Attached files
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| EX-31.2 - EXHIBIT 31.2 - Wright Investors Service Holdings, Inc. | ex31_2.htm |
| EX-31.1 - EXHIBIT 31.1 - Wright Investors Service Holdings, Inc. | ex31_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
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x
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ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2013
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o
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TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ________ to _______
Commission file Number: 000-50587
WRIGHT INVESTORS’ SERVICE HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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13-4005439
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(State or Other Jurisdiction of
Incorporation or Organization)
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(IRS Employer Identification Number)
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100 South Bedford Road, Suite 2R, Mount Kisco, NY 10549
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(Address of Principal Executive Offices, including Zip Code)
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(914) 242-5700
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(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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None
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Securities registered pursuant to Section 12(g) of the Act:
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Common Stock, $0.01 Par Value
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(Title of Class)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
(Do not check if a smaller reporting company)
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o
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Smaller reporting company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common stock, as of the last business day of the registrant’s most recently completed second quarter, is $25,000,000.
As of March 21, 2014, 18,475,347 shares of the registrant’s common stock were outstanding.
EXPLANATORY NOTE
Wright Investors’ Service Holdings, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Form 10-K/A”) pursuant to General Instruction G (3) to Form 10-K, which amends and supplements our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which was filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2014 (the “2013 Form 10-K”). This Form 10-K/A provides the information required to be disclosed in Part III, Items 10 through 14 and updates the information contained in Part IV, Item 15. As a result of this amendment, the Company is filing as exhibits to this Form 10-K/A the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002. Because no financial statements are contained within this Form 10-K/A, the Company is not including certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Except for the amendments described above, this Form 10-K/A does not modify or update the disclosures in, or exhibits to, the 2013 Form 10-K.
TABLE OF CONTENTS
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Page
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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1
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Item 11.
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Executive Compensation
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4
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and
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Related Stockholder Matters
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12
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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14
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Item 14.
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Principal Accounting Fees and Services
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16
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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16
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SIGNATURES
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17
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i
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
Set forth below are the names of, and certain biographical information regarding, the directors of the Company. The Board of Directors currently consists of four directors.
Harvey P. Eisen, 71, has served as Chairman of the Board of Directors and Chief Executive Officer of the Company since June 2007 and also has served as its President since July 2007. Mr. Eisen has served as a director of the Company since 2004. Mr. Eisen has served as Chairman and Managing Member of Bedford Oak Advisors, LLC, an investment partnership (“Bedford Oak”), since 1998 and Chairman and Director of GP Strategies Corporation (“GP Strategies”) since 2004.
Mr. Eisen was previously Senior Vice President of Travelers, Inc. and held various executive positions with Primerica, SunAmerica Corp., and Integrated Resources Asset Management. Mr. Eisen was president and portfolio manager of Eisen Capital Management for 10 years. He began his career as an analyst with Stifel, Nicolaus & Co. and Wertheim. Mr. Eisen has served on the Strategic Development Board for the Trulaske College of Business, University of Missouri since 1995 where he established the first accredited course on the Warren Buffett Principles of Investing. He also serves on the Zanvyl Krieger School of Arts and Sciences Advisory Board for Johns Hopkins University and is a member of the Carey Business School Board of Overseers and the Johns Hopkins Parents Council. Mr. Eisen is widely recognized as one of the country’s leading portfolio managers. With over three decades of investment experience, he is often consulted by the national media for his expert views on all phases of the investment marketplace and is frequently quoted in The Wall Street Journal, The New York Times, Pension World, U.S. News & World Report, Financial World and Business Week, among others. Mr. Eisen also appears regularly on various television programs on CNN, CNBC, Bloomberg TV and Lou Dobbs Tonight on Fox News. He also served as a regular panelist on Wall Street Week with Louis Rukeyser for over 20 years.
Harvey Eisen graduated from the University of Missouri at Columbia with a Bachelor of Science in Finance and Economics, and has also received a Master of Science in Commerce from St. Louis University. He is a former Trustee of Johns Hopkins University, Baltimore, MD, the Rippowam Cisqua School, Bedford, NY, and the Northern Westchester Hospital Center, Mount Kisco, NY.
Mr. Eisen is qualified to serve on our Board of Directors and brings valuable insight to our Board of Directors as a result of his broad range of business skills and his financial literacy and expertise and executive and management leadership skills. Mr. Eisen honed these skills and expertise during his long and successful business career as Chairman and Managing Member of Bedford Oak, a Senior Vice President of Travelers and Primerica, as well as his service on other public company and institutional boards
Peter M. Donovan, 71, has served as a director of the Company since December 19, 2012. Mr. Donovan is the Chief Executive Officer of The Winthrop Corporation (“Winthrop”) and through its wholly-owned subsidiaries Wright Investors’ Service, Inc. (“Wright”), Wright Investors’ Service Distributors, Inc. (“WISDI”) and Wright’s wholly-owned subsidiary, Wright Private Asset Management, LLC (“WPAM”) (collectively, the “Wright Companies”). Mr. Donovan worked at Jones, Kreeger & Co., in Washington, D.C. prior to joining Wright in 1966. At Wright, Mr. Donovan is responsible for the overall management of Wright. Mr. Donovan has been Chief Executive Officer of Winthrop since 1996 and its Chief Investment Officer since 2010. He is co-author of Worldscope Industrial Company Profiles and Worldscope Financial Company Profiles. He is also President of the Wright Managed Income Trust and the Wright Managed Equity Trust. Mr. Donovan is Chairman of the Board of Trustees of the School for Ethical Education. He is a member of the New York Society of Security Analysts and the Hartford Society of Financial Analysts. Mr. Donovan received a BA in Economics from Goddard College.
