As if it were a young, tech-savvy Scarlett O’Hara, Groupon, Inc. sashayed onto Wall Street and captured the attention of many suitors. And, just as tongues wagged about Scarlett in her day, there have been plenty of juicy stories about Groupon’s break-up with its Chief Operating Officer after only five months; a secret-but-leaked memo that may delay its own debutante ball (otherwise known as an IPO), and its spat with the SEC, which led to a restatement of bodacious revenue figures with modest numbers more befitting of Scarlett’s rival, Melanie.
And what do we know about Andrew Mason, Groupon’s president (and arguably a moustache-free version of the dashing Rhett Butler)? Well, thanks to the 598-page* amended S-1 that it filed with the SEC at 5:15 p.m. last Friday, we now know about Mason’s employment agreements with the company. They are Exhibits 10.6 and 10.7 to the S-1/A; although the former document contains the interesting numbers, the latter one (an amendment dated December 15, 2010) provides some severance protection if Groupon ushers Mason to the door without cause. Beyond the details (which we’ll get to in a minute), we thought it was particularly interesting that it took this long for those contracts to see the light of day, given that Groupon filed its first S-1 back in early June.
Mason’s Employment Agreement, dated November 1, 2009, has a five-year term. It gave him a starting base salary of $180,000 per year, which rose to a minimum of $207,000 in 2010. And – since the agreement assured Mason that his salary would be reviewed every year “for possible increase (but not decrease)” and that his paycheck “shall be increased by no less than fifteen percent (15%) per annum” – he could already be earning much more than that, with another raise just a couple of months away. Of course, as with most fast-growing companies, it’s really about the stock, and Mason’s agreement spells out buckets of that: 300,000 Class A shares of restricted stock.
Given that various estimates value the company at $20 billion, that’s a nice little cushion.
Ditto for former Chief Operating Officer, Rob Solomon, whose Employment Agreement was attached as Exhibit 10.9 to the S-1/A. Solomon’s agreement started March 15, 2010 and would have run through March 15, 2014 – but for his abrupt departure last March. Besides a base salary of $350,000 and eligibility for a performance bonus of up to 33% of his salary, Solomon also got 685,000 stock options, which he could purchase “at the fair market value of the company’s stock options determined in accordance with GAAP, which… [as of March, 2010 was] estimated not to exceed $3.00/share.” An important section in his employment agreement added:
“In the event that Solomon’s employment with the Company is terminated, Solomon shall have ninety (90) days following such termination to exercise any vested Options;…”
Because Solomon resigned after March 16, 2011 (the date upon which 171,250 of the shares vested) and he got an additional 90 days after that in which to exercise stock options, he may also get to exercise the 42,813 shares that are scheduled to vest on June 16, 2011. Assuming that he has exercised – or does exercise – some or all of the vested options, he will become an even wealthier man.
Between the jittery market and Groupon’s need to get things in order before it goes public, it will probably be a few more weeks or months before that can happen. And there will certainly be many more stories about this highly-anticipated public offering. However, unlike the famous line that Rhett delivers to Scarlett just before he leaves her, it seems that everyone gives a damn about what shall become of Groupon.
*The length of Groupon’s filing pales when compared to Margaret Mitchell’s classic book; a quick search of editions available on Amazon range between 960 and 1048 pages.
Risk avoidance is critical in the current market environment. Over on FootnotedPro, we shine a spotlight on potential problems well in advance of the market. For more information or to inquire about a trial subscription, please contact us.