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Compensation Committee.
The Compensation Committee is required to have no fewer than three members, all of whom must be and are independent directors under the standards set forth in the Company’s Corporate Governance Guidelines. During 2016 from the Distribution Date,2019, the Compensation Committee consisted of Timothy J. Bernlohr (Chairman)(Chair), Randee E. Day and Ty E. Wallach. The Compensation Committee met one timesix times in 2016 after the Distribution Date.2019.
The Compensation Committee establishes, oversees, and carries out the Company’s compensation philosophy and strategy. It implements the Board responsibilities relating to compensation of the Company’s executive officers, and ensures that the Company’s officers and senior executives are compensated in a manner consistent with the Company’s philosophy and competitive with its peers. As part of its duties, it monitors and oversees the preparation of the Company’s annual Compensation Discussion and Analysis for inclusion in the annual proxy statement, prepares an annual report on executive compensation, and provides guidance with respect to other compensation matters including recommendations for the CEO and the other NEOs.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) provides information regarding the compensation program for our executive officers in 2016. The CD&A describes our compensation philosophy, the objectives of the executive compensation program and policies for the fiscal year ended December 31, 2016, the elements of the compensation program and how each element fits into our overall compensation philosophy. The Compensation Committee is responsible for overseeing the compensation paid to all of our executive officers, including pursuant to the agreements described herein under the heading “Employment Agreements with the NEOs.”
From January 1, 2016 through November 30, 2016, INSW (formerly referred to as “OSG International” or “OIN”) was a wholly-owned subsidiary of Overseas Shipholding Group, Inc. (“OSG”). On November 30, 2016, OSG completed the separation of its business into two independent publicly-traded companies through the Spin-Off of INSW (the “Spin-Off”). All of the executive officers of INSW in 2016 other than Jeffrey Pribor were employees of OSG prior to the Spin-Off. The compensation of the executives who constitute INSW’s named executive officers (the “Named Executive Officers” or “NEOs”) is included in the Summary Compensation Table in this CD&A.
For the first eleven months of 2016, the compensation policies of the Company were those of OSG, and INSW’s compensation policies during the final month of 2016 were substantially the same as those of OSG. INSW’s Human Resources and Compensation Committee (the “Compensation Committee”) is continuing to review those policies and practices, and may adjust them in 2017 in support of the Company’s compensation philosophy and strategy as it evolves.
Our NEOs for 2016 were as follows:
| | | | | | |
Incumbent | | NEOs Prior To The Spin-Off | | NEOs Following the
Spin-Off Position
With INSW
(As of December 1, 2016) |
| Position With OSG | | Position With OIN |
Lois K. Zabrocky | | Senior Vice President and President of the International Flag Strategic Business Unit | | President and Director | | President and Chief Executive Officer (“CEO”) |
Ian T. Blackley | | President, CEO and Director | | Senior Vice President, Chief Financial Officer (“CFO”) and Director | | Non-Employee Director* |
Rick F. Oricchio | | CFO and Senior Vice President | | Comptroller and Director | | None |
Jeffrey D. Pribor | | N/A | | Senior Vice President, CFO and Treasurer | | Senior Vice President, CFO and Treasurer |
James D. Small III | | Senior Vice President, Secretary and General Counsel | | Senior Vice President and Secretary | | Chief Administrative Officer, Senior Vice President, General Counsel & Secretary |
Geoffrey Carpenter | | Vice President and Treasurer | | Treasurer | | None |
Adewale O. Oshodi | | Vice President and Controller | | None | | Controller |
| * | Captain Blackley was appointed as a Director of INSW in connection with the Spin-Off. |
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As indicated in the table above, for the period from January 1 through November 30, 2016, Ms. Zabrocky and Captain Blackley, Messrs. Oricchio, Small, Carpenter and Oshodi were employees of OSG. Accordingly, all compensation and benefits due to these executive officers through November 30, 2016 were paid by OSG. Upon the completion of the Spin-Off and for the period from December 1, 2016 to December 31, 2016, INSW assumed all compensation and benefits obligations for those OSG executives who joined INSW in connection with the Spin-Off, consisting of Ms. Zabrocky and Messrs. Small and Oshodi (the “Former OSG Executives”). Additionally, the employment agreements of the Former OSG Executives who became INSW employees were assumed by INSW on their existing terms with effect from the completion of the Spin-Off (and, for Messrs. Small and Oshodi, subject to the terms of the transition services agreement between OSG and the Company). Mr. Pribor entered an employment agreement with INSW effective as of November 9, 2016, but was paid by OSG for the period prior to the Spin-Off. See “Employment Agreements with the NEOs” below for a discussion in greater detail of the employment agreements between the NEOs and the Company.
In connection with the Spin-Off, Captain Blackley was appointed as a non-employee Director of INSW, and he is a nominee for election to the Board at the Annual General Meeting of Stockholders. Captain Blackley and Mr. Oricchio who remained employees of OSG through December 29, 2016 and Mr. Carpenter who remained an employee through January 31, 2017, provided services to INSW through such dates pursuant to a transition services agreement with OSG.
2016 Performance Highlights
We have a strong and measurable pay for performance philosophy. Accordingly, our operational and financial performance in fiscal year 2015 and 2016 were important factors in understanding our 2016 executive compensation. As INSW was a subsidiary of OSG for the first eleven months of 2016, and because compensation of the NEOs was based at least in part on OSG’s 2016 performance, we have also included certain details relating to OSG’s 2016 performance. Performance highlights included:
Planned and successfully executed the Spin-Off of INSW from OSG, thereby separating the original company into two standalone business entities consisting of OSG (the U.S. Flag business of OSG prior to the Spin-Off) and INSW (the International Flag business of OSG prior to the Spin-Off).
Time charter equivalent (“TCE”) revenues for INSW decreased in 2016 by $90.7 million, or 19%, to $385.0 million from $475.8 million in 2015. On a standalone basis (i.e. excluding the business of OIN), OSG’s 2016 TCE revenues were $446.2 million, down 1% compared with 2015.
Earnings from shipping operations (“ESO”) (as hereafter defined) for OSG decreased to $310.4 million for the 11 months ended November 30, 2016 from $365.6 million in 2015. ESO is income from vessel operations before depreciation and amortization and gains and losses from vessel sales (including impairments) reduced by payments for drydockings and vessel expenditures.
INSW’s loss for 2016 was $18.2 million, or a per-share loss of $0.62, compared with net income of $173.2 million, or per-share income of $5.94 for 2015. Net loss for 2016 reflects impairment charges on vessels and equity method investments aggregating $109.8 million.
INSW’s 2016 adjusted EBITDA was $222.0 million, a 26% decrease from $299.2 million in 2015. Adjusted EBITDA consists of EBITDA (which represents net income before interest expense, income taxes and depreciation and amortization expense) adjusted for the impact of certain items that INSW does not consider indicative of our ongoing operating performance, as disclosed in Item 6, “Selected Financial Data” included our Annual Report for 2016 on Form 10-K, a copy of which can be obtained as described in “Other Matters” below.
INSW’s total cash was $92.0 million as of December 31, 2016, compared to cash of $308.9 million as of December 31, 2015 (excluding restricted cash of $0 in 2016 and $9.0 million in 2015).
INSW repaid approximately $152.7 in principal amount of its term loan facility in 2016, and also paid dividends of $202 million to OSG for use by OSG in repayment of debt and for other corporate purposes.
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Our common stock began regular way trading on the NYSE on December 1, 2016 under the ticker symbol “INSW.”
Moved the corporate headquarters of INSW within Manhattan without office disruption and at an on-going lower cost.
Say on Pay Results
At OSG’s 2016 annual meeting of stockholders, approximately 95% of the stockholders who voted on the say-on-pay proposal voted in favor of OSG’s executive compensation program. In consideration of these results, OSG’s Compensation Committee acknowledged the support received from its stockholders and viewed the results as a confirmation of the company’s existing executive compensation policies and decisions.
As mentioned above, INSW’s compensation policies and practices during the one-month period from the effective date of the Spin-Off through December 31, 2016 remained substantially the same as OSG’s. The Compensation Committee is reviewing these policies and practices in 2017, and will adjust them as necessary in support of the Company’s strategy as it evolves.
At the 2017 annual meeting of stockholders, INSW will hold an annual advisory vote to approve executive compensation as well as a “say-when-on-pay” vote. The Compensation Committee will continue to engage with its stockholders and consider the results from this year’s and future advisory votes on executive compensation, as well as feedback from stockholders.
Compensation Philosophy and Objectives
INSW believes that a well-designed compensation program is a powerful tool to attract, motivate, retain and reward top executive and managerial talent. INSW further believes that the compensation program should align the interests of executives with those of stockholders in achieving and sustaining increases in stockholder value over the short-and long-term. We structure our compensation program to drive and support these goals. The compensation program is designed with the following objectives in mind:
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COMPENSATION PROGRAM OBJECTIVES |
Overall Objectives: | | •
Attract, motivate, retain and reward highly-talented executives and managers, whose leadership and expertise are critical to our overall growth and success.
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Align the interests of our executives with those of our stockholders.
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Support the long-term retention of the Company’s executives to maximize opportunities for teamwork, continuity of management and overall effectiveness.
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Compensate each executive competitively (1) within the marketplace for talent in which we operate; (2) based upon the scope and impact of his or her position as it relates to achieving our corporate goals and objectives; and (3) based on the potential of each executive to assume increasing responsibility within the Company.
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| | •
Discourage excessive and imprudent risk-taking.
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Structure the total compensation program to reward the achievement of both the short-term and long-term strategic objectives necessary for sustained optimal business performance.
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COMPENSATION PROGRAM OBJECTIVES |
Pay Mix Objectives | | •
Provide a mix of both fixed and variable (“at-risk”) compensation, each of which has a different time horizon and payout form (cash and equity), to reward the achievement of annual and sustained, long-term performance.
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Pay-For-Performance Objectives | | •
Use our incentive compensation program and plans to align the interests of our executives with those of our stockholders by linking incentive compensation rewards to the achievement of performance goals that maximize stockholder value by:
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| | –
Ensuring our compensation programs are consistent with, and supportive of, our short-term and long-term strategic, operating and financial objectives.
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Placing a significant portion of our executives’ compensation at risk, with payouts dependent on the achievement of both corporate and individual performance goals, which are set annually by the Compensation Committee.
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Encouraging balanced performance by employing a variety of performance measures to avoid over-emphasis on the short-term or any one metric.
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Applying judgment and reasonable discretion in making compensation decisions to avoid relying solely on formulaic program design, and to take into account both what has been accomplished and how it has been accomplished in light of the existing commercial environment.
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Executive Compensation Practices
It is our goal to maintain an executive compensation program that is competitive, rooted in the principles of pay-for-performance and that conforms to best practices in executive compensation and corporate governance. To this end, the Compensation Committee routinely evaluates its practices and programs with respect to executive compensation in an effort to identify any opportunities for improvement that might exist. The following table summarizes some of the key features of our executive compensation program.
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WHAT WE DO:
| | |
Stock Ownership Guidelines | | We maintain, and track progress against, stock ownership guidelines for our executives and directors. |
Anti-Hedging Policies | | We maintain policies and procedures for transactions in the Company’s securities that are designed to ensure compliance with all insider trading rules and that prohibit all hedging and short-selling of our stock by all officers and employees. |
Compensation Recoupment (“Clawback”) Policy | | All of our incentive compensation plans and the terms of our equity agreements provide that the Compensation Committee may seek reimbursement of incentives paid or equity-related proceeds provided to an executive officer if it is later determined that the executive officer engaged in misconduct, acted in a manner contrary to the Company’s interest or breached a non-competition agreement. |
WHAT WE DO NOT DO:
| | |
Excise Tax Gross-Ups | | We do not provide for excise tax gross-ups. |
Supplemental Executive Retirement Plans (“SERPs”) | | We do not provide any SERPs, and our legacy SERP was frozen to new participants in November 2012. |
Roles in Setting Executive Compensation
Role of the Compensation Committee
Structure of the Compensation Committee: Following the Spin-Off, the Compensation Committee consisted of three members of the Board of Directors. Each of the Directors serving on the Compensation Committee qualified as independent under the NYSE listing standards as well as applicable independence standards under the Exchange Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and the Internal Revenue Code of 1986, as amended (the “Code”). Two of the three members of the Compensation Committee were also members of the OSG Compensation Committee as of December 31, 2016. Recognizing the importance of independent perspectives, the Compensation Committee met in executive session, without any members of management present, following the only committee meeting in 2016 after the Spin-Off. Going forward, it is anticipated that the Compensation Committee will meet frequently in executive session, without any members of management present.
Objectives of The Compensation Committee and the Decision-Making Process: The primary goals of the Compensation Committee are to establish the Company’s compensation philosophy and strategy and to ensure that all of its executives are compensated in a manner consistent with the articulated philosophy and strategy. The Compensation Committee takes many factors into account when making compensation decisions with respect to the NEOs and other senior executives, including the individual’s performance, tenure and experience; the ability of the individual to affect long-term growth and success; INSW’s overall performance; internal equity among the NEOs; and external, publicly available market data on competitive compensation practices and levels.
Role of Outside Advisors: The Compensation Committee has the authority to engage independent advisors to assist in carrying out its duties. Following the Spin-Off, the Compensation Committee engaged Lyons, Benenson & Company Inc. (“LB&Co.”) as its compensation consultant to advise on executive and
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director compensation arrangements and related governance matters. LB&Co. assisted management in the preparation of the annual proxy report for 2016.
Compensation Consultant Conflict of Interest Assessment: As required by rules adopted by the SEC under the Dodd-Frank Act, each of the Compensation Committees assessed all relevant factors and determined that the work of LB&Co. did not raise any conflict of interest in 2016. In making this determination, those committees considered all relevant factors, including those set forth in Rule 10C-1(bX4)(i) through (vi) under the Exchange Act.
Role of the CEO in Setting CEO and Other Executives’ Compensation
All decisions relating to Ms. Zabrocky’s compensation, as the CEO of INSW, are made by the Compensation Committee and prior to the Spin-Off were made by the OSG Compensation Committee without her or other members of management present. In making determinations regarding compensation for INSW’s NEOs and other selected senior executives, the Compensation Committee generally considers the recommendations of the CEO (for all executives other than herself), and advice received from LB&Co. The CEO recommends the compensation levels for the NEOs and for all others whose compensation is determined by the Compensation Committee. In making her recommendations, the CEO evaluates the performance of each executive, considers each executive’s compensation in relation to the other officers and executives and assesses the retention risks. All recommendations of the CEO are subject to review by and, in some cases, approval of the Compensation Committee or, when sufficiently material, the full Board.
All 2016 compensation decisions (including base salaries, annual and long-term incentive target percentages and annual and long-term incentive performance measures and goals) were made under the auspices of the OSG Compensation Committee, as OSG and INSW were one company until completion of the Spin-Off on November 30, 2016, and no changes were made to compensation levels in December 2016. The OSG Compensation Committee was responsible for the review and certification of the 2016 performance results that determined the annual and long-term incentive payouts for the NEOs.
2016 Peer Group
In general, we strive for total compensation to be competitive with a select group of companies that the Compensation Committee believes to be an appropriate compensation reference group (the “Peer Group”). The Compensation Committee periodically reviews the Peer Group to affirm that it is comprised of companies that are similar to us in terms of industry focus and scope of operations, size (based on revenues), and the competitive marketplace for talent.
For 2016, the OSG Compensation Committee approved a Peer Group consisting of 15 publicly traded oil shipping and transportation companies with revenues between $300 million and $3.5 billion, and median revenues of $1.37 billion. When creating the 2016 Peer Group, the Compensation Committee considered measures of financial and operating performance; the scope of products and services offered; and the geographic footprint of each of the Peer Group companies. The 2016 Peer Group is set forth below.
2016 Peer Group Companies
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GATX Corporation | | Rose Rock Midstream, L.P. |
Gener8 Maritime, Inc. | | SemGroup Corporation |
Kirby Corporation | | Spectra Energy Partners, L.P. |
Magellan Midstream Partners, L.P. | | Tallgrass Energy Partners, L.P. |
MarkWest Energy Partners, L.P. | | TC PipeLines, L.P. |
Martin Midstream Partners, L.P. | | Tesoro Logistics, L.P. |
Matson, Inc. | | Western Gas Partners, L.P. |
MPLX L.P.
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While the 2016 Peer Group was relevant and representative of the marketplace for talent to compensation for OSG prior to the Spin-Off, including the executive officers of INSW as a subsidiary of OSG for substantially all of 2016, following the Spin-Off the Compensation Committee requested LB&Co. to research and recommend a new Peer Group for 2017 to ensure that the Peer Group going forward is appropriate for INSW as an internationally-focused independent publicly-traded shipping company. The recommended new Peer Group is discussed in greater detail below.
2017 Peer Group
In connection with the Spin-Off, and in recognition of the fact that INSW as a stand-alone company would differ from the former OSG in both size and scope of operations, the Compensation Committee worked with LB&Co. to identify a new Peer Group for 2017, and has approved the following new Peer Group for 2017 (the “2017 Peer Group”). The 2017 Peer Group consists of 14 publicly-traded oil shipping and transportation companies, approximately half of which were members of the 2016 Peer Group. The recommended 2017 Peer Group generally has a greater international focus than the 2016 Peer Group and total revenues between $100 million and $2.3 billion and median revenues of $536.2 million.
2017 Peer Group Companies
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DHT Holdings, Inc. | | Genesis Energy, L.P. |
Dorian LPG Ltd. | | Kirby Corporation |
Eagle Bulk Shipping Inc. | | Martin Midstream Partners, L.P. |
Euronav NV | | Matson, Inc. |
GATX Corporation | | SEACOR Holdings Inc. |
Genco Shipping & Trading Limited | | SemGroup Corporation. |
Gener8 Maritime, Inc. | | Tesoro Logistics, L.P. |
How We Intend to Use the Peer Group
While the Compensation Committee believes the data derived from any Peer Group is helpful, it also recognizes that benchmarking is not necessarily definitive in every case. Furthermore, the Peer Group is limited to those companies for which executive compensation data is publicly available, which necessarily eliminates some of INSW’s closest competitors that are privately held and/or incorporated in jurisdictions that do not require public disclosure of executive compensation. The Compensation Committee, therefore, intends to use the information from the Peer Group for informational and analytical purposes, but will not make compensation decisions based solely on this market data. With this in mind, INSW will augment the Peer Group data with publicly-available survey data, and will use all compensation data in conjunction with annual assessments of corporate and individual performance to make recommendations and decisions on the compensation arrangements applicable to the Company’s NEOs.
Elements of the 2016 Executive Officer Compensation Program
The Compensation Committee reviews each element of compensation annually to ensure alignment with its compensation philosophy and objectives, as well as to assess its executive compensation program and levels relative to the competitive landscape. The executive compensation program consists of the following:
Base salary
Annual cash incentive awards
Long-term incentive compensation
Severance arrangements through employment agreements
Retirement benefits generally available to all employees under the Savings Plan
Welfare benefits (e.g., medical, dental, disability and life insurance)
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INSW seeks to provide competitive “fixed” compensation in the form of base salary while emphasizing a pay for performance culture in which we place a larger portion of total compensation “at risk” in the form of annual performance-based cash incentives that will only be paid if INSW achieves specified performance goals and long-term equity incentives that vest over a multi-year period and, in certain cases, also depend on the achievement of specific performance goals.
Base Salary
We strive to pay base salaries that are market competitive to attract talented executives and to provide a secure fixed level of compensation to our executives and managers. The Compensation Committee reviews the base salaries of the executive officers and compares them to the salaries of senior management among the Peer Group companies, bearing in mind that total estimated direct compensation opportunity is the principal comparative measure of the competitiveness of its program. Based on its own experience and that comparison, the Compensation Committee determines whether the salaries of the NEOs are at levels sufficient to attract, motivate and retain, in concert with other elements of compensation, the executives who are essential to leading the Company and driving stockholder value.
Annual adjustments in base salary, if any, take into account individual performance, prior experience, position duties and responsibilities, internal equity and external market practices. The Compensation Committee generally relies on the CEO’s evaluation of each NEO’s performance (other than her own) in deciding whether to recommend and/or approve merit increases for any NEOs in a given year. In those instances, where the duties and responsibilities of an NEO change, the CEO may recommend any changes believed to be warranted, and the Compensation Committee will consider all the factors enumerated above in determining whether to approve any such increases. For the performance year 2016, the Compensation Committee relied on NEO evaluations from both Captain Blackley, who served as President and CEO of OSG from January 1, 2016 until November 30, 2016, and Ms. Zabrocky, who became President and CEO of INSW effective immediately following the Spin-Off for the period from December 1, 2016 to December 31, 2016.
There were not any base salary changes for the NEOs from 2015 to 2016, except Messrs. Carpenter and Oshodi who received increases of 2.5% of their 2015 base pay to $302,375 and $225,500.
The following table summarizes 2016 base salaries for our NEOs.
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Name | | Position | | 2016 Salary |
Zabrocky | | | President and Chief Executive Officer (“CEO”) | | | $ | 525,000 | |
Blackley | | | Formally Chief Financial Officer (“CFO”) and Director | | | $ | 675,000 | |
Pribor | | | Senior Vice President, CFO and Treasurer | | | $ | 450,000 | |
Oricchio | | | Formally Comptroller and Director | | | $ | 475,000 | |
Small | | | Chief Administrative Officer, Senior Vice President, General Counsel & Secretary | | | $ | 475,000 | |
Carpenter | | | Formally Treasurer | | | $ | 302,375 | |
Oshodi | | | Controller | | | $ | 225,500 | |
2016 Annual (Cash) Incentive Plan
The Company has adopted the International Seaways, Inc. Management Incentive Compensation Plan (the “MICP”), which is substantially similar to that of OSG’s Management Incentive Compensation Plan prior to the Spin-Off. As described in greater detail below, payments for 2016 were determined pursuant a combination of metrics and goals that considered the results and activities of OSG prior to the Spin-Off and those of INSW following the Spin-Off. Pursuant to (the “MICP”), NEOs are eligible to receive annual cash incentives based upon the achievement of the specified annual performance goals, which are to be established and approved by the Compensation Committee during the first quarter of the performance year. Our annual cash incentive plan is intended to focus the NEOs on critical, short-term financial and operational goals.
As in past years, the financial performance measure for 2016 was earnings from shipping operations (“ESO”), at both company and (for the business unit executives) business unit levels. With respect to 2016, performance goals for OSG prior to the Spin-Off were established by the OSG Compensation Committee during the first quarter of 2016. Accordingly, annual incentive compensation through November 30, 2016 was
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based on results and calculations for OSG on a consolidated basis and for the Former OSG Executives the results of both the U.S. Flag and the International Flag business units. For Ms. Zabrocky, annual incentive compensation was based on results and calculations for OSG on a consolidated basis and for the International Flag business unit only. For the month of December 2016, INSW’s ESO, business metrics and individual performance were used to calculate the annual incentive.
As determined by the OSG Compensation Committee and as reflected in amendments to their employment agreements, annual incentive targets for four NEOs were reduced since 2015. For 2016, Ms. Zabrocky, and Messrs. Oricchio and Small were eligible for annual cash incentives targeted at 125% of their base salaries compared with 150% in 2015. Captain Blackley was eligible for a target annual cash incentive at 137.5% of his base salary compared to 150%. Pursuant to his employment agreement, Mr. Pribor received $75,000 in lieu of a 2016 annual incentive award. Mr. Carpenter’s annual incentive target was 40% of base salary and Mr. Oshodi’s was 55% of base salary, each of which remained unchanged from 2015. The potential actual incentive award range was 0% to 150% of target.
Each NEO had a different weight ascribed to corporate, business unit and individual goals. The specific weights (which were ultimately recommended by the CEO and approved by the Compensation Committee) were established based on the scope of each NEO’s role and their respective abilities to affect the results. The following table sets forth the weights by component and NEO.
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Individual | | Corporate ESO | | Business Unit ESO | | Business Unit Operational Metrics | | Individual Performance Goals |
Lois K. Zabrocky | | | 25 | % | | | 25 | % | | | 25 | % | | | 25 | % |
Ian T. Blackley(1) | | | 60 | % | | | N/A | | | | 15 | % | | | 25 | % |
Jeffrey D. Pribor(2) | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Rick F. Oricchio(1) | | | 60 | % | | | N/A | | | | 10 | % | | | 30 | % |
James D. Small III | | | 60 | % | | | N/A | | | | 10 | % | | | 30 | % |
Geoffrey L. Carpenter | | | 50 | % | | | N/A | | | | N/A | | | | 50 | % |
Adewale O. Oshodi | | | 50 | % | | | N/A | | | | N/A | | | | 50 | % |
| (1) | Executive was eligible for an Annual Incentive award at the beginning of the plan year, however, no annual incentive was paid pursuant to his employment agreement after separation on December 29, 2016. |
| (2) | Executive joined INSW effective November 9, 2016, and therefore was ineligible to participate in the 2016 annual incentive plan. |
N/A — Not Applicable, meaning that this component was not used in calculating such executive’s award.
Following the Spin-Off, the Compensation Committee adjusted the weightings for each component to better reflect the scope of each NEO’s new role with INSW. The table below details the weights established for the INSW NEOs for December 2016. The references to “business unit” -specific metrics were eliminated, as the operations that previously comprised OSG’s International Flag business unit now comprise INSW’s stand-alone business, while “corporate” ESO refers to ESO for what formerly comprised the International Flag business unit of OSG.
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Individual | | Corporate ESO | | Operational Metrics | | Individual Performance Goals |
Lois K. Zabrocky | | | 60 | % | | | 15 | % | | | 25 | % |
Ian T. Blackley(1) | | | N/A | | | | N/A | | | | N/A | |
Jeffrey D. Pribor(2) | | | N/A | | | | N/A | | | | N/A | |
Rick F. Oricchio(1) | | | N/A | | | | N/A | | | | N/A | |
James D. Small III | | | 60 | % | | | 10 | % | | | 30 | % |
Geoffrey L. Carpenter(3) | | | 50 | % | | | N/A | | | | 50 | % |
Adewale O. Oshodi | | | 33.3 | % | | | 33.3 | % | | | 33.4 | % |
| (1) | Executives left the Company effective December 29, 2016 and were paid pursuant to their respective employment agreements. |
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| (2) | Executive joined INSW effective November 9, 2016, and therefore was ineligible to participate in the 2016 annual incentive plan. |
| (3) | The weightings of each component remained the same following the Spin-Off as prior to December because the executive remained an employee of OSG and departed on January 31, 2017. |
N/A — Not Applicable, meaning that this component was not used in calculating such executive’s award.
For 2016, business unit ESO goals were assessed on achievement scale of 0% to 130%, and business unit metrics and individual performance goals were assessed on achievement rating scale of 0% to 130%, with 100% as the performance factor for achieving target performance. If a rating for a measure was below 70%, the performance factor for that measure is zero, resulting in no bonuses being payable under that measure. If a rating for an individual performance measure was below 70%, the performance factor for that measure is zero, resulting in no bonus being payable. The formulas to determine each NEO’s actual annual cash incentive award are as follows:
Through November 30, 2016:
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CEO (Blackley)
|
the sum of
|
Base Salary × Target Incentive % × | | (60% × Performance Factor for Company ESO 0-150%) + | |
= | | Annual Cash Incentive Payout |
| (15% × Performance Factor for BU Metrics 0-150%) + |
| (25% × Performance Factor for Individual 0-150%) |
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CFO (Oricchio) and General Counsel (Small) |
the sum of |
Base Salary × Target Incentive % × | | (60% × Performance Factor for Company ESO 0-150%) + | |
= | | Annual Cash Incentive Payout |
| (10% × Performance Factor for BU Metrics 0-150%) + |
| (30% × Performance Factor for Individual 0-150%) |
| | | | | | |
Corporate Participants (Carpenter and Oshodi) |
the sum of |
Base Salary × Target Incentive % × | | (50% × Performance Factor for Company ESO 0-150%) + | |
= | | Annual Cash Incentive Payout |
| (50 × Performance Factor for Individual 0-150%) |
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Business Unit Participants (Zabrocky) |
the sum of |
Base Salary × Target Incentive % × | | (25% × Performance Factor for Company ESO 0-150%) + | |
= | | Annual Cash Incentive Payout |
| (25% × Performance Factor for BU ESO 0-150%) + |
| (25% × Performance Factor 0-150%) for BU Metrics + |
| (25% × Performance Factor 0-150%) for Individual |
For December 2016:
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CEO (Zabrocky) |
the sum of |
Base Salary × Target Incentive % × | | (60% × Performance Factor for Company ESO 0-150%) + | |
= | | Annual Cash Incentive Payout |
| (15% × Performance Factor for Operational Metrics 0-150%) + |
| (25% × Performance Factor for Individual 0-150%) |
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| | | | | | |
CFO and Chief Administrative Officer/General Counsel (Small) |
the sum of |
Base Salary × Target Incentive % × | | (60% × Performance Factor for Company ESO 0-150%) + | |
= | | Annual Cash Incentive Payout |
| (10% × Performance Factor for Operational Metrics
0-150%) + | | |
| (30% × Performance Factor for Individual 0-150%) |
| | | | | | |
Other Participants |
the sum of |
Base Salary × Target Incentive % × | | (33.3% × Performance Factor for Company ESO 0-150%) + | |
= | | Annual Cash Incentive Payout |
| (33.3% × Performance Factor for Operational Metrics 0-150%) + | | |
| (33.4% × Performance Factor for Individual 0-150%) |
Note: Includes International and US flag operational metrics for Ms. Zabrocky and Messrs. Small and Oshodi.
2016 Company and Business Unit ESO Goals
For 2016, the table below sets forth the performance goals at the OSG pre-Spin-Off corporate and the INSW/International Flag business unit, and the corresponding amounts that would be earned (expressed as percentages of target) by the NEOs at each level of achievement. In 2016, ESO result for the 11 months ended November 30 for OSG corporate was $310,380,000 and ESO for the International Flag business unit/INSW was $162,530,000, which corresponded to performance factors of 83.3% and 75%, respectively. In considering the effect of the Spin-Off, the OSG Corporate ESO targets were adjusted, with the goals calculated to reflect an 11-month performance period. Results for the International Flag business unit/INSW were calculated on a full-year basis.
| | | | | | | | |
($ Thousands) | | | | Bottom of range |
Performance Factor | | % Achievement | | Int’l SBU (12-month) | | Corporate (12-month) | | Adjustedfor Corporate (11-month) |
50.0% | | | 70 | % | | | 113,662 | | | | 236,868 | | | | 218,811 | |
58.4% | | | 75 | % | | | 129,798 | | | | 258,410 | | | | 238,711 | |
66.7% | | | 80 | % | | | 145,933 | | | | 279,952 | | | | 258,611 | |
75.0% | | | 85 | % | | | 162,069 | | | | 301,494 | | | | 278,510 | |
83.3% | | | 90 | % | | | 178,204 | | | | 323,036 | | | | 298,410 | |
91.7% | | | 95 | % | | | 194,340 | | | | 344,578 | | | | 318,310 | |
100.0% | | | 100 | % | | | 210,475 | | | | 366,120 | | | | 338,210 | |
108.4% | | | 105 | % | | | 226,611 | | | | 387,662 | | | | 358,110 | |
116.7% | | | 110 | % | | | 242,746 | | | | 409,204 | | | | 378,010 | |
125.0% | | | 115 | % | | | 258,882 | | | | 430,746 | | | | 397,910 | |
133.3% | | | 120 | % | | | 275,017 | | | | 452,288 | | | | 417,809 | |
141.7% | | | 125 | % | | | 291,153 | | | | 473,830 | | | | 437,709 | |
150.0% | | | 130 | % | | | 307,288 | | | | 495,372 | | | | 457,609 | |
Business Unit/INSW Operational Goals
For 2016, the International Flag business unit/INSW were weighted equally. The commercial metrics related to the time charter equivalent performance (“TCE”) of INSW’s VLCCs, Aframaxes, Panamaxes and MRs TCE compared with spot TCE rates of competitors, and savings on drydock placement. The operational measures were:
| (i) | Achieving or doing better than the International Flag business unit/INSW vessel operating budget; |
| (ii) | Time not earning (technical) — a metric that tracking unplanned off hire; |
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| (iii) | Total recordable case frequency (“TRCF”) — a metric that tracks injuries and monitors the incident recording process, includes near misses; and |
| (iv) | Vetting observations — Total operational and safety observations on the vessels. |
The overall International business unit/INSW operational performance score for 2016 was 113.5%.