Mr. Donovan is qualified to serve on our Board of Directors because of his extensive business skills and experiences in the financial services industry and his financial literacy and expertise.
Scott N. Greenberg, 57, has been a director of the Company since 2004. Mr. Greenberg was Chief Financial Officer of the Company from 2004 to July 2007. Mr. Greenberg has been the Chief Executive Officer of GP Strategies since April 2005 and a director since 1987. From 2001 until February of 2006 he was President of GP Strategies, Chief Financial Officer from 2001 until 2005, Executive Vice President and Chief Financial Officer from 1998 to 2001, Vice President and Chief Financial Officer from 1989 to 1998, and Vice President, Finance from 1985 to 1989. He was a director of GSE Systems, Inc. from 1999 to 2008.
1
Mr. Greenberg is qualified to serve on our Board of Directors because he possesses and brings valuable insight to our Board of Directors as a result of his broad range of business skills and experiences, financial literacy and expertise. Mr. Greenberg honed these skills and expertise during his long and successful business career, in which he served as a chief financial officer for over 20 years, as well as his service on other public company boards.
2
Lawrence G. Schafran, 74, has served as a director and chairman of the audit committee of the Company since 2006. Mr. Schafran also serves as a director of Cupcake Digital, Inc., and Glass Tech, Inc., and as an advisor to ZLOOP, Inc. Mr. Schafran also served as a Managing Director of Providence Capital, Inc., an investment and advisory firm from 2003 until December 2012 and until recently as a director of SecureAlert, Inc.
Mr. Schafran is qualified to serve on our Board of Directors because of his extensive business skills and experiences and his financial literacy and expertise. Mr. Schafran also possesses a broad range of experiences and skill garnered from the various leadership positions and from his service on other public company boards and committees.
Executive Officers Who Are Not a Director
Set forth below is the name of, and certain biographical information regarding executive officers of the Company who do not serve as directors of the Company.
Ira J. Sobotko, 57, has served as Vice President, Finance, Secretary and Treasurer of the Company since July 2007, and as its principal financial officer and principal accounting officer. His title was changed from Vice President, Finance, Secretary and Treasurer to Vice President and Chief Financial Officer, Secretary and Treasurer in 2008. Mr. Sobotko served as Senior Vice President, Finance, Secretary and Treasurer of Five Star Products and as its principal financial officer from July 2007 until its sale by the Company in January 2010. From April 2007 to July 2007, Mr. Sobotko served as Vice President, Finance of the Company. From September 2005 through March 2007, Mr. Sobotko served as a financial consultant to various publicly traded companies, including the Company and Five Star Products and various emerging technologies companies. From January 2004 through May 2005, Mr. Sobotko served as Vice President and Chief Financial Officer of Campusfood.com, a web-based network of restaurants for students and local communities. From August 2000 to January 2004, Mr. Sobotko served as Executive Vice President, Finance at Arrowsight, Inc., a web-based application service provider where Mr. Sobotko has also served as a director since November 2001.
Corporate Governance
General
The Company is committed to establishing sound principles of corporate governance which promote honest, responsible and ethical business practices. The Company’s Board of Directors and Nominating and Corporate Governance Committee actively review and evaluate the Company’s corporate governance practices. This review includes comparing the Board’s current governance policies and practices with those suggested by corporate governance authorities as well as the practices of other public companies. The Board of Directors has adopted those corporate governance policies and practices that its evaluation suggests are the most appropriate for the Company.
Audit Committee
Our Audit Committee is currently composed of Lawrence G. Schafran and Scott N. Greenberg. The Board of Directors affirmatively determined that Mr. Schafran is independent, in accordance with The Nasdaq Stock Market (“Nasdaq”) independence criteria and for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board of Directors has determined that Mr. Greenberg is not independent. See Item 13. “Certain Relationships and Related Transactions, and Director Independence.”
The Board of Directors determined that each of Messrs. Schafran and Greenberg is able to read and understand financial statements and that each of Messrs. Schafran and Greenberg has accounting or related financial management expertise in accordance with the applicable rules of Nasdaq. The Board of Directors also determined that each of Messrs. Schafran and Greenberg, who serve as the Audit Committee financial experts, has the accounting or related financial management expertise necessary to be considered a “financial expert” under SEC rules.
The Audit Committee is responsible for maintaining free and open communications among itself, the independent registered public accounting firm and Company management. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibility to the stockholders, potential stockholders, the investment community and others relating to the integrity of the Company’s financial statements and the financial reporting process, the Company’s compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence, the Company’s systems of internal accounting and financial controls, the annual independent audit of the Company’s financial statements, and the performance of the Company’s internal audit function and the independent registered public accounting firm.
3
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors to file reports regarding ownership of the Company’s common stock with the SEC, and to furnish the Company with copies of all such reports. Based on a review of these filings, the Company believes that with respect to the most recently concluded fiscal year, all such reports were timely filed.
