DEF 14A 1 trnc_currentfoliodef14a.htm DEF 14A trnc_Current_Folio_DEF14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.           )

 

 

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a‑12

 

 

 

TRONC, INC.

(Name of Registrant as Specified In Its Charter)

 

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

 

 

 

 

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a‑6(i)(1) and 0‑11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0‑11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0‑11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

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(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 

 

 

 

 

 

 


 

Picture 1

 

March 9, 2017

 

 

Dear Stockholders of tronc, Inc.:

 

We are pleased to invite you to the 2017 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting will begin at 9:30 a.m. local time on April 18, 2017, at the offices of Kirkland & Ellis LLP, located at 300 North LaSalle, Chicago, Illinois 60654.

 

At the Annual Meeting, you will be asked to:

 

1.

elect seven directors nominated by our Board of Directors;

 

2.

approve, on an advisory basis, the compensation of our named executive officers for 2016;

 

3.

ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017; and

 

4.

consider any other business properly presented at the Annual Meeting and any adjournment or postponement of the Annual Meeting.

 

Our Board of Directors recommends that you vote FOR each of the proposals described in this Proxy Statement.

 

We hope you can join us at the Annual Meeting. Regardless of whether you plan to attend, please read the accompanying Proxy Statement and vote your shares promptly. You may vote over the Internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card.

 

Sincerely,

 

 

 

 

 

Picture 6

Picture 7

Michael W. Ferro, Jr.

Justin C. Dearborn

Chair of the Board of Directors

Chief Executive Officer and Member of the Board of Directors

 

 

 

 

 


 

TRONC, INC.

435 N. Michigan Avenue

Chicago, Illinois 60611

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON TUESDAY, APRIL 18, 2017

9:30 A.M. LOCAL TIME

CHICAGO, ILLINOIS

 

TO THE STOCKHOLDERS OF TRONC, INC.:

 

On Tuesday, April 18, 2017, we will hold our 2017 Annual Meeting of Stockholders (the “Annual Meeting”) at the offices of Kirkland & Ellis LLP, located at 300 North LaSalle, Chicago, Illinois 60654. The Annual Meeting will begin at 9:30 a.m. local time.

 

At the Annual Meeting, you will be asked to:

 

1.

elect seven directors nominated by our Board of Directors;

 

2.

approve, on an advisory basis, the compensation of our named executive officers for 2016;

 

3.

ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017; and

 

4.

consider any other business properly presented at the Annual Meeting and any adjournment or postponement of the Annual Meeting.

 

You are entitled to vote at the Annual Meeting and any adjournments or postponements of the Annual Meeting if you were a stockholder of record at the close of business on February 28, 2017 (the “Record Date”). At the Annual Meeting and for ten days prior, a list of stockholders of record entitled to vote will be available for any purpose germane to the Annual Meeting at our principal executive offices, 435 N. Michigan Avenue, Chicago, Illinois 60611. If you would like to view the stockholder list, please call our Investor Relations Department at (469) 528‑9366.

 

Regardless of whether you plan to attend, please read the accompanying Proxy Statement and vote your shares as promptly as possible in order to ensure your representation at the Annual Meeting. You may vote over the Internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card. Even if you have given your proxy, you may still vote in person if you attend the Annual Meeting. If your shares are held through a broker, bank, or other holder of record and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy issued in your name from your broker, bank, or other holder of record.

 

The Proxy Statement is furnished in connection with the solicitation of proxies by tronc, Inc. on behalf of the Board of Directors for the Annual Meeting. In accordance with Securities and Exchange Commission rules, we will send a Notice of Internet Availability of Proxy Materials on or about March 9, 2017, and provided access to the Proxy Statement over the Internet on or before that date, to the holders of record of our common stock as of the close of business on the Record Date.

 

By Order of the Board of Directors

Picture 4

Julie K. Xanders

Executive Vice President, General Counsel and Secretary

 

Chicago, Illinois

March 9, 2017

 

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Stockholders to Be Held on April 18, 2017.

The Proxy Statement and the Annual Report are available at investor.tronc.com.

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

Item

  

Page

General Information Concerning Proxies and Voting at the Annual Meeting

 

1 

Proposal 1 Election of Directors

 

5 

Corporate Governance

 

8 

Director Compensation

 

13 

2016 Director Compensation Table

 

14 

Proposal 2 Advisory Vote to Approve Compensation of Named Executive Officers

 

14 

Proposal 3 Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm

 

15 

Report of the Audit Committee

 

17 

Independent Registered Public Accounting Firm’s Fees Report

 

18 

Executive Officers

 

18 

Security Ownership of Certain Beneficial Owners, Directors, and Management

 

20 

Section 16(a) Beneficial Ownership Reporting Compliance

 

22 

Compensation Discussion and Analysis

 

22 

Compensation Committee Report

 

33 

Named Executive Officer Compensation

 

34 

2016 Summary Compensation Table

 

34 

2016 Grants of PlanBased Awards Table

 

35 

2016 Outstanding Equity Awards at Fiscal YearEnd Table

 

37 

2016 Option Exercises and Stock Vested Table

 

38 

Potential Payments Upon Termination or Change of Control Table

 

39 

Policies and Procedures for the Review and Approval or Ratification of Transactions With Related Persons

 

42 

Additional Information

 

46 

 

 

 

 

 

 

i


 

TRONC, INC.

435 N. Michigan Avenue

Chicago, Illinois 60611

 

PROXY STATEMENT

FOR ANNUAL MEETING OF STOCKHOLDERS

 

GENERAL INFORMATION CONCERNING PROXIES AND VOTING AT THE ANNUAL MEETING

 

Why did I receive these proxy materials?

 

We are providing these proxy materials in connection with the solicitation by the Board of Directors (our “Board” or “Board of Directors”) of tronc, Inc. (“tronc,” the “Company,” “we,” “us,” or “our”), a Delaware corporation, of proxies to be voted at our 2017 Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment or postponement of the Annual Meeting. In accordance with rules of the Securities and Exchange Commission (the “SEC”), we will send a Notice of Internet Availability of Proxy Materials on or about March 9, 2017, and provided access to our proxy materials over the Internet beginning on or before that date, to the holders of record and beneficial owners of our common stock as of the close of business on February 28, 2017 (the “Record Date”).

 

You are invited to attend our Annual Meeting on Tuesday, April 18, 2017, beginning at 9:30 a.m. local time. The Annual Meeting will be held at the offices of Kirkland & Ellis LLP, located at 300 North LaSalle, Chicago, Illinois 60654.

 

What information is included in this Proxy Statement?

 

The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, our Board of Directors and Board committees, the compensation of directors and named executive officers for fiscal year 2016, and other information.

 

Who is entitled to vote?

 

Holders of our common stock at the close of business on February 28, 2017, the Record Date, are entitled to receive the Notice of Annual Meeting of Stockholders (the “Notice”) and vote at the Annual Meeting. As of the close of business on the Record Date, there were 36,441,443 shares of our common stock outstanding and entitled to vote.

 

How many votes do I have?

 

Each share of our common stock is entitled to one vote on each matter properly brought before the Annual Meeting. For example, if you own 30 shares of tronc common stock, you are entitled to 30 votes on each matter at the Annual Meeting. Stockholders do not have cumulative voting rights.

 

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

If your shares are registered directly in your name with our transfer agent, Computershare Shareholder Services, you are considered, with respect to those shares, the “stockholder of record.” As a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to vote over the Internet, by telephone or by filling out and returning a proxy card to ensure your vote is counted.

 

If your shares are held in a brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of such shares. In this case, the Notice, Proxy Statement, Annual Report to Stockholders (including our Form 10‑K for the year ended December 25, 2016 (the “Annual Report”)), and applicable voting instruction form should have been forwarded to you by your broker, bank, or other holder of record who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares by using the voting instruction form provided by your broker, bank, or other holder of record.

 

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What am I voting on?

 

We are asking you to vote on the following matters in connection with the Annual Meeting:

 

1.

The election of seven directors nominated by our Board of Directors;

 

2.

An advisory resolution approving the compensation of our named executive officers for 2016; and

 

3.

The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.

 

We will also consider any other business properly presented at the Annual Meeting and any adjournment or postponement of the Annual Meeting.

 

How do I vote?

 

You can vote using any one of the methods described below.

 

Vote by Internet.  Stockholders of record may submit proxies over the Internet by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial stockholders may vote by accessing the website specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees. Please check your voting instruction form for Internet voting availability.

 

Vote by Telephone.  Stockholders of record may submit proxies using any touch‑tone telephone from within the United States by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial owners may vote using any touch‑tone telephone from within the United States by calling the number specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees.

 

Vote by Mail.  You can vote by mail by completing, signing, and dating the proxy card or voting instruction form and returning it in the prepaid return envelope, if printed copies of the proxy materials were requested. If you are a stockholder of record and you return your signed proxy card but do not indicate your voting preferences, the persons named in the proxy card will vote the shares represented by that proxy as recommended by the Board of Directors. If you are a beneficial owner and you return your signed voting instruction form but do not indicate your voting preferences, please see “What are ‘broker non‑votes’ and how do they affect the proposals?” regarding whether your broker, bank, or other holder of record may vote your uninstructed shares on a particular proposal.

 

Vote in Person at the Annual Meeting.  All stockholders as of the close of business on the Record Date can vote in person at the Annual Meeting. You can also be represented by another person at the Annual Meeting by executing a proper proxy designating that person. If you are a beneficial owner, you must obtain a legal proxy from your broker, bank, or other holder of record and present it to the inspector of election with your ballot to be able to vote at the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you also vote either by telephone, by Internet, or by mail so that your vote will be counted if you later decide not to attend.

 

tronc, Inc. is incorporated under Delaware law, which specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder. The electronic voting procedures provided for the Annual Meeting are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded.

 

How many copies of the proxy materials should I have received?

 

If you received more than one proxy card or voting instruction form, your shares are registered in more than one name or are registered in different accounts. In order to vote all of the shares you own, please sign and return all proxy cards or voting instruction forms, or vote each proxy card or voting instruction form by telephone or by Internet to ensure that all of your shares are voted.

 

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What can I do if I change my mind after I vote?

 

If you are a stockholder of record, you can revoke your proxy before it is exercised by:

 

1.

delivering written notice of such revocation to the Company;

 

2.

timely delivering a valid, subsequent proxy by Internet, by telephone, or by mail; or

 

3.

voting by ballot at the Annual Meeting.

 

If you are a beneficial owner, you may be able to submit new voting instructions by contacting your broker, bank, or other holder of record. You may also vote in person at the Annual Meeting if you obtain a legal proxy, as previously described.

 

Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you vote by ballot at the Annual Meeting. All shares that have been properly voted and not revoked will be voted at the Annual Meeting.

 

Is there a list of stockholders entitled to vote at the Annual Meeting?

 

A list of the names of our stockholders of record entitled to vote at the Annual Meeting will be available for ten days prior to the Annual Meeting for any purpose germane to the meeting, between the hours of 9:00 a.m. and 4:30 p.m. local time at our principal executive offices at 435 N. Michigan Avenue, Chicago, Illinois 60611. If you would like to view the stockholder list, please call our Investor Relations Department at (469) 528‑9366. The list will also be available at the Annual Meeting.

 

What constitutes a quorum at the Annual Meeting?

 

The holders of a majority of the outstanding shares entitled to vote at the Annual Meeting, present in person or represented by proxy at the Annual Meeting, are necessary to constitute a quorum to transact business. Abstentions and “broker non‑votes” (as described under the heading “What are ‘broker non‑votes’ and how do they affect the proposals?”) are counted as present and entitled to vote for purposes of determining a quorum.

 

What are the voting requirements to elect directors and approve each of the other proposals described in this Proxy Statement?

 

Shares represented by a valid proxy will be voted at the Annual Meeting and, when instructions are given by the stockholder, will be voted in accordance with those instructions. If you are a stockholder of record and you return your proxy card but do not indicate your voting preferences, the persons named on the proxy card will vote the shares represented by that proxy as recommended by the Board of Directors. If you are a beneficial owner and you return your signed voting instruction form but do not indicate your voting preferences, please see “What are ‘broker non‑votes’ and how do they affect the proposals?” regarding whether your broker, bank, or other holder of record may vote your uninstructed shares on a particular proposal.

 

With respect to Proposal No. 1, the election of directors, the seven director candidates receiving the largest number of votes will be elected. With respect to Proposal Nos. 2 and 3, the affirmative vote of the holders of at least a majority of the outstanding shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote is required in order for the proposal to be approved. Abstentions will not be counted in the tabulation of votes cast on Proposal No. 1. Abstentions will be counted in the tabulation of votes cast on Proposal Nos. 2 and 3 and will have the same effect as a vote against the proposals. Withhold votes are not counted for any purpose in determining the outcome of Proposal No. 1.

 

What are “broker non‑votes” and how do they affect the proposals?

 

A “broker non‑vote” occurs when a broker, bank, or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because such holder of record does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

 

If you are a beneficial owner and you do not give instructions to your broker, bank, or other holder of record, such holder of record will be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to “non‑discretionary” items (those shares are treated as “broker non‑votes”). If you are a beneficial owner, your broker, bank, or other holder of record has “discretion” to vote your shares on Proposal No. 3, the ratification of the appointment of our independent

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registered public accounting firm, if the holder of record does not receive voting instructions from you. However, such holder of record may not vote your shares on Proposal Nos. 1 or 2, without your voting instructions on those proposals, because such proposals are considered “non‑discretionary.” Accordingly, without your voting instructions on those proposals, a broker non‑vote will occur. Broker non‑votes are not counted for any purpose in determining the outcome of Proposal Nos. 1 or 2.