Individual Performance Goals
Each of our NEOs also had individual performance goals, which were established by the Compensation Committee (or, in the case of Messrs. Oshodi and Carpenter, by Mr. Oricchio in his role as CFO) early in the 2016 performance year. The individual goals for 2016 (which were established by the OSG Compensation Committee prior to the Spin-Off) covered a broad range of performance indicators that generally included the following:
Separate OSG’s U.S. Flag and International businesses;
Reduce general and administrative expenses;
Manage the elimination of Class B Common Stock and warrants;
Develop strategies for capital allocation in light of the impending Spin Off;
Relocate the NY Office without business disruption;
Renegotiate contract extensions for the FSO joint venture; and
Special projects debt management, capital management and financial reports
After the 2016 performance year, the Compensation Committee assessed the level of achievement of our NEOs relative to their respective individual performance goals. Following this assessment, it was determined that Ms. Zabrocky and Captain Blackley, Messrs. Oricchio, Small and Oshodi achieved their individual goals above target levels. Mr. Carpenter remained an OSG employee after the Spin-Off and departed effective January 31, 2017 and was paid pursuant to his employment contract. Mr. Pribor was not a participant in the 2016 annual incentive plan, and accordingly did not have individual goals.
2016 Actual Annual Incentive Paid
Based on the foregoing, the NEOs received the following annual cash incentive awards for 2016: Ms. Zabrocky — $629,713; Mr. Small — $558,383; and Mr. Oshodi — $115,646. Captain Blackley’s and Mr. Oricchio’s employment ended in December 2016. Pursuant to his employment agreement, Mr. Pribor received $75,000 in lieu of an annual cash incentive award for 2016. Mr. Carpenter’s employment ended in January of 2017 and the annual cash incentive award was $110,851.
2014 Retention Bonuses
On December 19, 2014, OSG’s board of directors approved the OSG Retention Bonus Plan (the “OSG Retention Plan”) for a number of participants, including Ms. Zabrocky, Captain Blackley, Messrs. Carpenter and Oshodi. The objective of the OSG Retention Plan was to promote OSG’s interests to provide certain key employees with an appropriate incentive to remain employed with OSG through December 19, 2016 (the “Retention Period”). Awards under the OSG Retention Plan were to be paid in a lump sum after the completion of the Retention Period. The retention awards for Ms. Zabrocky and Captain Blackley, Carpenter and Oshodi were $525,000, $475,000, $147,500 and $220,000, respectively. These awards were paid to Ms. Zabrocky on January 12, 2017, to Captain Blackley on February 9, 2017 and Messrs. Carpenter and Oshodi on December 30, 2016.
Equity-Based Compensation
INSW’s equity-based compensation program, like OSG’s before it, is intended to align the interests of its executives with those of its stockholders, and to focus executives on the achievement of long-term performance objectives that are aligned with its business strategy, thereby establishing a direct relationship between compensation, long-term operating performance and sustained increases in stockholder value.
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OSG, in its capacity as the sole stockholder of International Seaways, Inc. at the time it was a subsidiary of OSG, approved the Management Incentive Compensation Plan (“MICP”), as well as a similar plan applicable to the incentive compensation for non-employee directors (the “Director Plan”), prior to the Spin-Off. The Compensation Committee subsequently ratified the adoption of the MICP and the Director Plan to facilitate the grant of equity and cash incentives to employees (including our NEOs) and consultants of the Company and to enable the Company to obtain and retain the services of these individuals, which is essential to our long-term success. INSW reserved 2,000,000 shares for issuance under the MICP and 400,000 shares for issuance under the Director Plan.
The MICP provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, performance units, performance shares and other performance awards, restricted stock units, restricted stock, and other awards valued in whole or in part by reference to, or otherwise based on, INSW stock. The MICP contains anti-dilution provision whereby in the event of various corporate changes in the Company, outstanding awards may be adjusted, as appropriate, in order to prevent dilution or enlargement or rights.
Equity awards may be granted from time to time to motivate and retain executives as consistent with our practices and align their interests with stockholders. In March 2016, the OSG Compensation Committee approved the following long-term incentive award date values for each of our NEOs:
| | | | | | | | |
Incumbent | | Total Grant Date Value | | Stock Options | | Time-Based RSUs | | Performance- Based RSUs |
Lois K. Zabrocky | | $ | 525,000 | | | $ | 175,000 | | | $ | 175,000 | | | $ | 175,000 | |
Ian T. Blackley | | $ | 1,500,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | 500,000 | |
Rick F. Oricchio | | $ | 900,000 | | | $ | 300,000 | | | $ | 300,000 | | | $ | 300,000 | |
James D. Small III | | $ | 900,000 | | | $ | 300,000 | | | $ | 300,000 | | | $ | 300,000 | |
Geoffrey Carpenter | | | — | | | | — | | | | — | | | | — | |
Wale Oshodi | | | — | | | | — | | | | — | | | | — | |
Represents grants made on March 30, 2016 pursuant to the terms of each of the OSG Management Incentive Compensation Plan. Each PRSU represents a contingent right to receive a share of stock based upon the covered employees being continuously employed through the end of the period over which the performance goals are measured. The 2016 Award vests as follows: (i) one-third of the target PRSUs shall vest on December 31, 2018, subject to OSG’s three-year cumulative earnings per share (“EPS”) performance; (ii) one-third of the target PRSUs shall vest on December 31, 2018, subject to OSG’s three-year return on invested capital (“ROIC”) performance; and (iii) one-third of the target PRSUs will be subject to OSG’s three-year total shareholder return (“TSR”) performance relative to that of a performance peer group. Vesting is subject in each case to the Compensation Committee’s certification of achievement of the performance targets no later than March 31, 2019. The funding formulas applicable to the PRSUs are as follows:
| | | | | | |
Cumulative EPS And ROIC | | Threshold | | Target | | Maximum |
Performance Achievement | | | 70 | % | | | 100 | % | | | 130 | % |
Payout | | | 50 | % | | | 100 | % | | | 150 | % |
| | | | | | |
TSR | | Threshold | | Target | | Maximum |
Performance Achievement | | | 25% percentile | | | | 50th Percentile | | | | 90th Percentile | |
Payout | | | 50 | % | | | 100 | % | | | 150 | % |
The 2016 tranche of the 2015 PRSU grant for Ms. Zabrocky and Messrs. Small, Carpenter and Oricchio, $40,411, $101,026, $13,469 and $10,102, respectively.
Upon termination of employment for any reason, all unvested PRSUs will be forfeited unless the NEO’s employment agreement provides otherwise.
Treatment of Previously Granted Equity Awards Following the Spin-Off
The OSG Management Incentive Compensation Plan contains anti-dilution provisions whereby in the event of any change in the capitalization of the Company the number and the type of securities underlying outstanding awards must be adjusted, as appropriate, in order to prevent dilution or enlargement of rights.
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Accordingly, the impact of these provisions resulted in a modification of all outstanding awards to reflect the stock dividend declared by OSG on November 20, 2015 and the one (1) for six (6) reverse stock split that became effective on June 13, 2016.
Additionally, pursuant to the Employee Matters Agreement dated November 30, 2016 (the “Employee Matters Agreement”), which was filed as an exhibit to a Form 8-K filed with the SEC on December 2, 2016 in connection with the Spin-Off, all outstanding awards have again been adjusted to preserve each Executive’s economic interests to the maximum extent possible, while providing each Executive with shares of common stock of the Company he or she is working for following the Spin-Off, rather than shares in the “spun-off” business. This was done such that each Executive’s economic interests were substantially the same on the business day immediately prior to and immediately following the Spin-Off. The number of securities, shares and option exercise prices disclosed in this CD&A, therefore, reflect these collective adjustments.
The Spin-Off affected unvested awards, including the March 2016 grants made to Ms. Zabrocky and Captain Blackley, Messrs. Oricchio, and Small. As a result of the Spin-Off, outstanding grants made to Ms. Zabrocky and Messrs. Small and Oshodi were assumed by INSW and became grants providing for vesting and settlement in shares of INSW stock. See “Executive Equity Awards Following the Spin-Off” below. The treatment of outstanding equity awards at the time of the Spin-Off was subject to the terms of the Employee Matters Agreement. INSW will recognize additional compensation expense of approximately $427,000 over the remaining vesting period of such awards for financial reporting purposes as a result of these modifications.
Captain Blackley’s, Messrs. Oricchio’s and Carpenter’s awards were also adjusted. Their respective grants were not, however, assumed by INSW as neither Captain Blackley, Messrs. Oricchio nor Carpenter became employees of INSW following the Spin-Off. Captain Blackley, Messrs. Oricchio and Carpenter, therefore, continued to hold OSG equity in connection with their 2016 long-term incentive grants and were paid pursuant to the terms of their employment agreement at termination.
Executive Equity Awards Following the Spin-Off
Pursuant to the terms of the Employee Matters Agreement, the outstanding equity awards previously made to Ms. Zabrocky and to Messrs. Small and Oshodi were assumed by INSW and the terms of those awards were appropriately adjusted pursuant to the terms thereof and of the Employee Matters Agreement to reflect the issuance of INSW stock upon vesting and settlement. Previously outstanding RSUs and non-qualified stock options were adjusted using a volume-weighted average price (“VWAP”) calculation described in the Employee Matters Agreement, which compared the 20-day VWAP of OSG’s Class A common stock prior to the Spin-Off to the 20-day VWAP of INSW’s common stock following the effective date of the Spin-Off.
The stock options issued to our NEOs in 2014, 2015 and 2016 have a ten-year term and vest ratably on each of the first three anniversaries of the date of award. Time-based RSUs that were granted during the same time period also vest ratably on each of the first three anniversaries of the date of award. Performance-based RSUs may be earned based on performance relative to pre-established goals for the applicable performance periods. For the initial award of performance-based RSUs on October 12, 2015, the OSG Compensation Committee reserved the right to choose different performance measures and targets applicable to the performance-based RSUs before March 31 of each year (2015, 2016 and 2017). For 2016, the OSG Compensation Committee determined that the performance measure would be return on invested capital (“ROIC”) with a target ROIC of 9% over the one-year period ending December 31, 2016. Invested capital is calculated net of cash in excess of operating requirements and return is based on pre-tax net income before interest. For 2016, the ROIC result was 9.14%, therefore 100% of the target shares awarded vested upon certification of this result which occurred in 2017. For 2016, due to the Spin-Off, the Compensation Committee agreed to use an 11-month time frame. The funding formula applicable to this portion of the award is set forth below, with a payout for achievement between the points subject to straight line interpolation.
| | | | | | |
| | Threshold | | Target | | Maximum |
Performance Achievement | | | 70 | % | | | 100.0 | % | | | 130 | % |
Payout | | | 50 | % | | | 100.0 | % | | | 150 | % |
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Upon termination, all unvested performance based RSUs will be forfeited unless the NEO’s employment agreement provides otherwise.
2017 Compensation Decisions
Base Salary:
As noted above, base salaries for those of our NEOs who continued to be employed by INSW following the completion of the Spin-Off, remained at the 2016 levels except for Mr. Oshodi, because the Compensation Committee determined that current base salaries were competitive and that no changes were required for 2017. The INSW NEOs earn annualized base salaries that are commensurate with their positions as named executive officers of a public company and which will provide a steady source of income sufficient to permit these officers to focus their time and attention on their work duties and responsibilities.
Annual Incentive Decisions
The design of INSW’s 2017 annual incentive plan is generally consistent with OSG’s 2016 annual incentive plan. In prior years, however, one of the metrics was a separate corporate and business unit ESO targets. As INSW now comprises the former OSG International Flag business (and has no underlying business unit), the 2017 incentive plan has no separate corporate metric. In addition, in 2017, pursuant to previous amendments to their employments agreements, Ms. Zabrocky and Mr. Small will have a target bonus equal to 100% of their base salary, rather than 125% as was the case in 2016. Mr. Pribor will also have a target bonus equal to 100% of his base salary, pursuant to the terms of his employment agreement with the Company. Mr. Oshodi’s target bonus remains at 55% of his base salary in 2017.
Employment Agreements with the NEOs
Current Employees of INSW Classified as NEOs of INSW for 2016
At the beginning of 2016, OSG had entered into employment agreements with all of its then-current NEOs. In connection with the Spin-Off, OSG assigned its rights and obligations under the employment agreements of Ms. Zabrocky, Mr. Small and Mr. Oshodi to INSW, and INSW assumed those rights and obligations. Under the terms of their agreements, the NEOs who remain employed by INSW are entitled to certain compensation arrangements and severance benefits as detailed in the paragraphs below. All of their employment agreements provide for vacation in accordance with INSW policy, as well as participation in medical, dental and life insurance, retirement and other benefit plans as may be in effect from time to time.
Under the terms of their employment agreements, if an executive’s employment is terminated by INSW for any reason or terminated voluntarily by the executive, he or she is entitled to the following payments (“Accrued Payments”): (i) any earned, unpaid base salary through the date of termination, (ii) any earned, unpaid annual bonus applicable to the performance year prior to the termination, (iii) payment for any accrued, but unused vacation through the date of termination and (iv) reimbursement of any business expenses not reimbursed as of the date of termination. If an executive’s employment is terminated by reason of death or permanent disability, INSW will pay the Accrued Payments to the executive or the executive’s estate, and INSW will vest any non-performance-based equity previously granted to the executive that has not yet vested.
On September 29, 2014, OSG entered into an employment agreement with Ms. Zabrocky to serve as the Co-President and Head of the International Flag Strategic Business Unit under which her annual salary was $525,000 and her Target Bonus was set at 150% of annual salary. Her agreement provides for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) salary continuation for a period of 24 months and (ii) a lump sum payment in the amount equal to her Target Bonus in effect for the year of termination. Her agreement provides for the possibility of annual equity grants at the discretion of the OSG (now INSW) board of directors upon recommendation from the OSG (now INSW) compensation committee. On March 30, 2016, OSG and Ms. Zabrocky executed an amendment to her employment agreement. This amendment changed Ms. Zabrocky’s title to Senior Vice President and President of International Flag SBU. The amendment also reduced the Target Annual Bonus from 150% to 125% of annual salary in 2016 and from 125% to 100% in 2017 and thereafter. The amendment also provided an equity grant to Ms. Zabrocky in the amount of $525,000 for 2016 and an amount equal to her base salary for 2017 and thereafter. The structure of the award is discussed above. The amendment also adjusted the
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severance benefits provided under the employment agreement in the event of termination without cause or resignation with good reason as follows: (i) a lump sum payment in the amount equal to 150% of her base salary in effect for the year of termination if separation occurs prior to January 1, 2018 and (ii) accelerated vesting of all unvested equity (performance-based grants shall vest at target levels). On August 3, 2016, Ms. Zabrocky and OSG entered into a subsequent amendment to her employment agreement. This amendment adjusted the severance benefits provided in the event of termination without cause or resignation with good reason: Ms. Zabrocky will receive salary continuation for 24 months and also a lump sum payment in an amount depending on which year the termination occurs (if in 2017, $1,204,166, in 2018 and beyond, $1,049,999). In addition, all outstanding and unvested options, RSUs and other equity-based grants or cash in lieu of grants that in all cases are not performance-based will vest upon a termination without cause, for good reason, by death or disability. INSW assumed this agreement in its current form effective as of the Spin-Off. On November 7, 2016, OSG and Ms. Zabrocky entered into a further amendment to her employment agreement, providing that she would become President and CEO of the Company as of the closing of the Spin-Off. As of the date of the Spin-Off, Ms. Zabrocky became President and CEO of the Company under the terms above.
On November 9, 2016, we entered into an employment agreement with Mr. Pribor to serve as CFO of the Company. Under his employment agreement, Mr. Pribor’s annual salary is $450,000, his annual Target Bonus is set at 100% of his base salary, and he will be granted a long-term, equity incentive award with a grant-date value of $1,500,000 consisting in equal amounts of stock options, time-based restricted stock units and performance based restricted stock units, vesting over a three-year period in equal portions. Mr. Pribor also received a one-time payment of $150,000 in lieu of his annual bonus and equity grants for his service in fiscal year 2016, and management expects to recommend to the INSW board of directors that Mr. Pribor be granted equity incentive awards starting in 2017 with a grant-date value equal to 100% of his base salary. The Company also agreed to reimburse Mr. Pribor for reasonable and customary attorney’s fees in connection with the negotiation of his agreement. Mr. Pribor’s agreement provides for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) 12 months’ continuation of annual base salary plus Target Bonus (18 months’ in the event of a change in control); (ii) to the extent not already paid, the $150,000 that Mr. Pribor is entitled to receive in lieu of his annual bonus and equity grants for fiscal year 2016; (iii) a lump sum payment of a pro rata portion of his annual bonus based on actual achievement, calculated by multiplying such bonus by a fraction, the numerator of which is the number of full weeks of employment in the year of termination and the denominator of which is fifty-two; (iv) accelerated vesting of all outstanding awards from hisinitial grant (with performance-based awards vesting at target); (v) accelerated vesting of all outstanding unvested options, RSUs and other equity-based grants or cash in lieu of grants (that are not performance-based) that would have vested on the next regularly scheduled vesting date following the termination date; and (vi) a pro-rated portion of all RSUs and other equity-based grants or cash in lieu of grants that are performance-based remain outstanding and eligible to vest, to the extent the applicable performance goals are achieved based on the portion of the performance period in which Mr. Pribor was employed with the Company. All outstanding and unvested options, RSUs, and other equity-based grants or cash in lieu of grants vest upon termination without cause or for good reason within a one year period following such change in control. INSW assumed this agreement in its current form effective as of the Spin-Off. As of the Spin-Off, Mr. Pribor is Senior Vice President, CFO and Treasurer of the Company.
INSW assumed the agreement between Mr. Small and OSG in its current form effective as of the Spin-Off. As of the Spin-Off, Mr. Small became Chief Administrative Officer, Senior Vice President, Secretary and General Counsel, INSW. On February 13, 2015, OSG entered into an employment agreement with Mr. Small to serve as Senior Vice President, Secretary and General Counsel effective March 2, 2015, his hire date with OSG. In connection with his employment, Mr. Small’s annual salary was $475,000, his annual Target Bonus was set at 150% of his base salary, and he was granted a long-term, equity incentive award with a grant-date value of $1,500,000 consisting in equal amounts of stock options, time-based restricted stock units and performance based restricted stock units, vesting over a three-year period in equal one-third portions. In addition, Mr. Small was paid a sign-on bonus of $150,000. The agreement also states that Mr. Small be granted equity incentive awards with a grant-date value of $600,000 for 2016. His agreement provides for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) salary continuation for a period of 24 months, (ii) a lump sum payment in the amount equal to his
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Target Bonus in effect for the year of termination, and (iii) accelerated vesting of all unvested equity. On March 30, 2016, OSG and Mr. Small executed an amendment to his employment agreement. This amendment reduced the Target Annual Bonus from 150% to 125% of annual salary in 2016 and from 125% to 100% in 2017. The amendment also provided an equity grant to Mr. Small in the total amount of $900,000 for 2016 and an amount equal to his base salary for 2017 and thereafter. The amendment also adjusted the severance benefits provided under the employment agreement in the event of termination without cause or resignation with good reason as follows: (i) a lump sum payment in the amount equal to 150% of his base salary in effect for the year of termination if separation occurs prior to January 1, 2018 and (ii) accelerated vesting of all unvested equity (performance-based grants shall vest at target levels). On August 3, 2016, Mr. Small and OSG entered into a subsequent amendment to his employment agreement. This amendment adjusted the severance benefits provided in the event of termination without cause or resignation with good reason: Mr. Small will receive salary continuation for 24 months and also a lump sum payment in an amount depending on which year the termination occurs (if in 2017, $1,337,499, in 2018, $1,091,666; in 2019 and beyond, $950,000). In addition, all outstanding and unvested options, RSUs and other equity-based grants or cash in lieu of grants that in all cases are not performance-based will vest upon a termination without cause, for good reason, by death or disability. On November 7, 2016, OSG and Mr. Small entered into a further amendment to his employment agreement, providing that he would become Chief Administrative Officer, Senior Vice President, Secretary and General Counsel of the Company as of the closing of the Spin-Off. As of the date of the Spin-Off, Mr. Small became Chief Administrative Officer, Senior Vice President, Secretary and General Counsel of the Company under the terms above.
On September 29, 2014, OSG entered into an employment agreement with Mr. Oshodi to serve as Vice President, Secretary and Controller, under which his annual base salary was $220,000 and his Target Bonus was set at 55% of annual base salary. Mr. Oshodi’s agreement provides for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) salary continuation for 18 months and a lump sum payment equal to his Target Bonus in effect in the year of termination, multiplied by a fraction, the numerator of which is the number of full months of employment from effective date of his agreement and the denominator of which is 36. Mr. Oshodi’s agreement also provides for the possibility of annual equity grants at the discretion of the OSG board of directors upon recommendation from the OSG Compensation Committee. On March 2, 2015, OSG and Mr. Oshodi entered into an amendment to his employment agreement. This amendment changed Mr. Oshodi’s title to Vice President and Controller. INSW assumed this agreement in its current form effective as of the Spin-Off.
Former Employees of OSG Classified as NEOs of INSW for 2016
While he was employed with OSG, Captain Blackley was party to an employment agreement pursuant to which his annual target bonus was 150% of annual salary. On December 29, 2016, Captain Blackley stepped down from his role as President and CEO of OSG and in connection with his departure from OSG and INSW, Captain Blackley entered into a separation agreement with OSG that included a general release and waiver of claims against the Company in addition to the payment of certain benefits, subject to applicable tax withholding that are generally consistent with the terms of his employment agreement, as amended, including: (a) a cash payment of $1,350,000 in substantially equal installments over a period of twenty-four months; (b) a lump sum cash payment of $3,213,879, which is comprised of a lump sum of $2,201,387 and the product of $19,471 for each week of service completed during the year of separation; (c) a lump sum cash payment of $475,000 pursuant to the Company’s Retention Bonus Plan; and (d) any benefits to which Captain Blackley is entitled under the Company’s Supplemental Executive Savings Plan. Captain Blackley also received accelerated vesting of all of his time-based equity grants.
While he was employed with the OSG, Mr. Oricchio was party to an employment agreement pursuant to which his annual target bonus was 150% of annual salary. In addition, Mr. Oricchio’s agreement provided for an additional cash payment of $400,000 to be paid in January of each of 2016 and 2017. On December 29, 2016, Mr. Oricchio retired from his position as the Senior Vice President and Chief Financial Officer of OSG and as Senior Vice President and Comptroller and Director of INSW and in connection with his departure from the both companies, Mr. Oricchio entered into a separation agreement with OSG that included a general release and waiver of claims against the Company in addition to the payment of certain benefits, subject to applicable tax withholding that are generally consistent with the terms of his employment
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agreement, as amended, including: (a) a cash payment of $475,000 in substantially equal installments over a period of twelve months; (b) a lump sum cash payment of $1,012,499; (c) the pro rata portion of Mr. Oricchio’s second anniversary bonus in a lump sum cash payment of $385,753; and (d) Mr. Oricchio’s annual bonus for fiscal year 2016, to be determined based on actual performance of previously established performance metrics and subject to the approval of the Company’s Compensation and Audit Committees. Mr. Oricchio also received accelerated vesting of all of his time-based equity grants.
Mr. Carpenter resigned as Treasurer of the Company effective as of the Spin-Off date. He remained with OSG through January 31, 2017 and provided services to INSW through the Transition Services Agreement. On September 29, 2014, OSG entered into an employment agreement with Mr. Carpenter to serve as Vice President and Treasurer, under which his annual base salary was $295,000 and his Target Bonus was set at 40% of annual base salary. Mr. Carpenter’s agreement provided for severance benefits in the event of termination without cause or resignation with good reason as follows: (i) salary continuation for 18 months and a lump sum payment equal to his Target Bonus in effect in the year of termination, multiplied by a fraction, the numerator of which is the number of full months of employment from the effective date of his agreement and the denominator of which is 36. Mr. Carpenter’s agreement also provided for the possibility of annual equity grants at the discretion of the OSG board of directors upon recommendation from the OSG Compensation Committee. Mr. Carpenter received a total of $453,562 which is paid in substantially equal installments over a period of eighteen (18) months following January 31, 2017, his Separation from Service Date. In addition, he received an amount equal to $97,432, reflecting his target bonus of 40% of his most recent base salary multiplied by 29/36. Furthermore, he received his annual bonus with respect to fiscal year 2016, based upon actual performance, of $110,850.68 on March 10, 2017.
Additional Information
Benefits
In general, INSW provides benefits to its employees that we believe are important to maintaining a competitive total compensation program. Benefits are designed to provide a reasonable level of retirement income and to provide a safety net for protection against the financial concerns and catastrophes that can result from illness, disability or death.
INSW provides a tax-qualified defined contribution employee benefit plan to employees, which for 2017 is the Engage PEO Retirement Savings Plan (the “Savings Plan”). Under the Savings Plan and the OSG retirement savings plan through December 31, 2016, eligible employees may contribute, on a pre-tax basis, an amount up to the limit imposed by the Code. Under the Savings Plan, INSW will match 100% of the first 6% of a participant’s pre-tax contribution (up to the Code limit) which for 2016 was $15,900. In addition, in 2016, under the Savings Plan INSW contributed to the account of each eligible employee an amount equal to 4% of the employee’s cash compensation up to the limits imposed by the Code. For 2017, the 4% cash compensation has been discontinued.
INSW does not currently have any plans that provide for payments or other benefits at, following or in connection with the retirement of our employees, other than the Savings Plan. INSW also assumed the obligations under the OSG Supplemental Executive Retirement Plan and closely replicated the retiree medical plan with respect to those employees who were eligible to continue to work for the Company.
Prior to OSG’s Chapter 11 filing, OSG sponsored a Supplemental Executive Retirement Plan (the “SERP”). Upon the Chapter 11 filing, account balances under the SERP, including accruals and earnings thereon, were frozen, and OSG discontinued future contributions to the SERP. In October 2014, OSG decided to pay interest on balances from the time of the Chapter 11 filing until the termination of the participant’s employment at the annual rate of 2.98%. INSW assumed this obligation for eligible employees employed by INSW following the Spin-Off.
Risk Mitigation
The Compensation Committee believes that a significant portion of its NEOs’ total compensation should be variable and “at risk,” based upon company, business metrics and individual performance. Performance measures are financial and operational at all three levels. To accomplish this, the Compensation Committee uses a balanced weighting of performance measures and metrics in its incentive compensation programs to
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promote the achievement of its annual operating plan and long-term business strategy, to build long-term stockholder value and to discourage excessive risk taking by eliminating any inducement to over-emphasize one goal to the detriment of others.
To further ensure we mitigate excessive risk taking:
INSW maintains policies prohibiting insider trading and hedging by directors and executives;
INSW has adopted the OSG Incentive Compensation Recoupment Policy for executive officers; and
The Compensation Committee has adopted stock ownership guidelines for executives and directors.
Stock Ownership Guidelines
INSW encourages stock ownership by its executives and non-employee directors in order to align their interests with the long-term interests of its stockholders. INSW has adopted stock ownership guidelines for its executives and directors. As measured on January 1 of each fiscal year, each director and officer of the Company (including the NEOs) is expected to own a number of shares of INSW common stock priced at the closing price on the last trading day of the prior fiscal year equal to a specified multiple of his or her salary:
President and CEO — 5 × base salary
Independent. Non-Employee Directors — 3 × annual board service cash retainer
Senior Vice Presidents — 2 × base salary
Vice Presidents — 1 × base salary
NEOs are afforded five years from the time they first received an equity grant from INSW to achieve these ownership guidelines, although the Compensation Committee is considering whether this should be revisited in light of the Spin-Off. For purposes of satisfying the guidelines, shares of common stock include stock owned by the incumbent, his or her spouse and minor children; time-based restricted stock or RSUs awarded (whether or not vested); vested in-the-money stock options; and shares of stock held for the incumbents’ benefit in any pension or 401(k) plan. Unvested performance based RSUs do not count towards satisfying the guidelines. Given the timing of the Spin-Off and that INSW has only recently become a public company, while the directors and executive officers employed by INSW were in compliance with the guidelines as of December 31, 2016, their stock ownership levels did not meet the levels set forth above. We will measure progress against the ownership guidelines on January 1 for each year.
Incentive Compensation Recoupment Policy for Executive Officers
INSW’s Incentive Compensation Recoupment Policy generally provides that if an executive officer, including any NEO, receives incentive compensation based on the achievement of a performance metric and the INSW board of directors commenced action to restate the calculation of such performance metric within five fiscal years due to a material misstatement or inaccuracy, INSW may require such executive officer to repay all or a portion of the amounts of such incentive compensation that the INSW board of directors in good faith determines would not have been payable if not for the material misstatement or inaccuracy. The five-year look back limitation does not apply where the INSW board of directors determines that the executive officer’s fraud, misconduct, negligence or other knowing actual involvement was a contributing factor to the need for the restatement. The INSW Compensation Committee is monitoring the proposed regulations under the Dodd-Frank Act relating to incentive compensation recoupment and will amend the policy to the extent necessary to comply with the Dodd-Frank Act.
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Hedging and Insider Trading
INSW’s insider trading policy prohibits its directors and employees from hedging their ownership of its securities, including investing in options, puts, calls, short sales, futures contracts or other derivative instruments relating to its securities, regardless of whether such directors and employees have material nonpublic information about INSW. In addition, the insider trading policy prohibits INSW directors and employees from purchasing or selling its securities while in possession of material nonpublic information or otherwise using such information for their personal benefit. Directors and employees are permitted to enter into trading plans under Rule 10b5-1 under the Exchange Act. With the approval of INSW’s General Counsel, a 10b5-1 Plan may be entered into during a time when the equity participant is not in possession of material, non-public information. These plans are intended to aid the equity participants in diversifying their portfolios without violating federal securities laws.
Report of the Compensation Committee
The Compensation Committee, comprised entirely of independent Directors (as defined in securities law, the NYSE listing standards applicable guidelines under the Code), has reviewed the CD&A included in this Proxy Statement and discussed that CD&A with management. Based on its review and discussion with management, the Compensation Committee approved the CD&A and recommended to the Board of Directors that the CD&A be included in this Proxy Statement.
Compensation Committee:
Timothy J. Bernlohr, Chairman
Randee E. Day
Ty E. Wallach
In accordance with the rules of the SEC, the report of the Compensation Committee does not constitute “soliciting material” and is not incorporated by reference in any filings with the SEC made pursuant to the Securities Act of 1933, as amended (the “1933 Act”), or the 1934 Act.
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Summary Compensation Table
The following Summary Compensation Table includes individual compensation information for services in all capacities for the Company and prior to Spin-Off, OSG, received by the individuals identified as NEOs of the Company.
