In connection with the acquisition of Biglari Capital (manager of the Lion Fund) and in recognition of Mr. Biglari’s increased responsibilities in overseeing the operations, investments and capital allocation of a diversified holding company, the Company entered into the Incentive Bonus Agreement, dated April 30, 2010 (the “Incentive Bonus Agreement”), with Mr. Biglari, subject to shareholder approval for purposes of Section 162(m) of the Code.
The Incentive Bonus Agreement provides Mr. Biglari the opportunity to receive annual incentive compensation payments based on the Company’s book value growth for each fiscal year. If the Company exceeds a 5% annual book value growth hurdle, Mr. Biglari would receive an incentive compensation payment equal to 25% of the Company’s book value in excess of that hurdle. Mr. Biglari will not receive incentive compensation payments under the Incentive Bonus Agreement unless the Company’s book value exceeds a 5% annual growth rate over the Company’s previous highest book value achieved during the term of the agreement, or the “high water mark.” Accordingly, in a fiscal year where book value declines, the hurdle for subsequent fiscal years will require the complete recovery of the deficit from the last high water mark, plus a 5% annual growth rate from the last high water mark. Determinations of book value and the incentive compensation payments to Mr. Biglari under the Incentive Bonus Agreement are subject to the approval of the Governance, Compensation and Nominating Committee of the Board of Directors of the Company.
The Incentive Bonus Agreement provides that Mr. Biglari will use an amount equal to at least 30% of his annual pre-tax incentive compensation to purchase shares of the Company’s common stock on the open market within 120 calendar days of his receipt of such payment, subject to restrictions under the Company’s insider trading policy. This requirement represents an approximate minimum of 50% of his after-tax incentive compensation. Mr. Biglari is then required to hold such shares for a minimum of three years from the date of purchase, unless there is a change of control of the Company or his employment is terminated by the Company without “cause” or by Mr. Biglari for “good reason.”
Is the deal for BV to increase 5%+ or BV per share? If just plain BV as a $ amount, then the simple sale of stock could trigger the bonus. IMO this would not create value on which he should be rewarded.
I am going to have to look at this company. It is interesting.
mags, nice to see you here...i am honored to see you end up on one of my long term stock favorites.
please do let me know what you think later on. Although it is based off the BV not shareprice, but there are other metrics used to assure that it is not a simple increase due to a merger or issuance of stock.
Is this legitimate?
I can not imagine this being proposed as I understand it.
The ultimate self enrichment and I thought this guys was on the side of shareholders. Now you see his true colors.
On the Outside Looking In.
smaycs, do you know anything at all about math or investment management? I'm starting to believe you must be a paid shill because no one is as stupd as you....and i've gotten into a couple of humdingers on the boards.
No, this isn't the way most hedge funds work. 3 and 25 doesn't exist at the best of the best of funds.
Do you know how much was in the Lion Fund? I know, let's see if you do.
Simplicity shouldn't mean shareholders get hosed.
Of course it doesn't matter that much to him if The Lion Fund merges--have you seen his new incentive plan on the table? LMAO
I encourage everyone to vote NO on this. I must admit I have been a big fan of Biglari but this crosses the line. I mean look at BRK, L or FFH they wouldn't think of something like this. Unreal...
It is true that this structure may be similar to hedge fund compensations. It just so happens that when he was running a hedge fund he was going nowhere, so this feels like a hijacking. He will get compensation in line with the CEO of Goldman Sachs and there is a lot more track record and responsibility there.
Also his incentives will be misaligned. Say he gets 8% growth in book value. By merging with a similar size company with equally 8% growth rate i.e. doubling the size he has done nothing for shareholders and doubled his own comp - that is outrageous. At least a hedge fund manager has to go out and get people to commit there own capital. If he does not perform, people walk. Mergers do not get undone. Overall it will be tough to get him out of there, so accountability is a major issue.
The following just smacks of non-sense. Seriously, for the extra repsonibility of running the Lion Fund within BH, he gets an absolutely enormous incentive package? This is absolutely rank. BTW, the Lion Fund was TINY. Most of which was invested in BH anyway. The non-sense with him is certainly become clear to even me:
In connection with the acquisition of Biglari Capital (manager of the Lion Fund) and in recognition of Mr. Biglari’s increased responsibilities in overseeing the operations, investments and capital allocation of a diversified holding company, the Company entered into the Incentive Bonus Agreement, dated April 30, 2010 (the “Incentive Bonus Agreement”),