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| ☐ | 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 Pursuant to §240.14a-12 |
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-(6)(i)(1) and 0-11. |
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August 16, 2023
Dear Stockholder:
It is my pleasure to inform you that our 2023 Annual Meeting of Stockholders (the “Annual Meeting”) will be conducted online on Thursday, October 5, 2023, commencing at 10:00 a.m. (Eastern Time).
Our Board of Directors will once again conduct the Annual Meeting as a virtual meeting because it believes that a virtual meeting will enable increased stockholder accessibility, while improving meeting efficiency and reducing costs. Stockholders will be able to listen, vote, and submit questions from their home or any remote location with Internet connectivity. Information on how to participate in the Annual Meeting can be found on page 3 of the Proxy Statement.
This year, we are once again taking advantage of the Securities and Exchange Commission rule that allows companies to provide their stockholders with access to proxy materials on the Internet. On or about August 22, 2023, we will begin mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders informing them that our Proxy Statement, Annual Report for the fiscal year ended December 31, 2022 and voting instructions are available online. As more fully described in that Notice, all stockholders may choose to access our proxy materials on the Internet or may request to receive paper copies of the proxy materials. This allows us to conserve natural resources and reduces the costs of printing and distributing the proxy materials, while providing our stockholders with access to the proxy materials in a fast and efficient manner.
During the Annual Meeting, you will be asked to consider and vote upon (i) the election of four directors; (ii) a vote on the ratification of the appointment of Ernst Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023; (iii) an advisory vote on executive compensation; and (iv) such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
Whether or not you are able to participate in the Annual Meeting, it is important that your shares be represented. Please vote your shares using the Internet or the designated toll-free telephone number, or by requesting a printed copy of the proxy materials and completing and returning by mail the proxy or voting instruction card you will receive in response to your request. Please refer to the section entitled “Voting Via the Internet, by Telephone, or by Mail” on page 2 of the Proxy Statement for a description of these voting methods.
Sincerely,
Howard W. Lutnick
Chairman of the Board of Directors
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Newmark Group, Inc.
125 Park Avenue
New York, New York 10017
Notice of 2023 Annual Meeting of Stockholders
NOTICE IS HEREBY GIVEN that our 2023 Annual Meeting of Stockholders will be held on Thursday, October 5, 2023, commencing at 10:00 a.m. (Eastern Time), for the following purposes:
| (1) | To elect four directors to hold office until the next Annual Meeting and until their successors are duly elected and qualified; |
| (2) | To hold a vote on the ratification of the appointment of Ernst Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023; |
| (3) | To hold an advisory vote on executive compensation; and |
| (4) | To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
Only holders of record of our Class A common stock or our Class B common stock at the close of business on August 8, 2023 are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. If you plan to participate in the Annual Meeting, please see the instructions under “Participating in the Annual Meeting” beginning on page 3 of the accompanying Proxy Statement. Stockholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity. Please see the instructions for voting under “Voting Via the Internet, by Telephone, or by Mail” beginning on page 2 of the accompanying Proxy Statement. There will be no physical location for stockholders to attend. Stockholders may only participate online by logging in at www.virtualshareholdermeeting.com/NMRK2023.
By Order of the Board of Directors,
CAROLINE A. KOSTER
Corporate Secretary
August 16, 2023
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO PARTICIPATE IN THE ANNUAL MEETING, PLEASE VOTE AS PROMPTLY AS POSSIBLE USING THE INTERNET OR THE DESIGNATED TOLL-FREE TELEPHONE NUMBER
OR BY REQUESTING A PAPER OR E-MAIL COPY OF THE PROXY MATERIALS AND COMPLETING AND RETURNING BY MAIL THE PROXY OR VOTING INSTRUCTION CARD YOU WILL RECEIVE IN RESPONSE TO YOUR REQUEST.
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Newmark Group, Inc.
125 Park Avenue
New York, New York 10017
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation of proxies by and on behalf of our Board of Directors for use at the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Newmark Group, Inc. (the “Company,” “Newmark,” “we,” “us,” or “our”) to be held on October 5, 2023, and at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of 2023 Annual Meeting of Stockholders. There will be no physical location for stockholders to attend. Stockholders may only participate online by logging in at www.virtualshareholdermeeting.com/NMRK2023. Our Annual Report for the fiscal year ended December 31, 2022 (the “2022 Annual Report”), accompanies this Proxy Statement. The Notice of Internet Availability of Proxy Materials is expected to be mailed to stockholders on or about August 22, 2023.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 5, 2023:
On or about August 22, 2023, we will begin mailing a notice, called the Notice of Internet Availability of Proxy Materials (the “Notice”), to our stockholders advising them that this Proxy Statement, the 2022 Annual Report and voting instructions can be accessed over the Internet at www.proxyvote.com. You may then access these proxy materials over the Internet, or you may request that a printed copy of the proxy materials be sent to you. If you want to receive a paper or e-mail copy of these proxy materials, you must request one over the Internet at www.proxyvote.com, by calling toll free 1-800-579-1639, or by sending an e-mail to sendmaterial@proxyvote.com. There is no charge to you for requesting a copy. Please make your request for a copy on or before September 21, 2023 to facilitate timely delivery. If you previously elected to receive our proxy materials electronically, these materials will continue to be sent via e-mail unless you change your election.
If you have not done so already, please help us protect the environment by signing up for electronic delivery for all future proxies and related materials. It takes just five easy steps:
| 1. | Go to www.proxyvote.com. |
| 2. | Type in the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials and click “Submit.” |
| 3. | On the right side, click “Sign up for E-delivery” under “Go Paperless.” |
| 4. | Fill out your email address, create a PIN, and click “Next.” |
| 5. | Review the Description of Service and click “Enroll in E-Delivery.” |
INFORMATION ABOUT VOTING
Who Can Vote
August 8, 2023 has been fixed as the record date (the “Record Date”) for the determination of the stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. Only holders of record as of the close of business on that date of shares of our Class A common stock, $0.01 par value per share (the “Class A common stock”), or of our Class B common stock, $0.01 par value per share (the “Class B common stock”), are entitled to notice of and to vote at the Annual Meeting. Our Class A common stock and our Class B common stock will vote together as a single class on all matters to come before the Annual Meeting and are sometimes collectively referred to herein as our “Common Equity.”
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Each share of our Class A common stock entitles the holder thereof to one vote per share on each matter presented to stockholders for approval at the Annual Meeting. Each share of our Class B common stock entitles the holder thereof to 10 votes per share on each matter presented to stockholders for approval at the Annual Meeting. The collective voting power represented by the shares of our Class A common stock and our Class B common stock issued and outstanding on the Record Date is referred to as the “Total Voting Power.” On the Record Date, there were 152,392,369 shares of our Class A common stock and 21,285,533 shares of our Class B common stock, for a total of 173,677,902 Class A and Class B shares of our Common Equity, outstanding and entitled to vote, with a Total Voting Power of 365,247,699 votes.
Voting Via the Internet, by Telephone, or by Mail
Stockholders of Record
If your shares are registered directly in your name with the Company’s transfer agent, Equiniti Trust Company, LLC, you are considered the “stockholder of record” of those shares, and the Notice of Internet Availability of Proxy Materials is being sent directly to you by the Company. If you are a stockholder of record, you can vote your shares in one of two ways: either by proxy or online during the Annual Meeting. If you choose to vote by proxy, you may do so by using the Internet (please visit www.proxyvote.com and follow the instructions), or by calling the designated toll-free number (1-800-690-6903), or by requesting a printed copy of our proxy materials and completing and returning by mail the proxy or voting instruction card you will receive in response to your request. Whichever method you use, each valid proxy received in time will be voted during the Annual Meeting in accordance with your instructions.
Beneficial Owners of Shares Held in Street Name
If your shares are held in a securities brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of shares held in “street name,” and the Notice is being forwarded to you by your broker, bank or nominee, who is considered the stockholder of record of those shares. As a beneficial owner, you have the right to direct your broker, bank or nominee on how to vote the shares held in your account. You may also vote using the Internet. Please visit www.proxyvote.com and follow the instructions, or, if you request printed proxy materials, you will receive voting instructions from your broker, bank or nominee describing the available processes for voting your stock.
Revocation of Proxies
A stockholder’s voting on the Internet or by telephone or by completing and returning a proxy or voting instruction card will not affect such stockholder’s right to participate in the Annual Meeting and to vote during such time. Any stockholder who votes on the Internet or by telephone or submits an executed proxy or voting instruction card has a right to revoke the proxy at any time before it is voted by taking any of the following actions:
| • | advising Caroline A. Koster, our Corporate Secretary, in writing of such revocation; |
| • | changing the stockholder’s vote on the Internet or by telephone; |
| • | executing a later-dated proxy or voting instruction card which is delivered prior to the Annual Meeting; or |
| • | participating in the Annual Meeting online and voting during such time. |
Participation in the Annual Meeting will not in and of itself constitute revocation of a proxy.
Quorum
The required quorum for the transaction of business at the Annual Meeting is a majority of the Total Voting Power, which shares must be present online or represented by proxy during the Annual Meeting.
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Broker Non-Votes
If you are a beneficial owner whose shares are held by a broker, bank or other nominee, you must instruct the broker, bank or nominee how to vote your shares. If you do not provide voting instructions, your shares will not be voted on proposals on which brokers do not have discretionary authority. This is called a “broker non-vote.”
Required Vote
With respect to Proposal 1, directors are elected by a plurality of the votes cast. With respect to Proposals 2 and 3, the affirmative vote of the holders of a majority of the Total Voting Power present online or represented by proxy at the Annual Meeting and entitled to vote on the proposals is required. Withheld votes will have no effect on the vote on Proposal 1, and abstentions will have the same effect on the votes as votes against on Proposals 2 and 3. Broker non-votes will have no effect on the votes on Proposals 1 and 3. Additionally, there will not be broker non-votes with regard to Proposal 2 as it is a routine matter pursuant to which brokers may exercise discretionary voting authority. Thus, your broker or nominee may vote on your behalf with regard to Proposal 2, whether or not you provide voting instructions. Shares not voted in the discretion of your broker or nominee will have the same effect as votes against this proposal.
Participating in the Annual Meeting
You are entitled to participate in the Annual Meeting only if you were a Newmark stockholder of record or a beneficial owner of shares of our Class A common stock or our Class B common stock as of the close of business on the Record Date, August 8, 2023, or you hold a valid proxy for the Annual Meeting. Our Annual Meeting will be a completely virtual meeting. There will be no physical meeting location. The meeting will be conducted only via live webcast.
To participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/NMRK2023 and enter the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the voting instruction card that accompanied your proxy materials. You may begin to log into the meeting platform beginning at 9:45 a.m. (Eastern Time) on October 5, 2023. The meeting will begin promptly at 10:00 a.m. (Eastern Time) on October 5, 2023.
The virtual meeting platform is fully supported across browsers (Edge, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.
If you want to submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/NMRK2023, type your question into the “Ask a Question” field, and click “Submit.” Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Questions regarding personal matters, including those related to employment, individual transactions, product or service issues, or other matters not relevant to investors generally, are not pertinent to meeting matters and therefore will not be answered.
Voting Procedures for Newmark 401(k) Plan Participants
Pursuant to the trust agreement governing the Newmark 401(k) Plan (the “401(k) Plan”), the trustee of our 401(k) Plan will not, except as otherwise required by law, vote shares of our Class A common stock held in the trust as to which the trustee has not received voting instructions from 401(k) Plan participants.
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Other Information
Unless specified otherwise, the proxies will be voted FOR the election of all the nominees to serve as our directors, FOR the ratification of the appointment of Ernst Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023, and FOR the approval, on an advisory basis, of the resolution on executive compensation. In the discretion of the proxy holders, the proxies will also be voted for or against such other matters as may properly come before the Annual Meeting. Management is not aware of any other matters to be presented for action at the Annual Meeting.
Our principal executive offices are located at 125 Park Avenue New York, New York 10017, and our telephone number is (212) 372-2000.
This Proxy Statement is accompanied by the 2022 Annual Report, which includes the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”), that we have previously filed with the Securities and Exchange Commission (the “SEC”) and that includes our audited financial statements. We file reports, proxy statements and other information with the SEC. These filings are available to the public on the SEC website at www.sec.gov. In addition, our website at ir.nmrk.com/investors/investors-home/ provides ongoing information about the Company, including documents filed by us with the SEC. To obtain documents from us, please direct requests in writing or by telephone to Newmark Group, Inc., 125 Park Avenue New York, New York 10017, phone: (212) 372-2000, Attention: Corporate Secretary. We will send you the requested documents without charge; however, a reasonable fee will be charged for exhibits that you request. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this Proxy Statement.
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PROPOSAL 1—ELECTION OF DIRECTORS
Our Board of Directors (the “Board” or the “Board of Directors”) is currently composed of four members. Our Board, upon recommendation of our independent directors, has nominated four persons for election as directors at the Annual Meeting. All of the nominees are currently members of our Board. Information with respect to the four nominees for election as directors is set forth below. All of the nominees are to be elected at the Annual Meeting and to serve until their successors are duly elected and qualified. All of the nominees listed below are expected to serve as directors if they are elected. If any nominee should decline or be unable to accept such nomination or to serve as a director (an event which our Board does not now expect), our Board reserves the right to nominate another person or to vote to reduce the size of our Board. In the event another person is nominated, the proxy holders intend to vote the shares to which the proxy relates for the election of the person nominated by our Board. There is no cumulative voting for directors.