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Name and Principal Position | | Year | | Salary(1) | | Bonus(2) | | Stock Awards(3)(4) | | Option Awards(3) | | Non-Equity Incentive Plan Compensation | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | All Other Compensation(5) | | Total |
Lois Zabrocky President and Chief Executive Officer | | | 2016 | | | $ | 525,000 | | | $ | 525,000 | | | $ | 390,411 | | | $ | 186,824 | | | $ | 629,713 | | | $ | — | | | $ | 41,248 | | | $ | 2,298,196 | |
| | 2015 | | | $ | 525,000 | | | $ | — | | | $ | 54,564 | | | $ | — | | | $ | 929,250 | | | $ | — | | | $ | 44,702 | | | $ | 1,553,516 | |
| | 2014 | | | $ | 545,192 | | | $ | — | | | $ | 200,000 | | | $ | 200,000 | | | $ | 882,000 | | | $ | — | | | $ | 44,230 | | | $ | 1,871,422 | |
Ian T. Blackley President and Chief Executive Officer of OSG | | | 2016 | | | $ | 675,000 | | | $ | 475,000 | | | $ | 1,208,787 | | | $ | 533,784 | | | $ | — | | | $ | — | | | $ | 3,298,256 | | | $ | 6,190,827 | |
| | 2015 | | | $ | 666,539 | | | $ | — | | | $ | 1,161,400 | | | $ | 839,328 | | | $ | 1,230,188 | | | $ | — | | | $ | 44,894 | | | $ | 3,942,349 | |
| | 2014 | | | $ | 493,269 | | | $ | — | | | $ | 200,000 | | | $ | 200,000 | | | $ | 819,375 | | | $ | — | | | $ | 146,086 | | | $ | 1,858,730 | |
Jeffrey D. Pribor Senior Vice President, Chief Financial Officer and Treasurer | | | 2016 | | | $ | 58,846 | | | $ | 150,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 208,846 | |
Rick F. Oricchio Senior Vice President and Chief Financial Officer of OSG | | | 2016 | | | $ | 475,000 | | | $ | 400,000 | | | $ | 600,000 | | | $ | 320,270 | | | $ | — | | | $ | — | | | $ | 2,014,590 | | | $ | 3,809,860 | |
| | 2015 | | | $ | 465,865 | | | $ | — | | | $ | 1,583,075 | | | $ | — | | | $ | 850,547 | | | $ | — | | | $ | 17,041 | | | $ | 2,916,528 | |
James D. Small III Senior Vice President, Chief Administrative Officer, Secretary and General Counsel | | | 2016 | | | $ | 475,000 | | | $ | — | | | $ | 701,026 | | | $ | 320,270 | | | $ | 558,363 | | | $ | — | | | $ | 38,737 | | | $ | 2,093,396 | |
| | 2015 | | | $ | 401,923 | | | $ | 150,000 | | | $ | 664,102 | | | $ | 503,597 | | | $ | 844,757 | | | $ | — | | | $ | 18,250 | | | $ | 2,582,629 | |
Geoffrey L. Carpenter Vice President and Treasurer of OSG | | | 2016 | | | $ | 302,403 | | | $ | 147,500 | | | $ | 13,469 | | | $ | — | | | $ | 110,851 | | | $ | — | | | $ | 35,778 | | | $ | 610,001 | |
| | 2015 | | | $ | 295,000 | | | $ | — | | | $ | 18,187 | | | $ | — | | | $ | 135,700 | | | $ | — | | | $ | 38,215 | | | $ | 487,102 | |
| | 2014 | | | $ | 100,981 | | | $ | — | | | $ | 66,667 | | | $ | 66,667 | | | $ | 41,300 | | | $ | — | | | $ | 78,849 | | | $ | 354,464 | |
Adewale O. Oshodi Controller | | | 2016 | | | $ | 225,077 | | | $ | 220,000 | | | $ | 10,102 | | | $ | — | | | $ | 115,646 | | | $ | — | | | $ | 33,363 | | | $ | 604,188 | |
| | 2015 | | | $ | 220,000 | | | $ | — | | | $ | 13,640 | | | $ | — | | | $ | 139,150 | | | $ | — | | | $ | 34,182 | | | $ | 406,972 | |
| | 2014 | | | $ | 196,127 | | | $ | 159,130 | | | $ | 50,000 | | | $ | 50,000 | | | $ | 133,403 | | | $ | — | | | $ | 33,310 | | | $ | 621,970 | |
| (1) | The salary amounts reflect the actual salary received during the year. |
| (2) | Retention bonuses were paid to Ms. Zabrocky and Captain Blackley, Messrs. Carpenter and Oshodi which were $525,000, $475,000, $147,500 and $220,000, respectively. Mr. Pribor joined INSW on November 9, 2016 and as part of his employment contract, he received a $75,000 sign-on bonus in lieu of an annual bonus and $75,000 in lieu of an equity award, thus totaling $150,000 for 2016. Mr. Oricchio received a $400,000 anniversary bonus upon his first anniversary of joining OSG. |
| (3) | These amounts represent the aggregate grant date fair value of equity awards granted in the specified fiscal year as calculated pursuant to FASB ASC Topic 718. In 2016, Ms. Zabrocky, Captain Blackley, Messrs. Oricchio and Small received time based equity awards. One third of these awards vest on the first, second and third anniversary of March 30, 2016. As a result of OSG completing the Spin-Off, all outstanding awards were adjusted to preserve the economic interests to the maximum extent possible in order that the Executive’s economic interests are substantially the same immediately after the Spin-Off as they were immediately prior to the Spin-Off. In connection with the Spin-Off, outstanding awards were modified pursuant to anti-dilution provisions whereby in the event of any change in the capitalization of INSW, the number and the type of securities underlying outstanding awards must be adjusted, as appropriate, in order to prevent dilution or enlargement of rights. The impact of these provisions resulted in a modification of all outstanding awards. As the fair value of the INSW restricted stock unit and the INSW stock option awards immediately after the Spin-Off transaction increased when compared to the |
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| | fair value of the equivalent OSG awards held by INSW employees immediately prior to the Spin-Off, incremental compensation costs of approximately $341,643 (including $75,415 applicable Ms. Zabrocky, $168,023 applicable to Mr. Small and $4,115 applicable to Mr. Oshodi) will be recognized by INSW over the remaining vesting period of such awards as a result of the Spin-Off modifications. No additional compensation was recognized in 2016 as a result of such modifications, numbers reported in the table reflect the various adjustment that have occurred to the awards. |
| (4) | In 2015, Ms. Zabrocky, Captain Blackley, Messrs. Small, Carpenter and Oshodi received performance-based RSU grants on October 12, 2015. One third of each performance award vests on December 31, 2015, 2016 and 2017, subject in each case to the respective Committee’s (OSG for the 2015 and 2016 grants and INSW for the 2017 grants) certification of achievement of the performance measures and targets no later than each March 31 following the respective date of vesting. Settlement of the vested performance RSUs may be in either shares of common stock or cash, as determined by the Committee in its discretion, and shall occur as soon as practicable following the respective Committee’s certification of the achievement of the applicable performance measures and targets for 2017 and in any event no later than April 30, 2018. The number of target performance RSUs, shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of RSUs vesting equivalent to 130% of the RSUs awarded. Since performance targets are set annually each tranche of the award is considered to be a separate grant. The amounts in this column represent the aggregate grant date fair value of the 2016 tranche of each such performance RSU award at Target, calculated in accordance with accounting guidance, as follows: Ms. Zabrocky — $40,411, Captain Blackley — $208,787, Mr. Small — $101,026, Mr. Carpenter — $13,469 and, Mr. Oshodi — $10,102. At the maximum number these values would be 130% of Target. In 2016, Ms. Zabrocky and Captain Blackley, Messrs. Oricchio and Small received performance RSU grants on March 30, 2016. The performance award vests in full on December 31, 2018, subject to the Committee’s certification of achievement of the performance measures and targets no later than March 31 following the vesting date. Settlement of the performance RSUs may be either in shares of common stock or cash, as determined by the Committee in its discretion, and shall occur as soon as practicable following the Committee’s certification of the achievement of the applicable performance measures and targets for 2018 and in any event no later than March 15, 2019. The number of performance target RSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of performance RSUs vesting equivalent to 150% of the RSUs awarded. The amounts in this column represent the aggregate grant date fair value of the performance RSU award at Target, calculated in accordance with accounting guidance, as follows: Ms. Zabrocky — $175,000, Captain Blackley — $500,000, Mr. Oricchio and Mr. Small — $300,000. As a result of OSG completing the Spin-Off all outstanding awards have been adjusted in order such that the Executive’s economic interests are substantially the same immediately after the Spin-Off as they were immediately prior to the Spin-Off. As described in note (3) above, the INSW Management Incentive Compensation Plan contains anti-dilution provisions whereby in the event of any change in the capitalization of INSW, the number and the type of securities underlying outstanding awards must be adjusted, as appropriate, in order to prevent dilution or enlargement of rights. The impact of these provisions resulted in a modification of all outstanding awards. The Number of Shares have also been adjusted to reflect the stock dividend paid by OSG on December 17, 2015 and the one (1) for six (6) reverse stock split that became effective on June 13, 2016. As the fair value of the INSW performance restricted stock unit awards immediately after the Spin-Off increased when compared to the fair value of the equivalent OSG awards held by INSW employees immediately prior to the Spin-Off, incremental compensation costs of $29,043 for Ms. Zabrocky, $54,419 for Mr. Small and $1,460 for Mr. Oshodi will be recognized by INSW over the remaining vesting period of such awards as a result of the Spin-Off modifications. |
| (5) | See the “All Other Compensation Table” below for additional information. |
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All Other Compensation Table
The following table describes each component of the All Other Compensation column for 2016 in the Summary Compensation Table.
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Name | | Savings Plan Matching Contribution(1) | | Qualified Defined Contribution Plan(2) | | Life Insurance Premiums(3) | | Other(4) | | Total |
Lois K. Zabrocky | | $ | 15,900 | | | $ | 10,600 | | | $ | 1,188 | | | $ | 13,560 | | | $ | 41,248 | |
Ian T. Blackley | | $ | 15,900 | | | $ | 10,600 | | | $ | 1,188 | | | $ | 3,270,568 | | | $ | 3,298,256 | |
Jeffrey D. Pribor | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Rick F. Oricchio | | $ | 15,900 | | | $ | 10,600 | | | $ | 1,188 | | | $ | 1,986,902 | | | $ | 2,014,590 | |
James D. Small III | | $ | 15,900 | | | $ | 10,600 | | | $ | 1,188 | | | $ | 11,049 | | | $ | 38,737 | |
Geoffrey L. Carpenter | | $ | 15,900 | | | $ | 10,600 | | | $ | 1,188 | | | $ | 8,090 | | | $ | 35,778 | |
Adewale O. Oshodi | | $ | 15,900 | | | $ | 10,600 | | | $ | 1,074 | | | $ | 5,789 | | | $ | 33,363 | |
| (1) | Constitutes OSG’s matching contributions under the OSG Savings Plan. |
| (2) | Constitutes OSG’s four percent contributions under the OSG Savings Plan. |
| (3) | Life insurance premiums represent the cost of term life insurance paid on behalf of the NEO. |
| (4) | Includes the following amounts for each NEO under plans and arrangements generally maintained by us for all employees (other than “umbrella” liability insurance coverage): (a) medical and dental coverage premiums of $11,537 for Ms. Zabrocky, $2,400 for Captain Blackley, $5,118 for Mr. Oricchio, $8,531 for Mr. Small, $6,067 for Mr. Carpenter, $6,067 and $4,063 for Mr. Oshodi; (b) long-term and short term disability plan premiums for Mr. Oshodi of $1,005, and premiums for Ms. Zabrocky and Captain Blackley, Messrs. Orrichio, Small and Carpenter of $1,302. Mr. Pribor did not have long and short term disability coverage; (c) a premium for excess liability insurance coverage for Captain Blackley, Messrs. Oricchio and Small of $1,216; (d) transportation payments for Ms. Zabrocky, Captain Blackley, and Messrs. Carpenter and Oshodi of $720; (e) separation payments as follows for Captain Blackley — $44,135 in unused vacation, and $3,213,879 lump sum pursuant to the terms of his employment agreement; and (f) separation payments as follows for Mr. Oricchio — $23,750 in unused vacation days, $385,753 pro rated anniversary bonus, $1,012,499 lump sum pursuant to the terms of his employment agreement and $557,264 in lieu of incentive compensation for 2016 because he was terminated on December 29, 2016. Includes fees of $6,916 paid in 2016 to an accounting firm the Company selected to prepare Captain Blackley’s 2015 U.S. income tax return and United Kingdom income tax return for the fiscal year ended April 2015 due to his previous foreign assignment. OSG agreed to pay for the provision of certain tax preparation services, in order to ensure that OSG can properly recapture certain foreign tax credits. Captain Blackley is responsible for paying his U.S. income taxes. Captain Blackley returned to New York in April 2013. |
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Grants of Plan-Based Awards
This following table lists the grants made in fiscal 2016 to the NEOs who became employees of INSW and whose awards were granted under the OSG Management Incentive Compensation Plan and assumed by INSW, or were granted under the INSW MICP in 2016 following the Spin-Off. Captain Blackley, Messrs. Oricchio and Carpenter, each of whom remained an OSG employee following the Spin-Off and did not become INSW employees, received awards in respect of OSG’s common shares in 2016 as follows: 96,447, 57,869, and 0 time-based restricted stock units, respectively, 202,262, 86,804 and 3,307 performance-based restricted stock units (at maximum performance), respectively, 256,761, 154,055 and 0 time-based stock options, respectively, and $1,392,188, $890,625 and $181,442 cash-based awards (at maximum performance), respectively. The number of shares underlying these awards reflect the adjustments to OSG’s common stock that occurred in 2016.
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| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | | All Other Stock Awards: Number of Shares of Stock or Stock Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards(2) |
Name | | Grant Date | | Threshold | | Target | | Maximum | | Threshold (#) | | Target (#) | | Maximum (#) |
Lois K. Zabrocky | | | 3/30/2016 | | | $ | 328,125 | | | $ | 656,250 | | | $ | 984,375 | | | | 6,231 | | | | 11,528 | | | | 16,825 | | | | 9,193 | | | | 24,474 | | | $ | 19.04 | | | $ | 565,411 | |
Ian T. Blackley | | | — | | | $ | — | | | $ | — | | | $ | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | |
Jeffrey D. Pribor | | | — | | | $ | — | | | $ | — | | | $ | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | |
Rick F. Oricchio | | | — | | | $ | — | | | $ | — | | | $ | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | |
James D. Small | | | 3/30/2016 | | | $ | 296,875 | | | $ | 593,750 | | | $ | 890,625 | | | | 11,967 | | | | 21,598 | | | | 31,229 | | | | 15,760 | | | | 41,956 | | | $ | 19.04 | | | $ | 1,001,026 | |
Geoffrey L. Carpenter | | | — | | | $ | — | | | $ | — | | | $ | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | |
Adewale O. Oshodi | | | 3/30/2016 | | | $ | 62,013 | | | $ | 124,025 | | | $ | 186,038 | | | | 408 | | | | 583 | | | | 758 | | | | — | | | | — | | | $ | — | | | $ | 10,102 | |
| (1) | In 2015, Ms. Zabrocky and Messrs. Small and Oshodi received a performance-based RSU grant on October 12, 2015. One third of each performance award will vest on each of December 31, 2015, 2016 and 2017, subject in each case to the Committee’s certification of achievement of the performance measures and targets no later than each March 31 following the respective date of vesting. Settlement of the vested RSUs may be in either shares of common stock or cash, as determined by the Committee in its discretion, and shall occur as soon as practicable following the Committee’s certification of the achievement of the applicable performance measures and targets for 2017 and in any event no later than April 30, 2018. The number of target RSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of RSUs vesting equivalent to 130% of the RSUs awarded. Since performance targets are set annually each tranche of the award is considered to be a separate grant. The numbers shown in the table represent the 2016 tranche of each such performance-based RSU award for which performance targets were established on March 30, 2016. Compensation expense recognized with respect to the performance award vesting on December 31, 2016 is based upon achievement level of 100% of the Target RSUs. In addition, in 2016, Ms. Zabrocky and Mr. Small received performance RSU grants on March 30, 2016. The performance award vests in full on December 31, 2018, subject to the Committee’s certification of achievement of the performance measures and targets no later than March 31 following the vesting date. Settlement of the performance RSUs may be either in shares of common stock or cash, as determined by the Committee in its discretion, and shall occur as soon as practicable following the Committee’s certification of the achievement of the applicable performance measures and targets for 2018 and in any event no later than March 15, 2019. The number of performance target RSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of performance RSUs vesting equivalent to 150% of the RSUs awarded. |
| (2) | For information with respect to grant date fair values, see Note 14, “Capital Stock and Stock Compensation,” to INSW’s consolidated financial statements included in INSW’s Annual Report on Form 10-K for the year ended December 31, 2016. |
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Outstanding Equity Awards at Fiscal Year-End
The following table lists outstanding INSW equity awards at December 31, 2016 for NEOs under the MICP.
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Name | | Option Awards | | Stock Awards |
| Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Unexercisable | | Options Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested (#)(3) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) |
Lois K. Zabrocky | | | 9,961 | | | | 4,981 | (1) | | | — | | | $ | 30.93 | | | | 9/29/2024 | | | | 2,079 | (4) | | $ | 29,189 | | | | 2,335 | (9) | | $ | 32,783 | |
| | | — | | | | 24,474 | (2) | | | — | | | $ | 19.04 | | | | 3/30/2026 | | | | 9,193 | (5) | | $ | 129,070 | | | | 9,913 | (8) | | $ | 139,179 | |
Ian T. Blackley | | | — | | | | — | | | | — | | | $ | — | | | | — | | | | — | | | $ | — | | | | — | | | $ | — | |
Jeffrey D. Pribor | | | — | | | | — | | | | — | | | $ | — | | | | — | | | | — | | | $ | — | | | | — | | | $ | — | |
Rick F. Oricchio | | | — | | | | — | | | | — | | | $ | — | | | | — | | | | — | | | $ | — | | | | — | | | $ | — | |
James D. Small | | | 14,151 | | | | 28,301 | (7) | | | — | | | $ | 27.54 | | | | 3/2/2025 | | | | 11,675 | (6) | | $ | 163,917 | | | | 5,838 | (9) | | $ | 81,966 | |
| | | — | | | | 41,956 | (2) | | | — | | | $ | 19.04 | | | | 3/30/2026 | | | | 15,760 | (5) | | $ | 221,270 | | | | 15,760 | (8) | | $ | 221,270 | |
Geoffrey L. Carpenter | | | — | | | | — | | | | — | | | $ | — | | | | — | | | | — | | | $ | — | | | | — | | | $ | — | |
Adewale O. Oshodi | | | 2,490 | | | | 1,245 | (1) | | | — | | | $ | 30.93 | | | | 9/29/2024 | | | | 519 | (4) | | $ | 7,287 | | | | 583 | (9) | | $ | 8,185 | |
Note: INSW assumed all the obligations from OSG regarding the grants listed above.
| (1) | The option to purchase these shares of common stock was granted pursuant to the 2014 Overseas Shipholding Group, Inc. Management Incentive Compensation Plan (the “OSG Management Incentive Compensation Plan”) and assumed by INSW in connection with the Spin-Off. All unvested options will vest and become exercisable on September 29, 2017, subject to accelerated vesting in the event of termination of employment. |
| (2) | The option to purchase these shares of common stock was granted pursuant to the 2014 OSG Management Incentive Compensation Plan and assumed by INSW in connection with the Spin-Off. The unvested options vest and become exercisable as to one third of such shares on March 30, 2017, March 30, 2018 and March 30, 2019, subject to accelerated vesting in the event of termination of employment. |
| (3) | Based on the closing price of INSW common stock of $14.04 on December 31, 2016. |
| (4) | These RSUs will vest on September 29, 2017, subject to accelerated vesting in the event of certain terminations of employment. |
| (5) | Of these RSUs, one third vest on March 30, 2017, March 30, 2018 and March 30, 2019, subject to accelerated vesting in the event of termination of employment. |
| (6) | Of these RSUs, one-half vest on March 2, 2017 and March 2, 2018, subject to accelerated vesting in the event of termination of employment. |
| (7) | The option to purchase these shares of common stock was granted pursuant to the 2014 OSG Management Incentive Compensation Plan. One-half vest and become exercisable on March 2, 2017 and March 3, 2018, subject to accelerated vesting in the event of terminations of employment. |
| (8) | These performance RSUs will vest on December 31, 2018. The performance RSUs have a maximum result of 150%. |
| (9) | These performance RSUs vested on December 31, 2016, subject to the Compensation Committee’s certification of achievement of the performance measure, which occurred in 2017. |
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Option Exercises and Stock Vested
The following table provides information as of December 31, 2016 concerning the exercises of INSW stock options and the vesting of stock awards by the NEOs in INSW common stock. This table includes exercised and vested INSW stock option and stock awards. The market value of the stock awards is based on the closing market price of the Company’s common stock as of December 31, 2016, which was $14.04 per share.
| | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise | | Number of Shares Acquired on Vesting (#)(1) | | Value Realized on Vesting |
Lois K. Zabrocky | | | — | | | | — | | | | 2,335 | | | $ | 32,783 | |
Ian T. Blackley | | | — | | | | — | | | | — | | | $ | — | |
Jeffrey D. Pribor | | | — | | | | — | | | | — | | | $ | — | |
Rick F. Oricchio | | | — | | | | — | | | | — | | | $ | — | |
James D. Small III | | | — | | | | — | | | | 5,838 | | | $ | 81,966 | |
Geoffrey L. Carpenter | | | — | | | | — | | | | — | | | $ | — | |
Adewale O. Oshodi | | | — | | | | — | | | | 583 | | | $ | 8,185 | |
| (1) | For Ms. Zabrocky and Messrs. Small and Oshodi the performance RSU tranche vested on December 31, 2016. The formal certification of the achievement of the performance measure by the Compensation Committee occurred in 2017. |
Nonqualified Deferred Compensation
The following table provides information with respect to the deferral of compensation on a non-tax qualified basis to the INSW Supplemental Plan for each NEO who was an INSW Executive following the Spin-Off in fiscal 2016. The Supplemental Plan provides for interest at an annual rate of 2.98% through the termination date of the participant. The plan is frozen to new participants. Captain Blackley has an account balance under the OSG supplemental plan which was in respect of his service as an employee of OSG and remained with OSG following the Spin-Off.
| | | | | | | | | | |
Name | | Executive Contributions in 2016 | | Company Contributions on 2016 | | Aggregate Earnings/ Losses in 2016(2) | | Aggregate Withdrawals/ Spin-Offs in 2016 | | Aggregate Balance at December 31, 2016 |
Lois K. Zabrocky | | $ | — | | | $ | — | | | $ | 4,937 | | | $ | — | | | $ | 186,074 | (1) |
Ian T. Blackley | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Jeffrey D. Pribor | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Rick F. Oricchio | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
James D. Small III | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Geoffrey L. Carpenter | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Adewale O. Oshodi | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| (1) | INSW assumed in December of 2016, the aggregate balance for Ms. Zabrocky of $186,074. |
| (2) | The aggregate earnings constitute accrued interest for the calendar year ended December 31, 2016. There was no executive or INSW contributions in 2016. |
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Potential Payments Upon Termination
The following table discloses the amounts that would have been payable to each NEO upon termination of their employment, assuming for this purpose that such termination occurred on December 31, 2016. At December 31, 2016, no NEO was eligible for normal retirement at age 65. The table excludes amounts payable pursuant to the INSW Supplemental Plan and pursuant to plans that do not discriminate in favor of executive officers and that are available generally to all salaried employees, such as the Savings Plan.
| | | | | | | | | | | | | | |
Event(1) | | Lois K. Zabrocky | | Ian T. Blackley | | Jeffrey D. Pribor | | Rick F. Oricchio | | James D. Small III | | Geoffrey L. Carpenter | | Adewale O. Oshodi |
Involuntary Termination Without Cause or Voluntary Termination for Good Reason
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash severance payment(2) | | $ | 1,050,000 | | | $ | 0 | | | $ | 450,000 | | | $ | 0 | | | $ | 950,000 | | | $ | 0 | | | $ | 338,250 | | | | | |
Pro rata Bonus Payment(3) | | $ | 787,500 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 712,500 | | | $ | 0 | | | $ | 0 | |
Bonus Payment | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 93,018 | (6) |
Equity Awards(4) | | $ | 158,259 | | | $ | 0 | | | $ | 1,000,000 | | | $ | 0 | | | $ | 385,187 | | | $ | 0 | | | $ | 0 | |
Anniversary Payment | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Lump Sum Payment | | $ | 1,095,831 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 1,345,832 | | | $ | 0 | | | $ | 0 | |
Total | | $ | 3,091,590 | | | $ | 0 | | | $ | 1,450,000 | | | $ | 0 | | | $ | 3,393,519 | | | $ | 0 | | | $ | 431,268 | |
Death/Disability
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pro Rata Bonus Payment | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Equity Awards | | $ | 0 | | | $ | 0 | | | $ | 0 | (5) | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Total | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| (1) | The values in this table reflect estimated payments associated with various termination scenarios except for Captain Blackley and Mr. Oricchio whose termination was December 29, 2016 and Mr. Carpenter whose termination date was January 31, 2017. |
| (2) | This reflects cash severance payment equal to 24 months of base salary for Ms. Zabrocky and Mr. Small. Mr. Pribor is entitled to receive 18 months of base salary if the separation is for “good reason” and due to a change of control or (as shown) 12 months if the separation is for “good reason” and not due to a change of control. Mr. Oshodi is entitled to receive 18 months of base salary. |
| (3) | For Ms. Zabrocky and Mr. Small a pro-rata bonus provided for in their employment agreement is considered earned if termination occurs on the last business day of the year. |
| (4) | For Ms. Zabrocky and Mr. Small all option shares and time based RSUs (and any other equity based grant or cash in lieu of grants that is not performance based) granted to Ms. Zabrocky and Mr. Small, to the extent not otherwise vested, shall be vested as of the separation date, as applicable. The unvested performance-based RSUs will be forfeited in the event of termination. As of December 31, 2016, all options were considered underwater and were therefore not included in the calculation. Mr. Pribor would be entitled to the vesting of his initial grant of $1,500,000. Since the option portion of such grant is not considered to have intrinsic value as of December 31, 2016 the award date value of $500,000 is excluded. |
| (5) | Upon Mr. Pribor’s disability or in the case of his death, his estate is entitled to his annual bonus at target. At December 31, 2016, Mr. Pribor was not entitled to any annual bonus. |
| (6) | Pursuant to his contract, Mr. Oshodi would be paid a lump sum payment equal to his Target Bonus in effect in the year of termination, multiplied by a fraction, the numerator of which is the number of full months of employment from effective date of his agreement and the denominator of which is 36. |
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INSW Compensation Committee Interlocks and Insider Participation
No member of the INSW Compensation Committee was, during fiscal year 2016, an officer or employee of INSW or was formerly an officer of INSW. None of INSW’s executive officers served on any board of directors or Compensation Committee of any other company for which any of INSW’s directors served as an executive officer at any time during fiscal 2016. Please see “Certain Relationships and Transactions with Related Persons, Affiliates and Affiliated Entities — Related Party Transactions” below for the Company’s policy on related person transactions.
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DIRECTOR COMPENSATION
The Company’s non-executive Chairman of the Board is entitled to receive an annual cash retainer of $172,000 and the Company’s other non-employee directors are entitled to receive an annual cash retainer of $80,000. The Chairman of each of the Audit Committee, the Compensation Committee and the Governance Committee is being entitled to receive an additional cash retainer of $20,000, $20,000 and $13,000 respectively. Each member of the three committees (other than the committee Chairman) is entitled to receive an additional cash retainer of $10,000, except that members of the Governance Committee are entitled to receive an additional cash retainer of $6,500.
During 2016 from the Distribution Date, the Company’s non-executive Chairman of the Board earned a cash retainer of $14,333 ($172,000 on an annual basis) and the Company’s other non-employee directors, except as described below, received a cash retainer of $6,667 ($80,000 on an annual basis). During 2016 for the one month period following the Distribution Date, the Chairman of each of the Audit Committee, the Compensation Committee and the Governance Committee earned an additional cash retainer of $1,667 ($20,000 on an annual basis), $1,667 ($20,000 on an annual basis), and $1,083 ($13,000 on an annual basis), respectively. Each member of the three committees (other than the committee Chairman and except as described below) earned an additional cash retainer of $833 ($10,000 on an annual basis), except that members of the Governance Committee earned an additional cash retainer of $542 ($6,500 on an annual basis). No director earned any fee for attending any Board meeting or Board committee meeting. The Company reimburses directors for their reasonable travel and lodging expenses in attending Board and Board committee meetings.
Mr. Kronsberg has instructed the Company to pay all cash compensation for his service as a director to his employer, CCP, at this time. Mr. Wallach has agreed to waive all compensation (cash and equity) for his service as a director at this time.
Under the International Seaways, Inc. Non-Employee Director Incentive Compensation Plan, the Board has discretion to grant various types of equity-based awards to directors. On December 15, 2016, the Board granted the non-Executive Chairman of the Board 6,559 shares of Common Stock having a fair market value of $90,000 and granted each other non-employee director, except as described below, and Mr. Kronsberg’s employer, CCP (and not Mr. Kronsberg), 3,644 shares of Common Stock having a fair market value of $50,000, in each case vesting on the earlier of (a) June 8, 2017 and (b) the date of the annual meeting of stockholders of the Company in 2017, subject to the director continuing to provide services to the Company as of such date.
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The following table shows the total compensation paid to the Company’s non-employee directors during 2016 from the Distribution Date:
| | | | | | | | | | |
| | Fees earned or Paid in Cash ($)(1) | | Stock Awards ($) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | | All Other Compensation ($) | | Total ($) |
Timothy J. Bernlohr | | | 8,876 | | | | 50,000 | | | | — | | | | — | | | | 58,876 | |
Ian T. Blackley | | | 6,667 | | | | 50,000 | | | | — | | | | — | | | | 56,667 | |
Randee E. Day | | | 8,333 | | | | 50,000 | | | | — | | | | — | | | | 58,333 | |
Joseph I. Kronsberg(2) | | | 6,667 | | | | 50,000 | | | | — | | | | — | | | | 56,667 | |
Ronald Steger | | | 8,583 | | | | 50,000 | | | | — | | | | — | | | | 58,583 | |
Chad L. Valerio | | | 6,667 | | | | 50,000 | | | | — | | | | — | | | | 56,667 | |
Ty E. Wallach(3) | | | — | | | | — | | | | — | | | | — | | | | — | |
Douglas D. Wheat | | | 14,333 | | | | 90,000 | | | | — | | | | — | | | | 104,333 | |
Gregory A. Wright | | | 8,876 | | | | 50,000 | | | | — | | | | — | | | | 58,876 | |
| (1) | Consists of annual Board fees, annual Board Chairman and annual Chairman of the Audit, Compensation and Governance Committees fees, and annual committee member fees. |
| (2) | In accordance with Mr. Kronsberg’s instruction, all compensation for his service as a director was paid to his employer, CCP, for 2016. |
| (3) | Mr. Wallach agreed to waive all compensation for his service as a director for 2016. |
All directors’ cash compensation is payable quarterly in advance.
Director Stock Ownership Guidelines
The Company encourages stock ownership by directors in order to align interests of directors with the long-term interests of the Company’s stockholders. To further stock ownership by directors, the Board believes that regular grants of equity compensation should be a significant component of director compensation.
The Board has adopted stock ownership guidelines for non-employee directors. Under the stock ownership guidelines, each non-employee director is expected within five years after becoming a director to own shares of the Company’s common stock (including restricted stock units convertible into shares of stock and stock owned by his spouse and minor children), whose market value would equal at least three times his annual cash base retainer.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company’s directors, executive officers and any persons holding more than 10 percent of the Company’s common stock are required to report their ownership of common stock and any changes in that ownership, on a timely basis, to the SEC. Directors, executive officers and beneficial owners of more than 10% of the common stock are also required to furnish the Company with copies of all Section 16(a) reports that they file with the SEC. Based on material provided to the Company, all such reports were filed on a timely basis in 2016.
Management has primary responsibility for preparing the consolidated financial statements of the Company, for maintaining effective internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for performing independent audits of the Company’s consolidated financial statements in accordance with auditing standards generally accepted in the United States (“
U.S. GAAS”GAAS”) and the effectiveness of the Company’s internal control over financial reporting based on criteria established by the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee’s responsibility is to monitor and oversee these processes on behalf of the Board. The Board has adopted a written Audit Committee Charter describing the Audit Committee’s role and responsibilities, which is posted on the Company’s website at
www.intlseas.com/Docs.
In fulfilling its oversight responsibilities, the Audit Committee met and held discussions with management and the Company’s independent registered public accounting firm concerning the acceptability and quality of the accounting principles, the reasonableness of significant judgments, and the adequacy and clarity of disclosures in the consolidated financial statements to be included in the Company’s Annual Report on Form 10-K for the year ended December 31,
20162019 (the
“2016 Form 10-K”“2019 Annual Report”). Management represented to the Audit Committee that such consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Audit Committee reviewed and discussed such consolidated financial statements with management and the Company’s independent registered public accounting firm. The Audit Committee further discussed with the Company’s independent registered public accounting firm the matters required to be discussed by U.S. GAAS, including those described in the
Public Company Accounting Oversight BoardPCAOB Auditing Standard No.
161301 (Communications with Audit Committees).
The Committee also held discussions with the Company’s internal auditors and reviewed management’s report on the assessment of the effectiveness of the Company’s internal control over financial reporting and the Company’s independent registered public accounting firm’s report on the effectiveness of the Company’s internal control over financing reporting.
The Company’s independent registered public accounting firm also provided to the Audit Committee the written disclosures and letter required by PCAOB Rule 3526 (Communication with Audit Committees Concerning Independence), and the Audit Committee discussed with the independent registered public accounting firm their independence from the Company and management, and considered the compatibility of non-audit services with the registered public accounting firm’s independence.
