Marcus & Millichap, Inc.

May 2, 2024, 2:00 p.m. Pacific Time

A Different Kind of Brokerage

 


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LOGO

23975 Park Sorrento, Suite 400

Calabasas, California 91302

(818) 212-2250

March 22, 2024

Dear Stockholder:

We are pleased to invite you to attend the 2024 Annual Meeting of Stockholders of Marcus & Millichap, Inc., which will be held virtually on May 2, 2024.

We are furnishing our proxy materials to stockholders primarily over the Internet. This process expedites stockholders’ receipt of proxy materials, while significantly lowering the costs of our annual meeting and conserving natural resources. On March 22, 2024, we mailed to our stockholders a notice containing instructions on how to access our Proxy Statement and 2023 Annual Report to Stockholders and to vote online. The notice also included instructions on how you can receive a paper copy of your annual meeting materials. If you received your annual meeting materials by mail, the Proxy Statement, 2023 Annual Report to Stockholders, and proxy card were enclosed.

At this year’s annual meeting, the agenda includes the following items:

 

Agenda Item    Board
Recommendation

1.  Election of directors

   FOR

2.  Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2024

   FOR

3.  Advisory vote to approve executive compensation

   FOR

4.  Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan

   FOR

5.  Approval of the Amended and Restated 2013 Employee Stock Purchase Plan

   FOR

Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of 2024 Annual Meeting of Stockholders and Proxy Statement.

Your vote is important. Whether or not you plan to attend the annual meeting, I hope you will vote as soon as possible. You may vote over the Internet before or at the annual meeting or, if you receive your proxy materials by U.S. mail, you also may vote by mailing a proxy card or voting by telephone. Please review the instructions on the notice or on the proxy card regarding your voting options.

Sincerely yours,

 

LOGO

Hessam Nadji

President and Chief Executive Officer


Table of Contents

LOGO

Table of Contents

 

 

Notice of 2024 Annual Meeting of Stockholders   1

Letter from the CEO & Chair of the Board

  4

About Marcus & Millichap

  6

PROPOSAL 1

Election of Directors

  7

Nominees and Continuing Directors

  7

Nominee Selection Process

  8

Attributes, Skills and Experience of our Nominees and Continuing Directors

  10

Background and Qualifications of Director Nominees and Continuing Directors

  11

Corporate Governance

  16

Governance Highlights

  16

Board Responsibilities and Structure

  16

Leadership of the Board

  17

Director Independence

  18

The Board of Directors and its Committees

  19

Director Resignation Policy

  24

Director Time Commitments

  24

Board and Committee Evaluations

  24

Director Orientation and Continuing Education

  24

CEO Evaluation and Succession Planning

  24

The Board’s Role in Risk Oversight

  25

Cybersecurity and Risk Oversight

  26

Corporate Governance Guidelines

  27

Code of Ethics

  27

Human Capital Oversight

  27

Sustainability

  28

Commitment to People and Community – Corporate Responsibility

  28

Communications from Stockholders and Other Interested Parties to Directors

  28

PROPOSAL 2

Ratification of Appointment of Independent Registered Public Accounting Firm for 2024

  29

Fees Billed by Independent Registered Public Accounting Firm

  29

Audit Committee Report

  30

PROPOSAL 3

Advisory Vote to Approve Executive Compensation

  31

Compensation Discussion and Analysis

  32

Compensation Committee Report

  44

Compensation Committee Interlocks and Insider Participation

  44

Executive Compensation Tables and Other Information

  45

PROPOSAL 4

Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan

  63

PROPOSAL 5

Approval of the Amended and Restated 2013 Employee Stock Purchase Plan

  79

General Information

  91

Principal Stockholders

  91

Certain Relationships and Related Party Transactions

  93

Information About the 2024 Annual Meeting of Stockholders

  94

Information Referenced in This Proxy Statement

  98

Other Matters

  98

Appendix A

Amended and Restated 2013 Omnibus Equity Incentive Plan

  A-1

Appendix B

Amended and Restated 2013 Employee Stock Purchase Plan

  B-1
 


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LOGO

March 22, 2024

Notice of 2024 Annual Meeting of Stockholders

TO BE HELD ON MAY 2, 2024

 

     
Date and Time   Virtual Meeting   Record Date
 

Thursday, May 2, 2024,

2:00 p.m. Pacific Time

  Via the Internet
https://web.lumiagm.com/204691330
(password: Mm2024)
  March 12, 2024

The 2024 Virtual Annual Meeting of Stockholders (“Annual Meeting”) of Marcus & Millichap, Inc. (“Marcus & Millichap,” “MMI,” or the “Company”) will be held as a virtual-only meeting on Thursday, May 2, 2024 at 2:00 p.m. Pacific Time. The platform for the virtual Annual Meeting includes functionality that affords validated stockholders substantially the same meeting participation rights and opportunities they would have at an in-person meeting. Once admitted to the Annual Meeting, stockholders may view reference materials, submit questions, and vote their shares by following the instructions that will be available on the Annual Meeting website.

Agenda

At the Annual Meeting, stockholders will be asked to vote on the following proposals:

 

 PROPOSAL          BOARD VOTING
RECOMMENDATION
    PAGE REFERENCE
(FOR MORE DETAIL)

 Management Proposals

                    

 Elect three Class II Directors nominated by our

 Board of Directors, each to serve for a three-year term

    LOGO       

FOR each nominated

Director

 

 

  7

 Ratify the appointment of Ernst & Young LLP as our

 independent registered public accounting firm for 2024

    LOGO        FOR     29

 Advisory vote to approve executive compensation

    LOGO        FOR     31

 Approval of the Amended and Restated 2013 Omnibus

 Equity Incentive Plan

    LOGO        FOR     63

 Approval of the Amended and Restated 2013 Employee

 Stock Purchase Plan

    LOGO        FOR     79

Other Important Information

Stockholders will also transact such other business as may properly come before the annual meeting (including adjournments and postponements).

You are entitled to participate in the Annual Meeting if you were a stockholder as of the close of business on March 12, 2024, the record date, or hold a legal proxy for the Annual Meeting provided by your bank, broker, or other nominee.

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 1


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It remains very important that your shares are represented and voted at the Annual Meeting. We therefore strongly encourage you to vote in advance of the Annual Meeting. See “Voting Methods” on the next page for instructions for various voting methods.

By Order of the Board of Directors,

 

LOGO

Hessam Nadji

President and Chief Executive Officer

Calabasas, California

March 22, 2024

 

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 2, 2024: The Notice of 2024 Annual Meeting of Stockholders the Proxy Statement and the 2023 Annual Report to Stockholders are available at http://www.astproxyportal.com/ast/18576.

 

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 2


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Voting Methods

 

     Before the Annual Meeting   During the Annual Meeting     
    Vote by Internet   Vote by Phone   Vote by Mail   Vote by Internet    
  LOGO   LOGO   LOGO   LOGO  
    Go to www.voteproxy.com until 11:59 p.m. Eastern Time on May 1, 2024.   Call toll-free 1 (800) 776-9437 in the United States or 1 (201) 299-4446 from foreign countries until 11:59 p.m. Eastern Time on May 1, 2024.   Complete, sign, and date the proxy card/voting instruction card and return it in the postage-paid envelope that is enclosed with your proxy materials.   Go to https://web.lumiagm.com/204691330 and vote during the Annual Meeting by entering the 11-digit control number included in your proxy materials and the password “Mm2024” and following the instructions on the Annual Meeting website.    

As noted above, we strongly encourage you to vote in advance of the Annual Meeting by using one of the methods set forth above under “Before the Annual Meeting”, whether or not you plan to attend the Annual Meeting. You have the right to revoke your proxy before it is exercised at the Annual Meeting at any time before the polls close by submitting a later-dated proxy card/voting instruction card, by attending the Annual Meeting virtually and voting by Internet, by delivering instructions to our Corporate Secretary before the Annual Meeting, or by voting again using the Internet or by telephone before the cut-off time. Your latest Internet or telephone proxy is the one that will be counted. If you hold shares through a broker, bank, or other nominee, you may revoke any prior voting instructions by contacting that firm.

List of Stockholders

The names of stockholders of record entitled to vote will be available for inspection by stockholders of record for ten (10) days prior to the Annual Meeting and during the virtual Annual Meeting. If you are a stockholder of record and want to inspect the stockholder list, please send a written request to our Corporate Secretary at 23975 Park Sorrento, Suite 400, Calabasas, California 91302, or Steve.DeGennaro@marcusmillichap.com to arrange for electronic access to the stockholder list.

Internet Availability of Proxy Materials

We are furnishing proxy materials to our stockholders primarily via the Internet. On March 22, 2024, we mailed most of our stockholders as of the record date, a Notice Regarding the Availability of Proxy Materials (“Notice of Internet Availability”) containing instructions on how to access and review all the important information contained in our proxy materials, including our Proxy Statement and our 2023 Annual Report to Stockholders. The Notice of Internet Availability also instructs you on how to vote via the Internet. Other stockholders, in accordance with their prior requests, have been mailed paper copies of our proxy materials, and a proxy card or voting form.

Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower the cost of the annual meeting, and conserve natural resources. However, if you would prefer to receive paper copies of proxy materials, please follow the instructions included in the Notice of Internet Availability.

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 3


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Letter from the CEO & Chair of the Board

 

To our Stockholders:

 

MMI remained resilient and continued to make progress toward our long-term goals despite significant market headwinds experienced across the U.S. commercial real estate industry last year. The real estate market faced declining transaction volume resulting from the most aggressive Federal Reserve tightening policy in 40 years, culminating in interest rate increases of 525 basis points in 18 months. An already constrained lending environment was further exacerbated by the regional banking crisis. Although the broader economy performed well, interest rate volatility presented challenges for transaction closings with widening bid-ask spreads and higher borrowing costs. According to CoStar and MSCI, 2023 U.S. commercial real estate transaction volume declined by an estimated 55% compared to prior year.

In this environment, our team delivered revenue of $646 million and a net loss of $34 million, which largely reflects the impact of a 39% decline in total transactions. Our earnings were particularly pressured by expenses related to capital invested in top talent acquisition and retention, technological innovations and expanding our technology platform. We believe these investments will be instrumental in helping us lead in the recovery and long-term growth. We believe the company is well positioned to not only withstand the current market dislocation but to leverage the downturn to our advantage. We ended the year with $407 million in cash, cash equivalents, and marketable debt securities, available-for-sale.

In 2023, our management team adopted a range of strategic measures to mitigate the impact of the market disruption while also strengthening the MMI platform. We implemented cost control initiatives aimed at reducing the interim impact of lower revenue while continuing to make well-underwritten investments essential to long-term growth. Focusing on our people, we continued to provide broker training, retention of top producers and recruitment of experienced professionals and teams. We prioritized enhancing our ability to serve client needs by expanding marketing efforts, further integrating our auction teams into the sales process and leveraging technology. These combined efforts resulted in over 7,000 closings and nearly $45 billion

in volume, keeping MMI as the top ranked brokerage firm by transactions last year.

Our commitment to strategic capital allocation that best aligns with the long-term interests of our stockholders remains constant. In 2023, we returned $20 million to stockholders in the form of dividends and another $39 million through share repurchases. We concluded the year with $72 million of share repurchase authorization remaining under our current program which is inclusive of the additional $70 million authorization that was announced in May. Recruitment and retention of top producers remains a key priority for our core business. Concurrently, we have aggressively explored several adjacent growth opportunities to further diversify our business geographically and to expand into complementary services. Although these transactions did not close due to a valuation gap, we continue to develop our pipeline and actively evaluate strategic acquisition opportunities.

Industry Position

The company’s leading position in investment sales and financing was accomplished through the efforts of our 1,783 member strong salesforce, the largest in our industry. Whether it was our participation in major industry conferences, our client webcasts which drew over 40,000 investors or providing insightful research and analysis, we are proud of the client guidance and touchpoints our team delivered at a difficult time for most investors. As we have highlighted in the past, we believe that the private client segment of the market will lead the turnaround and we feel confident in our positioning when activity inevitably does pick up.

Market Environment

We believe the Federal Reserve’s decision to pause interest rate hikes and turn to a more dovish stance has increased the market’s confidence in a soft landing for the economy. Despite ongoing challenges in the form of wide bid-ask spreads and tighter lending standards, clarity on interest rates and price adjustments are expected to provide positive tailwinds to the market in the second half of the year. Other factors such as distress in some sectors and debt maturities could also provide additional catalysts for activity.

 

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 4


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Looking Forward

As we turn to 2024 and beyond, MMI will stay the course and maintain the laser focus that has enabled our company to persist and thrive through multiple cycles since our founding over 50 years ago. We will strive to continue to drive operational excellence and refine our strategic capital allocation policy all with the goal of serving our clients and stockholders in the best way possible. Progress was made in 2023 to position our company for the eventual market recovery, and we will continue our efforts in strengthening our resilience and competitiveness going forward.

We thank our team for their hard work and our stockholders for their confidence in us over the past year and look forward to our continued partnership.

Sincerely,

 

LOGO

Hessam Nadji

President, Chief Executive Officer

 

LOGO

George M. Marcus

Chair of the Board of Directors

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This letter includes forward-looking statements, including statements regarding the company’s business outlook, strategies and industry position, and the market environment. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Please see our 2023 Annual Report on Form 10-K, which was filed with the SEC on February 27, 2024, for more information regarding the factors that could cause such differences. Forward-looking statements speak only as of the date of this letter. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws.

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 5


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About Marcus & Millichap

 

 

Marcus & Millichap, Inc. (“MMI”) is a leading national real estate services firm specializing in commercial real estate investment sales, financing services, research, and advisory services. We are the leading national investment brokerage company in the $1 million to $10 million private client market segment. This is the largest and most active market segment and comprised approximately 80% of total U.S. commercial property transactions greater than $1 million in the marketplace in 2023.

As of December 31, 2023, we had 1,783 investment sales and financing professionals that are primarily exclusive commission-based independent contractors who provide real estate investment brokerage and financing services to sellers and buyers of commercial real estate in over 80 offices in the United States and Canada. In 2023, we closed 7,546 sales, financing, and other transactions with total sales volume of approximately $43.6 billion.

We service clients by underwriting, marketing, selling, and financing commercial real estate properties in a manner that maximizes value for sellers, provides buyers with the largest and most diverse inventory of commercial properties, and secures the most competitive financing from lenders for borrowers.

We were founded in 1971 in the western United States, and we continue to increase our presence throughout North America through execution of our growth strategies by targeting markets based on population, employment, level of commercial real estate sales, inventory, and competitive landscape opportunities where we believe the markets will benefit from our business model. We have grown to have offices in 34 states across the United States and in four provinces in Canada.

Company Overview

At Marcus & Millichap, our commitment is to help our clients create and preserve wealth by providing them with the best real estate investment sales, financing, research, and advisory services.

 

 

National Platform Focused on
Real Estate Investment Brokerage

 

 

  Over 50 years of experience dedicated to perfecting real estate investment brokerage

  Designed to maximize real estate value, facilitate investment options by geography and property type, and create liquidity for investors

 

Market Leader in the Private Client Market Segment

 

 

  Only national brokerage firm predominantly focused on servicing the Private Client Market segment which consistently accounts for 80%+ of CRE transactions in the U.S.

  Private client business has been supplemented with penetration in larger transactions and institutional clients for over a decade

 

Platform Built for Maximizing Investor Value

 

 

  Marcus & Millichap Capital Corporation (“MMCC”), Research & Advisory support client dialogue, financing, strategy, and sales execution

  Culture and policy of information sharing is key to maximizing investor value

 

Management With Significant
Investment Brokerage Experience

 

 

  Non-competitive management with extensive investment brokerage experience, committed to training, coaching, and supporting investment sales professionals

  Culture creates a competitive advantage through agent retention and better client results

 

Well-Positioned to Execute on Strategic Growth Plan

 

 

  Positioned to increase Private Client Market segment share, expand presence in specialty niches/larger transaction business, and grow the MMCC division

  Strong balance sheet with no debt provides financial flexibility to pursue strategic acquisitions

 

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 6


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PROPOSAL 1: Election of Directors

 

We are asking our stockholders to vote “FOR” three nominees to election as Class II Directors, each to serve on our Board of Directors (the “Board,” and each member a “Director”) for a three-year term until the 2027 Annual Meeting of Stockholders or until his or her successor is elected and qualified or, if earlier, the Director’s death, resignation, or removal.

Nominees and Continuing Directors

The following table sets forth information regarding the nominees standing for election at the Annual Meeting and our continuing Directors.

 

 Nominee or
 Director Name
   Class    Election
Year
   Age    Position(s)    Director
Since
 
 Nominees:                 
 Collete English Dixon    II    2024    66    Director    2021    
 Lauralee E. Martin    II    2024    73    Director    2019    
 Nicholas F. McClanahan    II    2024    79    Director    2013    
                
 Continuing Directors:                             
 George M. Marcus    III    2025    82    Director, Founder,
Chair of the Board
   1971    
 George T. Shaheen    III    2025    79    Director    2013    
 Don C. Watters    III    2025    81    Director,
Lead Independent Director
   2013    
 Norma J. Lawrence    I    2026    69    Director    2013    
 Hessam Nadji    I    2026    58    Director, President, Chief Executive Officer    2016    

 

Recommendation of the Board

 

Provided that there is a quorum at the Annual Meeting, Directors are elected by a plurality of the votes cast by the stockholders entitled to vote at such election. Accordingly, subject to our Director Resignation Policy described in the “Corporate Governance” section below, the three nominees receiving the highest number of affirmative votes will be elected.

 

The individuals named as proxyholders will vote your shares for the election of these three nominees unless you direct them to withhold your vote. If any nominee is unable to serve or for good cause will not serve as a Director, the individuals named as proxyholders may vote for a substitute nominee.

   THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH NOMINEE FOR DIRECTOR.

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 7


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Election of Directors

 

 

Nominee Selection Process

The Board is responsible for nominating persons for election as Directors of the Company. Our Board has delegated responsibility for identifying and evaluating individuals as members of the Board to our Nominating and Corporate Governance Committee.

 

      
   
  

1

Identify the
Candidate

 

Our Nominating and Corporate Governance Committee is charged with identifying, evaluating, and recommending director nominees to the full Board.

 

When seeking new director candidates, the Nominating and Corporate Governance Committee will consider potential candidates for directors submitted by Board members, members of our management, and our stockholders. The Nominating and Corporate Governance Committee does not evaluate candidates differently based upon the source of the nominee.

 
   LOGO    
   
  

2

Confirm Candidate
Qualifications

 

Once a candidate has been identified, our Nominating and Corporate Governance Committee will confirm that the candidate meets the following general criteria:

 

  Nominees should have a reputation for integrity, honesty, and adherence to high ethical standards;

 

  Nominees should have demonstrated business acumen, experience, and ability to exercise sound judgments in matters that relate to the current and long-term objectives of the Company and should be willing and able to contribute positively to the decision-making process of the Company;

 

  Nominees should have a commitment to understand the Company and its industry and to regularly attend and participate in meetings of the Board and its committees;

 

  Nominees should have the interest and ability to understand the sometimes-conflicting interests of the various constituencies of the Company, which include stockholders, employees, customers, governmental units, creditors, and the general public, and to act in the interests of all stockholders; and,

 

  Nominees should not have, nor appear to have, a conflict of interest that would impair the nominee’s ability to represent the interests of all the Company’s stockholders and to fulfill the responsibilities of a director.

 

While we do not have a formal diversity policy for Board membership, we look for potential candidates that help ensure that the Board has a wide range of perspectives and backgrounds, and we understand the benefits of seeking qualified candidates reflecting the diversity in our community to include in the pool from which we select new Board members.

 

We also look for financial oversight experience, financial community experience, and a good reputation with the financial community; business management experience; business contacts, business knowledge, and influence that may be useful to our business; and knowledge about our industry.

 
      

 

Marcus & Millichap, Inc. | 2024 Proxy Statement | Page 8


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Election of Directors

 

 

      
   
  

3

Candidate
Evaluation

  The Nominating and Corporate Governance Committee takes such measures that it considers appropriate in connection with the evaluation of a candidate, including candidate interviews, inquiries of the person recommending the candidate, engagement of an outside search or personnel firm to gather additional information, or reliance on the knowledge of the members of the committee, the Board or management.  
   LOGO    
   
  

4

Committee
Recommendation

  The Nominating and Corporate Governance Committee recommends to the Board the persons to be nominated for election as directors at any meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board, taking into consideration direct input from the Chair of the Board, the Chief Executive Officer (“CEO”), and, if one is appointed, the Lead Independent Director.  
   LOGO    
   
  

5

Stockholder Vote

  Stockholders vote on director nominees at the Annual Meeting of Stockholders.  
   LOGO    
   
  

6

Implementation

  Since 2019, two new independent Directors have been added, both of whom will continue to serve as Directors after the Annual Meeting. We believe each of our Directors brings a diverse set of skills and perspectives that add significant value to our governance and oversight.  
      

 

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Election of Directors

 

 

Attributes, Skills and Experience of our Nominees and Continuing Directors

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board, on an annual basis, the skills and characteristics of Board members, as well as the composition of the Board as a whole. This assessment includes determining whether members of the Board may be classified as “independent” and assessing their skills and experience in the context of the needs of the Board. The assessment also includes considering the diversity of the members’ skills and experience in areas that are relevant to the Company’s business and activities, including operations, finance, marketing, and sales.

