Item 5.02 Departure of Directors or Certain Officers? Election of Directors?
Appointment of Certain Officers? Compensatory Arrangement of Certain Officers.
Departure of Chief Executive Officer and Director
On January 10, 2022, Adam Contos, the Chief Executive Officer of RE/MAX
Holdings, Inc. (the "Company"), reached an understanding with the Board of
Directors (the "Board") of the Company regarding his decision to leave the
Company in order to spend more time with his family and to pursue new
entrepreneurial endeavors. The Company and Mr. Contos entered into an Executive
Separation and Release Agreement (the "Separation Agreement") in order to, among
other things, provide for a transition period with the appointment of a new
Chief Executive Officer. Pursuant to the Separation Agreement, Mr. Contos will
cease serving as the Chief Executive Officer and as a member of the Company's
Board effective March 31, 2022. Mr. Contos's resignation is not because of any
disagreement with the Company on any matter relating to the Company's
operations, policies, or practices.
Pursuant to the Separation Agreement, Mr. Contos will receive 24 months of his
annual base salary, which shall be paid in the form of salary continuation
beginning in April 2022, 24 months of continued employee benefits from the
Company, a 2021 performance bonus based on the Company's achievement of
financial metrics and strategic goals in accordance with the Company's
short-term incentive plan for executive officers, and a pro-rated 2022 bonus at
the target level. In addition, 30,893 of his unvested performance restricted
stock units will vest on March 31, 2022, at which time his remaining performance
and time-based restricted stock units will be forfeited. Mr. Contos will receive
certain other benefits as set forth in the Separation Agreement.
The foregoing summary of the Separation Agreement does not purport to be
complete and is qualified it its entirety by reference to such agreement, a copy
of which is filed as Exhibit 10.1 and incorporated herein by reference.
Appointment of Chief Executive Officer on Interim Basis
The Company's Board has appointed Board member Stephen Joyce to become Chief
Executive Officer on an interim basis upon Mr. Contos' departure and to serve as
Co-Chief Executive Officer with Mr. Contos during an anticipated one-month time
period from March 1, 2022 to March 31, 2022, to allow for an orderly transition
of responsibilities. The Company expects to form a Chief Executive Officer
search committee of Board members to identify a permanent Chief Executive
Officer replacement and plans to retain an executive search firm to assist with
the process, which will include evaluating internal and external candidates for
the Chief Executive Officer role.
The Board has determined that Mr. Joyce is no longer independent as a result of
his appointment as Chief Executive Officer, and therefore, he has resigned from
the Compensation and Nominating and Corporate Governance Committees of the
Board. As a result, the Board plans to commence a selection process to add one
additional independent Board director who would fill the seat vacated by
Mr. Contos. The Company is committed to a corporate governance program that
ensures that its Board has the right people and practices to effectively create
stockholder value while considering the interests of all of its stakeholders.
Mr. Joyce, 61, is a seasoned executive with proven experience successfully
leading global franchise operations, including Dine Brands Global, the
franchisor of IHOP and Applebee's Grill + Bar, where he was previously Chief
Executive Officer and Board member. Prior to Dine Brands Global, Mr. Joyce
served as President and Chief Executive Officer of Choice Hotels International,
where he reinvigorated and grew its hotel brands, expanding them from nine to 13
brands, and grew Choice Hotels internationally to more than 6,700 hotels in over
45 countries. Earlier in his career, Mr. Joyce spent over 25 years with Marriott
International, Inc., the world's largest hotel company, where he created the
first franchise program and helped build a network of more than 2,500 franchised
hotels. Mr. Joyce also serves on the Board of Directors of Hospitality Investors
Trust, Inc. and on the Board of Directors of Cooperative for Assistance and
Relief Everywhere, Inc. (CARE).
The Company has entered into an Interim Executive Agreement with Mr. Joyce which
provides for a signing bonus of $100,000 in March 2022, and a monthly salary of
$100,000 per month starting in March 2022 for the duration of his tenure as
Co-Chief Executive Officer and after March 31, 2022, as Chief Executive Officer,
with a six-month minimum. In addition, Mr. Joyce will receive a one-time option
award with an aggregate grant date fair value of $1,000,000, vesting in 10 equal
monthly installments beginning on March 31, 2022, subject to Mr. Joyce's
continued service as Chief Executive Officer, with a six-month minimum. The
Company anticipates that Mr. Joyce will remain on the Board during the time that
he serves as Chief Executive Officer; however, Mr. Joyce will not receive
incremental compensation for his service on the Board during such time.