Code of Ethics
The Company has adopted a Code of Ethics for its principal executive officer, senior financial officers, including the principal financial officer and the principal accounting officer, and persons performing similar functions for its subsidiaries. If the Company makes any substantive amendment to the Code of Ethics or grants any waiver from a provision of the Code of Ethics for said executive officers, the Company will disclose the nature of such amendment or waiver in a filing on Form 8-K. The Code of Ethics was filed as Exhibit 14.1 to the Company’s Form 10-K for the year ended December 31, 2004 filed with the SEC on April 15, 2005 and is incorporated by reference herein. The Company will also provide a copy of such Code of Ethics to any person, without charge, upon written request made to the Company’s Secretary at the following address: Wright Investors’ Service Holdings, Inc., Attn: Secretary, 100 South Bedford Road, Suite 2R, Mount Kisco, New York 10549.
ITEM 11. EXECUTIVE COMPENSATION
The Company has elected to use the Smaller Reporting Company rules issued by the SEC regarding the disclosure of executive compensation. Under these rules, the Company provides a Summary Compensation Table covering 2013 and 2012 compensation for the individual who served as principal executive officer in 2013 and for two individuals who are the most highly-compensated executive officers other than the individual who served as principal executive officer (to whom we refer collectively as our “named executive officers”) and Outstanding Equity Awards at Year-End Table and certain narrative disclosures.
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation paid to or earned by each of the Company’s Named Executive Officers for the fiscal years ended December 31, 2013 and 2012.
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Name and Principal
Position
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Year
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Salary
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Bonus
(1)
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Option &
Restricted
Stock Unit
Awards
(2)
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All Other
Compensation
(3) (4)(5)
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Total
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($)
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($)
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($)
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($)
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($)
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Harvey P. Eisen, Chairman
of the Board and Chief
Executive Officer
(Principal Executive
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2013
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150,000
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0
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1,439
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151,439
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Officer) (3)
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2012
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150,000
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0
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0
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150,000
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Ira J. Sobotko, Vice
President, Chief Financial
Officer, Treasurer and
Secretary (Principal
Financial and Accounting
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2013
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200,000
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0
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0
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12,811
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212,811
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Officer) (4)
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2012
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200,000
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0
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0
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16,441
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216,441
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Peter M. Donovan, Chief
Executive Officer of
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2013
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300,000
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6,250
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63,665
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8,734
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378,649
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Winthrop (5)
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2012
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294,246
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875,000
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223,314
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10,086
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1,402,646
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4
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(1)
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The amounts in this column reflect the $850,000 “stay/client retention bonus” that was paid to Mr. Donovan on December 20, 2012. See Overview of Material Compensation Arrangements with Our Named Executive Officers. In addition, Mr. Donovan received a performance bonus of $25,000 during 2012, and earned a quarterly incentive bonus of $6,250 in 2013.
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(2)
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The dollar amount recognized as expense for financial statement reporting purposes, calculated in accordance with FASB ASC Topic 718. A discussion of the assumptions used in calculating these values with respect to awards related to Company common stock may be found in [Note 12] to our audited financial statements in the Form 10-K for the fiscal year ended December 31, 2013. .
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(3)
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For Mr. Eisen, the amount reflected under “All Other Compensation” is comprised of:
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·
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$1,439 and $0 for 2013 and 2012, respectively, for life insurance premiums;
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On January 24, 2014, the Board of Directors of the Company, upon the recommendation of the Company’s Compensation Committee, voted to reduce the current cash base salary of Harvey P. Eisen, the Chairman, Chief Executive Officer and President of the Company, in the amount of $150,000 per annum, to $20,000, effective January 1, 2014. Mr. Eisen had requested that the Company’s Board and Compensation Committee approve this reduction as a result of the Company’s current operating losses.
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(4)
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For Mr. Sobotko, the amount reflected under “All Other Compensation” is comprised of:
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·
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$3,211 and $879 for 2013 and 2012, respectively, for life insurance premiums;
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·
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$0 and $5,962 for 2013 and 2012, respectively, for 401(K) Company matching contributions; and
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·
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$9,600 for each of 2013 and 2012 for auto expense allowance.
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On January 24, 2014, the Company’s Board of Directors, upon the recommendation of the Company’s Compensation Committee, also voted to reduce the current base salary of Ira J. Sobotko, the Company’s Chief Financial Officer, in the amount of $200,000 per annum, to $150,000, effective February 1, 2014. Mr. Sobotko had requested that the Company’s Board and Compensation Committee approve this reduction as a result of the Company’s current operating losses.
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(5)
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Mr. Donovan is the Chief Executive Officer of Winthrop, which became a subsidiary of the Company on December 19, 2012 (the “Closing Date”) and at which time Mr. Donovan became a Named Executive Officer of the Company. For Mr. Donovan, the amount reflected in “All Other Compensation” is comprised of:
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·
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$3,365 and $4,332 for 2013 and 2012, respectively, for life insurance premiums; and
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·
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$5,369 and $5,754 for 2013 and 2012, respectively for personal auto usage.
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5
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information concerning the holdings of unexercised and unvested options to purchase shares of common stock of the Company for each of the named executive officers at December 31, 2013.