Based upon the Audit Committee’s discussions with management and the Company’s
internal auditors and independent registered public accounting firm, the Audit Committee’s review of the representations of management, the certifications of the Company’s chief executive officer and chief financial officer which are required by the Securities and Exchange Commission (“SEC”) and the Sarbanes-Oxley Act of 2002, and the reports, letters and other communications of the independent registered public accounting firm, the Audit Committee recommended to the Board
of Directors (and the Board
of Directors approved) that the audited consolidated financial statements
and management’s assessment of the Company’s internal control over financial reporting referred to above be included in the
2016 Form 10-K2019 Annual Report for filing with the SEC.
International Seaways, Inc. Audit Committee:
Gregory A. Wright, Chairman
Randee E. Day
Ronald Steger
April 13, 2017
| | | International Seaways, Inc. Audit Committee: |
| | | |
| | | Gregory A. Wright, Chair |
| | | Randee E. Day |
| | | David I. Greenberg |
| | | |
| | | April 29, 2020 |
In accordance with the rules of the SEC, this Audit Committee report does not constitute “soliciting material” and shall not be incorporated by reference in any filings with the SEC made pursuant to the 1933 Act or the 1934 Act and shall not otherwise be deemed filed under such Acts.
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RATIFICATION OF APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers (PROPOSAL NO. 2)
The Audit Committee has reappointed Ernst & Young LLP (“EY”) as the independent registered public accounting firm for the Company and its subsidiaries for the year ending December 31, 2020, subject to ratification of the stockholders at the Annual Meeting. EY served as the independent registered public accounting firm of the Company since 2017. The lead audit partner was appointed in 2017. As in prior years, management and the Audit Committee engaged in a review of EY in connection with the Audit Committee’s review of whether to recommend that stockholders ratify the selection of EY as the Company’s independent registered public accounting firm during 2016. Thefor 2020. In that review, the Audit Committee has not yet appointed anconsidered, among other factors, (i) the continued independence of EY, (ii) whether retaining EY is in the best interest of the Company and its stockholders, (iii) EY’s known legal risks and significant proceedings that may affect its ability to perform the Company’s annual audit, (iv) EY’s fees and services provided to the Company and (v) the impact of changing independent registered public accounting firm for 2017.firms. The Audit Committee is considering audit proposals from various accounting firms for 2017, including PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP has agreed, atconsiders the requestappointment of our Audit Committee,EY to continuebe in the best interest of the Company and its stockholders.
In deciding to
provide services as the Company’s independent registered public accounting firm during 2017 untilengage EY, the Audit Committee
has appointed an independent registered public accounting firm for 2017. Thereviewed auditor independence and existing commercial relationships with EY, and concluded that EY had no commercial relationship with the Company
has not had any disagreements with PricewaterhouseCoopers LLP on any accounting or auditing matters.Stockholder ratification is not required for the selection of the Company’s independent registered public accounting firm, since the Audit Committee has the sole responsibility for selecting the Company’s independent registered public accounting firm. Since the Audit Committee has not completed the process of makingthat would impair its selection, the Audit Committee is not submitting an independent registered public accounting firm to stockholders for ratification this year. independence.
Representatives of
PricewaterhouseCoopers LLPEY will attend the Annual Meeting and be afforded an opportunity to make a statement, as well as be available to respond to appropriate questions submitted by stockholders.
| • | Audit Fees. Audit fees incurred by the Company to PricewaterhouseCoopers LLP were $2,611,000 and $1,407,900 in 2016 and 2015, respectively. Audit fees include fees for professional services rendered for the audit of the Company’s annual financial statements for the years ended December 31, 2016 and 2015 and the review of the financial statements included in the Company’s Forms 10-Q for the respective quarters in the years ended December 31, 2016 and 2015 in 2016; the audit of the Company’s annual financial statements for the year ended December 31, 2014 in 2015; expenses incurred related to the performance of the services noted above; financial audits and reviews for certain of the Company’s subsidiaries; and services associated with documents filed with the SEC. |
| • | Audit-Related Fees. Audit-related fees incurred by the Company to PricewaterhouseCoopers LLP were $15,000 and none in 2016 and 2015, respectively. Audit related fees include fees for matters related to public offerings not classified as “audit services.” |
| • | Tax Fees. Tax fees incurred by the Company to PricewaterhouseCoopers LLP were $10,500 and $48,000 in 2016 and 2015, respectively. Tax fees relate to the preparation of certain foreign tax returns. |
| • | All Other Fees. Total other fees incurred by the Company to PricewaterhouseCoopers LLP were $2,000 and none in 2016 and 2015, respectively. |
If the appointment is not ratified by stockholders, the selection of the Company’s independent registered public accounting firm will be reconsidered by the Audit Committee.
Audit Fees. Audit fees incurred by the Company to EY were $984,000 in 2019 and $1,242,000 in 2018. Audit fees incurred by the Company to EY for 2019 and 2018 include fees for professional services rendered for the audit of the Company’s annual financial statements for the years ended December 31, 2019 and 2018; the review of the financial statements included in the Company’s Forms 10-Q for the respective quarters in the years ended December 31, 2019 and 2018; financial audits and reviews for certain of the Company’s subsidiaries; services associated with documents filed with the SEC; and expenses incurred related to the performance of the services noted above.
Audit-Related Fees. There were no audit-related fees incurred by the Company to EY in 2019 and 2018.
Tax Fees. Tax fees incurred by the Company to EY were $36,000 in 2019 and $38,000 in 2018. Tax fees relate to the preparation of certain foreign tax returns.
All Other Fees. There were no other fees incurred by the Company to EY in 2019 and 2018.
The Audit Committee considered whether the provision of services described above under
“All Other“Tax Fees” are compatible with maintaining
PricewaterhouseCoopers LLP’sEY’s independence. The Company does not believe that any reasonable concerns about the objectivity of
PricewaterhouseCoopers LLPEY in conducting the audit of the Company’s financial statements are raised as a result of the fees paid for non-audit-related services in
2016.2019.
The Audit Committee has established policies and procedures for pre-approving audit and permissible non-audit work performed by its independent registered public accounting firm. As set forth in the pre-approval policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. Any proposed services exceeding pre-approved cost levels require specific pre-approval by the Audit Committee.
Accordingly, at the Annual Meeting, stockholders will be asked to vote on the following resolution:
RESOLVED, that the action of the Audit Committee of the Board of Directors of this Company in appointing Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 be, and it hereby is, ratified and approved.
Recommendation of the Board The Audit Committee and the Board recommends a vote “FOR” such ratification.
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ADVISORY VOTE ON APPROVAL OF THE COMPENSATION OF THE NAMED
EXECUTIVE OFFICERS (PROPOSAL NO.
2)3)
As required by the Dodd-Frank
Wall Street Reform and Consumer Protection Act,
of 2010 (the “Dodd-Frank Act”), stockholders are being provided with the opportunity to cast an advisory vote on the compensation of the Named Executive Officers for
20162019 as described beginning on
the next page
15 of this Proxy Statement in the section titled
“Executive Compensation,” including the CD&A included therein.“Compensation Discussion and Analysis”.
As more fully described in the CD&A,that section, the Company’s executive compensation program is designed to promote the following objectives:
Attract, motivate, retain and reward highly-talented executives and managers, whose leadership and expertise are critical to the Company’s overall growth and success;
Compensate each executive based upon the scope and impact of his or her position as it relates to achieving the Company’s corporate goals and objectives, as well as on the potential of each executive to assume increasing responsibility within the Company;
Align the interests of the Company’s executives with those of its stockholders by linking incentive compensation rewards to the achievement of performance goals that maximize stockholder value; and
Reward the achievement of both the short-term and long-term strategic objectives necessary for sustained optimal business performance.
The Compensation Committee and the Board believe that the design of the executive compensation program, and hence the compensation awarded to the Named Executive Officers, fulfills these objectives.
Stockholders are urged to read the “Compensation Discussion and Analysis” section of this Proxy Statement and the accompanying compensation tables and narrative which describe in detail how the Company’s compensation policies and procedures implement the Company’s compensation philosophy and disclose the compensation paid to the Named Executive Officers for
2016.2019.
Accordingly, at the Annual Meeting, stockholders will be asked to vote on the following resolution:
RESOLVED
, that the stockholders of the Company hereby approve, in an advisory vote, the compensation of the Named Executive Officers for 20162019 as described in the “Compensation Discussion and Analysis” section and in the accompanying compensation tables and narrative in the Company’s Proxy Statement for the 20172020 Annual Meeting of Stockholders.As an advisory vote, the results of the vote will not be binding on the Board or the Company. However, the Board and the Compensation Committee value the opinion of the Company’s stockholders and will consider the outcome of the vote when making future decisions on the compensation of the Named Executive Officers and the Company’s executive compensation principles, policies and procedures. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock present in person or represented by proxy and entitled to vote is required to approve the resolution.
Recommendation of the Board The Board recommends a vote “FOR” advisory approval of the resolution set forth above and approval of the compensation of the Named Executive Officers for 20162019 as disclosed in this Proxy Statement.
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ADVISORY VOTE ON THE PREFERRED FREQUENCY OF FUTURE STOCKHOLDERADVISORY VOTES ON COMPENSATION
FOR THE NAMED EXECUTIVE OFFICERS(PROPOSAL NO. 3)In additionDISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) discusses our 2019 executive officer compensation program. It describes our compensation philosophy; the objectives of the executive compensation program and policies in 2019; the elements of the compensation program; and how each element fits into our overall compensation philosophy. The Compensation Committee oversees the compensation paid to our executive officers, including under their employment agreements (described below).
INSW became a public company on November 30, 2016, when it was spun off from OSG (the “Spin-Off”). Following the Spin-Off, the Compensation Committee developed an independent set of policies and practices to support the Company’s compensation philosophy and strategy. Prior to the stockholder advisory vote onSpin-Off, INSW was a wholly-owned subsidiary of OSG, and its compensation policies were substantially the same as those of OSG.
The compensation of the executives who constitute INSW’s named executive officers (the “Named Executive Officers” or “NEOs”) is set out in the Summary Compensation Table following this CD&A. In 2019, our NEOs (all of whom were employees of INSW throughout the year) were as set forthfollows:
Lois K. Zabrocky | | | President and Chief Executive Officer (“CEO”) |
Jeffrey D. Pribor | | | Chief Financial Officer (“CFO”) Senior Vice President and Treasurer |
James D. Small III | | | Chief Administrative Officer, Senior Vice President, General Counsel & Secretary |
Derek G. Solon | | | Vice President (Chief Commercial Officer) |
William F. Nugent | | | Vice President (Head of Ship Operations) |
2019 Performance
We have a strong and measurable pay for performance philosophy. Accordingly, our operational and financial performance in fiscal years 2017, 2018 and 2019 were important factors in understanding our 2019 executive compensation. Please refer to “Who We Are – 2019 Performance Highlights” above for a summary of our recent achievements. We believe that 2019 was a transformative year for the Dodd-Frank Act requires that stockholders be given the opportunity to vote, on an advisory and non-binding basis, whether the preferred frequencyCompany, as described in our 2019 Annual Report (a copy of which you can obtain as described in “Other Matters” below).
Say-on-Pay Results
At INSW’s 2019 Annual Meeting, approximately 99.7% of the stockholder advisory votestockholders who voted on the say-on-pay proposal (excluding broker non-votes) voted in favor of INSW’s executive compensation program. In considering that result, the Compensation Committee acknowledges the support received from its stockholders and views the result as a confirmation of INSW’s existing executive compensation policies and decisions.
The Company holds an annual say-on-pay vote by its stockholders, which vote frequency was most recently approved by stockholders in 2017. The Company anticipates its next “say-when-on-pay” vote will be conducted at the
Named Executive Officers should be every one, two or three years (commonly known as the “frequency of say-on pay” proposal). Stockholders may also abstain from this vote. This advisory frequency vote is required once every six years. At the2023 Annual Meeting of
Stockholders of Overseas Shipholding Group, Inc., the former parent corporation of the Company (“OSG”), in 2011 a majority of the shares voting at the meeting approved an annual frequency. Since that meeting, OSG conducted an advisory vote on the compensation of the Named Executive Officers of OSG at every annual meeting of stockholders.After careful consideration, the Board of Directors has determined that future stockholder advisory votes on the compensation of the Named Executive Officers of the Company should be conducted annually.Stockholders. The Board of Directors has reached this recommendation because it believes that an annual advisory vote on the Company’s executive compensation programs:
enhances transparency and gives stockholders a voice to express their opinion on the Company’s executive compensation every year.
facilitates stockholder engagement and provides the Board of Directors and Compensation Committee will continue to engage with closer to real timestockholders and more directwill consider feedback onfrom them, as well as the Company’s compensation practices.
allows the Board of Directorsresults from this year’s and Compensation Committee to analyze voting trends/stockholder views on the Company’s compensation programs.
has become normal at most companies and is preferred by a majority of institutional investors, proxy advisory firms and many corporate governance experts.
The Board of Directors understands that stockholders may have different views as to what is an appropriate frequency forfuture advisory votes on executive compensation, when evaluating INSW’s executive compensation program and policies.
Compensation Philosophy, Objectives and Practices Compensation Philosophy and Objectives
The Company believes that a well-designed compensation program is a powerful tool to attract, motivate, retain and reward top executive and managerial talent. INSW further believes that the compensation program should align the interests of executives with those of stockholders in achieving and sustaining increases in stockholder value over both the short- and long-term.
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The Company’s compensation program is structured to drive and support these goals, and is designed with the following objectives in mind:
Overall Objectives | | | • | | | Attract, motivate, retain and reward highly-talented executives and managers, whose leadership and expertise are critical to our overall growth and success. |
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| | | • | | | Align the interests of our executives with those of our stockholders. |
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| | | • | | | Support the long-term retention of the Company’s executives to maximize opportunities for teamwork, continuity of management and overall effectiveness. |
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| | | • | | | Compensate each executive competitively (1) within the marketplace for talent in which we operate; (2) based upon the scope and impact of his or her position as it relates to achieving our corporate goals and objectives; and (3) based on the potential of each executive to assume increasing responsibility within the Company. |
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| | | • | | | Discourage excessive and imprudent risk-taking. |
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| | | • | | | Structure the total compensation program to reward the achievement of both the short-term and long-term strategic objectives necessary for sustained optimal business performance. |
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Pay Mix Objectives | | | • | | | Provide a mix of both fixed and variable (“at-risk”) compensation, each of which has a different time horizon and payout form (cash and equity), to reward the achievement of annual and sustained, long-term performance. |
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Pay-For-Performance Objectives | | | • | | | Use our incentive compensation program and plans to align the interests of our executives with those of our stockholders by linking incentive compensation rewards to the achievement of performance goals that maximize stockholder value by: |
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| | | | | | – | | | Ensuring our compensation programs are consistent with, and supportive of, our short-term and long-term strategic, operating and financial objectives. |
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| | | | | | – | | | Placing a significant portion of our executives’ compensation at risk, with payouts dependent on the achievement of both corporate and individual performance goals, which are set annually by the Compensation Committee. |
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| | | | | | – | | | Encouraging balanced performance by employing a variety of performance measures to avoid over-emphasis on the short-term or any one metric. |
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| | | | | | – | | | Applying judgment and reasonable discretion in making compensation decisions to avoid relying solely on formulaic program design, taking into account both what has been accomplished and how it has been accomplished in light of the existing commercial environment. |
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Executive Compensation Practices
Our goal is to maintain an executive compensation program that is competitive, rooted in the principles of pay-for-performance and in conformance with best practices in executive compensation and corporate governance. To this end, the Compensation Committee routinely evaluates its practices and programs with respect to executive compensation to identify opportunities for improvement. The following table summarizes key features of our executive compensation program.
WHAT WE DO | | | |
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Stock Ownership Guidelines | | | We maintain, and track progress against stock ownership guidelines for our executives and directors. |
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Anti-Hedging and Anti-Pledging Policies | | | We maintain policies and procedures for transactions in the Company’s securities that are designed to ensure compliance with all insider trading rules and that prohibit all hedging, pledging and short-selling of our stock by all officers and employees. |
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Compensation Recoupment (“Clawback”) Policy | | | All of our incentive compensation plans and the terms of our equity agreements provide that the Compensation Committee may seek reimbursement of incentives paid or equity-related proceeds provided to an executive officer if it is later determined that the executive officer engaged in misconduct, acted in a manner contrary to the Company’s interest or breached a non-competition agreement. |
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WHAT WE DO NOT DO | | | |
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Excise Tax Gross-Ups | | | We do not provide for excise tax gross-ups. |
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Supplemental Executive Retirement Plans (“SERPs”) | | | We do not provide any SERPs, and our legacy SERP was frozen to new participants in November 2012. |
Roles in Setting Executive Compensation Role of the Compensation Committee
Structure of the Compensation Committee: In 2019, the Compensation Committee consisted of three members of the Board, each of whom qualified as “independent” under the NYSE listing standards and applicable independence standards under the 1934 Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act”). Recognizing the importance of independent perspectives, the Compensation Committee regularly meets in executive session, without any members of management present.
Objectives of The Compensation Committee and the Decision-Making Process: The primary goals of the Compensation Committee are to establish the Company’s compensation philosophy and strategy and to ensure that the Company’s executives are compensated in a manner consistent with the articulated philosophy and strategy. The Compensation Committee takes many factors into account when making compensation decisions with respect to the NEOs and other senior executives, including the individual’s performance, tenure and experience; the ability of the individual to affect long-term growth and success; INSW’s overall performance; internal equity among the NEOs; and external, publicly available market data on competitive compensation practices and levels.
Role of Outside Advisors: The Compensation Committee has the authority to engage independent advisors to assist in carrying out its duties. The Compensation Committee has engaged Lyons, Benenson & Company Inc. (“LB&Co.”) as its independent compensation consultant to advise on executive and director compensation arrangements and related governance matters. Additionally, LB&Co. assisted management in the preparation of this Proxy Statement.
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Compensation Consultant Conflict of Interest Assessment: As required by rules adopted by the SEC under the Dodd-Frank Act, the Compensation Committee assessed all relevant factors and determined that the work of LB&Co. did not raise any conflict of interest in 2019. In making this determination, the Compensation Committee considered all relevant factors, including those set forth in Rule 10C-1(b)(4)(i) through (vi) under the 1934 Act.
Role of the CEO in Setting CEO and Other Executives’ Compensation
All decisions relating to the compensation of Ms. Zabrocky, INSW’s CEO, are made by the Compensation Committee without her or other members of management present. In making determinations regarding compensation for INSW’s other NEOs and other selected senior executives, the Compensation Committee generally considers the recommendations of the CEO (for all executives other than herself), and advice received from LB&Co. The CEO recommends the compensation levels for the other NEOs and for all others whose compensation is determined by the Compensation Committee. In making her recommendations, the CEO evaluates the performance of each executive, considers each executive’s compensation in relation to the other officers and executives (“internal equity”) and assesses retention risks. The CEO’s recommendations are subject to review by and, in some cases modification by, and ultimately approval of, the Compensation Committee or, when sufficiently material, the full Board.
All 2019 compensation decisions (including base salaries, annual and long-term incentive target percentages and annual and long-term incentive performance measures and goals) were made under the auspices of the Compensation Committee. Additionally, the Compensation Committee was responsible for the review and certification of the 2019 performance results that determined the annual and long-term incentive payouts for the NEOs.
Consideration of Compensation Peer Group
The Compensation Committee examines the executive compensation of a group of peer companies to stay current with market pay practices and trends, and to understand the competitiveness of our total compensation and its various elements. In general, we strive for total compensation to be competitive with a select group of companies that the Compensation Committee believes to be an appropriate compensation reference group (the “Peer Group”). The Compensation Committee reviews the Peer Group at least annually to affirm that it is comprised of companies that are similar to us in terms of industry focus and scope of operations, size (based on revenues and market capitalization), and the competitive marketplace for talent.
While the Compensation Committee believes the data derived from any peer group is helpful, it also recognizes that benchmarking is not necessarily definitive in every case. Furthermore, the Peer Group is limited to those companies for which executive compensation data is publicly available, which necessarily eliminates some of INSW’s closest competitors that are privately held and/or incorporated in jurisdictions that do not require public disclosure of executive compensation. The Compensation Committee, therefore, uses the information from the Peer Group for informational and analytical purposes, but does not make compensation decisions based solely on this market data. With this in mind, INSW augments the Peer Group data with publicly-available survey data, and uses all compensation data in conjunction with annual assessments of corporate and individual performance to make recommendations and decisions on the compensation arrangements applicable to the Company’s NEOs.
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2019 Peer Group. The Peer Group for 2019 consisted of 12 publicly traded oil, shipping and transportation companies, with a significant international focus. For the 2018 fiscal year the total revenues of this group ranged between $159 million and just under $3 billion, with median revenues of approximately $503 million. For the 2019 fiscal year, the total revenues of this group ranged between $158 million and $2.8 billion, with median revenues of some $667.5 million. The following 12 companies comprised the 2019 Peer Group:
DHT Holdings, Inc. | | | Kirby Corporation |
Dorian LPG Ltd. | | | Martin Midstream Partners, L.P. |
Eagle Bulk Shipping Inc. | | | Matson, Inc. |
Euronav NV | | | SEACOR Holdings Inc. |
Genco Shipping & Trading Limited | | | SEACOR Marine Holdings Inc. |
Genesis Energy, L.P. | | | Tidewater Inc. |
2020 Peer Group. At the end of 2019, a decision was made to reassess the Peer Group for 2020. For 2020, the Compensation Committee approved a revised Peer Group consisting of 11 publicly traded oil, shipping and maritime offshore companies, again, with a significant international focus, with total revenues for 2019 between approximately $158 million and $2.8 billion, and median revenues of approximately $535 million. The 2020 Peer Group differs from the 2019 Peer Group in that Diamond S Shipping Inc. was added and Genesis Energy, L.P. and Martin Midstream Partners, L.P. were removed.
Elements of the 2019 Executive Officer Compensation Program The Compensation Committee reviews each element of compensation annually to ensure it aligns with our compensation philosophy and objectives, as well as to assess INSW’s executive compensation program and levels relative to the competitive landscape. The executive compensation program consists of the following:
Base salary
Annual cash incentive compensation
Long-term (equity) incentive compensation
Severance arrangements through employment agreements
Retirement benefits generally available to all employees
Welfare and similar benefits (e.g., medical, dental, disability and life insurance)
INSW seeks to provide competitive “fixed” compensation in the form of base salary while emphasizing a pay-for-performance culture in which we place a larger portion of total compensation “at-risk” in the form of annual performance-based cash incentives (which will only be paid if INSW achieves specified performance goals) and long-term equity incentives (which vest over a multi-year period and, in certain cases, also depend on the achievement of specific performance goals).
Base Salary
We strive to pay base salaries that are market competitive to attract talented executives and to provide a secure fixed level of compensation to our executives and managers. The Compensation Committee reviews the base salaries of the executive officers and compares them to the salaries of senior management among the Peer Group companies, bearing in mind that total estimated direct compensation opportunity is the principal comparative measure of the competitiveness of our program. Based on its own experience and that comparison, the Compensation Committee determines whether the NEO salaries, taken together with other elements of compensation, are at levels sufficient to attract, motivate and retain the executives who are essential to leading the Company and driving stockholder value.
Annual adjustments in base salary, if any, consider individual performance, prior experience, position duties and responsibilities, internal equity and external market practices. The Compensation Committee generally relies on the CEO’s evaluation of each NEO’s performance (other than her own) in deciding whether to recommend and/or approve merit increases for any NEOs in a given year. In those instances
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where the duties and responsibilities of a NEO change, the CEO may recommend any adjustments believed to be warranted, and the Compensation Committee will consider all the factors enumerated above in determining whether to approve any such changes.
With respect to those employees who were NEOs in 2019, increases in base salary from 2018 to 2019 for Ms. Zabrocky and Messrs. Pribor, Solon and Nugent were 2.5%, 11.1%, 5.1% and 9.7%, respectively. Mr. Small did not receive an increase in his base salary in 2019. The following table summarizes 2019 base salaries for our NEOs.
Lois K. Zabrocky | | | President and Chief Executive Officer | | | $615,000 |
Jeffrey D. Pribor | | | Chief Financial Officer, Senior Vice President and Treasurer | | | $500,000 |
James D. Small III | | | Chief Administrative Officer, Senior Vice President, General Counsel & Secretary | | | $475,000 |
Derek G. Solon | | | Vice President (Chief Commercial Officer) | | | $300,000 |
William F. Nugent | | | Vice President (Head of Ship Operations) | | | $300,000 |
2019 Annual (Cash) Incentive Plan
Pursuant to the Company’s currently effective Management Incentive Compensation Plan (the “MICP”), NEOs are eligible to receive annual cash incentives based upon the achievement of specified annual performance goals, which are established and approved by the Compensation Committee during the first quarter of the performance year. Our annual cash incentive plan, which for the NEOs generally reflects the terms of the annual cash incentive plan available to all employees, is intended to focus our NEOs on our critical, short-term financial and operational goals. As in past years, the financial performance measure for 2019 was earnings from shipping operations (“ESO”). ESO is a non-GAAP measure defined as income from vessel operations before depreciation and amortization and gains and losses from vessel sales (including impairments) reduced by payments for drydockings and vessel expenditures, which we use for compensation purposes. ESO for INSW was income of $73.5 million in 2019. The NEO awards were also based on quantifiable measures of our performance in corporate metrics, business/operational metrics (including safety) and individual factors.
For 2019, the annual incentive target for Ms. Zabrocky was 115% of her base salary; the annual incentive targets for Messrs. Pribor and Small were 100% of their respective base salaries and the annual incentive targets for Messrs. Solon and Nugent were 70% of their respective base salaries. Based on the weighting described below, the potential actual incentive payout range for Ms. Zabrocky and Messrs. Pribor and Small was 0% to 142% of target, while for Messrs. Solon and Nugent the range was 0% to 137%.
NEOs have different weights ascribed to their Company ESO, business/operational and individual goals, each of which is a component of the payout calculation. The specific weights were established based on the scope of each NEO’s role and their respective abilities to affect the results, and were ultimately recommended by the CEO and approved by the Compensation Committee. The following table sets forth the weights by component and NEO.
Ms. Zabrocky | | | 60% | | | 15% | | | 25% |
Messrs. Pribor and Small | | | 60% | | | 10% | | | 30% |
Messrs. Solon and Nugent | | | 33.3% | | | 33.3% | | | 33.4% |
For 2019, each goal was assessed on an achievement scale of between 70% and 130%, with 100% reflecting target level, 130% being the maximum level, and a score of 0% given for achievement below 70%.
For ESO achievement, the performance factor (i.e. payout) can range from 0% to a maximum of 150% (corresponding with a 130% ESO achievement level, as detailed below).
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For the business/operational metrics and individual performance, the payout can range from 0% to a maximum of 130% (corresponding with actual achievement level).
If the achievement level for ESO or business/operational metrics is below 70%, the performance factor (payout) for those measures is zero, resulting in no bonus being payable in respect of those measures.
If the individual performance achievement level for any NEO is below 70%, it would result in no bonus being payable to that individual.
The formulas to determine each NEO’s actual annual cash incentive award for 2019 are as follows:
Chief Executive Officer (Zabrocky) |
the sum of |
Base Salary × Target Incentive% × | | | (60% × Performance Factor for Company ESO 0-150%) + (15% × Performance Factor for Business/Operational Metrics 0-130%) + (25% × Performance Factor for Individual 0-130%) | | | = | | | Annual Cash Incentive Payout |
Chief Financial Officer and Chief Administrative Officer (Pribor and Small) |
the sum of |
Base Salary × Target Incentive % × | | | (60% × Performance Factor for Company ESO 0-150%) + (10% × Performance Factor for Business/Operational Metrics 0-130%) + (30% × Performance Factor for Individual 0-130%) | | | = | | | Annual Cash Incentive Payout |
Other Participants: Vice Presidents (Solon and Nugent) |
the sum of |
Base Salary × Target Incentive % × | | | (33.3% × Performance Factor for Company ESO 0-150%) + (33.3% × Performance Factor for Business/Operational Metrics 0-130%) + (33.4% × Performance Factor for Individual 0-130%) | | | = | | | Annual Cash Incentive Payout |
2019 Company ESO Goal. For 2019, the table below sets forth the ESO performance thresholds at INSW and the corresponding amounts that would be earned (expressed as percentages of target) by the NEOs at each level of achievement.
50.0% | | | 70% | | | (58,082) |
58.4% | | | 75% | | | (42,755) |
66.7% | | | 80% | | | (27,428) |
75.0% | | | 85% | | | (12,101) |
83.3% | | | 90% | | | 3,226 |
91.7% | | | 95% | | | 18,553 |
100.0% | | | 100% | | | 33,880 |
108.4% | | | 105% | | | 49,207 |
116.7% | | | 110% | | | 64,534 |
125.0% | | | 115% | | | 79,861 |
133.3% | | | 120% | | | 95,188 |
141.7% | | | 125% | | | 110,515 |
150.0% | | | 130% | | | 125,842 |
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In 2019, the ESO result was $73.5 million which corresponded to a performance factor of 116.7%.
INSW Business/Operational Metrics. For 2019, the INSW business and operational metrics were weighted equally.
The business metrics related to (a) the time charter equivalent (“TCE”) performance of INSW’s VLCCs, Aframaxes, Suezmaxes, Panamaxes and MRs TCE compared with spot TCE rates of competitors or market spot TCE rates published by a third party maritime research service for Panamaxes; and (b) minimizing the discount received on the Company’s older VLCCs compared with the TCE achieved on its more modern units.
The operational metrics included (a) achieving or doing better than INSW vessel operating budget; (b) time not earning (technical) — a metric that measures operational availability; (c) total recordable case frequency — a metric that tracks safety within the fleet; (d) vetting observations — a metric that indicates acceptability of our fleet to our customers; and (e) vessel visits — number of visits to a vessel by shoreside staff, a metric that indicates corporate culture and “tone at the top.” The Company also, for the first time, tracked (but did not include a score for) an environmental performance metric; that metric will be included in the 2020 operational metric score.
The overall INSW performance score for business/operational metrics for 2019 was 111%.
Individual Performance Goals. Each of our NEOs also had individual performance goals established by the Compensation Committee. The individual goals for 2019 covered a broad range of performance indicators that included, among others, the following (although not all goals listed below applied to all NEOs):
Assessing, negotiating and completing the sale of INSW’s interest in the LNG JV;
Developing and executing business strategy;
Achieving revenue, operating expenses and general & administrative expense targets;
Enhancing lines of communication with key customers and investors;
Evaluating strategic alternatives;
Evaluating capital allocation choices and balance sheet recapitalization;
Further establishing and executing ESG initiatives, including the Company’s “get to green” initiative;
Reviewing and identifying operational risks and performing risk assessments; and
Assessing and engaging in special projects, including additional fleet renewal assessments, business development, scrubber technology rollout, capital management, management development and financial strategy and reporting.
After the 2019 performance year, the Compensation Committee assessed the level of achievement of our NEOs relative to their respective individual performance goals. Following this assessment, it was determined that Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent achieved their individual goals above target levels.
2019 Actual Annual Incentive Paid. Based on the foregoing, the NEOs received the following annual cash incentive awards for 2019: Ms. Zabrocky – $813,833; Mr. Pribor – $577,800; Mr. Small – $549,195; Mr. Solon – $238,040; and Mr. Nugent – $237,773.
Equity-Based Compensation
INSW’s equity-based compensation program is intended to align the interests of its executives with those of its stockholders, and to focus executives on achieving long-term performance objectives aligned with the Company’s business strategy, thereby establishing a direct relationship between compensation, long-term operating performance and sustained increases in stockholder value. The MICP and a similar currently effective plan applicable to the long-term equity compensation for non-employee directors (the “Prior Director Plan”) became effective in December 2016. The MICP provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, performance units,
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performance shares and other performance awards, restricted stock units and restricted stock, and other awards valued in whole or in part by reference to, or otherwise based on, INSW stock. The primary purpose of the MICP and the Prior Director Plan is to facilitate the grant of equity and cash incentives to employees (including our NEOs) and equity compensation to non-employee directors of the Company, and to enable the Company to obtain and retain the services of these individuals, which is essential to our long-term success. INSW initially reserved 2,000,000 shares for issuance under the MICP and 400,000 shares for issuance under the Prior Director Plan, which included shares reserved in respect of certain equity awards issued prior to the Spin-Off under equivalent plans maintained by OSG and inherited by the Company in the Spin-Off. The MICP contains an anti-dilution provision whereby in the event of certain corporate changes in the Company, outstanding awards may be adjusted, as appropriate, to prevent dilution or enlargement of rights.
Consistent with our practices and in each case pursuant to the terms of the MICP, equity awards may be granted from time to time to motivate and retain executives and other key managers and employees and to align their interests with stockholders.