Mr. Joyce will receive certain other benefits as set forth in the Interim
Executive Agreement.
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The foregoing summary of the Interim Executive Agreement does not purport to be
complete and is qualified it its entirety by reference to such agreement, a copy
of which is filed as Exhibit 10.2 and incorporated herein by reference.
There are no related party transactions between Mr. Joyce and the Company as
defined in Item 404(a) of Regulation S-K. There are no family relationships
between Mr. Joyce and any other director, executive officer or person nominated
or chosen to be a director or executive officer of the Company
Approval and Adoption of Named Executive Officers' Reward and Retention Bonus
Program
Also on January 10, 2022, the Compensation Committee of the Board (the
"Committee") approved and adopted Reward and Retention Bonus Agreements (the
"Reward and Retention Agreements"), which provide for a special payment of cash
awards to certain of the Company's Named Executive Officers: Karri R. Callahan,
the Company's Chief Financial Officer; Nicholas R. Bailey, President and Chief
Executive Officer of RE/MAX; Serene M. Smith, the Company's Chief Operating
Officer and Chief of Staff; and Ward M. Morrison, President and Chief Executive
Officer of Motto Mortgage and wemlo. The Committee adopted the Reward and
Retention Agreements to recognize these executives' outsized contributions to
the Company's strategic goals in 2021, including the substantial effort
dedicated to successfully completing the acquisition of RE/MAX INTEGRA's North
American business and the integration of the Gadberry Group and wemlo
acquisitions which drove sustainable and meaningful revenue and earnings growth
for the Company. In addition, the Reward and Retention Agreements are structured
to encourage retention of the Company's management team given the transition of
the Company's Chief Executive Officer and amidst the highly competitive market
for talent, both within the real estate and mortgage industries and, more
generally, for seasoned top leadership with the specific expertise possessed by
these Named Executive Officers. Additionally, the Reward and Retention
Agreements are in recognition of excellent leadership throughout the pandemic,
which laid the groundwork for 2021's record results.
Under the Reward and Retention Agreements, certain of the Company's Named
Executive Officers were granted special cash bonus awards in the following
amounts: $308,000 for Ms. Callahan? $312,000 for Mr. Bailey? $288,000 for
Ms. Smith? and $280,000 for Mr. Morrison. An initial payment in the amount of
75% of these cash awards will be made to each executive on January 15, 2022. The
remaining 25% of these cash awards will be payable on September 30, 2022. The
awards also require the grantees to agree to certain restrictive covenants,
including non-competition, non-solicitation, non-disparagement, and
confidentiality provisions. The awards are subject to repayment provisions in
favor of the Company, at the discretion of the Committee, tied to continued
service through September 30, 2022, and adherence with the restrictive covenants
through December 31, 2022, as set forth in the Reward and Retention Agreements.
The foregoing description of the Reward and Retention Agreements is qualified in
its entirety by reference to the form of Reward and Retention Agreement, which
is filed hereto as Exhibit 10.3 and incorporated herein by reference.
Executive Officer Title Changes
RE/MAX President Nick Bailey has been named as President and Chief Executive
Officer of RE/MAX and will continue to lead all aspects of the RE/MAX brand and
business globally. Additionally, Motto President Ward Morrison has been named as
President and Chief Executive Officer of Motto Mortgage and wemlo and will
continue to lead all aspects of the Company's mortgage operations. Both title
changes were effective as of January 10, 2022.
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Item 7.01. Regulation FD Disclosure. *
$100 Million Share Repurchase Program
On January 11, 2022, the Company issued a press release announcing that its
Board of Directors has authorized a common stock repurchase program of up to
$100 million and announcing the Chief Executive Officer transition discussed in
Item 5.02 and the title changes for certain executive officers discussed in Item
5.02.
Share repurchases may be made from time to time through a variety of methods,
including by means of open market or privately negotiated transactions, through
Rule 10b5-1 trading plans, or in reliance on indirect purchases of common stock
such as by using derivatives. The timing of repurchases and the actual number of
shares repurchased will be subject to the discretion of the Company and may be
based upon market conditions as well as other opportunities that the Company may
have for the allocation of capital from time to time. The share repurchase
program does not obligate the Company to purchase any particular amount of
common stock. The share repurchase program has no expiration date and may be
suspended or discontinued at any time.
The full text of the press release is furnished as Exhibit 99.1 to this Current
Report on Form 8-K.
