Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers
(e) On April 21, 2016, KCG Holdings, Inc. (“KCG”) and Daniel
Coleman, the Chief Executive Officer of KCG, entered into an amended and restated employment agreement (the “Employment Agreement”), which amended and restated the previous employment agreement between KCG and Mr. Coleman, dated as of
July 1, 2013, and which provides for Mr. Coleman’s employment as Chief Executive Officer of KCG for a term beginning on April 21, 2016 and ending on December 31, 2018. During the term, the Board will continue to nominate
Mr. Coleman to serve as a member of the Board unless prohibited by applicable law. Following the term, Mr. Coleman will be available to consult on transition matters and to provide general advisory services to the Company, as may be
reasonably requested by the Company from time to time, provided that in no event will Mr. Coleman provide more than 200 hours of such services over the duration of the non-competition period described below, nor will Mr. Coleman receive
any compensation in consideration for providing such advisory services.
The Employment Agreement provides for, among other things:
(1) that Mr. Coleman will continue to receive an annual base salary of $1,000,000; (2) that Mr. Coleman will be eligible for an annual incentive award for the 2016 calendar year delivered 65% in restricted stock units and 35% in
cash, with a target of $7,000,000 and (3) the grant of 2,000,000 performance stock options with an exercise price of the greater of the fair market value on the date of grant and $23.35 (the “Performance Options”). The Performance
Options have a five year term and subject to certain exceptions set forth in the Employment Agreement, will vest in three equal installments on each of December 31, 2016, December 31, 2017 and December 31, 2018, subject to
Mr. Coleman’s continued employment.
Mr. Coleman will be subject to a covenant not to compete with KCG or its affiliates
during his employment and for a period of 12 months following his termination for any reason and to a covenant not to solicit employees during his employment and for a period of 36 months following his termination for any reason. If Mr. Coleman
breaches the non-competition or non-solicitation covenants, he must forfeit all unexercised Performance Options (whether vested or unvested) and repay to KCG any gains that he received after the end of his employment from the exercise of Performance
Options and from the vesting of any annual incentive paid in the form of equity. Following a “change in control” (as defined in the Employment Agreement), each of the non-competition period and non-solicitation period will be reduced to
six months following his termination without “cause” or a termination with “good reason”. Mr. Coleman’s obligation to comply with the non-competition and non-solicitation covenants survives the end of the term of the
Employment Agreement.
If Mr. Coleman’s employment is terminated during the term of the Employment Agreement by KCG without
“cause” or by Mr. Coleman for “good reason” (each as defined in the Employment Agreement), subject to his execution of a release, Mr. Coleman will be entitled to receive: (1) subject to compliance with
non-competition and non-solicitation covenants described above, (A) continued vesting of his Performance Options (which will remain exercisable until they expire at the completion of their 5 year term), (B) continued vesting of any annual
incentive paid in the form of equity, and (C) non-compete/non-solicit payments equal, in the aggregate, to $2,000,000, paid in equal monthly installments over the course of his non-competition period described above; (2) any earned but
unpaid annual incentive for the fiscal year ending immediately before termination, paid 100% in cash; (3) an annual incentive for the fiscal year in which the termination occurs, paid 100% in cash and prorated for the number of days elapsed
during the year prior to the termination; and (4) payment of COBRA health insurance premiums for up to 12 months following termination.
Upon a resignation by Mr. Coleman without “good reason”, during the term of the Employment Agreement: (1) subject to his
execution of a release and his compliance with non-competition and non-solicitation covenants described above, (A) Mr. Coleman’s vested Performance Options will remain exercisable until they expire at the completion of their 5 year term,
(B) Mr. Coleman’s annual incentive paid in the form of equity that was earned during the term will continue to vest and (C) Mr. Coleman will be entitled to receive the non-compete/non-solicit payments described above, and
(2) Mr. Coleman will forfeit any unpaid annual incentives and any unvested Performance Options.
The foregoing summary does not
purport to be complete and is subject to, and qualified in its entirety by, the full text of the Employment Agreement, which is filed as Exhibit 10.1 to this Current Report Form 8-K, and is incorporated by reference into this Item 5.02.