Board Composition and Diversity

 

 

DIVERSITY

 

 

LOGO

 

50% of Directors are gender and/or racially diverse Three Directors are Female One Director is African

American

One Director is Middle Eastern

   

 

TENURE

 

Average tenure of eight years as of the end of 2023.

 

    0 to 5 Years    LOGOLOGO  
    5 to 10 Years    LOGO  
    > 10 Years    LOGOLOGOLOGOLOGOLOGO  
        
        
          
          

 

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Election of Directors

 

 

Background and Qualifications of Director Nominees and Continuing Directors

Set forth on the following pages are the names and ages of the Director nominees and the continuing Directors, the years they became Directors, their principal occupations or employment for at least the past five years, and the names of other public companies for which they serve as a Director or have served as a Director during the past five years. Also set forth below are the specific experiences, qualifications, or skills that led our Nominating and Corporate Governance Committee to conclude that each person should serve as a Director.

Nominees for Election for a Three-Year Term Ending with the 2027 Annual Meeting of Stockholders

 

 

 Collete English Dixon

 

 Executive Director,

 Marshall Bennett Institute of Real Estate, Roosevelt  University

 

 Independent

Director Since   Age    Committees
 2021   66    Nominating and Corporate Governance

Director Qualifications

 

    Ms. English Dixon has extensive experience with the commercial real estate services industry and in evaluating acquisition opportunities as well as significant experience serving on the boards of several private companies.

Experience and Biography

 

    Serves as executive director of the Marshall Bennett Institute of Real Estate, Roosevelt University in Chicago.

 

    Currently serves as a managing principal of Libra Investment Group, LLC, a real estate consulting group, a position which she has held since September 2016.

 

    Previously held various key officer and management roles at PGIM Real Estate/Prudential Real Estate Investors (“PREI”), which is a business unit of Prudential Financial.

 

    In her role as executive director, vice president of transactions and as co-leader of PREI’s national investment dispositions program, she managed a number of real estate professionals and oversaw the sale of investment properties throughout the United States.

 

    Ms. English Dixon received a B.B.A. in finance and international business economics from the University of Notre Dame and an M.B.A. from Mercer University.
 

 Lauralee E. Martin

 

 Former CEO and President,

 Healthpeak Properties, Inc.

 

 Independent

 

Director Since   Age    Committees
 2019   73    Audit, Executive

Director Qualifications

 

    Ms. Martin has extensive experience with the commercial real estate services industry and in evaluating acquisition opportunities, managing banking relationships and investor relations as well as significant experience serving on the boards of other public companies.

Experience and Biography

 

    Ms. Martin served as chief executive officer and president of Healthpeak Properties, Inc. (formerly HCP, Inc.), a real estate investment trust focusing on properties serving the healthcare industry, from October 2013 to July 2016.

 

    Served as chief executive officer of the Americas Division of Jones Lang LaSalle, Inc., a financial and professional services firm specializing in real estate services and investment management, from January 2013 to October 2013.

 

    Executive vice president and chief financial officer of Jones Lang LaSalle from January 2002 and was appointed chief operating and financial officer in October 2005 and served in that capacity until January 2013.

 

    15 years with Heller Financial, Inc., a commercial finance company with international operations, where she was vice president, chief financial officer, senior group president and president of the Real Estate group.
 

 

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Election of Directors

 

 

    Ms. Martin currently serves on the boards of Kaiser Aluminum Corporation and QuadReal Property Group, is an advisor to Beacon Capital Partners, and previously served on the board of Healthpeak Properties, Inc., ABM Industries, KeyCorp and Gables Residential Trust.
    Ms. Martin received a B.A. in English from Oregon State University and an M.B.A. from the University of Connecticut.
 

 

Nominees for Election for a Three-Year Term Ending with the 2027 Annual Meeting of Stockholders

 

 

 Nicholas F. McClanahan

 

 Former Managing Director,

 Accretive Advisor Inc.

 

 Independent

Director Since   Age   Committees:
 2013   79   Nominating and Corporate Governance (Chair), Compensation

Director Qualifications

 

    Mr. McClanahan possesses particular knowledge and experience in finance, capital structure, strategic planning, management and investment. 

Experience and Biography

 

    Served as managing director of strategic relationships at Accretive Advisor Inc. from September 2010 to February 2012.

 

    From April 1971 through April 2006, Mr. McClanahan worked at Merrill Lynch & Co. in various positions, including as executive vice president of Merrill Lynch Canada and managing director of Merrill Lynch Private Banking Group from 2003 to 2005.

 

    Mr. McClanahan received a B.B.A. in finance from Florida Atlantic University and is a graduate of the Securities Industry Institute executive education program at The Wharton School at the University of Pennsylvania.
 

 

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Election of Directors

 

 

Directors Continuing in Office until the 2025 Annual Meeting of Stockholders

 

 

 George M. Marcus

 

 Founder, Chair

 Marcus & Millichap, Inc.

 

 Non-Independent Director

Director Since   Age   Committees
 1971   82   Executive (Chair)

Director Qualifications

 

    Mr. Marcus is our founder and has served as our chair of the Board since 1971. He has extensive knowledge of the Company, over 45 years of experience working in the real estate industry and significant experience serving on boards of other public companies.

Experience and Biography

 

    Founder and chair of Marcus & Millichap Company, the parent company of a diversified group of real estate service investment and development firms, including, SummerHill Housing Group, Pacific Urban Investors and Meridian Property Company.

 

    Founder and chair of the board of Essex Property Trust, a public multifamily real estate investment trust, and was one of the original directors of Plaza Commerce Bank and Greater Bay Bancorp, both of which were formerly publicly held financial institutions.

 

    Professional memberships include Real Estate Roundtable, Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley and Urban Land Institute, as well as numerous other professional and community organizations.

 

    Mr. Marcus graduated with a B.S. degree in Economics from San Francisco State University in 1965, was honored as Alumnus of the Millennium in 1999, and received his honorary doctorate in 2011. In June 2019, Mr. Marcus received an honorary doctorate from the American College of Greece. He is also a graduate of Harvard Business School’s Owner/President Management Program and Georgetown University’s Leadership Program.
 

 George T. Shaheen

 

 Advisor

 Andersen Global

 

 Independent

Director Since   Age    Committees
 2013   79    Audit,
Compensation,
Nominating and Corporate Governance

Director Qualifications

 

    Mr. Shaheen has extensive experience as a senior executive and director of numerous companies, and he possesses significant business and leadership knowledge and experience.

Experience and Biography

 

    Currently serves as a director of NetApp, Inc., [24]7.ai, and Green Dot Corporation, along with its wholly owned subsidiary, Green Dot Bank.

 

    Currently serves as an advisor to Andersen Global, an international tax and legal advisory firm.

 

    Previously was the chief executive officer of Siebel Systems, Inc., a CRM software company, from April 2005 until the sale of the company in January 2006.

 

    From October 1999 to April 2001, he served as the chief executive officer and chair of the board of Webvan Group, Inc.

 

    Previously was the officer and global managing partner of Andersen Consulting, which later became Accenture, from 1988 to 1999.

 

    He has served as an IT Governor of the World Economic Forum and as a member of the board of advisors for the Northwestern University Kellogg Graduate School of Management. He has also served on the board of trustees of Bradley University.

 

    Mr. Shaheen received a B.S. in marketing and an M.B.A. in management from Bradley University. Mr. Shaheen has extensive experience as a senior executive and director of numerous companies, and he possesses significant business and leadership knowledge and experience.
 

 

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Election of Directors

 

 

Directors Continuing in Office until the 2025 Annual Meeting of Stockholders

 

 

 Don C. Watters

 

 Director Emeritus

 McKinsey & Company

 

 Independent

Director Since   Age    Committees:
 2013   81    Compensation (Chair),
Audit

Director Qualifications

 

    Mr. Watters possesses substantial knowledge and experience in strategic planning, organization, operations, and leadership of complex organizations.

Experience and Biography

 

    Mr. Watters is a director (senior partner) emeritus of McKinsey & Company, a global management consulting firm. During his 28 years with McKinsey & Company, Mr. Watters served primarily Fortune 500 sized private sector clients in over a dozen different industries on issues of strategy, organization and operations.

 

    Served on the board of directors of Merant PLC, a publicly traded company based in the United Kingdom from the late 1990s to 2004.

 

    Was on the advisory board of Cunningham Communication, Inc. Mr. Watters has served on the board of directors of numerous non-profit organizations, including the San Jose Ballet, the Tech Museum of Innovation, the American Leadership Forum Silicon Valley, the American Leadership Forum National, United Way Silicon Valley and the Bay Area Garden Railway Society, and is a member of the El Camino Hospital Board of Directors.

 

    Mr. Watters received a B.S. in engineering from the University of Michigan and an M.B.A. from Stanford University.
 

 

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Election of Directors

 

 

Directors Continuing in Office until the 2026 Annual Meeting of Stockholders

 

 

 Norma J. Lawrence

 

 Former Partner

 KPMG LLP

 

 Independent Director

Director Since   Age    Committees
 2013   69    Audit (Chair), Nominating and Corporate Governance

Director Qualifications

 

    Ms. Lawrence possesses particular knowledge and expertise in accounting and financial matters in the real estate industry.

Experience and Biography

 

    Ms. Lawrence previously served on the board of Broadmark Realty Capital Inc.

 

    Served as a partner in the audit department of KPMG LLP where she specialized in real estate.

 

    Ms. Lawrence was with KPMG from 1979 through 2012 and she was a member of the National Association of Real Estate Investment Trusts, the Pension Real Estate Association, the National Council of Real Estate Investment Fiduciaries, the California Society of Certified Public Accountants, and the American Institute of Certified Public Accountants, and was a member of WomanCorporateDirectors.

 

    Ms. Lawrence received a B.A. in mathematics and an M.B.A. in finance and accounting from the University of California, Los Angeles.
 

 Hessam Nadji

 

 President and CEO

 Marcus & Millichap, Inc.

 

 Non-Independent

Director Since   Age    Committees
 2016   58    Executive

Director Qualifications

 

    Mr. Nadji has extensive knowledge of the Company and over 35 years of experience working in the real estate industry.

Experience and Biography

 

    Previously served as senior executive vice president and chief strategy officer at Marcus & Millichap, Inc.

 

    He joined the Company as vice president of research in 1996 and held various other senior management roles through the years, including chief marketing officer and head of the Company’s specialty brokerage divisions.

 

    Mr. Nadji received a B.S. in information management and computer science from City University in Seattle.
 

 

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Corporate Governance

 

Governance Highlights

The Board is committed to governance practices that promote long-term stockholder value and strengthen Board and management accountability to our stockholders, clients, and other stakeholders. The following table highlights many of our key governance practices.

 

  Six of our eight Directors are independent

 

  We have a Lead Independent Director

 

  Separate CEO and Board Chair positions

 

  Independent standing board committees

 

  Regular meetings of our independent Directors without management present

 

  Four of our eight Directors are female and/or diverse

 

  Average Board tenure of eight years since initial public offering (as of the end of 2023)

 

  Annual Board and committee self-assessment process
  Strong focus on pay-for-performance

 

  Stock ownership guidelines for executive officers and Directors

 

  Policies prohibiting hedging, short selling, and pledging of our common stock

 

  Compensation recovery policy on executive compensation

 

  Review of cybersecurity, social issues, diversity, environmental sustainability, and public policy at the Board and Committee level
 

 

Board Responsibilities and Structure

Our Board oversees, counsels, and directs management in the long-term interests of the Company and our stockholders. Among other things, the Board’s responsibilities include:

 

  selecting the CEO and other executive officers;

 

  overseeing the risks that the Company faces;

 

  reviewing and approving our major financial objectives, strategic and operating plans, and other significant actions;

 

  overseeing the conduct of our business and the assessment of our business and other enterprise risks to evaluate whether the business is being properly managed; and

 

  overseeing the processes for maintaining our integrity regarding our financial statements and other public disclosures, and compliance with law and ethics.

Board Classes

The Board is divided into three classes. Any Director appointed to fill a vacancy on the Board in a given year will stand for election at the Company’s annual meeting of stockholders in respect of the class to which the Director is appointed.

The Class I Directors are Norma J. Lawrence and Hessam Nadji, whose terms will expire at the 2026 Annual Meeting of Stockholders.

The Class II Directors are Collete English Dixon, Lauralee E. Martin, and Nicholas F. McClanahan, who are nominated to be elected at the Annual Meeting.

The Class III Directors are George M. Marcus, George T. Shaheen, and Don C. Watters, whose terms will expire at the 2025 Annual Meeting of Stockholders.

 

 

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Corporate Governance

 

 

Leadership of the Board

Our Amended and Restated Bylaws (“Bylaws”) do not dictate a particular Board structure, and the Board is free to determine whether to have a Chair of the Board and, if so, to select that Chair and our CEO in the manner it considers in our best interest. Additionally, when the Chair of the Board also serves as the CEO, or is not otherwise an independent Director, the Board may designate an independent Director to act as a Lead Independent Director. Currently, the Company has a separate Chair of the Board, Lead Independent Director, and CEO.

 

     
Chair of the Board   Lead Independent Director   Chief Executive Officer
     
George M. Marcus   Don C. Watters   Hessam Nadji
     

The responsibilities of the Chair include, among other responsibilities:

 

  Presiding over meetings of the Board

 

  Presiding over meetings of stockholders

 

  Preparing the agenda for each Board meeting

 

  In conjunction with the Compensation Committee, evaluating the performance of the CEO and reviewing CEO compensation

 

The responsibilities of the Lead Independent Director include, among other responsibilities:

 

  Consulting with the Chair as to an appropriate schedule of Board meetings and providing the Chair with input as to the preparation of meeting agendas

 

  Consulting with the Chair as to the quality, quantity, and timeliness of the flow of information from Company management to the Board

 

  Acting as principal liaison between the Chair and the independent Directors

 

  Coordinating and presiding over meetings of independent Directors at which the Chair is not present

 

 

The responsibilities of the CEO include, among other responsibilities:

 

  Leading the affairs of the Company, subject to the overall direction and supervision of the Board and its committees

 

  Consulting and advising the Board and its committees on the business and affairs of the Company

 

  Performing such other duties as may be assigned by the Board

 

Currently, the Board has selected George M. Marcus to hold the position of Chair of the Board. Mr. Marcus’ experience at the Company has afforded him intimate knowledge of the issues, challenges, and opportunities facing the Company’s business. Accordingly, he is well-positioned to focus the Board’s attention on the most pressing issues facing the Company.

The Board has appointed Don C. Watters as its Lead Independent Director. As Lead Independent Director, Mr. Watters oversees the executive sessions of the independent Directors and serves as a liaison between the independent Directors and the Chair of the Board.

The Board believes its administration of its risk oversight function has not affected the Board’s leadership structure.

 

 

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Corporate Governance

 

 

Director Independence

The Board is currently composed of eight Directors, six of whom are independent.

Our Corporate Governance Guidelines provide that our Board must be comprised of a majority of Directors who are not current employees of the Company and otherwise meet appropriate independence standards. In determining independence, the Board considers the definition of “independence” or “independent director” in the listing standards of the New York Stock Exchange (“NYSE”), laws and regulations applicable to the Company, and other factors that contribute to effective oversight and decision-making by the Board.

The Board has undertaken a review of its composition, the composition of its committees and, in coordination with the Nominating and Corporate Governance Committee, the independence of each Director. Based upon information requested from and provided by each Director concerning his or her background, employment, and affiliations, including family relationships, the Nominating and Corporate Governance Committee has recommended that the Board determine and the Board has determined that Collete English Dixon, Norma J. Lawrence, Lauralee E. Martin, Nicholas F. McClanahan, George T. Shaheen, and Don C. Watters, representing six of our eight Directors who served during 2023, do not or did not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director and that each of these Directors is “independent,” as that term is defined under the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and the listing requirements and rules of the NYSE.

Transactions Considered in Independence Determinations

In making its independence determinations, the Board considered any transactions that occurred since the beginning of 2023 between the Company and entities associated with the independent Directors or members of their immediate family. All identified transactions are described below in “Certain Relationships and Related Party Transactions.”

None of our Directors are disqualified from being “independent” under the NYSE objective standards, except for Mr. Nadji, our CEO. However, the Board also considered any transactions in the context of the NYSE objective standards, the special standards established by the SEC for members of audit committees, the SEC and NYSE standards for compensation committee members, and the beneficial ownership of our capital stock by each non-employee director. Based on the foregoing, as required by the NYSE rules, the Board made a subjective determination that no relationships exist that, in the opinion of the Board, would impair our non-employee directors’ independence, except in the case of Mr. Marcus.

Independent Directors

 

LOGOLOGOLOGOLOGOLOGOLOGO

 

LOGOLOGO

6 of 8 Directors are Independent

Independent Committee Leadership

 

Audit Committee Chair    Independent   LOGO
Compensation Committee Chair    Independent   LOGO
Nominating and Corporate Governance Committee Chair    Independent   LOGO
 

 

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Corporate Governance

 

 

The Board of Directors and its Committees

The Board delegates various responsibilities and authority to different Board committees. Committees regularly report on their activities and actions to the full Board. The Board currently has, and appoints the members of, a standing Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and Executive Committee.

Each of the Board committees has a written charter approved by the Board, and we post the charters on our website at https://ir. marcusmillichap.com/corporate-governance/governance-documents. Each committee can engage outside experts, advisors, and counsel to assist the committee in its work.

The following table identifies the current committee members.

 

LOGO  Chair   LOGO  Member

 

 Board Members   Independent   Audit   Compensation   Nominating and
Corporate
Governance
  Executive
 Collete English Dixon   Yes       LOGO  
 Norma J. Lawrence   Yes   LOGO     LOGO  
 George M. Marcus           LOGO
 Lauralee E. Martin   Yes   LOGO       LOGO
 Nicholas F. McClanahan   Yes     LOGO   LOGO  
 Hessam Nadji           LOGO
 George T. Shaheen   Yes   LOGO   LOGO   LOGO  
 Don C. Watters   Yes   LOGO   LOGO    

 Number of Committee Meetings

 Held in 2023

    4   4   4   1

Attendance at Board, Committee, and Annual Stockholders’ Meetings

 

The Board and its committees meet throughout the year on a set schedule, hold special meetings, and act by written consent from time to time as appropriate. The Board held 5 meetings in 2023.

We expect each Director to attend every meeting of the Board and the committees on which he or she serves, and we encourage them to attend the annual meetings of the stockholders. None of our Directors attended fewer than 75% of the total number of meetings of the Board and committees on which he or she serves that were held during the time that he or she served on the Board or such committees during 2023. Everyone who served as a Director on the date of the 2023 Annual Meeting of Stockholders attended that meeting. We expect that all current directors will attend the upcoming Annual Meeting.

 

 

2023 Average

Board and Committee Meeting

Attendance

 

 

96%

 

 

 

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Corporate Governance

 

 

Audit Committee

 

Current Members

 

Norma J Lawrence (Chair)

 

Lauralee E. Martin

 

George T. Shaheen

 

Don C. Watters

 

Independence

 

The Board has affirmatively determined that each member of the Audit Committee meets the definition of “independent director” for purposes of the NYSE rules and the independence requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

The Board has also determined that each of Norma J. Lawrence and Lauralee E. Martin qualifies as an “audit committee financial expert” under the applicable SEC rules and regulations and that they are “financially literate” as that term is defined by the NYSE corporate governance requirements.

 

Meetings

 

The Audit Committee held 4 meetings in 2023.

 

Attendance

  

Responsibilities

 

Among other responsibilities, the Audit Committee is charged by the Board with the authority and responsibility to:

 

  review and approve the selection of our independent registered public accounting firm, and approving the audit and non-audit services to be performed by our independent registered public accounting firm;

 

  monitor the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

 

  review the adequacy and effectiveness of our internal control policies and procedures;

 

  oversee our internal audit function;

 

  discuss the scope and results of the audit with the independent registered public accounting firm, and review with management and the independent registered public accounting firm, our interim and year-end operating results;

 

  review, with management, cybersecurity and other risks relevant to the Company’s computerized information system controls and security, and determine if any such risks and incidents should be disclosed in the Company’s periodic filings with the SEC;

 

  oversee the principal risk exposures facing the Company and the Company’s mitigation efforts in respect of such risks, including, but not limited to financial reporting risks and credit and liquidity risks; and

 

  preparing the Audit Committee Report that the SEC requires in our annual proxy statement.

 

 

2023 Average

Audit Committee

Meeting Attendance

 

 

94%

 

 

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Corporate Governance

 

 

Compensation Committee

 

Current Members

 

Don C. Watters (Chair)

 

Nicholas F. McClanahan

 

George T. Shaheen

 

Independence

 

The Board has affirmatively determined that each of these Directors meets the definition of “independent director” for purposes of the NYSE rules and the independence requirements of the Exchange Act.

 

Meetings

 

The Compensation Committee held 4 meetings in 2023.

 

Attendance

  

Responsibilities

 

Among other responsibilities, the Compensation Committee is charged by the Board with the authority and responsibility to:

 

  oversee our compensation policies, plans, and benefit programs;

 

  review and approve for our executive officers: annual base salary, annual cash incentives, including the specific goals and amount, equity compensation, employment agreements, severance arrangements, change in control arrangements, and any other benefits, compensation, or arrangements;

 

  administer our equity compensation plans;

 

  prepare the Compensation Committee Report that the SEC requires in our annual proxy statement; and

 

  oversee the development, implementation and effectiveness of our policies, strategies, programs, and practices relating to human capital management.