Information About Our Directors
| Name |
Age | Director Since | Biographies | |||||||
| Howard W. Lutnick |
62 | 2017 | Mr. Lutnick is our Executive Chairman and has served as our principal executive officer since 2016. Mr. Lutnick also serves as the Chairman of our Board of Directors. Mr. Lutnick is the Chairman of the board of directors and Chief Executive Officer of BGC Group, Inc., a leading global brokerage and financial technology company, positions in which he has served BGC Group, Inc.’s predecessor BGC Partners, Inc. since 1999. Mr. Lutnick joined Cantor Fitzgerald, L.P. (“Cantor”) in 1983 and has served as President and Chief Executive Officer of Cantor since 1992 and Chairman since 1996. Mr. Lutnick also served as President of Cantor from 1991 until 2017. In addition, Mr. Lutnick also holds offices at and provides services to various other affiliates of Cantor and provides services to our and BGC Group, Inc.’s operating partnerships and subsidiaries, including BGC Partners, L.P. (“BGC U.S. OpCo”), BGC Global Holdings, L.P. (“BGC Global OpCo”), and Newmark Partners, L.P. (“Newmark OpCo”). In addition, Mr. Lutnick is the Chief Executive Officer, President, sole shareholder and a director of CF Group Management, Inc. (“CFGM”), the managing general partner of Cantor. Mr. Lutnick has also been a director of Satellogic, Inc. (“Satellogic”) since January 2022. Mr. Lutnick is a member of the board of directors of the Horace Mann School, the board of directors of the National September 11 Memorial Museum, and the board of directors of the Partnership for New York City. | |||||||
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| Name |
Age | Director Since | Biographies | |||||||
| In addition, Mr. Lutnick also served as the Chairman and Chief Executive Officer of CF Finance Acquisition Corp., a special purpose acquisition company (“SPAC”) from October 2015 until consummation of its business combination with GCM Grosvenor, Inc. (“GCM Grosvenor”), in November 2020, as the Chairman and Chief Executive Officer of CF Finance Acquisition Corp. II, a SPAC, from September 2019 until consummation of its business combination with View, Inc. in March 2021, as the Chairman and Chief Executive Officer of CF Finance Acquisition Corp. III from March 2016 until consummation of its business combination with AEye, Inc., in August 2021, as the Chairman and Chief Executive Officer of CF Acquisition Corp. V from April 2020 until consummation of its business combination with Satellogic in January 2022, and as the Chairman and Chief Executive Officer of CF Acquisition Corp. VI from April 2020 until consummation of its business combination with Rumble Inc. in September 2022. Currently, Mr. Lutnick has served as the Chairman and Chief Executive Officer of CF Acquisition Corp. IV since January 2020, CF Acquisition Corp. VII since July 2020 and CF Acquisition Corp. VIII since July 2020, all of which are SPACs. Additionally, Mr. Lutnick has served as Chairman and Chief Executive Officer of Cantor Fitzgerald Income Trust, Inc. (formerly known as Rodin Global Property Trust, Inc.) which is a non-traded real estate investment trust, or REIT, since February 2017. Mr. Lutnick received an undergraduate degree from Haverford College. | ||||||||||
| Virginia S. Bauer |
67 | 2018 | Ms. Bauer has been a director of our Company since June 2018. From 2010 to 2022, Ms. Bauer served as Chief Executive Officer of GTBM, Inc., a security technology company that develops and markets proprietary software solutions, where she currently serves as an advisor. Prior thereto, Ms. Bauer served as Senior Vice President of Covenant House International from 2009 to 2010, as the Secretary of Commerce for the State of New Jersey from 2004 to 2008, and as Director of the New Jersey Lottery Commission from 2003 to 2004. In addition, Ms. Bauer has served on the Board of the New Jersey Economic Development Authority since January 2020, on the Foundation Board of Monmouth Medical Center since 2009 and on the board of directors of the National September 11 Memorial Museum since 2008. She previously served on the Board of Commissioners of The Port Authority of New York and New Jersey from 2008 to 2012 and on the Advisory Board of the Lower Manhattan Development Corporation from 2001 to 2004. | |||||||
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| Name |
Age | Director Since | Biographies | |||||||
| Jay Itzkowitz |
63 | 2022 | Mr. Itzkowitz has been a director of our Company since August 2022. Mr. Itzkowitz is an experienced real estate and mergers and acquisitions attorney. Since 2016, Mr. Itzkowitz has been the Executive Vice President and General Counsel of S.D. Malkin Properties, a Connecticut-based real estate investment firm. Mr. Itzkowitz holds senior positions in affiliates of S.D. Malkin Properties, including Value Retail PLC, the London-based owner and operator of large-scale premium shopping villages in Europe and China, and NY Hockey Holdings, the holding company of the New York Islanders and UBS Arena. From 2013 to 2016, Mr. Itzkowitz served as Senior Vice President and General Counsel for Los Angeles-based Anuvu Operations LLC (formerly Global Eagle Entertainment Inc.). From 2004 to 2014, Mr. Itzkowitz served as Senior Managing Director of Cantor and affiliated entities. Prior to joining Cantor, Mr. Itzkowitz practiced law at Hogan Lovells (formerly Hogan Hartson L.L.P.) and was Head of Mergers Acquisitions for Vivendi Universal S.A. in New York and Paris. From 1992 to 2002, Mr. Itzkowitz held senior legal positions at The News Corporation Limited and its affiliate Fox Entertainment Group in Los Angeles, London, and New York. Prior to joining News Corporation, Mr. Itzkowitz practiced law at the firm of Paul, Weiss, Rifkind, Wharton Garrison, LLP. In addition, Mr. Itzkowitz currently serves on the Board of Pininfarina S.p.A., a Milan Stock Exchange-listed automotive design firm. Mr. Itzkowitz graduated from Rutgers University School of Law and Harvard College. | |||||||
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| Name |
Age | Director Since | Biographies | |||||||
| Kenneth A. McIntyre |
62 | 2020 | Mr. McIntyre has been a director of our Company since January 2020. Mr. McIntyre has over 25 years of experience in the commercial real estate industry. Since February 2020, Mr. McIntyre has been the Chief Executive Officer of the Real Estate Executive Council (“REEC”), having served as a founding member of the board of directors of the organization since 2003. REEC is a preeminent trade association in the U.S. for minority commercial real estate professionals. Since 2012, Mr. McIntyre has been the Founder and Managing Principal of PassPort Real Estate, LLC, a New York based consulting firm focused on advising developers and institutions on commercial real estate deal and platform structuring. His clients have included the Real Estate Associate Program (“Project REAP”), a non-profit that is focused on increasing the diversity of talent in the commercial real estate industry, where he served as the Executive Director, and the Port Authority of New York and New Jersey, where he served as Executive Advisor to the Office of Diversity Inclusion. Mr. McIntyre was a former Senior Vice President and Head of Commercial Real Estate at Hudson City Savings Bank from May 2014 to May 2016. Prior to joining Hudson City Saving Bank, Mr. McIntyre was a Managing Director in MetLife’s Real Estate Investments Group with various responsibilities across both the debt and equity portfolios, including: Head of Equity Acquisitions; Head of Strategic Initiatives; Head of Real Estate Capital Markets; and Head of Commercial Mortgage Production and Pricing. Prior to joining MetLife, Mr. McIntyre held senior origination and relationship management roles at KeyBank, GE Capital Real Estate, UBS and Chase. Since March 2021, Mr. McIntyre has served on the Board of Trustees of Acadia Realty Trust. In addition, he is a member of The Real Estate Roundtable, where he serves on the Equity, Diversity and Inclusion Committee. Mr. McIntyre is also a Member of the Board of Governors for the Real Estate Board of New York and serves on the Boards of the National Jazz Museum of Harlem and the Yorkville Youth Athletic Association. | |||||||
VOTE REQUIRED FOR APPROVAL
The four nominees receiving a plurality of the votes cast via the internet, by telephone or by mail or represented by proxy at the Annual Meeting and entitled to vote on the election of directors will be elected as directors. Withheld votes and broker non-votes will have no effect on the election of directors.
RECOMMENDATION OF OUR BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE FOUR NOMINEES FOR DIRECTOR.
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Independence of Directors
Our Board has determined that each of Ms. Bauer and Messrs. McIntyre and Itzkowitz qualifies as an “independent director” in accordance with the published listing requirements of Nasdaq, Inc. (“Nasdaq”). The Nasdaq independence definition consists of a series of objective tests, including that the director is not an officer or employee of ours and has not engaged in various types of business dealings with us. In addition, as further required by Nasdaq rules, our Board has made a subjective determination with respect to each independent director that no relationships exist which, in the opinion of our Board, would interfere with the exercise of independent judgment by each such director in carrying out the responsibilities of a director. In making these determinations, our Board has reviewed and discussed information provided by the individual directors and us with regard to each director’s business and personal activities as they may relate to us and our management, including participation on any boards of other organizations in which other members of our Board are members. In evaluating Ms. Bauer’s independence, the Board took into consideration her service on the board of directors of the National September 11 Memorial Museum since 2008, an organization where Mr. Lutnick also is a member of the board of directors, as well as the fact that Ms. Bauer’s husband was employed by an affiliate of Cantor and subsequent to his death on September 11, 2001, her family received the payments and health care coverage distributed to all affected victims from The Cantor Fitzgerald Relief Fund. In evaluating Mr. McIntyre’s independence, the Board took into consideration his service as an independent director at a public company for which the Company provides an immaterial amount of ordinary course real estate services. In evaluating Mr. Itzkowitz’s independence, the Board took into consideration his prior employment by a Cantor affiliate and his prior partnership interest in Cantor, which ended in 2014.
Meetings and Committees of Our Board of Directors
Our Board held 14 meetings during the year ended December 31, 2022. In addition to meetings, our Board and its committees reviewed and acted upon matters by unanimous written consent from time to time. During 2022, each independent director attended 100% of the total number of meetings of the Board and the committees of which he or she was a member, except former director Mr. Michael Snow did not attend the annual meeting of stockholders held on September 28, 2022 (the “2022 Annual Meeting”) where he did not stand for re-election.
Audit Committee
Our Audit Committee consists of Ms. Bauer and Messrs. McIntyre and Itzkowitz with Mr. McIntyre serving as Chair of the Audit Committee. Former director Mr. Snow served as Chair of the Audit Committee in 2022 prior to his departure following the 2022 Annual Meeting and on that date Mr. McIntyre became Chair of the Committee. Mr. Itzkowitz joined the Committee on August 10, 2022. Each member of the Committee qualifies as “independent” in accordance with the published listing requirements of Nasdaq and under special standards established by the SEC for members of audit committees, and each member of the Committee has been determined by our Board to meet the qualifications of an “audit committee financial expert” in accordance with the SEC rules. Our Board has determined that each of Ms. Bauer and Messrs. McIntyre and Itzkowitz meets the qualifications of an “audit committee financial expert.” The Committee operates pursuant to an Audit Committee Charter, which is available at ir.nmrk.com/disclaimer-and-legal-information under the heading “Charter of the Audit Committee of the Board of Directors” or upon written request from us free of charge.
Our Audit Committee selects our independent registered public accounting firm, consults with our auditors and with management with regard to the adequacy of our financial reporting, internal control over financial reporting and the audit process and considers any permitted non-audit services to be performed by our auditors. The Committee also approves all related party transactions, oversees the management of our enterprise risk management program, oversees compliance with our Code of Business Conduct and Ethics (the “Code of Ethics”) and administers our whistleblower policy, including the establishment of procedures with respect to the receipt, retention and treatment of complaints received by us regarding accounting, internal controls and auditing matters, and the anonymous submission by employees of complaints involving questionable accounting or auditing matters (collectively, the “Whistleblower Policy”). The Committee pre-approves all audit services, audit-related services and permitted non-audit services to be performed for us by our auditors, subject to certain minimum exceptions set forth in our Audit Committee Charter. The Committee held 15 meetings during the year ended December 31, 2022.
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During 2023, our Audit Committee approved the appointment of Ernst Young LLP (“Ernst Young”) to be our auditors for the year ending December 31, 2023. Ernst Young was also approved to perform reviews of each of our quarterly financial reports for the year ending December 31, 2023, and certain other audit-related services such as accounting consultations. Pursuant to our Audit Committee Charter, the Audit Committee will pre-approve audit services, internal control-related services and permitted non-audit services to be performed for us by Ernst Young, as set forth in the Audit Committee Charter. We are submitting such engagement to our stockholders for ratification at the Annual Meeting in Proposal 2.
Compensation Committee
Our Board of Directors has a Compensation Committee. The Committee consists of Ms. Bauer and Messrs. Itzkowitz and McIntyre, with Ms. Bauer serving as Chair of the Committee. Former director Mr. Snow also served on the Committee in 2022 prior to his departure following the 2022 Annual Meeting. Each member of the Committee qualifies as “independent” in accordance with the published listing requirements of Nasdaq. The Committee is responsible for reviewing and approving all compensation arrangements for our executive officers and for administering the Newmark Holdings, L.P. Participation Plan, which we refer to as the “Participation Plan,” our Long-Term Incentive Plan, which we refer to as the “Equity Plan” and our Incentive Bonus Compensation Plan, which we refer to as our “Incentive Plan” (together with the Equity Plan and the Participation Plan, the “Newmark Compensation Plans”). The Committee operates pursuant to a Compensation Committee Charter, which is available at www.nmrk.com/esg/governance under the heading “Compensation Committee Charter,” or upon written request from us free of charge. The Committee held 15 meetings during the year ended December 31, 2022.
ESG Committee
Our Board of Directors also has an Environmental, Social and Governance (“ESG”) Committee, which was formed in November 2020. The members of the ESG Committee are currently Ms. Bauer and Mr. McIntyre, both of whom are independent directors. Mr. McIntyre is the Chair of the ESG Committee. Each member of the ESG Committee qualifies as “independent” in accordance with the published listing requirements of Nasdaq. The ESG Committee is responsible for working with management to review ESG initiatives and procedures appropriate to the Company, to provide periodic review of ESG practices and policies, to review management’s current ESG strategy to ensure the Company engages in appropriate practices and technologies and to otherwise make recommendations on these matters to the full Board. The ESG Committee operates pursuant to an ESG Committee Charter, which is available at www.nmrk.com/esg/governance under the heading “ESG Governance,” or upon written request from us free of charge. The Committee held 5 meetings during the year ended December 31, 2022.
Nominating Process
All directors participate in the consideration of director nominees recommended for selection by a majority of the independent directors as defined by the published listing requirements of Nasdaq. Accordingly, our Board does not have a separate nominating committee or committee performing similar functions and does not have a nominating committee charter. The Board believes that such participation of all directors is appropriate given the size of our Board and the level of participation of all of our independent directors in the nomination process. The Board will also consider qualified director candidates identified by a member of senior management or by a stockholder. However, it is our general policy to re-nominate qualified incumbent directors and, absent special circumstances, the Board will not consider other candidates when a qualified incumbent consents to stand for re-election. A stockholder wishing to submit a recommendation for a director candidate should follow the instructions set forth in this Proxy Statement under the section below entitled “Communications with Our Board of Directors.”
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Qualification Criteria and Diversity
Our Board considers the following minimum criteria when reviewing a director nominee: director candidates must (1) have the highest character and integrity, (2) be free of any conflict of interest which would violate applicable laws or regulations or interfere with the proper performance of the responsibilities of a director, (3) possess substantial and significant experience which would be of particular importance in the performance of the duties of a director, (4) have sufficient time available to devote to our affairs in order to carry out the responsibilities of a director and (5) have the capacity and desire to represent the best interests of our stockholders. In addition, the Board considers as one factor among many the diversity of Board candidates, which may include diversity of gender, age and ethnicity. See “Environmental, Social and Governance Policies and Practices (ESG/Sustainability)—Board Diversity Matrix.” The Board also considers diversity of skills and experience as well as geographic background. Our Board screens candidates, does reference checks and conducts interviews, as appropriate. Our Board does not evaluate nominees for director any differently because the nominee is or is not recommended by a stockholder.
With respect to qualifications of the members of the Board, the Board generally values the broad business experience and independent business judgment in the financial, real estate or other fields of each member. Specifically, Ms. Bauer is qualified based on her depth of experience in both the technology and government sectors, Mr. Itzkowitz is qualified based on his experience as a mergers and acquisitions attorney in the real estate and media industries and his general business experience, and Mr. McIntyre is qualified based on his extensive experience in the commercial real estate industry and general business experience. Each of Ms. Bauer and Messrs. McIntyre and Itzkowitz is additionally qualified as a result of his or her status as an “audit committee financial expert.”
The following matrix provides information regarding the members of our Board, including certain types of knowledge, skills, experiences and attributes possessed by one or more of our directors which our Board believes are relevant to our business and industry. The matrix does not encompass all of the knowledge, skills, experiences or attributes of our directors, and the fact that a particular knowledge, skill, experience or attribute is not listed does not mean that a director does not possess it. In addition, the absence of a particular type of knowledge, skill, experience or attribute with respect to any of our directors does not mean the director in question is unable to contribute to the decision-making process in that area. The type and degree of knowledge, skill and experience listed below may vary among the members of the Board.
| Skills and Experience |
Bauer | Itzkowitz | Lutnick | McIntyre | ||||||||||||
| Business Operations |
X | X | X | |||||||||||||
| Finance/Accounting |
X | X | X | X | ||||||||||||
| Risk Management |
X | X | X | |||||||||||||
| Global Business |
X | X | ||||||||||||||
| Human Capital Management |
X | X | ||||||||||||||
| MA |
X | X | ||||||||||||||
| Other Public Company Board Service and Governance |
X | X | X | X | ||||||||||||
| Environmental |
X | |||||||||||||||
| Real Estate Industry Experience |
X | X | X | |||||||||||||
| Global Financial Markets |
X | X | ||||||||||||||
| Brokerage |
X | X | X | |||||||||||||
| Regulatory |
X | X | ||||||||||||||
| Innovation and Strategy |
X | X | X | |||||||||||||
| Ethics and Integrity |
X | X | ||||||||||||||
| Senior Leadership/CEO |
X | X | X | |||||||||||||
| Technology/Information Security |
X | X | ||||||||||||||
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Chairman of the Board
The Board has determined that, in light of Mr. Lutnick’s control of the stockholder vote of the Company through his control of Cantor, having a separate Chairman of the Board and principal executive officer is not efficient or appropriate for us. Additionally, our Board does not have a lead independent director for the same reason.