 

What is the effect of the advisory resolution to approve the compensation of our Named Executive Officers?

 

In accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are providing our stockholders with a nonbinding, advisory vote to approve the compensation of our Named Executive Officers (as defined in the Compensation Discussion and Analysis section of this Proxy Statement), commonly known as a “say‑on‑pay” proposal. In 2015, our stockholders voted that we conduct advisory votes to approve the compensation of our Named Executive Officers annually and, consistent with this result, we decided to conduct the advisory vote annually. Although this advisory vote is not binding upon the Board of Directors or the Company, the Board of Directors and the Compensation, Nominating and Corporate Governance Committee of the Board of Directors will review and consider the voting results when making future decisions regarding our executive compensation program.

 

We expect to have our stockholders vote again, on a nonbinding, advisory basis, on whether we should have a say-on-pay proposal every one, two, or three years at the 2021 Annual Meeting of Stockholders.

 

What is the effect of the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm?

 

Selection of our independent registered public accounting firm is not required to be submitted to a vote of stockholders. The Sarbanes‑Oxley Act of 2002 requires the Audit Committee of our Board of Directors (the “Audit Committee”) to be directly responsible for the appointment, compensation, and oversight of the audit work of the independent registered public accounting firm. However, the Board of Directors has elected to submit the selection of Ernst & Young LLP as our independent registered public accounting firm to stockholders for ratification as a matter of corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain Ernst & Young LLP, and may retain that firm or another firm without resubmitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, at its discretion, appoint a different independent registered public accounting firm at any time during the year.

 

Who counts the votes?

 

Broadridge Financial Solutions, Inc. will count all votes and serve as the inspector of election. The inspector of election will separately count affirmative and negative votes, abstentions, and broker non‑votes.

 

Who will pay for the cost of this proxy solicitation?

 

We will bear the cost of soliciting proxies. Proxies may be solicited on our behalf by the Company’s directors, officers, or employees in person or by telephone, electronic transmission, and facsimile transmission. No additional compensation will be paid to directors, officers, or other employees for soliciting proxies. In addition, D.F. King will solicit proxies from brokers, banks, nominees, and institutional investors or other stockholders at a cost of approximately $15,000 plus out‑of‑pocket expenses. We furnish copies of solicitation materials to banks, brokerage houses, fiduciaries, and custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of our common stock for their costs of forwarding solicitation materials to such beneficial owners.

 

Why did I receive a one‑page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

 

Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials to our stockholders. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials or request to receive an electronic copy or printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request an electronic copy or printed copy may be found in the Notice of Internet Availability of Proxy Materials. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We encourage stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of the Annual Meeting.

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When will tronc announce the results of the voting?

 

We will report the voting results in a Current Report on Form 8‑K filed within four business days after the end of the Annual Meeting. If final voting results are unavailable at that time, we will file an amended Current Report on Form 8‑K within four business days of the day the final results are available. The Current Report on Form 8‑K, and any amendments, will be available at www.sec.gov and on our website at investor.tronc.com.

 

What are the requirements for admission to the Annual Meeting?

 

You are entitled to attend the Annual Meeting if you were a Company stockholder as of the close of business on the Record Date or you hold a valid proxy for the Annual Meeting. In order to be admitted to the Annual Meeting, you must present photo identification (e.g., a driver’s license or passport). In addition, if you are a stockholder of record, your name will be verified against the list of stockholders of record as of the Record Date. If your shares are held in the name of a broker, bank or other holder of record that holds your shares, you should provide a copy of the voting instruction card provided by your broker, bank, or other holder of record, or other similar evidence of your beneficial ownership of those shares. If you do not comply with these procedures, you may not be admitted to the Annual Meeting.

 

PROPOSAL 1: ELECTION OF DIRECTORS

 

Our Amended and Restated Certificate of Incorporation (“Restated Certificate”) and our Amended and Restated By‑Laws (“By‑Laws”) currently provide that the Board of Directors will be elected at the annual meeting of stockholders to serve one‑year terms or until their successors have been duly elected and qualified, or until their earlier death, resignation or removal.

 

Board Composition

 

As of March 9, 2017, the Board of Directors was composed of nine members serving on the standing Board committees set forth below:    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Board

    

 

    

Compensation,

    

 

 

 

 

 

 

of

 

Audit

 

Nominating and

 

 

 

Name

 

Age

 

Directors

 

Committee

 

Corporate Goverance Committee

 

 

 

Carol Crenshaw

 

60

 

*

 

*

 

*

 

 

 

Justin C. Dearborn

 

47

 

*

 

 

 

 

 

 

 

David Dreier

 

64

 

*

 

 

 

 

 

 

 

Donald Tang

 

53

 

*

 

*

 

*

 

 

 

Eddy W. Hartenstein

 

66

 

*

 

 

 

 

 

 

 

Michael W. Ferro, Jr. (1)

 

50

 

**

 

 

 

 

 

 

 

Patrick Soon-Shiong (1)

 

64

 

***

 

 

 

 

 

 

 

Philip G. Franklin

 

65

 

*

 

**

 

*

 

 

 

Richard A. Reck

 

67

 

*

 

*

 

**

 

 

 


(1)

Mr. Ferro and Dr. Soon-Shiong were nominated and serve as directors pursuant to their respective Purchase Agreements, which are described in the “Policies and Procedures for the Review and Approval or Ratification of Transactions with Related Persons--Related Person Transactions” section of this proxy statement.

*     Member

 

**   Chair

 

*** Vice Chair

 

Nominees for Director

 

The Board of Directors has nominated the seven individuals listed below for election as directors at the Annual Meeting. All nominees are currently serving as directors of the Company. Two of our current directors, Dr. Soon-Shiong and Mr. Tang, will not stand for reelection at the Annual Meeting. The Board has voted to reduce its size to seven directors effective upon commencement of the Annual Meeting. There are no vacancies on the Board.

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Each of the nominees has consented to being named as a  Board nominee in this Proxy Statement and has agreed to serve if elected. Management has no reason to believe that any nominee will be unable to serve. If any of the Board nominees becomes unavailable to serve as a director, proxies will be voted for the election of such person as shall be designated by the Board of Directors, unless the Board chooses to reduce the number of directors serving on the Board.

 

Biographical information about the seven nominees for director appears below, including information about the experience, qualifiactions, attributes and skills considered by our Compensation, Nominating and Corporate Governance Committee and the Board  in determinating that the nominees should serve as a director.

 

The Board of Directors Recommends a Vote “FOR” Each of the Board’s Nominees.

 

Carol Crenshaw

 

Ms. Crenshaw has served as a director since April 2016. She is the Chief Financial Officer and Vice President of Finance for The Chicago Community Trust, a community foundation dedicated to improving the Chicagoland region through strategic grant making, civic engagement and inspiring philanthropy. She joined The Chicago Community Trust in 1983 as assistant controller, was promoted to controller in 1984, and has served in her current role since 1994. Prior to joining The Chicago Community Trust, she was an auditor with the certified public accounting firm of KPMG Peat Marwick/Chicago. Ms. Crenshaw is a member of the Accounting Practices Committee of Community Foundations, a trustee of the John L. Patten Charitable Trust and a member of the board of directors of Northern Illinois University Foundation. Ms. Crenshaw is a certified public accountant and holds a B.S. from Northern Illinois University.

 

Specific qualifications, experience, skills and expertise that led to the Compensation, Nominating and Corporate Governance Committee’s conclusion that Ms. Crenshaw is qualified to serve on the Board include:

 

·

Operating and management experience;

 

·

Expertise in finance and financial reporting; and

 

·

Core business skills, including financial, audit and strategic planning.

 

Justin C. Dearborn

 

Mr. Dearborn has served as Chief Executive Officer of tronc and a director since February 2016. Prior to joining the Company, Mr. Dearborn was Chief Executive Officer and a director of Merge Healthcare Incorporated (“Merge”), an information technology company supplying radiology and cardio information solutions to healthcare providers. Merge was a publicly-traded company until its acquisition by IBM in October 2015. Mr. Dearborn served as Chief Executive Officer, President, and Chief Financial Officer of Merge at various times from 2008 to 2016. From January 2007 to June 2008, Mr. Dearborn served as managing director at Merrick Ventures, LLC (“Merrick Ventures”), a venture capital and private equity firm focused on big data, deep learning, and content aggregation and distribution technologies. Prior to Merrick Ventures, he served in various executive and senior management positions for Click Commerce, Inc., a publicly-traded software and services company. Mr. Dearborn holds a B.S. in Accounting from Illinois State University and a J.D. from DePaul University.

 

Specific qualifications, experience, skills and expertise that led to the Compensation, Nominating and Corporate Governance Committee’s conclusion that Mr. Dearborn is qualified to serve on the Board include:

 

·

Operating and management experience;

 

·

Core business skills, including operations and strategic planning; and

 

·

Deep understanding of the technology industry.

 

David Dreier

 

Mr. Dreier has served as a director of tronc since June 2016. He has served the Chairman of the Annenberg-Dreier Commission at Sunnylands, an initiative focused on the role of technology in enhancing prosperity, good governance, and cross-cultural links throughout the Greater Pacific region, since February 2013. Prior to that, he served as a member of the U.S. House of Representatives from 1981 to January 2013. While in Congress, Mr. Dreier served as Chairman of the Rules Committee from 1999 to

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2007 and 2011 to 2013. He was also the founding Chairman of the bipartisan House Democracy Partnership, which works to strengthen legislative bodies in new and reemerging democracies on five continents, and founded the bipartisan Congressional Trade Working Group. Mr. Dreier is an honors graduate of Claremont McKenna College and holds a Master’s degree from Claremont Graduate University.

 

Specific qualifications, experience, skills and expertise that led to the Compensation, Nominating and Corporate Governance Committee’s conclusion that Mr. Dreier is qualified to serve on the Board include:

 

·

Operating and management experience;

 

·

Core business skills, including operations and strategic planning; and

 

·

Deep understanding of international commerce and the technology industry.

 

Michael W. Ferro, Jr.

 Mr. Ferro has served as Non-Executive Chairman of the Board of Directors since February 2016. Since 2007, he has been the Chairman and Chief Executive Officer of Merrick Ventures. From 2008 to 2015, Mr. Ferro served as Chairman of Merge. Merge was a publicly-traded company until its acquisition by IBM in October 2015. From 2011 until early 2016, Mr. Ferro served as Chairman of Wrapports, LLC, which owns various media properties including the Sun-Times Network, the Chicago Sun-Times, the Chicago Reader, Chicago.com, and Aggrego. Mr. Ferro was co-founder of Click Commerce, Inc., an Internet software company.

 

Specific qualifications, experience, skills and expertise that led to the Compensation, Nominating and Corporate Governance Committee’s conclusion that Mr. Ferro is qualified to serve on the Board include:

 

·

Operating and management experience;

 

·

Core business skills, including operations and strategic planning; and

 

·

Deep understanding of media and technology industries.

 

Philip G. Franklin

 

Mr. Franklin has served as a director since the consummation of the Company’s distribution and separation from Tribune Media Company (the “Distribution”) in August 2014. Mr. Franklin retired from serving as Chief Financial Officer of Littelfuse, Inc., a manufacturer of electronic components, in April 2016 after 17 years of service. Prior to joining Littelfuse in 1998, he was Vice President and Chief Financial Officer of OmniQuip International, a private equity sponsored roll‑up in the construction equipment industry. Previously, Mr. Franklin served as Chief Financial Officer for Monarch Marking Systems, a subsidiary of Pitney Bowes, and Hill Refrigeration. Earlier in his career, he worked in a variety of finance and general management positions at FMC Corporation. Mr. Franklin also currently serves as a director of TTM Technologies, Inc., where he is chairman of the audit committee. Mr. Franklin attended Dartmouth College, where he earned a bachelor’s degree in economics and an MBA at the Tuck School of Business.

 

Specific qualifications, experience, skills and expertise that led to the Compensation, Nominating and Corporate Governance Committee’s conclusion that Mr. Franklin is qualified to serve on the Board include:

 

·

Operating and management experience;

 

·

Core business skills, including financial and strategic planning; and

 

·

Expertise in finance and financial reporting.

 

Eddy W. Hartenstein

 

Mr. Hartenstein has served as a director since the Distribution in August 2014 and was the Non-Executive Chairman from August 2014 until February 2016. From August 2008 until the Distribution, Mr. Hartenstein served as Publisher and Chief Executive Officer of the Los Angeles Times, where he was responsible for all aspects of print, digital and mobile operations of the metropolitan daily news organization, as well as those of the Los Angeles Times Media Group’s portfolio. Prior to Tribune Media Company’s

7


 

January 2013 change of ownership, he was also President and Chief Executive Officer of Tribune Media Company, a multimedia company operating businesses in publishing, digital and broadcasting. From December 2012 until July 2014, he was a member of the Board of Directors of Tribune Media Company and until the Distribution, continued to serve as special advisor to the Chief Executive Officer of Tribune Media Company. Previously, Mr. Hartenstein served in a variety of positions at DIRECTV Inc., including as President from its inception in 1990 through 2001, as Chairman and Chief Executive Officer from late 2001 through 2004, and as Vice Chairman of the board of The DIRECTV Group Inc. from late 2003 through 2004. Mr. Hartenstein currently serves on the boards of directors of SIRIUS XM Holdings Inc., a satellite radio broadcaster (where he is the lead independent director); Broadcom Limited, a semiconductor company; TiVo Corporation, a digital entertainment technology provider; Yahoo, a technology company; and City of Hope. He previously served on the board of directors of SanDisk Corp., a manufacturer of flash memory, from November 2005 to May 2016. Mr. Hartenstein holds Bachelor of Science degrees in aerospace engineering and mathematics from California State Polytechnic University, Pomona and a Master of Science degree from Cal Tech, and a Doctorate of Science (HON) from California State Polytechnic University, Pomona.