2019 Awards. In April 2019, the Compensation Committee approved the following long-term incentive award date values for Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent:
Lois K. Zabrocky | | | $1,230,000 | | | $410,000 | | | $410,000 | | | $410,000 |
Jeffrey D. Pribor | | | $750,000 | | | $250,000 | | | $250,000 | | | $250,000 |
James D. Small III | | | $593,750 | | | $197,916 | | | $197,916 | | | $197,916 |
Derek G. Solon | | | $300,000 | | | $100,000 | | | $100,000 | | | $100,000 |
William F. Nugent | | | $300,000 | | | $100,000 | | | $100,000 | | | $100,000 |
The time-based restricted stock units (“RSUs”) and stock options vest and become exercisable in equal amounts on the first, second and third anniversaries of the grant date of April 5, 2019. The 2019 performance-based restricted stock units (“PRSUs”) awards vest as follows: (i) one-half of the target PRSUs vest on December 31, 2021, subject to INSW’s three-year Return on Invested Capital (“ROIC”) performance; and (ii) one-half of the target PRSUs vest on December 31, 2021, subject to INSW’s three-year total shareholder return (“TSR”) performance relative to that of a performance peer group. Vesting is subject in each case to the Compensation Committee’s certification of achievement of the performance targets no later than March 15, 2022.
The funding formulas applicable to the PRSUs granted in April 2019 are as follows:
The cumulative target ROIC for the three-year period is 3.72% (with a minimum threshold for 50% achievement of 0.72% and a maximum threshold for 150% achievement of 6.72%).
TSR performance is described in the following table. If the absolute value of three-year TSR is negative, then the payout for the TSR component of the PRSUs is capped at 100%; this was a newly added provision in 2019.
Performance Achievement | | | 25th Percentile | | | 50th Percentile | | | 90th Percentile |
Payout | | | 50% | | | 100% | | | 150% |
Upon termination of employment for any reason, all unvested PRSUs will be forfeited unless the NEO’s respective employment agreement provides otherwise.
For the initial award of performance-based RSUs granted on March 29, 2017 to Mr. Pribor, the Compensation Committee reserved the right to choose different performance measures and targets applicable to the performance-based RSUs before March 31 of each year (2017, 2018 and 2019) and for 2019 determined that the performance measure would be ROIC with a target ROIC of 2.83% for the year ending December 31, 2019 (with a minimum threshold for 50% achievement of -0.17% and a maximum threshold for 150% achievement of 5.83%). For 2019, the actual ROIC result was 4.37% resulting in
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achievement of 126% for Mr. Pribor. Therefore, for Mr. Pribor the performance-based RSUs awarded vested at the appropriate percentage upon certification of this result which occurred in 2020. The grant date value of the 2019 tranche of the 2017 PRSU grant value for Mr. Pribor was $204,489.
In addition, in December 2019, the Compensation Committee approved long-term incentive awards for Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent, as well as a number of other employees of the Company, in connection with the successful completion of the sale of INSW’s interest in the LNG JV. Ms. Zabrocky and Messrs. Pribor and Small each received RSUs in the amount of $119,989 and Messrs. Solon and Nugent each received RSUs in the amount of $169,998. The RSUs granted in December 2019 will vest on the first anniversary of the grant date.
2020 Plans. In April 2020, the Company adopted a new Management Incentive Compensation Plan (the “2020 Management Plan”) and a new non-employee director equity compensation plan (the “2020 Director Plan” and, together with the 2020 Management Plan, the “2020 Plans”). The Company has submitted the 2020 Plans for shareholder ratification and approval pursuant to this Proxy Statement. Please refer to Proposal No. 4 (Ratification and Approval of the International Seaways, Inc. 2020 Non-Employee Director Incentive Compensation Plan) and Proposal No. 5 (Ratification and Approval of the International Seaways, Inc. 2020 Employee Incentive Compensation Plan) further below in this Proxy Statement. Certain features of the existing MICP and Prior Director Plan were revised in the 2020 Plans, and the features of the new plans are detailed in those proposals.
2020 Compensation Decisions Base Salary Decision:
On April 2, 2020, base salaries were increased for Ms. Zabrocky (from $615,000 to $675,000), Mr. Pribor (from $500,000 to $510,000), Mr. Small (from $475,000 to $485,000), Mr. Solon (from $300,000 to $320,000), and Mr. Nugent (from $300,000 to $320,000), in each case retroactive to January 1, 2020. The NEOs earn annualized base salaries that are commensurate with their positions as named executive officers of a public company and which will provide a steady source of income sufficient to permit these officers to focus their time and attention on their work duties and responsibilities.
Annual Incentive Decisions
The design of INSW's 2020 annual cash incentive plan is generally consistent with INSW's 2019 annual cash incentive plan, with two significant changes. The first change is that a failure to achieve the minimum threshold for the Company’s ESO target will result in payouts attributable to Operational/Business Metrics being capped at target and payouts for individual goals being capped at threshold. The second is that any person what has an individual goal achievement below threshold will no longer “zero out” his or her full cash bonus for the year, but will instead zero out only the bonus attributable to achievement of those goals, while the ESO target and Operational/Business Metric goals will continue to pay out pursuant to the formula described above to reflect the actual results achieved. In 2020, pursuant to the terms of their employment agreements with the Company, as amended, Ms. Zabrocky will have a target annual incentive equal to 125% of base salary (increased from 115% in 2019), and Messrs. Pribor and Small will each continue to have a target annual incentive equal to 100% of their base salaries. In addition, Messrs. Solon and Nugent will each have a target annual incentive equal to 85% of base salary (increased from 70% in 2019 in each case).
Long-Term Equity Awards Decisions:
On April 2, 2020, the Compensation Committee awarded each of the NEOs equity grants with a fair value as of the grant date of approximately (1) for Ms. Zabrocky, 250% of her base salary (an increase from 200%); (2) for Mr. Pribor, 150% of his base salary; (3) for Mr. Small, 125% of his base salary; and (4) Messrs. Solon and Nugent, 100% of their respective base salaries. These equity grants were divided equally among time-based RSUs, stock options and PRSUs. Certain of the PRSU grants remain subject to ratification by the Company’s stockholders within twelve months after the grant date.
Ms. Zabrocky, as President and CEO, does not receive additional compensation for services as a director of the Company.
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Employment Agreements with the NEOs Employees of INSW Classified as NEOs for 2019
INSW has employment agreements with Ms. Zabrocky and Messrs. Pribor and Small. Under the terms of those agreements, Ms. Zabrocky and Messrs. Pribor and Small are entitled to certain compensation arrangements and severance benefits as detailed in the paragraphs below. Although Messrs. Solon and Nugent do not have formal contractual employment agreements with INSW, they are also entitled to certain compensation arrangements and severance benefits. In addition, each NEO (whether or not his or her employment relationship with INSW is governed by a formal contractual employment agreement) is entitled to vacation in accordance with INSW policy, and each of them participates in medical, dental, and life insurance, as well as retirement and other benefit plans as may be in effect from time to time. Each of the employment agreements also provides for the possibility of annual equity grants at the discretion of the Board upon recommendation from the Compensation Committee.
Under the terms of the employment agreements for Ms. Zabrocky and Messrs. Pribor and Small, if an executive’s employment is terminated by INSW for any reason or terminated voluntarily by the executive, he or she is entitled to the following payments (“Accrued Payments”):
any earned, unpaid base salary through the date of termination;
any earned, unpaid annual bonus applicable to the performance year prior to the termination;
payment for any accrued, but unused vacation through the date of termination; and
reimbursement of any business expenses not reimbursed as of the date of termination.
If any such executive’s employment is terminated by reason of death or permanent disability, INSW will pay the Accrued Payments to the executive or the executive’s estate, and INSW will vest any non-performance-based equity previously granted to the executive that has not yet vested.
The following table summarizes certain terms of the Company’s employment agreements with Ms. Zabrocky and Messrs. Pribor and Small as in effect on December 31, 2019 and describing amendments to those agreements made during 2019 and 2020:
| Lois K. Zabrocky President and CEO | | | 9/29/14 (originally entered into with OSG; assumed in Spin-Off) | | | $615,000 (increasing to $675,000 for 2020) | | | 115% (increasing to 125% for 2020) | | | • | | | Severance benefits in the event of termination without cause or resignation with good reason include: | |
| | | | ○ | | | salary continuation for 24 months | |
| | | | ○ | | | a lump sum payment of $1,049,999 | |
| | | | ○ | | | accelerated vesting of all outstanding and unvested options, RSUs and other equity-based grants or cash in lieu of grants that in all cases are not performance-based upon a termination without cause, for good reason, by death or disability | |
| • | | | Equity grant target set at 200% of base salary for 2019, and increased to 250% of base salary for 2020 | |
| • | | | Amended on April 5, 2019 to increase base salary and target bonus for 2019 to $615,000 (from $600,000) and 115% of base salary (from 100%), respectively | |
| • | | | Amended as of April 2, 2020 to increase base salary and target bonus for 2020 to $675,000 and 125% of base salary, respectively | |
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| Jeffrey D. Pribor Senior Vice President, CFO and Treasurer | | | 11/9/16 | | | $500,000 (increasing to $510,000 for 2020) | | | 100% | | | • | | | Severance benefits in the event of termination without cause or resignation with good reason include: | |
| | | | ○ | | | 12 months’ continuation of annual base salary plus Target Bonus (18 months’ in the event of a change in control) | |
| | | | ○ | | | a lump sum payment of a pro rata portion of his annual bonus based on actual achievement | |
| | | | ○ | | | accelerated vesting of the outstanding time-based awards that would have vested on the next regularly scheduled vesting date following the termination date | |
| | | | ○ | | | pro-rated vesting of all performance-based RSUs and other equity-based grants, to the extent the applicable performance goals are achieved | |
| • | | | Equity grant target set at 150% of base salary for 2019 and 2020 | |
| • | | | Amended on April 5, 2019 to increase base salary and target bonus for 2019 to $500,000 (from $450,000) | |
| • | | | Amended as of April 2, 2020 to increase base salary for 2020 to $510,000 | |
| James D. Small III Senior Vice President, Chief Administrative Officer, Secretary & General Counsel | | | 2/13/15 (originally entered into with OSG; assumed in Spin-Off) | | | $475,000 (increasing to $485,000 for 2020) | | | 100% | | | • | | | Severance benefits in the event of termination without cause or resignation with good reason include: | |
| | | | | | | | | | | | | ○ | | | salary continuation for 24 months | |
| | | | | | | | | | | | | ○ | | | a lump sum payment of $950,000 | |
| | | | | | | | | | | | | ○ | | | accelerated vesting of all outstanding and unvested time-based options, RSUs and other equity-based grants upon a termination without cause, for good reason, by death or disability | |
| | | | | | | | | | • | | | Equity grant target set at 125% of base salary for 2019 and 2020 | |
| | | | | | | | | | • | | | Amended as of April 2, 2020 to increase base salary and target bonus for 2020 to $485,000 | |
The Company has entered into its standard offer letter with Messrs. Solon and Nugent, except that each of Messrs. Solon and Nugent have an additional letter providing for their years of service to be treated as 26 years of service solely with regard to the terms of the INSW severance plan and the specific terms as described in their equity grant letters. On April 5, 2019, each of their annual base salaries was increased to $300,000. On April 2, 2020, each of their annual base salaries was increased to $320,000 from $300,000 and each of their target bonuses increased to 85% from 70% of base salary.
Benefits
In general, INSW provides benefits to its employees that we believe are important to maintaining a competitive total compensation program. Benefits are designed to provide a reasonable level of retirement income and to provide a safety net for protection against the financial concerns and catastrophes that can result from illness, disability or death.
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INSW provides a tax-qualified defined contribution employee benefit plan to employees, which for 2020 is the EngagePEO Retirement Savings Plan (the “Savings Plan”). Under the Savings Plan eligible employees may contribute, on a pre-tax basis, an amount up to the limit imposed by and the Internal Revenue Code of 1986, as amended (the “Code”). Under the Savings Plan, INSW will match 100% of the first 6% of a participant’s pre-tax contribution (up to the Code limit) which for 2019 was $16,800.
INSW does not currently have any plans that provide for payments or other benefits at, following or in connection with the retirement of our employees, other than the Savings Plan and the INSW SERP (as described in the following paragraph). INSW also assumed OSG’s obligations under the retiree medical plan with respect to those OSG employees who continued to work for INSW after the Spin-Off.
In December 2017, INSW formally adopted the INSW Supplemental Executive Retirement Plan (“INSW SERP”), pursuant to which INSW formally documented its assumption of existing obligations under OSG’s Supplemental Executive Retirement Plan (the “OSG SERP”), which were assumed in connection with the Spin-Off. INSW employees who participated in the OSG SERP prior to the Spin-Off (including Ms. Zabrocky) now participate in the INSW SERP, which is frozen to new contributions and pays interest on assumed obligations at an annual rate of 2.98%.
Risk Mitigation
As previously discussed, the Compensation Committee believes a significant portion of the NEOs’ total compensation should be variable and “at risk,” based upon Company ESO achievement, business/operational metrics and individual performance. To accomplish this, the Compensation Committee uses a balanced weighting of performance measures and metrics in its incentive compensation programs (i) to promote the achievement of its annual operating plan and long-term business strategy; (ii) to build long-term stockholder value; and (iii) to discourage excessive risk taking by eliminating any inducement to over-emphasize one goal to the detriment of others.
To further ensure the Company mitigates excessive risk taking, INSW maintains:
policies prohibiting insider trading, hedging and pledging of its securities by non-employee directors and executives;
an incentive compensation recoupment, or “clawback,” policy for executives; and
stock ownership guidelines applicable to, among others, non-employee directors and executives of the Company.
Hedging, Pledging and Insider Trading. INSW’s insider trading policy prohibits its directors and employees from hedging their ownership of its securities, including investing in options, puts, calls, short sales, futures contracts or other derivative instruments relating to its securities or pledging securities directly owned by them, regardless of whether such directors and employees have material nonpublic information about INSW. The policy also prohibits INSW directors and employees from purchasing or selling its securities while in possession of material nonpublic information or otherwise using such information for their personal benefit. Directors and employees are permitted to enter into trading plans under Rule 10b5-1 under the 1934 Act. With the approval of INSW’s General Counsel, a 10b5-1 Plan may be entered into during a time when the equity participant is not in possession of material, non-public information. These plans are intended to aid the equity participants in diversifying their portfolios without violating federal securities laws.
Incentive Compensation Recoupment Policy for Executive Officers. INSW’s Incentive Compensation Recoupment Policy (or “clawback policy”) generally provides that if an executive officer, including any NEO, receives cash or equity-based incentive compensation based on the achievement of a performance metric and the Board commenced action to restate the calculation of such performance metric within five fiscal years due to a material misstatement or inaccuracy, INSW may require such executive officer to repay all or a portion of the amounts of such incentive compensation that the Board in good faith determines would not have been payable if not for the material misstatement or inaccuracy. The five-year look back limitation does not apply where the Board determines that the executive officer’s fraud, misconduct, negligence or other knowing actual involvement was a contributing factor to the need for the restatement. The Compensation Committee is monitoring the proposed regulations under the Dodd-Frank Act relating to incentive compensation recoupment and will carefully reviewamend the voting resultspolicy to the extent
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necessary to comply with the Dodd-Frank Act.
Stock Ownership Guidelines. INSW encourages stock ownership by its executives and non-employee directors in order to align their interests with the long-term interests of its stockholders. INSW has adopted stock ownership guidelines for non-employee directors and executive officers of the Company. As measured on this proposal.Stockholders are being askedJanuary 1 of each fiscal year, each non-employee director and officer of the Company (including the NEOs) is expected to voteown a number of shares of INSW common stock priced at the closing price on the last trading day of the prior fiscal year equal to a specified multiple of his or her salary (or, in the case of the independent, non-employee members of the Board, a multiple of his or her annual cash retainer) as follows:
President and CEO — 5 × base salary
Senior Vice Presidents — 2 × base salary
Vice Presidents — 1 × base salary
Independent Non-Employee Directors — 3 × annual board service cash retainer
NEOs and independent, non-employee directors are afforded five years from the later of (1) the adoption of the ownership guidelines following
resolution:RESOLVED, that stockholdersthe Spin-Off and (2) the time they first received an equity grant from INSW to achieve these ownership guidelines. For purposes of Company approve, on an advisory basis, whethersatisfying the preferred frequencyguidelines, shares of future stockholder advisory votedcommon stock deemed to be owned include (a) stock owned outright by the incumbent, his or her spouse and minor children; (b) vested time-based restricted stock or RSUs; (c) vested PRSUs where the performance criteria have been satisfied; (d) vested in-the-money stock options (counted based on the Named Executive Officernumber of shares underlying such in-the-money options); and (e) shares of stock held for the incumbents’ benefit in any pension or 401(k) plan. Unvested time-based RSUs and PRSUs do not count towards satisfying the guidelines. INSW has only recently become a public company, and its directors and executive officers have made progress towards meeting these goals since the Spin-Off.
Report of the Compensation Committee The Compensation Committee, comprised entirely of independent directors (as defined under U.S. securities laws, NYSE listing standards and applicable guidelines under the Code), has reviewed the CD&A included in this Proxy Statement and discussed that CD&A with management. Based on its review and discussion with management, the Compensation Committee approved the CD&A and recommended to the INSW Board of Directors that the CD&A be included in this Proxy Statement.
| | | Compensation Committee: |
| | | |
| | | Timothy J. Bernlohr, Chairman |
| | | Randee E. Day |
| | | Ty E. Wallach |
| | | |
| | | April 29, 2020 |
In accordance with the rules of the SEC, the report of the Compensation Committee does not constitute “soliciting material” and is not incorporated by reference in any filings with the SEC made pursuant to the Securities Act of 1933, as amended (the “1933 Act”), or the 1934 Act.
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SUMMARY COMPENSATION DATA Summary Compensation Table The following Summary Compensation Table includes individual compensation disclosedinformation for services in all capacities for the Company received by the individuals identified as NEOs of the Company.
Lois Zabrocky President and Chief Executive Officer | | | 2019 | | | $614,942 | | | $— | | | $939,989 | | | $410,000 | | | $813,833 | | | $— | | | $37,153 | | | $2,815,917 |
| | | 2018 | | | $600,000 | | | $— | | | $800,000 | | | $399,997 | | | $567,720 | | | $— | | | $36,899 | | | $2,404,616 |
| | | 2017 | | | $525,000 | | | $— | | | $394,669 | | | $174,993 | | | $554,439 | | | $— | | | $36,465 | | | $1,685,566 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Jeffrey D. Pribor Senior Vice President, Chief Financial Officer and Treasurer | | | 2019 | | | $499,808 | | | $— | | | $619,989 | | | $250,000 | | | $577,800 | | | $— | | | $31,952 | | | $1,979,549 |
| | | 2018 | | | $450,000 | | | $— | | | $657,460 | | | $225,000 | | | $426,645 | | | $— | | | $24,666 | | | $1,783,771 |
| | | 2017 | | | $450,000 | | | $— | | | $1,300,000 | | | $798,648 | | | $476,321 | | | $— | | | $24,532 | | | $3,049,501 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
James D. Small III Senior Vice President, Chief Administrative Officer, Secretary and General Counsel | | | 2019 | | | $475,000 | | | $— | | | $515,822 | | | $197,917 | | | $549,195 | | | $— | | | $26,221 | | | $1,764,155 |
| | | 2018 | | | $475,000 | | | $— | | | $316,665 | | | $158,335 | | | $448,153 | | | $— | | | $26,000 | | | $1,424,153 |
| | | 2017 | | | $475,000 | | | $— | | | $428,348 | | | $158,335 | | | $490,556 | | | $— | | | $25,556 | | | $1,577,795 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derek G. Solon Vice President and Chief Commercial Officer | | | 2019 | | | $299,944 | | | $— | | | $369,998 | | | $100,000 | | | $238,040 | | | $— | | | $37,153 | | | $1,045,135 |
| | | 2018 | | | $285,475 | | | $— | | | $190,317 | | | $95,153 | | | $206,257 | | | $— | | | $36,899 | | | $814,101 |
| | | 2017 | | | $277,160 | | | $— | | | $129,341 | | | $64,665 | | | $208,279 | | | $— | | | $36,465 | | | $715,910 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
William F. Nugent VP & Head of International Fleet Operations | | | 2019 | | | $299,898 | | | $— | | | $369,998 | | | $100,000 | | | $237,773 | | | $— | | | $37,153 | | | $1,044,742 |
| | | 2018 | | | $273,500 | | | $— | | | $182,333 | | | $91,164 | | | $196,569 | | | $— | | | $36,899 | | | $780,465 |
| | | 2017 | | | $260,337 | | | $— | | | $121,491 | | | $60,747 | | | $194,785 | | | $— | | | $35,932 | | | $673,292 |
(1)
| The salary amounts reflect the actual salary received during the year, including amounts contributed by such individuals to the INSW Savings Plan. |
(2)
| These amounts represent the aggregate grant date value of equity awards granted in the specified fiscal year. On April 5, 2019, Ms. Zabrocky, Messrs. Pribor, Small, Solon and Nugent received time-based equity awards. One-third of these awards vests on each of the first, second and third anniversaries of the award. Additionally, on December 11, 2019, Ms. Zabrocky, Messrs. Pribor, Small, Solon and Nugent received time-based equity awards. All of these December 2019 awards vest on the first anniversary of the award. Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent received stock option awards on April 5, 2019. One third of each stock option award vests and becomes exercisable on each of the first, second and third anniversaries of April 5, 2019. |
(3)
| Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent received PRSU grants on April 5, 2019. The performance awards vest in full on December 31, 2021, subject to the Compensation Committee’s certification of achievement of the performance measures and targets. Settlement of the PRSUs may be either in shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Compensation Committee’s certification of the achievement of the applicable performance measures and targets for 2021 and in any event no later than March 15, 2022. The number of PRSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of PRSUs vesting equivalent to 150% of the PRSUs awarded. The 2019 amounts in this column represent the aggregate grant date fair value of the PRSU award at target, calculated in accordance with accounting guidance, as follows: Ms. Zabrocky — $410,000, Mr. Pribor — $250,000, Mr. Small — $197,917, Mr. Solon — $100,000 and Mr. Nugent — $100,000. Additionally, as part of his initial grant, Mr. Pribor also received a PRSU grant on March 29, 2017 with one-third of the performance award vesting on each anniversary of December 31, 2016 subject in each case to the Compensation Committee’s certification of the performance measures and targets no later than each March 31st following the respective date of vesting. Settlement of the vested PRSUs may be in either shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Committee’s certification of the achievement of the applicable performance measures and targets for 2019 |
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and in any event no later than March 31, 2020. The number of PRSUs, shall be subject to an increase or decrease depending on performance against the applicable performance measures and goals with the maximum number of PRSUs vesting equivalent to 150% of the PRSUs awarded. Since performance targets are set annually each tranche of the award is considered to be a separate grant for accounting purposes. For accounting purposes, the amount of $204,489 represents the aggregate grant date fair value of the 2019 tranche of such PRSU award at target, calculated in accordance with accounting guidance.
(4)
| The amounts in this column for 2019, 2018 and 2017 reflect the amounts paid in 2020, 2019 and 2018 under the Company’s Cash Incentive Compensation Plan for performance in 2019, 2018, and 2017, respectively. |
(5)
| See the “All Other Compensation Table” below for additional information. |
All Other Compensation Table The following table describes each component of the All Other Compensation column for 2019 in the Summary Compensation Table.
Lois K. Zabrocky | | | $16,800 | | | $— | | | $1,158 | | | $19,195 | | | $37,153 |
Jeffrey D. Pribor | | | $16,800 | | | $— | | | $1,158 | | | $13,994 | | | $31,952 |
James D. Small III | | | $16,800 | | | $— | | | $1,158 | | | $8,263 | | | $26,221 |
Derek G. Solon | | | $16,800 | | | $— | | | $1,158 | | | $19,195 | | | $37,153 |
William F. Nugent | | | $16,800 | | | $— | | | $1,158 | | | $19,195 | | | $37,153 |
| | | | | | | | | | | | | | | |
(1)
| Constitutes INSW’s matching contributions under the INSW Savings Plan. |
(2)
| Life insurance premiums represent the cost of term life insurance paid on behalf of the NEO. |
(3)
| Includes the following amounts for each NEO under plans and arrangements generally maintained by us for all employees (other than “umbrella” liability insurance coverage): (a) medical and dental coverage premiums of $16,662 for Ms. Zabrocky, Messrs. Pribor, $11,461, Small, $5,730, Solon, $16,662, Nugent, $16,662, (b) long-term and short-term disability plan premiums for each NEO of $735; and (c) a premium for excess liability insurance coverage for each NEO of $1,798. |
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Grants of Plan-Based Awards This following table lists the INSW equity and non-equity awards made in fiscal year 2019 to the NEOs granted under the MICP, which included one-time awards in conjunction with the sale of the LNG JV in 2019.
Lois K. Zabrocky | | | 4/5/2019 | | | $353,625 | | | $707,250 | | | $1,060,875 | | | 11,911 | | | 23,822 | | | 35,733 | | | 23,823 | | | 51,314 | | | $17.21 | | | $1,223,656 |
| | | 12/11/2019 | | | | | | | | | | | | | | | | | | | | | 4,338 | | | | | | | | | 119,989 |
Jeffrey D. Pribor | | | 4/5/2019 | | | $250,000 | | | $500,000 | | | $750,000 | | | 7,263 | | | 14,526 | | | 21,789 | | | 14,526 | | | 31,289 | | | $17.21 | | | $950,624 |
| | | 12/11/2019 | | | | | | | | | | | | | | | | | | | | | 4,338 | | | | | | | | | 119,989 |
James D. Small III | | | 4/5/2019 | | | $237,500 | | | $475,000 | | | $712,500 | | | 5,750 | | | 11,500 | | | 17,250 | | | 11,500 | | | 24,771 | | | $17.21 | | | $590,703 |
| | | 12/11/2019 | | | | | | | | | | | | | | | | | | | | | 4,338 | | | | | | | | | 119,989 |
Derek G. Solon | | | 4/5/2019 | | | $105,000 | | | $210,000 | | | $315,000 | | | 2,905 | | | 5,810 | | | 8,715 | | | 5,811 | | | 12,515 | | | $17.21 | | | $298,453 |
| | | 12/11/2019 | | | | | | | | | | | | | | | | | | | | | 6,146 | | | | | | | | | 169,998 |
William F. Nugent | | | 4/5/2019 | | | $105,000 | | | $210,000 | | | $315,000 | | | 2,905 | | | 5,810 | | | 8,715 | | | 5,811 | | | 12,515 | | | $17.21 | | | $298,453 |
| | | 12/11/2019 | | | | | | | | | | | | | | | | | | | | | 6,146 | | | | | | | | | 169,998 |
(1)
| Amounts actually paid under these awards for 2018 are set forth above under “ – Elements of the 2019 Executive Officer Compensation Program – 2019 Actual Annual Incentive Paid.” |
(2)
| In 2019, Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent received PRSU grants on April 5, 2019. These performance awards vest in full on December 31, 2021, subject to the Compensation Committee’s certification of achievement of the performance measures. Settlement of the PRSUs may be either in shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Compensation Committee’s certification of the achievement of the applicable performance measures and targets for 2021 and in any event no later than March 15, 2022. The number of PRSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of PRSUs vesting equivalent to 150% of the PRSUs awarded. |
Mr. Pribor received a PRSU grant on April 5, 2019 as part of an initial grant made to him in 2017. One third of the initial PRSU grant award was eligible to vest on each of December 31, 2017, 2018 and 2019, subject in each case to the Compensation Committee’s establishing performance criteria at the beginning of each of 2017, 2018 and 2019 and then certification of achievement of the performance measures and targets no later than each March 31 of the year following the performance period. Settlement of the vested PRSUs may be in either shares of common stock or cash, as determined by the Compensation Committee in its discretion, and shall occur as soon as practicable following the Compensation Committee’s certification of the achievement of the applicable performance measures and targets for 2019 and in any event no later than March 31, 2020. The number of target PRSUs shall be subject to an increase or decrease depending on performance against the applicable performance measures and targets with the maximum number of PRSUs vesting equivalent to 150% of the PRSUs awarded. Since performance targets are set annually each tranche of the award is considered to be a separate grant for accounting treatment and, therefore, $204,489 is excluded from the grant date fair value amounts in the above table. For 2019, the actual achievement level was 125.7% for Mr. Pribor. Therefore, for Mr. Pribor the PRSUs awarded vested at the appropriate percentage upon certification of this result which occurred in 2020. These awards were made pursuant to the terms of Mr. Pribor’s employment agreement.
(3)
| The grants comprise time-based RSUs. The grants made on April 5, 2019 vest in equal installments on the first, second and third anniversaries of the date of grant, while the grants made on December 11, 2019 vest on the first anniversary of the grant date. |
(4)
| For information with respect to grant date fair values, see Note 13, “Capital Stock and Stock Compensation, “to INSW’s consolidated financial statements included in INSW’s 2019 Annual Report. |
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Outstanding Equity Awards at Fiscal Year-End The following table lists outstanding INSW equity awards at December 31, 2019 for NEOs under the MICP.
Lois K. Zabrocky | | | 2014 | | | 14,942(2) | | | — | | | — | | | $30.93 | | | 9/29/2024 | | | | | | | | | | | | |
| | | 2016 | | | 24,474(2) | | | — | | | — | | | $19.04 | | | 3/30/2026 | | | | | | | | | | | | |
| | | 2017 | | | 13,565 | | | 6,783(3) | | | — | | | $19.13 | | | 3/29/2027 | | | 3,049(4) | | | $90,738 | | | —(5) | | | $— |
| | | 2018 | | | 17,182 | | | 34,364(6) | | | — | | | $17.46 | | | 4/4/2028 | | | 15,274(7) | | | $454,554 | | | 22,908(8) | | | $681,742 |
| | | 2019 | | | — | | | 51,314(9) | | | — | | | $17.21 | | | 4/5/2029 | | | 23,823(10) | | | $708,972 | | | 23,822(11) | | | $708,943 |
| | | | | | | | | | | | | | | | | | | | | 4,338(12) | | | $129,099 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Jeffrey D. Pribor | | | 2017 | | | 79,491 | | | — | | | — | | | $18.21 | | | 2/14/2027 | | | | | | | | | —(13) | | | $— |
| | | | | | 11,628 | | | 5,814(3) | | | — | | | $19.13 | | | 3/29/2027 | | | 2,614(4) | | | $77,793 | | | —(5) | | | $— |
| | | 2018 | | | 9,665 | | | 19,330(6) | | | — | | | $17.46 | | | 4/4/2028 | | | 8,592(7) | | | $255,698 | | | 12,887(8) | | | $383,487 |
| | | 2019 | | | — | | | 31,289(9) | | | — | | | $17.21 | | | 4/5/2029 | | | 14,526(10) | | | $432,294 | | | 14,526(11) | | | $432,294 |
| | | | | | | | | | | | | | | | | | | | | 4,338(12) | | | $129,099 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James D. Small III | | | 2015 | | | 42,452(2) | | | — | | | — | | | $27.54 | | | 3/11/2025 | | | | | | | | | | | | |
| | | 2016 | | | 41,956(2) | | | — | | | — | | | $19.04 | | | 3/30/2026 | | | | | | | | | | | | |
| | | 2017 | | | 12,274 | | | 6,137(3) | | | — | | | $19.13 | | | 3/29/2027 | | | 2,759(4) | | | $82,108 | | | —(5) | | | $— |
| | | 2018 | | | 6,801 | | | 13,603(6) | | | — | | | $17.46 | | | 4/4/2028 | | | 6,046(7) | | | $179,929 | | | 9,068(8) | | | $269,864 |
| | | 2019 | | | — | | | 24,771(9) | | | — | | | $17.21 | | | 4/5/2029 | | | 11,500(10) | | | $342,240 | | | 11,500(11) | | | $342,240 |
| | | | | | | | | | | | | | | | | | | | | 4,338(12) | | | $129,099 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derek G. Solon | | | 2017 | | | 4,324 | | | 2,162(14) | | | — | | | $22.42 | | | 8/3/2027 | | | 962(15) | | | $28,629 | | | —(5) | | | $— |
| | | 2018 | | | 4,087 | | | 8,175(6) | | | — | | | $17.46 | | | 4/4/2028 | | | 3,634(7) | | | $108,148 | | | 5,450(8) | | | $162,192 |
| | | 2019 | | | — | | | 12,515(9) | | | — | | | $17.21 | | | 4/5/2029 | | | 5,811(10) | | | $172,935 | | | 5,810(11) | | | $172,906 |
| | | | | | | | | | | | | | | | | | | | | 6,146(12) | | | $182,905 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
William F. Nugent | | | 2017 | | | 4,062 | | | 2,031(14) | | | — | | | $22.42 | | | 8/3/2027 | | | 903(15) | | | $26,873 | | | —(5) | | | $— |
| | | 2018 | | | 3,916 | | | 7,832(6) | | | — | | | $17.46 | | | 4/4/2028 | | | 3,481(7) | | | $103,595 | | | 5,222(8) | | | $155,407 |
| | | 2019 | | | — | | | 12,515(9) | | | — | | | $17.21 | | | 4/5/2029 | | | 5,811(10) | | | $172,935 | | | 5,810(11) | | | $172,906 |
| | | | | | | | | | | | | | | | | | | | | 6,146(12) | | | $182,905 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)
| Based on the closing price of INSW common stock of $29.76 on December 31, 2019. |
(2)
| The option to purchase these shares of common stock was granted pursuant to the 2014 OSG Management Incentive Compensation Plan and assumed by INSW in connection with the Spin-Off. |
(3)
| The unvested options vested and became exercisable on March 29, 2020. |
(4)
| These RSUs vested on March 29, 2020. |
(5)
| One-third of these PRSUs vested on December 31, 2019 with a payout of 150% subject to the Compensation Committee’s certification of achievement of the performance measure, which occurred in March 2020. Two-thirds of the PRSUs did not meet the payout threshold. Refer to footnote (1) to the “Option Exercises and Stock Vested Table,” which follows for additional information. |
(6)
| The unvested options vested and became exercisable as to one-half of such shares on April 4, 2020. The remaining one-half of such unvested options vest and become exercisable on April 4, 2021. |
(7)
| One-half vested on April 4, 2020. The remaining one-half will vest on April 4, 2021 subject to accelerated vesting on the event of termination of employment. |
(8)
| These PRSUs will vest on December 31, 2020, subject to performance achievement. The PRSUs have a maximum payout of 150% of target. |
(9)
| One-third of these options vested and became exercisable on April 5, 2020. The remaining two-thirds will vest ratably on each of the second and third anniversaries of April 5, 2019. |
(10)
| One-third of these RSUs vested on April 5, 2020. The remaining two-thirds will vest ratably on each of the second and third anniversaries of April 5, 2019, subject to accelerated vesting on the event of termination of employment. |
(11)
| These PRSUs will vest on December 31, 2021, subject to performance achievement. The PRSUs have a maximum payout of 150% of target. |
(12)
| All of these RSUs vest on December 11, 2020, subject to accelerated vesting in the event of termination of employment. |
(13)
| These PRSUs vested on December 31, 2019, subject to achievement of the performance measures. The PRSUs vested at 125.7% for a total number of RSUs of 14,939 as determined by the Compensation Committee in March 2020. These shares, which represent one-third of Mr. Pribor’s initial grant, are not considered granted for accounting purposes as of December 31, 2019. |
(14)
| The unvested options vest and become exercisable on August 3, 2020. |
(15)
| These RSUs vest on August 3, 2020 subject to accelerated vesting in the event of involuntary termination of employment, including a termination without cause or a resignation with good reason within the twelve months following a change in control. |
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Option Exercises and Stock Vested The following table provides information for the year ended December 31, 2019 concerning the exercises of INSW stock options and the vesting of stock awards by the NEOs in INSW common stock. This table includes exercised and vested INSW stock option and RSU/stock awards. The market value of the RSU/stock awards is based on the closing market price of the Company’s proxy statement should be every one, twocommon stock as of December 31, 2019, which was $29.76 per share.