We believe that we and our stockholders are best served by having Mr. Lutnick serve as Chairman of the Board and as our Executive Chairman and principal executive officer. Mr. Lutnick’s role as Executive Chairman, which combines his roles of Chairman of the Board and principal executive officer, promotes unified leadership and direction for our Board of Directors and executive management, and it allows for a single, clear focus for the chain of command to execute our strategic initiatives and business plans. Mr. Lutnick may be referred to as “Chairman” or “Executive Chairman” interchangeably. Mr. Gosin, who serves as our Chief Executive Officer, and who is not a director, provides strong leadership in strategic initiatives, acquisitions and day-to-day management of the business and industry-leading experience in our markets. Our strong and independent Board members effectively oversee our management and provide vigorous oversight of our business and affairs and any proposed related party transactions. Our Board is composed of active and effective directors, a majority of whom are independent. Three of our four directors meet the independence qualifications in accordance with the published listing requirements of Nasdaq and the SEC and our Board’s standards for determining director independence. Mr. Lutnick is the only member of executive management who is also a director. We believe that requiring that the Chairman of the Board be an independent director is not necessary to ensure that our Board provides independent and effective oversight of our business and affairs. Such oversight is maintained through the composition of our Board, the strong leadership of our independent directors and Board committees and our highly effective corporate governance structures and processes.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines (the “Guidelines”) that provide the framework for the governance of the Company. The Guidelines address, among other things, the composition and structure of the Board, including membership criteria, independence standards and limits on other directorships, duties and responsibilities of directors, meeting procedures, committees of the Board, executive officer leadership development and stockholder engagement, including with respect to ESG matters. The Board reviews these principles and other aspects of governance annually. The Guidelines are available at https://www.nmrk.com/esg/governance under the heading “Corporate Governance Policies and Practices” or upon written request from the Company free of charge.
Executive Sessions
In order to comply with Nasdaq rules, the Board has resolved that it will continue to schedule and/or provide opportunities during at least two meetings per year in which the independent directors will meet without the presence of Mr. Lutnick.
Annual Meetings
The Corporate Governance Guidelines provide that each member of the Board is expected to attend Annual Meetings of Stockholders of the Company. At the 2022 Annual Meeting, held on September 28, 2022, all of the Company’s directors other than former director Mr. Snow, who did not stand for re-election, were in attendance.
Communications with Our Board of Directors
Stockholders may contact any member of our Board, including to recommend a candidate for director, by addressing their correspondence to the director, c/o Newmark Group, Inc., 125 Park Avenue, New York, NY 10017, Attention: Corporate Secretary. Our Corporate Secretary will forward all such correspondence to the named director. If you wish to submit any proposal to be considered at our 2024 annual meeting of stockholders, please follow the instructions set forth in the section below entitled “2024 Stockholder Proposals.”
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The Board’s Role in Risk Oversight
Risk oversight is an integral part of Board and Committee deliberations throughout the year. The Audit Committee oversees the management of our enterprise risk management program, and it annually reviews an assessment prepared by management of the critical risks facing us, their relative magnitude and management’s actions to monitor and mitigate these risks.
Our management implemented an enterprise risk management program to enhance our existing processes through an integrated effort to identify, evaluate and manage risks that may affect our ability to execute our corporate strategy and fulfill our business objectives. The activities of the enterprise risk management program entail the identification, prioritization and assessment of a broad range of risks (e.g., strategic, operational, cybersecurity and information security, financial, legal/regulatory, reputational and market) and the formulation of plans to mitigate their effects.
Our Board generally discusses cybersecurity and information security risks annually with the Chief Information Officer and other relevant technology and security personnel.
Similarly, in designing and implementing our executive compensation program, the Compensation Committee takes into consideration our operating and financial objectives, including our risk profile, and considers executive compensation decisions based in part on incentivizing our executive officers to take appropriate business risk consistent with our overall goals and risk tolerance.
Non-executive brokers, managers and other professionals are generally compensated based upon production or commissions, which may involve committing to certain transactions in certain of our businesses. These transactions may expose the Company to risks by individual employees, who are motivated to increase production. While we have in place management oversight and risk management policies, there is an inevitable conflict of interest between our compensation structure and certain brokerage, transactional, or similar risks on various portions of our businesses.
Succession Planning
From time to time, the Board discusses succession planning, including our consideration of succession strategy, the impact of any potential absence due to illness or leave of certain key executive officers or employees, as well as competing demands on the time of certain of our executive officers who also provide services to Cantor, BGC (which term refers to BGC Partners, Inc. (“BGC Partners”) and its consolidated subsidiaries prior to July 1, 2023, and to BGC Group, Inc. (“BGC Group”) and its consolidated subsidiaries from July 1, 2023), and various other ventures and investments sponsored by Cantor. Our Board also discusses from time to time, as part of its succession planning, engagement and encouragement of future business leaders and the process of introducing directors to leaders in our business lines. The Board may also discuss short-term succession in the event that certain of the senior executive officers should, on an interim or unexpected basis, become temporarily unable to fulfill their duties. The Board also considers hiring and retention of leaders required for the changing business landscape and to lead future business lines. Such individuals could include internal and external candidates. Additionally, we have implemented identification and tracking of diverse candidates as part of our succession planning efforts and plan to implement development plans for all high-potential successors this year.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE POLICIES AND PRACTICES (ESG / SUSTAINABILITY)
Environmental, Social and Governance (“ESG”) / Sustainability Information
We believe that our ESG policies and practices will create sustainable long-term value for Newmark, our stockholders and other stakeholders, our clients and our employees while also helping us mitigate risks, reduce costs, protect brand value, and identify market opportunities. As Newmark continues to expand globally, we expect that our ESG initiatives will add value to our clients and positively impact the communities in which our clients and we operate.
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In November 2020, we established a Board-level ESG Committee to provide oversight with respect to our ESG policies and practices. The ESG Committee charter may be found on our website at www.nmrk.com/esg/governance under the heading “ESG Governance.” With the Board’s and the ESG Committee’s oversight, we are embedding social and human capital, employment, environmental, sustainability, charitable and corporate governance policies and practices into our corporate strategy, compensation, disclosure, and goals to maintain and advance long-term value for our investors.
Newmark supports sustainable business practices and is focused on taking the steps necessary to establish a sustainability program both internally and for our clients. In 2022, we retained a nationally certified women-owned firm to assist our leadership in this endeavor. We also established an Executive ESG Council, comprised of key Company executives and other senior leaders, to provide direction for Newmark’s ESG and sustainability progress and initiatives.
For more information about these topics, new and evolving initiatives and specific examples of policies and practices, see our website at www.nmrk.com/esg and “Additional ESG/Sustainability Information” below. Unless the context indicates otherwise, references in this ESG and sustainability section to our “employees” includes our professionals who are independent contractors.
Our Fundamental Values
Newmark is an organization built on strong values, employee engagement and ownership. At our core we are committed to our employees by providing them with an opportunity to participate in our success. We believe that by cultivating a dynamic mix of people and ideas, we enrich the performance of our businesses, the experiences of our increasingly diverse employee base, and the level of engagement in the communities in which we operate. We value hard work, innovation, superior client service, strong ethics and governance, equal opportunities, and philanthropy is woven into our corporate culture. We believe these values foster sustainable, profitable growth. We strive to be exemplary corporate citizens and honor high ethical principles in our interactions with other businesses, our employees and the communities in which we live and work. We take corporate social responsibility and sustainability seriously: we want to contribute to the common good.
Set forth below is a discussion of many of our ESG and sustainability policies and practices. These are our values in action.
Human Capital and Social Policies and Practices
We are committed to our people, our stockholders and the community as a whole. We have a variety of programs to incentivize and support our employees, from employee ownership to comprehensive benefits and training. We are also committed to equal opportunity, diversity and other policies and practices designed to fulfill our commitment to social and human capital development.
Attracting and Retaining the Best Talent
Our success depends on our ability to attract and retain talented, productive and skilled employees to transact with our clients in a challenging and regulated environment that is experiencing ever-increasing competition for talent. We are investing in creating a diverse, inclusive and incentivized work environment where our people can deliver their best work every day. In 2021, we were named by GlobeSt.com as one of commercial real estate’s “Best Places to Work.” Newmark was ranked #1 on LinkedIn’s 2022 “Top Companies in Real Estate” list, which ranks the top 25 companies at which to grow a career in the industry.
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Flexible, Safe and Empowering Work Environment
To facilitate the retention of our employees, we have maintained our flexible work arrangements implemented during COVID-19, where appropriate, made compensation adjustments, and provided additional benefits, including a 401(k) match.
We have taken significant measures to develop a safe work environment in our offices subject to applicable state and local regulatory requirements. We have established a more flexible hybrid approach in many instances for non-revenue generating roles or for roles which are not office dependent. We have established vaccination requirements in accordance with applicable laws, including time-off for vaccines, coverage for COVID-19 testing and enhanced sick leave.
We have implemented measures to ensure the mental health and well-being of our employees during the pandemic, including increased access to behavioral health and mental health telemedicine, expanding access to employee assistance program services and providing employees with access to preventative mental health solutions.
We continue to take significant steps to protect our employees and encourage them all to be vaccinated.
Our employees receive safety awareness training via Newmark’s online safety training platform, providing access to over 1,000 courses across three safety catalogs. In 2022, Newmark employees completed nearly 7,000 individual safety training sessions.
Performance-Based and Highly Retentive Compensation Structure
Virtually all our key executives and producers have equity or partnership stakes in the Company and/or its subsidiaries. Generally, they receive deferred equity, limited partnership units or restricted stock units (“RSUs”) as part of their compensation. As of June 30, 2023, our employees and independent contractors, partners, executive officers and directors owned approximately 27% of our equity on a fully diluted basis. We issue limited partnership units and other forms of equity-based compensation, such as RSUs, which:
| • | Provide liquidity to our partners and employees over time; |
| • | Align the interests of our partners and employees and management with those of common stockholders; |
| • | Help motivate and retain key partners and employees; and |
| • | Encourage a collaborative culture that drives cross-selling and growth. |
The non-exchangeable partnership units held by our partners are subject to forfeiture (such as if the non-compete, confidentiality or non-solicit provisions of the Newmark Holdings limited partnership agreement are violated), and unvested RSUs are subject to service conditions that must be met in order for them to vest into shares of Newmark common stock. In addition, any partnership amounts paid following termination of service generally are paid over a number of years to ensure compliance with post-termination partner obligations. This compensation structure has proven to be highly retentive and since 2015, we have retained 94% of our top-performing producers.
We also enter into various agreements with certain of our employees and partners. Many of these individuals receive loans that may be either wholly or in part repaid from the distribution earnings that the individual receives on some or all of their limited partnership units, or that may be forgiven over a period of time. These loans provide incentives and promote entrepreneurship, retention and long-term engagement.
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Clawbacks and Incentives
The partnership units issued to our executive officers, certain of which, such as PSUs or NPSUs, may be redeemed for zero at any time by the Compensation Committee, as well as partnership obligations under the Newmark Holdings limited partnership agreement, are retentive and provide broad discretion and significant clawback power to the Compensation Committee. We do not currently have a formal general compensation recovery or “clawback” policy for our executive officers and others. See “Compensation, Discussion and Analysis—Clawback, Forfeiture and Recoupment.”
We also enter into various agreements with certain of our employees and partners whereby these individuals receive loans which may be either wholly or in part repaid from the distributions that these individuals receive on some or all of their limited partnership units or may be forgiven over time. These loans provide incentives and promote retention.
Employee Diversity, Inclusion and Equal Opportunity
We are committed to equal opportunity, diversity and other policies and practices that seek to further our development of a diverse and inclusive workplace. We consider all qualified applicants for job openings and promotions without regard to race, color, religion, gender, sexual orientation, gender identity, national origin or ancestry, age, disability, service in the armed forces, or any other characteristic that has no bearing on the ability of employees to do their jobs well. We continue to develop initiatives to support these values and include qualified, diverse candidates in the interviews process for leadership roles.
We are dedicated to our efforts to achieve pay equity. Our promotion and compensation processes are designed to enable us to treat employees fairly, and our compensation decisions are differentiated based on performance.
Newmark participates in the Corporate Equality Index, a national benchmarking tool measuring policies, practices and benefits pertinent to lesbian, gay, bisexual, transgender and queer (LGBTQ+) employees and was named to GlobeSt.’s 2021 Women of Influence ‘Diversity Champion’ list.
Talent remains at the core of who we are as a company, and we remain committed to having a culture built around inclusion, equality and developing a diverse workforce. In 2020, we launched IDEA (Inclusion, Diversity, Equality and Access), a program designed to enhance our ability to attract, develop and retain top talent with an emphasis on increasing representation of traditionally underrepresented groups at all levels of the organization. Our goal is to build an even more successful organization that more closely reflects our client base and the population at large.
Our employee resource groups (“ERGs”) support the recruitment, development and retention of diverse professionals across our organization to advance our business and reputation. Our current ERGs are the Asian Pacific American Community, the Black Employee Network, the Latin American/Hispanic ERG, the Military Veterans ERG, Newmark Pride and the Network of Women (“NOW”). Our ERGs strive to offer a variety of opportunities and tools to help our employees make new professional contacts, find mentors and develop their careers. These events and activities also allow our employees to support one another through a valuable exchange of experiences, advice, and best practices for career success.
We are helping to shape future leaders from a wide variety of backgrounds. We actively participate in various initiatives, including the following:
| • | NOW, which supports the recruitment, development, and retention of women across our organization. |
| • | The Mortgage Bankers Association Path to Diversity Scholarship Program; |
| • | Sponsorship of the Summer Enrichment and Analyst Development Programs run by Artemis Real Estate Partners, a female-owned financial firm with a strong track record in fostering diversity; |
| • | Platinum Level sponsorship of the virtual internship program run by the Real Estate Board of New York (REBNY) in partnership with the City University of New York (CUNY) and Project Destined; |
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| • | Project Destined, an education platform providing training in commercial real estate fundamentals and related skills through a Newmark leadership speaker series; and |
| • | The National Suppliers Diversity Council (NMSDC) to incorporate the organization’s certified minority suppliers into our supplier bid process. |
We further participate in job fairs and job boards that are focused on reaching a diverse applicant pool. We are also an investor in a commercial real estate services firm that operates as E Smith Advisors, which is a certified minority-owned business enterprise offering a wide variety of real estate services in the U.S.
Employee Engagement, Communication, Management and Leadership Training and Development
We are investing in our employees’ long-term development and engagement by delivering training and development programs and a culture where our people can thrive and maximize their potential. This includes “Newmark Next Generation,” a program designed to recruit and develop junior sales professionals in our brokerage business. We require mandatory annual training in workplace respect and inclusion, anti-money laundering, and anti-crime, global sanctions, ethics, cyber-security and harassment among other topics. We also provide or support periodic job-specific and other developmental training and support for our employees so they can maximize their potential, as well as tuition reimbursement programs to eligible employees.
We provide virtual and in-person leadership training to managers on topics, including management effectiveness, communication skills, interview skills, writing and delivering effective performance evaluations, managing diverse teams and other topics. This training is supplemented by a comprehensive library of on-line training courses that managers and employees may access. Finally, our individual business lines offer ongoing learning and development opportunities tied to deepening the subject matter expertise of their professionals.
Our success depends on employees understanding how their work and engagement contribute to our strategy, culture, values and regulatory environment. We use various channels to facilitate open and direct communication, including internal calls and meetings with employees, training and policy updates, our ERGs, our IDEA program and our social and family outings and events.
Our Environmental Focus, Workplace Strategies and Sustainable Business Practices
We are focused on the environment and recognize the importance of treating our natural resources with the greatest respect, so that they are available to future generations. Building operations have a significant impact on the environment, and as technology continues to place greater demands on building systems for power and cooling, energy consumption is expected to continue to rise at an unsustainable rate. As one of the largest real estate service providers in the U.S., we believe it is our responsibility to improve energy efficiency and reduce energy consumption to protect the environment through continuous improvement of building practices. We understand that sustainable buildings provide a better work environment, increase building efficiency, and reduce the environmental impact of building operations. We continue to work on these initiatives.
As a responsible business, we are acutely aware of climate change and other major issues affecting the environment. We also understand the impact commercial real estate can have on the health of the environment. That is why we encourage sustainable building practices, and in our Global Corporate Services business and property management assignments, recommend strategies to clients to maximize energy efficiency, recycle materials and limit waste. In 2022, Newmark Holdings Limited, formerly NGFK Global Corporate Services LTD (“Newmark GCS”), submitted a sustainability assessment questionnaire to the independent business sustainability ratings firm EcoVadis, which assesses companies across four themes: environment, labor and human rights, ethics and sustainable procurement. In this first independent assessment, Newmark GCS was awarded a Silver EcoVadis Medal, placing the group in the top 10% of 90,000 companies assessed. These goals apply to Newmark’s offices as well as to the work we do for our clients, whether in selecting a location, building out space or managing an asset.
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Newmark’s property, facilities and energy/sustainability management teams work internally and with clients to reduce energy demand and carbon emissions. Newmark is increasingly collecting and measuring environmental data and this data is used to build client strategies around energy efficiency and renewable energy supply initiatives.