 

Specific qualifications, experience, skills and expertise that led to the Compensation, Nominating and Corporate Governance Committee’s conclusion that Mr. Hartenstein is qualified to serve on the Board include:

 

·

Operating and management experience;

 

·

Core business skills, including financial and strategic planning; and

 

·

Deep understanding of our company, its history and culture.

 

Richard A. Reck

 

Mr. Reck has served as a director since April 2016. He is the founder and President of Business Strategy Advisors LLC, a business strategy consultancy firm that focuses on serving technology-based and entertainment companies, and has served in such capacity since August 2002. Mr. Reck joined the certified public accounting firm of KPMG LLP in June 1973 and remained employed there until his retirement as a partner in July 2002. He currently serves on the board of directors and chairs the audit committee of SilkRoad, Inc., a venture capital backed multinational human capital management software company; serves on the board of advisors of Ultra Corporation, a private IT consultancy firm; and serves on the board of directors and chairs the audit committee of Advanced Life Sciences Holdings, Inc., a public biopharmaceutical company that has been inactive since 2011. He previously served on the board of directors, as well as the audit and compensation committees, of Interactive Intelligence, Inc., a public communications software company which was acquired by Genesys Telecommunications Laboratories, Inc. in December 2016, and the board of directors of Merge Healthcare, Inc., which was a publicly-traded company until its acquisition by IBM in October 2015 where he served on the audit committee and chaired the nominating and governance committee. Mr. Reck is a registered certified public accountant in Illinois and holds a B.A. from DePauw University and an M.B.A. in Accounting from the University of Michigan.

 

Specific qualifications, experience, skills and expertise that led to the Compensation, Nominating and Corporate Governance Committee’s conclusion that Mr. Reck is qualified to serve on the Board include:

 

·

Operating and management experience;

 

·

Expertise in finance and financial reporting; and

 

·

Core business skills, including financial, audit and strategic planning.

 

CORPORATE GOVERNANCE

 

Board of Directors

 

During the fiscal year ended December 25, 2016, the Board of Directors met 27 times, the Audit Committee held ten meetings, the Compensation, Nominating and Corporate Governance Committee held five meetings, and prior to the formation of the Compensation, Nominating and Corporate Governance Committee in June 2016, the Compensation Committee held seven meetings and the Nominating and Corporate Governance Committee held seven meetings. No incumbent director attended fewer than 75% of the meetings of the Board and standing Board committees on which he or she served during his or her term of service. Three of our directors attended the 2016 Annual Meeting.

 

8


 

The Nasdaq Stock Market (“Nasdaq”) listing rules (“Nasdaq Rules”) require that a majority of our Board of Directors be “independent directors,” as defined in Nasdaq Rule 5605(a)(2). The Board, following the review and recommendation of the Compensation, Nominating and Corporate Governance Committee of the Board, reviewed the independence of the persons who served as our directors, including whether specified transactions or relationships exist currently, or existed during the past three years, between our directors, or certain family members or affiliates of our directors, and the Company and our subsidiaries, certain other affiliates, or our independent registered public accounting firm. As a result of the review, the Board determined that all of the current directors, except for Messrs. Dearborn, Ferro, Hartenstein, and Dr. Soon-Shiong, are “independent” under the applicable Nasdaq Rules. In making the independence determinations, the Board considered the fact that Mr. Ferro serves as chair of the board of The Chicago Community Trust and Ms. Crenshaw is the Chief Financial Officer and Vice President of Finance of that organization. The Board also considered the related party transaction with Mr. Tang described in the “Policies and Procedures for the Review and Approval or Ratification of Transactions with Related Persons--Related Person Transactions” section of this proxy statement. 

 

Our independent directors and our non‑management directors have the opportunity to meet in executive session to consider such matters as they deem appropriate, without management being present, as a regularly scheduled agenda item for Board and committee meetings, as appropriate. The Chairman of the Board of Directors (for non‑management executive sessions of the Board), the chairperson of the Audit Committee or the Chairman of the Board, if that person is an independent director (for executive sessions of the independent directors), and the chairperson of each committee (for committee executive sessions) act as the chair of the applicable executive sessions.

 

Board Leadership Structure and Role in Risk Oversight

 

The Company’s Corporate Governance Guidelines provide that it is the policy of the Board that it may choose in its discretion whether to separate or combine the offices of Chairman and Chief Executive Officer on a case‑by‑case basis. Our Board believes that it should have the flexibility to make this determination as circumstances require and in a manner that it believes is best to provide appropriate leadership for our Company. If the Board chooses to combine the offices of Chairman and Chief Executive Officer, a Lead Director will be appointed annually by the independent directors. The Board believes that its current leadership structure, with Mr. Ferro serving as Non‑Executive Chairman and Mr. Dearborn serving as Chief Executive Officer, is appropriate because it enables the Board as a whole to engage in oversight of management, promote communication between management and the Board and oversee governance matters while allowing our Chief Executive Officer to focus on his primary responsibility for the operational leadership and strategic direction of the Company. The Board does not believe that its role in risk oversight has affected the Board’s leadership structure. Stockholders may access a copy of the Company’s Corporate Governance Guidelines on our website at investor.tronc.com.

 

The Board of Directors considers oversight of the Company’s risk management efforts to be a responsibility of the entire Board (as reported by and through the appropriate committee in the case of risks that are under the purview of a particular committee). Management provides the full Board regular updates on major Company initiatives, strategies, and related risks. The Compensation, Nominating and Corporate Governance Committee provides oversight of the Company’s pay policies and practices, including risks associated with executive compensation. In addition, the Compensation, Nominating and Corporate Governance Committee oversees risks associated with corporate governance and Board composition, including the independence of Board members. The Audit Committee receives the results of a risk assessment designed to identify and assess key risks associated with the achievement of the Company’s strategic objectives. The Audit Committee also receives periodic reports regarding internal audits, which include management action plans designed to mitigate deficiencies and related risks. The Audit Committee also provides oversight concerning key financial risks and, pursuant to its charter, discusses Company policies with respect to risk assessment and risk management.

 

The chairperson of the relevant Board committee reports on its discussions to the full Board of Directors during the committee reports portion of the applicable Board meeting. The full Board may access committee materials and may attend committee meetings. This enables the Board and its committees to coordinate the risk oversight role regarding, for example, compensation and governance‑related risks.

 

Board Committees

 

The Board of Directors has established the following standing committees: the Audit Committee and the Compensation, Nominating and Corporate Governance Committee. In June 2016, the Board determined to combine the Compensation Committee and the Nominating and Corporate Governance Committee into one committee. The Board may, by resolution passed by a majority of the Board, from time to time, appoint other committees to address special projects or matters of interest to the Board.

 

9


 

All of the members of each of the standing committees meet the criteria for independence prescribed by the Nasdaq Rules. Membership of the standing committees is determined periodically by the Board of Directors. Adjustments to committee assignments may be made at any time. As of March 9, 2017, membership of each standing committee was as set forth above under “Board Composition.”

 

The Board of Directors has adopted a written charter for each standing committee. Stockholders may access a copy of each standing committee’s charter on our website at investor.tronc.com. A summary of the duties and responsibilities of each committee is set forth below.

 

Audit Committee

 

The primary purposes of the Audit Committee are: (a) to assist the Board in overseeing (i) the quality and integrity of the Company’s financial statements, (ii) the qualifications and independence of the Company’s independent auditor, (iii) the performance of the Company’s internal audit function and independent auditor, (iv) the Company’s compliance with legal and regulatory requirements, and (v) management’s process to assess and manage the Company’s enterprise risk issues; and (b) to prepare the report of the Audit Committee required to be included in the Company’s annual proxy statement under the rules of the SEC.

 

The Audit Committee has the sole authority to appoint or replace the independent auditor. The Audit Committee has the direct responsibility for the compensation, retention and oversight of the work of each independent auditor engaged by the Company for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for the Company, and each such independent auditor reports directly to the Audit Committee. The Audit Committee is responsible for resolving disagreements between management and each such independent auditor regarding financial reporting. The Audit Committee has established policies and procedures for the review and pre‑approval by the Audit Committee of all auditing services and permissible non‑audit services (including the fees and terms thereof) to be performed by the independent auditor.

 

The Audit Committee meets with our independent auditor at least quarterly, prior to releasing our quarterly results, to review the results of the independent auditor’s interim reviews or annual audit before the results are released to the public or filed with the SEC or other regulators. The Audit Committee also meets at least once every quarter in separate sessions with management and with the Company’s internal auditor. In addition, the Audit Committee reviews and comments on the quality of our accounting principles and financial reporting and controls, the adequacy of staff, and the results of procedures performed in connection with the audit process. Pursuant to its charter, the Audit Committee is required to meet at least once per quarter.

 

The charter of the Audit Committee requires that it be composed of at least three directors, all of whom meet the independence requirements relating to directors and audit committee members (a) of Nasdaq and (b) under Section 10A(m) of the Exchange Act and any related rules and regulations promulgated thereunder by the SEC. Each member of the Audit Committee shall, in the judgment of the Board, have the ability to read and understand fundamental financial statements. At least one member of the Audit Committee shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. No member of the Audit Committee may serve on more than three audit committees of publicly traded companies (including our Audit Committee), unless the Board determines that such simultaneous service would not impair the ability of such member to effectively serve on the Audit Committee.

 

The Board of Directors has determined that each member of the Audit Committee meets the independence and financial literacy requirements of Nasdaq and the SEC. The Board also has determined that Messrs. Franklin and Reck and Ms. Crenshaw are “audit committee financial experts” under SEC rules and satisfy the financial sophistication requirements of the Nasdaq Rules.

 

Compensation, Nominating and Corporate Governance Committee

 

With respect to its compensation functions, the purpose of the Compensation, Nominating and Corporate Governance Committee is to assist the Board in fulfilling its responsibilities for establishing and administering the Company’s policies, programs and procedures for compensating its executives, including (a) to discharge the Board’s responsibilities relating to the compensation of the Company’s Chief Executive Officer and executive officers (collectively, the “Senior Management Group”), and the compensation of the independent directors of the Board, (b) to review an annual compensation discussion and analysis of executive compensation for inclusion in the proxy statement or annual report on Form 10‑K, and prepare any report of the Compensation, Nominating and Corporate Governance Committee on executive compensation required by item 407(e)(5) of Regulation S‑K, and

10


 

(c) to take such other actions relating to the compensation and benefits structure of the Company as the Compensation, Nominating and Corporate Governance Committee deems necessary or appropriate.

 

With respect to its nominating and corporate governance functions, the purpose of the Compensation, Nominating and Corporate Governance Committee is to assist the Board in fulfilling its responsibilities by: (a) identifying individuals qualified to become directors and selecting, or recommending that the Board select, the candidates for all director positions to be filled by the Board or by the stockholders, (b) developing and recommending to the Board a set of corporate governance guidelines applicable to the Company, and (c) otherwise taking a leadership role in shaping the corporate governance of the Company.

 

The Compensation, Nominating and Corporate Governance Committee’s charter reflects the responsibilities noted above and is reviewed regularly by the Compensation, Nominating and Corporate Governance Committee. The charter also requires that the Compensation, Nominating and Corporate Governance Committee be composed of at least three members who satisfy the independence requirements relating to directors and compensation committee members under the Nasdaq Rules. Unless the Board shall determine otherwise, at least two members of the Compensation, Nominating and Corporate Governance Committee are required to satisfy the requirements of a “Non‑Employee Director” for purposes of Rule 16b‑3 under the Exchange Act. In addition, subject to any applicable transition rule, as to any compensation plan that is intended to be administered in a manner consistent with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), at least two members of the Compensation, Nominating and Corporate Governance Committee are required to satisfy the requirements of “outside director” for purposes of Section 162(m) of the Code and the regulations thereunder. The Board has determined that each member of the Compensation, Nominating and Corporate Governance Committee meets the Nasdaq independence requirements and at least two members of the Compensation, Nominating and Corporate Governance Committee meet such other requirements. In accordance with its charter and to the extent permitted by applicable law, regulations, and the Nasdaq Rules, the Compensation, Nominating and Corporate Governance Committee may form and delegate its duties, responsibilities and authority to subcommittees or to members of management to perform certain duties and responsibilities on its behalf.

 

Pursuant to its charter, the Compensation, Nominating and Corporate Governance Committee may, without further approval by the Board, retain or terminate, as it determines to be necessary or advisable, a compensation consultant or other advisors, including outside accounting and legal advisors, to assist in the evaluation of the compensation of members of the Senior Management Group and any non‑employee directors or any other compensation‑related matter, and commission special studies, when deemed necessary or appropriate, on any matter of concern relating to overall corporate organization, compensation practice or compensation policy for the Company. Additionally, the Compensation, Nominating and Corporate Governance Committee may, without further approval by the Board, obtain such advice and assistance, including, without limitation, the performance of special reviews and other procedures, from outside legal or other advisors, and the selection, retention and termination of a consultant or search firm to be used to identify director candidates, as the committee determines to be necessary or advisable in connection with the discharge of its duties and responsibilities. Any legal or other advisor retained by the Committee may, but need not be, otherwise engaged by the Company for any other purpose.

