NORWEGIAN CRUISE LINE HOLDINGS LTD. (NASDAQ:NCLH) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain OfficersItem 5.02
Compensatory Arrangements of Certain Officers.
On August 1, 2017, Norwegian Cruise Line Holdings Ltd. (the “Company”) entered into a letter agreement (the “Letter Agreement”) with Mr. Frank J. Del Rio to amend his existing employment agreement, originally dated June 5, 2014 and subsequently amended by letter agreements dated September 2, 2014 and August 4, 2015 (the “Employment Agreement”). The key terms of the Letter Agreement are summarized below.
Continuation of Employment. Mr. Del Rio’s term of employment as the Company’s President and Chief Executive Officer is extended to December 31, 2020.
Waiver of Gross-up Payment. Mr. Del Rio’s original employment agreement, dated June 5, 2014, which was in place prior to his becoming President and Chief Executive Officer of the Company, entitled him to a “gross-up” payment for any excise taxes that might have become payable in connection with a change in control of the Company to Section 4999 of the Internal Revenue Code of 1986, as amended. The Letter Agreement provides that Mr. Del Rio is no longer entitled to any such “gross-up” payment.
Restricted Share Unit Awards. The Letter Agreement entitles Mr. Del Rio to annual restricted share unit awards (“RSUs”) through the term of his employment that have a grant date value of not less than $7,500,000, with such actual target number of RSUs being determined by multiplying the number of RSUs by the closing price of an ordinary share of the Company on the applicable date of grant. At least 60% of each such grant will be required to be subject to performance-based vesting requirements that will be determined by the Company’s Compensation Committee.
2017 RSU Award. In satisfaction of his award for 2017, Mr. Del Rio was granted an RSU award which consisted 60% of performance-based RSUs. Mr. Del Rio was awarded 52,715 RSUs that are subject to time-based vesting requirements and will become vested ratably on each of August 1, 2018, March 1, 2019, and March 1, 2020, in each case subject to Mr. Del Rio’s continued employment through the applicable vesting date. Mr. Del Rio was also awarded a target number of 79,073 performance-based RSUs that are subject to an adjusted return on invested capital target for 2018, adjusted earnings per share growth targets for 2017 and 2018, and also subject to a time-based vesting requirement through March 1, 2020. The exact number of shares delivered in satisfaction of the performance-based RSUs will be determined based on the satisfaction of the predetermined performance conditions.
Treatment of RSUs upon Certain Terminations. The Letter Agreement provides that if the Company terminates Mr. Del Rio’s employment without “cause,” if Mr. Del Rio terminates his employment for “good reason,” or if Mr. Del Rio’s employment terminates by reason of the expiration of the term of the Letter Agreement or his death or disability (as these terms are defined in the Employment Agreement), all then outstanding, unvested RSUs subject only to time-based vesting requirements that were awarded during and after 2017 will vest in full, and any outstanding, unvested performance-based RSUs that were awarded during and after 2017 will continue to remain outstanding as if Mr. Del Rio were still employed until the performance period is complete, will remain subject to all of the applicable performance conditions and will vest in full at the time, if any, that the performance conditions are satisfied.
Severance Provision. On the expiration of the term of the Letter Agreement on December 31, 2020, or earlier if the Company terminates Mr. Del Rio’s employment without “cause,” if Mr. Del Rio terminates his employment for “good reason,” or if Mr. Del Rio’s employment terminates by reason of his death or disability (as these terms are defined in the Employment Agreement) prior to December 31, 2020, Mr. Del Rio will receive a severance payment equal to the sum of 2.25 times his annualized base salary, target annual cash bonus and certain benefits at the rates in effect on August 1, 2017. Mr. Del Rio will also be entitled to a pro-rata portion of any annual cash bonus for the year his employment terminates earned based on actual performance and continued healthcare coverage for two years following a termination of his employment if his employment terminates on December 31, 2020, or is earlier terminated by the company without “cause” or by Mr. Del Rio for “good reason.”
Except as described herein, the material terms of Mr. Del Rio’s Employment Agreement remain unchanged. Mr. Del Rio’s original employment agreement, the September 2, 2014 amendment and the August 4, 2015 amendment are filed as Exhibits 10.38, 10.39 and 10.40 to the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission on February 27, 2017 and incorporated herein by reference.
About NORWEGIAN CRUISE LINE HOLDINGS LTD. (NASDAQ:NCLH)
Norwegian Cruise Line Holdings Ltd. (NCLH) is a global cruise company. The Company operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. Its brands offer itineraries to over 510 destinations around the world, including Europe, Asia, Australia, New Zealand, South America, Africa, Canada, Bermuda, Caribbean, Alaska and Hawaii with a combined fleet of approximately 20 ships with over 45,000 Berths. Its brands offer various features, amenities, and activities, including various accommodations, multiple dining venues, bars and lounges, spa, casino and retail shopping areas and various entertainment choices. Its Norwegian offers approximately 10 ships that have been purpose-built to deliver the Freestyle Cruising product. Its Oceania Cruises offers the cuisine at sea and destination experiences with destination-rich itineraries. Its Regent Seven Seas Cruises offers a cruise line, which provides amenities included in the cruise fare.