In our workplaces, we are studying how to make our own contribution to state, national and global environmental initiatives and to expect the same of our vendors and suppliers when doing business with us. As part of this, we are considering how to minimize our future carbon footprint when planning office renovations and intend to focus our attention in the near term on methods of reducing our greenhouse gas emissions, increasing use of renewable energy, conserving water, and reducing waste generation. Newmark occupies over a dozen buildings that are LEED Certified and over 30 that are Energy Star Certified. For example, our New York City Headquarters at 125 Park Avenue is in a building that has received U.S. Green Building Council LEED Gold and Energy Star certifications. Newmark is working with the landlords and property management teams that oversee the buildings we occupy to collect accurate and actionable energy data. As this data becomes more available, Newmark plans to implement energy efficiency initiatives where possible that will help lower our overall carbon footprint. We are also investigating the purchase of renewable energy supply where possible in deregulated energy markets. For all new leased space for Newmark, we generally consider green lease options and in an effort to ensure the workplace is as sustainable as possible.
Environmental Policy and Energy and Sustainable Service Reference Guide
We have a policy with respect to the responsible environmental management of our operations. We are creating a baseline to understand and minimize the impact that our business has on the environment and have begun to actively search for ways to reduce our footprint. We are pursuing traditional, as well as new and innovative, methods to achieve our goals. We are seeking to create a culture where environmental focus is a way of being rather than a secondary consideration.
Further information on our policy can be found on our website at the following link: www.nmrk.com/esg/environmental.
Since 2017, Newmark’s Energy and Sustainability Services team has led energy management initiatives for Newmark clients. The team partners with clients to help identify, develop and manage green building investments, pursue Energy Star certifications, manage their greenhouse gas emissions inventory, and establish long-term energy conservation measures to help meet their corporate decarbonization and net zero emissions goals. Newmark has also developed an Energy and Sustainability Services Reference Guide, which is available at https://www.nmrk.com/storage-nmrk/uploads/documents/Newmark-Energy-and-Sustainability-Services-Guide_2023.pdf, which assists clients and property teams in reducing the environmental impact of property operations, maintenance and construction associated with real estate assets.
For more information about our policies and these initiatives and services provided to clients and within our own facilities as they evolve, please refer to our website at www.nmrk.com/esg.
Business Continuity and Resiliency
We are implementing additional sustainability policies and practices to protect the continuity of our business and operations to maintain and advance value for stockholders and other stakeholders. These policies and practices include disaster recovery and crisis management protocols to minimize the impact of health emergencies and natural or other disasters on our operations. We maintain concurrent data centers in the United States and internationally, providing backup of our computer systems and capacity for our employees to work remotely during crises. These policies and practices enabled our employees to maintain a high level of performance while working in offices or remotely during the COVID-19 pandemic in compliance with relevant rules and regulations in applicable jurisdictions, and in preservation of the health, safety and welfare of our workforce.
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Charitable Policies and Practices
Never has our commitment to our people and others been so evident as in our corporate giving and charitable work. Honoring the events of September 11, 2001, the Company currently matches 100% of individual employee donations to The Cantor Fitzgerald Relief Fund made in September of each year up to $5,000 per individual employee. Employees have the option of designating a bona-fide charity as the beneficiary of the donation and the match. Additional charitable initiatives are in effect from time to time.
In 2022, Newmark announced a Ukraine relief program with the Company matching 100% of employee, broker and client donations up to $1 million to The Cantor Fitzgerald Relief Fund to support direct relief efforts through charity partners in neighboring countries.
We are a leading sponsor of the Homeless Assistance Fund, a collective public private initiative launched in 2022, led by the Partnership for New York City, to provide services and mental health resources to unsheltered New Yorkers. The Homeless Assistance Fund partners with Breaking Ground, a homeless outreach and housing nonprofit, to accelerate the connect-to-care process, getting individuals with mental illness into the treatment programs and housing they need. Taking our commitment a step further, Newmark provided office space, 24 hours a day, at its New York City headquarters for the Breaking Ground outreach teams working in the Grand Central/Midtown East area.
Newmark actively encourages our producers, managers and other employees to support the communities in which we live and operate through volunteerism and philanthropy. In 2022, we supported hospitals, universities, food banks and community-based organizations focused on childhood development and education and programs for the disabled, families and the financially disadvantaged. Some of the charities include: American Cancer Society, Big Brothers, Big Sisters, Boston Children’s Hospital, Bowery Mission, Boys Girls Clubs, Breaking Ground, Creative Art Works, Food First, Homes Fit for Heroes, Junior Achievement, National Kidney Foundation, Navy Seals Foundation, Northern Virginia Family Services, Pace University and United Jewish Appeal.
We actively encourage volunteerism from our people, and we proudly support our clients in their charitable efforts. To encourage our professionals to engage in civic and charitable efforts, we have a matching program for charities that fit within Newmark’s overall charitable mission.
As part of these values in action, we offer a Volunteer Time Off program to support individual employee volunteerism in the communities in which they work and live. All full and part-time regular employees are eligible to utilize one paid workday (whole day or two half-days) each calendar year to volunteer with bona fide charitable organizations of their choice. Participation is growing and as office life normalizes and pandemic measures continue to recede, we will encourage broader use of this benefit and participation by employees in charitable and community service activities within all our office communities.
We also support victims of disasters and sometimes, our volunteers travel to those in need. In January 2019, a group of more than 200 volunteers drawn from The Cantor Fitzgerald Relief Fund, employee volunteers from Newmark and its affiliates and many friends from the New York community and clients from Banco Santander and Scotiabank, traveled to Puerto Rico to aid in its recovery from Hurricanes Irma and Maria. This operation distributed $4 million in $1,000 prepaid cards to thousands of families still suffering from the devastation.
Additional information about our charitable efforts is available at www.nmrk.com/esg/social.
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Corporate Governance Policies and Practices
Our commitment to good corporate governance policies and practices is demonstrated by our Corporate Governance Guidelines, our rigorous Code of Ethics, the charters of the Audit, Compensation and ESG Committees of our Board, our Hedging and Pre-Clearance Policy and our other corporate governance policies and practices. Some highlights of our corporate governance policies and practices include the following:
| • Independence of a substantial majority of the members of the Board;
• Only independent directors serve on each committee;
• Board-level ESG Committee;
• Annual independence review of independent outside directors;
• Diverse array of personal characteristics and professional experience of the Board, consisting of 25% women and 25% persons of color;
• Annual election of each member of the Board – we do not have a classified (“staggered”) Board;
• The ability of our Board to require the resignation of a director who fails to obtain a majority vote for election;
• No stockholder rights plan or other “poison pill” or similar anti-takeover device;
• A prohibition on personal loans to directors and executive officers;
• Requirement for directors to inform the Board of changes in their principal job responsibilities;
• Limits on the service of directors and executive officers on other public company boards;
• Director orientation and continuing education;
• Annual self-assessments of the performance of our Board and its committees and individual directors;
• Prohibitions against trading while in possession of material, non-public information;
• Prohibitions against hedging;
• Strict procedures and enforcement of our ethical standards and our conflict of interest policies, including our robust Whistleblower Policy – completely confidential and with a whistleblower hotline available 24/7; |
• Annual evaluation of the performance of both our Executive Chairman and Chief Executive Officer;
• Procedures for establishing and disseminating agendas and materials for meetings of the Board and its committees in advance;
• Periodic executive sessions of independent directors;
• Consideration of factors including diversity of gender, age, ethnicity, skills, experience and geographic background in considering director candidates;
• Strict ethical and other criteria for membership on the Board;
• Detailed processes and review of all related party transactions and required approval by independent directors;
• Access of the Board and its committees to management and to retain outside independent advisors;
• Diversified mix of cash and short and long-term equity awards designed to be highly retentive and risk-appropriate, and to align the interests of our executive officers with those of our stockholders;
• Executive officers holding much of their personal net worth in our and our affiliates’ equity;
• Robust annual review and oversight of Code of Ethics responses;
• Succession planning and management development of executive officers and potential senior managers having significant responsibility for business areas;
• Annual stockholder say-on-pay votes;
• Annual ratification of the appointment of our independent registered public accounting firm; and
• Annual review of our corporate governance policies and practices |
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Board Diversity Matrix
The table below provides certain highlights of the composition of our Board members as of August 16, 2023. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f).
| Board Size: |
||||||||||||||||
| Total Number of Directors |
4 | |||||||||||||||
| Gender: |
Male | Female | Non-Binary | Gender Undisclosed |
||||||||||||
| Number of directors based on gender identity |
3 | 1 | — | — | ||||||||||||
| Number of directors who identify in any of the categories below |
||||||||||||||||
| African American or Black |
1 | — | — | — | ||||||||||||
| Alaskan Native or American Indian |
— | — | — | — | ||||||||||||
| Asian |
— | — | — | — | ||||||||||||
| Hispanic or Latinx |
— | — | — | — | ||||||||||||
| Native Hawaiian or Pacific Islander |
— | — | — | — | ||||||||||||
| White |
2 | 1 | — | — | ||||||||||||
| Two or More Races or Ethnicities |
— | — | — | — | ||||||||||||
| LGBTQ+ |
— | — | — | — | ||||||||||||
| Undisclosed |
— | — | — | — | ||||||||||||
Whistleblower Complaint and Investigation Procedures for Accounting, Internal Controls, Auditing Matters and Employment and Labor Practices
We have a policy regarding reporting of complaints about accounting, internal controls, employment and labor practices, auditing matters, or questionable financial practices. The policy is designed to provide a channel of communication for employees and others who have concerns about our conduct or any of our directors or employees. Complaints are treated seriously and handled expeditiously. Any person may submit a complaint to our independent outside law firm to a dedicated hotline and email account available 24 hours a day, 7 days a week. Complaints that are accounting or financial in nature (“Accounting Complaints”) will be handled by the Chair of our Audit Committee and by our Chief Legal Officer, Corporate Secretary or designee.
Employees submitting an Accounting Complaint need not provide their names or other personal information and reasonable efforts will be used to conduct the investigation that follows from an Accounting Complaint from an employee in a manner that protects the confidentiality and anonymity of the employees submitting the Complaint.
Employees are reminded of the Whistleblower Policy at least annually and information is provided in local languages. We honor a culture of investigation, confidentiality and non-retaliation. Persons submitting complaints in good faith will not be subject to retaliation and the policy does not prohibit other actions protected under applicable law. Our Whistleblower Policy is publicly available on our website at www.nmrk.com/esg/governance under the heading “Whistleblower Complaint and Investigation Procedures for Accounting, Internal Controls, Auditing Matters and Employment and Labor Practices.”
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Code of Business Conduct and Ethics and Professional Integrity
Our corporate values and strong policies and procedures regarding ethics, conflicts of interests, related party transactions and similar matters are contained in our Code of Ethics. This commitment applies to members of our Board, executive officers, other officers and our other covered employees globally. The Code of Ethics and its training modules are circulated in local languages and training and certifications are conducted annually for all employees. Annual written certifications are required. Potential violations and disclosures globally are reviewed annually by executive management and escalated to the Audit Committee. Director and executive officer disclosures are reviewed by the Audit Committee on an annual basis. The Code of Ethics is available on our website at www.nmrk.com/esg/governance under the heading “Code of Business Conduct and Ethics and Professional Integrity.” In 2021, we adopted a global anti-bribery and corruption policy. See “Compliance and Anti-Financial Crime Policy and Bribery and Corruption” below.
Compliance and Anti-Financial Crime Policy and Bribery and Corruption
We are committed globally to our policy regarding anti-money laundering and anti-financial crime, including anti-bribery and corruption, counter-terrorism financing and anti-fraud. We are committed to compliance and training regarding all relevant laws, rules, and regulations designed to combat bribery and corruption, including, but not limited to, the UK Bribery Act of 2010 and the U.S. Foreign Corrupt Practices Act of 1977, as amended. Further information on this policy can be found on our website at the following link: https://www.nmrk.com/esg/governance under the heading “Compliance Anti-Financial Crime Policy.”
In addition, our Code of Ethics provides that we will not enter into a business relationship or engage in an activity if we know or have reasonable grounds to suspect that a business relationship or activity is connected with or facilitates bribery or corruption. It is the responsibility of each person covered under the Code of Ethics to comply with applicable anti-bribery and corruption laws. Persons covered under the Code of Ethics are required to report any suspicions of bribery or corruption to the Compliance Officer or, as appropriate, to the Audit Committee or the Board, or in accordance with our Whistleblower Policy. For more information on our Code of Ethics and Whistleblower Policy, see the section entitled “Code of Ethics and Whistleblower Procedures.”
Global Anti-Bribery and Corruption Policy
In 2021, we implemented a global policy to combat bribery and corruption through a clear set of policies and procedures outlining anti-bribery and corruption standards, procedures and annual employee training. The policy specifically defines Bribery and Corruption and provides for management and Board oversight. Further information on this policy can be found on our website at the following link: www.nmrk.com/esg/governance under the heading “Global Anti-Bribery and Corruption Policy.”
Annual Risk Evaluation and Board-Level Risk Oversight
Our Board of Directors meets at least annually with our senior risk officer to review and evaluate our enterprise risk framework, risk management policies and practices, credit and risk mitigation policies and practices, and other related issues.
Focus on our Internal Control Environment
As described more fully in its charter, the primary function of the Audit Committee is to assist our Board of Directors in its general oversight of the Company’s financial reporting, internal control over financial reporting and audit process. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements; accounting and financial reporting principles; internal control over financial reporting; disclosure controls; and procedures designed to ensure compliance with accounting standards, applicable laws and regulations.
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Our overall control environment is a focal point for our management, the Audit Committee and the Board. With this focus and with the oversight of the Audit Committee and the Board, management regularly enhances our overall control environment
Cyber-Security and Information Security Program
We are committed on a Company-wide basis to combating the global threat of cyber-attacks and to securing our business through our information security programs to operate with confidence, through a deep understanding of cyber-security risks, vulnerabilities, mitigations, and threats. We have a global cyber-security program applicable to all subsidiaries and business lines. We conduct periodic internal and external vulnerability audits and assessments and penetration testing and provide periodic training to employees and independent contractors. Further information on this program can be found on our website at the following link: https://www.nmrk.com/esg/governance under the heading “Cyber-Security and Information Security Program.”
Data Privacy Policy
We have a global data privacy policy applicable to all subsidiaries and business lines. We are committed to conducting our business in line with the right to privacy set forth in the Universal Declaration of Human Rights (Article 12). As such, we are committed to handling personal data responsibly and recognize the privacy rights of persons involved in our business dealings. Our policy provides a mechanism for data subjects to raise concerns about personal data and privacy as well as a right of access to personal information, rights to correct or amend such information and the right to request deletion of such personal information. Further information on this program can be found on our website at the following link: www.nmrk.com/esg/governance under the heading “Data Privacy Program.”
Hedging and Pre-Clearance Policy
We have a policy with respect to hedging of equity securities issued by Newmark (collectively, “Company Equity Securities”). In this regard, we prohibit our directors, officers, and employees, including leased employees, brokers and independent contractors, from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engaging in transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of Company Equity Securities held by such persons, except with the explicit approval of our Audit Committee or its designees. Additionally, we have a pre-clearance policy and process for trades in Company Equity Securities that all our directors, executive officers, and other designated insiders and employees, including leased employees, brokers and independent contractors must follow. Under this policy, such persons’ trades are subject to pre-clearance through our legal and compliance department. Directors and executive officers are also required to advise management in advance of entering into any SEC Rule 10b5-1 trading plans or similar plans in accordance with applicable law. For avoidance of doubt, Cantor and its affiliated entities or any securities issued by such entities other than the Company are not covered under the hedging restrictions. Further information on this program can be found on our website at the following link: www.nmrk.com/esg/governance under the heading “Hedging and Pre-Clearance Policy.”
Additional ESG / Sustainability Information
To learn more about our policies and practices and our continuing efforts related to human capital management, ESG and sustainability matters, including any sustainability or corporate responsibility reports released from time to time, please refer to the ESG / sustainability section of our website at www.nmrk.com/esg and to our periodic reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for further information. You may also find our Corporate Governance Guidelines, Code of Ethics, the charters of the committees of our Board of Directors, Hedging and Pre-Clearance Policy, Environmental Policy, information about our charitable initiatives and other sustainability and ESG policies and practices on our website. The information contained on, or that may be accessed through, our website, is not part of, and not incorporated into, this document.