 

 

2023 Average

Compensation Committee

Meeting Attendance

 

 

92%

 

 

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Corporate Governance

 

 

Nominating and Corporate Governance Committee

 

Current Members

 

Nicholas F. McClanahan (Chair)

 

Collete English Dixon

 

Norma J. Lawrence

 

George T. Shaheen

 

Independence

 

The Board has affirmatively determined that each of these Directors meets the definition of “independent director” for purposes of the NYSE rules and the independence requirements of the Exchange Act.

 

Meetings

 

The Nominating and Corporate Governance Committee held 4 meetings in 2023.

 

Attendance

 

  

Responsibilities

 

Among other responsibilities, the Nominating and Corporate Governance Committee is charged by the Board with the authority and responsibility to:

 

  identify, evaluate, and recommend to the Board for nomination candidates for membership on the Board;

 

  review with the Board on an annual basis, the independence, skills and characteristics of Board members, and the skills and characteristics of the Board as a whole, in determining whether to recommend incumbent Directors in the class subject to re-election;

 

  prepare and recommend to the Board corporate governance guidelines and policies;

 

  review and evaluate our policies and practices and monitoring our efforts and risk oversight in the areas of social issues, diversity, environmental sustainability, and public policy, and recommend changes for approval by the Board; and

 

  identify, evaluate, and recommend to the Board the chair and membership of each committee of the Board.

 

 

2023 Average

Nominating and Corporate

Governance Committee

Meeting Attendance

 

 

100%

 

 

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Corporate Governance

 

 

Executive Committee

 

Current Members

 

George M. Marcus (Chair)

 

Lauralee E. Martin

 

Hessam Nadji

 

Independence

 

The Board has affirmatively determined that Lauralee E. Martin meets the definition of an “independent director” for purposes of the NYSE rules and the independence requirements of the Exchange Act.

 

Meetings

 

The Executive Committee held 1 meeting in 2023.

 

Attendance

  

Responsibilities

 

The Executive Committee is charged by the Board with the authority and responsibility to take any and all actions which may be taken by the Board, including acting upon recommendations of other Committees of the Board, and administering the Company’s stock plans (including the granting of stock options and stock awards thereunder), except those actions reserved by law to the full Board or as limited by the Executive Committee Charter.

 

 

2023 Average

Executive Committee

Meeting Attendance

 

 

100%

 

 

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Corporate Governance

 

 

Director Resignation Policy

A Director who changes the business or professional responsibility they held when they were elected to the Board, or whose personal circumstances have changed to the extent that it affects his or her ability to contribute to the Company’s continued development, should consult with the Chair of the Board and the Chair of the Nominating and Corporate Governance Committee and shall tender his or her resignation to the Board. The Nominating and Corporate Governance Committee will recommend to the Board the action, if any, to be taken with respect to the resignation. Any executive officer of the Company who serves on the Board shall submit his or her resignation to the Board at the time such officer ceases to be an executive officer of the Company.

The Board believes that term or age limits are, on balance, not the best way to maximize the effectiveness of the Board. While term limits may introduce fresh perspectives and viewpoints to the Board, they may also have the countervailing effect of causing the loss of contributions from Directors who have developed deep insight into the Company through years of experience.

As an alternative to term limits the Nominating and Corporate Governance Committee reviews the appropriateness of each Board member’s continued service every three years in connection with evaluating the appropriateness of their recommendation. Likewise, the Board does not believe that a mandatory retirement age is appropriate but will assess each Director’s ability to continue serving on the Board every three years in connection with evaluating the appropriateness of their recommendation.

Director Time Commitments

We believe that our Directors should be committed to enhancing stockholder value and should dedicate sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. We believe our Directors should not serve on an excessive number of boards of other public companies to permit them, given their individual circumstances, to perform and carry out all Director duties in a responsible manner.

Board and Committee Evaluations

The Board conducts a self-evaluation of its performance and the performance of individual Directors from time to time. The Nominating and Corporate Governance Committee is responsible for establishing the evaluation criteria and overseeing the evaluations. Each committee also evaluates its performance periodically.

Director Orientation and Continuing Education

In connection with the appointment of new members to the Board, management provides new Board members with Director orientation materials, including presentations from senior executives and Company policies. Each Director is expected to participate in continuing education programs to maintain the necessary level of expertise to perform his or her responsibilities.

CEO Evaluation and Succession Planning

The Compensation Committee conducts a review of the performance of the CEO at least annually. The Compensation Committee establishes the evaluation process and determines the specific criteria on which the performance of the CEO is evaluated. The results of the review and evaluation are communicated to the CEO by the Chair of the Board and the Chair of the Compensation Committee.

The CEO reviews succession planning and management development with the Board on an annual basis.

 

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Corporate Governance

 

 

The Board’s Role in Risk Oversight

Our Company faces a number of risks, including operational, economic, financial, legal, regulatory, and competitive risks. Our management is responsible for the day-to-day management of the risks we face. While our Board, as a whole, has the ultimate responsibility for the oversight of risk management, it administers its risk oversight role in part through the Board committee structure, with the Audit, Compensation, and Nominating and Corporate Governance Committees being responsible for monitoring and reporting on the material risks associated with their respective subject matter areas.

 

 
The Board

The Board’s role in our risk oversight process includes receiving regular reports from members of senior management, as well as external advisors, on areas of material risk to us, including operational, economic, financial, legal, regulatory, cybersecurity, and competitive risks. The full Board (or the appropriate committee in the case of risks that are reviewed by a particular committee) receives these reports from those responsible for the relevant risk to better understand our risk exposures and the steps that management may take to monitor and control these exposures. When a committee receives the report, the chair of the relevant committee generally will provide a summary to the full Board at the next Board meeting, allowing the Board and its committees to coordinate the risk oversight role.

LOGO   LOGO   LOGO
 
Committee Responsibilities
     
Audit Committee   Compensation Committee   Nominating and Corporate Governance Committee
   
The Audit Committee assists the Board in oversight and monitoring of principal risk exposures related to financial statements, legal, regulatory, cybersecurity, and other matters, as well as related mitigation efforts and receives regular reports on such matters from the Company’s Chief Information Officer and Chief Compliance Officer.   The Compensation Committee assesses, at least annually, the risks associated with our compensation policies.  

The Nominating and Corporate Governance Committee assists the Board in oversight of risks that we have relative to compliance with corporate governance standards.

 

This includes oversight of risks related to social issues, diversity, environmental sustainability, and public policy.

 

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Corporate Governance

 

 

Cybersecurity and Risk Oversight

 

Cybersecurity is an important part of our risk management processes and an area of increasing focus for our Board and management.

The Role of the Board

The Audit Committee of our Board, which is comprised entirely of independent Directors, is responsible for the oversight of risks from cybersecurity threats and other risks relevant to the Company’s information technology controls and security.

At least quarterly, the Audit Committee receives an overview from management of our cybersecurity threat risk management and strategy processes covering topics such as data security posture, results from third-party assessments, progress towards pre-determined risk-mitigation-related goals, our incident response plan, and material cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to such risks. In such sessions, the Audit Committee generally receives materials indicating current and emerging material cybersecurity threat risks, and describing the company’s ability to mitigate those risks, and discusses such matters with our Chief Information Officer.

Members of the Audit Committee are also encouraged to regularly engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.

Material cybersecurity threat risks are also considered during separate Board meeting discussions of important matters like risk management, operational budgeting, business continuity planning, mergers and acquisitions, brand management, and other relevant matters.

The Role of Management

Our cybersecurity risk management and strategy processes are led by our Chief Information Officer, who is ultimately responsible for our information

security program. This includes identifying threats, detecting potential attacks, and protecting all of our information assets.

Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process, covering all company risks. As part of this process, appropriate disclosure personnel collaborate with subject matter specialists, as necessary, to gather insights for identifying and assessing material cybersecurity threat risks, their severity, and potential mitigations.

Additionally, we maintain a cybersecurity-specific risk assessment process which helps identify our cybersecurity threat risks. This process also aims to provide for the availability of critical data and systems, maintain regulatory compliance, identify and manage our risks from cybersecurity threats, and protect against, detect, and respond to cybersecurity incidents. This includes periodic comparison of our processes to standards set by the National Institute of Standards and Technology.

We carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident.

As part of our information security program, we maintain an incident response plan which coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.

The firm’s senior executive team, inclusive of the CEO, CFO, COO, CAO and Legal, are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.

 

 

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Corporate Governance

 

 

Our Cybersecurity Oversight Structure

 

The Board
LOGO
Audit Committee
LOGO
Chief Information Officer
LOGO
Cybersecurity Team

Corporate Governance Guidelines

We are committed to having sound corporate governance practices and have adopted formal Corporate Governance Guidelines to enhance our effectiveness.

The Nominating and Corporate Governance Committee is responsible for developing and reviewing our Corporate Governance Guidelines, and for preparing and recommending any changes to our Corporate Governance Guidelines and policies to the Board.

Having such principles is essential to running our business efficiently and maintaining our integrity in the marketplace. A copy of our Corporate Governance Guidelines is available on our website at https://ir.marcusmillichap.com/corporate-governance/governance-documents.

Code of Ethics

We strive to conduct our business with the highest integrity and standards of ethics and governance that support our values. This includes promoting fair labor practices, upholding human rights, and compliance with legal requirements, including those that address bribery and corruption. This also includes implementing policies, practices, and trainings that convey our expectations and values and meet stakeholder needs.

As part of this effort, we adopted a Code of Ethics. The Code of Ethics does not attempt to identify every possible category of ethical and legal behavior, but instead sets forth our clear expectations for ethical and honest behavior. We are committed to legal compliance, fair dealing, and addressing internal and external ethical concerns, which we do in part through our Ethics Hotline, which allows for anonymous reporting and direct communication with the Company’s Compliance Officer. Our expectations for ethics are further embedded into our practices through cross-discipline education and trainings, which are provided at the individual, office, and company-wide levels.

Our Audit Committee is responsible for reviewing and evaluating our policies and practices and monitoring our efforts in the area of ethics.

Our Code of Ethics can be found at https://ir. marcusmillichap.com/corporate-governance/governance-documents. Any amendments to the Code of Ethics, or any waivers of their requirements required to be disclosed pursuant to SEC or NYSE requirements, will be disclosed on the website.

Human Capital Oversight

Our Compensation Committee is responsible for the development, implementation and effectiveness of our policies, strategies, programs, and practices relating to human capital management including but not limited to those regarding recruiting, talent development and retention, culture, human health and safety and total rewards.

Our Nominating and Corporate Governance Committee is responsible for reviewing and evaluating our policies and practices and monitoring our efforts and risk oversight in the area of diversity.

For more information about our human capital efforts, please refer to the section entitled “Human Capital” in our Annual Report on Form 10-K for 2023.

 

 

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Corporate Governance

 

 

Sustainability

We recognize that operating our business in a sustainable manner is important to our success. For this reason, we are exploring ways to address the environmental impact of our business, reduce carbon emissions, increase energy efficiency, reduce waste, and limit our consumption of natural resources.

More information on our Commitment to Sustainability policy can be found at: https://ir.marcusmillichap.com/esg/a-commitment-to-sustainability.

Commitment to People and Community – Corporate Responsibility

Marcus & Millichap maintains a Corporate Responsibility Policy. This policy memorializes our commitment to our employees, our community, and our stakeholders, as we believe taking into account the interests of our stakeholders drive the success of our business.

More information on our Corporate Responsibility Policy can be found at:

https://ir.marcusmillichap.com/esg/corporate-social-responsibility.

Communications from Stockholders and Other Interested Parties to Directors

The Board recommends that stockholders and other interested parties initiate communications with the Board, any committee of the Board, or any individual Director in writing to the attention of our Corporate Secretary at our principal executive office at 23975 Park Sorrento, Suite 400, Calabasas, CA 91302. This process will assist the Board in reviewing and responding to stockholder communications in an appropriate manner. The Board has instructed our Corporate Secretary to review such correspondence and, at the Corporate Secretary’s discretion, not to forward items if the Corporate Secretary deems them to be of a commercial or frivolous nature or otherwise inappropriate for the Board’s consideration.

 

 

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PROPOSAL 2: Ratification of Appointment of Independent Registered Public Accounting Firm for 2024

 

 

Ernst & Young LLP has served as our independent registered public accounting firm since 2013. The Audit Committee has once again selected Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2024. As a matter of good corporate governance, the Audit Committee is submitting its appointment to our stockholders for ratification. If the appointment of Ernst & Young LLP is not ratified by a majority of the shares of our common stock present or represented at the Annual Meeting and entitled to vote on the proposal, the Audit Committee will review its future appointment of an independent registered public accounting firm in light of that vote result.

The Audit Committee pre-approves and reviews audit and non-audit services performed by our independent registered public accounting firm, as well as the fees charged for audit services. In its pre-approval and review of non-audit services, the Audit Committee considers, among other factors, the possible effect of the performance of such services on the auditor’s independence. For additional information concerning the Audit Committee and its activities with the independent registered public accounting firm, see “Corporate Governance” and “Audit Committee Report” in this Proxy Statement.

We expect that a representative of Ernst & Young LLP will attend the Annual Meeting, and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.

Fees Billed by Independent Registered Public Accounting Firm

The following table shows the fees and related expenses for audit and other services provided by Ernst & Young LLP in 2023 and 2022. The services described in the following fee table were approved in conformity with the Audit Committee’s pre-approval process.

 

        2023            2022     

Audit Fees

   $ 1,340,482      $ 1,278,537  

Audit-Related Fees

     —         —   

Tax Fees

     —         —   

All Other Fees

     —         —   
  

 

 

    

 

 

 

Total

   $    1,340,482      $    1,278,537  
  

 

 

    

 

 

 

Audit Fees. This category includes fees for (i) the audit of our annual consolidated financial statements, (ii) reviews of our quarterly condensed consolidated financial statements, and (iii) services that are normally provided by our independent auditors in connection with statutory and regulatory filings or engagements.

Audit-Related Fees. This category includes fees for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.”

Tax Fees. This category includes fees for professional services for tax compliance, tax advice, and tax planning. These services include assistance regarding federal, state, and international tax compliance, assistance with tax reporting requirements and audit compliance, tax planning, consulting, and assistance on business restructuring.

All Other Fees. This category includes fees for products and services other than the services reported above. These services included cyber security consultation and impact analysis and environmental, social and governance framework development and materiality assessment.

The Audit Committee determined that Ernst & Young LLP’s provision of these services, and the fees that we paid for these services, are compatible with maintaining the independence of the independent registered public accounting firm. The Audit Committee pre-approved all services that Ernst & Young LLP provided for 2022 and 2023 in accordance with the pre-approval policy discussed above.

Recommendation of the Board

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024.

 

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Audit Committee Report

 

 

The Audit Committee of the Board consists of the four Directors whose names appear below. The Audit Committee is composed exclusively of Directors, who are independent under the NYSE listing standards and the SEC rules.

The Audit Committee’s general role is to assist the Board in monitoring the Company’s financial reporting process and related matters. Its specific responsibilities are set forth in its charter.

The Audit Committee has reviewed the Company’s audited financial statements for the year ended December 31, 2023, and met with management, as well as with representatives of Ernst & Young LLP, the Company’s independent registered public accounting firm, to discuss the financial statements. The Audit Committee also discussed with members of Ernst & Young LLP, the matters required to be discussed by the applicable Public Company Accounting Oversight Board and SEC requirements.

In addition, the Audit Committee received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and discussed with members of Ernst & Young LLP, its independence.

Based on these discussions, the financial statement review, and other matters it deemed relevant, the Audit Committee recommended to the Board that the Company’s audited financial statements for the year ended December 31, 2023 be included in the Company’s Annual Report on Form 10-K for 2023.

Norma J. Lawrence (Chair)

Lauralee E. Martin

George T. Shaheen

Don C. Watters

 

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PROPOSAL 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 are being asked 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).

Our executive compensation program is designed to reward performance in a simple and effective way. We believe the compensation paid to our named executive officers for 2023 appropriately reflects and rewards their contributions to our performance and is aligned with the long-term interests of our stockholders.

We encourage stockholders to read the Compensation Discussion and Analysis, beginning on page 32 of this Proxy Statement, which describes the details of our executive compensation program and the decisions made by the Compensation Committee in 2023.

Stockholders are being asked to approve the following resolution at the Annual Meeting:

“RESOLVED, that the compensation paid to the named executive officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables), is hereby approved.”

As an advisory vote, this proposal is not binding on the Company, the Board, or the Compensation Committee. However, the Board and the Compensation Committee value the opinions expressed by stockholders in their votes on this proposal and will consider the outcome of the vote when making future compensation decisions regarding named executive officers.

We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote on executive compensation at our 2025 Annual Meeting of Stockholders.

Recommendation of the Board

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE NON-BINDING RESOLUTION TO APPROVE EXECUTIVE COMPENSATION.

 

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Compensation

 

 

Compensation Discussion and Analysis

 

In this Compensation Discussion and Analysis, we discuss our compensation philosophy and executive compensation program, as well as describe and analyze our compensation actions and decisions for our named executive officers for the fiscal year ended December 31, 2023 (each, an “NEO”). For 2023, our NEOs and their designated titles are as follows:

 

Hessam Nadji, President and Chief Executive Officer

 

Steven F. DeGennaro, Executive Vice President and Chief Financial Officer

 

Richard Matricaria, Executive Vice President and Chief Operating Officer, Western Division

 

John David Parker, Executive Vice President and Chief Operating Officer, Eastern Division

 

Gregory A. LaBerge, Senior Vice President, Chief Administrative Officer

 

 

2023 Business Overview

We remained resilient and continued to make progress toward our long-term goals despite significant market headwinds experienced across the U.S. commercial real estate industry last year. According to CoStar and MSCI, 2023 U.S. commercial real estate transaction volume declined by an estimated 55% compared to prior year driven by the Federal Reserve’s fight against inflation, which resulted in significant interest rate volatility, and the regional banking crisis, which further exacerbated an already constrained lending environment.

In this environment, our team delivered revenue of $646 million and a net loss of $34 million in 2023, which largely reflects the impact of a 39% decline in total transactions. In addition, our earnings were pressured by expenses related to capital invested in top talent acquisition and retention, technological innovations and expanding our technology platform, which we believe will be instrumental in helping us lead in the recovery and long-term growth of the Company. We believe the Company is well positioned to not only withstand the current market dislocation but to leverage the downturn to our advantage. We ended the year with $407 million in cash, cash equivalents, and marketable debt securities, available-for-sale.

In 2023, our management team also adopted a range of strategic measures to mitigate the impact of the market disruption while also strengthening the MMI platform. We implemented cost control initiatives aimed at reducing the interim impact of lower revenue while continuing to make well-underwritten investments essential to long-term growth. Focusing on our people, we continued to provide broker training, retention of top producers and recruitment of experienced professionals and teams. We prioritized enhancing our ability to serve client needs by expanding marketing efforts, further integrating our auction teams into the sales process and leveraging technology. The ongoing elevation of our brand was on pace once again with marquee client webcasts, industry-leading research content, and commanding presence in the media as well as at industry conferences. These combined efforts helped contribute to over 7,000 closings and nearly $45 billion in volume, keeping MMI as the top ranked commercial real estate brokerage firm by transactions last year.

Our commitment to strategic capital allocation that best aligns with the long-term interests of our stockholders also remained constant. In 2023, we returned $20 million to stockholders in the form of dividends and another $39 million through share repurchases.

While we continue to navigate near-term challenges, we remain committed to sustaining our long-term mindset. This includes building competitive advantages, continuing to prioritize delivering best-in-class services for our clients, and strategically deploying capital to further strengthen our internal resources and enhancing growth opportunities externally in the coming years.

 

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Compensation

 

 

Alignment of CEO Compensation and Company Performance

We designed our 2023 executive compensation program to motivate and reward executive performance. The chart below indicates the Summary Compensation Table total compensation and compensation actually paid for Hessam Nadji, our President and CEO, for each of 2021, 2022 and 2023, as reported in the 2023 Summary Compensation Table and the Pay Versus Performance Table, respectively. Mr. Nadji’s Summary Compensation Table total compensation for 2023 increased primarily due to an additional grant he received, as further described below. As the chart illustrates, our CEO compensation is generally aligned with total stockholder return (“TSR”). While we did not achieve our pre-tax net income target for our annual incentive plan, which is reflected in our CEO’s annual cash incentive award and annual restricted stock unit (“RSU”) grant, our stock price increased in 2023 from $34.45 to $43.68, or a 27% increase, which is reflected in the value of his unvested equity awards as of the end of 2023.

 

 

LOGO

Given the Company’s overall financial performance in 2023, the Compensation Committee reduced the earned amount of our CEO’s annual cash incentive award for 2023 by an additional $175,000, which resulted in a 65% decrease in our CEO’s earned annual incentive award from 2022. In addition, the Compensation Committee also reduced the size of his 2024 annual RSU grant from 92,000 RSUs to 72,000 RSUs, which represented a 22% decrease in the number of RSUs from 2023.