Certain Operational Statistics
The Company is also providing the following update on its operational statistics
as of December 31, 2021:
Operating Statistics as of December 31, 2021
(Compared to December 31, 2020)
§ Total RE/MAX agent count increased 3.1% to 141,998 agents
§ U.S. and Canada combined agent count increased 1.4% to 85,471 agents, led by
10.0% growth in Canada
§ Total open Motto Mortgage franchises increased 32.6% to 187 offices1
Item 9.01. Financial Statements and Exhibits. *
Exhibit No. Description
10.1 Executive Separation and General Release Agreement**
10.2 Interim Executive Agreement
10.3 Form of RE/MAX Holdings, Inc. Reward and Retention Agreement
99.1 Press release issued on January 11, 2022
104 Cover Page Interactive Data File (formatted as inline XBRL).
Footnotes:
* The information contained in Items 7.01 and 9.01 and Exhibit 99.1 of this
Current Report on Form 8-K is being "furnished" and shall not be deemed "filed"
for purpose of Section 18 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or otherwise subject to the liabilities of that section,
nor shall it be deemed incorporated by reference into any registration statement
or other filings of the Company under the Securities Act of 1933, as amended, or
the Exchange Act, except as shall be set forth by specific reference in such
filing.
** Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Registrant hereby undertakes to furnish supplemental copies
of any omitted exhibits and schedules upon request by the SEC.
1Total open Motto Mortgage franchises includes only "bricks and mortar" offices
with a unique physical address with rights granted by a full franchise agreement
with Motto Franchising, LLC and excludes any "virtual" offices or "branchises".
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Forward-Looking Statements
This Current Report on Form 8-K includes "forward-looking statements" within the
meaning of the "safe harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking statements are often identified
by the use of words such as "believe," "intend," "expect," "estimate," "plan,"
"outlook," "project," "anticipate," "may," "will," "would" and other similar
words and expressions that predict or indicate future events or trends that are
not statements of historical matters.
Forward-looking statements include statements related to: the Company's
expectations related to its share repurchase program including any implications
about the timing or amount of purchases to be made in connection with the
program, statements regarding the Company's capital allocation and return of
capital to shareholders, expectations concerning the benefits of the acquisition
of the North American operations of RE/MAX INTEGRA, statements regarding the
integration of the Gadberry Group and wemlo acquisitions, the Company's
anticipated growth and its generation of free cash flow, statements related to
the transition of the Company's Chief Executive Officer, including the
appointment and service of a Chief Executive Officer on an interim basis and the
time that Mr. Contos will continue to serve as Chief Executive Officer, the
Company's search for a new Board member, the Company's Reward and Retention
Agreements and the benefits expected from such arrangements including with
respect to providing retention and other incentives to the executives receiving
the benefits of such arrangements. Forward-looking statements should not be read
as a guarantee of future performance or results and will not necessarily
accurately indicate the times at 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. These risks and
uncertainties include, without limitation, (1) the global COVID-19 pandemic,
which continues to pose significant and widespread risks to the Company's
business, including the Company's agents, loan originators, franchisees and
employees, as well as home buyers and sellers, (2) changes in the real estate
market or interest rates and availability of financing, (3) changes in business
and economic activity in general, (4) the Company's ability to attract and
retain quality franchisees and the Company's franchisees' ability to recruit and
retain real estate agents and mortgage loan originators, (5) changes in laws and
regulations, (6) the Company's ability to enhance, market, and protect its
brands, including the RE/MAX and Motto Mortgage brands, (7) the Company's
ability to implement its technology initiatives, (8) fluctuations in foreign
currency exchange rates, (9) risks and uncertainties related to the share
repurchase program including the timing, amount and the price at which any share
repurchases might be made in connection with the program, (10) uncertainties
concerning the Company's ability to continue to generate free cash flow, (11)
uncertainties regarding the returns to be achieved and benefits to shareholders
from different allocations of capital and the Company's decisions and
expectations around expenditure of capital towards the share repurchase program
versus other priorities, (12) the exact details and timing of events related to
the Chief Executive Officer transition including the timing and duration of the
Co-Chief Executive Officer period and (13) those risks and uncertainties
described in the sections entitled "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the most
recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission ("SEC") and similar disclosures in
subsequent periodic and current reports filed with the SEC, which are available
on the investor relations page of the Company's website at www.remaxholdings.com
and on the SEC website at www.sec.gov. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date on which
they are made. Except as required by law, the Company does not intend, and
undertakes no obligation, to update this information to reflect future events or
circumstances.
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