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STOCKHOLDER ENGAGEMENT
Our Board of Directors and management value the opportunity to engage with our stockholders and gain insight year-round on their views on a broad range of topics, including our strategy, financial performance, executive compensation, corporate governance, human capital management, including diversity and inclusion, and environmental and social goals. Our Board of Directors receives reporting on feedback from investors and stockholder voting results. In addition, our management routinely engages with investors at conferences and other forums. We also speak with proxy advisors to discuss, and receive feedback on, our governance practices and executive compensation programs. Feedback from investors informs the Board’s ongoing review of governance and compensation matters.
In recent years, we have also enhanced our engagement strategy through:
| • | Information available on our website including SEC alerts, more detailed financial and operational disclosures in our investor presentations and supplemental Excel tables; |
| • | Commercial real estate-focused market reports, white papers, and thought leadership; and |
| • | Investor meetings, analyst and investor days, and conferences, including nearly 140 investment community interactions in 2022 and over 250 such interactions in 2021, which is when we held our last investor and analyst day event. This was in addition to the several hundred people who listened to one or more of our quarterly financial results conference calls. |
In 2022, we reached out to institutions who collectively represented the majority of Newmark shares held by active professional investors. Of those who engaged with us, our interactions with them covered topics including industry trends, business trends and strategy, capital allocation, geographic and business line expansion, our recruitment and retention policies, key drivers of our growth, ESG, corporate governance matters, board composition and diversity, our executive compensation program, and ways to enhance our disclosures. We also periodically engage a third-party research firm to conduct anonymous surveys of our top institutional owners and the broader investment community to solicit candid feedback on these and other issues.
We look forward to further expanding our communication with stockholders and will continue to consider their views and perspectives, as appropriate, in making governance decisions and establishing strategic direction for the Company going forward.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Our executive officers are appointed annually by and serve at the discretion of our Board. In addition to Mr. Lutnick, who serves as Chairman of our Board and our principal executive officer, our executive officers, their respective ages and positions, and certain other information with respect to each of them are as follows:
Barry M. Gosin, 72, has served as our Chief Executive Officer since 1979 and a principal since 1978. Mr. Gosin guides our national and global expansion initiatives and oversees all facets of our day-to-day operations. Mr. Gosin spearheaded our merger with BGC and has since led our acquisition and hiring efforts and increased our annual revenues by over 10 times. An active industry and community leader, Mr. Gosin serves as a member of the board of directors of the Partnership for New York City, Trustee of the Citizens Budget Commission, and Trustee of Pace University.
Michael J. Rispoli, 51, has served as our Chief Financial Officer since 2012. As head of the finance and accounting departments, Mr. Rispoli steers our financial activities, with a focus on managing risk and monitoring cash flow. His responsibilities include financial planning and forecasting, accounting, financial reporting, financial due diligence, investor relations, and analysis and integration of acquisitions. Mr. Rispoli also provides services to our operating partnership and subsidiaries. Prior to joining Newmark, Mr. Rispoli was the Chief Financial Officer of Grubb Ellis from August 2010 to April 2012 and had served in various capacities with such firm since May 2007. Mr. Rispoli served as executive director and corporate controller at Conexant Systems, Inc. from 2000 to 2007. Mr. Rispoli began his career at PricewaterhouseCoopers as manager of business assurance. Mr. Rispoli is a licensed CPA in the State of New Jersey (inactive).
Stephen M. Merkel, 65, has been our Executive Vice President, Chief Legal Officer and Assistant Corporate Secretary since January 2019 and was our Corporate Secretary from December 2017 to January 2019. Mr. Merkel has been Executive Managing Director, General Counsel and Secretary of Cantor since December 2000 and was Senior Vice President, General Counsel and Secretary of Cantor from May 1993 to December 2000. He joined Cantor in 1993 and oversees all legal and compliance functions. Mr. Merkel has been Executive Vice President and General Counsel of BGC since September 2001 and was its Senior Vice President, General Counsel and Secretary from June 1999 to September 2001. Mr. Merkel was BGC’s Secretary from June 1999 to January 2019. Mr. Merkel also holds offices at and provides services to various operating partnerships and subsidiaries of Newmark and affiliates of Cantor and provides services to our operating partnerships and subsidiaries, including BGC U.S. OpCo, BGC Global OpCo and Newmark OpCo. Mr. Merkel also served as the Executive Vice President, General Counsel and Secretary of CF Finance Acquisition Corp., from October 2015 until consummation of its business combination with GCM Grosvenor in November 2020. Prior to joining Cantor, Mr. Merkel was Vice President and Assistant General Counsel at Goldman Sachs Co. from February 1990 to May 1993. From September 1985 to January 1990, Mr. Merkel was an associate with the law firm of Paul, Weiss, Rifkind, Wharton Garrison. Mr. Merkel is a founding member of the board of directors of the Wholesale Markets Brokers’ Association, Americas. Mr. Merkel graduated with a B.A. magna cum laude from the University of Pennsylvania and received his law degree from the University of Michigan School of Law.
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EXECUTIVE COMPENSATION
Introduction
Separation and Spin-Off of the Company
On December 19, 2017, the Company, which had previously been a wholly owned subsidiary of BGC Partners, completed its initial public offering (the “IPO”). Through the following series of transactions prior to and following the completion of the Separation (as defined below) and the IPO, Newmark became a separate publicly traded company. Prior to the closing of the IPO, on December 13, 2017, BGC Partners, BGC Holdings, L.P. (“BGC Holdings”), BGC U.S. OpCo, the Company, Newmark Holdings, Newmark OpCo and, solely for the provisions listed therein, Cantor and BGC Global OpCo entered into the separation and distribution agreement (as amended on November 8, 2018 and amended and restated on November 23, 2018, the “Separation and Distribution Agreement”). Pursuant to the Separation and Distribution Agreement, BGC Partners, BGC Holdings and BGC U.S. OpCo and their respective subsidiaries (other than the Newmark group (defined below), the “BGC group”) transferred to the Company, Newmark Holdings and Newmark OpCo and their respective subsidiaries (the “Newmark group”) the assets and liabilities of the BGC group relating to BGC Partners’ Real Estate Services business (such series of transactions that resulted in the transfer are herein referred to as the “Separation”). For more information on our IPO and transactions and agreements related to the Separation and the IPO, see “Certain Relationships and Related Transactions, and Director Independence—Separation, Initial Public Offering, and Spin-Off.”
On November 30, 2018, BGC Partners completed its previously announced pro-rata distribution (the “Spin-Off”) to its stockholders of all of the shares of our common stock owned by BGC Partners as of immediately prior to the effective time of the Spin-Off. In addition, BGC Partners also caused its subsidiary, BGC Holdings, to distribute pro rata (the “BGC Holdings distribution”) all of the exchangeable limited partnership units of Newmark Holdings held by BGC Holdings immediately prior to the effective time of the BGC Holdings distribution to its limited partners entitled to receive distributions on their BGC Holdings units. Following the Spin-Off and the BGC Holdings distribution, BGC Partners ceased to be our controlling stockholder, and BGC Partners and its subsidiaries no longer held any shares of our common stock or other equity interests in us or our subsidiaries. For more information on the Spin-Off, see “Certain Relationships and Related Transactions, and Director Independence—Separation, Initial Public Offering, and Spin-Off—The Spin-Off.”
In connection with our IPO in December 2017, we established the Equity Plan and the Incentive Plan, under which the Compensation Committee of our Board of Directors may pay compensation in the form of cash, shares of our common stock or other equity awards, to our directors, executive officers or other officers or employees. We also maintain the Participation Plan, under which the Committee may award Newmark Holdings units to our directors, executive officers or other officers or employees.
Effect of the Separation and Spin-Off on Executive Compensation
Prior to our IPO, we did not have a Board of Directors or a Compensation Committee. Following our IPO, our executive compensation program was designed and implemented by the Compensation Committee of our Board of Directors and is described below. For 2020, 2021 and 2022, year-end compensation for each of our executive officers, including compensation awarded under the Newmark Compensation Plans, was determined by our Compensation Committee.
In connection with the Separation, interests in Newmark Holdings were distributed to holders of interests in BGC Holdings in proportion to such interests of BGC Holdings held by such holders immediately prior to the Separation. Due to such distribution, any BGC Holdings-related interest that existed as of December 13, 2017 also included 0.454545 of a Newmark Holdings-related interest, and any redemption or exchange of a BGC Holdings-related interest prior to the Spin-Off must also have included the redemption or exchange of the associated ratable portion of a Newmark Holdings-related interest. This 0.454545 figure was based on what the distribution ratio would have been had the Spin-Off occurred immediately following the IPO.
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As a result of the Separation, and due to the fact that certain BGC Partners awards granted pursuant to the BGC Partners compensation plans prior to the Separation became, upon the Separation, awards of interests in both BGC Holdings and Newmark Holdings, when we refer generally to partnership units that may be or have been awarded as part of compensation (i.e., NPSUs, PSUs, PPSUs, LPUs and PLPUs), we are referring to such units as may be awarded under the Newmark Compensation Plans, and, prior to BGC’s completion of its Corporate Conversion (as defined below) on July 1, 2023, BGC Partners’ compensation plans. When we refer to specific awards, we are referring to awards under the Newmark Compensation Plans, unless otherwise indicated.
In connection with the Spin-Off, holders of BGC Partners restricted stock awards participated in the distribution as if such holders held unrestricted shares of BGC Partners common stock, and following the Spin-Off, any shares of Newmark common stock issued in respect of restricted BGC Partners common stock remained subject to any vesting, lapse or forfeiture restrictions applicable to the restricted BGC Partners shares prior to the Spin-Off. RSU awards outstanding at the time under the Seventh Amended and Restated BGC Partners, Inc. Long Term Incentive Plan (the “BGC Equity Plan”), which was in effect at the time of the Spin-Off, were adjusted so that each holder of a BGC Partners RSU award continued to hold a BGC RSU award covering BGC Partners Class A common shares, but also received a Newmark RSU award covering Newmark Class A common shares on an “as distributed basis” in order to reflect the impact of the Spin-Off on the pre-Spin-Off BGC Partners RSU awards. Such RSUs generally have the same terms, including vesting terms, as the pre-Spin-Off BGC Partners RSU awards, subject to any adjustments made by the Compensation Committee of the board of directors of BGC.
Effect of BGC’s Corporate Conversion on Executive Compensation
On November 15, 2022, BGC Group, BGC Partners, and BGC Holdings, along with certain other entities, entered into a corporate conversion agreement, which was amended as of March 29, 2023, in order to reorganize and simplify the organizational structure of the BGC entities by converting BGC Partners from an “Up-C” to a “Full C-Corporation” through a series of mergers and related transactions (the “Corporate Conversion”). On July 1, 2023, the Corporate Conversion closed, BGC Group became the public holding company for BGC Partners, and BGC Holdings’ successor became a wholly owned subsidiary of BGC Partners; accordingly, there are no longer any BGC Holdings units outstanding held by Newmark employees.
As a result of a series of transactions prior to and in anticipation of the Corporate Conversion, all BGC Holdings units held by the Newmark employees were redeemed or exchanged, in each case, for shares of BGC Partners Class A common stock or cash.
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COMPENSATION DISCUSSION AND ANALYSIS
Background
Our principal executive officer for 2022 was our Executive Chairman, Howard W. Lutnick, and our principal financial officer for 2022 was our Chief Financial Officer, Michael J. Rispoli. Our other two executive officers for 2022 were Barry M. Gosin and Stephen M. Merkel.
For 2020, 2021 and 2022, the compensation determined and approved by our Compensation Committee for Newmark matters for Messrs. Lutnick, Gosin, Merkel and Rispoli is reflected in full below. In each case compensation includes salary, other cash compensation and non-cash compensation.
The following compensation discussion and analysis describes the material elements of our executive compensation program for 2022, including aspects of our executive compensation program which were designed and implemented by the Compensation Committee of our Board of Directors in March 2023, at which time 2022 year-end compensation decisions with respect to each of our executive officers were reviewed and approved.
The one-time December 2021 bonus award to Mr. Lutnick approved by the Compensation Committee on December 27, 2021 is separately discussed below under the heading “2021 Lutnick Award.”
Compensation Philosophy
Our executive compensation program, which is under the direction and control of our Compensation Committee, is designed to integrate compensation with the achievement of our short- and long-term business objectives and to assist it in attracting, motivating and retaining the highest quality executive officers and rewarding them for superior performance. Different components of our executive compensation program are geared to short- and longer-term performance, with the goal of increasing stockholder value over the long-term.
We believe that the compensation of our executive officers should reflect their success in attaining key corporate objectives, such as growth or maintenance of market position, success in attracting and retaining qualified brokers and other professionals, increasing or maintaining revenues and/or profitability, developing new products and marketplaces, completing acquisitions, dispositions, restructurings, and other value-enhancing transactions and integrating any such transactions, as applicable, meeting established goals for operating earnings, earnings per share and increasing the total return for stockholders, including stock price and/or dividend increases, and maintaining and developing customer relationships and long-term competitive advantage. Such objectives may also include the ability to respond to extraordinary events and manage the business under changing health, environmental, microeconomic and financial circumstances. Although the vote is advisory and non-binding on the Board, the Compensation Committee considers the results of the “say-on-pay” vote.
We also believe that executive compensation should also reflect achievement of individual managerial objectives established for specific executive officers at the beginning of the fiscal year as well as reflect specific achievements by such individuals over the course of the year, such as development of specific products or customer relationships or executing or integrating specific acquisitions, dispositions and other strategic arrangements. We further believe that specific significant events led by executives, including acquisitions, dispositions, management activities that create significant value and other significant transactions, should also be given significant weight. We believe that the performance of our executives in managing our Company, and in the provision of services to our operating partnerships and subsidiaries, considered in light of general economic and specific company, industry and competitive conditions, should be the basis for determining their overall compensation.
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Although reviewed by the Compensation Committee, our policy is generally that the compensation of our executive officers should not be based on the short-term performance of our Class A common stock, whether favorable or unfavorable, since we believe that the price of our Class A common stock will, in the long-term, reflect our overall performance and, ultimately, our management by our executives. Long-term stock performance is reflected in executive compensation through the grant of various equity and partnership awards as described below.
Our Compensation Committee is aware that certain of our executive officers, including Messrs. Lutnick and Merkel, also receive compensation from our affiliates, including Cantor and BGC, for services rendered to each of them, but the Committee generally does not specifically review the nature or amount of such compensation. Messrs. Lutnick’s and Merkel’s overall compensation from BGC is reviewed and approved by the compensation committee of the board of directors of BGC and not by our Compensation Committee.
None of our executive officers has received any compensation for serving on our Board of Directors or on the board of directors of BGC.
Overview of Compensation and Processes
For 2022, executive compensation was composed of the following principal components: (i) a base salary, which is designed to retain talented executive officers and contribute to motivating, retaining and rewarding individual performance; (ii) an incentive bonus award that is intended to tie financial rewards to the achievement of the Company’s short- or longer-term performance objectives; and (iii) an incentive program that is designed to promote the achievement of short- and long-term performance goals and to align the long-term interests of executive officers with those of stockholders through the grant of awards. In all cases, performance objectives and goals relate to the performance of our executives at the Company and in the provision of services to our operating partnerships and subsidiaries.
From time to time, we may also restructure the existing partnership, equity and compensation arrangements of our executive officers as described below. We may also adopt various policies related to or in addition to such restructurings, including with respect to the grant of exchange rights, other monetization of awards, and the acceleration of the lapse of restrictions on restricted stock. We may also issue potential extraordinary grants to executive officers which may or may not be based on prior results or other performance measures, including stock price increase or other measures to be specified.
From time to time, we have also used employment agreements, change of control agreements, retention agreements, and other arrangements, including some with specified target or guaranteed bonus components, and extraordinary bonuses to attract, motivate and retain talented executives. Any such arrangements with the executive officers are summarized below.
Our Compensation Committee, with the assistance where appropriate of special project committees and advisors, approves, and recommends to our Board of Directors that it approve the salaries, bonuses and other compensation of our executive officers. In addition, the Committee approves grants to executive officers under and otherwise administers our Incentive Plan, our Equity Plan and our Participation Plan.