Compensation Philosophy

Our executive compensation program is intended to achieve the following objectives:

 

 

Attract and incentivize talented individuals to lead and manage our business

 

 

Align our executive officers’ compensation with our business objectives and the interests of our stockholders

 

 

Reward our executive officers fairly over time based on actual performance and retain those individuals who continue to meet our high expectations

 

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Compensation

 

 

Compensation Policies and Practices

Our executive compensation program and corporate governance policies are designed to link pay with operational performance and increase in long-term stockholder value while striking a responsible balance between risk and reward. To accomplish these objectives, we have adopted the following policies and practices over time:

 

What We Do

  

What We Don’t Do

  Pay-for-performance philosophy and culture

 

  More than two-thirds of our current NEOs’ total target direct compensation is performance-based and/or at risk

 

  Independent compensation committee

 

  Independent compensation consultant

 

  Compensation recovery policy for executive officers on cash and equity incentives

 

  Responsible use of shares under our long-term incentive program

 

  Robust stock ownership requirements

 

  Annual risk assessment of our compensation program

 

  Limited perquisites and personal benefits

  

×   Minimum guaranteed vesting for performance-based equity awards

 

×   Allow for pledging and hedging of Company stock by executive officers, Directors, employees, and independent contractor agents

 

×   Single trigger vesting of equity awards

 

×   Excessive severance or change in control benefits

 

×   Payout or settlement of dividends and dividend equivalents on unvested equity awards

 

×   Reprice, cash-out or exchange “underwater” stock options without stockholder approval

 

×   Tax gross-ups

 

×   Executive pension plans or supplemental retirement plans

Stockholder Advisory Vote on Executive Compensation

The Compensation Committee is interested in the ideas and any concerns of our stockholders regarding executive compensation. At last year’s Annual Meeting of Stockholders, approximately 92.6% of votes cast (for or against) by stockholders supported the advisory vote on executive compensation. In evaluating our compensation practices in 2023, the Compensation Committee was mindful of the strong support our stockholders expressed for the Company’s philosophy of linking compensation to operational objectives and the enhancement of stockholder value. As a result, no changes to the executive compensation program were made based on the results of the 2023 advisory vote.

Elements of 2023 Compensation

This section describes the elements of our NEOs’ 2023 compensation, which consist of the following:

 

Direct Compensation

  

Indirect Compensation

  Base Salary

  

  Employee Benefits

  Annual Cash Incentives

  

  Long-Term Equity Incentives

  

 

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Compensation

 

 

In 2023, approximately 94% of our CEO’s and about 80% on average of our other NEOs’ target total direct compensation was “at-risk” and/or performance-based.

 

LOGO

LOGO

 

 

(1)

Reflects target amounts and not amounts actually earned.

Base Salary

Base salary is a fixed component of our NEOs’ compensation and does not vary with Company performance. Base salaries are set at levels intended to be competitive and commensurate with each executive officer’s position, performance, skills, and experience to attract and retain the best talent. The Compensation Committee reviews base salaries for our executive officers annually and adjusts them, if needed, to reflect changes in market conditions or other factors, including business climate and changing responsibilities as our executive officers’ positions evolve.

In February 2023, after considering each NEO’s individual performance and responsibilities, as well as the business climate and a market data analysis of the Company’s peer group, the Compensation Committee determined that each NEO’s base salary remained market competitive and commensurate with each NEO’s role, responsibilities, and performance.

The table below sets forth our NEOs’ 2023 base salary levels and our NEOs’ base salary increases compared to 2022 base salary levels.

 

NEO

   2023 Annual
Base Salary
     2022 Annual
Base Salary
      Percentage 
Increase

Hessam Nadji

   $   700,000      $   700,000     

Steven F. DeGennaro

   $ 400,000      $ 400,000     

Richard Matricaria

   $ 400,000      $ 400,000     

John David Parker

   $ 400,000      $ 400,000     

Gregory A. LaBerge

   $ 350,000      $ 350,000     

Annual Cash Incentives

In 2023, all our executive officers participated in the 2023 Executive Short-Term Incentive Plan (the “2023 Annual Incentive Plan”). The Compensation Committee established certain financial and non-financial goals in February 2023, which are discussed in more detail below.

Annual cash incentives are designed to reward annual accomplishments against pre-established financial and strategic goals. The Compensation Committee approved 2023 target short-term cash incentive award opportunities for the NEOs in the amounts set forth below, which represented a 15% decrease from each NEO’s target annual incentive opportunity in 2022. In making this decision, the Compensation Committee considered each NEO’s individual performance and responsibilities, historical target amounts, business conditions and a

 

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Compensation

 

 

market data analysis of the Company’s peer group and, ultimately, determined that business conditions warranted a uniform decrease in target annual cash incentive opportunities.

 

NEO

   2023 Target Annual
Incentive Opportunity
     2022 Target Annual
Incentive Opportunity
      Percentage 
Decrease

Hessam Nadji

   $     2,295,000      $     2,700,000      (15%)

Steven F. DeGennaro

   $ 807,500      $ 950,000      (15%)

Richard Matricaria

   $ 1,317,500      $ 1,550,000      (15%)

John David Parker

   $ 1,317,500      $ 1,550,000      (15%)

Gregory A. LaBerge

   $ 467,500      $ 550,000      (15%)

Actual annual incentive awards could range from 0% to 200% of each NEO’s target based on performance against the performance goals. In addition, the Compensation Committee retained the flexibility to adjust awards based on the Company and each NEO’s performance and any other factors they deem appropriate.

Annual incentives for 2023 were based on a combination of financial and individual strategic performance goals.

The weightings between each performance category for each NEO were as follows:

 

NEO

    MMI Financial 
Performance
      Individual/Strategic 
Performance
 

Hessam Nadji

     50%        50%  

Steven F. DeGennaro

     40%        60%  

Richard Matricaria

     40%        60%  

John David Parker

     40%        60%  

Gregory A. LaBerge

     25%        75%  

Financial Objectives for 2023.

Pre-tax net income is used for the financial performance goal for the Company’s Annual Incentive Plan because it provides a consistent, firm, and accurate measure of the Company’s overall financial performance and profitability, as it excludes the impact of tax considerations, which can be complex and variable due to the nature of our business, and the various state, local, and foreign taxes that we are subject to.

As discussed in more detail above, our business was negatively impacted by the significant market headwinds experienced across the U.S. commercial real estate industry starting in the second half of 2022 and continuing through 2023. As a result, our internal operating plan anticipated significantly lower net income than that achieved in 2022. To ensure our annual cash incentive program was appropriately rigorous, the Compensation Committee set the pre-tax net income financial performance target 19% higher than our internal operating plan (i.e., the annual cash incentive program target was pre-tax net income of $65 million versus our pre-tax net income budget of $54.6 million). The 2023 target goal was established on the premise of the Federal Reserve’s interest rate hikes ending by the second quarter and bringing about improving market conditions starting in the third quarter, which ultimately did not occur. The Compensation Committee also determined that approving such an aggressive goal in combination with reducing each NEO’s target annual incentive opportunity by 15% was appropriate given the prior year’s results and the desire to incentivize strong financial performance.

Despite being the top ranked brokerage firm by transactions in 2023, we incurred a pre-tax net loss of $40.4 million, due to the significant decline in total transactions, as well as expenses related to the capital that we invested in talent acquisition and retention, technological innovations and expanding our platform. This resulted in no payout for the financial performance component of each NEO’s target annual incentive opportunity.

 

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Compensation

 

 

Individual Strategic Objectives for 2023.

Individual strategic goals varied for each executive and related to the following:

 

NEO

  

Individual Strategic Performance Goals

Hessam Nadji    Retention rate, recruiting, sales force advancements, marketing, technology and skill development initiatives, and strategic initiatives
Steven F. DeGennaro    Financial services operational improvements, analyst expectation management, investor relations function management, and strategic initiatives, including executing strategic priorities in partnership with the CEO
Richard Matricaria    Retention rate, recruiting, and strategic initiatives, including successfully executing key initiatives and supporting the CEO in managing positive outcomes for key people and projects
John David Parker    Retention rate, recruiting, and strategic initiatives, including leading special projects and focuses, successfully executing key initiatives and supporting the CEO in managing outcomes for key people and projects
Gregory A. LaBerge    Retention rate, technology enhancements, strategic initiatives, and operational and administrative support improvements

The Compensation Committee evaluated each NEO’s performance against his strategic goals to make an overall determination of the aggregate achievement for each NEO. Based on this evaluation, the Compensation Committee determined that each NEO met or largely achieved most of his strategic goals. Key performance highlights that were considered by the Compensation Committee in assessing the achievements of the NEOs included:

 

 

Provided business development support to the salesforce through research content, industry conferences and private label events.

 

 

Achieved a pre-established retention rate at 95% of target, despite a highly competitive landscape for talent.

 

 

Aggressively explored several adjacent growth opportunities to further diversify our business geographically and to expand into complementary services.

 

 

Adopted a range of strategic measures to mitigate the impact of the market disruption while also strengthening the MMI platform.

 

 

Implemented cost control initiatives aimed at reducing the interim impact of lower revenue while continuing to make well-underwritten investments essential to long-term growth.

 

 

Prioritized enhancing our ability to serve client needs by expanding marketing efforts, further integrating our auction teams into the sales process, and leveraging technology.

 

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Compensation

 

 

Despite these individual achievements, given the Company’s overall financial performance, the Compensation Committee chose to reduce the earned amount of each NEO’s annual incentive award by $175,000 in the case of Mr. Nadji, $100,000 in the case of Mr. Matricaria and Mr. Parker, and $50,000 in the case of Mr. DeGennaro and Mr. LaBerge. The earned amount of each NEO’s annual incentive award prior to the reduction and the amount of each NEO’s actual annual incentive award are set forth in the table below.

 

NEO

   Target Annual Incentive
Opportunity

($)
     Award Earned Prior to
Reduction
($)
     Actual Award Following
Reduction
($)
     Actual Award
(% of Target)

Hessam Nadji

   $   2,295,000      $   986,850      $   811,850      35.4%

Steven F. DeGennaro

   $ 807,500      $ 464,313      $ 414,313      51.3%

Richard Matricaria

   $ 1,317,500      $ 523,706      $ 423,706      32.2%

John David Parker

   $ 1,317,500      $ 645,575      $ 545,575      41.4%

Gregory A. LaBerge

   $ 467,500      $ 305,044      $ 255,044      54.6%

Long-Term Incentives

Our long-term incentive program generally consists of annual grants of RSUs, which align the interests of management with those of stockholders, promote retention of key talent, and reward total stockholder return performance. When determining the appropriate RSU grants for the NEOs, the Compensation Committee considers each NEO’s role, responsibilities, past performance, future potential, current level of ownership, and amount of unvested equity holdings. Generally, for NEOs other than the CEO, the Compensation Committee has chosen to award RSUs that have a grant date fair value that does not exceed 50% of each NEO’s actual annual incentive award for the prior year, with the actual number of RSUs to be determined based on the consideration of the foregoing factors.

After considering the Company’s and each NEO’s 2022 performance relative to the metrics set forth in the annual incentive plan for 2022, each NEO’s current equity holdings in the Company, a market data analysis of the Company’s peer group, and the current equity ownership of our NEOs, in February 2023, the Compensation Committee granted 92,000 RSUs to Hessam Nadji, 12,508 RSUs to Steven DeGennaro, 20,362 RSUs to Richard Matricaria, 20,657 RSUs to John David Parker, and 6,590 RSUs to Gregory A. LaBerge in connection with the annual compensation review process. Despite their strong individual performance in 2022, Messrs. DeGennaro, Matricaria, Parker, and LaBerge received significantly less RSUs in 2023, as the value of each NEO’s RSU award was tied to 50% of his actual annual incentive award for 2022, which was reflective of the Company not achieving its 2022 target pre-tax net income goal. The table below sets forth the number of RSUs granted to each of Messrs. DeGennaro, Matricaria, Parker, and LaBerge in 2022 and 2023, as well as the difference in grant date fair value.

 

NEO

   2023 RSUs    2022 RSUs     Difference in Grant 
Date Fair Value

Steven F. DeGennaro

   12,508    44,272    $(1,646,087)

Richard Matricaria

   20,362    58,788    $(2,051,532)

John David Parker

   20,657    58,788    $(2,040,977)

Gregory A. LaBerge

   6,590    26,766    $(1,029,974)

The Compensation Committee determined that Mr. Nadji’s personal growth, leadership during a difficult fiscal year, positive perception in the marketplace and overall strong performance supported Mr. Nadji receiving the same number of annual RSUs in 2023 as 2022 (i.e., 92,000 RSUs). In addition, in August 2023, the Compensation Committee made a one-time special retention grant of 150,000 RSUs to Mr. Nadji. The Compensation Committee made the grant to encourage Mr. Nadji’s retention and to incentivize Mr. Nadji to focus on leading the Company through this period of significant market disruption. In determining whether to make the grant and the size of the grant, the Compensation Committee considered the retentive power of

 

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Mr. Nadji’s current equity award holdings, the equity compensation holdings of the chief executive officers of the companies for which we compete for talent, Mr. Nadji’s role in reshaping the Company’s leadership team and in acquiring several strategically important companies in key spaces, and his contribution to the significant growth of our key operating and financial metrics, since his appointment as CEO on March 31, 2016. Further, the Compensation Committee’s decision to make the grant was informed by discussions with FW Cook, its independent compensation consultant, and the Chair of the Board.

Each NEO’s RSUs vest in five equal annual installments, with the first vesting date beginning on March 10, 2024 (or September 10, 2024 with respect to Mr. Nadji’s August 2023 grant), subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving a change in control. See “Severance and Change in Control Benefits” below for more information. The grant date value of these RSU awards is disclosed in the Grants of Plan-Based Awards table.

As discussed above, given the Company’s financial results in 2023, the Compensation Committee reduced the size of Mr. Nadji’s annual grant for 2024 from 92,000 RSUs to 72,000 RSUs, which represented a 22% decrease in the number of annual grant RSUs from 2023.

Process for Determining Executive Compensation

Role of Compensation Committee and Management

The Compensation Committee has responsibility for administering and approving annually all elements of compensation for the Company’s NEOs, with input from our management team and advice from the Compensation Committee’s independent consultant, FW Cook.

At the start of the year, with the assistance of FW Cook and our management team, the Compensation Committee approves target pay opportunities for each current executive officer, including base salary, target annual incentive opportunity, and long-term equity awards. Our CEO develops recommendations for target pay opportunities for executives other than himself, informed by competitive market dynamics, the responsibilities and capabilities of each executive officer, internal fairness, past performance, and future potential. The CEO does not provide recommendations to the Compensation Committee for his own compensation. Our corporate performance and our CEO’s individual performance is reviewed annually by the Chair of the Board, who then presents his recommendation regarding the CEO’s target pay opportunities to our Compensation Committee for discussion. The Compensation Committee then makes the final determination on the target pay opportunities for our CEO.

At the start of the year, the Compensation Committee also determines the design of the incentive program, including performance measures, weightings, and goals, to ensure these programs support the Company’s business objectives and strategic priorities. With respect to performance measures and goals, the annual operating plan initially established by management, and subsequently approved by our Board, is an important input into the Compensation Committee’s decision-making process. Some members of the management team attend Compensation Committee meetings but are not present for executive sessions. The Compensation Committee makes all final decisions with respect to compensation of our NEOs.

After the end of the year, the Compensation Committee determines the earned incentive amounts for each of our executive officers, based on a thorough review of Company and individual performance. In determining earned amounts, the Compensation Committee considers: (i) the CEO’s evaluation of each executive officer other than himself, (ii) the Compensation Committee’s qualitative evaluation of each executive officer’s overall and corporate performance, (iii) the Chair of the Board’s qualitative evaluation of our corporate performance and our CEO’s individual performance, and (iv) the objective assessment of each executive officer’s actual performance against pre-established goals and financial targets.

 

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The Compensation Committee also approves compensation packages for new executive officers, which generally include an initial base salary, target annual incentive opportunity, and long-term equity award, and may include severance benefits. Such compensation packages are typically approved after consulting with FW Cook and our management team, including our CEO, and are informed by competitive market dynamics, the responsibilities associated with the position, and internal fairness.

Role of Consultants

The Compensation Committee has engaged FW Cook as its independent executive compensation advisor. FW Cook reports directly to the Compensation Committee and does no work for management that is not under the Compensation Committee’s purview. FW Cook provides independent advice to the Compensation Committee on the reasonableness of executive compensation levels in comparison with typical market practices, and on the appropriateness of the compensation program structure in supporting the Company’s business objectives. A representative of FW Cook attends meetings of the Compensation Committee, and communicates with the Compensation Committee Chair between meetings. The Compensation Committee assessed the independence of FW Cook pursuant to SEC rules and stock exchange listing standards and concluded that no conflicts of interest exist.

Role of Competitive Data

In establishing 2022 target pay opportunities for our NEOs, the Compensation Committee considered competitive market data from an analysis prepared by FW Cook in April 2022. In light of the Company’s challenging business conditions and the Compensation Committee’s intention to reduce target pay opportunities in 2023, FW Cook did not provide updated competitive market data between April 2022 and the Committee’s determination of 2023 target pay opportunities.

Because there are not many publicly traded commercial real estate services firms similar in size and business model to us, development of an appropriate “peer group” of companies against which to compare pay levels and practices proves challenging. Therefore, the Compensation Committee, with the assistance of FW Cook, used the following more expansive criteria to select a peer group consisting of 13 business services companies:

 

 

reasonable comparability in size to the Company in terms of annual revenue and market cap;

 

 

executives are responsible for managing large numbers of professional employees; and

 

 

generally engaged in the business of providing transactional services to businesses and individuals.

Based on the above criteria, the Compensation Committee selected the following companies as our peer group.

 

B. Riley Financial    Moelis & Company    Ryan Specialty Group
Brown & Brown    Newmark Group*    SelectQuote
Crawford & Company    Oppenheimer Holdings    Walker & Dunlop
Douglas Elliman*    Piper Sandler   
Houlihan Lokey    PJT Partners   

 

 

*

As noted above, there are not many publicly traded commercial real estate services firms similar in size and business model to us. However, Douglas Elliman and Newmark Group represent two real estate companies that the Compensation Committee, with the assistance of its independent compensation consultant, determined to be similar enough to warrant inclusion in our peer group.

The Compensation Committee also considered CBRE Group, Colliers International, Cushman & Wakefield, and Jones Lang LaSalle, which we consider to be our direct competitors for inclusion in the peer group, but it was ultimately determined that these companies were too large to include in the peer group.

 

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Compensation

 

 

Policies for Compensation Risk Mitigation

Compensation Recovery Policy

The SEC and the New York Stock Exchange recently adopted long-awaited final rules implementing the incentive-based compensation recovery provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which require listed companies to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers.

In accordance with these final rules, on October 31, 2023, the Compensation Committee approved the restatement of the Marcus & Millichap, Inc. Compensation Recovery Policy, which provides that in the event the Company is required to restate any of its financial statements that have been filed with the SEC, then the Compensation Committee will seek to recover any erroneously awarded performance-based incentive-based compensation (including any performance-based cash and equity awards and salary increases earned wholly or in part based on the attainment of financial performance goals) received by any person who is or was a Section 16 Officer or a division manager of a subsidiary of the Company during the three-fiscal year recovery period. In addition, in the event the Company is required to restate any of its financial statements that have been filed with the SEC, the Compensation Committee may also, in its sole discretion, seek recovery of all or any portion of time-based incentive compensation received by any person who is or was a Section 16 Officer or a division manager of a subsidiary of the Company during the three-fiscal year recovery period.

The restated Marcus & Millichap, Inc. Compensation Recovery Policy further provides that, in the event any person who is or was a Section 16 Officer or a division manager of a subsidiary of the Company has engaged in improper conduct, then the Compensation Committee may, in its sole discretion, seek to recover all or any portion of any incentive-based compensation (including both performance-based and time-based cash and equity awards) received by any such person during the year of improper conduct and the three completed fiscal years immediately preceding the date of improper conduct.

Hedging, Pledging and Insider Trading Policies

Our Insider Trading Policy expressly bars hedging, derivative, or any other speculative transactions involving the Company’s stock by all officers, employees, and independent contractor agents of the Company and its subsidiaries, all members of the Board, and any consultants, advisors, and contractors to the Company and its subsidiaries that the Company designates, as well as members of the immediate families and households of these persons. Such prohibited transactions include hedging or derivative transactions, such as “cashless” collars, forward contracts, equity swaps or other similar or related transactions, or any short sale, “sale against the box” or equivalent transaction involving the Company’s stock or the stock of certain business partners. We also generally prohibit such covered persons from pledging Company stock to secure a loan, or from purchasing Company stock on margin (including in connection with exercising any Company stock options). In addition, we prohibit covered persons from purchasing or selling our securities while in possession of material, non-public information, or otherwise using such information for their personal benefit, and maintain a quarterly black-out window where applicable individuals may not trade. We may, in appropriate circumstances, permit transactions pursuant to a blind trust or a pre-arranged trading program that complies with Rule 10b5-1 to take place during periods in which the individual entering into the transaction may have material nonpublic information or during black-out periods.

Indemnification Agreements

Indemnification agreements indemnify our executive officers and the members of our Board of Directors, as well as those who act as directors and officers of other entities at our request, against expenses, judgments, fines, settlements, and other amounts, actually and reasonably incurred in connection with any proceedings arising out of their services to us and our subsidiaries.