Lois K. Zabrocky | | | — | | | — | | | 18,323 | | | $545,292 |
Jeffrey D. Pribor | | | — | | | — | | | 37,649 | | | $1,120,434 |
James D. Small III | | | — | | | — | | | 15,172 | | | $451,519 |
Derek G. Solon | | | — | | | — | | | 4,218 | | | $125,528 |
William F. Nugent | | | — | | | — | | | 3,997 | | | $118,951 |
(1)
| Mr. Pribor’s PRSUs (2019 tranche of the 2017 grant) vested at 125.7% for a total of 14,939. Additionally, Ms. Zabrocky and Mr. Small had RSUs vest on March 29, 2019, March 30, 2019 and April 4, 2019 in the amounts of 3,049, 3,065 and 7,636 respectively for Ms. Zabrocky and in the amounts of 2,759, 5,254 and 3,022 respectively for Mr. Small. Mr. Pribor had 2,614, 4,295 and 11,882 RSUs vest on March 29, 2019, April 4, 2019 and December 31, 2019 respectively. Messrs. Solon and Nugent had RSUs vest on April 4, 2019 and August 3, 2019 in the amounts of 1,816 and 961 respectively for Mr. Solon and in the amounts of 1,740 and 903 respectively for Mr. Nugent. Ms. Zabrocky and Messrs. Pribor, Small, Solon and Nugent all had PRSUs vest on December 31, 2019 in the amounts of 4,573, 3,919, 4,137, 1,441 and 1,354, respectively. |
Nonqualified Deferred Compensation The following table provides information with respect to the deferral of compensation on a non-tax qualified basis to the INSW SERP for each NEO. The INSW SERP provides for interest at an annual rate of 2.98% through the termination date of the participant. The plan is frozen to new participants.
Lois K. Zabrocky | | | $— | | | $— | | | $4,938 | | | $— | | | $200,886 |
Jeffrey D. Pribor | | | $— | | | $— | | | $— | | | $— | | | $— |
James D. Small III | | | $— | | | $— | | | $— | | | $— | | | $— |
Derek G. Solon | | | $— | | | $— | | | $— | | | $— | | | $— |
William F. Nugent | | | $— | | | $— | | | $— | | | $— | | | $— |
(1)
| The aggregate earnings constitute accrued interest for the calendar year ended December 31, 2019. There were no executive or INSW contributions in 2019. |
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Potential Payments Upon Termination or
three years.Stockholders will be ableChange in Control
The following table discloses the amounts that would have been payable to
specify oneeach NEO upon termination of
four choicestheir employment, assuming for this
proposalpurpose that such termination had occurred on
December 31, 2019. At December 31, 2019, no NEO was eligible for normal retirement at age 65. The table excludes amounts payable pursuant to the
proxy card: one year, two years, three years or abstain.The advisory vote onINSW Supplemental Plan and pursuant to plans that do not discriminate in favor of executive officers and that are generally available to all salaried employees, such as the preferred frequency of future stockholder advisory votesSavings Plan.
Involuntary Termination Without Cause or Voluntary Resignation for Good Reason, Including in Connection with a Change in Control
| | | | | | | | | | | | | | | |
Cash Severance Payment(2) | | | $1,230,000 | | | $500,000 | | | $950,000 | | | $300,000 | | | $300,000 |
Pro Rata Bonus Payment(3) | | | $707,250 | | | $555,600 | | | $475,000 | | | $0 | | | $0 |
Bonus Payment(4) | | | $0 | | | $0 | | | $0 | | | $210,000 | | | $210,000 |
Equity Awards(5) | | | $2,522,135 | | | $1,379,991 | | | $1,276,805 | | | $0 | | | $0 |
Lump Sum Payment | | | $1,049,999 | | | $0 | | | $950,000 | | | $0 | | | $0 |
Total | | | $5,509,384 | | | $2,435,591 | | | $3,651,805 | | | $510,000 | | | $510,000 |
| | | | | | | | | | | | | | | |
Death/Disability
| | | | | | | | | | | | | | | |
Pro Rata Bonus Payment | | | $0 | | | $500,000(6) | | | $0 | | | $0 | | | $0 |
Equity Awards | | | $0 | | | $0 | | | $0 | | | $0 | | | $0 |
Total | | | $0 | | | $500,000 | | | $0 | | | $0 | | | $0 |
(1)
| The values in this table reflect estimated payments associated with various termination scenarios. |
(2)
| This reflects a cash severance payment equal to 24 months of base salary for Ms. Zabrocky and Mr. Small. Mr. Pribor is entitled to 12 months of base salary plus target bonus if the separation is for good reason and not due to a change in control. Not shown in this table: Mr. Pribor is entitled to receive 18 months of base salary plus target bonus if he is terminated without cause or resigned with good reason in connection with a change in control. Messrs. Solon and Nugent are entitled to 12 months of base salary. |
(3)
| For Ms. Zabrocky and Messrs. Pribor and Small a pro-rata target bonus is provided for in their respective employment agreements. The amounts listed are if termination of employment occurs on the last business day of the year. For Mr. Pribor the pro-rata target is to be based on actual Company performance (other than for individual goal metrics, which are to be at target) and (2) if no bonus payment is made to other executive officers of the Company in respect of the year in which the separation from service occurs due to business unit and company performance objectives not being met, then no amount shall be payable to him. |
(4)
| Messrs. Solon and Nugent are to receive a 12-month bonus at target for the year if terminated. |
(5)
| For Ms. Zabrocky and Mr. Small all option shares and time based RSUs (and any other equity based grant or cash in lieu of grants that is not performance based) granted to Ms. Zabrocky and Mr. Small, to the extent not otherwise vested, shall vest as of the separation date, as applicable. The unvested PRSUs will be forfeited in the event of termination. As of December 31, 2019, Ms. Zabrocky has 46,484 RSUs and 6,783, 34,364 and 51,314 unvested stock options with strike prices of $19.13, $17.46 and $17.21, respectively. Mr. Pribor has 30,070 RSUs and 5,814, 19,330 and 31, 289 unvested stock options with a strike price of $19.13, $17.46 and $17.21, respectively. Mr. Small had 24,643 RSUs and had 6,137, 13,603 and 24,771 unvested stock options with strike prices of $19.13, $17.46 and $17.21 respectively. For Mr. Pribor, per his agreement for RSUs and stock options he would have of those not otherwise vested that would have vested on the next regularly scheduled vesting date following the separation he would have RSUs of 2,614, 4,296, ,842 and 4,338 vest at $29.76 for 3/29/2017, 4/4/2018, 4/5/2019 and 12/11/2019 respectively, for actual value of $478,819. For unvested stock options he would have 5,814, 9,665 and 10,430 vest at the difference of their respective share price at $29.76 for 3/29/2017, 4/4/2018, and 4/5/2019 respectively, for an actual value of $311,575. For PRSUs the number of unvested units, 7,841 at a rate of $29.76 multiplied by the number of weeks worked, divided by the term of the grant 143 weeks for a total value of $233,348 for the 3/29/2017 grant. For PRSUs, the number of unvested units, 12,887 at a rate of $29.76 multiplied by the number of weeks worked for a total value of $241,374 for the 4/4/2018 grant. For PRSUs, the number of unvested units, 14,526 at a rate of $29.76 multiplied by the number of weeks worked for a total value of $114,875 for the 4/5/2019 grant Messrs. Solon and Nugent would be entitled to vesting of the unvested time based RSUs and unvested stock options if the separation is for “good reason” and within 12 months of a “change in control”, otherwise the unvested RSUs and unvested stock options shall immediately be forfeited (as reflected above). For Messrs. Solon and Nugent all PRSUs shall immediately be forfeited on the separation date. |
(6)
| Upon Mr. Pribor’s disability, Mr. Pribor, or in the case of his death, his estate, is entitled to receive the pro-rata portion of his annual bonus at target for the year of termination. The amount listed in table is if his disability or death occurs on December 31, 2019, the last business day of the year. |
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The compensation of the Named Executive OfficersCompany’s median employee (“Median Employee”) was determined by reviewing the amount of compensation paid to each of the Company’s full-time and part-time employees, of which 42 (not including the CEO) were located in its New York, Houston and United Kingdom offices, all of whom were employed by the Company at December 31, 2019, and the 1,623 seafarers who had been employed on the Company’s vessels for one or more days during the year ended December 31, 2019. The Company’s seafarers are hired by its technical managers acting as agent for the individual ship owning companies, each of which is nonbinding.a subsidiary of the Company, and include employees from various non-U.S. jurisdictions, including in particular the Philippines, India and Eastern Europe. In determining the compensation paid to the CEO and the Median Employee, the Company used the data as shown in its payroll records including base salary, bonuses (including equity awards), seniority payments, performance bonuses, welfare costs, healthcare payments and other benefits paid by or on behalf of the Company. While the number of days worked by the Company’s seafarers ranged from 1 to 348 days in 2019, the Median Employee worked approximately 241 days. Our CEO had annual total compensation of $2,815,917 and our Median Employee had annual total compensation of $21,487. Therefore, our CEO’s annual total compensation in 2019 was 131 times that of the median of the annual total compensation of our Median Employee.
Compensation Committee Interlocks and Insider Participation No member of the Compensation Committee was, during fiscal year 2019, an officer or employee of INSW or was formerly an officer of INSW. None of INSW’s executive officers served on any board of directors or compensation committee of any other company for which any of INSW’s directors served as an executive officer at any time during fiscal 2019. Please see “Information About the Board and Corporate Governance — Related Party Transactions” above for the Company’s policy on related person transactions.
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RATIFICATION AND APPROVAL OF THE INTERNATIONAL SEAWAYS, INC.2020 NON-EMPLOYEE DIRECTOR INCENTIVE COMPENSATION PLAN(PROPOSAL NO. 4) In April 2020, the Company adopted the International Seaways, Inc. 2020 Non-Employee Director Incentive Compensation Plan (the “2020 Director Plan”) in order to promote the interests of the Company and its stockholders by providing certain non-employee directors of the Company, who are largely responsible for the management, growth and protection of the business of the Company, with incentives and rewards to encourage them to continue in the service of the Company.
Summary of the Non-Employee Director Incentive Compensation Plan The following summary of the material terms of the 2020 Director Plan is qualified in its entirety by reference to the copy of the 2020 Director Plan attached hereto as Appendix A. Unless otherwise indicated, all capitalized terms in the below summary shall have the meanings given to such terms in the 2020 Director Plan.
Under the 2020 Director Plan, the Compensation Committee may grant cash-based awards, stock options or other equity-based awards (including stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units) with respect to a number of shares of Common Stock of the Company that in the aggregate does not exceed 400,000 shares, plus the number of shares that, on the day immediately following the effective date of the 2020 Director Plan, remain available for awards under the International Seaways, Inc. Non-Employee Director Incentive Compensation Plan effective as of November 18, 2016, as amended and restated (the “Prior Director Plan”), which we anticipate will be no more than 60,774 additional shares of Common Stock. Incentive awards settled in shares of Common Stock reduce the number of shares of Common Stock available under the 2020 Director Plan by one share of Common Stock for every one share of Common Stock subject to such incentive award. The aggregate limit described in this paragraph does not take into account any stock options assumed as of a result of any merger or consolidation involving the Company in which the Company is the surviving corporation.
Shares covered by incentive awards will only be counted as used to the extent they are actually issued and delivered to a non-employee director pursuant to the 2020 Director Plan, and will not be counted to the extent any such incentive award is settled in cash, forfeited, cancelled, terminated, or expires or lapses for any reason. Any shares of Common Stock that again become available for future grants shall be added back as one share of Common Stock. In addition, if shares of Common Stock owned by a non-employee director are tendered to the Company to pay any obligation in connection with an incentive award, the number of shares tendered shall be added to the number of shares of Common Stock available for delivery under the 2020 Director Plan. However, the following may not again be made available for issuance as incentive awards: (i) shares not issued or delivered as a result of the net settlement of an outstanding stock appreciation right or option; (ii) shares used to pay the exercise price or withholding taxes related to an outstanding incentive award; or (iii) shares repurchased on the open market with the proceeds of an option exercise price. Shares covered by incentive awards granted pursuant to the 2020 Director Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger also will not count as used under the 2020 Director Plan.
The persons eligible to receive incentive awards pursuant to the 2020 Director Plan are those non-employee directors of the Company whom the Compensation Committee shall select from time to time. Each incentive award granted under the 2020 Director Plan shall be evidenced by an award agreement. It is expected that approximately eight directors will be eligible to participate in the 2020 Director Plan. The closing per share price on the NYSE of a share of the Company’s Common Stock on April 23, 2020, was $26.31.
The Compensation Committee is authorized to grant awards, designating the non-employee directors of the Company or its affiliates who will be granted the awards, the type of award, the number of shares or amount of cash underlying such awards and the terms and conditions of such awards from time to time. The Compensation Committee may also from time to time authorize a subcommittee consisting of one or more members of the Board or officers of the Company to grant awards to persons who are not executive
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officers of the Company (within the meaning of Rule 16a-1 of the 1934 Act). The Compensation Committee has the full discretionary authority to administer the 2020 Director Plan, including the authority to interpret and construe any provision of the 2020 Director Plan and the terms of any award granted thereunder.
Total annual compensation for any participant in respect of his or her service on the Board and committee of the Board shall not exceed $500,000 per year including both cash compensation and incentive awards under the 2020 Director Plan, but excluding the reimbursement of any reasonable expenses. The value of incentive awards for this purpose shall be determined based on their fair value on the relevant grant date.
In the case of any stock options issued under the 2020 Director Plan, the exercise price per share of Common Stock covered by any such option shall be not less than 100% of the fair market value of a share of Common Stock on the date on which such option is granted. Any stock option granted under the Plan shall expire on the ten-year anniversary of the date such option is granted.
Each award agreement will specify the consequences with respect to such award of any termination of employment, leave of absence, and the employee’s death or disability. Under the 2020 Director Plan, a change of control can either have the definition set out in the plan or in any individual grant agreement.
On or after the date of grant of an incentive award under the 2020 Director Plan, the Compensation Committee may (i) accelerate the date on which any such incentive award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such incentive award, including, without limitation, extending the period following a termination of a Participant’s Employment during which any such incentive award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such incentive award or (iv) provide for the payment of dividends or dividend equivalents with respect to any such incentive award; provided, that the Compensation Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code. The Company shall not reprice any stock option (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual and any other formal or informal guidance issued by the New York Stock Exchange) without the approval of the stockholders of the Company.
No person shall have any rights as a stockholder with respect to any shares of Common Stock covered by or relating to any incentive award until the date of the issuance of such shares on the books and records of the Company. Except as otherwise expressly provided in the 2020 Director Plan, no adjustment of any incentive award shall be made for dividends or other rights for which the record date occurs prior to the date of such issuance. Nothing in the 2020 Director Plan is intended, or should be construed, to limit authority of the Compensation Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Common Stock if it were issued or outstanding, or from granting rights related to such dividends. At a participant’s request, the Compensation Committee may withhold or permit the participant to tender a portion of the shares underlying an award to satisfy tax withholding obligations incurred in connection with such award.
The Board may at any time suspend or discontinue the 2020 Director Plan or revise or amend it in any respect whatsoever; provided, however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires stockholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence does not restrict the Compensation Committee’s ability to exercise its discretionary authority hereunder pursuant to the 2020 Director Plan, which discretion may be exercised without amendment to the 2020 Director Plan. No provision of the 2020 Director Plan shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the 2020 Director Plan, no action taken thereunder may, without the consent of a Participant, adversely affect the Participant’s rights under any previously granted and outstanding incentive award.
The 2020 Director Plan became effective as of April 2, 2020 provided that the Company’s stockholders approve the 2020 Director Plan within twelve months after such date, the date the 2020 Director Plan was adopted. Notwithstanding the recommendationadoption of the 2020 Director Plan by the Board and
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approval of the 2020 Director Plan by the Company’s stockholders, the Prior Director Plan remains in effect but no grants or awards under the Prior Director Plan may be made after the effective date of the 2020 Director Plan. All grants and awards made under the Prior Director Plan are governed by the terms of the Prior Director Plan.
Certain Federal Income Tax Consequences The following is a brief description of the principal United States federal income tax consequences related to options granted under the 2020 Director Plan.
Non-Qualified Options. Generally, a grantee will not be subject to tax at the time a non-qualified option is granted, and no tax deduction is then available to the Company. Upon the exercise of a non-qualified option, an amount equal to the excess of the fair market value of the shares acquired on the date of exercise over the exercise price paid will be included in the grantee’s ordinary income and the Company will generally be entitled to deduct the same amount. Upon disposition of shares acquired upon exercise, appreciation or depreciation after the date of exercise will be treated by the grantee or transferee of the non-qualified option as either capital gain or capital loss and, depending upon the length of period following exercise, either short term or long term.
If a non-qualified option provides for issuance of Common Stock subject to restrictions upon exercise, the grantee receiving such restricted stock will not recognize income for tax purposes until the restrictions lapse, unless he or she elects otherwise, as described below. Rather, the grantee will have taxable income upon lapse of the restrictions equal to the amount by which the fair market value of the shares at the time the restrictions lapse exceeds the exercise price paid on exercise, and the Company will generally have a tax deduction in the same amount. Proceeds from the sale of stock sold after the restrictions lapse will be taxable as a capital gain or capital loss, depending upon the amount by which the sale price exceeds or is less than the fair market value of the stock at the time the restrictions lapse.
Alternatively, a grantee who receives Common Stock subject to restrictions can elect to recognize income immediately upon exercise of the non-qualified option, in which case the grantee’s taxable income and the Company’s tax deduction are generally determined at the time of option exercise, as explained in the first paragraph of this section. However, if the grantee subsequently forfeits the stock or is required to sell it to the Company by the terms of the restriction, the grantee’s tax deduction for any loss on the sale will be limited to the amount, if any, by which the exercise price exceeds the amount paid by the Company on such sale.
If the grantee pays the exercise price, in whole or in part, with previously acquired shares, the exchange will not affect the tax treatment of the exercise. No gain or loss is recognized on delivery of the previously acquired shares to the Company, and shares received by the grantee equal in number to the previously acquired shares so exchanged will have the same basis and holding period for capital gain purposes as the previously acquired shares. Shares received by the grantee in excess of the number of previously acquired shares will have a basis equal to the fair market value of such additional shares as of the date ordinary income equal to such fair market value is realized, and a holding period beginning as of such date.
Estimate of New Plan Benefits Awards under the 2020 Director Plan are discretionary and are not subject to set benefits or amounts. Accordingly, the Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future under the 2020 Director Plan. No grants have been made under the 2020 Director Plan since its adoption through the date of this Proxy Statement. See “Director Compensation” above for a discussion of awards made under the Prior Director Plan in 2019, and below under “Estimate of New Plan Benefits” in the following proposal for a tabular discussion of 2019 awards, including director awards.
Recommendation of the Board The Board recommends a vote “FOR” the ratification and approval of the International Seaways, Inc. 2020 Non-Employee Director Incentive Compensation Plan as described in this Proxy Statement.
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RATIFICATION AND APPROVAL OF THE INTERNATIONAL SEAWAYS, INC.2020 MANAGEMENT INCENTIVE COMPENSATION PLAN(PROPOSAL NO. 5) In April 2020, the Company adopted the International Seaways, Inc. 2020 Management Incentive Compensation Plan (the “2020 Management Plan”) in order to promote the interests of the Company and its stockholders by providing certain employees of the Company, who are largely responsible for the management, growth and protection of the business of the Company, with incentives and rewards to encourage them to continue in the service of the Company.
Summary of the Management Incentive Compensation Plan The following summary of the material terms of the 2020 Management Plan is qualified in its entirety by reference to the copy of the 2020 Management Plan attached hereto as Appendix B. Unless otherwise indicated, all capitalized terms in the below summary shall have the meanings given to such terms in the 2020 Management Plan.
Under the 2020 Management Plan, the Compensation Committee may grant cash-based awards, stock options (both non-qualified and “incentive stock options” within the meaning of Section 422 of the Code, or other equity-based awards (including stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units) with respect to a number of shares of Common Stock that in the aggregate does not exceed 1,400,000 shares, plus the number of shares that, on the day immediately following the effective date of the 2020 Management Plan, remain available for awards under the International Seaways, Inc. Management Incentive Plan effective as of November 18, 2016, as amended and restated (the “Prior Plan”), which we anticipate will be no more than five additional shares of Common Stock. Incentive awards settled in shares of Common Stock reduce the number of shares available under the 2020 Management Plan by one share of Common Stock for every one share of Common Stock subject to such incentive award. The maximum number of shares of Common Stock that may be issued through options designated as “incentive stock options” within the meaning of Section 422 of the Code shall not exceed 200,000 shares of Common Stock in the aggregate. The aggregate limit described in this paragraph does not take into account any stock options assumed as of a result of any merger or consolidation involving the Company in which the Company is the surviving corporation.
No more than 1,400,000 shares of stock may be granted to any single employee in any calendar year pursuant to the 2020 Management Plan. The amount paid under the 2020 Management Plan to any single employee in any calendar year with respect to any cash-based award shall not exceed $7,500,000. Shares issued under the 2020 Management Plan may be either newly issued shares or treasury shares, as determined by the Compensation Committee. In the event of any change in the capitalization of the Company, the Compensation Committee will adjust the share limitations described above and the type of securities available for grant under the 2020 Management Plan to the extent deemed appropriate, and in the event of other corporate transactions involving the Company the Compensation Committee will adjust the number and the type of securities underlying outstanding awards, in each case as it considers appropriate in order to prevent dilution or enlargement of rights.
Shares covered by incentive awards will only be counted as used to the extent they are actually issued and delivered to an employee pursuant to the 2020 Management Plan, and will not be counted to the extent any such incentive award is settled in cash, forfeited, cancelled, terminated, or expires or lapses for any reason. Any shares of Common Stock that again become available for future grants shall be added back as one share of Common Stock. In addition, if shares of Common Stock owned by an employee are tendered to the Company to pay any obligation in connection with an incentive award, the number of shares tendered shall be added to the number of shares of Common Stock available for delivery under the 2020 Management Plan. However, the following may not again be made available for issuance as incentive awards: (i) shares not issued or delivered as a result of the net settlement of an outstanding stock appreciation right or option; (ii) shares used to pay the exercise price or withholding taxes related to an outstanding incentive award; or (iii) shares repurchased on the open market with the proceeds of an
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option exercise price. Shares covered by incentive awards granted pursuant to the 2020 Management Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger also will not count as used under the 2020 Management Plan.
The persons eligible to receive incentive awards pursuant to the 2020 Management Plan are those employees of the Company whom the Compensation Committee shall select from time to time, including officers of the Company, whether or not they are directors. Each incentive award granted under the 2020 Management Plan shall be evidenced by an award agreement. It is currently expected that six employees (including one employee who is also a director) will regularly participate in the 2020 Management Plan, although other individuals may be determined to be eligible to participate from time to time. The closing per share price on the NYSE of a share of the Company’s Common Stock on April 23, 2020, was $26.31.
The Compensation Committee is authorized to grant awards, designating the individuals who will be granted the awards, the type of award, the number of shares or amount of cash underlying such awards and the terms and conditions of such awards from time to time. The Compensation Committee may also from time to time authorize a subcommittee consisting of one or more members of the Board or officers of the Company to grant awards to persons who are not executive officers of the Company (within the meaning of Rule 16a-1 of the 1934 Act). The Compensation Committee has the full discretionary authority to administer the 2020 Management Plan, including the authority to interpret and construe any provision of the 2020 Management Plan and the terms of any award granted thereunder.
In the case of any stock options issued under the 2020 Management Plan, the exercise price per share of Common Stock covered by any such option shall be not less than 100% of the fair market value of a share of Common Stock on the date on which such option is granted. Any stock option granted under the 2020 Management Plan shall expire on the ten-year anniversary of the date such option is granted.
Each award agreement will specify the consequences with respect to such award of any termination of employment, leave of absence, and the employee’s death or disability. For purposes of the 2020 Management Plan, a “Change in Control” means: (i) any one person, or more than one person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)), other than the Company or any employee benefit plan sponsored by the Company, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company; or (ii) any one person, or more than one person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)) other than the Company or any employee benefit plan sponsored by the Company acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or (iii) a majority of members of the Board of Directors and the outcomeis replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the stockholder vote,members of the Board of Directors maybefore the date of each appointment or election; or (iv) any one person, or more than one person acting as a group (as defined in Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the future decide12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to conduct advisory votes onor more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For purposes of subsection (iv), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. The foregoing subsections (i) through (iv) shall be interpreted in a less frequent basismanner that is consistent with the Treasury Regulations promulgated pursuant to Section 409A of the Code so that all, and may vary its practice based on factorsonly, such transactions or events that could qualify as discussions with stockholders anda “change in control event” within the adoptionmeaning of material changesTreasury Regulation §1.409A-3(i)(5)(i) will be deemed to be a Change in Control for purposes of the 2020 Management Plan.
On or after the date of grant of an incentive award under the 2020 Management Plan, except to the
executive compensation program.The Boardextent that the grant of Directors recommends that stockholders vote “1 YEAR”authority to the Compensation Committee to take any of the following actions would cause any tax to become due under Section 409A of the Code, the Compensation Committee may (i) accelerate the date on which any such incentive award becomes vested, exercisable or transferable, as the preferred frequencycase may be, (ii) extend the term of the say-on-pay proposal.
any such incentive award, including, without limitation, extending TABLE OF CONTENTS
the period following a termination of a Participant’s Employment during which any such incentive award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such incentive award or (iv) provide for the payment of dividends or dividend equivalents with respect to any such incentive award; provided, that the dividends or dividend equivalents are subject to the same restrictions and conditions as the incentive award underlying such dividends or dividend equivalents and are payable only if, and no earlier than at the same time as, the underlying incentive award becomes vested. The Company shall not reprice any stock option (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual and any other formal or informal guidance issued by the New York Stock Exchange) without the approval of the stockholders of the Company.
No person shall have any rights as a stockholder with respect to any shares of Common Stock covered by or relating to any incentive award until the date of the issuance of such shares on the books and records of the Company. Except as otherwise expressly provided in the 2020 Management Plan, no adjustment of any incentive award shall be made for dividends or other rights for which the record date occurs prior to the date of such issuance. Nothing in the 2020 Management Plan is intended, or should be construed, to limit authority of the Compensation Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Common Stock if it were issued or outstanding, or from granting rights related to such dividends. At a participant’s request, the Compensation Committee may withhold or permit the participant to tender a portion of the shares underlying an award to satisfy tax withholding obligations incurred in connection with such award.
The Board may at any time suspend or discontinue the 2020 Management Plan or revise or amend it in any respect whatsoever; provided, however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires stockholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence does not restrict the Compensation Committee’s ability to exercise its discretionary authority hereunder pursuant to the 2020 Management Plan, which discretion may be exercised without amendment to the 2020 Management Plan. No provision of the 2020 Management Plan shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the 2020 Management Plan, no action taken thereunder may, without the consent of a Participant, adversely affect the Participant’s rights under any previously granted and outstanding incentive award.
The 2020 Management Plan became effective as of April 2, 2020 provided that the Company’s stockholders approve the 2020 Management Plan within twelve months after such date, the date the Board adopted the 2020 Management Plan. Notwithstanding the adoption of the 2020 Management Plan by the Board and approval of the 2020 Management Plan by the Company’s stockholders, the Prior Plan remains in effect but no grants or awards under the Prior Plan may be made after the effective date of the 2020 Management Plan. All grants and awards made under the Prior Plan are governed by the terms of the Prior Plan.
Certain Federal Income Tax Consequences The following is a brief description of the principal U.S. federal income tax consequences related to options granted under the 2020 Management Plan.
Non-Qualified Options. Generally, a grantee will not be subject to tax at the time a non-qualified option is granted, and no tax deduction is then available to the Company. Upon the exercise of a non-qualified option, an amount equal to the excess of the fair market value of the shares acquired on the date of exercise over the exercise price paid will be included in the grantee’s ordinary income and the Company will generally be entitled to deduct the same amount. Upon disposition of shares acquired upon exercise, appreciation or depreciation after the date of exercise will be treated by the grantee or transferee of the non-qualified option as either capital gain or capital loss and, depending upon the length of period following exercise, either short term or long term.
If a non-qualified option provides for issuance of Common Stock subject to restrictions upon exercise, the grantee receiving such restricted stock will not recognize income for tax purposes until the restrictions lapse, unless he or she elects otherwise, as described below. Rather, the grantee will have taxable income
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upon lapse of the restrictions equal to the amount by which the fair market value of the shares at the time the restrictions lapse exceeds the exercise price paid on exercise, and the Company will generally have a tax deduction in the same amount. Proceeds from the sale of stock sold after the restrictions lapse will be taxable as a capital gain or capital loss, depending upon the amount by which the sale price exceeds or is less than the fair market value of the stock at the time the restrictions lapse.
Alternatively, a grantee who receives Common Stock subject to restrictions can elect to recognize income immediately upon exercise of the non-qualified option, in which case the grantee’s taxable income and the Company’s tax deduction are generally determined at the time of option exercise, as explained in the first paragraph of this section. However, if the grantee subsequently forfeits the stock or is required to sell it to the Company by the terms of the restriction, the grantee’s tax deduction for any loss on the sale will be limited to the amount, if any, by which the exercise price exceeds the amount paid by the Company on such sale.