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Name
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Number of
Shares of
Common
Stock
Underlying
Unexercised
Options which
are
Exercisable
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Number of
Shares of
Common
Stock
Underlying
Unexercised
Options
which are
Unexercisable
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Option
Exercise Price
Per Share of
Common
Stock
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Option Expiration Date
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(#)
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(#)
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($)
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Harvey P. Eisen
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2,500,000(1)
250,000(1)
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-
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$2.45
$1.36
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February 28, 2017
April 28, 2020
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Ira J. Sobotko
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100,000 (1)
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-
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$2.68
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July 29, 2017
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(1)
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These options were fully vested at December 31, 2013.
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Restricted stock units
As a result of the Winthrop acquisition, the Company issued a total of 195,711 Restricted Stock Units (RSUs) to Mr. Donovan on December 19, 2012 to be settled in shares of Company common stock as follows:
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a)
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110,771 RSUs, which vested on December 19, 2012 and are subject to post-vesting restrictions on sale for three years. The RSUs were valued at the closing price of the Company’s common stock of $2.52, less a 20% discount for post vesting restrictions on sale, or $2.02 per share. The total value of these RSUs of $223,314, was accounted for as compensation and charged to retention bonus expense on the Closing Date.
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b)
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85,000 RSUs were granted on December 19, 2012, which vest equally over three years, with the first third vesting December 19, 2013. The RSUs are valued based on the closing price of the Company’s common stock on the Closing Date of $2.52, less an average discount of 11% for post-vesting restrictions on sale until the three year anniversary of the grant date, or an average price per share of $2.25. The Company recorded compensation expense of $63,665 and $5,700 for the year ended December 31, 2013 and 2012, respectively, related to these RSUs. The total unrecognized compensation expense related to these unvested RSUs is $127,000, which will be recognized over the remaining vesting period of approximately 2 years.
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Overview of Material Compensation Arrangements with Our Named Executive Officers
The following is a summary of the material terms of employment and compensation arrangements pursuant to which compensation was paid to our named executive officers for their service with the Company or its subsidiaries for the fiscal year ended December 31, 2013.
Harvey P. Eisen
On January 24, 2014, the Board of Directors of the Company, upon the recommendation of the Company’s Compensation Committee, voted to reduce the current cash base salary of Harvey P. Eisen, the Chairman, Chief Executive Officer and President of the Company, in the amount of $150,000 per annum, to $20,000, effective January 1, 2014. Mr. Eisen had requested that the Company’s Board and Compensation Committee approve this reduction as a result of the Company’s current operating losses.
On March 1, 2007, in connection with its decision to appoint Mr. Eisen to the executive positions described above, our Board of Directors granted to Mr. Eisen options to purchase an aggregate of 2,500,000 shares of Company common stock, pursuant to the Company’s 2003 Incentive Stock Plan (the “2003 Plan”), at an exercise price equal to $2.45 per share, which was the average of the closing bid and ask prices of Company common stock on March 1, 2007. The options vested in approximately one-third increments on each of March 1, 2008, March 1, 2009 and March 1, 2010.
6
On April 28, 2010, our Board of Directors granted to Mr. Eisen for 2010 for his role in the completion of the sale of both the Company’s undeveloped real property located in Pawling, New York and Five Star Products, the latter of which closed in January 2010, an option to purchase 250,000 shares of common stock, of the Company granted under the Company’s 2007 Incentive Stock Plan. The options have an exercise price of $1.36 per share, which was equal to the fair market value on the date of grant, vest over three years, in approximately one-third increments each year, commencing on the first anniversary of the date of grant and have a term of ten years, subject to earlier termination as provided in the form of option agreement.
Ira J. Sobotko
Mr. Sobotko serves as Vice President, Chief Financial Officer, Secretary and Treasurer of the Company. Mr. Sobotko received a salary of $200,000 per annum from the Company, which was reduced to $150,000, effective February 1, 2014. Mr. Sobotko had requested that the Company’s Board and Compensation Committee approve this reduction as a result of the Company’s current operating losses. In addition, pursuant to the terms and conditions of the Stock Option Agreement, dated July 30, 2007, between the Company and Mr. Sobotko (the “Sobotko NPDC Stock Option Agreement”), Mr. Sobotko was granted options to purchase 100,000 shares of Company common stock under the 2003 Plan at an exercise price equal to $2.68 per share, which was the average of the closing bid and ask prices of Company common stock on July 30, 2007. The options were fully vested at December 31, 2013.
Peter Donovan
On the Closing Date the Company, completed the merger (the “Merger”) of a wholly-owned subsidiary of the Company (“MergerSub”) with and into The Winthrop Corporation, a Connecticut corporation (“Winthrop”), pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”) dated June 18, 2012. Simultaneously with the execution of the Merger Agreement, and as an inducement to the Company’s entering into the Merger Agreement, the Company entered into an employment agreement with Mr. Donovan (the “Employment Agreement”), which was effective at the Closing of the Merger. Pursuant to his Employment Agreement, Mr. Donovan will serve as Chief Executive Officer of Winthrop. Mr. Donovan’s Employment Agreement provides for a term of five years, with automatic annual renewals unless notice of non-renewal is given at least six months prior to the applicable employment period. Mr. Donovan will receive an annual base salary of $300,000, subject to increases at the discretion of the Compensation Committee of Winthrop‘s Board of Directors. During the initial term of Mr. Donovan’s Employment Agreement but subsequent to the third anniversary of the Closing, in the sole discretion of the Board of Directors of Winthrop, Mr. Donovan will assume the position of Executive Chairman of Winthrop in lieu of his position as Chief Executive Officer of Winthrop, with such authority, duties and responsibilities as are commensurate with his position as Executive Chairman and such other duties and responsibilities as may reasonably be assigned to him by the Chief Executive Officer of the Company. As Executive Chairman, Mr. Donovan will be entitled to an annual base salary of $200,000. During his employment under the Employment Agreement, Mr. Donovan will report directly to the Chief Executive Officer of the Company.