 

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A Culture of Ownership

The Company’s stock ownership guidelines are designed to encourage our executive officers and other key employees to achieve and maintain a significant equity stake in the Company and closely align their interests with those of our stockholders. The stock ownership guidelines call for each executive officer and key employee that is subject to the guidelines to own shares of our common stock (including directly owned shares, beneficially owned shares held indirectly by family members, trusts or otherwise, vested share units in a non-qualified deferral arrangement, shares held in the 401(k) plan, and unvested restricted shares and RSUs that vest solely on continued service) having a value equal to a multiple of their annual base salary within five years from the date they become subject to the share ownership guidelines as set forth below:

 

Position

   Ownership
Requirement
 

Chief Executive Officer

     6x Base Salary  

Other NEOs and Senior Executives

     3x Base Salary  

Division Managers and Specialty Directors

     2x Base Salary  

If an executive officer or key employee is promoted to a position with a higher ownership requirement, he or she will have five years from such promotion to achieve the higher ownership level. Until these minimums are achieved, executive officers must retain 50% of the net after tax shares earned at exercise of stock options or stock appreciation rights, payment of performance shares/units, and vesting of restricted shares/RSUs, in each case, during the five-year initial compliance period and 100% thereafter.

The Compensation Committee conducts an annual review to assess compliance with the guidelines. Specifically, as of the last day of each fiscal year, the number of shares each executive officer is required to own is calculated based on the then-current annual salary and an average of the closing stock prices for the prior 60 trading days. This number of shares will be the required ownership level until the next annual calculation. At the end of 2023, each of our NEOs had satisfied his stock ownership guideline requirement.

Exceptions to the stock ownership guidelines may be made at the discretion of the Compensation Committee. It is expected that these instances will be rare. If an exception is granted in whole or in part, the Compensation Committee will, in consultation with the affected executive, develop an alternative stock ownership and holding requirement for such individual that reflects both the intention of the policy and such individual’s particular circumstances.

Compensation Risk Assessment

For 2023, FW Cook conducted a review of the compensation-related risks associated with our executive compensation program as well as the Company’s compensation practices for regional managers, staff employees, and independent contractor agents, which included the different levels of compensation for regional managers, the basic commission programs and splits available to independent contractor agents, and the equity award program available to agents, as well as the deferred commission program in which many agents participate. The risk assessment concluded that our compensation programs do not encourage behaviors that would create material risk. FW Cook also found a reasonable balance in fixed versus variable pay, cash and equity, corporation, business unit and individual goals, and appropriate mix of financial and non-financial metrics. Finally, it was determined that there are appropriate policies in place to mitigate compensation-related risk, including stock ownership guidelines for executives, insider-trading prohibitions, anti-hedging and anti-pledging policies, the recoupment policy, and independent Compensation Committee oversight of our executive compensation programs. Based on this information, the Compensation Committee concluded that our compensation programs do not create material risks that are likely to have a material adverse effect on the Company.

 

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Other Compensation Practices and Policies

Benefits and Limited Perquisites

Our benefits philosophy is to provide our executive officers, including our NEOs, with the same benefits available to all other employees, including health and welfare, retirement (which includes our 401(k) plan that provides for matching contributions), and life insurance benefits.

In addition to these Company-wide benefits, our NEOs are offered Company-paid automobile allowances or leases. We believe that it is important to compensate our executive officers for all expenses incurred while traveling for work to allow our NEOs to concentrate on their responsibilities and our future success.

Deferred Compensation

Our NEOs are eligible to voluntarily defer base salary and annual cash incentives through the Marcus & Millichap, Inc. Deferred Compensation Plan (the “NQDC Plan”). This is a standard management benefit plan offered by many public companies to provide executives tax-planning flexibility. In addition, Mr. Nadji holds fully vested cash-settled stock appreciation rights (“SARs”), which were granted before our initial public offering that constitute deferred compensation as they are cash-settled awards only payable upon death, a long-term disability of three months or longer, a mutual termination, a termination other than for cause, a resignation, or a change in control. The specific benefits and a more detailed description of features of these arrangements are set forth in the section entitled “Non-Qualified Deferred Compensation” below. In 2022, Mr. DeGennaro elected to defer receipt of $250,000 of the cash award he earned under the Executive Incentive Plan in respect of his service in 2023. None of our other NEOs participated in the NQDC Plan in 2023.

Policy Regarding Deduction Limit

While Section 162(m) of the Internal Revenue Code (the “Code”) places a limit of $1 million on the amount of compensation that we may deduct as a business expense in any year with respect to certain of our most highly paid executive officers, the Compensation Committee retains the discretion to award and pay compensation that is not deductible as it believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation and to structure a program that we consider to be the most effective in attracting, motivating, and retaining key executives.

Severance and Change in Control Benefits

We maintain a change in control policy, which is designed to align the interests of management and stockholders when considering the long-term future for the Company. The primary purpose of these arrangements is to keep our executive officers and key employees focused on pursuing all corporate transaction activity that is in the best interests of our stockholders regardless of whether those transactions may result in their own job loss.

The change in control policy provides that if an executive officer’s employment is terminated by the Company without “cause” or an executive officer resigns for “good reason” (each as defined in the change in control policy), in each case, within 12 months following the change in control, then the executive will be entitled to receive the following severance payments and benefits: (1) a lump sum payment equal to 12 months’ base salary; (2) a lump sum equal to the target annual incentive opportunity for the year of termination (or if less, the target annual incentive opportunity for the year immediately preceding the year of termination); (3) acceleration of vesting of all outstanding and unvested RSUs; (4) COBRA premium reimbursement for up to 12 months; and (5) up to $25,000 toward appropriate executive-level outplacement or job search assistance. Further, we will seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.

 

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The change in control policy does not provide for a “gross-up” or other reimbursement payment for any tax liability that the executive officer may owe as a result of the application of Sections 280G or 4999 of the Code, and we have not agreed and are not otherwise obligated to provide any executive officer with such a “gross-up” or other reimbursement.

We also maintain a death and disability policy, which is designed to align with typical market practices. The policy provides that upon a termination of service due to death or disability, in each case, after at least one year of service, then vesting of all of the executive officer’s outstanding and unvested RSUs will accelerate. In addition, in the event of termination of service due to disability after at least one year of service, the executive officer will be entitled to receive COBRA premium reimbursement for up to 12 months.

Our Amended and Restated 2013 Omnibus Equity Incentive Plan (the “Equity Plan”) also provides that in the event of a change in control (as defined in the Equity Plan) in which the surviving corporation does not assume or continue outstanding awards granted under the Equity Plan or substitute similar awards for such awards, the vesting of such awards (including awards held by the NEOs) will fully accelerate. This is a change in control benefit that many companies provide.

Finally, Mr. DeGennaro’s employment agreement provides that in the event that Mr. DeGennaro resigns for good reason or is terminated without cause by the Company, and complies with certain post-termination obligations, Mr. DeGennaro will receive cash severance benefits in an amount equal to six months of his base salary and 50% of the last annual cash incentive that he earned.

Compensation Committee Report

 

 

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” section of this Proxy Statement with the Company’s management. Based on that review and those discussions, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” section be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for 2023.

Don C. Watters (Chair)

Nicholas F. McClanahan

George T. Shaheen

Compensation Committee Interlocks and Insider Participation

 

 

The members of the Compensation Committee during 2023 were: Don C. Watters, Nicholas F. McClanahan, and George T. Shaheen. No member of this committee was at any time during 2023 or at any other time an officer or employee of the Company, and no member of this committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. No executive officer of the Company has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of the Compensation Committee during 2023.

 

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Compensation

 

 

Executive Compensation Tables and Other Information

 

 

The following table provides information regarding certain compensation awarded to, or earned by, our NEOs for 2021, 2022, and 2023.

Summary Compensation Table

 

Name and Principal Position

  Fiscal
Year
    Salary
($)(1)
    Bonus
($)
    Stock
Awards
($)(2)
    Non-
Equity
Incentive
Plan
Compensation
($)(3)
    Change in
Pension Value
and Non-
qualified
Deferred
Compensation
Earnings
($)(4)
    All
Other
Compensation
($)(5)
    Total
($)
 

Hessam Nadji

President and CEO

    2023       700,000       —        8,646,760       811,850       240,454       8,500       10,407,564  
    2022       675,000       —        4,350,680       2,339,750       145,470       22,000       7,532,900  
    2021       562,500       437,500       3,597,200       3,500,000       114,077       13,500       8,224,777  

Steven F. DeGennaro

    2023       400,000       —        447,536       414,313       —        8,500       1,270,349  

Executive Vice President and Chief Financial Officer

    2022       400,000       —        2,093,623       895,125       —        22,000       3,410,748  
    2021       400,000       150,000       294,600       1,200,000       —        17,500       2,062,100  
                   

Richard Matricaria

    2023       400,000       —        728,552       423,706       —        12,562       1,564,820  

Executive Vice President and Chief Operating Officer, Western Division

    2022       387,500       —        2,780,085       1,457,125       —        14,853       4,639,563  
    2021       350,000       250,000       822,340       2,000,000       —        11,013       3,433,353  
               
               

John David Parker

    2023       400,000       —        739,107       545,575       —        4,587       1,689,269  

Executive Vice President and Chief Operating Officer, Eastern Division

    2022       387,500       —        2,780,085       1,478,250       —        5,562       4,651,397  
    2021       350,000       250,000       878,019       2,000,000       —        7,237       3,485,256  
               
               

Gregory A. LaBerge

    2023       350,000       —        235,790       255,044       —        7,750       848,584  

Senior Vice President, Chief Administrative Officer

    2022       337,500       —        1,265,764       471,625       —        19,000       2,093,889  
    2021       298,125       —        198,159       800,000       —        15,000       1,311,284  
               

 

(1)

The amounts shown in this column represent the actual amount of salary earned during the applicable year by each NEO.

(2)

The amounts shown in this column represent the aggregate grant date fair value of RSUs granted during the applicable year to certain of our NEOs, which was computed in accordance with Accounting Standards Codification (“ASC”) 718. The fair value of these awards was calculated based on the fair market value of our common stock on the accounting measurement date multiplied by the number of shares subject to the award and may not represent the actual value that may be realized.

(3)

The amounts listed in this column reflect the cash awards paid under the Company’s Executive Incentive Plan for performance in the applicable year. Despite each NEO’s individual achievements, given the Company’s overall financial performance, the Compensation Committee chose to reduce the earned amount of each NEO’s annual incentive award by $175,000 in the case of Mr. Nadji, $100,000 in the case of Mr. Matricaria and Mr. Parker, and $50,000 in the case of Mr. DeGennaro and Mr. LaBerge. See the “Compensation Discussion and Analysis” section for a more complete description of how the cash

 

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  incentive awards were determined for 2023, including the earned amount of each NEO’s annual incentive award prior to the reduction and the amount of each NEO’s actual annual incentive award.
(4)

The amounts listed in this column include the interest on Mr. Nadji’s cash-settled SARs for 2023:

 

Named Executive Officer

   Increased Value
of SARs during
Fiscal Year ($)
     Aggregate Value of
SARs as of Fiscal
Year End ($)
 

Hessam Nadji

     240,454        4,393,374  

For further information regarding the SARs, please refer to the discussion under the heading “Nonqualified Deferred Compensation.”

 

(5)

The following table reflects the breakout of the items and amounts included in this column for 2023:

 

     Nadji ($)      DeGennaro ($)      Matricaria ($)      Parker ($)      LaBerge ($)  

Auto Benefit

     4,500        4,500        8,562        1,587        3,750  

401(k) Match

     4,000        4,000        4,000        3,000        4,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total for Other

     8,500        8,500        12,562        4,587        7,750  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Compensation

 

 

Grants of Plan Based Awards Table

The following table provides information regarding the incentive awards granted to the NEOs for 2023.

 

                   All
Other
Stock

Awards:
Number
of
Shares of
Stock or
Units
(#)(2)
     Grant
Date
Fair Value
of Stock
Awards
($) (3)
 
            Estimated Future Payouts Under
Non-Equity Incentive
Plan Awards(1)
 

Name

   Grant
Date
     Threshold
($)
     Target
($)
     Maximum
($)
 

Hessam Nadji

     N/A        —         2,295,000        4,590,000        —         —   
     2/9/2023        —         —         —         92,000        3,291,760  
     8/11/2023        —         —         —         150,000        5,355,000  

Steven F. DeGennaro

     N/A        —         807,500        1,615,000        —         —   
     2/9/2023        —         —         —         12,508        447,536  

Richard Matricaria

     N/A        —         1,317,500        2,635,000        —         —   
     2/9/2023        —         —         —         20,362        728,552  

John David Parker

     N/A        —         1,317,500        2,635,000        —         —   
     2/9/2023        —         —         —         20,657        739,107  

Gregory A. LaBerge

     N/A        —         467,500        935,000        —         —   
     2/9/2023        —         —         —         6,590        235,790  

 

(1)

The Compensation Committee established certain financial and non-financial goals in May 2023, which are discussed in more detail in the “Compensation Discussion and Analysis.”

(2)

Messrs. Nadji, DeGennaro, Matricaria, Parker, and LaBerge’s RSUs vest in five equal annual installments, with the first vesting date beginning on March 10, 2024 (or September 10, 2024, with respect to Mr. Nadji’s August 2023 grant), subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Severance and Change in Control Benefits” below for more information.

(3)

The amounts shown in this column represent the aggregate grant date fair value of the RSUs granted in 2023 to certain of our NEOs, which was computed in accordance with ASC 718. The fair value of these awards was calculated based on the fair market value of our common stock on the accounting measurement date multiplied by the number of shares subject to the award and may not represent the actual value that may be realized.

 

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Outstanding Equity Awards at Fiscal Year End

The following table provides information about outstanding equity awards as of December 31, 2023 for the NEOs. None of the NEOs hold any stock options.

 

Name

   Number of
shares or
units of stock
that have not
vested
(#)
    Market value
of shares or
units of stock
that have not
vested
($)(1)
 

Hessam Nadji

     18,400 (2)      803,712  
     36,800 (3)      1,607,424  
     55,200 (4)      2,411,136  
     73,600 (5)      3,214,848  
     92,000 (6)      4,018,560  
     150,000 (7)      6,552,000  

Steven F. DeGennaro

     35,418 (5)      1,547,058  
     12,508 (6)      546,349  
     3,000 (8)      131,040  
     4,500 (9)      196,560  

Richard Matricaria

     1,376 (2)      60,104  
     3,752 (3)      163,887  
     7,094 (4)      309,866  
     47,032 (5)      2,054,358  
     20,362 (6)      889,412  
     3,000 (10)      131,040  
     6,000 (11)      262,080  

John David Parker

     1,780 (2)      77,750  
     4,416 (3)      192,891  
     7,950 (4)      347,256  
     47,032 (5)      2,054,358  
     20,657 (6)      902,298  
     3,000 (10)      131,040  
     6,000 (11)      262,080  

Gregory A. LaBerge

     392 (2)      17,123  
     1,221 (3)      53,333  
     3,044 (4)      132,962  
     21,414 (5)      935,364  
     6,590 (6)      287,851  
     2,000 (12)      87,360  

 

(1)

Based upon the closing price of our common stock of $43.68 on December 29, 2023, the last trading day before the end of the 2023 fiscal year.

(2)

Messrs. Nadji, Matricaria, Parker, and LaBerge were awarded 92,000, 6,864, 8,892, and 1,956 RSUs, respectively, effective February 13, 2019, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on March 10, 2020. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

 

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Compensation

 

 

(3)

Messrs. Nadji, Matricaria, Parker, and LaBerge were awarded 92,000, 9,374, 11,028, and 3,051 RSUs, respectively, effective February 11, 2020, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on March 10, 2021. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(4)

Messrs. Nadji, Matricaria, Parker, and LaBerge were awarded 92,000, 11,822, 13,246, and 5,068 RSUs, respectively, effective February 11, 2021, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on March 10, 2022. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(5)

Messrs. Nadji, DeGennaro, Matricaria, Parker, and LaBerge were awarded 92,000, 44,272, 58,788, 58,788, and 26,766 RSUs, respectively, effective February 10, 2022, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on March 10, 2023. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(6)

Messrs. Nadji, DeGennaro, Matricaria, Parker, and LaBerge were awarded 92,000, 12,508, 20,362, 20,657, and 6,590 RSUs, respectively, effective February 9, 2023, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on March 10, 2024. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(7)

Mr. Nadji was awarded 150,000 RSUs, effective August 11, 2023, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on September 10, 2024. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(8)

Mr. DeGennaro was awarded 7,500 RSUs, effective August 4, 2020, which vest in five equal annual installments with 20% of such shares vesting beginning on August 10, 2021. The vesting of the RSUs is subject to Mr. DeGennaro’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(9)

Mr. DeGennaro was awarded 7,500 RSUs, effective August 3, 2021, which vest in five equal annual installments with 20% of such shares vesting beginning on August 10, 2022. The vesting of the RSUs is subject to Mr. DeGennaro’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(10)

Messrs. Matricaria and Parker were each awarded 15,000 RSUs, effective May 2, 2019, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on May 10, 2020. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(11)

Messrs. Matricaria and Parker were each awarded 10,000 RSUs, effective May 4, 2021, which, in each case, vest in five equal annual installments with 20% of such shares vesting beginning on May 10, 2022. The vesting of the RSUs is subject to the applicable NEO’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

(12)

Mr. LaBerge was awarded 5,000 RSUs effective May 5, 2020, which vest in five equal annual installments with 20% of such shares vesting beginning on May 10, 2021. The vesting of the RSUs is subject to Mr. LaBerge’s continuous service through each vesting date, except in certain limited circumstances involving termination of service and/or a change in control. See “Potential Payments Upon Termination or Change in Control” below for more information.

 

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Compensation

 

 

Option Exercises and Stock Vested Table

The following table provides information about stock awards that vested during 2023 for the NEOs. None of the NEOs have been granted any stock options.

 

     Stock Awards  

Name        

   Number of
Shares
Acquired
on Vesting
(#)(1)
     Value Realized
on Vesting
($)(2)
 

Hessam Nadji

     76,600        2,461,280  

Steven F. DeGennaro

     11,854        392,686  

Richard Matricaria

     23,660        740,319  

John David Parker

     25,400        796,260  

Gregory A. LaBerge

     8,870        281,100  

 

(1)

Includes shares withheld to cover taxes.

(2)

The value realized upon vesting was calculated by multiplying the number of shares acquired on vesting by the closing share price of the Company’s common stock on the NYSE on the vesting date, except where such vesting date fell on a day that was not a trading day, in which case such value was calculated by multiplying the number of shares acquired on vesting by the closing share price on the first trading day immediately following the vesting date.

 

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Compensation

 

 

Employment Agreements

Hessam Nadji

We entered into an employment agreement with Hessam Nadji, our President and CEO, effective March 31, 2016. The employment agreement has no specific term and constitutes at-will employment. Either the Company or Mr. Nadji may terminate the agreement at any time, with or without cause, upon 15 days’ prior written notice. Mr. Nadji’s base salary is $700,000 and he is eligible to receive annual non-equity incentive compensation, subject to his continued employment through the payment date, as described in more detail in the Compensation Discussion and Analysis. Mr. Nadji is not entitled to any severance compensation under his employment agreement if his employment terminates for any reason. Mr. Nadji’s employment agreement also includes terms concerning non-competition, non-solicitation, confidentiality, and arbitration.

Steven F. DeGennaro

We entered into an employment agreement with Steven F. DeGennaro, our Executive Vice President and Chief Financial Officer, effective August 4, 2020. In accordance with his employment agreement, Mr. DeGennaro’s base salary is currently $400,000 and he is eligible to receive annual non-equity incentive compensation, subject to his continued employment through the payment date, as described in more detail in the Compensation Discussion and Analysis.

Mr. DeGennaro’s employment agreement provides that in the event that Mr. DeGennaro resigns for good reason or is terminated without cause by the Company, and complies with certain post-termination obligations, Mr. DeGennaro will receive cash severance benefits in an amount equal to six months of his base salary and 50% of the last annual cash incentive award that he earned. Mr. DeGennaro’s employment agreement also provides for certain change in control severance benefits that were superseded by the change in control policy. Mr. DeGennaro’s employment agreement also includes terms concerning non-competition, non-solicitation, confidentiality, and arbitration.

Richard Matricaria

We entered into an employment agreement with Richard Matricaria, our Executive Vice President and Chief Operating Officer, Western Division, effective August 4, 2022. The employment agreement has no specific term and constitutes at-will employment. Either the Company or Mr. Matricaria may terminate the agreement at any time, with or without cause. Mr. Matricaria’s base salary is $400,000 and he is eligible to receive annual non-equity incentive compensation, subject to his continued employment through the payment date, as described in more detail in the Compensation Discussion and Analysis. Mr. Matricaria is not entitled to any severance compensation under his employment agreement if his employment terminates for any reason. Mr. Matricaria’s employment agreement also includes terms concerning non-competition, non-solicitation, confidentiality, and arbitration.

