Business Context and Reporting Period
This Form 8-K, filed on November 15, 2016, by Evercore Partners Inc. (Evercore), reports the appointment of John S. Weinberg as Executive Chairman and Chairman of the Board, effective on or before November 21, 2016. The filing details the entry into a material definitive employment agreement and related compensatory arrangements. Roger C. Altman, the current Executive Chairman, will transition to the role of Founder and Senior Chairman.
Key Financial Metrics and Compensation Terms
This filing does not contain standard financial performance metrics such as revenue, profit, cash flow, or debt levels. Instead, it outlines the specific financial terms of Mr. Weinberg's compensation package:
- Base Salary: The greater of $500,000 or the annual base salary of the Chief Executive Officer (Mr. Ralph L. Schlosstein).
- Annual Bonus: Discretionary cash bonus based on performance criteria, with terms no less favorable than the CEO. A percentage will be deferred.
- Initial Cash Award: Target payment of $35 million, vesting as follows:
- $11 million on March 1, 2019.
- $6 million on each of the first four anniversaries of March 1, 2019.
- Restricted Stock Units (RSUs): An inducement award of 900,000 RSUs with a vesting schedule of 18% on December 31, 2016, 14% on March 1, 2018, 14% on each of the next three anniversaries, and 26% on March 1, 2022.
- Partnership Units: Subscription for 400,000 Class I-P Units (profits interests) subject to service and performance vesting conditions tied to stock price thresholds ($65-$74.99 and $75+).
Material Changes and Agreements
The primary material change is the leadership transition and the execution of several new agreements on November 15, 2016:
- Employment Agreement: Term extends until March 1, 2023. Establishes an Executive Committee with Mr. Weinberg and Mr. Schlosstein as Co-Chairmen.
- Restrictive Covenant Agreement: Includes a 12-month non-compete and non-solicitation period following termination of employment.
- Partnership Agreement Amendment: The Fifth Amended and Restated Limited Partnership Agreement of Evercore LP was adopted to facilitate Mr. Weinberg's admission as a limited partner.
Outlook, Risks, and Unusual Items
Management Commentary and Outlook: The filing highlights Mr. Weinberg's extensive background, including his tenure as Vice Chairman of The Goldman Sachs Group, Inc., and his experience advising major corporations. The compensation structure is designed to align his interests with long-term company performance through significant deferred cash and equity components.
Risks and Contingencies:
- Vesting Conditions: Significant portions of the compensation ($35 million cash award, 900,000 RSUs, and 400,000 partnership units) are contingent upon continued employment and specific performance metrics (e.g., stock price thresholds for partnership units).
- Forfeiture: Violation of the Restrictive Covenant Agreement results in immediate forfeiture of unvested RSUs and repayment of certain dividend equivalents.
- Change in Control: Provisions exist for accelerated vesting of the Initial Cash Award and RSUs in the event of a Change in Control.
Investor Verification Checklist
- Verify the exact vesting schedule and performance criteria for the $35 million Initial Cash Award, noting the Compensation Committee's discretion to adjust amounts by up to 200% or down to 75% of target.
- Confirm the stock price thresholds ($65-$74.99 and $75+) required for the 400,000 Class I-P Units to vest and convert into Class I Units.
- Review the specific definitions of "Cause," "Good Reason," and "Qualifying Termination" in the Employment Agreement to understand severance triggers.
- Assess the impact of the 12-month non-compete clause on Mr. Weinberg's future mobility and potential conflicts.
- Examine the tax implications of the "profits interests" (Class I-P Units) as described in the Incentive Subscription Agreement.