In addition to his base salary, Mr. Donovan is eligible for a “Stay/Client Retention Bonus” of $1,170,000, $850,000 of which was paid on the Closing Date, and the remainder of which will be payable ratably upon the first, second and third anniversaries of the Closing Date provided that Mr. Donovan is then employed by Winthrop or one of its affiliates.
Under his Employment Agreement, Mr. Donovan also received following the Closing Date a grant from the Company of 110,771 RSUs, which are fully vested as of the Closing Date and which will settle in shares of Company Common Stock on the third anniversary of the Closing Date. Mr. Donovan also received a grant of 85,000 “Stay/Client Retention” RSUs which vest in equal annual installments on the first, second and third anniversaries of the Closing Date, provided that Mr. Donovan is then employed by Winthrop or one of its affiliates, and will settle in shares of Company Common Stock on the third anniversary of the Closing Date.
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Mr. Donovan will also be entitled to receive a “Special Bonus,” payable on the third anniversary of the Closing Date equal to the excess, if any, of $1,900,000 over the product of (i) the aggregate trailing average closing price of the Company Common Stock for the 10 trading days prior to such third anniversary multiplied by (ii) the number of shares of Company Common Stock that he receives as Merger Consideration (subject to equitable adjustment to reflect stock splits and similar changes in the Company’s capitalization) regardless of whether he is employed on the third anniversary date. Under his Employment Agreement, Mr. Donovan will also be eligible to receive quarterly and annual incentive bonuses for each period during the initial term of his Employment Agreement and for any period thereafter prior to the date his title is changed to Executive Chairman. The quarterly incentive bonuses will be equal to $6,250 per quarter for each fiscal quarter during which the revenue of Winthrop, determined in accordance with generally accepted accounting principles in the United States (“GAAP”), does not decline from the immediately prior year’s GAAP revenue by 9% or more. If during a fiscal year Mr. Donovan has not earned all quarterly incentive bonuses for such year, he will be entitled to a “catch up” bonus for any such quarter in which the incentive bonus has not been earned if the GAAP revenue of Winthrop for the entire fiscal year has not declined from the immediately prior year by 9% or more. Mr. Donovan will also be entitled to an annual incentive bonus of $25,000 if, at the end of a given fiscal year, GAAP revenue of Winthrop for such year has increased by at least 9% over the immediately prior year. For the year ended December 31, 2013, Mr. Donovan received a quarterly incentive bonus of $6,250.
8
Termination of Employment and Change in Control Arrangements
Potential Payments upon Termination or Change in Control
As discussed above, both Mr. Eisen and Mr. Sobotko’s awards granted under the 2003 and 2007 Plan have vested. See the descriptions of the agreement with the named executive officers above for additional information.
At the Closing Date, an Investors’ Rights Agreement was entered into by and among the Company and Mr. Donovan and certain other individuals and entities who are key executives of Winthrop or that elected to receive Company Common Stock as Merger Consideration. The Investors’ Rights Agreement provides that shares of Company Common Stock received as Merger Consideration by Mr. Donovan are subject to a three year transfer restriction and if Mr. Donovan terminates his employment without “good reason” prior to the third anniversary of the Closing, a call right in favor of the Company at a purchase price per share equal to the fair market value of Company Common Stock as of the date of notice of exercise of the call right. In addition, the Investors’ Rights Agreement provides for: (i) a right of first offer in favor of Mr. Donovan and the other key Winthrop executives party to this agreement in the event that the Company effects or agrees to a sale of Winthrop of all or substantially all of its business or assets prior to the fifth anniversary of the Closing Date, and (ii) certain demand and piggyback registration rights to be available following the third anniversary of the Closing Date with respect to the Company Common Stock held, or to be held upon the settlement date of Mr. Donovan’s RSU agreement
DIRECTOR COMPENSATION
Only directors who are not employees of the Company or its subsidiaries are entitled to receive compensation for service as a director. The table below summarizes the total compensation paid to or earned by each director of the Company (who is not also a named executive officer) for the fiscal year ended December 31, 2013. The column “Fees Earned or Paid in Cash” includes common stock of the Company issued in lieu of cash.