John David Parker

We entered into an employment agreement with John David Parker, our Executive Vice President and Chief Operating Officer, Eastern Division, effective August 4, 2022. The employment agreement has no specific term and constitutes at-will employment. Either the Company or Mr. Parker may terminate the agreement at any time, with or without cause. Mr. Parker’s base salary is $400,000 and he is eligible to receive annual non-equity incentive compensation, subject to his continued employment through the payment date, as described in more detail in the Compensation Discussion and Analysis. Mr. Parker is not entitled to any severance compensation under his employment agreement if his employment terminates for any reason. Mr. Parker’s employment agreement also includes terms concerning non-competition, non-solicitation, non-disparagement, confidentiality, and arbitration.

 

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Compensation

 

 

Pension Benefits

We do not maintain any defined benefit pension plans.

Nonqualified Deferred Compensation

The following table provides information regarding the contributions, earnings, and withdrawals during 2023, and account balances as of December 31, 2023 for our NEOs under the NQDC Plan and SARs:

Nonqualified Deferred Compensation—Fiscal 2023

 

Name

   Plan      Executive
Contributions
in Last FY
($)(1)
     Registrant
Contributions
in Last FY
($)
     Aggregate
Earnings
in Last FY
($)(2)
     Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance at
Last FYE
($)(3)
 

Hessam Nadji

     SARs        —         —         240,454        —         4,393,374  

Steven F. DeGennaro

     NQDC Plan        250,000        —         74,614        —         545,931  

Richard Matricaria

     —         —         —         —         —         —   

John David Parker

     —         —         —         —         —         —   

Gregory A. LaBerge

     —         —         —         —         —         —   

 

(1)

The amount reflected includes executive contributions of the cash award earned under the Executive Incentive Plan in respect of service in 2023, which is reported as “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table for 2023.

(2)

The SARs are included in the Summary Compensation Table because such earnings were determined to be preferential or above-market. The earnings on the SARs represent interest on the SAR Account Balances (as defined below) for 2023.

(3)

A portion of these amounts were previously reported as compensation to the NEO in our Summary Compensation table for fiscal years prior to 2023: Hessam Nadji: SARs: $1,764,043 in interest; Steven F. DeGennaro: NQDC: $500,000.

 

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Deferred Compensation Plan

The NQDC Plan is designed to allow a select group of management and highly compensated employees, including the Company’s NEOs, to defer receipt of a specified percentage or amount of their base salaries (up to 25%) and annual cash incentives or supplemental bonuses (up to 100%). Further, the Company may make discretionary contributions on behalf of participants in the NQDC Plan, which will vest based on years of service with the Company. Such discretionary amounts will vest in full upon the participant’s death, disability, or retirement. Mr. DeGennaro is enrolled in the NQDC Plan. In 2022, he elected to defer receipt of $250,000 of the cash award he earned under the Executive Incentive Plan in respect of his service in 2023. None of our other NEOs participated in the NQDC Plan in 2023.

Amounts deferred by a participant and any employer contributions will be credited to a bookkeeping account maintained on behalf of each participant. These amounts will be periodically adjusted for earnings and/or losses at a rate that is equal to the various hypothetical investment funds (also referred to as measurement funds) selected by the plan administrator and elected by the participant. Participants may reallocate previously invested money among each of the available measurement funds.

Under the NQDC Plan, if a participant has attained age 50 or has 10 or more years of service with the Company, a participant will be permitted to elect a single lump-sum payment or quarterly installment payments for up to 15 years following termination of employment with respect to each year’s deferrals, any discretionary company contributions, and any earnings associated with such amounts. Otherwise, such amounts will be paid out in a lump sum. Deferrals, but not discretionary Company contributions, also may be paid out prior to a participant’s termination of employment in the event of a financial hardship or if the participant makes a short-term payout election. In the event of a participant’s death or disability, such participant’s benefits will be paid out in a single lump sum.

The Company elected to fund the NQDC Plan through company owned variable life insurance policies. The NQDC Plan is managed by a third-party institutional fund manager, and the deferred compensation and investment earnings are held as Company assets in a rabbi trust. The assets in the trust are restricted unless the Company becomes insolvent in which case the trust assets are subject to the claims of the Company creditors.

Stock Appreciation Rights

The SARs constitute deferred compensation as they are cash-settled awards only payable upon death, a long-term disability of three months or longer, a mutual termination, a termination other than for cause, a resignation, or a change in control. In connection with our initial public offering (“IPO”), all of the outstanding SARs were fully vested and frozen at a liability amount calculated as of March 31, 2013 (such liability value, the “SAR Account Balance”). The Company began to accrue interest starting on January 1, 2014, based on SAR Account Balances as of December 31, 2013. In 2023, the accrued interest credited to SAR Account Balances was based on an interest rate of 5.79%, which, in turn, was based on a 10-Year Treasury Note plus 200 basis points. Upon a termination other than for cause or a resignation other than by mutual agreement, the executive only receives 75% of the appreciation value on the vested portion.

Upon a payment event other than a change in control, the SAR Account Balance is paid to the NEO in 10 annual installments, with the first installment due within 30 days following the date of the event giving rise to the distribution or the last day of the calendar year in which the event giving rise to the distribution occurs, and the remaining portion of the account balance will be paid in cash within 30 days of each of the first nine anniversaries of the initial payment date. However, no amount payable on account of the NEO’s termination of service which constitutes a “deferral of compensation” within the meaning of Section 409A will be paid unless and until the NEO has incurred a “separation from service” within the meaning of Section 409A. The account balance will continue to be credited with deemed earnings during the payment term until it is fully distributed. In the event of a change of control of the Company (as defined in the Equity Plan), the NEO’s entire SAR Account Balance will be paid to the NEO upon the consummation of the change in control.

 

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Potential Payments upon Termination or Change in Control

Current NEOs

As described above, the change in control policy, the amended and restated death and disability policy, Mr. DeGennaro’s employment agreement and Mr. Nadji’s SARs provide for certain payments and/or benefits in the event of a qualifying termination or change in control. In addition, the Equity Plan provides that in the event of a change in control (as defined in the Equity Plan) in which the surviving corporation does not assume or continue outstanding awards granted under the Equity Plan or substitute similar awards for such awards, the vesting schedule of such awards (including awards held by the NEOs) will fully accelerate.

Estimated Termination and Change in Control Payments for Current NEOs

The table below provides information regarding the estimated value that may be realized by each of the NEOs in the event of the following:

 

    Death

 

    Disability

 

    Mutual termination

 

    Termination other than for cause

 

    Resignation other than by mutual agreement

 

    Resignation for good reason
    Change in control where equity awards are assumed or substituted

 

    Change in control where equity awards are not assumed or substituted

 

    Termination other than for cause or resignation for good reason in connection with a change in control
 

 

The table does not include any information regarding the benefits available generally to salaried employees, such as distributions under the Company’s 401(k) plan.

 

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The amounts shown below assume that the applicable termination event or change in control event occurred on December 31, 2023. The actual amounts that would be paid can only be determined at the time of the actual event. The amounts with respect to an NEO’s SARs do not include any deemed earnings that would be credited during the payment term until his SAR Account Balance is fully distributed. The amounts with respect to the RSUs are based on the $43.68 per share closing price of the Company’s common stock on the NYSE on December 29, 2023, the last trading day before the end of the 2023 fiscal year.

 

Name

  Type of
Benefit
    Death
($)
    Disability
($)
    Mutual
Termination
($)
    Termination
other than
for Cause
($)
    Resignation
Other than
by Mutual
Agreement
($)
    Resignation
for Good
Reason
($)
    Change in
Control
Where
Awards are
Assumed
($)
    Change in
Control
Where
Awards are
Not
Assumed
($)
    Termination
other than
for Cause or
Resignation
for Good
Reason in
Connection
with a
Change in
Control
($)(1)
 

Hessam Nadji

    Cash Severance       —        —        —        —        —        —        —        —        2,995,000 (3) 
   

COBRA

Reimbursement

 

 

    31,125       31,125       —        —        —        —        —        —        31,125  
    Outplacement       —        —        —        —        —        —        —        —        25,000  
    SARs Payout       4,393,374       4,393,374       4,393,374       3,295,030       3,295,030       3,295,030       4,393,374       4,393,374       3,295,030  
    RSU Acceleration       18,607,680       18,607,680       —        —        —        —        —        18,607,680       18,607,680  

Steven F. DeGennaro

    Cash Severance       —        —        —        647,563 (2)      —        647,563 (2)      —        —        1,207,500 (3) 
   

COBRA

Reimbursement

 

 

    21,247       21,247       —        —        —        —        —        —        21,247  
    Outplacement       —        —        —        —        —        —        —        —        25,000  
    RSU Acceleration       2,421,007       2,421,007       —        —        —        —        —        2,421,007       2,421,007  

Richard Matricaria

    Cash Severance       —        —        —        —        —        —        —        —        1,717,500 (3) 
   

COBRA

Reimbursement

 

 

    33,758       33,758       —        —        —        —        —        —        33,758  
    Outplacement       —        —        —        —        —        —        —        —        25,000  
    RSU Acceleration       3,870,747       3,870,747       —        —        —        —        —        3,870,747       3,870,747  

John David Parker

    Cash Severance       —        —        —        —        —        —        —        —        1,717,500 (3) 
   

COBRA

Reimbursement

 

 

    31,041       31,041       —        —        —        —        —        —        31,041  
    Outplacement       —        —        —        —        —        —        —        —        25,000  
    RSU Acceleration       3,967,673       3,967,673       —        —        —        —        —        3,967,673       3,967,673  

Gregory A. LaBerge

    Cash Severance       —        —        —        —        —        —        —        —        817,500 (3) 
   

COBRA

Reimbursement

 

 

    33,758       33,758       —        —        —        —        —        —        33,758  
    Outplacement       —        —        —        —        —        —        —        —        25,000  
    RSU Acceleration       1,513,993       1,513,993       —        —        —        —        —        1,513,993       1,513,993  

 

(1)

Represents payments and benefits that would have been provided for under the Company’s Change in Control Policy or any SARs held by the NEO.

(2)

Represents six months of Mr. DeGennaro’s base salary and 50% of the annual cash incentive award that Mr. DeGennaro earned in respect of his service in 2022.

(3)

Represents the sum of 12 months of the executive’s base salary and 2023 target annual incentive opportunity as the Company’s change in control policy provides for cash severance equal to the sum of 12 months’ base salary and the lesser of the target annual incentive opportunity for the year of termination or the year immediately preceding the year of termination.

 

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Table of Contents

Compensation

 

 

CEO Pay Ratio

The annual total compensation of Hessam Nadji, our CEO, was $10,407,564 in 2023, as reflected in the Summary Compensation Table above. Based on reasonable estimates, the median annual total compensation of all employees of the Company and its subsidiaries, excluding our CEO, was $84,062 for 2023. Accordingly, for 2023, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all our other employees was 124 to 1. Most of our investment sales professionals are classified as independent contractors under state and U.S. Internal Revenue Service guidelines, so they are not included in the employee population, which would have had the effect of decreasing the pay ratio.

To identify the “median employee” from our employee population, we collected the total gross compensation earned during the 12-month period ending November 30, 2023 by each person who was employed by the Company or one of its subsidiaries on November 30, 2023, other than those persons who were employed in Canada. We also annualized the salary of permanent employees who were employed on November 30, 2023, but commenced employment after December 1, 2022. As permitted by SEC rules, we excluded from our analysis all 38 of our employees who resided in Canada on November 30, 2023, which represented less than 5% of our employee population as a whole on such date. Our employee population on November 30, 2023, prior to taking into consideration this exclusion, consisted of 893 individuals. Our employee population on November 30, 2023, after taking into consideration this exclusion, consisted of 855 individuals.

We identified and calculated the elements of the median employee’s annual total compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $84,062. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column for 2023 in our Summary Compensation Table included in this Proxy Statement.

 

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Table of Contents
Compensation
 
 
Pay Versus Performance
This section provides disclosure about the relationship between executive compensation actually paid to our principal executive officer (PEO) and
non-PEO
NEOs and certain financial performance measures of the Company for the fiscal years listed below. This disclosure has been prepared in accordance with Item 402(v) of Regulation
S-K
under the Securities Exchange Act of 1934 (the “Pay Versus Performance Rules”) and does not necessarily reflect how the Compensation Committee evaluates compensation decisions.
 
Year
(1)
 
Summary
Compensation
Table Total for
PEO
   
Compensation
Actually Paid
to PEO
(2)(3)
   
Average
Summary
Compensation
Table Total
for
Non-PEO

NEOs
   
Average
Compensation
Actually Paid
to
Non-PEO

NEOs
(2)(4)
   
Value of Initial Fixed
$100 Investment Based
On:
(5)
   
Net
Income
(millions)
   
Pre-Tax

Net
Income

(millions)
(6)
 
 
Total
Stockholder
Return
   
Peer Group
Total
Stockholder
Return
 
2023
  $ 10,407,564     $ 13,852,094     $ 1,343,256     $ 1,896,804     $ 123.12     $ 128.05     $ (34.0   $ (40.4
2022
  $ 7,532,900     $ 3,519,692     $ 3,698,899     $ 2,691,110     $ 95.24     $ 106.44     $ 104.2     $ 142.0  
2021
  $ 8,224,777     $ 10,965,723     $ 2,572,998     $ 2,981,491     $ 138.15     $ 163.37     $ 142.5     $ 193.3  
2020
  $ 5,257,504     $ 5,059,672     $ 714,373     $ 749,696     $ 99.95     $ 93.48     $ 42.8     $ 59.4  
 
(1)
The following table lists the PEO and
non-PEO
NEOs for each of fiscal years 2020, 2021, 2022 and 2023.
 
     
PEO
  
Non-PEO
NEOs
2023    Hessam Nadji    Steven F. DeGennaro, Richard Matricaria, John David Parker, and Gregory A. LaBerge
2022    Hessam Nadji    Steven F. DeGennaro, Richard Matricaria, John David Parker, and Gregory A. LaBerge
2021    Hessam Nadji    Steven F. DeGennaro, Richard Matricaria, John David Parker, and Gregory A. LaBerge
2020    Hessam Nadji    Steven F. DeGennaro, Martin E. Louie, and Gregory A. LaBerge
 
(2)
The dollar amounts reported represent the amount of “compensation actually paid,” as calculated in accordance with the Pay Versus Performance Rules. These dollar amounts do not reflect the actual amounts of compensation earned by or paid to our NEOs during the applicable year. For purposes of calculating “compensation actually paid,” the fair value of equity awards is calculated in accordance with ASC Topic 718 using the same assumption methodologies used to calculate the grant date fair value of awards for purposes of the Summary Compensation Table (refer to “Executive Compensation and Other Information – Summary Compensation Table” for additional information).
(3)
The following table shows the amounts deducted from and added to the Summary Compensation Table total to calculate “compensation actually paid” to Mr. Nadji in accordance with the Pay Versus Performance Rules:
 
        
Pension Plan
Adjustments
 
Equity Award Adjustments
 
Compensation
Actually Paid to
PEO
    
Summary
Compensation
Table Total
for PEO
 
Change
in
Pension
Value
 
Pension
Service
Cost
 
Stock
Awards
 
Year End Fair
Value of Equity
Awards Granted
in the Year and
Unvested at
Year End
 
Year over
Year Change
in Fair Value
of Outstanding
and Unvested
Equity
Awards
Granted in
Prior Years
 
Fair
Value
as of
Vesting
Date of
Equity
Awards
Granted
and
Vested
in the
Year
 
Change in Fair
Value of Equity
Awards Granted
in Prior Years
that Vested in
the Year
 
Fair Value
at the End of
the Prior
Year
of Equity
Awards that
Failed to
Meet Vesting
Conditions
in the Year
 
Value of
Dividends
or other
Earnings
Paid on
Stock or
Option
Awards
not
Otherwise
Reflected
in Fair
Value
2023
  $10,407,564   $—   $—   $8,646,760   $10,570,560   $1,698,320   $—   $(177,590)   $—   $—   $13,852,094
2022
  $7,532,900   $—   $—   $4,350,680   $3,169,400   ($2,588,010)   $—   ($243,918)   $—   $—   $3,519,692
2021
  $8,224,777   $—   $—   $3,597,200   $4,581,600   $1,856,196   $—   ($99,650)   $—   $—   $10,965,723
2020
  $5,257,504   $—   $—   $3,376,400   $3,314,760   ($826)   $—   ($135,366)   $—   $—   $5,059,672
 
(4)
The following table shows the amounts deducted from and added to the average Summary Compensation Table total compensation to calculate the average “compensation actually paid” to our
non-PEO
NEOs in accordance with the Pay Versus Performance Rules:
 
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Compensation
 
 
        
Pension Plan
Adjustments
 
Equity Award Adjustments
 
Compensation
Actually Paid to
Non-PEO NEOs
    
Summary
Compensation
Table Total
for
Non-PEO

NEOs
 
Change
in
Pension
Value
 
Pension
Service
Cost
 
Stock
Awards
 
Year End Fair
Value of Equity
Awards Granted
in the Year and
Unvested at Year
End
 
Year over
Year Change
in Fair Value
of Outstanding
and Unvested
Equity Awards
Granted in
Prior Years
 
Fair
Value
as of
Vesting
Date of
Equity
Awards
Granted
and
Vested
in the
Year
 
Change in
Fair
Value of
Equity
Awards
Granted
in Prior
Years that
Vested in
the Year
 
Fair Value
at the End of
the Prior
Year
of Equity
Awards that
Failed to
Meet Vesting
Conditions
in the Year
 
Value of
Dividends
or other
Earnings
Paid on
Stock or
Option
Awards
not
Otherwise
Reflected
in Fair
Value
2023
  $1,343,256   $—   $—   $537,746   $656,478   $483,239   $—   $(48,423)   $—   $—   $1,896,804
2022
  $3,698,899   $—   $—   $2,229,889   $1,624,438   ($347,643)   $—   ($54,695)   $—   $—   $2,691,110
2021
  $2,572,998   $—   $—   $548,280   $717,568   $237,467   $—   $1,738   $—   $—   $2,981,491
2020
  $714,373   $—   $—   $179,888   $216,912   ($26)   $—   ($1,675)   $—   $—   $749,696
 
(5)
In accordance with the Pay Versus Performance Rules, the Company and the Company’s peer group total stockholder return (the “Peer Group TSR”) is determined based on the value of an initial fixed investment of $100 on December 31, 2019, through the end of the listed fiscal year. The Peer Group TSR set forth in this table was determined using the Company’s industry peer group (“Peer Group Index”), which we also use in preparing the stock performance graph required by Item 201(e) of Regulation
S-K
for our Annual Report for the fiscal year ended December 31, 2023. The Peer Group Index is comprised of the following publicly-traded real estate services companies: CBRE Group, Inc., Colliers International Group, Inc., Cushman & Wakefield plc, Jones Lang LaSalle Incorporated, and Newmark Group Inc. The Peer Group Index is weighted by each company’s stock market capitalization at the beginning of each fiscal year.
 
(6)
We have determined that
pre-tax
net income is the financial performance measure that, in the Company’s assessment, represents the most important financial performance measure used to link “compensation actually paid” to our NEOs, for fiscal year 2023, to company performance (the “Company Selected Measure” as defined in the Pay Versus Performance Rules).
Required Tabular Disclosure of Most Important Measures
As described in greater detail in “Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable
pay-for-performance
philosophy. The most important financial performance measure used by the Company to link executive compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance is
Pre-Tax
Net Income
.
Relationship Between “Compensation Actually Paid” and Performance Measures
In accordance with the Pay Versus Performance Rules, the charts below illustrate how “compensation actually paid” to the NEOs aligns with the Company’s financial performance as measured by TSR, net income, and
pre-tax
net income, as well as a comparison of TSR and Peer Group TSR.
 
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Table of Contents
Compensation
 
 
Compensation Actually Paid and TSR
 
 
LOGO
* Assumes $100 invested on 12/31/2019
Compensation Actually Paid and Net Income and
Pre-Tax
Net Income
 
 
LOGO
 
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Table of Contents
Compensation
 
 
TSR of the Company and TSR of the Peer Group
 
 
LOGO
* Assumes $100 invested on 12/31/2019
 
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Table of Contents
Compensation
 
 
Director Compensation
Director Compensation Highlights
 
  Emphasis on equity in the overall compensation mix.
 
  Equity grants under a fixed-value annual grant policy with
one-year
vesting.
 
  A robust stock ownership guideline set at five times the annual cash retainer to support stockholder alignment.
  Stockholder-approved annual director compensation limit on cash and equity awards to
non-employee
directors.
 
  No performance awards, perquisites, or special benefits.
 
Director Compensation Policy
Pursuant to the terms of our director compensation policy,
each non-employee director
typically receives annual cash fees for their services, payable quarterly in arrears, as follows:
 
 
Board Member, including the Chair—$65,000 per year
 
 
Chair of Audit Committee—an additional $20,000 per year; other Audit Committee members—an additional $10,000 per year
 
 
Chair of Compensation Committee—an additional $15,000 per year; other Compensation Committee members—an additional $5,000 per year
 
 
Chair of Nominating and Corporate Governance Committee—an additional $10,000 per year; other Nominating and Corporate Governance Committee members—an additional $5,000 per year
 
 
Executive Committee Member—an additional $10,000 per year for independent board members
Each continuing
non-employee director
is also entitled to receive an annual restricted stock grant on the date of each annual meeting of stockholders equal to $75,000 divided by the fair market value of our common stock on the date of grant. Each annual restricted stock grant will vest in full on the earlier of the first anniversary of the date of grant and the next annual meeting of stockholders.
Any
new non-employee director
will automatically receive
a pro-rated annual
restricted stock grant based on the number of months from the time
the non-employee director
joins the Board until the next annual meeting of stockholders.
Such pro-rated annual
restricted stock grants will vest in full on the date of the next annual meeting of stockholders.
Under our change in control policy, the vesting of restricted stock awards held by our
non-employee
directors will fully accelerate upon a change in control, regardless of whether equity awards are otherwise assumed, continued, or substituted. In addition, under our death and disability policy, the vesting of all outstanding and unvested restricted stock awards held by
our non-employee directors
will vest in full upon a termination of service due to death or disability, in each case, after at least one year of service.
 