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From time to time, the Compensation Committee has engaged a compensation consultant in connection with its compensation decisions. With respect to 2022, Korn Ferry (the “Compensation Advisor”) advised the Committee. The Committee retained the Compensation Advisor to provide surveys, information, and other assistance with respect to pay practices and compensation levels at the Company’s peer group and other companies, and the Committee discussed with the Compensation Advisor all compensation arrangements for 2022. For 2022, the Committee and the Compensation Advisor also reviewed additional pay for performance considerations and metrics and other measures including financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”) and non-GAAP financial results, changes in margins, investment sales, origination and mortgage broker market share, fees from management services, servicing, and other, catalyst transactions, acquisitions, and strategy and management responsibility, challenges and risk management, international expansion and other specific line items and measures in order to review financial performance and consider compensation awards. The Committee reviewed the Company’s total revenues as a key performance measure for 2022. While the Committee does take into consideration such peer data and percentiles, the Committee does not attempt to benchmark executive compensation against any level, range, or percentile of compensation paid at any other companies, does not apply any specific measures of internal or external pay equity in reaching its conclusions, and does not employ tally sheets, wealth accumulation, or similar tools in its analysis. The Committee considered whether the Compensation Advisor had any conflicts of interest in advising the Committee. The Committee considered whether the Compensation Advisor had been providing services of any other nature to the Company; the amount of fees received from the Company by the Compensation Advisor; the policies and procedures adopted by the Compensation Advisor that have been designed to prevent conflicts of interest; whether any business or personal relationships existed between the consultants employed by the Compensation Advisor who worked on Company matters and any member of the Committee; whether any business or personal relationship existed between such consultants and any of our executive officers; and whether the Compensation Advisor or such consultants hold any of our Class A common stock. The Compensation Advisor also provides services to the compensation committee of the board of directors of BGC from time to time. Upon evaluating such considerations, the Committee found no conflicts of interest in the Compensation Advisor advising the Committee.
Our policy for allocating between currently paid short- and long-term compensation is designed to ensure adequate base compensation to attract and retain talented executive officers, while providing incentives to maximize long-term value for our Company and our stockholders. Cash compensation is provided in the form of base salary to meet competitive salary norms and reward superior performance on an annual basis, and in the form of bonuses and awards for achievement of specific short-term goals or in the discretion of the Compensation Committee. Equity and partnership awards reward superior performance against specific objectives and long-term strategic goals and assist in retaining executive officers and aligning their interests with those of our Company and our stockholders. From time to time, we may provide additional equity or partnership awards on a periodic basis to reward superior performance, which awards may provide further long-term retention incentives.
Base salaries for the following year are generally set for our executive officers at year-end meetings of the Compensation Committee or in the early part of the applicable year. At these meetings, the Committee also approves incentive bonuses under the Incentive Plan for the prior year and any discretionary bonuses and grants of equity and partnership awards under our Equity Plan and the Participation Plan to our executive officers.
At or around the year-end Compensation Committee meetings, our Executive Chairman, Mr. Lutnick, makes compensation recommendations to the Committee with respect to the other executive officers. Such executive officers are not present at the time of these deliberations. With respect to its determination of the Chairman’s compensation, the Committee shall consider such information received from the Chairman as it deems necessary or appropriate. The Committee deliberates separately in executive sessions with the Compensation Advisor as to all executive officers other than Mr. Lutnick in the presence of Mr. Lutnick, and separately in executive sessions with the Compensation Advisor as to all executive officers, including Mr. Lutnick. The Committee may accept or adjust Mr. Lutnick’s recommendations and makes the sole determination of the compensation of all of our executive officers. In accordance with our Corporate Governance Guidelines, the Committee shall review and evaluate, at least annually, the performance and leadership of Mr. Lutnick as Executive Chairman and Mr. Gosin as Chief Executive Officer. Based upon the results of this evaluation, and input from the Compensation Advisor, the Committee reviews and approves Mr. Lutnick’s and Mr. Gosin’s compensation.
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During the first quarter of each fiscal year, the practice of our Compensation Committee is to establish annual incentive performance goals and guidelines for all executive officers under the Incentive Plan, with the Committee retaining negative discretion to reduce or withhold any bonuses earned at the end of the year. All executive officers in office at that time are eligible to participate in the Incentive Plan. In all cases, such performance goals relate to the performance of our executive officers at the Company and in the provision of services to our operating partnership and subsidiaries.
We provide long-term incentives to our executive officers through the grants of limited partnership units under the Participation Plan and exchange rights or cash settlement awards in connection with such partnership units and restricted stock and other equity grants under the Equity Plan. In addition, executive officers may receive a portion of their Incentive Plan bonuses in equity or partnership awards, rather than cash, with the number of awards determined by reference to the market price of a share of our Class A common stock on the date that the award is granted or such other date that awards to executive officers are made generally. Grants under our Equity Plan and our Participation Plan have vesting provisions that are time-based, rather than performance-based, vesting schedules, although both plans are flexible enough to provide for performance-based awards.
In designing and implementing our executive compensation program, our Compensation Committee considers our operating and financial objectives, including our risk profile, and the effect that our executive compensation decisions will have on encouraging our executive officers to take an appropriate level of business, operational and market risk consistent with our overall goal of enhancing long-term stockholder value. In particular, the Committee considers those risks identified in our risk factors and the known trends and uncertainties identified in our management discussion and analysis in our 2022 10-K, and considers how our executive compensation program serves to achieve its operating, financial and other strategic objectives while at the same time mitigating any incentives for executive officers to engage in excessive risk-taking to achieve short-term results that may not be sustainable in the long-term. Our Committee may also consider specific performance measures or grants based on specific events including catalyst transactions or significant acquisitions or particular strategic efforts, hires or transactions.
In attempting to strike this balance, our Compensation Committee seeks to provide executive officers with an appropriately diversified mix of fixed and variable cash and non-cash compensation opportunities, time-based and performance-based awards, and short- and long-term incentives. In particular, our performance-based bonuses under our Incentive Plan focus on a mix of Company-wide and product-specific operating and financial metrics, in some cases based upon our absolute performance and in other cases based upon our performance relative to our peer group or other companies. In addition, the Incentive Plan award opportunities provide for the exercise of considerable negative discretion by the Committee to reduce, but not increase, amounts granted to executive officers under the Incentive Plan, and to take individual as well as corporate performance into account in exercising that discretion. Further, the Committee retains the discretion to pay out any amounts finally awarded under the Incentive Plan in equity or partnership awards, rather than cash, and to include restrictions on vesting, resale and forfeiture in any such equity or partnership awards.
Discretionary and Retentive Partnership Opportunities
To incentivize executive officers and hold them accountable to stockholders, our Compensation Committee uses a variety of highly retentive partnership units issued under the Participation Plan. These partnership awards are granted as a tax-efficient, strongly retentive, and risk-appropriate means to align the interests of the executive officers with those of our long-term stockholders. For executive officers, these grants may include NPSUs, along with PSUs and PPSUs. The Committee believes that the features of the units, coupled with the discretion of the Committee to grant the right to partnership distributions, exchangeability into shares of Class A common stock of Newmark, and various liquidity opportunities, create a best-in-class form of incentive award for our executives. Until such units are made exchangeable into shares of Class A common stock or exchanged for cash or, in some cases, made exchangeable into another partnership unit with a capital account such as a HDU, at the discretion of the Committee, these units are generally forfeitable for any reason, subject to certain exceptions.
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We believe this incentivizes performance. These partnership units may be redeemed for zero by the Committee at its discretion while in non-exchangeable form. Traditionally, the Committee generally has not granted options and equity-based awards such as RSUs to executives and emphasized instead these flexible and retentive limited partnership units. The Committee has recently granted NPSUs, along with PSUs/PPSUs, and HDUs, provided as long-term incentives to executive officers, which awards are generally coupled with performance-based grants of exchange rights and cash settlement awards. The Committee may consider RSUs and options, as well as partnership units and other forms of compensation, in future grants. NPSUs are subject to adjustment at the time of conversion into PSUs based on the then-applicable exchange ratio.
NPSUs have no value for accounting or other purposes at the time of grant, do not participate in quarterly partnership distributions, are not allocated any items of profit or loss and may not be made exchangeable into shares of Class A common stock. Grants of NPSU awards are highly discretionary and provide additional flexibility for the Compensation Committee to determine the timing and circumstances of replacing such units with units that earn partnership distributions and any rights to exchange such units for shares of Class A common stock or cash. NPSUs have generally been granted to our executives in the event of business developments, changing compensation requirements or other factors, or in connection with execution of long-term employment arrangements.
From time to time, our Compensation Committee may choose to replace a NPSU with a non-exchangeable PSU or HDU. A non-exchangeable PSU may also be replaced with a non-exchangeable HDU. A non-exchangeable PSU that has been granted the right to convert into a non-exchangeable HDU is referred to as a “PSU-H,” and a non-exchangeable PPSU that has been granted the right to be converted into cash upon conversion of the underlying PSU-H into an HDU is referred to as a “PPSU-H.” PSUs participate in quarterly partnership distributions, but otherwise generally have no value for accounting purposes and are not exchangeable into shares of Class A common stock until such exchange rights are granted by the Committee. HDUs have a stated capital account and are valued based upon such capital account which is initially based on the closing trading price of Class A common stock at the time the HDU right is granted. HDUs participate in quarterly partnership distributions and are not exchangeable into shares of Class A common stock unless such exchange rights are granted by the Committee.
Executive officers may also receive PPSUs. These units are preferred limited partnership units that may be awarded to holders of, or contemporaneously with the grant of, PSUs. PPSUs are entitled to a preferred distribution of net profits of Newmark Holdings, but otherwise are not entitled to participate in quarterly distributions. PPSUs cannot be made exchangeable into shares of Class A common stock, and can only be exchanged for cash, at the determination price on the date of grant, in connection with an exchange of the related PSUs or HDUs, and therefore are not included in our fully diluted share count. PPSUs are expected to provide a mechanism for issuing fewer aggregate share equivalents than traditionally issued in connection with our compensation and to have a lesser overall impact on our fully diluted share count. The ratio of the grant of PPSUs to traditional units (e.g., PSUs) is expected to approximate the compensatory tax rate applicable in the relevant country jurisdiction of the partner recipient. The determination price used to exchange PPSUs for cash is determined by the Compensation Committee on the date of the grant of such unit and is based on a closing trading price of Class A common stock identified by the Committee on such date.
Over time, as compensation goals are met and our executives are awarded other incentives, the Compensation Committee may choose, in its sole discretion, to grant an exchange right with respect to a PSU, thereby creating a potential liquidity event for the executive and creating a value for accounting purposes. The life cycle of these units, as they may evolve from NPSUs to shares of Class A common stock, provides the Committee and the Board of Directors with superior opportunities to retain and incentivize executives and employees in a tax-efficient and discretionary manner.
Until non-exchangeable units are made exchangeable into a share of Class A common stock or exchanged for cash at the discretion of the Committee, they are generally forfeitable for any reason, subject to certain exceptions. We believe this incentivizes performance and helps align the interests of our executives with those of our investors.
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Our executive officers have much of their personal net worth in a combination of deferred compensation, including non-exchangeable and exchangeable limited partnership units and RSUs. Messrs. Lutnick, Gosin, Merkel and Rispoli hold limited partnership units in Newmark Holdings. Mr. Rispoli also holds RSUs in Newmark. Mr. Lutnick holds additional partnership interests in Cantor, which, through its and CFGM’s ownership of shares of our Class B common stock, controls approximately 58.3% of the total voting power of the outstanding Newmark common stock as of June 30, 2023. Mr. Merkel also holds additional partnership interests in Cantor.
Tax and Accounting Treatment
Section 162(m) of the U.S. Internal Revenue Code of 1986 (the “Code”) eliminates a corporation’s tax deduction in a given year for payments to certain executive officers in excess of $1,000,000. We do not currently expect that decisions relating to compensation will be significantly impacted by Section 162(m) matters on a going forward basis. The Committee retains negative discretion to reduce or withhold performance-based compensation to our executive officers, including after taking into consideration changing business conditions or the executive officer’s individual performance.
Our management and our Compensation Committee recognize that we are subject to certain Financial Accounting Standards Board and SEC guidance on share-based awards and other accounting charges with respect to the compensation of the executive officers and other employees. However, management and the Committee do not believe that these accounting charges should necessarily determine the appropriate types and levels of compensation to be made available. Where material to the Committee’s decisions, these accounting charges will be described in our compensation discussion and analysis, compensation tables and related narratives.
Our Compensation Committee may grant equity and partnership awards to executive officers in a variety of ways under the Equity Plan and the Participation Plan, including restricted stock, RSUs, exchange rights, cash settlement awards and other equity grants under the Equity Plan and non-exchangeable limited partnership unit awards under the Participation Plan. Grants of such awards may have different accounting treatment and may be reported differently in the compensation tables and related narratives depending upon the type of award granted and how and when it is granted.
For GAAP purposes, a compensation charge is recorded on PSUs and similar limited partnership units if and when an exchange right is granted to such units to acquire shares of Class A common stock, and the charge is based on the market price of Class A common stock on the date on which the exchange right is granted, regardless of when such exchange occurs. Additionally, when the exchange actually occurs, a U.S. federal income tax deduction is generally allowed equal to the fair market value of a share of Class A common stock on the date of exchange.
For GAAP purposes, if shares of restricted stock granted are not subject to continued employment or service with us or any of our affiliates or subsidiaries, even if they are subject to compliance with our customary non-compete obligations, the grant-date fair value of the restricted stock will be expensed on the date of grant.
Clawback, Forfeiture and Recoupment
The partnership units issued to our executive officers, certain of which, such as PSUs or NPSUs, may be redeemed for zero at any time by the Compensation Committee, as well as partnership obligations under the Newmark Holdings limited partnership agreement, are retentive and provide broad discretion and significant clawback power to the Compensation Committee. We do not currently have a formal general compensation recovery or “clawback” policy.
Further, our policy is to provide much of our compensation through highly retentive partnership units or other equity with strong vesting mechanisms. Accordingly, we do not require additional share ownership or hold-through-retirement thresholds.
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Consideration of Peer Data for 2022
As part of its compensation process, the Compensation Committee considered both the 2022 performance and year-on-year growth of various financial metrics for the year ended December 31, 2022, which represented the latest public financial information available at the time, as compared with the disclosed growth rates for these same metrics at our full-service U.S. listed peers. These peers were CBRE Group, Inc., Colliers International Group Inc., Jones Lang LaSalle Incorporated, Savills Plc and Cushman Wakefield plc. The metrics included GAAP and non-GAAP financial results, changes in margins, Newmark’s origination and mortgage broker market share, and fees from management services, servicing and other. The data indicated that Newmark’s growth in each of these metrics exceeded the certain year-on-year or two-year growth rates for these peers over applicable periods. The Committee also reviewed our relative performance versus these peers in individual business lines including leasing, capital markets and mortgage banking, and other areas of management services, as well as our market share in investment sales and mortgage origination, and noted improvements compared to our peers in areas including employee productivity, management services, servicing and other, and non-U.S. revenue growth. Performance data is provided to the Committee by management and the Compensation Advisor.
As discussed under “Overview of Compensation and Processes,” while we use market data from peer companies as a reference point for evaluating our executive compensation program, we do not benchmark against any specific compensation level or metric.
Base Salary
Our executive officers receive base salaries or similar cash payments intended to reflect their skills, expertise and responsibilities. Subject to any applicable employment or other agreements, such payments and subsequent adjustments, if any, are reviewed and approved by the Compensation Committee annually, based on a variety of factors, which may include, from time to time, a review of relevant salaries of executives at our peer group of companies and others, and each executive officer’s individual performance for the prior year, including such executive officer’s experience and responsibilities.
We generally establish base pay at levels comparable to our peer group and other companies which employ similarly skilled personnel, including CBRE Group, Inc., Colliers International Group, Inc., Compass, Inc., Cushman Wakefield plc, FirstService Corporation, Jones Lang LaSalle Inc., Marcus Millichap Inc., Opendoor Technologies Inc., RE/MAX Holdings, Inc., Savills plc, WeWork Inc., and Zillow Group, Inc. While we determine these levels by reviewing publicly available information with respect to our peer group of companies and others, we generally do not expect to engage in benchmarking.
For 2022, Mr. Lutnick spent approximately 33% of his time on our matters and Mr. Merkel spent approximately 25% of his time on our matters and they expect to spend approximately the same percentage of time on Newmark matters in 2023. These percentages may vary in 2023 depending on business developments at Newmark or Cantor, BGC or any of our or their respective affiliates. Messrs. Gosin and Rispoli spend all of their time on our matters, including on investments or ventures.