If the grantee pays the exercise price, in whole or in part, with previously acquired shares, the exchange will not affect the tax treatment of the exercise. No gain or loss is recognized on delivery of the previously acquired shares to the Company, and shares received by the grantee equal in number to the previously acquired shares so exchanged will have the same basis and holding period for capital gain purposes as the previously acquired shares. Shares received by the grantee in excess of the number of previously acquired shares will have a basis equal to the fair market value of such additional shares as of the date ordinary income equal to such fair market value is realized, and a holding period beginning as of such date.
Incentive Stock Options. A grantee will not be subject to tax at the time an incentive stock option is granted or exercised, and no tax deduction is available to the Company; however, the grantee may be subject to the alternative minimum tax on the excess of the fair market value of the shares received upon exercise of the incentive stock option over the exercise price paid. Upon disposition of the shares acquired upon exercise of an incentive stock option, capital gain or capital loss will generally be recognized in an amount equal to the difference between the sale price and the exercise price, as long as the grantee has not disposed of the shares within two years of the date of grant of the option or within one year from the date of exercise and has been employed by the Company at all times from the grant date until the date three months before the date of exercise (one year in the case of permanent disability). If the grantee disposes of the shares without satisfying both the holding period and employment requirements (a disqualifying disposition), the grantee will recognize ordinary income at the time of the disqualifying disposition to the extent of the excess of the amount realized on such disqualifying disposition over the exercise price paid or, if the disqualifying disposition resulted from a failure to satisfy the holding period requirement, the fair market value of the shares on the date the incentive stock option is exercised (if less). Any remaining gain or loss is treated as a capital gain or capital loss.
If the grantee pays the exercise price, in whole or in part, with previously acquired shares, the exchange will not affect the tax treatment of the exercise. Upon such exchange, and except for disqualifying dispositions, no gain or loss is recognized upon the delivery of the previously acquired shares to the Company, and the shares received by the grantee equal in number to the previously acquired shares exchanged therefor will have the same basis and holding period for capital gain or capital loss purposes as the previously acquired shares. Shares received by the grantee in excess of the number of previously acquired shares will have a basis of zero and a holding period which commences as of the date the shares are issued to the grantee upon exercise of the incentive stock option. If such an exercise is effected using shares previously acquired through the exercise of an incentive stock option, the exchange of the previously acquired shares will be considered a disposition of such shares for the purpose of determining whether a disqualifying disposition has occurred.
The Company is not entitled to a tax deduction upon either the exercise of an incentive stock option or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the grantee recognized ordinary income in a disqualifying disposition.
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Estimate of New Plan Benefits Awards under the 2020 Management Plan are discretionary and are not subject to set benefits or amounts. Accordingly, the Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future under the 2020 Management Plan.
The following reflects grants made in April 2020 under the 2020 Management Plan between its adoption and the date of this Proxy Statement subject to stockholder approval of the 2020 Management Plan.
Named Executive Officers
| | | |
Lois K. Zabrocky President and Chief Executive Officer | | | 37,588 |
Jeffrey D. Pribor Chief Financial Officer, Senior Vice President and Treasurer | | | 16,555 |
James D. Small III Chief Administrative Officer, Senior Vice President, General Counsel and Secretary | | | 12,936 |
Derek G. Solon Vice President (Chief Commercial Officer) | | | 6,409 |
William F. Nugent Vice President (Head of Ship Operations) | | | 6,409 |
All Current Executive Officers as a Group (6 Persons) | | | 82,075 |
All Current Non-Employee Directors as a Group (8 Persons) | | | 0 |
All Other Employees, including all Current Officers who are not Executive Officers, as a Group (6 Persons) | | | 0 |
(1)
| Represents performance-based RSUs (at maximum payout of 150%) granted under the 2020 Management Plan. |
Because the Committee has discretion to grant additional awards pursuant to the 2020 Management Plan, it is not possible to calculate the future value of awards to executive officers at this time. Had the 2020 Management Plan and 2020 Director Plan been in place in 2019, awards in 2019 would have been made under those plans instead of the Prior Plan and the Prior Director Plan. The table below reflects awards made in 2019 under both the Prior Plan and Prior Director Plan. See “Summary Compensation Data – Grants of Plan Based Awards” above for additional information about the awards made to NEOs in 2019.
Named Executive Officers(2)
| | | | | | |
Lois K. Zabrocky President and Chief Executive Officer | | | 51,314 | | | 63,894 |
Jeffrey D. Pribor Chief Financial Officer, Senior Vice President and Treasurer | | | 31,289 | | | 40,653 |
James D. Small III Chief Administrative Officer, Senior Vice President, General Counsel and Secretary | | | 24,771 | | | 33,088 |
Derek G. Solon Vice President (Chief Commercial Officer) | | | 12,515 | | | 20,672 |
William F. Nugent Vice President (Head of Ship Operations) | | | 12,515 | | | 20,672 |
All Current Executive Officers as a Group (6 Persons) | | | 137,847 | | | 185,295 |
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All Current Non-Employee Directors as a Group (8 Persons) | | | 0 | | | 51,107 |
All Other Employees, including all Current Officers who are not Executive Officers, as a Group (29 Persons) | | | 0 | | | 27,106 |
(1)
| Does not include any deduction for payment of exercise price of $17.21 per share. |
(2)
| For executive officer (including NEOs), comprises both time-based RSUs and PRSUs, with performance-based RSUs at maximum payout of 150%. For non-employee directors, comprises restricted stock. For all other employees who are not executive officers, comprises time-based RSUs. |
(3)
| Further grants under the Prior Plan were made in April 2020 to the NEOs and one additional executive officer. The shares underlying those grants included, in aggregate, 131,992 shares underlying options and 63,568 shares of Common Stock underlying time-based RSUs and PRSUs. In addition, grants were made to such individuals under the 2020 Management Plan, which remain subject to stockholder approval, as described above. |
Recommendation of the Board The Board recommends a vote “FOR” the ratification and approval of the International Seaways, Inc. 2020 Management Incentive Compensation Plan as described in this Proxy Statement.
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OWNERSHIP OF COMMON STOCK BY DIRECTORS, EXECUTIVE OFFICERSAND CERTAIN OTHER BENEFICIAL OWNERS The tables below set forth certain beneficial ownership information with respect to certain individuals and stockholders. Except as disclosed in the notes to these tables and subject to applicable community property laws, the Company believes that each beneficial owner identified in the table possesses sole voting and investment power over all Common Stock shown as beneficially owned by the beneficial owner.
Beneficial ownership for the purposes of the following tables is determined in accordance with the rules and regulations of the SEC. Those rules generally provide that a person is the beneficial owner of shares if such person has or shares the power to vote or direct the voting of shares, or to dispose or direct the disposition of shares or has the right to acquire such powers within 60 days. For purposes of calculating each person’s percentage ownership, shares of Common Stock issuable pursuant to options exercisable within 60 days (including out of the money options) are included as outstanding and beneficially owned for that person, but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The percentage of beneficial ownership is based on 28,843,761 shares of the Company’s Common Stock outstanding as of the record date (April 23, 2020), and excludes any treasury stock.
Directors and Executive Officers The table below sets forth information as to each director, director nominee and Named Executive Officer listed in the Summary Compensation Table in this Proxy Statement, and includes the amount and percentage of the Company’s Common Stock of which each director, director nominee, each Named Executive Officer, and all directors, directors nominees and executive officers as a group, was the “beneficial owner” (as defined in regulations of the SEC) on the record date, all as reported to the Company. The address of each person identified below as of the date of this Proxy Statement is c/o International Seaways, Inc., 600 Third Avenue, 39th Floor, New York, New York 10016.
Directors/Nominees
| | | | | | |
Doug Wheat | | | 49,799(2) | | | 0.2% |
Timothy J. Bernlohr | | | 26,190(3) | | | * |
Ian T. Blackley | | | 24,234(3) | | | * |
Randee E. Day | | | 8,261(3) | | | * |
David I. Greenberg | | | 15,917(3) | | | * |
Joseph I. Kronsberg(4) | | | — | | | * |
Ty E. Wallach | | | 10,099(3) | | | * |
Gregory A. Wright | | | 26,190(3) | | | * |
Lois K. Zabrocky | | | 147,136(5) | | | 0.5% |
Named Executive Officers (other than Ms. Zabrocky who is listed above with the other Directors/Nominees)
| | | | | | |
Jeffrey D. Pribor | | | 170,578(6) | | | 0.6% |
James D. Small III | | | 167,273(7) | | | 0.6% |
Derek G. Solon | | | 25,689(8) | | | * |
William F. Nugent | | | 24,786(9) | | | * |
All Directors, Director Nominees and Executive Officers as a Group (14 Persons)
| | | 703,622(10) | | | 2.4% |
(1)
| Includes shares of Common Stock issuable within 60 days of the record date upon the exercise of options owned by the indicated stockholders on that date. |
(2)
| Includes 12,222 shares of Common Stock that vest on June 6, 2020, the anniversary of the grant date for these shares. |
(3)
| Includes 5,555 shares of Common Stock that vest on June 6, 2020, the anniversary of the grant date for these shares. |
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(4)
| Mr. Kronsberg is an employee of Cyrus Capital Partners, L.P. (“CCP”) which beneficially owns 4,023,137 shares of Common Stock, including 19,561 shares which were granted by the Company to CCP under the Company’s non-Employee Director Incentive Compensation Plan (of which 5,555 shares vest on June 6, 2020, the anniversary of the date of the grant of these shares). The grant was made to CCP pursuant to agreements between CCP and Mr. Kronsberg under which CCP is required to receive all compensation in connection with Mr. Kronsberg’s directorship. Mr. Kronsberg disclaims beneficial ownership of all Company securities held by CCP except to the extent of his pecuniary interest therein, if any. |
(5)
| Includes 111,232 shares issuable upon the exercise of options. |
(6)
| Includes 126,692 shares issuable upon the exercise of options. |
(7)
| Includes 124,678 shares issuable upon the exercise of options. |
(8)
| Includes 16,669 shares issuable upon the exercise of options. |
(9)
| Includes 16,065 shares issuable upon the exercise of options. |
(10)
| Includes 400,885 shares issuable upon the exercise of options. |
Set forth below is information regarding stockholders of the Company’s Common Stock that are known by the Company to have been “beneficial owners” (as defined in regulations of the SEC) of 5% or more of the outstanding shares of the Common Stock as of the record date. The information with respect to beneficial ownership by the identified stockholders was prepared based on information supplied by such stockholders in their filings with the SEC.
BlackRock, Inc.(1) | | | 1,872,153 | | | 6.5% |
Cobas Asset Management, SGIIC, SA(2) | | | 3,664,930 | | | 12.7% |
Cyrus Funds(3) | | | 4,023,137 | | | 13.9% |
Dimensional Fund Advisors LP(4) | | | 1,692,235 | | | 5.9% |
Donald Smith & Co., Inc.(5) | | | 1,865,321 | | | 6.5% |
Frontier Capital Management Co., LLC(6) | | | 1,571,148 | | | 5.4% |
The Vanguard Group(7) | | | 1,825,974 | | | 6.3% |
*
| Unless otherwise stated in the notes to this table, the share and percentage ownership information presented is as of the record date. |
(1)
| Based on a Schedule 13G filed on February 5, 2020 with the SEC by BlackRock, Inc. (“BlackRock”) with respect to the beneficial ownership of 1,872,153 shares of Common Stock as of December 31, 2019 by BlackRock and certain of its subsidiaries. The address of BlackRock is 55 East 52nd Street, New York, New York 10055. |
(2)
| Based on a Schedule 13G filed on February 20, 2020 with the SEC by Cobas Asset Management, SGIIC, SA (“Cobas”) with respect to the beneficial ownership of 3,664,930 shares of Common Stock as of December 31, 2019 by Cobas. The address of Cobas is Jose Abascal, 45 St. 28003 Madrid, Spain. |
(3)
| Based on a Schedule 13D filed on December 9, 2016 and a Form 4 filed on June 10, 2019 with the SEC by Cyrus Capital Partners, L.P. (“CCP”) with respect to beneficial ownership of 4,023,137 shares by each of CCP and Cyrus Capital Partners GP, L.L.C. (“CCPGP”) as of June 6, 2019 of which 19,561 were granted to CCP pursuant to agreements between CCP and Mr. Joseph Kronsberg relating to the Company’s non-Employee Director Incentive Compensation Plan (of which 5,555 shares vest on June 6, 2020, the anniversary of the grant of these shares). As the (i) principal of CCP and (ii) principal of Cyrus Capital Partners GP, L.L.C., the general partner of CCP, Stephen C. Freidheim (“Freidheim”) may be deemed the beneficial owner of 4,023,137 shares of Common Stock. The address of each of CCP, CCPGP and Freidheim is 65 East 55th Street, 35th Floor, New York, NY 10022. |
(4)
| Based on a Schedule 13G filed on February 12, 2020 with the SEC by Dimensional Fund Advisors LP (“Dimensional”) with respect to the beneficial ownership of 1,692,235 shares of Common Stock as of December 31, 2019 by Dimensional. Dimensional is an investment advisor registered under section 203 of the Investment Advisors Act of 1940 and furnishes investment advice to four investment companies registered under the Investment Company Act of 1940 and serves as investment manager or sub-advisor to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts are referred to as the “Funds”). The Funds own all the shares of the Common Stock that are reported to be beneficially owned by Dimensional. The business address of Dimensional is Building One, 6300 Bee Cave Road, Austin, Texas 78746. |
(5)
| Based on a Schedule 13G filed on February 10, 2020 with the SEC by Donald Smith & Co., Inc. (“DS”) with respect to the beneficial ownership of 1,865,321 shares of Common Stock as of December 31,2019 by DS and one of its subsidiaries and Jon Hartsel, an individual. The address of DS, its subsidiary and Jon Hartsel is 152 West 57th Street, New York, New York 10019. |
(6)
| Based on a Schedule 13G filed on February 14, 2020 with the SEC by Frontier Capital Management Co., LLC (“Frontier”) with respect to beneficial ownership of 1,571,148 shares of Common Stock by Frontier as of December 31, 2019. Frontier is an investment advisor registered under Section 203 of the Investment Advisors Act of 1940 and its address is 99 Summer Street, Boston, Massachusetts 02110. |
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(7)
| Based on a Schedule 13G filed on February 12, 2020 with the SEC by The Vanguard Group (“Vanguard”) with respect to the beneficial ownership of 1,825,974 shares of Common Stock as of December 31, 2019 by Vanguard and two of its subsidiaries. The address of Vanguard and its subsidiaries is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
Delinquent Section 16(a) Reports Under the securities laws of the United States, the Company’s directors, executive officers and any persons holding more than 10 percent of the Company’s common stock are required to report their ownership of common stock and any changes in that ownership, on a timely basis, to the SEC. Directors, executive officers and beneficial owners of more than 10% of the common stock are also required to furnish the Company with copies of all Section 16(a) reports that they file with the SEC. Based on material provided to the Company, all such reports were filed on a timely basis in 2019.
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The Board is not aware of any matters to be presented at the meeting other than those specified above. If any other matter should be presented, the holders of the accompanying proxy will vote the shares represented by the proxy on such matter in accordance with their best judgment.
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. Some brokers use this process for proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice that any person will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account or the Company if you hold shares registered in your name, and the Company will promptly undertake to carry out your request. You can notify the Company by sending a written request to the Company at its address set forth above.
The Company’s
2019 Annual Report
on Form 10-K for the fiscal year ended December 31, 2016 is available at
http://www.intlseas.com/Docs. That
2019 Annual Report
on Form 10-K does not form part of this Proxy Statement. The Company will provide to any stockholder of the Company, without charge, a copy of the Company’s
2019 Annual Report
on Form 10-K for the fiscal year ended December 31, 2016 upon
the written request
of such stockholder addressed to the Corporate Secretary of the Company at 600 Third Avenue, New York, New York 10016.
| | | By order of the Board of Directors, |
| | | |
| | | JAMES D. SMALL III |
| | | |
| | | Chief Administrative Officer, Senior Vice President, |
| | | General Counsel and Secretary |
| | | |
New York, New York | | | |
April 29, 2020 | | | |
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Appendix A
INTERNATIONAL SEAWAYS, INC.
2020 NON-EMPLOYEE DIRECTOR INCENTIVE COMPENSATION PLAN
This Plan is intended to promote the interests of the Company and its shareholders by providing certain non-employee directors of the Company, who are largely responsible for the management, growth and protection of the business of the Company, with incentives and rewards to encourage them to continue in the service of the Company.
As used in the Plan or in any instrument governing the terms of any Incentive Award, the following definitions apply to the terms indicated below:
(a)
| “Affiliate” means, with respect to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified Person. |
(b)
| “Award Agreement” means a written agreement, in a form determined by the Committee from time to time, entered into by each Participant and the Company, evidencing the grant of an Incentive Award under the Plan. |
(c)
| “Board of Directors” means the Board of Directors of INSW. |
(d)
| “Cash Incentive Award” means an award granted to a Participant pursuant to Section 8 of the Plan. |
(e)
| “Change in Control” means (i) any one Person, or more than one Person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)), other than INSW or any employee benefit plan sponsored by INSW, acquires ownership of stock of INSW that, together with stock held by such Person or group, constitutes more than 50 percent of the total fair market value or total Voting Power of the stock of INSW; or (ii) any one Person, or more than one Person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)) other than INSW or any employee benefit plan sponsored by INSW acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of INSW possessing 30 percent or more of the total Voting Power of the stock of INSW; or (iii) a majority of members of the Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of each appointment or election; or (iv) any one Person, or more than one Person acting as a group (as defined in Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For purposes of subsection (iv), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. The foregoing subsections (i) through (iv) shall be interpreted in a manner that is consistent with the Treasury Regulations promulgated pursuant to Section 409A of the Code so that all, and only, such transactions or events that could qualify as a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5)(i) will be deemed to be a Change in Control for purposes of this Plan. |
(f)
| “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. |
(g)
| “Committee” means the Compensation Committee of the Board of Directors or such other committee as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan. |
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(h)
| “Common Stock” means INSW’s common stock, no par value, or any other security into which the common stock shall be changed pursuant to the adjustment provisions of Section 9 of the Plan. |
(i)
| “Company” means INSW and all of its Subsidiaries, collectively. |
(j)
| “Deferred Compensation Plan” means any plan, agreement or arrangement maintained by the Company from time to time that provides opportunities for deferral of compensation. |
(k)
| “Effective Date” means the date the Plan is adopted. |
(l)
| “Employment” means the period during which an individual is classified or treated by the Company as a non-employee director of the Company. |
(m)
| “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
(n)
| “Fair Market Value” means, with respect to a share of Common Stock, as of the applicable date of determination or if the exchange is not open for trading on such date, the immediately preceding day on which the exchange is open for trading, the closing price as reported on the date of determination on the principal securities exchange on which shares of Common Stock are then listed or admitted to trading (the “Securities Exchange”). In the event that the price of a share of Common Stock shall not be so reported, the Fair Market Value of a share of Common Stock shall be determined by the Committee in its sole discretion taking into account the requirements of Section 409A of the Code. |
(o)
| “Incentive Award” means one or more Stock Incentive Awards and/or Cash Incentive Awards, collectively. |
(p)
| “INSW” means International Seaways, Inc., a Marshall Islands corporation (and any successor thereto). |
(q)
| “Option” means a stock option to purchase shares of Common Stock granted to a Participant pursuant to Section 6. |
(r)
| “Other Stock-Based Award” means an award granted to a Participant pursuant to Section 7. |
(s)
| “Participant” means a non-employee director of the Company who is eligible to participate in the Plan and to whom one or more Incentive Awards have been granted pursuant to the Plan and have not been fully settled or cancelled and, following the death of any such Person, his successors, heirs, executors and administrators, as the case may be. |
(t)
| “Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act. |
(u)
| “Plan” means the International Seaways, Inc. Non-Employee Director Incentive Compensation Plan, as it may be amended from time to time. |
(v)
| “Securities Act” means the Securities Act of 1933, as amended. |
(w)
| “Stock Incentive Award” means an Option or Other Stock-Based Award granted pursuant to the terms of the Plan. |
(x)
| “Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act. |
(y)
| “Voting Power” means the number of votes available to be cast (determined by reference to the maximum number of votes entitled to be cast by the holders of Voting Securities upon any matter submitted to shareholders where the holders of all Voting Securities vote together as a single class) by the holders of Voting Securities. |
(z)
| “Voting Securities” means any securities or other ownership interests of an entity entitled, or which may be entitled, to vote on the election of directors, or securities or other ownership interests which are convertible into, or exercisable in exchange for, such Voting Securities, whether or not subject to the passage of time or any contingency. |
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3.
| Stock Subject to the Plan |
The maximum number of shares of Common Stock that may be covered by Incentive Awards granted under the Plan shall be the sum of (i) 400,000 shares of Common Stock plus (ii) the number of shares of Common Stock that, on the day immediately following the effective date of this Plan, remain available for awards under the International Seaways, Inc. Non-Employee Director Incentive Compensation Plan effective as of November 18, 2016, as amended and restated (the “Prior Plan”). The maximum number of shares referred to in the preceding sentences of this Section 3 shall in each case be subject to adjustment as provided in Section 9 and the following provisions of this Section 3. Shares of Common Stock issued under the Plan may be either authorized and unissued shares, treasury shares, shares purchased by the Company in the open market, or any combination of the preceding categories as the Committee determines in its sole discretion. Incentive Awards settled in shares of Common Stock shall reduce the number of shares of Common Stock available hereunder by one share of Common Stock for every one share of Common Stock subject to such Incentive Award.
For purposes of the preceding paragraph, shares of Common Stock covered by Incentive Awards shall only be counted as used to the extent they are actually issued and delivered to a Participant (or such Participant’s permitted transferees as described in the Plan) pursuant to the Plan, and shall not be counted to the extent any such Incentive Award is settled in cash, forfeited, cancelled, terminated, or expires or lapses for any reason. Any shares of Common Stock that again become available for future grants pursuant to this Section 3 shall be added back as one share of Common Stock. In addition, if shares of Common Stock owned by a Participant (or such Participant’s permitted transferees as described in the Plan) are tendered (either actually or through attestation) to the Company in payment of any obligation in connection with an Incentive Award, the number of shares tendered shall be added to the number of shares of Common Stock that are available for delivery under the Plan. The following shares of Common Stock may not again be made available for issuance as Incentive Awards: (i) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding stock appreciation right or Option; (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an outstanding Incentive Award; or (iii) shares of Common Stock repurchased on the open market with the proceeds of a Option exercise price. Shares of Common Stock covered by Incentive Awards granted pursuant to the Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual) shall not count as used under the Plan for purposes of this Section 3.
Total annual compensation for any Participant in respect of his or her service on the Board of Directors and/or any Committee of the Board of Directors
JAMES D. SMALL IIIChief Administrative Officer, Senior Vice President,General Counsel shall not exceed $500,000 per year including both cash compensation and
SecretaryNew York, New York
April 28, 2017
Incentive Awards under the Plan, but excluding the reimbursement of any reasonable expenses. The value of Incentive Awards shall be determined based on their value on the relevant grant date. 4.
| Administration of the Plan |
The Plan shall be administered by a Committee of the Board of Directors consisting of two or more Persons, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act) and as “independent” as required by NYSE or any security exchange on which the Common Stock is listed, in each case if and to the extent required by applicable law or necessary to meet the requirements of such Rule, Section or listing requirement at the time of determination. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall, consistent with the terms of the Plan, from time to time designate those individuals who shall be granted Incentive Awards under the Plan and the amount, type and other terms and conditions of such Incentive Awards. All of the powers and responsibilities of the Committee under the Plan may be delegated by the Committee, in writing, to any subcommittee thereof, in which case the acts of such subcommittee shall be deemed to be acts of the Committee hereunder. The Committee may also from time to time authorize a subcommittee consisting of one or more members of the Board of Directors (including members who are employees of the Company) or employees of the Company to grant Incentive Awards to Persons who are
not “executive officers” of the Company (within the meaning of Rule 16a-1 under the Exchange Act), subject to such restrictions and limitations as the Committee may specify and to the requirements of applicable law.
The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and any Award Agreement thereunder, and to adopt, amend and rescind from time to time such rules and regulations for the administration of the Plan, including rules and regulations related to sub-plans established for the purpose of satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable foreign tax laws, as the Committee may deem necessary or appropriate. Decisions of the Committee shall be final, binding and conclusive on all parties. For the avoidance of doubt, the Committee may exercise all discretion granted to it under the Plan in a non-uniform manner among Participants.
The Committee may delegate the administration of the Plan to one or more officers or employees of the Company, and such administrator(s) may have the authority to execute and distribute Award Agreements, to maintain records relating to Incentive Awards, to process or oversee the issuance of Common Stock under Incentive Awards, to interpret and administer the terms of Incentive Awards, and to take such other actions as may be necessary or appropriate for the administration of the Plan and of Incentive Awards under the Plan, provided that in no case shall any such administrator be authorized (i) to grant Incentive Awards under the Plan (except in connection with any delegation made by the Committee pursuant to the first paragraph of this Section 4), (ii) to take any action inconsistent with Section 409A of the Code or (iii) to take any action inconsistent with applicable law. Any action by any such administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee and, except as otherwise specifically provided, references in this Plan to the Committee shall include any such administrator. The Committee and, to the extent it so provides, any subcommittee, shall have sole authority to determine whether to review any actions and/or interpretations of any such administrator, and if the Committee shall decide to conduct such a review, any such actions and/or interpretations of any such administrator shall be subject to approval, disapproval, or modification by the Committee.
On or after the date of grant of an Incentive Award under the Plan, the Committee may (i) accelerate the date on which any such Incentive Award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such Incentive Award, including, without limitation, extending the period following a termination of a Participant’s Employment during which any such Incentive Award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Incentive Award or (iv) provide for the payment of dividends or dividend equivalents with respect to any such Incentive Award; provided, that the Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code. Notwithstanding anything herein to the contrary, the Company shall not reprice any stock option (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual and any other formal or informal guidance issued by the New York Stock Exchange) without the approval of the shareholders of INSW.
The Company shall pay any amount payable with respect to an Incentive Award in accordance with the terms of such Incentive Award, provided that the Committee may, in its discretion, defer, or give a Participant the election to defer, the payment of amounts payable with respect to an Incentive Award subject to and in accordance with the terms of a Deferred Compensation Plan.
No member of the Committee shall be liable for any action, omission, or determination relating to the Plan, and INSW shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company.
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The Persons who shall be eligible to receive Incentive Awards pursuant to the Plan shall be those non-employee directors of the Company whom the Committee shall select from time to time. Each Incentive Award granted under the Plan shall be evidenced by an Award Agreement.
The Committee may from time to time grant Options on such terms as it shall determine, subject to the terms and conditions set forth in the Plan.
The exercise price per share of Common Stock covered by any Option shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date on which such Option is granted.
(b)
| Term and Exercise of Options |
(1)
| Each Option shall become vested and exercisable on such date or dates, during such period and for such number of shares of Common Stock as shall be determined by the Committee on or after the date such Option is granted; provided, however that no Option shall be exercisable after the expiration of ten years from the date such Option is granted; and, provided, further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or the Award Agreement. |
(2)
| Each Option shall be exercisable in whole or in part; provided, however that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof. |
(3)
| An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise. |
7.
| Other Stock-Based Awards |
The Committee may from time to time grant equity-based or equity-related awards not otherwise described herein in such amounts and on such terms as it shall determine, subject to the terms and conditions set forth in the Plan. Without limiting the generality of the preceding sentence, each such Other Stock-Based Award may (i) involve the transfer of actual shares of Common Stock to Participants, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of shares of Common Stock, (ii) be subject to performance-based and/or service-based conditions, (iii) be in the form of stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, and (iv) be designed to comply with applicable laws of jurisdictions other than the United States; provided, that each Other Stock-Based Award shall be denominated in, or shall have a value determined by reference to, a number of shares of Common Stock that is specified at the time of the grant of such Incentive Award.
The Committee may from time to time grant Cash Incentive Awards on such terms as it shall determine, subject to the terms and conditions set forth in the Plan. Cash Incentive Awards may be settled in cash or in other property, including shares of Common Stock, provided that the term “Cash Incentive Award” shall exclude any Option or Other Stock-Based Award.
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9.
| Adjustment Upon Certain Changes |
Subject to any action by the shareholders of INSW required by law, applicable tax rules or the rules of any exchange on which shares of common stock of INSW are listed for trading:
(a)
| Shares Available for Grants |
In the event of any change in the number of shares of Common Stock outstanding by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the maximum aggregate number of shares of Common Stock with respect to which the Committee may grant Incentive Awards and the maximum aggregate number of shares of Common Stock with respect to which the Committee may grant Incentive Awards to any individual Participant in any year shall be appropriately adjusted or substituted by the Committee. In the event of any change in the number of shares of Common Stock of INSW outstanding by reason of any other event or transaction, the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments to the type or number of shares of Common Stock with respect to which Incentive Awards may be granted.
(b)
| Increase or Decrease in Issued Shares Without Consideration |
In the event of any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend (but only on the shares of Common Stock), or any other increase or decrease in the number of such shares effected without receipt or payment of consideration by the Company, the Committee shall, to the extent deemed appropriate by the Committee, adjust the type or number of shares of Common Stock subject to each outstanding Incentive Award and the exercise price per share of Common Stock of each such Incentive Award.
(c)
| Certain Mergers and Other Transactions |
In the event of any merger, consolidation or similar transaction as a result of which the holders of shares of Common Stock receive consideration consisting exclusively of securities of the surviving corporation in such transaction, the Committee shall, to the extent deemed appropriate by the Committee, adjust each Incentive Award outstanding on the date of such merger or consolidation so that it pertains and applies to the securities which a holder of the number of shares of Common Stock subject to such Incentive Award would have received in such merger or consolidation.
In the event of (i) a dissolution or liquidation of INSW, (ii) a sale of all or substantially all of the Company’s assets (on a consolidated basis), (iii) a merger, consolidation or similar transaction involving INSW in which the holders of shares of Common Stock receive securities and/or other property, including cash, other than shares of the surviving corporation in such transaction, the Committee shall, to the extent deemed appropriate by the Committee, have the power to:
(i)
| cancel, effective immediately prior to the occurrence of such event, each Incentive Award (whether or not then exercisable or vested), and, in full consideration of such cancellation, pay to the Participant to whom such Incentive Award was granted an amount in cash, for each share of Common Stock subject to such Incentive Award, equal to the value, as determined by the Committee, of such Incentive Award, provided that with respect to any outstanding Option such value shall be equal to the excess of (A) the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Common Stock as a result of such event over (B) the exercise price of such Option; or |
(ii)
| provide for the exchange of each Incentive Award (whether or not then exercisable or vested) for an Incentive Award with respect to (A) some or all of the property which a holder of the number of shares of Common Stock subject to such Incentive Award would have received in such transaction or (B) securities of the acquiror or surviving entity and, incident thereto, make an equitable adjustment as determined by the Committee in the exercise price of the Incentive Award, or the number of shares or amount of property subject to the Incentive Award or provide for a payment (in cash or other property) to the Participant to whom such Incentive Award was granted in partial consideration for the exchange of the Incentive Award. |
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In the event of any change in the capitalization of INSW or corporate change other than those specifically referred to in Sections 9(b), (c) or (d), the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments in the number and class of shares subject to Incentive Awards outstanding on the date on which such change occurs and in such other terms of such Incentive Awards as the Committee may consider appropriate.
In the event of any transaction or event described in this Section 9, including without limitation any corporate change referred to in paragraph (e) hereof, the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments in the terms and conditions of any Cash Incentive Award.
Except as expressly provided in the Plan or any Award Agreement, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividends or dividend equivalents, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of INSW or any other corporation. Except as expressly provided in the Plan, no issuance by INSW of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares or amount of other property subject to, or the terms related to, any Incentive Award.
No provision of this Section 9 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.
No provision of this Section 9 shall be given effect to the extent such provision would result in short-swing profits liability under Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 of the Exchange Act.
10.
| Change in Control; Termination of Employment |
The consequences of a Change in Control, if any, will be set forth in the Award Agreement in addition to what is provided in this Section 10.