 

The Compensation, Nominating and Corporate Governance Committee reports frequently to the Board of Directors and maintains open communication with the Company’s Chief Executive Officer, independent consultants, and internal human resources professionals. The Compensation, Nominating and Corporate Governance Committee meets as frequently as necessary to carry out its responsibilities under the charter and takes actions by written consent when necessary. The Compensation, Nominating and Corporate Governance Committee meets at such times and places as determined by the Chairperson of the committee. 

 

Compensation Consultant

 

Pursuant to the Compensation, Nominating and Corporate Governance Committee’s charter, as outlined above, the Compensation, Nominating and Corporate Governance Committee may engage outside consultants to assist it in meeting its responsibilities. In 2016, the Compensation, Nominating and Corporate Governance Committee retained Willis Towers Watson (the “Compensation Consultant”) as its compensation consultant to assist with peer group analysis, director compensation analysis, risk assessment of the Company’s compensation programs, and other services upon request. The Compensation, Nominating and Corporate Governance Committee has reviewed the independence of the Compensation Consultant based on the criteria established by the SEC and determined that there were no conflicts of interest. The Compensation Consultant did not provide any other services to the Company and only received fees from the Company on behalf of the Compensation, Nominating and Corporate Governance Committee.

 

11


 

Role of Executives in Establishing Executive Compensation

 

With support from the Company’s human resources department, our Chief Executive Officer prepared and provided recommendations to the Compensation, Nominating and Corporate Governance Committee on the following items: base salaries for current executives, the design of the short‑term and long‑term incentive plans for executives, and the grant value of equity awards provided to executives. The Chief Executive Officer assisted in the review of compensation studies and proposed incentive plans, including proposing specific performance goals to be reviewed by the Compensation, Nominating and Corporate Governance Committee with respect to short‑term and long‑term executive compensation. The Chief Executive Officer, the General Counsel or Assistant General Counsel, members of the human resources department and the Compensation Consultant attended the Compensation, Nominating and Corporate Governance Committee meetings that related to executive compensation to assist the committee with its review; however, the executives did not attend the executive sessions of the meetings. In connection with reviewing and determining executive compensation, the Compensation, Nominating and Corporate Governance Committee asked the Chief Executive Officer to provide recommendations for compensation levels for the executives. The Compensation, Nominating and Corporate Governance Committee uses this information along with, among other information, survey data and market studies to determine executive compensation.

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of the Compensation, Nominating and Corporate Governance Committee or its predecessor, the Compensation Committee, in fiscal 2016 was at any time during fiscal 2016 or at any other time, an officer or employee of the Company, and none had or has any relationships with the Company that are required to be disclosed under Item 404 of Regulation S‑K, except as otherwise disclosed under “Policies and Procedures for the Review and Approval or Ratification of Transactions With Related Persons.” None of the Company’s executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on the Board, the Compensation, Nominating and Corporate Governance Committee or its predecessor, the Compensation Committee, during fiscal 2016.

 

Board Selection, Composition and Evaluation

 

The Compensation, Nominating and Corporate Governance Committee reviews annually the appropriate skills and characteristics required of directors in light of the current composition of the Board of Directors. When assessing a director candidate’s qualifications, the Compensation, Nominating and Corporate Governance Committee will consider, among other factors, diversity, and balance of inside, outside and independent directors. The Compensation, Nominating and Corporate Governance Committee will also consider the general qualifications of the potential nominees, such as: integrity and honesty; the ability to exercise sound, mature and independent business judgment in the best interests of the stockholders as a whole; a background and experience with media, including broadcasting, digital and publishing, finance or marketing or other fields which will complement the talents of the other Board members; willingness and capability to take the time to actively participate in Board and committee meetings and related activities; ability to work professionally and effectively with other Board members and the Company’s management; availability to remain on the Board long enough to make an effective contribution; satisfaction of relevant independence standards; and absence of material relationships with competitors or other third parties that could present realistic possibilities of conflict of interest or legal issues. The Compensation, Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, which includes age, geography, professional, and other factors; however, the Compensation, Nominating and Corporate Governance Committee and the Board believe it is essential to have directors representing diverse viewpoints. Diversity is one factor considered by the Compensation, Nominating and Corporate Governance Committee in determining the needs of the Board and evaluating director candidates to fill such needs.

 

The Compensation, Nominating and Corporate Governance Committee will consider qualified director candidates recommended by the Company’s stockholders. The Compensation, Nominating and Corporate Governance Committee evaluates the qualifications of candidates properly submitted by stockholders in the same manner as it evaluates the qualifications of director candidates identified by the Compensation, Nominating and Corporate Governance Committee or the Board of Directors. Stockholders can recommend director candidates by following the instructions outlined below under “Additional Information—Consideration of Stockholder‑Recommended Director Nominees.” No nominations for director were submitted to the Compensation, Nominating and Corporate Governance Committee for consideration by any of the Company’s stockholders in connection with the Annual Meeting.

 

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DIRECTOR COMPENSATION

 

Time, Manner and Components of Compensation

 

For 2016, the components of the Company’s standard non‑employee director cash and equity compensation were as follows:

 

 

 

 

 

 

Compensation Paid to NonEmployee Directors(1)

    

 

    

 

Annual retainer of a restricted stock unit award

 

$

170,000

 

Additional Compensation for Board Chair and Committee Chairpersons

 

 

 

 

NonEmployee Board Chairperson—annual retainer of a restricted stock unit award

 

$

75,000

 

Audit Committee Chairperson—annual retainer of a restricted stock unit award

 

$

20,000

 

Compensation, Nominating and Corporate Governance Committee Chairperson—annual retainer of a 

 

$

15,000

 

restricted stock unit award(2)

 

 

 

 


(1)

Effective as of the 2016 annual meeting of stockholders, the non-employee director compensation program was modified to replace the cash retainers with restricted stock unit awards that will be subject to a one-year vesting schedule. Awards are granted based on grant date fair value.

 

(2)

In June 2016, the Board determined to combine the Compensation Committee and the Nominating and Corporate Governance Committee into one committee, the Compensation, Nominating and Corporate Governance Committee.

 

Annual cash retainers for service as a director or committee chairperson were paid in quarterly installments at the beginning of each of the first and second fiscal quarters of 2016. Effective as of the 2016 annual meeting of stockholders, the non-employee director compensation program was modified to replace the cash retainers with restricted stock unit awards that will be subject to a one-year vesting schedule. Such restricted stock unit awards will be granted pursuant to the Company’s 2014 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) following the election or re-election, as applicable, of non-employee directors to the Board at the annual meeting of stockholders. The annual equity retainer for 2016 was granted on June 2, 2016 following the election or re-election, as applicable, of our non-employee directors at the annual meeting of stockholders.

 

Our non-employee directors may elect to defer the receipt of the shares of common stock awarded by timely filing an election to establish a notional deferred stock account in compliance with applicable tax rules. Each deferred unit credited to such an account represents an unfunded obligation of the Company to issue a share of common stock on a future payment date. Shares will be issued with respect to such deferred units upon the earlier of (i) termination of the individual’s service as a director of the Company or (ii) a change in control (as defined in the Omnibus Incentive Plan).   

 

Our directors are reimbursed for reasonable Company-related travel expenses.

 

The following table shows compensation earned by or paid to non‑employee directors who served as directors for any portion of fiscal 2016. Messrs. Dearborn and Griffin, who served as our Chief Executive Officer during portions of 2016, did not receive additional compensation for their service on the Board of Directors. The compensation of Messrs. Dearborn and Griffin is described in the “2016 Summary Compensation Table.”

 

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2016 Director Compensation Table  

 

 

 

 

 

 

 

 

 

 

    

Fees Earned or

    

Stock

    

 

 

Name

 

Paid in Cash ($)(1)

 

Awards ($)(2)

 

Total ($)

 

Carol Crenshaw

$

17,500

$

170,006

$

187,506

 

David Dreier

$

 

$

170,006

$

170,006

 

Michael W. Ferro, Jr.

$

35,000

$

245,000

$

280,000

 

Philip G. Franklin

$

45,000

$

190,000

$

235,000

 

Eddy W. Hartenstein

$

35,000

$

170,006

$

205,006

 

Richard A. Reck

$

4,377

$

185,005

$

189,382

 

Patrick Soon-Shiong

$

 

$

170,006

$

170,006

 

Donald Tang

$

17,500

$

170,006

$

187,506

 

David E. Dibble (former)

$

35,000

$

170,006

$

205,006

 

Renetta McCann (former)

$

40,000

$

 

$

40,000

 

Ellen Taus (former)

$

42,500

$

 

$

42,500

 


(1)

On April 1, 2016, each of Ms. Crenshaw, Mr. Ferro and Mr. Reck received a fully-vested restricted stock unit award for the following number of shares pursuant to their respective elections to convert all or a portion of their cash fees for the second quarter of 2016 into restricted stock units (“RSUs”): Ms. Crenshaw, 2,212; Mr. Ferro, 2,212; and Mr. Reck, 1,659.  

 

(2)

The dollar amounts in this column reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation (“FASB ASC Topic 718”) for awards granted during the fiscal year ended December 25, 2016 excluding the effect of any estimated forfeitures. Assumptions used in the calculation of these amounts are described in footnotes 3 and 17 to the Company’s audited financial statements included in the Annual Report. On June 2, 2016, the non-employee directors received the following annual awards: Ms. Crenshaw, Messrs. Dibble, Hartenstein, and Tang, and Dr. Soon-Shiong, 14,939 RSUs; Mr. Ferro, as Chair of the Board, 21,529 RSUs; Mr. Franklin, as Chair of the Audit Committee, 16,696 RSUs; and Mr. Reck, as Chair of the Compensation, Nominating and Corporate Governance Committee, 16,257 RSUs. On June 15, 2016, Mr. Dreier received his annual award of 12,612 RSUs. Each such RSU award vests on the first anniversary of the grant date. Such RSU awards were the only outstanding unvested RSUs held by the individuals listed in the table above as of December 25, 2016, except Mr. Dibble’s RSUs were cancelled following his termination of Board service, and Mr. Hartenstein had additional outstanding unvested RSUs which were previously granted in connection with his employment by the Company. Mr. Hartenstein had a total of 24,154 unvested RSUs as of December 25, 2016.

 

For additional information regarding the stock holdings of our non‑employee directors, see “Security Ownership of Certain Beneficial Owners, Directors, and Management.”

 

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

 

In accordance with Section 14A of the Exchange Act, we are providing our stockholders with an opportunity to approve, on a nonbinding, advisory basis, the compensation of our Named Executive Officers. This advisory proposal is commonly referred to as a “say‑on‑pay” proposal. Although this advisory vote is not binding upon the Board of Directors, our Board and the Compensation, Nominating and Corporate Governance Committee will review and consider the voting results of this vote when making future decisions regarding our Named Executive Officer compensation and related executive compensation program.

 

As discussed under the “Compensation Discussion and Analysis” section of this proxy statement, our executive compensation program is designed to attract, retain and motivate superior executive talent, including our Named Executive Officers, who are critical to our success. We seek to align pay and performance by making a significant portion of our Named Executive Officers’ compensation dependent on:

 

·

the achievement of specific annual and long‑term strategic or financial goals; and

 

·

the realization of increased stockholder value.

 

Please read the “Compensation Discussion and Analysis” section of this proxy statement, the accompanying tables, and the related narrative disclosures for a description of our executive compensation program, including information about the fiscal year 2016 compensation of our Named Executive Officers.

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We are asking our stockholders to support our Named Executive Officer compensation described in this proxy statement. Your vote is not intended to address any specific item of our compensation program, but rather our overall approach to the compensation of our Named Executive Officers described in this proxy statement. Our Board and the Compensation, Nominating and Corporate Governance Committee believe our overall program effectively implements our compensation approach and achieves our goals. Accordingly, we ask you to vote “FOR” the following resolution at the Annual Meeting:

 

“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, the accompanying tables, and related narrative in the Proxy Statement for the Company’s Annual Meeting of Stockholders.”

 

The Board of Directors Recommends a Vote “FOR”

the Advisory Resolution to Approve the Compensation of Our Named Executive Officers.

 

PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP

AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee has engaged Ernst & Young LLP (“EY”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017. Representatives of EY are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions. 

 

Stockholder ratification of the appointment of EY as the Company’s independent registered public accounting firm is not required by our By-Laws or otherwise. However, the Board of Directors is submitting the appointment of EY to the stockholders for ratification as a matter of corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain EY. Even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

 

Recent Change in Auditor

 

As reported on the Company’s Current Report on Form 8-K filed on March 28, 2016 (the “Change in Auditor 8-K”), effective March 22, 2016, the Audit Committee dismissed PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm and engaged EY to serve in this role for the fiscal year ending December 25, 2016.

 

PwC’s reports on the consolidated financial statements of the Company for the fiscal years ended December 27, 2015, and December 28, 2014, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.

 

During the fiscal years ended December 27, 2015, and December 28, 2014, and the subsequent interim period through March 22, 2016, there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused PwC to make reference to the subject matter of the disagreements in connection with their reports on the Company’s consolidated financial statements for such fiscal years.