Base Salaries for 2022
Base salary and similar cash payment rates for 2022 were established in December 2021 by our Compensation Committee with respect to each of our executive officers, based on their continuing qualifications, experience and responsibilities. The base rate for 2022 was continued at $1,000,000 for Messrs. Lutnick and Gosin. The base rate for Mr. Rispoli for 2022 was increased to $850,000 from $750,000 effective January 1, 2022, and the base rate for Mr. Merkel for 2022 was continued at $500,000. Mr. Rispoli’s $100,000 base salary increase was awarded due to his increased responsibilities in connection with strategic transactions and his leadership during the COVID-19 pandemic.
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Base Salaries for 2023
Base salary and similar cash payment rates for 2023 were established in March 2023 by our Compensation Committee with respect to each of our executive officers, based on their continuing qualifications, experience and responsibilities. The base rate for 2023 was continued at $1,000,000 for Messrs. Lutnick and Gosin. The base rate for Mr. Rispoli for 2023 was continued at $850,000, and the base rate for Mr. Merkel for 2023 was continued at $500,000.
Bonus Compensation
Notwithstanding the elimination of the exception to the $1,000,000 limit on deductibility for qualified performance-based compensation under Section 162(m) of the Code pursuant to the Tax Cuts and Jobs Act, we intend to award performance-based compensation in the form of bonuses to our executive officers, including pursuant to the Incentive Plan. The Compensation Committee believes that such performance-based compensation appropriately aligns the interests of our executive officers with the interests of our stockholders.
With respect to each performance period, our Compensation Committee specifies the applicable performance criteria and targets to be used under the Incentive Plan for that performance period. These performance criteria, which may vary from participant to participant, will be determined by the Committee and may be based upon one or more of the following financial performance measures and may be expressed on an absolute and/or relative basis and on a GAAP or non-GAAP basis:
| • | pre-tax or after-tax net income; |
| • | pre-tax or after-tax operating income; |
| • | total or gross revenues or similar items; |
| • | profit, earnings or other margins; |
| • | stock price, dividends and/or total stockholder return; |
| • | EBITDA measures |
| • | cash flow(s); |
| • | market share; |
| • | pre-tax or after-tax earnings per share; |
| • | pre-tax or after-tax operating earnings per share; |
| • | expenses; |
| • | return on investment or equity; |
| • | environmental, social, governance or similar criteria; or |
| • | strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration, or geographic business expansion goals, cost targets, goals relating to acquisitions, strategic hires, dispositions or divestitures, or any combination thereof. |
The actual Incentive Plan bonus paid to any given participant at the end of a performance period is based upon the extent to which the applicable performance goals for such performance period are achieved, subject to the exercise of negative discretion by the Compensation Committee, and may be paid in cash or in equity or partnership awards. These awards also serve as incentives for future performance and retention.
In addition, from time to time, our Compensation Committee may provide for target or guaranteed bonuses in employment or other agreements in order to attract and retain talented executives, or may grant ad hoc discretionary bonuses when an executive officer is not eligible to participate in the Incentive Plan award opportunities for that performance period or when it otherwise considers such bonuses to be appropriate. Such bonuses may also be paid in cash or in equity or partnership awards.
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Incentive Plan Bonus Guidelines for 2022
In the first quarter of 2022, our Compensation Committee determined that Messrs. Lutnick, Gosin, Rispoli and Merkel, our executive officers for 2022, would be participating executives for 2022 in our Incentive Plan.
For 2022, our Compensation Committee used the same performance criteria for all the executive officers and set individual bonus opportunities for 2022 equal to the maximum value allowed for each individual pursuant to the terms of the Incentive Plan (i.e., $25 million), provided that (i) the Company achieved operating profits or Adjusted Earnings annually for 2022, as calculated on substantially the same basis as in the Company’s 2021 year-end earnings release, or (ii) the Company achieved improvement or percentage growth in gross revenue or total transaction volumes for any product annually for 2022 as compared annually to 2021 over any of its peer group members or industry measures, as reported in the Company’s 2022 earnings release, in each case calculated on substantially the same basis as in the Company’s 2021 earnings release, and compared to the most recently available peer group information or industry measures, (each of which we refer to as a “Performance Goal”) in each case subject to any appropriate corporate adjustment to reflect stock splits, reverse stock splits, mergers, spin-offs or any other extraordinary corporate transactions in accordance with the Equity Plan, the Incentive Plan and the Participation Plan, as applicable.
The Compensation Committee determined that the payment of any such amount may be in the form of cash, shares of Class A common stock, limited partnership units, or other equity or partnership awards permitted under the Equity Plan, the Participation Plan or otherwise. The Compensation Committee, in its sole and absolute discretion, retained the right to reduce the amount of any Incentive Plan bonus payment based upon any factors it determines, including whether and the extent to which the Performance Goals or any other corporate, as well as individual, performance objectives have been achieved.
Incentive Plan Bonuses Awarded for 2022
On March 30, 2023, having determined that the Performance Goals established in the first quarter of 2022 had been met for 2022, our Compensation Committee made awards, effective as of April 1, 2023, to certain of the participating executive officers for 2022 under our Incentive Plan. The awards were granted using a stock price of $6.95 on March 30, 2023, as adjusted by the 0.9303 exchange ratio (as defined herein) in effect as of such date, resulting in $6.47, and provided a combination of short- and long-term incentives that align the Company’s financial performance with its executive compensation. In addition to short-term cash compensation awarded to certain executives, the Committee awarded significant portions of its 2022 compensation to all executives in the form of long-term partnership units. These units are eligible for partnership distributions, if any, in the current period, which are tied to the Company’s current and future earnings and may rise and fall with the Company’s results and market conditions in a given period. The units awards, however, are issued as non-exchangeable and the non-Preferred Unit awards may be made exchangeable into the Company’s Class A common stock at a future time at the Committee’s discretion, thus incentivizing future performance by aligning it with the Company’s stock price.
In making its year-end bonus determination for 2022, the Committee considered both 2022 performance and future strategic positioning and catalyst transactions, as well as the Company’s financial performance as a whole as compared to its peers including improvements in productivity, fees from management services, certain U.S. investment sales, and total debt volumes over the U.S. industry. The impact of any of these measures during 2023 or beyond may materially impact the value of current and previous partnership awards, thus aligning the interests of the executives with those of our stockholders. All of such 2022 partnership awards are forfeitable in the event that any such executive was to leave the Company and compete or otherwise violate applicable partnership obligations. These awards were also expected to incentivize our executive officers with respect to future performance and encourage ongoing contributions to our business.
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The specific Incentive Plan awards to our executive officers for 2022 were as follows:
| • | Mr. Lutnick’s aggregate bonus of $9,000,000 for 2022 was paid $4,000,000 in current cash compensation and $5,000,000 in a long-term partnership award represented by 772,798 non-exchangeable Newmark Holdings PSUs at $6.47 per unit. The Compensation Committee noted Mr. Lutnick’s efforts in historic catalyst transactions and strategic guidance and emphasis on positioning the Company for expected future results and the results of our business in determining Mr. Lutnick’s award for the year. |
| • | Mr. Rispoli’s aggregate bonus was paid $500,000 in current cash compensation. The Compensation Committee noted his leadership and efforts with respect to recent efforts in a challenging economic environment in 2022 as well as his contribution to the Company’s acquisitions and treasury matters in awarding his bonus for the year. |
| • | Mr. Merkel’s aggregate bonus of $1,000,000 for 2022 was paid $500,000 in current cash compensation and $500,000 in a long-term partnership award represented by 38,640 non-exchangeable Newmark Holdings PSUs and 38,640 non-exchangeable Newmark Holdings PPSUs with a determination price of $6.47 per unit. The Compensation Committee noted his strategic guidance and overall leadership of the Company’s complex business, legal and regulatory matters during the year. |
Employment Agreement Awards
Messrs. Gosin and Rispoli received certain awards for 2022 pursuant to the terms of their respective employment agreements, in lieu of awards under the Incentive Plan in the case of Mr. Gosin and in addition to an Incentive Plan award in the case of Mr. Rispoli. Messrs. Gosin and Rispoli’s respective employment agreements provide for certain annual awards through 2025 and 2027, respectively, but also allow the Compensation Committee to grant additional discretionary annual bonuses, including under the Incentive Plan.
Pursuant to the employment agreement that Mr. Gosin executed on February 10, 2023 (the “Gosin Employment Agreement”), Mr. Gosin’s 2022 bonus of $1,500,000 was paid in current cash compensation. Also pursuant to the Gosin Employment Agreement, Mr. Gosin received 4,581,900 non-exchangeable Newmark Holdings NPSUs issued at $8.73 per unit (which was the closing price of Newmark’s Class A common stock on February 10, 2023), of which 1,145,475 non-exchangeable NPSUs, or $10,000,000 at $8.73 per unit, was attributed by the Compensation Committee to compensation for fiscal year 2022. These 1,145,475 non-exchangeable NPSUs were converted into non-exchangeable PSUs on April 1, 2023. Although these non-exchangeable NPSUs were considered compensation for 2022, because the award of Newmark Holdings NPSUs was made in 2023, the aggregate amount of Mr. Gosin’s non-exchangeable NPSU award pursuant to his employment agreement will appear in the Summary Compensation Table for 2023. See “Employment Agreements—Gosin Employment Agreement” below for more information on the schedule and criteria for these non-exchangeable NPSUs to convert into non-exchangeable PSUs and receive exchangeability. The Compensation Committee noted in particular Mr. Gosin’s contributions to the Company’s strategic efforts, his real estate domain expertise, creative ideas and skills regarding the future of the Company.
Pursuant to Mr. Rispoli’s employment agreement, dated September 29, 2022 (the “Rispoli Employment Agreement”), on October 1, 2022, Mr. Rispoli received an aggregate of 750,000 RSUs, which will vest over a seven-year schedule. Of these RSUs, the Compensation Committee attributed 100,000 RSUs to the signing of the Rispoli Employment Agreement, and 150,000 RSUs to compensation for fiscal year 2022. See “Employment Agreements—Rispoli Employment Agreement.”
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Incentive Plan Bonus Guidelines for 2023
In April 2023, the Compensation Committee determined that Messrs. Lutnick, Gosin, Merkel and Rispoli, our current executive officers, would be participating executives for 2023 in the Incentive Plan. For 2023, the Committee established performance criteria for all executive officers and set a bonus for 2023 equal to the maximum value allowed for each individual pursuant to the terms of the Incentive Plan (i.e., $25 million), provided that (i) the Company achieves operating profits or Adjusted Earnings annually for 2023, as calculated on substantially the same basis as in the Company’s 2022 year-end earnings release, or (ii) the Company achieves improvement or percentage growth in gross revenue or total or net transaction volumes for any product annually for 2023 as compared to 2022 over any of our peer group members or other industry measures, as reported in its 2023 earnings release, in each case calculated on substantially the same basis as in its 2022 earnings release, and compared to the most recently available peer group information or other industry measures, in each case, subject to any appropriate corporate adjustment to reflect stock splits, reverse stock splits, mergers, spin-offs or any other extraordinary corporate transactions in accordance with the Incentive Plan, Equity Plan and the Participation Plan, as applicable. As each of the Company’s executive officers also provides services to certain of our operating partnerships and subsidiaries, potential bonuses for 2023 are also on behalf of all such operating partnerships and subsidiaries, as may be applicable.
The Compensation Committee determined that the payment of any such amount may be in the form of cash, shares of Class A common stock, limited partnership units or other equity or partnership awards permitted under the Equity Plan, the Participation Plan or otherwise. To the extent determined to reflect the portion of an executive officer’s compensation related to services performed for a particular subsidiary, entity or affiliate as noted above, the cost of compensation awarded under any of the Newmark Compensation Plans shall be borne by such operating partnership or entity. The Committee, in its sole and absolute discretion, retains the right to reduce the amount of any Incentive Plan bonus payment based upon any factors it determines, including whether and the extent to which Performance Goals or any other corporate, as well as individual, performance objectives have been achieved. The Committee further retains discretion to authorize bonuses and other awards to the participating executives regardless of whether or not such bonuses and awards are tax deductible under tax law in effect at the time of such bonuses and awards.
Equity Plan and Participation Plan Awards
It is the Compensation Committee’s general policy to award restricted stock, exchange rights, awards that are repurchased for cash, which we refer to as “cash settlement awards,” and other equity or partnership awards to executive officers in order to align their interests with those of our long-term investors and to help attract and retain qualified individuals. Our Equity Plan permits the Committee to grant restricted stock, stock options, stock appreciation rights, deferred stock such as RSUs, bonus stock, performance awards, dividend equivalents and other stock-based awards, including to provide exchange rights for shares of our Class A common stock and cash settlement awards relating to Newmark Holdings limited partnership units.
Our Participation Plan provides for the grant or sale of Newmark Holdings limited partnership units. The total number of Newmark Holdings limited partnership units issuable under the Participation Plan will be determined from time to time by our Board of Directors, provided that exchange rights or cash settlement awards relating to units may only be granted pursuant to other stock-based awards granted under our Equity Plan. Partnership units in Newmark Holdings (other than NPSUs) are entitled to participate in preferred or quarterly partnership distributions from Newmark Holdings and (other than Preferred Units and NPSUs) are eligible to be made exchangeable for shares of our Class A common stock. We view these incentives as an effective tool in motivating, rewarding and retaining our executive officers.
Our Compensation Committee retains the right to grant a combination of forms of such awards under our Equity Plan and our Participation Plan to executive officers as it considers appropriate or to differentiate among executive officers with respect to different types of awards. The Committee has also granted authority to Mr. Lutnick, our Executive Chairman, to grant awards to non-executive officer employees of the Company under the Equity Plan and Participation Plan and to establish sub-plans for such persons.
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In addition, our executive officers and other employees may also be offered the opportunity to purchase limited partnership units. The Compensation Committee and Mr. Lutnick will have the discretion to determine the price of any purchase right for partnership units, which may be set at preferential or historical prices that are less than the prevailing market price of our Class A common stock.
Timing of Awards
Equity and partnership awards to executive officers that are in payment of the Incentive Plan or discretionary bonuses are typically granted annually in conjunction with the Compensation Committee’s review of Company performance and individual performance of executive officers, although interim grants may be considered and approved from time to time. The Committee’s annual review generally takes place at year-end meetings, which are generally held in the first quarter of each year, although the reviews may be held at any time and from time to time throughout the year. From time to time, grants to executive officers may be made on a mid-year or other basis in the event of business developments, changing compensation requirements or other factors, in the discretion of the Committee.
Our policy is generally to award year-end grants to executive officer recipients and non-executive employees effective April 1 of the following year. Grants, if any, to newly hired employees are effective on the first day of the quarter following the employee’s first day of employment. In addition, from time to time the Company may offer compensation enhancements or modifications to employees that it does not offer to its executive officers.
The exercise price of all equity-based compensation is set at the closing price of our Class A common stock on the Nasdaq Global Select Market on the date of grant. As discussed above, with respect to limited partnership units and other equity or partnership awards, grants may be made based on a dollar value, with the number of units or shares determined by reference to the market price of our Class A common stock on the date of grant, or based on a specified number of awards.
Replacement and Exchange Right Grants in Respect of 2022
From time to time, the Compensation Committee generally approves monetization of previously issued and outstanding units and shares in order to provide liquidity to the executives in accordance with applicable tax and accounting rules, taking into consideration the retentive impact of the remaining units held by the executives. The 2022 monetizations described below were approved by the Compensation Committee.
Messrs. Lutnick, Gosin and Merkel received no standalone monetization with respect to 2022. See below under “Standing Policy for Mr. Lutnick” for a description of the exchange rights and/or other monetization rights granted to him with respect to 2022. In connection with signing the Rispoli Employment Agreement on September 29, 2022, Mr. Rispoli received immediate exchangeability on 25% of his then currently held 88,079 non-exchangeable PSUs and 87,049 non-exchangeable PPSUs (such 25% totaled 23,560 PPSUs with a value of $283,527 and 20,221 PSUs), and will receive monetization rights on another 25% of such units held as of September 29, 2022, split pro-rata into one-fifth (1/5) increments, on or as soon as practicable after October 1 of each of 2023-2027, to the extent such units had not previously been given monetization rights, with each monetization contingent upon Mr. Rispoli performing substantial services exclusively for us or any affiliate, remaining a partner in Newmark Holdings, and complying with the terms of the Rispoli Employment Agreement and any of his obligations to Newmark Holdings, us or any affiliate through such dates.