2013 Director Compensation
|
Name
|
Fees Earned or
Paid in Cash
|
Option Awards (2)
|
All Other
Compensation
|
Total
|
|
($)
|
($)
|
($)
|
($)
|
|
|
Lawrence G. Schafran
|
41,000 (1)
|
4,442
|
0
|
45,442
|
|
Scott N. Greenberg
|
31,000
|
4,442
|
0
|
35,442
|
|
(1)
|
Mr. Schafran elected to receive 5,582 shares of Company common stock in lieu of $12,500 of his annual director’s fee.
|
|
(2)
|
The amounts in this column reflect the dollar amount recognized in fiscal 2013 for financial statement reporting purposes, calculated in accordance with FSB ASC 718. A discussion of the assumptions used in calculating these values may be found in Note 12 to our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. At December 31, 2013, each of Messrs. Greenberg and Schafran each had 200,000 vested and no unvested options.
|
Director Compensation Program
For the year ended December 31, 2013 directors who are not employees of the Company or its subsidiaries were entitled to receive:
|
|
·
|
annual director compensation to each member of the Board of Directors of (i) $25,000, paid in quarterly installments of $6,250 (except the Vice Chairman of the Board of Directors who is to receive annual director compensation of $35,000, paid in quarterly installments of $8,750) and (ii) a one-time grant of an option to purchase 100,000 shares of Company common stock . The option is to have an exercise price of fair market value on the date of grant, vest over three years, in approximately one-third increments each year commencing on the first anniversary of the date of grant and have a term of ten years;
|
9
|
|
·
|
$1,500 in cash for each meeting of the Board of Directors and for each committee meeting attended in person and $750 in cash for each Board of Directors or Board committee meeting attended by means of conference telephone connection;
|
|
|
·
|
annual compensation of $5,000, paid in quarterly installments of $1,250, to each member of the Audit Committee (except the Chairman of the Audit Committee who is to receive annual compensation of $10,000), plus $750 in cash for each meeting of the Audit Committee attended in person and $500 in cash for each meeting of the Audit Committee attended by telephone, except that the per meeting attendance fee is reduced to $500 for attendance at any Audit Committee meeting held on the same day as a regular or special meeting of the Board; and
|
|
|
·
|
annual compensation of $2,500, paid in quarterly installments of $625, to each member of the Compensation Committee and each member of the Nominating and Corporate Governance Committee (except the Chairman of each such Committee, who is to receive annual compensation of $5,000), plus $750 in cash for each meeting of the Nominating and Corporate Governance Committee attended in person and $500 in cash for each meeting of the Nominating and Corporate Governance Committee attended by telephone, except that the per attendance meeting fee is reduced to $500 for attendance at any Nominating and Corporate Governance Committee meeting held on the same day as a regular or special meeting of the Board.
|
At the option of each director, up to half of the sums designated above as “annual director compensation” may be paid in Company common stock; provided that (1) the option to receive Company common stock is exercisable by notice to the Company at any time prior to the payment of one or more quarterly payments of the annual compensation, (2) common stock issued in lieu of annual compensation is valued at the average between the closing bid and ask price on the day prior to the date upon which the annual compensation became payable, (3) all right, title and interest in and to common stock issued will vest in the receiving director upon issuance, and (4) payment in common stock will only be available if such payment may be made without registration or other similar actions and in compliance with all relevant laws and regulations.
On January 24, 2014, the Company’s Board of Directors, upon the recommendation of the Company’s Compensation Committee, had voted that effective January 1, 2014, the annual director compensation for directors who are not employees of the Company or its subsidiaries, shall be paid in Company common stock as set forth below (which policy was subsequently modified On April 25, 2014 as described below prior to its implementation):
|
·
|
annual director compensation to each member of the Board of Directors of (i) $25,000, paid in quarterly installments of $6,250 (except the Vice Chairman of the Board of Directors who is to receive annual director compensation of $35,000, paid in quarterly installments of $8,750)
|
|
|
·
|
$1,500 in cash for each meeting of the Board of Directors and for each committee meeting attended in person and $750 in cash for each Board of Directors or Board committee meeting attended by means of conference telephone connection;
|
|
|
·
|
annual director compensation of $5,000, paid in quarterly installments of $1,250, to each member of the Audit Committee (except the Chairman of the Audit Committee who is to receive annual compensation of $10,000), plus $750 in cash for each meeting of the Audit Committee attended in person and $500 in cash for each meeting of the Audit Committee attended by telephone, except that the per meeting attendance fee is reduced to $500 for attendance at any Audit Committee meeting held on the same day as a regular or special meeting of the Board; and
|
|
|
·
|
annual director compensation of $2,500, paid in quarterly installments of $625, to each member of the Compensation Committee and each member of the Nominating and Corporate Governance Committee (except the Chairman of each such Committee, who is to receive annual compensation of $5,000), plus $750 in cash for each meeting of the Audit Committee attended in person and $500 in cash for each meeting of the Audit Committee attended by telephone, except that the per attendance meeting fee is reduced to $500 for attendance at any Nominating and Corporate Governance Committee meeting held on the same day as a regular or special meeting of the Board.
|
10
All of the sums designated above as “annual director compensation” were required to be paid in Company common stock; provided that (1) common stock issued in lieu of annual compensation is valued at the average between the closing bid and ask price on the day prior to the date upon which the annual compensation became payable, and (2) all right, title and interest in and to common stock issued will vest in the receiving director upon issuance. However, on April 25, 2014, the Board of Directors, upon the recommendation of the Compensation Committee, modified the January 2014 policy for director compensation to provide that only half of the sums designated above as “annual director compensation” are required to be paid in Company common stock provided that; (1) common stock issued in lieu of annual compensation is valued at the average between the closing bid and ask price on the day prior to the date upon which the annual compensation became payable, and (2) all right, title and interest in and to common stock issued will vest in the receiving director upon issuance.