 

During the fiscal years ended December 27, 2015, and December 28, 2014, and the subsequent interim period through March 22, 2016, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K), other than the identification of material weaknesses in the Company’s internal control over financial reporting as described in the Company’s annual report on Form 10-K for the fiscal year ended December 27, 2015 (the “2015 10-K”) and annual report on Form 10-K for the fiscal year ended December 28, 2014 (the “2014 10-K”). As more fully disclosed in the 2015 10-K, the Company’s management concluded that the Company’s internal control over financial reporting was not effective as of the fiscal year ended December 27, 2015 due to material weaknesses in the Company’s internal control over financial reporting. Management identified a material weakness related to an ineffective control environment, which contributed to material weaknesses related to review and approval of insert volume forecasts and variance analysis for preprint advertising, documentation of approval of rates for circulation and other revenue, and the review of compensation expense, including sales commissions and bonus plans. Further, as disclosed in the 2014 10-K, the Company’s management identified the following material weaknesses in the Company’s internal control over financial reporting as of the fiscal year ended December 28, 2014: (1) an insufficient complement of finance and accounting resources within the organization commensurate with the Company’s financial reporting requirements and (2) an ineffective control environment due to (a) lack of formalized accounting policies and review controls including procedures and controls over completeness and accuracy of journal entry

15


 

review and account reconciliations, (b) deficiencies in business processes related to placing fixed assets in service and retirement of fixed assets, and (c) deficiencies over information technology controls around system security, user access and change management.

 

The Audit Committee has discussed these material weaknesses with PwC and the Company has authorized PwC to respond fully to the inquiries of the successor independent registered public accounting firm concerning these matters.

 

The Company provided PwC with a copy of the Change in Auditor 8-K and requested that PwC furnish the Company with a copy of PwC’s letter addressed to the SEC stating whether PwC agrees with the statements made by the Company in the Change in Auditor 8-K. The Company received the requested letter from PwC and a copy of PwC’s letter was attached as Exhibit 16.1 to the Change in Auditor 8-K.

 

During the fiscal years ended December 27, 2015, and December 28, 2014, and the subsequent interim period prior to engaging EY, the Company did not consult with EY regarding (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might have been rendered on the Company’s consolidated and combined financial statements, and no written report or oral advice was provided that EY concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) or a “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K).

 

The Board of Directors Recommends a Vote “FOR” the Ratification of the

Appointment of ERNST & YOUNG LLP as Our Independent Registered Public Accounting Firm.

16


 

REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee serves as the representative of the Board of Directors for general oversight of the quality and integrity of the Company’s financial statements, the qualifications and independence of the Company’s independent auditor, the performance of the Company’s internal audit function and independent auditor, the Company’s compliance with legal and regulatory requirements and management’s process to assess and manage the Company’s enterprise risk issues. Management has responsibility for preparing the Company’s financial statements as well as for the Company’s financial reporting process, including internal controls thereon. The Company’s independent registered public accounting firm is responsible for auditing those financial statements.

 

In connection with our review of the Company’s consolidated audited financial statements for the fiscal year ended December 25, 2016, we relied on reports received from Ernst & Young LLP, the Company’s independent registered public accounting firm for fiscal 2016, as well as the advice and information we received during discussions with the Company’s management. In this context, we hereby report as follows:

 

(i)

The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2016 with the Company’s management.

 

(ii)

The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed under PCAOB Auditing Standard 1301, Communications with Audit Committees.

 

(iii)

The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed under Rule 2‑07 of Regulation S‑X, Communications with Audit Committees.

 

(iv)

The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence.

 

(v)

Based on the review and discussion referred to in paragraphs (i) through (iv) above, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements be included in the Annual Report on Form 10‑K for the year ended December 25, 2016, for filing with the SEC.

 

The Audit Committee

 

Philip G. Franklin, Chairperson

Carol Crenshaw

Richard A. Reck

Donald Tang

17


 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES REPORT

 

Fees Paid to Independent Registered Public Accounting Firm

 

PricewaterhouseCoopers LLP and Ernst & Young LLP served as the Company’s independent registered public accounting firm for fiscal years 2015 and 2016, respectively. The following table sets forth aggregate fees billed or expected to be billed for services rendered by PricewaterhouseCoopers LLP and Ernst & Young LLP for the 2015 and 2016 fiscal years, respectively, inclusive of out‑of‑pocket expenses.

 

 

 

 

 

 

 

 

Type of Fees

    

2016

    

2015

Audit Fees

 

$

2,331,835

 

$

3,983,339

AuditRelated Fees

 

$

 

$

Tax Fees

 

$

62,009

 

$

5,960

All Other Fees

 

$

2,663

 

$

 

Audit Fees consist of fees for professional services rendered for the audit of our consolidated annual financial statements, reviews of our interim consolidated financial statements included in quarterly reports, and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements, including relating to the SEC.

 

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

 

Tax Fees consist of fees for professional services rendered for assistance with federal, state, and international tax compliance, tax advice, and tax planning.

 

All Other Fees consist of license fees for an accounting research tool.

 

Audit Committee Review and Pre‑Approval of Independent Registered Public Accounting Firm’s Services

 

The Audit Committee has considered the non‑audit services provided by the independent registered public accounting firms as described above and believes that they were compatible with maintaining the independence of the applicable firm as the Company’s independent registered public accounting firm for the 2015 or 2016 fiscal year, as applicable.

 

Pursuant to its charter, the Audit Committee has the sole authority to appoint or replace the independent auditor. The Audit Committee has the direct responsibility for the compensation, retention and oversight of the work of each independent auditor engaged by the Company for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for the Company, and each such independent auditor reports directly to the Committee. The Audit Committee establishes policies and procedures for the review and pre‑approval by the Audit Committee of all auditing services and permissible non‑audit services (including the fees and terms thereof) to be performed by the independent auditor. The chairperson of the Audit Committee may grant the approvals (including pre‑approvals) on behalf of the Committee. The decision of the chairperson of the Audit Committee to approve (including to pre‑approve) an activity is required to be reported to the full Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibilities to pre‑approve services performed by the independent auditor. The Audit Committee pre‑approved all of the Audit Fees, Audit‑Related Fees, Tax Fees, and All Other Fees listed above.

 

EXECUTIVE OFFICERS

 

The following table sets forth the name, age, and position of each of our executive officers as of March 9, 2017:  

 

Name

    

Age

    

Position

 

Justin C. Dearborn

 

47

 

Chief Executive Officer and Director

 

Terry Jimenez

 

44

 

Executive Vice President and Chief Financial Officer

 

Timothy P. Knight

 

51

 

President, troncX

 

Timothy E. Ryan

 

58

 

President, troncM 

 

Julie K. Xanders

 

52

 

Executive Vice President, General Counsel and Secretary

 

 

18


 

Justin C. Dearborn.  For biographical information for Mr. Dearborn, please refer to the section entitled “Proposal 1: Election of Directors”.

 

Terry Jimenez.    Mr. Jimenez has served as Executive Vice President and Chief Financial Officer since April 2016.  Prior to joining the Company, Mr. Jimenez was a Partner for IBM’s Global Business Services, where he served in that capacity since 2012.  Before that, from April 2012 until October 2012, Mr. Jimenez worked as a consultant for Wrapports, LLC (“Wrapports”), a holding company that owns the Chicago Sun-Times, Chicago Reader, and Chicago.com.. From September 2009 through February 2012, he served as President of Newsday Media Group, a subsidiary of Cablevision Systems Corporation. From 2008 to 2009, Mr. Jimenez served as Chief Operating Officer/Chief Financial Officer of Newsday, LLC and Publisher of amNew York, subsidiaries of Cablevision Systems Corporation. Prior to Cablevision’s acquisition of Newsday from Tribune Company (now known as Tribune Media Company), he served in various roles at Tribune Media Company. From 2005 to 2008, he was Vice President Finance/Chief Financial Officer of Newsday, Inc. and from 2003 to 2005, he served as Controller for the Chicago Tribune Group. Prior to joining Tribune Media Company, from 1994 to 2002, Mr. Jimenez served in roles at McDonald’s Corporation, including Finance Director for McDonald’s Partner Brands Group, Controller for Donatos Pizzeria and other accounting, financial consulting, strategy and merger & acquisition roles. Mr. Jimenez holds a B.S. in accountancy from Northern Illinois University and an M.B.A. from J.L. Kellogg Graduate School of Management, Northwestern University.

 

Timothy P. Knight.  Mr. Knight has served as President, troncX since February 2017. Before joining the Company, Mr. Knight served as President of Advance Ohio, a digital media and marketing company, since October 2015. Before that, from December 2011 to October 2015, Mr. Knight served as Chief Executive Officer of Wrapports. Prior to joining Wrapports, he held various roles at Newsday including President, Chief Executive Officer and Publisher. Before joining Newsday in 2003, he held various senior management positions at Tribune Media Company, the Chicago Tribune Media Group, and Classified Ventures, LLC. Prior to joining Classified Ventures in 1997, Mr. Knight served as mergers and acquisitions counsel for Tribune Media Company and a senior associate at Skadden, Arps, Slate, Meagher & Flom LLP, an international law firm. He has been engaged in a number of civic organizations over the years and is currently a member of the Board of Trustees of DePaul University, the Rock and Roll Hall of Fame, Destination Cleveland, United Way of Greater Cleveland, and the Board of Regents of Mercy Home for Boys and Girls (Chicago). He also was a member of the Long Island Chapter of Young President’s Organization. Mr. Knight holds a B.S. in accounting from Marquette University and a J.D. from DePaul University College of Law.

 

Timothy E. Ryan.  Mr. Ryan has served as President, troncM since February 2016. Prior to that, he served as Chief Executive Officer, California News Group, since September 2015, overseeing the Los Angeles Times,  The San Diego Union-Tribune and various community newspapers. Prior to that position, Mr. Ryan served as Publisher and Chief Executive Officer of The Baltimore Sun and The Morning Call since the Distribution in August 2014, and as Publisher, President and Chief Executive Officer of the Baltimore Sun Media Group since 2007. In 2010, he also became Publisher and CEO for additional Tribune Media properties, The Morning Call and mcall.com. In Baltimore, Mr. Ryan oversaw not only The Baltimore Sun but also 30 community newspapers and magazines and the region’s leading website, baltimoresun.com. Mr. Ryan joined The Baltimore Sun after having served as Vice President of Circulation and Consumer Marketing since 2005 at the Chicago Tribune, where he was responsible for sales, marketing and distribution throughout Chicago and the Midwest. Prior to joining the Chicago Tribune, Mr. Ryan served as Vice President of Circulation and Operations at The Baltimore Sun from July 2000 to February 2005. Mr. Ryan also worked as Vice President of Circulation at The Philadelphia Inquirer from 1993 to 2000. Mr. Ryan holds a B.A. in political science from the University of Notre Dame and an M.B.A. from J.L. Kellogg Graduate School of Management, Northwestern University.

 

Julie K. Xanders.  Ms. Xanders has served as Executive Vice President, General Counsel and Secretary of tronc since the Distribution in August 2014. Ms. Xanders previously served as the Assistant General Counsel/West Coast Media of Tribune Media Company and served as Senior Vice President, Legal for the Los Angeles Times. Ms. Xanders joined The Times Mirror Company, a media company, in 1993 as Corporate Counsel for Times Mirror Cable Television, Inc. and was promoted to Assistant General Counsel in 1995 for Times Mirror, Associate General Counsel in 1997, Deputy General Counsel in 1998, and Senior Vice President and General Counsel for the Los Angeles Times in August 1998. Prior to joining Times Mirror, Ms. Xanders worked for four years in private practice with Gibson, Dunn & Crutcher, a law firm, as an associate attorney. Ms. Xanders earned a J.D. from Boalt Hall School of Law (UC Berkeley) and has a B.A. from Yale University, where she graduated summa cum laude and was elected Phi Beta Kappa. She is a past chair and continues to serve as a member of the Executive Committee of the Corporate Law Departments Section of the Los Angeles County Bar Association. She served on the Board of Trustees and several Board committees of the Los Angeles County Bar Association from July 2004 to June 2009 and from July 2010 to June 2011. She serves as Vice Chair of the Board of Trustees of Southwestern Law School and is co‑chair of the Membership and Governance Committee, chair of the Executive Committee and a member of the Compensation Committee. From October 2013 to October 2015, she served on the Board of Directors of the California Newspaper Publishers Association and was Chair of its Governmental Affairs Committee.

 

19


 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, AND MANAGEMENT

 

The following table shows the number of shares of the Company’s common stock beneficially owned as of February 28, 2017 by: (i) all those known by us to be beneficial owners of more than 5% of our outstanding common stock as of February 28, 2017; (ii) each director as of February 28, 2017; (iii) each of the Named Executive Officers listed in the “2016 Summary Compensation Table”; and (iv) the directors and executive officers as a group as of February 28, 2017.

 

Unless otherwise indicated, beneficial owners listed in the table may be contacted at the Company’s corporate headquarters at 435 N. Michigan Avenue, Chicago, Illinois 60611.

 

 

 

 

 

 

 

    

Number of

    

 

 

 

 

Shares

 

Percentage of

 

 

 

Beneficially

 

Outstanding

 

Name

 

Owned(1)

 

Shares(1)

 

More Than 5% Stockholders:

 

 

 

 

 

Merrick Media, LLC(2)

 

9,050,000

 

24.8

%

350 North Orleans Street, 10th Floor

 

 

 

 

 

Chicago, IL 60654

 

 

 

 

 

Nant Capital LLC(3)

 

5,793,619

 

15.9

%

9922 Jefferson Boulevard

 

 

 

 

 

Culver City, CA 90232

 

 

 

 

 

Oaktree Capital Group Holdings GP, LLC(4)

 

4,695,947

 

12.9

%

333 South Grand Avenue, 28th Floor

 

 

 

 

 

Los Angeles, CA 90071

 

 

 

 

 

PRIMECAP Management Company(5)

 

3,541,993

 

9.7

%

225 South Lake Avenue, #400

 

 

 

 

 

Pasadena, CA 91101

 

 

 

 

 

HG Vora Capital Management, LLC(6)

 

2,000,000

 

5.5

%

330 Madison Avenue, 23rd Floor

 

 

 

 

 

New York, NY 10017

 

 

 

 

 

Non-Employee Directors:

 

 

 

 

 

Carol Crenshaw(7)

 

2,212

 

*

%

David Dreier

 

 —

 

 

 

Michael W. Ferro, Jr.(2)(8)

 

9,050,000

 

24.8

%

Philip G. Franklin 

 

10,956

 

*

 

Eddy W. Hartenstein(9)

 

111,423

 

*

 

Richard A. Reck(10)

 

11,659

 

*

 

Patrick Soon-Shiong(3)

 

5,793,619

 

15.9

%

Donald Tang

 

 —

 

 

 

Named Executive Officers:

 

 

 

 

 

Justin C. Dearborn

 

 —

 

 

 

Terry Jimenez

 

 —

 

 

 

Timothy E. Ryan(11)

 

64,289

 

*

 

Julie K. Xanders(12)

 

28,612

 

*

 

John H. Griffin, Jr.