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Table of Contents
Compensation
 
 
2023 Director Compensation
Director Compensation Table
The following table sets forth the total compensation for
our non-employee directors
for the year ended December 31, 2023:
 
Name
  
Fees Earned or
Paid in Cash
($)
    
Stock
Awards
($)(1)(2)
    
All Other
Compensation
($)
    
Total
($)
 
Collete English Dixon
     70,000        74,979        —         144,979  
Norma J. Lawrence
     90,000        74,979        —         164,979  
George M. Marcus
     65,000        74,979        —         139,979  
Lauralee E. Martin
     85,000        74,979        —         159,979  
Nicholas F. McClanahan
     80,000        74,979        —         154,979  
George T. Shaheen
     85,000        74,979        —         159,979  
Don C. Watters
     90,000        74,979        —         164,979  
 
(1)
This column represents the aggregate grant date fair value of restricted stock granted in 2023, computed in accordance with ASC 718. On May 2, 2023, each
non-employee
director received a grant of 2,477 shares of restricted stock, which vests on the first anniversary of the date of grant, and the value represented here with respect to each such Director’s restricted stock grant is based on 2,477 shares multiplied by the closing price of $30.27 on the grant date of May 2, 2023. These amounts reflect our calculation of the value of these awards, and do not necessarily correspond to the actual value that may ultimately be realized by the Directors.
(2)
As of December 31, 2023, each
non-employee
director has 2,477 shares of restricted stock in the aggregate outstanding and subject to vesting.
Director Compensation Limit
We have a stockholder-approved $500,000 limit on the total value of cash and equity compensation that may be paid or granted to
a non-employee director
each fiscal year.
Director Stock Ownership Guidelines and Insider Trading Policy
The Company’s stock ownership guidelines are designed to encourage our executive officers and our
non-employee
directors to achieve and maintain a significant equity stake in the Company and closely align their interests with those of our stockholders. The stock ownership guidelines call for each
non-employee
director to own shares of our common stock having a value equal to at least five times
the non-employee director’s
regular annual cash board service retainer within five years from the date they become subject to the share ownership guidelines. Until these minimums are achieved, each
non-employee
director shall retain 50% of the shares that he or she earns upon vesting of his or her restricted shares during the five-year initial compliance period, and 100% thereafter.
As of March 12, 2024, all our Directors have accumulated ownership of the required amount under the ownership guidelines, except for Ms. English Dixon who joined the Board in 2021, and who will be subject to the retention requirement until they own the required amount. In addition, our insider trading policy prohibits our
non-employee
directors from engaging in hedging, derivative, or any other speculative transactions involving the Company’s stock. See the “Compensation Discussion and Analysis” section for a more complete description of our stock ownership guidelines, stock sale policy and insider trading policy.
 
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PROPOSAL 4: Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan
 
We are asking our stockholders in this Proposal 4 to approve our 2013 Omnibus Equity Incentive Plan (the “2013 Plan”), as amended and restated by our Board to, among other things, (i) eliminate the term of the 2013 Plan, and (ii) make certain other best practice and administrative changes to the 2013 Plan (the 2013 Plan, as amended and restated, the “Amended Plan”).
Background
The Board amended and restated the 2013 Plan in October 2023, subject to stockholder approval, to prevent the 2013 Plan from expiring in October 2023.
If stockholders approve the Amended Plan, the number of shares authorized for issuance under the 2013 Plan will not increase.
If our stockholders do not approve this proposal, then the Amended Plan will not become effective and the 2013 Plan will terminate. We have also approved an aggregate of 547,424 stock awards that are conditioned on stockholder approval of the Amended Plan to certain persons and groups (the “Ungranted Approved Awards”) as described further below in the section entitled “New Plan Benefits” and if stockholders do not approve the Amended Plan, such Ungranted Approved Awards will not become effective. If stockholders approve the Amended Plan, the Ungranted Approved Awards will be granted effective as of the date of the Annual Meeting.
Reasons to Approve the Amended Plan
The Board recommends a vote in favor of the Amended Plan because the Board believes the Amended Plan is in the best interests of the Company and our stockholders for the following reasons:
 
 
Aligns executive, employee,
non-employee
director, independent contractor, and stockholder interests.
We currently provide stock awards to a broad-based group of our employee population as well as our
non-employee
directors and independent contractors. We believe that our stock-based compensation program, along with our stock ownership guidelines for our
non-employee
directors and executives, help align the interests of our executives, employees,
non-employee
directors, and independent contractors with the interests of our stockholders by giving them a sense of ownership and long-term personal involvement in and accountability for the development and financial success of the Company. If the Amended Plan is approved, we will be able to continue to use equity to align the interests of our executives, employees,
non-employee
directors, and independent contractors with the interests of our stockholders.
 
 
Attracts and retains talent.
Talented, motivated, and effective executive officers, employees, and independent contractors are essential to execute our business strategies and propelling our business forward. Stock-based compensation has been a critical component of total compensation at the Company for many years because this type of compensation enables the Company to effectively recruit and retain executive officers and other employees as well as independent contractors in a competitive market for talent while encouraging them to act and think like owners of the Company. If the Amended Plan is approved, we believe we will maintain our ability to offer competitive compensation packages to both retain our best performers and attract new talent
.
 
 
Supports our
pay-for-performance
philosophy.
A significant portion of total compensation for our executive officers is equity-based incentive compensation tied to the achievement of our stock price performance. We use incentive compensation to help reinforce desired business results and to motivate executives to make decisions to produce those results. If the Amended Plan is approved, it will continue to support our
pay-for-performance
philosophy.
 
 
Avoids disruption in our compensation programs and mitigates the need for significant cash compensation.
We consider equity compensation to be a vital element of our employee compensation
 
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Proposal 4: Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan
 
 
  program. If the Amended Plan is not approved, we would need to replace components of compensation previously awarded in equity (including the Ungranted Approved Awards) with cash or with other instruments that may not necessarily support our goals of strengthening longer-term retention and aligning employee interests with those of our stockholders. Additionally, replacing equity with cash would increase our cash compensation expense and significantly deplete cash that could be better utilized for other strategic purposes or returned to stockholders.
 
 
Balances appropriately our need to attract and retain talent with stockholder interests regarding dilution.
We recognize the dilutive impact of our equity compensation program on our stockholders, and we continuously strive to balance this concern with the competition for talent, competitive compensation practices, and the need to attract and retain talent. As described in more detail below under the heading “Dilution, Overhang and Burn Rate,” we believe the Amended Plan is not excessively dilutive to our stockholders given our overhang and that our three-year average annual gross burn rate is 1.87% and our three-year average net burn rate is 1.81%. If stockholders approve the Amended Plan,
the number of shares authorized for issuance under the Amended Plan will not increase
.
 
 
Protects stockholder interests and embraces sound stock-based compensation practices.
As described in more detail below under the heading “The Amended Plan Reflects Governance Best Practices,” the Amended Plan includes features that are consistent with the interests of our stockholders (and their advisors) and sound corporate governance practices.
 
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Proposal 4: Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan
 
 
Summary of Changes to the Amended Plan
The 2013 Plan is being amended to provide, among other things, for the following:
 
 
Eliminate Term and Provide for Incentive Stock Option Limit
. Eliminate the term of the 2013 Plan and specify that incentive stock options may not be granted without stockholder approval following the
ten-year
anniversary of the Board’s approval of the Amended Plan.
 
 
Eliminate Liberal Share Counting of Stock Options or Stock Appreciation Rights (“SARs”)
. Provide that the following shares do not become available again for issuance under the 2013 Plan: (i) shares that are reacquired or withheld (or not issued) by us to satisfy the exercise or strike price of a stock option or SAR; (ii) shares that are reacquired or withheld (or not issued) by us to satisfy a tax withholding obligation in connection with a stock option or SAR; (iii) shares repurchased by us on the open market with the proceeds of the exercise or strike price of a stock option or SAR; and (iv) in the event that a SAR is settled in shares, the gross number of shares subject to such SAR.
 
 
Provide for Specific Disclosure of Equity Award Vesting Upon a Change in Control
. Specifically provide that in the event of a change in control, if the successor corporation does not assume or substitute for outstanding awards granted under the 2013 Plan, the participants will fully vest in and have the right to exercise all of their outstanding options and stock appreciation rights, including shares as to which such awards would not otherwise be vested or exercisable, all restrictions on restricted stock and restricted stock units will lapse, and, with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met.
 
 
Clarify That No Dividends and Dividend Equivalents Will Be Paid on Unvested Awards.
Dividends and dividend equivalents will not be paid or settled with respect to any award granted under the 2013 Plan until the underlying shares or units vest, and no dividend equivalents or otherwise may be credited with respect to options and SARs.
 
 
Remove Section
 162(m) References
. Remove certain references to Section 162(m) of the Internal Revenue Code of 1986, as amended and restated (the “Code”) in connection with recent amendments to Section 162(m) of the Code, while retaining certain best practice performance-based award provisions.
 
 
Provide for Additional Requirements on Vesting and Transferability of Awards
. Clarify that (i) in no event may any stock award be transferred for consideration to a third-party financial institution, and (ii) we have the authority to reduce or extend the vesting of awards in the event a participant has a change in status from a full-time employee to a part-time employee or takes an extended leave of absence.
 
 
Provide that Awards are Subject to Compliance Requirements
. Provide that each participant must comply with applicable law, the Company’s Code of Ethics, and the Company’s corporate policies, as applicable, including but not limited to its Compensation Recovery Policy, and such compliance is necessary to earn an award under the Amended Plan.
 
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Proposal 4: Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan
 
 
The Amended Plan Reflects Governance Best Practices
Our Amended Plan includes additional provisions that are designed to protect our stockholders’ interests and to reflect corporate governance best practices, including:
 
 
No Repricing or Buyout of Underwater Options or SARs
. Prohibits stock option and SAR repricing or other exchanges for cash or equity compensation without stockholder consent.
 
 
No Discounted Options and SARs
. Requires stock options and SARs to be granted with an exercise price equal to at least the fair market value of our common stock on the date the award is granted, except options issued pursuant to a transaction described in, and in a manner consistent with Section 424(a) of the Code may be granted with an exercise price that is less than the fair market value of our common stock on the date the award is granted.
 
 
No Evergreen Provision
. Avoids the use of “evergreen” share reserve increases and instead requires stockholder approval to increase the share reserve.
 
 
No Single Trigger and Specific Disclosure of Equity Award Vesting upon a Change in Control
. Awards do not automatically accelerate upon a corporate transaction unless the acquiring company does not assume or replace the awards, with performance-based equity awards vesting at target.
 
 
Prohibition on Payment of Dividends and Dividend Equivalents on Unvested Awards
. Prohibits the payment or settlement of dividends or dividend equivalents with respect to any award until the underlying shares or units vest.
 
 
Limit on
Non-Employee
Director Awards
. The aggregate value of all compensation paid or granted, as applicable, to any individual for service as a
non-employee
director of our Board with respect to any fiscal year, including awards granted under the 2013 Plan and cash fees paid by us to such
non-employee
director, will not exceed $500,000 in total value.
 
 
No Automatic Grants
. The Amended Plan does not provide for automatic grants to any participant.
 
 
No Tax
Gross-ups
. The Amended Plan does not provide for any tax
gross-ups.
 
 
No Transferability
. Awards generally may not be transferred, except by will or the laws of descent and distribution, unless approved by the Plan Administrator (as defined below), and in no event may any stock award be transferred for consideration to a third-party financial institution.
 
 
No Reload Grants
. The Amended Plan does not provide for reload grants, or the granting of stock options conditioned upon delivery of shares to satisfy the exercise price and/or tax withholding obligation under another employee stock option.
While the use of long-term incentives in the form of equity awards is an important part of our compensation program, we recognize that stock awards dilute existing stockholders and are mindful of our responsibility to our stockholders to exercise judgment in the granting of equity awards.
 
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The following table sets forth information regarding outstanding grants as of February 13, 2024 under the 2013 Plan (excluding any Ungranted Approved Awards). As of February 13, 2024, we had 38,412,484 shares of common stock issued and outstanding (excluding any Ungranted Approved Awards). The market value of one share of our common stock on February 13, 2024, as determined based on the closing price per share of our common stock as reported on the NYSE was $37.30.
 
Equity Plan
  
Stock Options
(# of shares)
    
Weighted-
Average
Exercise Price
Per
Share ($)
    
Weighted-
Average
Remaining
Contractual
Term
(In Years)
    
Full Value
Awards

(# of shares)
(1)
    
Shares Available
for Future Grant
(# of shares)
(2)
 
2013 Plan
     -        -        -        1,999,745        3,221,417  
(1)
Restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) are referred to as “Full Value Awards.” Does not include the Ungranted Approved Awards, which will only become effective if stockholders approve the Amended Plan.
(2)
The amount disclosed does not reflect the Ungranted Approved Awards.
The following table provides detailed information regarding our historical equity award granting practices, including our share usage rate (commonly referred to as “burn rate”) and equity overhang activity (based on total potential award shares) under the 2013 Plan for the last three fiscal years. The effects of our stock repurchase program are included in these calculations. During the last three fiscal years, no awards were issued under any equity plan other than the 2013 Plan and our 2013 Employee Stock Purchase Plan and no awards were made outside of a stockholder-approved equity plan.
 
    
Fiscal 2023
  
Fiscal 2022
  
Fiscal 2021
Gross Burn Rate
(1)
   1.90%    2.75%    0.96%
Net Burn Rate
(2)
   1.87%    2.68%    0.86%
Equity Overhang
(3)
   11.86%    12.23%    12.46%
(1)
Gross Burn Rate is calculated as (a) the number of new stock awards granted under the 2013 Plan (excluding Ungranted Approved Awards), divided by (b) the weighted average common shares outstanding of the Company at the end of the fiscal year (excluding Ungranted Approved Awards).
(2)
Net Burn Rate is calculated as (a) the number of new stock awards granted under the 2013 Plan (excluding Ungranted Approved Awards), net of stock awards cancelled and forfeited under the 2013 Plan, divided by (b) the weighted average common shares outstanding of the Company at the end of the fiscal year (excluding Ungranted Approved Awards).
(3)
Equity Overhang is calculated as (a) the number of shares subject to outstanding stock awards (excluding Ungranted Approved Awards) plus the number of shares available for grant under the 2013 Plan (excluding Ungranted Approved Awards), divided by (b) the number of shares subject to outstanding stock awards (excluding Ungranted Approved Awards), plus the number of shares available for grant under the 2013 Plan (excluding Ungranted Approved Awards), plus the weighted average common shares outstanding of the Company at the end of the fiscal year (excluding Ungranted Approved Awards).
 
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The table below shows the number of time-based Full-Value Awards granted under the 2013 Plan in each of the last three fiscal years (excluding any Ungranted Approved Awards). The Company did not grant any options or performance-based awards in the last three years.
 
Fiscal Year
  
Option
Awards
Granted
    
Total Full Value
Awards Granted
(1)
    
Time Based
Full Value
Awards Granted
(1)
 
2023
     -        734,388        734,888  
2022
     -        1,094,507        1,094,507  
2021
     -        381,215        381,215  
(1)
Does not include the Ungranted Approved Awards, which will only become effective if stockholders approve the Amended Plan.
Description of the Amended Plan
Set forth below is a summary of the material features of the Amended Plan. The Amended Plan is set forth in its entirety as
 Appendix
 A
 to this Proxy Statement, and all descriptions of the Amended Plan contained in this Proposal 3 are qualified by reference to
 Appendix A
.
Purpose
The purposes of this Plan are (a) to attract and retain the best available personnel to ensure the Company’s success and to accomplish the Company’s goals; (b) to incentivize employees and independent contractors of the Company and its subsidiaries and members of the Board with long-term equity-based compensation to align their interests with the Company’s stockholders; and (c) to promote the success of the Company’s business.
Types of Stock Awards
The Amended Plan provides for the grant of incentive stock options (“ISOs”), within the meaning of Section 422 of the Code, to our employees and the employees of our subsidiaries. In addition, the Amended Plan provides for the grant of nonstatutory stock options (“NSOs”), SARS, RSAs, RSUs, performance units, and performance shares to our employees, independent contractors,
and non-employee directors,
and the employees and independent contractors of our subsidiaries.
Share Reserve
The aggregate number of shares of our common stock that may be issued pursuant to stock awards under the Amended Plan is 8,800,000 shares, which amount has not changed since the last time the 2013 Plan was approved by the Company’s stockholders in 2017. As of February 13, 2024, 3,221,417 shares of common stock remain available for future stock awards under the Amended Plan (which amount does not reflect the Ungranted Approved Awards that are described further below in the section entitled “New Plan Benefits”). The Amended Plan does not contain any provision, pursuant to which the share reserve would be automatically increased in the future without stockholder approval.
Shares Available for Subsequent Issuance.
 
The following shares will become available again for issuance under the Amended Plan: (a) any shares subject to an award that are not issued because such award or any portion thereof expires or otherwise terminates without all of the shares covered by such award having been issued; (b) any shares subject to an award that are not issued because such award or any portion thereof is settled in cash; (c) any shares issued pursuant to an award that are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares; and (d) any shares that are
 
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reacquired or withheld (or not issued) by the Company to satisfy a tax withholding obligation in connection with any award granted under the Amended Plan (other than an option or SAR).
Shares Not Available for Subsequent Issuance
. The following shares will not become available again for issuance under the Amended Plan: (a) any shares that are reacquired or withheld (or not issued) by the Company to satisfy the exercise or strike price of any option or SAR granted under the Amended Plan (including any shares subject to such award that are not delivered because such award is exercised through a reduction of shares subject to such award); (b) any shares that are reacquired or withheld (or not issued) by the Company to satisfy a tax withholding obligation in connection with any option or SAR granted under the Amended Plan; (c) any shares repurchased by the Company on the open market with the proceeds of the exercise or strike price of any option or SAR granted under the Amended Plan; and (d) in the event that a SAR granted under the Amended Plan is settled in shares, the gross number of shares subject to such award.
Eligibility
All of our employees (including our executive
officers), non-employee directors,
and independent contractors and all of the employees and independent contractors of our subsidiaries are eligible to participate in the Amended Plan. Incentive stock options may be granted only to our employees (including our executive officers) and the employees of our subsidiaries. However, all other types of awards may be granted to our employees (including our executive
officers), non-employee directors,
and independent contractors and the employees and independent contractors of our subsidiaries. As of March 1, 2024, there were approximately 887 employees (including five current executive officers), 1,643 independent contractors (other than our
non-employee
directors), and
eight non-employee directors
who were eligible to participate under the Amended Plan.
Plan Administration.
Our Board or a duly authorized committee has the authority to administer the Amended Plan. Our Board has delegated this authority to the Compensation Committee. Subject to the terms of the Amended Plan, our Board or the authorized committee, referred to in this proposal as the “Plan Administrator,” determines recipients. The Amended Plan is administered by our Compensation Committee. The Compensation Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or any part of its authority and powers under the Amended Plan to one or more
non-employee
directors or officers of the Company; provided, however, that the Compensation Committee may not delegate its authority and powers with respect to (i) any person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder or (ii) in any way which would disqualify transactions as exempt under
Rule 16b-3.
Subject to the provisions of the Amended Plan, the Plan Administrator has the power to determine the terms of awards, including, without limitation, the recipients, the exercise price, if any, the number of shares subject to each award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration or waiver of forfeiture restrictions, and the form of consideration, if any, payable upon exercise of the award and the terms of the award agreement for use under the Amended Plan. The Plan Administrator also has the authority, subject to the terms of the Amended Plan, to modify or amend existing awards, to prescribe rules, to construe and interpret the Amended Plan and awards granted thereunder and to make all other determinations deemed necessary or advisable for administering the Amended Plan.
 