11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Principal Stockholders
The following table sets forth the number of shares of common stock beneficially owned as of April 15, 2014 by each person who is known by the Company to own beneficially more than five percent of outstanding Company common stock other than executive officers or directors of the Company, whose beneficial ownership is reflected in the Security Ownership of Directors and Executive Officers table below. There were 18,475,347 shares of Company common stock outstanding on April 15, 2014.
Security Ownership of Principal Stockholders Table
|
Name and Address
of Beneficial Owner
|
Amount and Nature of Beneficial
Ownership
|
Percent of Class
|
|
Bedford Oak Advisors, LLC
100 South Bedford Road
Mt. Kisco, NY 10549
|
5,210,434 (1)
|
28.20%
|
|
GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580
|
2,405,028 (2)
|
13.02%
|
|
Frost Gamma Investments Trust
4400 Biscayne Blvd.
Miami, FL 33137
|
1,325,017 (3)
|
7.17%
|
|
(1)
|
Based on a Schedule 13D/A filed jointly by Bedford Oak Advisors, LLC (“Bedford Oak”), Bedford Oak Capital, L.P. (“Capital”), Bedford Oak Acorn, L.P. (“Acorn”) and Mr. Eisen with the SEC on December 20, 2012, and updated for other information known to the Company, including various Form 4’s filed jointly by Bedford Oak, Capital and Mr. Eisen with the SEC through April 15, 2014. . Mr. Eisen is deemed to have beneficial ownership of such shares by virtue of his position as managing member of Bedford Oak, the investment manager of Capital and Acorn and certain other private investment partnerships. Does not include options to purchase 2,750,000 shares of Company common stock exercisable by Mr. Eisen within 60 days of April 15, 2014. . See Security Ownership of Directors and Executive Officers table below.
|
|
(2)
|
Based on a Schedule 13D/A filed jointly by Gabelli Funds, LLC, GGCP, Inc., GAMCO Investors, Inc., GAMCO Asset Management, Inc., MJG Associates, Inc., Teton Advisors and Mario J. Gabelli with the SEC on January 26, 2011.
|
|
(3)
|
Based on a Schedule 13G filed by Frost Gamma Investments Trust with the SEC on February 12, 2014.
|
12
Security Ownership of Directors and Executive Officers
The following table sets forth the beneficial ownership of Company outstanding common stock as of April 15, 2014 by each person who is a director or named executive officer of the Company as of such date, naming each such person, and all persons who are directors and executive officers of the Company as of such date, as a group.
Security Ownership of Directors and Executive Officers Table
|
Name
|
Amount and Nature of Beneficial
Ownership
|
Percent of Class
|
|
|
Harvey P. Eisen
|
7,960,434
|
(1)
|
37.50%
|
|
Scott N. Greenberg
|
225,535
|
(2) (3)
|
1.21%
|
|
Lawrence G. Schafran
|
251,412
|
(3)
|
1.35%
|
|
Ira J. Sobotko
|
100,625
|
(4)
|
*
|
|
Peter M. Donovan
|
991,271
|
(5)
|
5.33%
|
|
Directors and executive officers as a group
(5 persons) (6)
|
9,529,277
|
43.58%
|
|
* The number of shares owned is less than one percent of the outstanding shares.
|
(1)
|
Includes 5,210,434 shares of Company common stock beneficially owned by Bedford Oak, Capital and Acorn. Mr. Eisen is deemed to have beneficial ownership of such shares by virtue of his position as managing member of Bedford Oak, the investment manager of Capital and Acorn. See footnote 1 to Principal Stockholders table above. Also includes 2,750,000 shares of Company common stock issuable upon the exercise of options that are exercisable by Mr. Eisen within 60 days of April 15, 2014.
|
|
(2)
|
Includes 4,000 shares of Company common stock held by members of Mr. Greenberg’s family, and 5,867 shares of Company common stock allocated to Mr. Greenberg’s account pursuant to the provisions of the GP Strategies Retirement Savings Plan. Mr. Greenberg disclaims beneficial ownership of the 4,000 shares of Company common stock held by members of his family.
|
|
(3)
|
Includes 200,000 shares of Company common stock issuable to each of Messrs. Greenberg, and Schafran upon the exercise of options, all of which are exercisable by Messrs. Greenberg and Schafran within 60 days of April 15, 2014.
|
|
(4)
|
Includes 625 shares of Company common stock owned by Mr. Sobotko individually, and 100,000 shares of Company common stock issuable to Mr. Sobotko upon the exercise of options, all of which are currently exercisable.
|
|
(5)
|
Includes 110,771 RSUs, which vested on December 19, 2012 and 28,333 RSU’s, which vested on December 19, 2013 and are subject to post-vesting restrictions on sale through December 19, 2015.
|
|
(6)
|
Includes Messrs. Greenberg and Schafran, each of whom is currently a director of the Company, Messrs. Eisen and Donovan, each of whom is currently a director and a named executive officer of the Company, and Mr. Sobotko who is currently a named executive officer of the Company.
|
13
Equity Compensation Plan Information
The following table provides information as of December 31, 2013 with respect to shares of Company common stock that may be issued under existing equity compensation plans.