 

500

 

*

 

Tony W. Hunter(13)

 

73,562

 

*

 

Sandra J. Martin

 

 —

 

*

 

All directors and current executive officers as a group (13 persons)(14)

 

15,072,770

 

41.2

%


*Represents beneficial ownership of less than 1%

 

(1)

Beneficial ownership is determined in accordance with SEC rules. For the number of shares beneficially owned by each of the “More Than 5% Stockholders,” we rely on each of such stockholder’s statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Exchange Act or provided to the Company, as described in the footnotes below. For each person, entity, or group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person, entity, or group by the sum of 36,441,443 shares of the Company’s common stock outstanding as of February 28, 2017, plus the number of shares of common stock, if any, that such person, entity, or group had the right to acquire pursuant to the exercise of stock options or vesting of restricted stock units or other rights within 60 days of February 28, 2017. Except as indicated by

20


 

footnote, and subject to marital community property laws where applicable, we believe that the persons or entities named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

 

(2)

Information presented is based on a Schedule 13D/A (Amendment No. 2) filed with the SEC on December 28, 2016 by Merrick Media, LLC (“Merrick Media”), Merrick Venture Management, LLC (“Merrick Management”) and Michael W. Ferro, Jr.  Pursuant to the filing, the reporting persons directly own 9,047,788 shares. The number of shares beneficially owned by Mr. Ferro also includes 2,212 shares (attributable to deferred cash retainer converted to stock units) issuable within 60 days of February 28, 2017 if during such period (i) his service as a director of the Company terminates or (ii) there is a change in control (as defined in the Omnibus Incentive Plan). Merrick Media owns, and has sole voting power and sole dispositive power over, 5,220,000 shares, Merrick Management owns, and has sole voting power and sole dispositive power over, 3,827,788 shares, and Mr. Ferro is the manager of Merrick Management, which is the sole manager of Merrick Media. As a result, Mr. Ferro has sole voting and dispositive power over the shares owned by Merrick Management and Merrick Management and Mr. Ferro have sole voting and dispositive power over the shares owned by Merrick Media. Mr. Ferro, by virtue of his relationship to Merrick Management, may be deemed to indirectly beneficially own the shares which Merrick Management directly beneficially owns. Merrick Management and Mr. Ferro, by virtue of their relationship to Merrick Media, may be deemed to indirectly beneficially own the shares which Merrick Media directly beneficially owns.

 

(3)

Information presented is based on a Schedule 13D/A (Amendment No. 1) filed with the SEC on November 25, 2016 by Dr. Patrick Soon-Shiong, a natural person and citizen of the United States, Nant Capital, LLC, a limited liability company organized under the laws of the state of Delaware (“Nant Capital”) and California Capital Equity, LLC, a limited liability company organized under the laws of the state of Delaware (“CalCap”) and the Form 4 filings filed with the SEC by Dr. Soon-Shiong through February 21, 2017.  Nant Capital beneficially owns, in the aggregate, 4,700,000 shares. CalCap and Dr. Soon-Shiong may be deemed to beneficially own, and share voting power and investment power with Nant Capital over, all shares beneficially owned by Nant Capital. Dr. Soon-Shiong directly beneficially owns 1,093,619 shares. Dr. Soon-Shiong has the sole power to vote or direct the vote, and the sole power to dispose or direct the disposition, of all 5,793,619 shares. As a result, Dr. Soon-Shiong may be deemed to beneficially own, in the aggregate, 5,793,619 shares. On March 2, 2017, Oaktree Tribune, L.P. and the affiliated entities described in footnote 4 below filed with the SEC a Schedule 13D/A (Amendment No. 6) reporting that, on February 28, 2017, Oaktree Tribune, L.P. entered into an agreement to sell 950,000 shares of the Company’s common stock to Dr. Soon-Shiong and/or an affiliate thereof at a price of $14.60 per share for an aggregate purchase price of $13,870,000. The Schedule 13D/A states that consummation of such sale is conditioned upon expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to Dr. Soon-Shiong’s acquisition of the shares contemplated by the sale.

 

(4)

Information presented is based on a Schedule 13D/A (Amendment No. 5) filed with the SEC on June 13, 2016 by Oaktree Tribune, L.P. and the affiliated entities described below, and on information provided to the Company by Oaktree Capital Management, L.P. as of November 9, 2015.  Oaktree Tribune, L.P. beneficially owns 4,691,371 shares of the Company’s common stock and OCM FIE, LLC (“FIE”) beneficially owns 4,576 shares of the Company’s common stock. The general partner of Oaktree Tribune, L.P. is Oaktree AIF Investments, L.P. (“AIF Investments”). The general partner of AIF Investments is Oaktree AIF Holdings, Inc. (“AIF Holdings”). The holder of all of the voting shares of AIF Holdings is Oaktree Capital Group Holdings, L.P. (“OCGH”). The managing member of FIE is Oaktree Capital Management, L.P. (“OCM”). The general partner of OCM is Oaktree Holdings, Inc. (“Holdings”). The sole shareholder of Holdings is Oaktree Capital Group, LLC (“OCG”). The duly appointed manager of OCG and the general partner of OCGH is Oaktree Capital Group Holdings GP, LLC (“OCGH GP”). The media company business of OCGH GP is managed by a media company committee, which controls the decisions of OCGH GP with respect to the vote and disposition of the shares held by Oaktree Tribune, L.P. and FIE. The members of such committee are Howard S. Marks, Bruce A. Karsh, John B. Frank, David M. Kirchheimer and Stephen A. Kaplan. On March 2, 2017, Oaktree Tribune, L.P. and the affiliated entities described above filed with the SEC a Schedule 13D/A (Amendment No. 6) reporting that, on February 28, 2017, Oaktree Tribune, L.P. entered into an agreement to sell 950,000 shares of the Company’s common stock to Dr. Soon-Shiong and/or an affiliate thereof at a price of $14.60 per share for an aggregate purchase price of $13,870,000. The Schedule 13D/A states that consummation of such sale is conditioned upon expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to Dr. Soon-Shiong’s acquisition of the shares contemplated by the sale.

 

(5)

Information presented is based on a Schedule 13G/A (Amendment No. 3) filed with the SEC on February 9, 2017 by PRIMECAP Management Company (“Primecap”) as of December 31, 2016. Pursuant to the filing, Primecap has sole voting power over 3,242,393 shares of the Company’s common stock and sole dispositive power over 3,541,993 shares.

 

21


 

(6)

Information presented is based on a Schedule 13G/A (Amendment No. 1) filed with the SEC on February 6, 2017 by HG Vora Special Opportunities Master Fund, Ltd., a Cayman Islands exempted company, HG Vora Capital Management, LLC, a Delaware limited liability company, and Parag Vora, a natural person and citizen of the United States. Each of the reporting persons beneficially owns 2,000,000 shares and has shared voting power and shared dispositive power over 2,000,000 shares.

 

(7)

The number of shares beneficially owned by Ms. Crenshaw includes 2,212 shares (attributable to deferred cash retainer converted to stock units) issuable within 60 days of February 28, 2017 if during such period (i) her service as a director of the Company terminates or (ii) there is a change in control (as defined in the Omnibus Incentive Plan).

 

(8)

The number of shares beneficially owned by Mr. Ferro also includes 2,212 shares (attributable to deferred cash retainer converted to stock units) issuable within 60 days of February 28, 2017 if during such period (i) his service as a director of the Company terminates or (ii) there is a change in control (as defined in the Omnibus Incentive Plan).

 

(9)

The number of shares beneficially owned by Mr. Hartenstein includes (a) 52,333 shares subject to options that are currently exercisable or that will become exercisable within 60 days of February 28, 2017 and (b) 9,215 shares issuable upon the vesting of restricted stock units within 60 days of February 28, 2017.

 

(10)

The number of shares beneficially owned by Mr. Reck includes 1,659 shares (attributable to deferred cash retainer converted to stock units) issuable within 60 days of February 28, 2017 if during such period (i) his service as a director of the Company terminates or (ii) there is a change in control (as defined in the Omnibus Incentive Plan).

 

(11)

The number of shares beneficially owned by Mr. Ryan includes (a) 44,781 shares subject to options that are currently exercisable or that will become exercisable within 60 days of February 28, 2017 and (b) 11,704 shares issuable upon the vesting of restricted stock units within 60 days of February 28, 2017.

 

(12)

The number of shares beneficially owned by Ms. Xanders includes (a) 15,051 shares subject to options that are currently exercisable or that will become exercisable within 60 days of February 28, 2017 and (b) 6,579 shares issuable upon the vesting of restricted stock units within 60 days of February 28, 2017.

 

(13)

The number of shares beneficially owned by Mr. Hunter includes 30,286 shares subject to options that are currently exercisable or that will become exercisable within 60 days of February 28, 2017.

 

(14)

The number of shares beneficially owned by all directors and current executive officers as a group as of February 28, 2017 includes (a) 112,165 shares subject to options which are currently exercisable or which will become exercisable within 60 days of February 28, 2017, (b) 27,498 shares issuable upon the vesting of restricted stock units within 60 days of February 28, 2017, and (c) 6,083 shares issuable within 60 days of February 28, 2017 if during such period (i) the director’s service as a director of the Company terminates or (ii) there is a change in control (as defined in the Omnibus Incentive Plan). 

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires the Company’s directors, officers, and beneficial holders of more than 10% of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. To our knowledge, based solely on our review of the copies of such reports and written representations from certain reporting persons that no other reports were required, all of the applicable directors, officers, and beneficial holders of more than 10% of the Company’s stock complied with all of the Section 16(a) reporting requirements applicable to them with respect to transactions during fiscal year 2016.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Introduction

 

Effective as of June 17, 2016, our Board of Directors combined the duties, responsibilities and authority of the Compensation Committee and the Nominating and Corporate Governance Committee under one new standing committee, the Compensation, Nominating and Corporate Governance Committee. For purposes of this Compensation Discussion and Analysis, the Compensation, Nominating and Corporate Governance Committee and its predecessor, the Compensation Committee, are collectively referred to as the “Committee”. During 2016, the Committee oversaw, evaluated and reviewed all aspects of our executive compensation philosophy and programs.

22


 

 

This Compensation Discussion and Analysis describes material elements of our compensation philosophy, summarizes our executive compensation program, and reviews compensation decisions for the following Named Executive Officers (the “Named Executive Officers” or “NEOs”):

 

 

 

 

Name

    

Title

 

Justin C. Dearborn

 

Chief Executive Officer

 

Terry Jimenez

 

Executive Vice President, Chief Financial Officer

 

Timothy E. Ryan

 

President of Publishing

 

Julie K. Xanders

 

Executive Vice President, General Counsel and Secretary

 

John H. Griffin, Jr.

 

Former Chief Executive Officer, President and Director

 

Tony W. Hunter

 

Former President of National Revenue and Strategic Initiatives

 

Sandra J. Martin

 

Former Executive Vice President, Chief Financial Officer

 

 

Mr. Griffin, our former Chief Executive Officer and President, and Ms. Martin, our former Executive Vice President, Chief Financial Officer, are considered Named Executive Officers because they served as our Chief Executive Officer and Chief Financial Officer, respectively, for a portion of fiscal year 2016. Mr. Hunter, our former President of National Revenue and Strategic Initiatives is considered a Named Executive Officer because he would have been among the top three highest paid executive officers of the Company if he had remained in our employment through the end of the 2016 fiscal year. The employment of Messrs. Griffin, Hunter and Ms. Martin terminated in 2016.

 

2016 Overview

 

In 2016, we made significant changes to the senior management team, our organizational structure, and our strategic plan. We changed the Company’s name to tronc, Inc. and transferred the listing of our common stock from the New York Stock Exchange to the Nasdaq Global Stock Market. We also realigned our business around two operating segments, one covering the legacy publishing businesses and the other covering the digital businesses. These changes and the rebranding were intended to emphasize the Company’s plans to transform from a publishing company into a digital and online content company. We continued to execute on our plan to reduce costs across the organization and achieved further expense savings in 2016. As discussed below, some of the compensation decisions made in 2016 were in support of these efforts.

 

2016 Compensation Highlights

 

1.

NEO Compensation Tied to Business Performance and Long‑Term Share Price Performance

 

Our compensation program tied a substantial portion of executive compensation to business performance. Under the 2016 management incentive program (“MIP”), if the Company’s consolidated financial performance fell below the identified threshold, at‑risk compensation would not have been paid. Compensation design for executives was structured to achieve long‑term stockholder value creation without undue business risk.

 

2.