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Equity Grant Limits.
 The following limits apply to any awards granted under the Amended Plan:
 
 
Options and SARs
—no employee will be granted within any fiscal year one or more options or SARs, which in the aggregate cover more than 500,000 shares; provided, however, that in connection with an employee’s initial service as an employee, an employee’s aggregate limit may be increased by 1,000,000 shares;
 
 
RSAs and RSUs
—no employee will be granted within any fiscal year one or more RSAs or RSU awards, which in the aggregate cover more than 500,000 shares; provided, however, that in connection with an employee’s initial service as an employee, an employee’s aggregate limit may be increased by 1,000,000 shares; and
 
 
Performance Units and Performance Shares
—no employee will receive performance units or performance shares having a grant date value (assuming maximum payout) greater than $2 million or covering more than 500,000 shares, whichever is greater; provided, however, that in connection with an employee’s initial service as an employee, an employee may receive performance units or performance shares having a grant date value (assuming maximum payout) of up to an additional amount equal to $5 million or covering up to 1,000,000 shares, whichever is greater. A participant may only have one award of performance units or performance shares for a performance period.
Director Compensation.
 The maximum number of shares of our common stock subject to stock awards granted during a single fiscal year under the Amended Plan, if any, taken together with any cash fees paid during such fiscal year for services on the Board, will not exceed $500,000 in total value for
any non-employee director,
calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes. Such applicable limit will include the value of any stock awards that are received in lieu of all or a portion of any annual committee cash retainers or other similar cash-based payments.
No Dividends and Dividend Equivalents on Unvested Awards
. Dividends and dividend equivalents will not be paid or settled with respect to any award granted under the Amended Plan until the underlying shares or units vest, and no dividend equivalents or otherwise may be credited with respect to options and SARs.
No Repricing without Stockholder Approval.
 The Amended Plan expressly provides that the Plan Administrator will not implement an exchange program without the approval of stockholders under which outstanding awards are amended to provide for a lower exercise price or surrendered or cancelled in exchange for awards with a lower exercise price, a different type of award, cash, or a combination of the foregoing.
Stock Options.
 The Plan Administrator may grant ISOs and/or NSOs under the Amended Plan; provided that ISOs are only granted to employees. The exercise price of ISOs and NSOs must equal at least the fair market value of our common stock on the date of grant and the term of an option may not exceed 10 years; provided, however, an ISO held by a participant who owns more than 10% of the total combined voting power of all classes of our stock, or any related corporations, may not have a term in excess of 5 years and must have an exercise price of at least 110% of the fair market value of our common stock on the grant date. Notwithstanding the foregoing, options may be granted with a per share exercise price that is less than the fair market value of our common stock on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. The Plan Administrator will determine the methods of payment of the exercise price of an option, which may include cash, check, promissory note to the extent permitted by applicable law, shares with a fair market value equal to the aggregate exercise price, consideration received by the Company under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Amended Plan, net exercise, such other consideration and method of payment to the extent permitted by applicable laws, or any combination of the foregoing methods of payment. Subject to the
 
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provisions of the Amended Plan, the Plan Administrator determines the remaining terms of the options (
e.g.
, vesting). After the termination of service of an employee, independent contractor, or
non-employee
director, the participant may exercise his or her option, to the extent vested as of such date of termination, for the period of time stated in his or her option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for twelve months. In all other cases, the option will generally remain exercisable for three months following the termination of service. However, in no event may an option be exercised later than the expiration of its term.
SARs.
 SARs may be granted under the Amended Plan. SARs allow the participant to receive the appreciation in the fair market value of our common stock between the exercise date and the date of grant. Subject to the provisions of the Amended Plan, the Plan Administrator determines the terms of SARs, including when such rights vest and become exercisable and whether to settle such awards in cash or with shares of our common stock, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a SAR will be no less than 100% of the fair market value per share on the date of grant. The specific terms will be set forth in an award agreement.
RSAs.
 RSAs may be granted under the Amended Plan. RSAs are grants of shares of our common stock that are subject to various restrictions, including restrictions on transferability and forfeiture provisions. Shares will vest and the restrictions on such shares will lapse, in accordance with terms and conditions established by the Plan Administrator. Such terms may include, among other things, vesting upon the achievement of specific performance goals determined by the Plan Administrator and/or continued service. The Plan Administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipients of RSAs generally will have voting rights with respect to such shares upon grant without regard to vesting, unless the Plan Administrator provides otherwise. Shares that do not vest for any reason will be forfeited by the participant and will revert to the Company. The specific terms will be set forth in an award agreement. Dividends and other distributions will be credited with respect to restricted shares and will be distributed only if, when, and to the extent, the related restricted shares vest. Dividends and other distributions credited with respect to any shares that do not vest will be forfeited.
RSUs.
 RSUs may be granted under the Amended Plan, which may include DSUs and/or the right to be credited with dividend equivalents, in each case as determined in the discretion of the Plan Administrator. Each RSU granted is a bookkeeping entry representing an amount equal to the fair market value of one share of our common stock. The Plan Administrator determines the terms and conditions of RSUs including the vesting criteria, which may include achievement of specified performance criteria or continued service, and the form and timing of payment. The Plan Administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. The Plan Administrator determines in its sole discretion whether an award will be settled in stock, cash, or a combination of both. The specific terms will be set forth in an award agreement. Any dividend equivalents that are credited with respect to RSUs will be equal in value to the dividends and other distributions that are paid by the Company on an equivalent number of shares and will be settled in cash or shares to the participant only if, when, and to the extent, the related RSUs vest. Any dividend equivalents credited with respect to any RSUs that do not vest will be forfeited.
Performance Units/Performance Shares.
 Performance units and performance shares may be granted under the Amended Plan. Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the Plan Administrator are achieved and any other applicable vesting provisions are satisfied. The Plan Administrator will establish organizational or individual performance goals in its discretion for a performance period, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. For purposes of such awards, the performance goals may be one or more of the following, as
 
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determined by the Plan
Administrator: (i) pre-tax income
or after-tax income;
(ii) income or earnings including operating income, earnings before or after taxes, interest, stock-based compensation expense, depreciation and/or amortization; (iii) net income excluding amortization of intangible assets, depreciation, and impairment of goodwill and intangible assets and/or excluding charges attributable to the adoption of new accounting pronouncements; (iv) earnings or book value per share (basic or diluted); (v) return on assets (gross or net), return on investment, return on capital, or return on equity; (vi) return on revenues; (vii) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (viii) economic value created; (ix) operating margin or profit margin; (x) stock price or total stockholder return; (xi) income or earnings from continuing operations; (xii) capital expenditures, cost targets, reductions, and savings and expense management; (xiii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or market share, geographic, or product specialty expansion, recruitment, and retention goals, or objective customer or agent satisfaction, and objective goals relating to divestitures, joint ventures, mergers, acquisitions, and similar transactions, each with respect to the Company and/or one or more of its affiliates or operating units; and (xiv) any other metric the Compensation Committee so designates, provided that such objectives do not result in adverse accounting, tax, reporting or other consequences.
As determined in the discretion of the Compensation Committee, the performance measures for any performance period may (a) differ from participant to participant, performance period to performance period and from award to award, (b) be based on the performance of the Company as a whole, the performance of a specific participant or against any affiliate(s), a particular segment(s), a business unit(s), or a product(s) of the Company or individual project company, (c) be measured on a per share, share per capita basis, and/or other objective basis, (d) be measured on
a pre-tax or after-tax basis,
and I be measured on an absolute basis or in relative terms (including, but not limited to, any increase (or decrease) over the passage of time and/or any measurement against other companies or financial or business or stock index metrics particular to the Company), (f) be measured using an actual foreign exchange rate or on a foreign exchange neutral basis. Without limiting the foregoing, the Compensation Committee will adjust any performance criteria, performance measures, or other feature of an award that relates to, or is wholly or partially based on, or the value of, any stock of the Company, to reflect any stock dividend or split, repurchase, recapitalization, combination, or exchange of shares, or other similar changes in such stock.
After the grant of a performance unit or performance share, the Plan Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or performance shares. Performance units will have an initial dollar value established by the Plan Administrator prior to the grant date. Performance shares will have an initial value equal to the fair market value of our common stock on the grant date. The Plan Administrator, in its sole discretion, may pay earned performance units or performance shares in the form of cash, in shares, or in some combination thereof. The specific terms will be set forth in an award agreement.
Change in Time Commitment
. In the event a participant’s regular level of time commitment in the performance of his or her services for the Company or any subsidiary is reduced (for example, and without limitation, if the participant is an employee of the Company and the employee has a change in status from full-time to part-time or takes an extended leave of absence) after the date of grant of any award, the Plan Administrator, in that party’s sole discretion, may, subject to applicable laws, (x) make a corresponding reduction in the number of shares or cash amount subject to any portion of such award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting schedule applicable to such award (in accordance with Section 409A of the Code, as applicable). In the event of any such reduction, the participant will have no right with respect to any portion of the award that is so amended.
 
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Leaves of Absence/Transfer Between Locations
. Unless the Plan Administrator provides otherwise, vesting of awards granted under the Amended Plan will be suspended during any unpaid leave of absence unless contrary to applicable law. A participant will not cease to be an employee in the case of (i) any leave of absence approved by the participant’s employer or (ii) transfers between locations of the Company or between the Company or any subsidiary. For purposes of ISOs, no such leave may exceed three months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the participant’s employer is not so guaranteed, then six months following the first day of such leave any ISO held by the participant will cease to be treated as an ISO and will be treated for tax purposes as an NSO.
Transferability of Awards.
 Unless the Plan Administrator provides otherwise, the Amended Plan generally does not allow for the transfer of awards and only the recipient of an option or SAR may exercise such an award during his or her lifetime. If the Plan Administrator makes an award transferable, such award will contain such additional terms and conditions as the Plan Administrator deems appropriate; provided, that in no event may any award be transferred for consideration to a third-party financial institution.
Certain Adjustments.
 In the event of certain corporate events or changes in our capitalization, to prevent diminution or enlargement of the benefits or potential benefits available under the Amended Plan, the Plan Administrator will make adjustments to one or more of the number and class of shares that may be delivered under the Amended Plan and/or the number, class, and price of shares covered by each outstanding award and the numerical share limits contained in the Amended Plan. In the event of a proposed winding up, liquidation, or dissolution of the Company, the Plan Administrator will notify participants as soon as practicable, and all awards will terminate immediately prior to the consummation of such proposed transaction.
Change in Control.
 In the event of a change in control (as defined under the Amended Plan), if a successor corporation or its parent or subsidiary does not assume or substitute an equivalent award for any outstanding award, then such award will fully vest, all restrictions on such award will lapse, and all performance goals or other vesting criteria applicable to such award will be deemed achieved at 100% of target levels. In addition, if an option or SAR is not assumed or substituted in the event of a change in control, the Plan Administrator will notify the participant in writing or electronically that the option or SAR will be exercisable for a period of time determined by the Plan Administrator in its sole discretion as set forth in the award agreement, and the option or SAR will terminate upon the expiration of such period.
For the purposes of the Amended Plan, an award will be considered assumed if, following the change in control, the award confers the right to purchase or receive, for each share subject to the award immediately prior to the change in control, the consideration (whether stock, cash, or other securities or property) received in the change in control by holders of common stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the change in control is not solely common stock of the successor corporation or its parent, the Plan Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an option or SAR or upon the payout of an RSU, performance unit or performance share, for each share subject to such award, to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of common stock in the change in control.
Notwithstanding anything in the Amended Plan to the contrary, an award that vests, is earned or
paid-out
upon the satisfaction of one or more performance goals will not be considered assumed if the company or its successor modifies any of such performance goals without the participant’s consent; provided, however, a modification to
 
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such performance goals only to reflect the successor corporation’s post-change in control corporate structure will not be deemed to invalidate an otherwise valid award assumption.
For purposes of the Amended Plan, a change in control generally includes:
 
(i)
The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if the Company’s stockholders immediately prior to such merger, consolidation or reorganization cease to directly or indirectly own immediately after such merger, consolidation or reorganization at least a majority of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or other reorganization;
 
(ii)
The consummation of the sale, transfer or other disposition of all or substantially all of the Company’s assets (other than (x) to a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the Company, (y) to a corporation or other entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company or (z) to a continuing or surviving entity in connection with a merger, consolidation or corporate reorganization which does not result in a change in control under clause (i) above;
 
(iii)
A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election;
 
(iv)
The consummation of any transaction as a result of which any person becomes the beneficial owner, directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company’s then outstanding voting securities.
A transaction will not constitute a change in control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transactions.
Compliance with Applicable Law and Company Policies; Compensation Recovery
. The Amended Plan provides that each participant must comply with applicable law, the Company’s Code of Ethics, and the Company’s corporate policies, as applicable, including without limitation the Company’s Compensation Recovery Policy, and that (i) compliance with applicable law, the Company’s Code of Ethics, and the Company’s corporate policies, as applicable, will be a
pre-condition
to earning, or vesting in, any award and (ii) any awards which are subject to the Company’s Compensation Recovery Policy will not be earned or vested, even if already granted, paid or settled, until the Company’s Compensation Recovery Policy ceases to apply to such awards and any other vesting conditions applicable to such awards are satisfied. Please see the Compensation Discussion and Analysis for more information about the Compensation Recovery Policy, which provides for recovery of performance-based and time-based compensation in the event of a restatement of financial statements that have been filed with the SEC or improper conduct.
Plan Amendment, Termination.
 The Board has the authority to amend, suspend, or terminate the Amended Plan provided such action does not impair the existing rights of any participant (unless mutually agreed in writing between the participant and the Plan Administrator).
Term of Plan
. The Amended Plan, if approved by stockholders, will continue in effect until terminated by the Board. Further, no ISOs may be granted after October 6, 2033 without further stockholder approval.
 
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U.S. Federal Tax Aspects
THE FOLLOWING IS ONLY A SUMMARY OF THE EFFECT OF THE U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY UNDER THE AMENDED PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND IT DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
Options or SARs
A participant will not have taxable income upon the grant of an option or SAR.
Exercising an ISO will not result in any taxable income to the participant, except for purposes of the alternative minimum tax. Gain or loss recognized by the participant on a later sale or other disposition of the shares will either be long-term capital gain or loss or ordinary income depending upon whether the participant holds the shares transferred upon exercise for a specified period. Any ordinary income recognized will be the amount, if any, by which the lesser of the fair market value of the shares on the date of exercise or the amount realized from the sale exceeds the option price.
For NSOs and SARs the participant will recognize ordinary income upon exercise in an amount equal to the excess of the fair market value of the shares subject to the exercised NSOs/SARs over the exercise price on the date of exercise. Any gain or loss recognized upon any later disposition of the shares generally will be capital gain or loss.
RSAs
A participant who receives an RSA will not have taxable income upon grant but upon vesting, unless the participant elects to be taxed at the time of grant by timely filing an 83(b) election with the IRS. The participant will recognize ordinary income equal to the fair market value of the shares at the time of vesting (or at the time of grant if the participant makes a timely 83(b) election), less the purchase price paid for the RSA (if any).
RSUs, Performance Units or Performance Shares
A participant who receives RSUs, performance units, or performance shares will not have taxable income upon grant of the stock award; instead, the participant will be taxed upon settlement of the stock award. The participant will recognize ordinary income equal to the fair market value of the shares or the amount of cash received by the participant. In addition, Section 409A of the Code imposes certain restrictions on deferred compensation arrangements. Stock awards that are treated as deferred compensation under Section 409A of the Code are intended to meet the requirements of this section of the Code.
Section 162(m)
The Company generally will be entitled to a tax deduction in connection with an award under the Amended 2003 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the vesting of a restricted stock unit). Special rules limit the deductibility of compensation paid to certain executive officers. Section 162(m) of the Code places a limit of $1.0 million dollars on the amount of compensation that we may deduct as a business expense in any year with respect to certain of our most highly paid executive officers.
 
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Proposal 4: Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan
 
 
New Plan Benefits
While the Amended Plan does not provide for set benefits or amounts of awards, we have approved the Ungranted Approved Awards to the persons and groups set forth in the table below, which are RSU grants that are conditioned on stockholder approval of the Amended Plan. The table below also includes the RSA grants that our current
non-employee
directors as a group will receive if they remain a Director following the 2024 Annual Meeting. As discussed in further detail in the section entitled “Director Compensation” above, pursuant to the terms of our director compensation policy, each of our
non-employee
directors is entitled to receive an annual RSA on the date of each annual meeting of stockholders equal to $75,000. As of the date of the Annual Meeting, such awards will be granted under the Amended Plan. The following table summarizes the RSAs that our current
non-employee
directors as a group will receive if they remain a Director following the Annual Meeting.
 
Name and Position
  
Dollar
Value
    
Number of
Shares(1)
 
Hessam Nadji
     
President and CEO(2)
            72,000  
Steven F. DeGennaro
     
Executive Vice President and Chief Financial Officer(2)
            10,701  
Richard Matricaria
     
Executive Vice President and Chief Operating Officer, Western Division(2)
            8,730  
John David Parker
     
Executive Vice President and Chief Operating Officer, Eastern Division(2)
            17,460  
Gregory A. LaBerge
     
Senior Vice President, Chief Administrative Officer(2)
            6,195  
All current executive officers as a group(2)
            115,086  
All current Directors who are not executive officers as a group(3)(4)
     $525,000         
All employees, including all current officers who are not executive officers, as a group(2)(5)
            295,317  
 
 
(1)
The number of shares for each person or group (other than Mr. Nadji and our
non-employee
directors) was calculated based on the Ungranted Unapproved Award cash value that was approved by the Compensation Committee, divided by our $37.73 closing price on February 8, 2024, the date the Compensation Committee approved the Ungranted Approved Awards.
(2)
The actual grant date dollar value of such RSU grants will not be determinable until the grant date.
(3)
Number of shares is not determinable because it is based on the dollar amount of the award divided by the closing price on the grant date.
(4)
Includes the grant date fair value of the RSAs that will be granted to our
current non-employee directors
after the Annual Meeting.
(5)
Excludes Ungranted Approved Awards that will be granted
to non-employee service
providers covering an aggregate of 252,107 shares.
 
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Proposal 4: Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan
 
 
Historical Plan Benefits
The following table sets forth, for each of the individuals and groups indicated, the total number of shares of our common stock subject to stock awards and stock-based awards that have been granted (even if not currently outstanding) under the 2013 Plan, since the 2013 Plan became effective until February 13, 2024.
 
Name and Position
  
Total Number
of Shares
Subject to
Stock Awards
or Stock-
Based
Awards(1)
Hessam Nadji
   837,042
President and CEO
  
Steven F. DeGennaro
   71,780
Executive Vice President and Chief Financial Officer
  
Richard Matricaria
   159,586
Executive Vice President and Chief Operating Officer, Western Division
  
John David Parker
   187,213
Executive Vice President and Chief Operating Officer, Eastern Division
  
Gregory A. LaBerge
   88,267
Senior Vice President, Chief Administrative Officer
  
All current executive officers as a group
   1,343,888
All current Directors who are not executive officers as a group
   265,938
Each nominee for election as a Director
  
Collete English Dixon
   4,950
Lauralee E. Martin
   11,253
Nicholas F. McClanahan
   28,767
Each associate of any executive officer, current Director, or director nominee
   — 
Each person who received 5% or more of the awards granted under the 2013 Plan
  
Hessam Nadji
   837,042
President and CEO
  
Gene Berman
   573,728
Former Executive Vice President
  
John Kerin
   416,124
Former President and Chief Executive Officer
  
All employees, including all current officers who are not executive officers, as a group(2)
   4,994,820
 
 
 
(1)
Excludes any Ungranted Approved Awards.
(2)
Excludes stock awards granted
to non-employee service
providers covering an aggregate of 2,225,015 shares since the 2013 Plan became effective until February 13, 2024.
 
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Proposal 4: Approval of the Amended and Restated 2013 Omnibus Equity Incentive Plan
 
 
Equity Compensation Plan Information
The following table provides information as of December 31, 2023 with respect to the shares of our common stock that may be issued under our existing equity compensation plans.
 
Plan Category
  
Number of securities
to be issued upon
exercise of outstanding
options, warrants, and
rights(a)(1)
    
Weighted average
exercise price of
outstanding options,
warrants, and
rights(b)(2)
    
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column(a))
(c)(3)
 
Equity compensation plans approved by security holders
         2,016,929       $       —             3,332,511   
Equity compensation plans not approved by security holders
        —         —   
  
 
 
    
 
 
    
 
 
 
Total
      $ —       3,332,511   
 
 
 
(1)
Consists of RSUs granted under our 2013 Plan. Excludes RSAs granted under the 2013 Plan, the Ungranted Approved Awards under the 2013 Plan, and purchase rights granted under our ESPP.
 
(2)
Outstanding RSUs have no exercise price.
 
(3)
Includes 3,221,417 shares available for future issuance under the 2013 Plan (excluding the Ungranted Approved Awards). Includes 111,094 shares available for future issuance under the ESPP, including shares subject to purchase during the current offering period, which commenced on October 6, 2023 (the exact number of which will not be known until the purchase date on May 15, 2024). Subject to the number of shares remaining in the share reserve, the maximum number of shares purchasable by any participant on any one purchase date for any purchase period, including the current purchase period, may not exceed 1,250 shares.
Recommendation of the Board
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE AMENDED AND RESTATED 2013 OMNIBUS INCENTIVE PLAN
 
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PROPOSAL 5: Approval of the Amended and Restated 2013 Employee Stock Purchase Plan
 
We are asking our stockholders in this Proposal 5 to approve our 2013 Employee Stock Purchase Plan (the “ESPP”), as amended and restated by our Board to, among other things, (i) eliminate the term of the ESPP, (ii) remove the “evergreen” feature providing for annual increases in the number of shares reserved for issuance under the ESPP without stockholder approval, and (iii) make certain other best practice and administrative changes to the ESPP (the ESPP, as amended and restated, the “Amended ESPP”).
Background
The Board amended and restated the ESPP in October 2023, subject to stockholder approval, to prevent the ESPP from expiring in October 2023. If stockholders approve the Amended ESPP,
the number of shares authorized for issuance under the ESPP will not increase.
If