|
Plan category
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants, Restricted
Stock Units and rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of securities
remaining
available for future
issuance
under equity
compensation
plans (excluding
securities
reflected in column (a))
(c)
|
|
Equity compensation
plans approved by
security holders (1)
|
4,117,018
|
$2.31
|
6,882,982
|
|
Equity compensation
plans not approved by
security holders
|
―
|
―
|
―
|
|
Total
|
4,117,018
|
$2.31
|
6,882,982
|
|
(1)
|
Consists of: (i) the 2003 Stock Plan, as amended, which was originally adopted by the Board of Directors and approved by the sole stockholder of the Company on November 3, 2003 and the amendment thereto, which was approved by the Board of Directors of the Company on March 1, 2007 and by the stockholders of the Company on December 20, 2007; and (ii) the 2007 Incentive Stock Plan, which was approved by the Board of Directors on July 30, 2007 and by the stockholders of the Company on December 20, 2007.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Bedford Oak
Effective June 1, 2010, the Company relocated its headquarters to the offices of Bedford Oak in Mount Kisco, New York. Bedford Oak is controlled by Harvey P. Eisen, Chairman, Chief Executive Officer and a director of the Company. From June 1, 2010 through August 31, 2012, the Company had been subleasing a portion of the Bedford Oak space and had access to various administrative support services on a month-to-month basis at a rate of approximately $19,700 per month.
On October 31, 2012, the Company’s Audit Committee approved an increase to approximately $40,700 per month (effective as of September 1, 2012) in the monthly sublease and administrative support services rate, which increased rate the Company believes is necessary to provide for the increased personnel and space requirements necessary for an operating company. General and administrative expenses for the years December 31, 2013 and 2012, includes $488,000 and $368,000, respectively, related to the sublease arrangement with Bedford Oak.
Wright acts as an investment advisor, its subsidiary acts as a principal underwriter and several officers of Winthrop are officers for a family of mutual funds from which investment management and distribution fees are earned based on the net asset values of the respective funds. Such fees amounted to $938,000 for the year ended December 31, 2013 and $28,000 from the date of the Company’s acquisition of Wright through December 31, 2012.
See the narrative disclosure following the Summary Compensation Table and the Outstanding Equity Awards at Fiscal Year-End Table in “Item 11. Executive Compensation” for summaries of the compensation arrangements and agreements in which the Company and its executive officers and directors are participants.
14
Director Independence
Since the adoption of the Sarbanes-Oxley Act in July 2002, there has been growing public and regulatory focus on the independence of directors. The Company is not subject to the listing requirements of any securities exchange, including Nasdaq, because the Company’s common stock is traded on the over-the-counter bulletin board. However, in July 2007, the Board of Directors adopted the standards for independence for Nasdaq-listed companies, and the independence determinations that follow are based upon the criteria established by Nasdaq for determining director independence and upon the criteria established by Nasdaq and the SEC for determining Audit Committee member independence.
The Board of Directors determines the independence of its members through a broad consideration of all relevant facts and circumstances, including an assessment of the materiality of any relationship between the Company and a director. In making each of these independence determinations, the Board of Directors considered and broadly assessed, from the standpoint of materiality and independence, all of the information provided by each director in response to detailed inquiries concerning his independence and any direct or indirect business, family, employment, transactional or other relationship or affiliation of such director with the Company.
Using the objective and subjective independence criteria enumerated in the Nasdaq marketplace rules listing requirements and SEC rules, the Board of Directors has reviewed all relationships between each director and the Company and, based on this review, the Board of Directors has affirmatively determined that, in accordance with Nasdaq independence criteria, (i) Mr. Schafran is independent, (ii) Messrs. Eisen, Donovan and Greenberg are not independent.
15
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The fees billed for services rendered for 2013 and 2012 by EisnerAmper LLP, were as follows:
|
2013
|
2012
|
|||||||
|
Audit Fees (1)
|
$
|
187,000
|
$
|
157,000
|
||||
|
Audit-Related Fees (2)
|
-
|
135,000
|
||||||
|
Total
|
$
|
187,000
|
$
|
292,000
|
||||
|
(1)
|
Audit fees consisted principally of fees for the audit of the annual financial statements and reviews of the condensed consolidated financial statements included in the Company’s quarterly reports on Form 10-Q and review of proxy statement.
|
|
(2)
|
Consists of due diligence work incurred on potential acquisitions.
|
Policy on Pre-Approval of Services Provided by Independent Auditor
Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the terms of the engagement of EisnerAmper LLP are subject to specific pre-approval policies. In 2013 and 2012, all audit services and other services to be performed by EisnerAmper LLP require pre-approval by the Audit Committee in accordance with pre-approval policies established by the Board of Directors. The procedures require that all proposed engagements of EisnerAmper LLP for services of any kind be directed to the Audit Committee prior to the beginning of any service.
All services provided by the independent registered public accounting firm for 2013 and 2012 were approved in advance by the Audit Committee of the Board of Directors.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
See accompanying Index to Exhibits.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
WRIGHT INVESTORS’ SERVICE HOLDINGS, INC.
|
||||
|
Date: April 29, 2014
|
By:
|
/s/ IRA J. SOBOTKO
|
||
|
Name:
|
Ira J. Sobotko
|
|||
|
Title:
|
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
|
|||
17
INDEX TO EXHIBITS
|
Number
|
Description
|
|
|
31.1
|
*
|
Certification of Principal Executive Officer
|
|
31.2
|
*
|
Certification of Principal Financial Officer
|
|
*
|
Filed herewith
|
18