Pay for Performance—Compensation At Risk

 

·

Fiscal year 2016 Adjusted EBITDA performance varied by business unit while Adjusted EBITDA performance for the Company (on a consolidated basis) was above the target objective established by the Committee in the 2016 MIP. The Committee designed the 2016 MIP so that incentive amounts would be not paid at all if the Company’s consolidated Adjusted EBITDA performance fell below the specified threshold. Payouts were above target for all of the applicable Named Executive Officers. 

 

·

Stock option and restricted stock unit grants of the Company’s common stock directly tie Named Executive Officer compensation to absolute share price performance.

 

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·

The following charts reflect the 2016 annualized base salary, target bonus and annualized LTI awards of Mr. Dearborn, who has served as the Company’s Chief Executive Officer since February 2016, and the average of the other actively employed Named Executive Officers, namely, Mr. Jimenez, Mr. Ryan, and Ms. Xanders, in each case, as if such Named Executive Officers had worked the full year.

 

 

 

CEO

Other NEOs

 

Picture 2

Picture 10

 

3.

Good Pay Practices

 

The Company has adopted best practices with respect to the executive compensation program, including the following:

 

·

We pay for performance. A significant portion of total executive compensation is earned by attaining annual and long‑term goals that increase stockholder value.

 

·

We emphasize equity compensation to reward long‑term growth and stockholder value creation.

 

·

We have a Policy on Trading Securities that prohibits hedging, pledging and other speculative transactions in our securities.

 

·

The Committee has retained an independent compensation consultant to advise the Committee regarding the executive compensation program and the risk profile of the Company’s compensation programs.

 

·

The Committee has reviewed a risk analysis of our compensation programs and practices to ensure that appropriate risk mitigation controls are in place.

 

·

The Company’s Omnibus Incentive Plan prohibits repricing or replacing stock options with exercise prices below the current fair market value without stockholder approval.

 

·

The Omnibus Incentive Plan generally prohibits acceleration of vesting of equity awards except in the case of a change of control, death or disability.

 

·

We have an Executive Compensation Clawback Policy that allows the Company to recoup executive compensation in the event of a restatement of the Company’s financial statement that results in the amount of any performance‑based compensation paid or awarded to an executive officer being a greater amount than it would have been had it been calculated based on the restated financial statement.

 

·

Our Board of Directors adopted stock ownership guidelines that apply to executive officers and directors.

 

·

Any dividend equivalents on our restricted stock units are paid only when such units vest.

 

·

We offer executive officers the same group benefit programs as we provide other employees.

 

·

We provide limited executive perquisites.

 

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Independent Compensation Consultant

 

The Committee retained Willis Towers Watson (the “Compensation Consultant”) as its independent compensation consultant. The Compensation Consultant regularly attends Committee meetings, advises on matters including peer group composition, annual and long‑term incentive plan design and awards, and provides market data, analysis and advice regarding compensation for our Named Executive Officers and non‑employee directors.

 

Our Approach to Executive Compensation

 

Our approach to executive compensation is aimed at achieving the following:

 

·

Attract and retain top talent;

 

·

Motivate and reward the performance of senior executives to achieve strategic, financial and operating performance objectives;

 

·

Ensure that our total compensation packages are competitive in comparison to those offered by our peers and that our compensation practices are consistent with high standards of corporate governance; and

 

·

Align our executives’ interests with the long‑term interests of our stockholders.

 

NEO Compensation

 

The Committee oversees all components of the Company’s executive compensation program. During 2016, the Company’s Chief Executive Officer and senior human resources executives made recommendations to the Committee regarding executive compensation actions and equity awards for the Named Executive Officers. Based on their recommendations, the Committee approved the compensation package and employment agreement with Mr. Jimenez in connection with his hire and awarded equity grants to the Named Executive Officers.

 

In July 2016, the Committee updated the Company’s group of peer companies to add five additional companies (as updated, the “Peer Group”). The previous peer group consisted of nine companies primarily from the newspaper publisher and content industry with a secondary emphasis on digital media. In light of the Company’s strategy to transform from a publishing company into a digital and online content company, the Compensation Consultant recommended, and the Committee approved, five additional peer companies with an emphasis on online and digital businesses. The companies in the current Peer Group are as follows:

 

 

 

 

 

 

 

 

 

Company (Ticker Symbol)

 

 

Revenue (1)

AMC Networks Inc. (AMCX)

 

$

2,580.9

The E. W. Scripps Company (SSP)

 

$

715.7

Fair Isaac Corporation (FICO)

 

$

881.4

Gannett Co., Inc. (GCI)

 

$

2,885.0

IAC/InterActiveCorp (IAC)

 

$

3,139.9

Lee Enterprises, Incorporated (LEE)

 

$

614.4

Lions Gate Entertainment Corp. (LGF.A)/(LGF.B)

 

$

2,347.4

The McClatchy Company (MNI)

 

$

1,056.6

Meredith Corporation (MDP)

 

$

1,649.6

The New York Times Company (NYT)

 

$

1,555.3

Scholastic Corporation (SCHL)

 

$

1,672.8

Scripps Networks Interactive, Inc. (SNI)

 

$

3,018.2

Take-Two Interactive Software Inc.(TTWO)

 

$

1,413.7

(1)

Revenue set forth is in millions and is based on most recent fiscal year-end reported.

 

The Peer Group serves as one data input for determining compensation for the Named Executive Officers. The Committee used this market compensation data, along with other qualitative information, in making its compensation determinations.

 

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Our Compensation Cycle

 

In general, compensation is reviewed during the first quarter of every year. This review includes:

 

·

Annual performance reviews for the prior year;

 

·

Base salary increases;

 

·

MIP target awards; and

 

·

Long‑term incentive target awards (including stock options, restricted stock units and/or performance‑based awards).

 

The actual award date of stock options or restricted stock unit awards is determined on the date on which the Committee approves these awards. The Committee will review and assess the performance of the Chief Executive Officer and all executive officers and authorize compensation actions it believes are appropriate and commensurate with relevant competitive data and the compensation program.

 

Primary Compensation Components

 

The following sections, including information supplied in tabular form, provide information about principles and approaches with respect to base salary, the MIP and long-term incentive target awards.

 

BASE SALARY

 

 

 

 

General Principle

    

Specific Approach

A competitive salary provides a necessary element of stability. Base salary should recognize individual performance, market value of a position and the executive officer’s tenure, experience, responsibilities, contribution to the Company, and growth in his or her role.

 

Salary levels are intended to be reviewed annually. The Committee will consider compensation data from the Peer Group. Any increases will be based on overall performance and relative competitive market position.

 

MANAGEMENT INCENTIVE PROGRAM (MIP)

 

 

 

 

General Principle

    

Specific Approach

The MIP is designed to provide an opportunity for our executive officers to earn incentive awards tied to annual performance. The program aligns the focus of our executive officers with Company‑wide and business unit‑specific financial and operating measures. The MIP is the key compensation tool for aligning short‑term realized pay for the management team with the attainment of key operating imperatives.

 

The 2016 MIP was designed to emphasize financial and/or individual goals. Mr. Dearborn’s bonus opportunity was based entirely on the Company’s consolidated financial performance. For Messrs. Jimenez, Hunter and Ryan, their bonus opportunities were based 80% on consolidated financial performance and 20% on individual goals. For Ms. Xanders, her bonus opportunity was based entirely on individual goals.

 

 

 

Structure MIP awards to achieve competitive compensation levels when targeted performance results are achieved. Use objective formulas to establish potential MIP performance awards.

 

The 2016 MIP provided for an annual cash payment to participating executive officers established as a target percentage of base salary. Any MIP payment is the product of the annual base salary rate multiplied by the target base salary percentage multiplied by the MIP annual performance factor based on the approved metrics. The Committee may approve negative discretionary adjustments with respect to MIP awards for executive officers.

 

Overview of the MIP

 

2016 Internal Performance Metrics (Corporate Level)

 

Mr. Dearborn’s bonus opportunity was subject to the Company’s attainment of the threshold goal set by the Committee for a corporate-level metric (which measured performance across the enterprise), and his bonus amount was based entirely on the Company’s consolidated financial performance. The bonus opportunity for Messrs. Jimenez, Hunter and Ryan, and Ms. Xanders was

26


 

subject to the Company’s attainment of the same threshold goal set for the corporate‑level metric, and their bonus amounts were based on company-wide performance goals and/or individual goals tied to their respective areas of responsibility.

 

 

 

 

 

 

 

Performance Metric

    

Why this Metric

Adjusted EBITDA

 

Adjusted EBITDA reflects the Company’s emphasis on profitability and cost‑containment and is a measure of total operating performance of the enterprise.

 

 

 

 

 

The Company uses the same Adjusted EBITDA definition and calculation used for financial reporting purposes, which is net income before equity in earnings of unconsolidated affiliates, income taxes, loss on early debt extinguishment, interest expense, other (expense) income, realized gain (loss) on investments, reorganization items, depreciation and amortization, net income attributable to non-controlling interests, and other items that the Company does not consider in the evaluation of ongoing operating performance. These items include stock-based compensation expense, restructuring charges, transaction expenses, and certain other charges and gains that the Company does not believe reflects the underlying business performance (including spin-related costs).

 

 

 

 

 

2016 Internal Performance Metric Attainment and Payout Design

 

We pay for MIP performance that clearly demonstrates substantial achievement of plan goals. The Committee set the goals for our Adjusted EBITDA metric. The threshold Adjusted EBITDA level of $172.5 million (after the effect of MIP payouts) had to be exceeded in order for any MIP bonus to be earned. If Adjusted EBITDA (after the effect of MIP payouts) was less than $172.5 million, no MIP bonus would be earned. The plan design also was weighted towards performance above target. Performance at target yielded a payout of the full targeted bonus amount as outlined in the table below. The overall MIP award was capped at 200%. Results between points were interpolated.

 

 

 

 

 

Adjusted EBITDA (After the Effect of MIP) ($ millions)

MIP Payout %

Target

$172.5

100%

Max

$203.5

200%

 

2016 MIP Performance Target and Performance

 

The Committee established 2016 MIP performance targets for the Named Executive Officers based on the performance metrics and the Company’s annual operating plan, taking into consideration the Company’s aspirational business and strategic goals. Successful attainment is achievable only if the Company performs at the established level. Goals are set to be attainable but yet to stretch an executive officer to perform at a high level.

 

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2016 Target MIP Award Percentage of Base Salary

 

The following table shows the performance metrics and target award percentage of base salary for each Named Executive Officer under the 2016 MIP.

 

 

 

 

 

 

 

 

    

 

    

Target

 

 

 

 

 

Award

 

 

 

 

 

Percentage

 

 

 

 

 

of Base

 

Named Executive Officer(1)

 

Metric

 

Salary

 

Justin C. Dearborn

 

Adjusted EBITDA

 

70%

 

Terry Jimenez

 

Adjusted EBITDA (80%) and Individual Goals (20%)

 

75%

 

Timothy E. Ryan

 

Adjusted EBITDA (80%) and Individual Goals (20%)

 

100%

 

Julie K. Xanders

 

Individual Goals (100%)

 

50%

 

Tony W. Hunter

 

Adjusted EBITDA & Revenue (National Revenue and Recruitment Revenue) (80%) and Individual Goals (20%)

 

100%

 


(1)

Mr. Griffin and Ms. Martin are not included in the table above because their employment terminated prior to implementation of the 2016 MIP. Pursuant to their respective employment agreements, they received a bonus amount, prorated based on their respective period of employment in 2016.

 

Actual 2016 MIP Awards

 

In determining 2016 MIP awards, the Committee based the calculations on the MIP performance goals established by the Committee. The percentage of target performance for each applicable Named Executive Officer based on financial performance and individual goals is shown in the table above.

 

In February 2017, the Committee determined that the Company attained a level of Adjusted EBITDA performance that exceeded the 2016 MIP’s threshold for earning awards. The Committee determined the 2016 MIP awards for each of Messrs. Dearborn, Jimenez, Hunter, and Ryan and Ms. Xanders based on the actual financial performance of the Company and/or their level of achievement of their respective individual goals. 

 

Reflected in the table below are the target financial goals, actual performance achieved, and percentage of target bonus earned for such performance by Messrs. Dearborn, Jimenez, Hunter and Ryan. Ms. Xanders’ 2016 MIP goals were based entirely on her individual goals.

28


 

 

 

 

 

 

 

 

Financial Goals for Messrs. Dearborn, Jimenez, Ryan

 

 

 

 

 

 

 

 

Target

 

Achievement

 

 

 

 

(millions)

 

(millions)

 

Payout %

Adjusted EBITDA

$

172.5

$

180.5

 

125.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Name

 

Weighting

 

 

 

 

Justin C. Dearborn

 

100%

 

 

 

 

Terry Jimenez

 

80%

 

 

 

 

Timothy E. Ryan

 

80%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Goals for Mr. Hunter

 

 

 

 

 

 

 

 

Target

 

Achievement

 

 

 

 

(millions)

 

(millions)

 

Payout %

Adjusted EBITDA

$

172.5

$

180.5

 

125.7

National Advertising Revenue

$

191.1

$

191.7

 

100

Recruitment Advertising Revenue

$

31.0

$

25.7

 

 

 

 

 

 

 

 

 

Executive Name

 

Weighting

 

 

 

 

Tony W. Hunter (former)

 

80%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individual Goals

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Name

 

Weighting

 

 

 

 

Terry Jimenez (1)

 

20%

 

 

 

 

Timothy E. Ryan (2)

 

20%

 

 

 

 

Julie K. Xanders (3)

 

100%

 

 

 

 

Tony W. Hunter (former ) (4)

 

20%

 

 

 

 


(1)

Mr. Jimenez’s individual goals relate to his oversight and management of the Company’s financial organization and related functions.