(b)
| Termination of Employment |
(1)
| Except as to any awards constituting stock rights subject to Section 409A of the Code, termination of Employment shall mean a separation from service within the meaning of Section 409A of the Code. The Employment of a Participant with the Company shall be deemed to have terminated for all purposes of the Plan if such Person is employed by or provides services to a Person that is a Subsidiary of the Company and such Person ceases to be a Subsidiary of the Company, unless the Committee determines otherwise. Without limiting the generality of the foregoing, the Committee shall determine whether an authorized leave of absence, or absence in military or government service, shall constitute termination of Employment. Furthermore, no payment shall be made with respect to any Incentive Awards under the Plan that are subject to Section 409A of the Code as a result of any such authorized leave of absence or absence in military or government service unless such authorized leave or absence constitutes a separation from service for purposes of Section 409A of the Code. |
(2)
| The Award Agreement shall specify the consequences with respect to such Option of the termination of Employment of the Participant holding the Option. |
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No Person shall have any rights as a shareholder with respect to any shares of Common Stock covered by or relating to any Incentive Award until the date of the issuance of such shares on the books and records of INSW. Except as otherwise expressly provided in Section 9 hereof, no adjustment of any Incentive Award shall be made for dividends or other rights for which the record date occurs prior to the date of such issuance. Nothing in this Section 11 is intended, or should be construed, to limit authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Common Stock if it were issued or outstanding, or from granting rights related to such dividends.
The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan. To the extent any Person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.
12.
| No Special Employment Rights; No Right to Incentive Award |
(a)
| Nothing contained in the Plan or any Award Agreement shall confer upon any Participant any right with respect to the continuation of his or her Employment by the Company or interfere in any way with the right of the Company at any time to terminate such Employment or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Incentive Award. |
(b)
| No Person shall have any claim or right to receive an Incentive Award hereunder. The Committee’s granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant an Incentive Award to such Participant or any other Participant or other Person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other Person. |
(a)
| INSW shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Common Stock to be issued hereunder or to effect similar compliance under any state or local laws. Notwithstanding anything herein to the contrary, INSW shall not be obligated to cause to be issued shares of Common Stock pursuant to the Plan unless and until INSW is advised by its counsel that the issuance is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded. The Committee may require, as a condition to the issuance of shares of Common Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that any related certificates representing such shares bear such legends, as the Committee, in its sole discretion, deems necessary or desirable. |
(b)
| The exercise or settlement of any Incentive Award (including, without limitation, any Option) granted hereunder shall only be effective at such time as counsel to INSW shall have determined that the issuance and delivery of shares of Common Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded. INSW may, in its sole discretion, defer the effectiveness of any exercise or settlement of an Incentive Award granted hereunder in order to allow the issuance of shares pursuant thereto to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state or local securities laws. INSW shall inform the Participant in writing of its decision to defer the effectiveness of the exercise or settlement of an Incentive Award granted hereunder. During the period that the effectiveness of the exercise of an Incentive Award has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto. |
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Whenever withholding tax obligations are incurred in connection with any Incentive Award, INSW shall have the right to require the Participant to remit to INSW in cash an amount sufficient to satisfy federal, state and local withholding tax requirements, if any, attributable to such event. In addition, upon the exercise or settlement of any Incentive Award in cash, or the making of any other payment with respect to any Incentive Award (other than in shares of Common Stock), INSW shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, settlement or payment.
At the election of the Participant, subject to the approval of the Committee, whenever withholding tax obligations are incurred in connection with any Incentive Award, the Participant may tender to INSW a number of shares of Common Stock that have been owned by the Participant for at least six months (or such other period as the Committee may determine) having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such event. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.
At the election of the Participant, subject to the approval of the Committee, whenever withholding tax obligations are incurred in connection with any Incentive Award, INSW shall withhold a number of such shares having a Fair Market Value determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such event. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.
15.
| Amendment or Termination of the Plan |
The Board of Directors may at any time suspend or discontinue the Plan or revise or amend it or any Incentive Award in any respect whatsoever; provided, however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires shareholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence shall not restrict the Committee’s ability to exercise its discretionary authority hereunder pursuant to Section 4 hereof, which discretion may be exercised without amendment to the Plan. No provision of this Section 15 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the Plan, no action hereunder may, without the consent of a Participant, adversely affect the Participant’s rights under any previously granted and outstanding Incentive Award. Nothing in the Plan shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.
Notwithstanding anything in the Plan or in any Award Agreement to the contrary, the Company will be entitled to the extent permitted or required by applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act), Company policy and/or the requirements of an exchange on which the Company’s shares are listed for trading, in each case, as in effect from time to time to recoup compensation of whatever kind paid by the Company at any time to a Participant under this Plan.
17.
| No Obligation to Exercise |
The grant to a Participant of an Incentive Award shall impose no obligation upon such Participant to exercise such Incentive Award.
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Incentive Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of a Participant, only by the Participant; provided, however that the Committee may permit Options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine. Upon the death of a Participant, outstanding Incentive Awards granted to such Participant may be exercised only by the executors or administrators of the Participant’s estate or by any Person or Persons who shall have acquired such right to exercise by will or by the laws of descent and distribution. No transfer by will or the laws of descent and distribution of any Incentive Award, or the right to exercise any Incentive Award, shall be effective to bind INSW unless the Committee shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Incentive Award that are or would have been applicable to the Participant and to be bound by the acknowledgements made by the Participant in connection with the grant of the Incentive Award.
The expenses of the Plan shall be paid by INSW. Any proceeds received by INSW in connection with any Incentive Award will be used for general corporate purposes.
In addition to the remedies of the Company elsewhere provided for herein, failure by a Participant to comply with any of the terms and conditions of the Plan or any Award Agreement, unless such failure is remedied by such Participant within ten days after having been notified of such failure by the Committee, shall be grounds for the cancellation and forfeiture of such Incentive Award, in whole or in part, as the Committee, in its absolute discretion, may determine.
21.
| Relationship to Other Benefits |
No payment with respect to any Incentive Awards under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.
The Plan and the rights of all Persons under the Plan shall be construed and administered in accordance with the laws of the State of New York without regard to its conflict of law principles.
If all or any part of this Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Plan not declared to be unlawful or invalid. Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
24.
| Effective Date and Term of Plan |
This Plan shall become effective as of April 2, 2020, provided that the Plan has been approved by the shareholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. This Plan shall remain in effect for a term of ten years following the date on which it is effective or until all shares of Common Stock subject to the Plan shall have been purchased or acquired according to the Plan’s provisions, whichever occurs first, unless this Plan is sooner terminated pursuant to Section 15 hereof. No Incentive Awards shall be granted pursuant to the Plan after such Plan termination or expiration, but outstanding Incentive Awards may extend beyond that date.
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Notwithstanding the adoption of this Plan by the Board and approval of this Plan by the Company’s shareholders as provided hereunder, the Prior Plan shall remain in effect, but grants of awards thereunder shall not be made on or after the day immediately following the effective date of this Plan. All grants and awards previously made under the Prior Plan shall be governed by the terms of the Prior Plan.
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Appendix B
INTERNATIONAL SEAWAYS, INC.
2020 MANAGEMENT INCENTIVE COMPENSATION PLAN
This Plan is intended to promote the interests of the Company and its shareholders by providing certain employees of the Company, who are largely responsible for the management, growth and protection of the business of the Company, with incentives and rewards to encourage them to continue in the service of the Company.
As used in the Plan or in any instrument governing the terms of any Incentive Award, the following definitions apply to the terms indicated below:
(a)
| “Affiliate” means, with respect to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified Person. |
(b)
| “Award Agreement” means a written agreement, in a form determined by the Committee from time to time, entered into by each Participant and the Company, evidencing the grant of an Incentive Award under the Plan. |
(c)
| “Board of Directors” means the Board of Directors of INSW. |
(d)
| “Cash Incentive Award” means an award granted to a Participant pursuant to Section 8 of the Plan. |
(e)
| “Change in Control” means (i) any one Person, or more than one Person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)), other than INSW or any employee benefit plan sponsored by INSW, acquires ownership of stock of INSW that, together with stock held by such Person or group, constitutes more than 50 percent of the total fair market value or total Voting Power of the stock of INSW; or (ii) any one Person, or more than one Person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)) other than INSW or any employee benefit plan sponsored by INSW acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of INSW possessing 30 percent or more of the total Voting Power of the stock of INSW; or (iii) a majority of members of the Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of each appointment or election; or (iv) any one Person, or more than one Person acting as a group (as defined in Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For purposes of subsection (iv), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. The foregoing subsections (i) through (iv) shall be interpreted in a manner that is consistent with the Treasury Regulations promulgated pursuant to Section 409A of the Code so that all, and only, such transactions or events that could qualify as a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5)(i) will be deemed to be a Change in Control for purposes of this Plan. |
(f)
| “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. |
(g)
| “Committee” means the Compensation Committee of the Board of Directors or such other committee as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan. |
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(h)
| “Common Stock” means INSW’s common stock, no par value, or any other security into which the common stock shall be changed pursuant to the adjustment provisions of Section 9 of the Plan. |
(i)
| “Company” means INSW and all of its Subsidiaries, collectively. |
(j)
| “Deferred Compensation Plan” means any plan, agreement or arrangement maintained by the Company from time to time that provides opportunities for deferral of compensation. |
(k)
| “Effective Date” means the date the Plan is adopted. |
(l)
| “Employment” means the period during which an individual is classified or treated by the Company as an employee of the Company. |
(m)
| “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
(n)
| “Fair Market Value” means, with respect to a share of Common Stock, as of the applicable date of determination or if the exchange is not open for trading on such date, the immediately preceding day on which the exchange is open for trading, the closing price as reported on the date of determination on the principal securities exchange on which shares of Common Stock are then listed or admitted to trading (the “Securities Exchange”). In the event that the price of a share of Common Stock shall not be so reported, the Fair Market Value of a share of Common Stock shall be determined by the Committee in its sole discretion taking into account the requirements of Section 409A of the Code. |
(o)
| “Incentive Award” means one or more Stock Incentive Awards and/or Cash Incentive Awards, collectively. |
(p)
| “INSW” means International Seaways, Inc., a Marshall Islands corporation (and any successor thereto). |
(q)
| “Option” means a stock option to purchase shares of Common Stock granted to a Participant pursuant to Section 6. |
(r)
| “Other Stock-Based Award” means an award granted to a Participant pursuant to Section 7. |
(s)
| “Participant” means an employee of the Company who is eligible to participate in the Plan and to whom one or more Incentive Awards have been granted pursuant to the Plan and have not been fully settled or cancelled and, following the death of any such Person, his successors, heirs, executors and administrators, as the case may be. |
(t)
| “Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act. |
(u)
| “Plan” means the International Seaways, Inc. Management Incentive Compensation Plan, as it may be amended from time to time. |
(v)
| “Securities Act” means the Securities Act of 1933, as amended. |
(w)
| “Stock Incentive Award” means an Option or Other Stock-Based Award granted pursuant to the terms of the Plan. |
(x)
| “Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act. |
(y)
| “Voting Power” means the number of votes available to be cast (determined by reference to the maximum number of votes entitled to be cast by the holders of Voting Securities upon any matter submitted to shareholders where the holders of all Voting Securities vote together as a single class) by the holders of Voting Securities. |
(z)
| “Voting Securities” means any securities or other ownership interests of an entity entitled, or which may be entitled, to vote on the election of directors, or securities or other ownership interests which are convertible into, or exercisable in exchange for, such Voting Securities, whether or not subject to the passage of time or any contingency. |
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3.
| Stock Subject to the Plan and Limitations on Cash Incentive Awards |
(a)
| Stock Subject to the Plan |
The maximum number of shares of Common Stock that may be covered by Incentive Awards granted under the Plan shall be the sum of (i) 1,400,000 shares of Common Stock plus (ii) the number of shares of Common Stock that, on the day immediately following the effective date of this Plan, remain available for awards under the International Seaways, Inc. Management Incentive Compensation Plan effective as of November 18, 2016, as amended and restated (the “Prior Plan”). Out of such aggregate, the maximum number of shares of Common Stock that may be covered by Options that are designated as “incentive stock options” within the meaning of Section 422 of the Code shall not exceed 200,000 shares of Common Stock. The maximum number of shares referred to in the preceding sentences of this Section 3(a) shall in each case be subject to adjustment as provided in Section 9 and the following provisions of this Section 3. Shares of Common Stock issued under the Plan may be either authorized and unissued shares, treasury shares, shares purchased by the Company in the open market, or any combination of the preceding categories as the Committee determines in its sole discretion. Incentive Awards settled in shares of Common Stock shall reduce the number of shares of Common Stock available hereunder by one share of Common Stock for every one share of Common Stock subject to such Incentive Award.
For purposes of the preceding paragraph, shares of Common Stock covered by Incentive Awards shall only be counted as used to the extent they are actually issued and delivered to a Participant (or such Participant’s permitted transferees as described in the Plan) pursuant to the Plan, and shall not be counted to the extent any such Incentive Award is settled in cash, forfeited, cancelled, terminated, or expires or lapses for any reason. Any shares of Common Stock that again become available for future grants pursuant to this Section 3(a) shall be added back as one share of Common Stock. In addition, if shares of Common Stock owned by a Participant (or such Participant’s permitted transferees as described in the Plan) are tendered (either actually or through attestation) to the Company in payment of any obligation in connection with an Incentive Award, the number of shares tendered shall be added to the number of shares of Common Stock that are available for delivery under the Plan. The following shares of Common Stock may not again be made available for issuance as Incentive Awards: (i) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding stock appreciation right or Option; (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an outstanding Incentive Award; or (iii) shares of Common Stock repurchased on the open market with the proceeds of a Option exercise price. Shares of Common Stock covered by Incentive Awards granted pursuant to the Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual) shall not count as used under the Plan for purposes of this Section 3.
(b)
| Individual Award Limits |
Subject to adjustment as provided in Section 9, the maximum number of shares of Common Stock that may be covered by an Incentive Award granted under the Plan shall not exceed 1,400,000 shares. For this purpose, the number of shares “covered by” an Incentive Award shall be the maximum number of shares that may be required to be delivered in settlement of that Incentive Award. The amount payable to any employee with respect to any calendar year for all Cash Incentive Awards shall not exceed $7,500,000. For purposes of the preceding sentences, the phrase “amount payable with respect to any calendar year” means the amount of cash, or value of other property, required to be paid based on the achievement of applicable performance measures during the applicable performance period that ends in such calendar year, disregarding any deferral pursuant to the terms of a Deferred Compensation Plan.
4.
| Administration of the Plan |
The Plan shall be administered by a Committee of the Board of Directors consisting of two or more Persons, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act), and as “independent” as required by NYSE or any security exchange on which the Common Stock is listed, in each case if and to the extent required by applicable law or necessary to meet the requirements of such Rule, Section or listing requirement at the time of determination. From time to time, the Board may increase or decrease the size of the Committee,
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add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall, consistent with the terms of the Plan, from time to time designate those individuals who shall be granted Incentive Awards under the Plan and the amount, type and other terms and conditions of such Incentive Awards. All of the powers and responsibilities of the Committee under the Plan may be delegated by the Committee, in writing, to any subcommittee thereof, in which case the acts of such subcommittee shall be deemed to be acts of the Committee hereunder. The Committee may also from time to time authorize a subcommittee consisting of one or more members of the Board of Directors (including members who are employees of the Company) or employees of the Company to grant Incentive Awards to Persons who are not “executive officers” of the Company (within the meaning of Rule 16a-1 under the Exchange Act), subject to such restrictions and limitations as the Committee may specify and to the requirements of applicable law.
The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and any Award Agreement thereunder, and to adopt, amend and rescind from time to time such rules and regulations for the administration of the Plan, including rules and regulations related to sub-plans established for the purpose of satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable foreign tax laws, as the Committee may deem necessary or appropriate. Decisions of the Committee shall be final, binding and conclusive on all parties. For the avoidance of doubt, the Committee may exercise all discretion granted to it under the Plan in a non-uniform manner among Participants.
The Committee may delegate the administration of the Plan to one or more officers or employees of the Company, and such administrator(s) may have the authority to execute and distribute Award Agreements, to maintain records relating to Incentive Awards, to process or oversee the issuance of Common Stock under Incentive Awards, to interpret and administer the terms of Incentive Awards, and to take such other actions as may be necessary or appropriate for the administration of the Plan and of Incentive Awards under the Plan, provided that in no case shall any such administrator be authorized (i) to grant Incentive Awards under the Plan (except in connection with any delegation made by the Committee pursuant to the first paragraph of this Section 4), (ii) to take any action inconsistent with Section 409A of the Code or (iii) to take any action inconsistent with applicable law. Any action by any such administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee and, except as otherwise specifically provided, references in this Plan to the Committee shall include any such administrator. The Committee and, to the extent it so provides, any subcommittee, shall have sole authority to determine whether to review any actions and/or interpretations of any such administrator, and if the Committee shall decide to conduct such a review, any such actions and/or interpretations of any such administrator shall be subject to approval, disapproval, or modification by the Committee.
On or after the date of grant of an Incentive Award under the Plan, the Committee may (i) accelerate the date on which any such Incentive Award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such Incentive Award, including, without limitation, extending the period following a termination of a Participant’s Employment during which any such Incentive Award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Incentive Award or (iv) provide for the payment of dividends or dividend equivalents with respect to any such Incentive Award; provided, that dividends or dividend equivalents shall be subject to the same restrictions and conditions as the Incentive Awards underlying such dividends or dividend equivalents and shall be payable only if and no earlier than at the same time as the underlying Incentive Award becomes vested. Notwithstanding anything herein to the contrary, the Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code, and the Company shall not reprice any stock option (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual and any other formal or informal guidance issued by the New York Stock Exchange) without the approval of the shareholders of INSW.
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The Company shall pay any amount payable with respect to an Incentive Award in accordance with the terms of such Incentive Award, provided that the Committee may, in its discretion, defer, or give a Participant the election to defer, the payment of amounts payable with respect to an Incentive Award subject to and in accordance with the terms of a Deferred Compensation Plan.
No member of the Committee shall be liable for any action, omission, or determination relating to the Plan, and INSW shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company.
The Persons who shall be eligible to receive Incentive Awards pursuant to the Plan shall be those employees and other service providers of the Company whom the Committee shall select from time to time, including officers of INSW, whether or not they are directors. Each Incentive Award granted under the Plan shall be evidenced by an Award Agreement.
The Committee may from time to time grant Options on such terms as it shall determine, subject to the terms and conditions set forth in the Plan. The Award Agreement shall clearly identify such Option as either an “incentive stock option” within the meaning of Section 422 of the Code or as not an incentive stock option.
The exercise price per share of Common Stock covered by any Option shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date on which such Option is granted.
(b)
| Term and Exercise of Options |
(1)
| Each Option shall become vested and exercisable on such date or dates, during such period and for such number of shares of Common Stock as shall be determined by the Committee on or after the date such Option is granted; provided, however that no Option shall be exercisable after the expiration of ten years from the date such Option is granted; and, provided, further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or the Award Agreement. |
(2)
| Each Option shall be exercisable in whole or in part; provided, however that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof. |
(3)
| An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise. |
(c)
| Special Rules for Incentive Stock Options |
(1)
| The aggregate Fair Market Value of shares of Common Stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of INSW or any of its “subsidiaries” (within the meaning of Section 424 of the Code) shall not exceed $100,000. Such Fair Market Value shall be determined as of the date on which each such incentive stock option is granted. In the event that the aggregate Fair Market Value of shares of Common Stock with respect to such incentive stock options exceeds $100,000, then incentive stock options granted hereunder to such Participant shall, to the extent and in the order required by regulations promulgated under the Code (or any |
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other authority having the force of regulations), automatically be deemed to be non-qualified stock options, but all other terms and provisions of such incentive stock options shall remain unchanged. In the absence of such regulations (and authority), or in the event such regulations (or authority) require or permit a designation of the Options which shall cease to constitute incentive stock options, incentive stock options granted hereunder shall, to the extent of such excess and in the order in which they were granted, automatically be deemed to be non-qualified stock options, but all other terms and provisions of such incentive stock options shall remain unchanged.
(2)
| Incentive stock options may only be granted to individuals who are employees of the Company. No incentive stock option may be granted to an individual if, at the time of the proposed grant, such individual owns stock possessing more than ten percent of the total combined “voting power” (within the meaning of Section 422 of the Code) of all classes of stock of INSW or any of its “subsidiaries” (within the meaning of Section 424 of the Code), unless (i) the exercise price of such incentive stock option is at least 110% of the Fair Market Value of a share of Common Stock at the time such incentive stock option is granted and (ii) such incentive stock option is not exercisable after the expiration of five years from the date such incentive stock option is granted. |
7.
| Other Stock-Based Awards |
The Committee may from time to time grant equity-based or equity-related awards not otherwise described herein in such amounts and on such terms as it shall determine, subject to the terms and conditions set forth in the Plan. Without limiting the generality of the preceding sentence, each such Other Stock-Based Award may (i) involve the transfer of actual shares of Common Stock to Participants, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of shares of Common Stock, (ii) be subject to performance-based and/or service-based conditions, (iii) be in the form of stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, and (iv) be designed to comply with applicable laws of jurisdictions other than the United States; provided, that each Other Stock-Based Award shall be denominated in, or shall have a value determined by reference to, a number of shares of Common Stock that is specified at the time of the grant of such Incentive Award.
The Committee may from time to time grant Cash Incentive Awards on such terms as it shall determine, subject to the terms and conditions set forth in the Plan. Cash Incentive Awards may be settled in cash or in other property, including shares of Common Stock, provided that the term “Cash Incentive Award” shall exclude any Option or Other Stock-Based Award.
9.
| Adjustment Upon Certain Changes |
Subject to any action by the shareholders of INSW required by law, applicable tax rules or the rules of any exchange on which shares of common stock of INSW are listed for trading:
(a)
| Shares Available for Grants |
In the event of any change in the number of shares of Common Stock outstanding by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the maximum aggregate number of shares of Common Stock with respect to which the Committee may grant Incentive Awards and the maximum aggregate number of shares of Common Stock with respect to which the Committee may grant Incentive Awards to any individual Participant in any year shall be appropriately adjusted or substituted by the Committee. In the event of any change in the number of shares of Common Stock of INSW outstanding by reason of any other event or transaction, the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments to the type or number of shares of Common Stock with respect to which Incentive Awards may be granted.
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(b)
| Increase or Decrease in Issued Shares Without Consideration |
In the event of any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend (but only on the shares of Common Stock), or any other increase or decrease in the number of such shares effected without receipt or payment of consideration by the Company, the Committee shall, to the extent deemed appropriate by the Committee, adjust the type or number of shares of Common Stock subject to each outstanding Incentive Award and the exercise price per share of Common Stock of each such Incentive Award.
(c)
| Certain Mergers and Other Transactions |
In the event of any merger, consolidation or similar transaction as a result of which the holders of shares of Common Stock receive consideration consisting exclusively of securities of the surviving corporation in such transaction, the Committee shall, to the extent deemed appropriate by the Committee, adjust each Incentive Award outstanding on the date of such merger or consolidation so that it pertains and applies to the securities which a holder of the number of shares of Common Stock subject to such Incentive Award would have received in such merger or consolidation.
In the event of (i) a dissolution or liquidation of INSW, (ii) a sale of all or substantially all of the Company’s assets (on a consolidated basis), (iii) a merger, consolidation or similar transaction involving INSW in which the holders of shares of Common Stock receive securities and/or other property, including cash, other than shares of the surviving corporation in such transaction, the Committee shall, to the extent deemed appropriate by the Committee, have the power to:
(i)
| cancel, effective immediately prior to the occurrence of such event, each Incentive Award (whether or not then exercisable or vested), and, in full consideration of such cancellation, pay to the Participant to whom such Incentive Award was granted an amount in cash, for each share of Common Stock subject to such Incentive Award, equal to the value, as determined by the Committee, of such Incentive Award, provided that with respect to any outstanding Option such value shall be equal to the excess of (A) the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Common Stock as a result of such event over (B) the exercise price of such Option; or |
(ii)
| provide for the exchange of each Incentive Award (whether or not then exercisable or vested) for an Incentive Award with respect to (A) some or all of the property which a holder of the number of shares of Common Stock subject to such Incentive Award would have received in such transaction or (B) securities of the acquiror or surviving entity and, incident thereto, make an equitable adjustment as determined by the Committee in the exercise price of the Incentive Award, or the number of shares or amount of property subject to the Incentive Award or provide for a payment (in cash or other property) to the Participant to whom such Incentive Award was granted in partial consideration for the exchange of the Incentive Award. |
In the event of any change in the capitalization of INSW or corporate change other than those specifically referred to in Sections 9(b), (c) or (d), the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments in the number and class of shares subject to Incentive Awards outstanding on the date on which such change occurs and in such other terms of such Incentive Awards as the Committee may consider appropriate.
In the event of any transaction or event described in this Section 9, including without limitation any corporate change referred to in paragraph (e) hereof, the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments in the terms and conditions of any Cash Incentive Award.
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Except as expressly provided in the Plan or any Award Agreement, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividends or dividend equivalents, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of INSW or any other corporation. Except as expressly provided in the Plan, no issuance by INSW of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares or amount of other property subject to, or the terms related to, any Incentive Award.
No provision of this Section 9 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.
No provision of this Section 9 shall be given effect to the extent such provision would result in short-swing profits liability under Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 of the Exchange Act.
10.
| Change in Control; Termination of Employment |
The consequences of a Change in Control, if any, will be set forth in the Award Agreement in addition to what is provided in this Section 10.
(b)
| Termination of Employment |
(1)
| Except as to any awards constituting stock rights subject to Section 409A of the Code, termination of Employment shall mean a separation from service within the meaning of Section 409A of the Code, unless the Participant is retained as a consultant pursuant to a written agreement and such agreement provides otherwise. The Employment of a Participant with the Company shall be deemed to have terminated for all purposes of the Plan if such Person is employed by or provides services to a Person that is a Subsidiary of the Company and such Person ceases to be a Subsidiary of the Company, unless the Committee determines otherwise. A Participant who ceases to be an employee of the Company but continues, or simultaneously commences, services as a director of the Company shall be deemed to have had a termination of Employment for purposes of the Plan. Without limiting the generality of the foregoing, the Committee shall determine whether an authorized leave of absence, or absence in military or government service, shall constitute termination of Employment, provided that a Participant who is an employee will not be deemed to cease employment in the case of any leave of absence approved by the Company. Furthermore, no payment shall be made with respect to any Incentive Awards under the Plan that are subject to Section 409A of the Code as a result of any such authorized leave of absence or absence in military or government service unless such authorized leave or absence constitutes a separation from service for purposes of Section 409A of the Code. |
(2)
| The Award Agreement shall specify the consequences with respect to such Option of the termination of Employment of the Participant holding the Option. |
No Person shall have any rights as a shareholder with respect to any shares of Common Stock covered by or relating to any Incentive Award until the date of the issuance of such shares on the books and records of INSW. Except as otherwise expressly provided in Section 9 hereof, no adjustment of any Incentive Award shall be made for dividends or other rights for which the record date occurs prior to the date of such issuance. Nothing in this Section 11 is intended, or should be construed, to limit authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Common Stock if it were issued or outstanding, or from granting rights related to such dividends.
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The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan. To the extent any Person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.
12.
| No Special Employment Rights; No Right to Incentive Award |
(a)
| Nothing contained in the Plan or any Award Agreement shall confer upon any Participant any right with respect to the continuation of his or her Employment by the Company or interfere in any way with the right of the Company at any time to terminate such Employment or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Incentive Award. |
(b)
| No Person shall have any claim or right to receive an Incentive Award hereunder. The Committee’s granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant an Incentive Award to such Participant or any other Participant or other Person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other Person. |
(a)
| INSW shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Common Stock to be issued hereunder or to effect similar compliance under any state or local laws. Notwithstanding anything herein to the contrary, INSW shall not be obligated to cause to be issued shares of Common Stock pursuant to the Plan unless and until INSW is advised by its counsel that the issuance is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded. The Committee may require, as a condition to the issuance of shares of Common Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that any related certificates representing such shares bear such legends, as the Committee, in its sole discretion, deems necessary or desirable. |
(b)
| The exercise or settlement of any Incentive Award (including, without limitation, any Option) granted hereunder shall only be effective at such time as counsel to INSW shall have determined that the issuance and delivery of shares of Common Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded. INSW may, in its sole discretion, defer the effectiveness of any exercise or settlement of an Incentive Award granted hereunder in order to allow the issuance of shares pursuant thereto to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state or local securities laws. INSW shall inform the Participant in writing of its decision to defer the effectiveness of the exercise or settlement of an Incentive Award granted hereunder. During the period that the effectiveness of the exercise of an Incentive Award has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto. |
Whenever withholding tax obligations are incurred in connection with any Incentive Award, INSW shall have the right to require the Participant to remit to INSW in cash an amount sufficient to satisfy federal, state and local withholding tax requirements, if any, attributable to such event. In addition, upon the exercise or settlement of any Incentive Award in cash, or the making of any other payment with respect to any Incentive Award (other than in shares of Common Stock), INSW shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, settlement or payment.
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At the election of the Participant, subject to the approval of the Committee, whenever withholding tax obligations are incurred in connection with any Incentive Award, the Participant may tender to INSW a number of shares of Common Stock that have been owned by the Participant for at least six months (or such other period as the Committee may determine) having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such event. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.
At the election of the Participant, subject to the approval of the Committee, whenever withholding tax obligations are incurred in connection with any Incentive Award, INSW shall withhold a number of such shares having a Fair Market Value determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such event. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.
15.
| Amendment or Termination of the Plan |
The Board of Directors may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires shareholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence shall not restrict the Committee’s ability to exercise its discretionary authority hereunder pursuant to Section 4 hereof, which discretion may be exercised without amendment to the Plan. No provision of this Section 15 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the Plan, no action hereunder may, without the consent of a Participant, adversely affect the Participant’s rights under any previously granted and outstanding Incentive Award. Nothing in the Plan shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.
Notwithstanding anything in the Plan or in any Award Agreement to the contrary, the Company will be entitled to the extent permitted or required by applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act), Company policy and/or the requirements of an exchange on which the Company’s shares are listed for trading, in each case, as in effect from time to time to recoup compensation of whatever kind paid by the Company at any time to a Participant under this Plan.
17.
| No Obligation to Exercise |
The grant to a Participant of an Incentive Award shall impose no obligation upon such Participant to exercise such Incentive Award.
Incentive Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of a Participant, only by the Participant; provided, however that the Committee may permit Options that are not incentive stock options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine. Upon the death of a Participant, outstanding Incentive Awards granted to such Participant may be exercised only by the executors or administrators of the Participant’s estate or by any Person or Persons who shall have acquired such right to exercise by will or by the laws of descent and distribution. No transfer by will or the laws of descent and distribution of any Incentive Award, or the right to exercise any Incentive Award, shall be effective to bind INSW unless the Committee shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the
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Committee may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Incentive Award that are or would have been applicable to the Participant and to be bound by the acknowledgements made by the Participant in connection with the grant of the Incentive Award.
The expenses of the Plan shall be paid by INSW. Any proceeds received by INSW in connection with any Incentive Award will be used for general corporate purposes.
In addition to the remedies of the Company elsewhere provided for herein, failure by a Participant to comply with any of the terms and conditions of the Plan or any Award Agreement, unless such failure is remedied by such Participant within ten days after having been notified of such failure by the Committee, shall be grounds for the cancellation and forfeiture of such Incentive Award, in whole or in part, as the Committee, in its absolute discretion, may determine.
21.
| Relationship to Other Benefits |
No payment with respect to any Incentive Awards under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.
The Plan and the rights of all Persons under the Plan shall be construed and administered in accordance with the laws of the State of New York without regard to its conflict of law principles.
If all or any part of this Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Plan not declared to be unlawful or invalid. Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
24.
| Effective Date and Term of Plan |
This Plan shall become effective as of April 2, 2020, provided that the Plan has been approved by the shareholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. This Plan shall remain in effect for a term of ten years following the date on which it is effective or until all shares of Common Stock subject to the Plan shall have been purchased or acquired according to the Plan’s provisions, whichever occurs first, unless this Plan is sooner terminated pursuant to Section 15 hereof. No Incentive Awards shall be granted pursuant to the Plan after such Plan termination or expiration, but outstanding Incentive Awards may extend beyond that date.
Notwithstanding the adoption of this Plan by the Board and approval of this Plan by the Company’s shareholders as provided hereunder, the Prior Plan shall remain in effect, but grants of awards thereunder shall not be made on or after the day immediately following the effective date of this Plan. All grants and awards previously made under the Prior Plan shall be governed by the terms of the Prior Plan.