 

(2)

Mr. Ryan’s individual goals relate to the oversight and management of the troncM segment.

 

(3)

Ms. Xanders’ individual goals relate to her oversight and management of the Company’s legal department and related functions.

 

(4)

Mr. Hunter’s individual goals relate to his oversight and management of the Company’s investment in Nucleus Marketing Solutions, LLC and certain of the Company’s relationships with third party industry organizations. 

 

Based on the Company’s Adjusted EBITDA performance, Messrs. Jimenez, Hunter and Ryan and Ms. Xanders were eligible for MIP awards equal to up to 120.6% of their respective target bonus amounts, and Mr. Dearborn was eligible for an MIP award equal to 125.7% of his target bonus amount. After discussions between Mr. Dearborn and the Chair of the Committee where Mr. Dearborn expressed interest in receiving the same percentage bonus as the other executives, it was determined that he would be awarded an MIP award equal to 120.6% of his target bonus amount in order for his payout percentage to be in line with the maximum payout percentage of the other executives. 2016 MIP awards for the Named Executive Officers are included in the 2016 Summary Compensation Table below in the “Non‑Equity Incentive Plan Compensation” column.

 

Long‑Term Incentive Awards Program

 

The Company’s long‑term incentive award program for senior executives has two components, each of which directly tied long‑term compensation to long‑term value creation and stockholder return:

 

·

Restricted stock unit awards, and

 

29


 

·

Non‑qualified stock option awards.

 

In July 2016, the Committee awarded restricted stock units and non‑qualified stock options to Messrs. Hunter and Ryan. The value and mix of their respective awards were based on the terms of their respective employment agreements. The grants awarded to Messrs. Hunter and Ryan are subject to a four-year vesting schedule.

 

In August 2016, the Committee awarded restricted stock units and non‑qualified stock options to Messrs. Dearborn and Jimenez. They joined the Company earlier in 2016. The Committee delayed awarding equity grants to the executive officers until stockholder approval of the amended Omnibus Incentive Plan was received at the 2016 Annual Meeting of Stockholders. The Committee granted the equity awards in consultation with the Compensation Consultant in order to align the interests of senior management with the interests of the Company’s stockholders and for the Company to remain competitive in attracting and retaining talent. The grants awarded to Messrs. Dearborn and Jimenez are subject to a three-year vesting schedule. The Committee intends for the equity grants awarded to Messrs. Dearborn and Jimenez to serve as the sole long-term equity incentive program for them until 2019.

 

In October 2016, the Committee awarded restricted stock units to Ms. Xanders. The number of restricted stock units awarded to Ms. Xanders equaled the number of restricted stock units awarded to each of Messrs. Hunter and Ryan in July 2016. The grant awarded to Ms. Xanders is subject to a four-year vesting schedule.

 

Restricted Stock Unit Component

 

Grants of restricted stock units provide Named Executive Officer with stock ownership of unrestricted shares after the restriction lapses. Executive officers received restricted stock unit awards in 2016 because, in the judgment of the Committee and based on management recommendations, these individuals were in positions most likely to assist in the of the Company’s long‑term value creation goals and to create stockholder value over time. The Committee reviewed all proposed grants of restricted stock units for executive officers prior to award.

 

Key elements of the 2016 restricted stock unit program were:

 

·

Restricted stock units provide the same economic risk or reward as restricted stock, but recipients do not have voting rights and do not receive cash dividends during the restriction period. Dividend equivalents are accrued and paid in cash upon vesting of the restricted stock units. Vested restricted stock units are settled in shares.

 

·

Restricted stock units are subject to a three-year or four‑year restriction period and will vest in three or four equal installments, as applicable.

 

In certain cases, such as for new hires or to facilitate retention, selected employees may receive restricted stock units subject to different vesting terms.

 

Non‑Qualified Stock Options Component

 

Non‑qualified stock options permit optionees to buy the Company’s common stock in the future at a price equal to the common stock’s value on the date the option was granted, which is the option exercise price.

 

Key elements of the 2016 non‑qualified stock option program were:

 

·

The option exercise price of stock options awarded was the Nasdaq closing price of the Company’s common stock on the date the award was approved by the Committee.

 

·

The options will vest in three or four equal annual installments.

 

·

Options cannot be exercised prior to vesting.

 

·

The options expire seven years after the grant date.

 

·

The Omnibus Incentive Plan prohibits the repricing of, or exchange of, stock options that are priced below the prevailing market price with lower‑priced stock options without stockholder approval.

 

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The following table provides an overview of some of the main characteristics of restricted stock units and non‑qualified stock options.

 

 

 

 

Restricted Stock Units

    

Non‑Qualified Stock Options

A restricted stock unit award is a promise to deliver to the recipient, upon vesting, shares of the Company’s common stock.

 

Non‑qualified stock options provide the opportunity to purchase the Company’s common stock at a specified price called the “exercise price” at a future date.

 

 

 

Holders of restricted stock units are not entitled to vote the shares and do not receive cash dividends during the restriction period. Dividend equivalents are paid in cash upon the vesting of restricted stock units.

 

Stock option holders do not receive dividends on shares underlying options and cannot vote their shares.

 

 

 

Restricted stock units have intrinsic value on the day the award is received and retain some realizable value even if the share price declines during the restriction period, so each provides strong employee retention value.

 

Non‑qualified stock options increase focus on activities primarily related to absolute share price appreciation. The Company’s non‑qualified stock options will expire seven years after their grant date. If the value of the Company’s common stock increases and the optionee exercises his or her option to buy at the exercise price, the optionee receives a gain in value equal to the difference between the option exercise price and the price of the stock on the exercise date. If the value of the Company’s common stock fails to increase or declines, the stock option has no realizable value. Stock options provide less retention value than restricted stock units because stock options have realizable value only if the share price appreciates over the option exercise price before the options expire.

 

 

The Committee determined allocations among restricted stock units and non‑qualified stock options based on the view that a balanced award of restricted stock units and non‑qualified stock options provides a combination of incentives for absolute share price appreciation. The Committee selected vesting terms for restricted stock units and stock options taking into consideration the historical vesting terms of equity awards granted by TCO.

 

Stock Ownership Guidelines

 

In order to further align the interests of the Company’s executive officers and directors with those of its stockholders, in March 2017, the Committee recommended to the Board of Directors, and the Board of Directors adopted, stock ownership guidelines that cover executive officers and directors of the Company. Pursuant to the guidelines, the Company’s executive officers and directors are required to maintain the following levels of equity in the Company: Chief Executive Officer, five times base salary; Chief Financial Officer, three times base salary; other executive officers, one times base salary; and directors, $210,000 (which is three times the amount of their annual cash retainer prior to the director compensation program changing to an all stock program). For purposes of determining an individual’s ownership level, shares held outright, unvested restricted stock units and deferred stock units are included in the calculation. The covered individuals have five years to achieve the required ownership level. 

 

Severance Plan Arrangements

 

The employment agreements with each of the Named Executive Officers provide for a specified severance payment in the case of certain termination events. The Company’s current form of executive employment agreement does not provide for a severance payment upon a change of control. In connection with the separation of Messrs. Griffin and Hunter and Ms. Martin in 2016, they were paid severance payments in accordance with the terms of their respective employment agreements. The severance‑related terms of the employment agreements with the Named Executive Officers and the severance guidelines are described in more detail in “Named Executive Officer Compensation—Potential Payments Upon Termination or Change in Control.”

 

In February 2016, the outstanding restricted stock units and stock options held by Messrs. Ryan, Griffin and Hunter, and Mses. Xanders and Martin were amended to provide for full acceleration of the unvested shares in the event of a termination of employment without cause following a change of control as defined in their respective employment agreements. The 2016 equity grants awarded to Messrs. Dearborn, Jimenez, Ryan and Hunter included a similar provision.

 

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Employee Benefits and Perquisites

 

Our Named Executive Officers are eligible for the same benefits as full‑time employees generally, including life, health, and disability insurance and defined contribution retirement benefits. We do not offer supplemental executive benefits of any kind, and perquisites are not a material item of our compensation program.

 

In connection with the relocation of Mr. Dearborn from Chicago, Illinois to Los Angeles, California in 2016, the Committee approved a relocation package to cover some of his expenses. In addition, he was provided with temporary housing and a rental car for up to four months. Certain of his relocation payments were subject to a tax gross-up adjustment. The actual amounts paid are included in the 2016 Summary Compensation Table below in the “All Other Compensation” column. All or half of the foregoing amounts will be subject to repayment if his employment is terminated for cause or he resigns without good reason prior to the two- or three-year anniversary of his hire date, respectively. If his employment is terminated on or prior to February 21, 2018 by the Company without cause or by Mr. Dearborn for good reason, the Company will provide a return home allowance for expenses associated with his relocating back to Chicago.

 

Recoupment Policy

 

The Company has an Executive Compensation Clawback Policy that provides for recoupment of performance‑based compensation in the event of a restatement of the Company’s financial statement. This would include any performance‑based cash incentive and bonus awards and performance‑based equity compensation. If the Committee determines that the amount of any performance‑based compensation actually paid or awarded to the executive officer would have been a lower amount had it been calculated based on the restated financial statement, the Committee may, to the extent permitted by applicable law, seek recoupment from that executive officer of such excess amount of compensation previously paid or awarded after a review of all relevant facts and circumstances. The Named Executive Officers are covered by this policy.

 

Consideration of Tax and Accounting Impacts

 

The Committee may consider tax and accounting implications in designing the Company’s compensation programs. However, the Committee believes that in establishing the compensation programs for our executive officers, the potential tax and accounting implications of those programs should be only one of a number of relevant factors taken into consideration, and not the sole governing factor.

 

Risk Assessment of Executive Officer Compensation

 

The Committee believes the various components of the total compensation package of the executive officers, as discussed above, are appropriately balanced so as to avoid any excessive risk taking by such individuals. First, long‑term equity awards tied to the market price of our common stock represent a significant component of executive officer compensation and promote a commonality of interest between the executive officers and our stockholders in increasing stockholder value. In addition, a substantial portion of the equity awards is in the form of restricted stock units. The use of such restricted stock units mitigates the potential risk that stock options might otherwise pose to risk taking in the short term. Restricted stock units provide varying levels of compensation as the market price of our common stock fluctuates over time, and they are less likely to contribute to excessive risk taking. Furthermore, the equity awards, whether in the form of stock options or restricted stock unit awards, generally will vest over a period of years, and that vesting element encourages the award recipients to focus on sustaining our long‑term performance. Additionally, because equity awards are typically made on an annual basis, the executive officers always have unvested awards outstanding that could decrease significantly in value if our business is not managed to achieve its long‑term goals. Secondly, under the 2016 MIP, an individual bonus amount is established for each executive officer at each level of potential goal attainment. Accordingly, at all levels of performance goal attainment, there are limits in place for the potential bonus payout. In addition, a maximum bonus amount is established for each participant such that no participant may earn more than a fixed percentage of the participant’s base salary. Accordingly, our overall compensation structure is not overly‑weighted toward short‑term incentives, and the Committee has taken what it believes are reasonable steps to protect against the potential of disproportionately large short‑term incentives that might encourage excessive risk taking.

 

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COMPENSATION, NOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORT

 

The Compensation, Nominating and Corporate Governance Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis with management, and, based on such review and discussions, the Compensation, Nominating and Corporate Governance Committee recommended to the Board of Directors of the Company that the Compensation Discussion and Analysis be included in this proxy statement.

 

The Compensation, Nominating and Corporate Governance Committee

 

Richard A. Reck, Chairperson

Carol Crenshaw

Philip G. Franklin

Donald Tang

 

33


 

NAMED EXECUTIVE OFFICER COMPENSATION

 

2016 Summary Compensation Table  

 

The following table shows for the fiscal year ended December 25, 2016, compensation earned by our Chief Executive Officer and former Chief Executive Officer, our Chief Financial Officer and former Chief Financial Officer, the other three most highly compensated individuals who served as executive officers as of December 25, 2016, and the individuals who would have been among the most highly compensated executive officers if they had remained employed as of December 25, 2017 (collectively, the “Named Executive Officers”).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

NonEquity

    

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

Incentive Plan

 

All Other

 

 

 

 

Name and Principal Position

Year

 

Salary

 

Bonus

 

Awards(1)

 

Awards(1)

 

Compensation(2)

 

Compensation(3)

 

Total

 

Justin C. Dearborn(4)

2016

 

$

450,000

 

$

— 

 

$

5,576,250

 

$

1,345,500

 

$

506,455

 

$

244,632

 

$

8,122,837

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terry Jimenez(5)

2016

 

$

306,923

 

$

 

$

2,788,125

 

$

672,750

 

$

379,841

 

$

6,865

 

$

4,154,504

 

EVP/Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timothy E. Ryan

2016

 

$

625,000

 

$

 

$

275,010

 

$

275,000

 

$

753,653

 

$

160,274

 

$

2,088,937

 

President of Publishing

2015

 

$

485,769

 

$

 

$

139,280

 

$

23,698

 

$

318,120

 

$

301,089

 

$

1,267,956

 

 

2014

 

$

425,000

 

$

265,522

 

$

192,000

 

$

32,690

 

$

204,000

 

$

11,071

 

$

1,130,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Julie K. Xanders

2016

 

$

430,000

 

$

 

$

334,152

 

$

 

$

259,257

 

$

10,600

 

$

1,034,009

 

EVP/General Counsel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John H. Griffin, Jr.(6)

2016

 

$

303,846

 

$

 

$

 

$

 

$

249,315

 

$

1,456,177

 

$

2,009,338

 

Former President and Chief Executive Officer

2015