Replacement and Exchange Right Grants in Respect of 2021
Mr. Lutnick
Mr. Lutnick received no standalone monetization with respect to 2021. See below under “Standing Policy for Mr. Lutnick” for a description of the exchange rights and/or other monetizations rights granted to him with respect to 2021, and under “Replacement and Exchange Right Grants Related to the 2021 Equity Event” for a description of the exchange rights and/or other monetizations rights granted to him with respect to this event.
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Mr. Gosin
On December 21, 2021, the Compensation Committee approved: (i) the redemption of all of Mr. Gosin’s remaining 838,996 non-exchangeable Newmark PPSUs for $8,339,980 in cash and (ii) compensation of approximately $7,357,329 by way of the Company causing 478,328 of Mr. Gosin’s non-exchangeable Newmark PSUs to be redeemed for zero and issuing 446,711 shares of our Class A common stock, based upon the closing price on our Class A common stock the date the Committee approved the transaction (which was $16.47) and an exchange ratio of 0.9339.
In addition to the above, on September 21, 2021, 2,114,546 non-exchangeable BGC Holdings PSUs held by Mr. Gosin were redeemed, and an aggregate of 1,176,745 net shares of Class A common stock of BGC Partners were issued at $4.86 (which was the closing price of BGC Partners Class A common stock on September 21, 2021). Effective as of April 14, 2022, Mr. Gosin’s 905,371 BGC Holdings HDUs were redeemed for a cash payment of $3,521,893 based upon a price of $3.89 per unit, which was the closing price of BGC Partners’ Class A common stock on April 14, 2022.
See below under “Replacement and Exchange Right Grants Related to the 2021 Equity Event” for a description of the exchange rights and/or other monetizations rights granted to him with respect to this event.
Mr. Merkel
On April 27, 2021, (a) 73,387 of Mr. Merkel’s 145,384 non-exchangeable Newmark Holdings PSUs held by Mr. Merkel were redeemed for zero and 68,727 shares of Class A common stock of Newmark, as adjusted by the then applicable exchange ratio of 0.9365, held by Mr. Merkel, were repurchased by the Company for $10.67 per unit (the April 27, 2021 closing price of our Class A common stock), and (b) $82,560.50 associated with Mr. Merkel’s non-exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes. The total payment delivered to Mr. Merkel was $815,878, less applicable taxes and withholdings.
On June 28, 2021, (a) 51,124.28 non-exchangeable Newmark Holdings PSUs held by Mr. Merkel were redeemed and an aggregate of 48,072 shares of Class A common stock of Newmark were issued, as adjusted by the then applicable exchange ratio of 0.9403, and (b) $329,155 associated with Mr. Merkel’s non-exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes.
Mr. Rispoli
See below under “Replacement and Exchange Right Grants Related to the 2021 Equity Event” for a description of the exchange rights and/or other monetizations rights granted to him with respect to this event.
2019 Newmark NPSU Awards
In connection with the 2018 year-end compensation cycle, the Compensation Committee previously approved the issuance of 500,000 Newmark Holdings NPSUs and 500,000 Newmark Holdings NPPSUs with a determination price of $10.05 per unit to Mr. Lutnick, effective April 1, 2019. The terms of those awards provided that on or about each April 1 of 2020, 2021, 2022, and 2023, Newmark Holdings shall grant an aggregate award of 125,000 non-exchangeable Newmark Holdings PSUs and 125,000 non-exchangeable PPSUs in replacement of 125,000 Newmark Holdings NPSUs and 125,000 Newmark Holdings NPPSUs (which, upon replacement, shall be cancelled and no longer exist), provided that (i) Newmark, inclusive of its affiliates thereof, earns, in aggregate, at least USD 5 million in gross revenues in the calendar quarter in which the applicable award of Newmark Holdings PSUs or PPSUs is to be granted and (ii) except in the event of death prior to the applicable grant date, Mr. Lutnick remains an employee of Newmark or an affiliate thereof and has at all times remained in compliance with the Newmark Holdings limited partnership agreement. Mr. Lutnick exercised his rights on December 21, 2021 pursuant to the standing policy for Mr. Lutnick to redeem his remaining 250,000 Newmark Holdings NPPSUs issued effective April 1, 2019. Pursuant to this grant, on April 1, 2023, the Company granted Mr. Lutnick an aggregate award of 125,000 non-exchangeable PSUs in replacement of the remaining 125,000 NPSUs.
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Replacement and Exchange Right Grants Related to the 2021 Equity Event
On June 28, 2021, in connection with our accelerated receipt of common shares of Nasdaq, Inc. (“Nasdaq Shares”) (see “Certain Relationships and Related Transactions, and Director Independence—Nasdaq Monetization Transaction” in the 2022 10-K), the Compensation Committee approved a plan to expedite the tax deductible exchange and redemption of a substantial number of limited partnership units held by partners of the Company (the “2021 Equity Event”). The 2021 Equity Event also accelerated certain compensation expenses, resulting in $428.6 million of compensation charges. These partnership units were settled using a $12.50 share price. In July 2021, the Compensation Committee approved increasing the price to $13.01 to settle certain units.
Some of the key components of the approved plan were as follows:
| • | 8.3 million and 8.0 million compensatory limited partnership units, respectively, of Newmark Holdings and BGC Holdings held by Newmark partners who are employees were redeemed or exchanged. |
| • | 23.2 million and 17.4 million compensatory limited partnership units, respectively, of Newmark Holdings and BGC Holdings held by the Newmark Holdings’ partners who are independent contractors were redeemed or exchanged. Newmark also accelerated the payment of related withholding taxes to them with respect to their Newmark Holdings units. Independent contractors received one BGC Partners Class A common share for each redeemed non-preferred BGC Holdings unit or cash and are responsible for paying any related withholding taxes. |
| • | Partners with non-exchangeable non-preferred compensatory units exchanged or redeemed in connection with the 2021 Equity Event generally received restricted Class A common shares of Newmark and/or BGC to the extent tax deductible. A portion of the BGC Partners Class A common shares received by independent contractors were unrestricted to facilitate their payment of withholding taxes. |
| • | The issuance of Newmark Class A common stock related to the 2021 Equity Event reflected the June 28, 2021 exchange ratio of 0.9403. |
| • | Newmark Holdings and BGC Holdings limited partnership interests with rights to convert into HDUs for cash were also redeemed in connection with the 2021 Equity Event. |
The specific transactions approved by the Compensation Committee, in connection with the 2021 Equity Event, with respect to Newmark’s executive officers are set forth below. All of the transactions included in the 2021 Equity Event with respect to Messrs. Lutnick, Gosin and Rispoli, were based on (i) the price for Newmark Class A common stock of $12.50 per share, as approved by the Compensation Committee; (ii) the price of BGC Partners Class A common stock of $5.86; and (iii) the price of Nasdaq common stock of $177.11.
Mr. Lutnick
On June 28, 2021, in connection with the 2021 Equity Event, the Compensation Committee approved the following for Mr. Lutnick:
| (i) | the exchange of 279,725 exchangeable Newmark Holdings PSUs into 263,025 shares of Class A common stock of Newmark based on the then applicable exchange ratio of 0.9403; and $1,465,874 associated with Mr. Lutnick’s non-exchangeable 193,530 Newmark Holdings PPSUs was redeemed and used for tax purposes; |
| (ii) | the conversion of 552,482.62 non-exchangeable Newmark Holdings PSUs with the right to exchange PSUs into HDUs (“H-Rights”) into 552,482.62 non-exchangeable Newmark Holdings HDUs and redemption of such HDUs for their Capital Account of $7,017,000, paid in the form of Nasdaq Shares issued at $177.11 per share (which was the Nasdaq closing price as of June 28, 2021); and $7,983,000 associated with Mr. Lutnick’s non-exchangeable Newmark Holdings PPSUs with H-Rights were redeemed and used for tax purposes; |
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| (iii) | the exchange of 520,380 exchangeable BGC Holdings PSUs into 520,380 shares of Class A common stock of BGC Partners, and $1,525,705 associated with Mr. Lutnick’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; |
| (iv) | the redemption of 88,636 non-exchangeable BGC Holdings PSUs pursuant to Mr. Lutnick’s rights under his existing standing policy, and the issuance of 88,636 shares of Class A common stock of BGC Partners; |
| (v) | the conversion of 1,131,774 non-exchangeable BGC Holdings PSUs with H-Rights into 1,131,774 non-exchangeable BGC Holdings HDUs and $7,983,000 associated with Mr. Lutnick’s BGC Holdings PPSUs with H-Rights was redeemed and used for tax purposes in connection with the exercise of the exercise of the BGC Holdings HDUs; and |
| (vi) | the issuance of 29,059 shares of Class A common stock of Newmark. |
In accordance with Mr. Lutnick’s right under his existing standing policy, and in connection with the 2021 Equity Event, upon the approval of the Compensation Committee: (i) 2,909,819 non-exchangeable Newmark Holdings PSUs, pursuant to Mr. Lutnick’s rights under his existing standing policy, were redeemed and 2,736,103 shares of Class A common stock of Newmark, based upon the then applicable exchange ratio of 0.9403, were granted to Mr. Lutnick; and (ii) $8,798,546 associated with Mr. Lutnick’s rights under his existing standing policy was redeemed and used for tax purposes.
Mr. Gosin
The Compensation Committee approved the following for Mr. Gosin:
| (i) | the exchange of 1,531,061.84 exchangeable Newmark Holdings units (comprised of 1,438,597.37 exchangeable Newmark Holdings PSUs and 92,464.47 exchangeable Newmark Holdings APSUs) into 1,439,658 shares of Class A common stock of Newmark based upon the then current exchange ratio of 0.9403; and $834,508 associated with Mr. Gosin’s exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; |
| (ii) | the conversion of 443,871.60 non-exchangeable Newmark Holdings PSUs with H-Rights into 443,871.60 non-exchangeable Newmark Holdings HDUs, and redemption of such HDUs, less any taxes and withholdings in excess of $5,362,452, paid in the form of Nasdaq Shares issued at $177.11 per share (which was the Nasdaq closing price as of June 28, 2021); and $5,362,452 in connection with Mr. Gosin’s Newmark Holdings PPSUs with H-Rights was redeemed and used for tax purposes; |
| (iii) | the exchange of 3,348,706 exchangeable BGC Holdings units (comprised of 3,147,085 exchangeable BGC Holdings PSUs and 201,621 exchangeable BGC Holdings APSUs) into 3,348,706 shares of Class A common stock of BGC Partners; and $298,273 associated with Mr. Gosin’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; |
| (iv) | the conversion of 1,592,016 non-exchangeable BGC Holdings PSUs with H-Rights into 1,592,016 non-exchangeable BGC Holdings HDUs, and $1,129,499 associated with Mr. Gosin non-exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; and |
| (v) | the issuance of 12,500 shares of Class A common stock of Newmark. |
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Mr. Rispoli
On June 28, 2021, the Compensation Committee approved the following for Mr. Rispoli:
| (i) | the exchange of 23,124 exchangeable Newmark Holdings PSUs into 21,744 shares of Class A common stock of Newmark based on the then current exchange ratio of 0.9403 and $208,407 associated with Mr. Rispoli’s exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; |
| (ii) | 6,000 non-exchangeable Newmark Holdings PSUs were redeemed and an aggregate of 5,642 restricted shares of Newmark were issued to Mr. Rispoli based upon the then current exchange ratio of 0.9403, and $52,309 associated with Mr. Rispoli’s non-exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; |
| (iii) | the conversion of 5,846.07 non-exchangeable Newmark Holdings PSUs with H-Rights into 5,846 non-exchangeable Newmark Holdings HDUs and the redemption of such HDUs, less any taxes and withholdings in excess of $60,750, paid in the form of Nasdaq Shares issued at $177.11 per share (which was the Nasdaq closing price as of June 28, 2021); and $60,750 associated with Mr. Rispoli’s PPSUs with H-Rights was redeemed and used for tax purposes; |
| (iv) | the exchange of 36,985 exchangeable BGC Holdings PSUs into 36,985 shares of Class A common stock of BGC Partners, and $134,573 associated with Mr. Rispoli’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; and |
| (v) | the issuance of 383 shares of Class A common stock of Newmark. |
Gosin Commissions
Mr. Gosin received commissions in 2020 in the amount of $16,109 payable in connection with brokerage transactions. This amount was paid in the form of $1,611 in cash and 1,519 non-exchangeable Newmark Holdings NPSUs. Mr. Gosin did not receive any commissions in 2021. Mr. Gosin received commissions in 2022 in the amount of $646 payable in connection with brokerage transactions paid in the form of $65 in cash and $581 in non-exchangeable 73 Newmark Holdings NPSUs.
2021 Lutnick Award
Introduction
On December 27, 2021, the Compensation Committee approved a one-time bonus award to Mr. Lutnick (the “Award”), which was evidenced by the execution and delivery of a Retention Bonus Agreement dated December 28, 2021 (the “Effective Date”) and described below (the “Award Agreement”), in consideration of his success in managing certain aspects of the Company’s performance as its principal executive officer and Chairman. The Award rewarded Mr. Lutnick for his efforts in delivering superior financial results for the Company and its stockholders, including in particular his success in creating substantial value for the Company and its stockholders in connection with creating, structuring, hedging and monetizing the forward share contract to receive over time Nasdaq Shares (the “Nasdaq Derivative”) held by the Company and the strong balance sheet and significant amount of income created from the Nasdaq Derivative. A principal reason for structuring the Award with a substantial portion to be paid out over three years was also to further incentivize Mr. Lutnick to continue to serve as both the Company’s principal executive officer and its Chairman for the benefit of the Company’s stockholders.
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The Award Agreement provides for an aggregate cash payment of $50 million, payable as follows: $20 million within three days of the Effective Date (which payment was made on December 31, 2021), and $10 million within thirty days following vesting on each of the first, second and third anniversaries of the Effective Date. Any entitlement to future amounts not vested will be forfeited immediately if, prior to the applicable anniversary date, Mr. Lutnick ceases to serve as both the Company’s Chairman and its principal executive officer, unless Mr. Lutnick ceasing to serve in either such capacity occurs pursuant to a “Vesting Termination,” as that term is defined in the Award Agreement. Mr. Lutnick has purchased Newmark Class A Common Stock with the after-tax proceeds of the initial tranche of the Award. The Award Agreement describes a “Vesting Termination” as (i) a termination of Mr. Lutnick’s employment by the Company without “Cause” (as that term is defined in the Award Agreement) or (ii) an involuntary removal of the Executive from the position of Chairman of the Board on or after the occurrence of a Change in Control (as that term is defined in the Change of Control Agreement dated as of December 13, 2017 by and between Mr. Lutnick and the Company (the “Change of Control Agreement”)). In the event that Mr. Lutnick ceases to serve as both the Company’s Chairman and its principal executive officer pursuant to a Vesting Termination, any amounts not vested will immediately become fully vested. The Award Agreement provides that Mr. Lutnick ceasing to serve as the Company’s Chairman and principal executive officer pursuant to his death or disability does not constitute a Vesting Termination. The provisions of the Change of Control Agreement do not apply to the Award. A copy of the Award Agreement was attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 29, 2021.
The Compensation Committee’s Consideration of the Award and Award Agreement
The Award and the Award Agreement were approved by the Compensation Committee of our Board of Directors on December 27, 2021 after careful consideration of Mr. Lutnick’s contributions to the Company’s financial growth and success, and Mr. Lutnick’s specific contributions to that success as the Company’s principal executive officer. The terms were determined and agreed by the Committee following an extensive process that included numerous meetings of the Committee dedicated to discussing the Award through the last four months of 2021, during which the Committee evaluated reports and analyses prepared by Aon Human Capital Solutions (“Aon”). In order to assist it with its deliberations, the Committee retained Aon to be its independent compensation consultant and Mayer Brown LLP to be its independent counsel, in each case for the sole purpose of assisting the Committee in its consideration of the Award. The Committee evaluated and discussed reports and analyses prepared by Aon throughout its deliberations. Mr. Lutnick did not participate in any meetings of the Committee where the Award was discussed.
The Nasdaq Share Transactions
Among the principal factors considered by the Compensation Committee in deciding to grant Mr. Lutnick the Award was Mr. Lutnick’s critical role in the value created for Newmark and its stockholders in connection with the Nasdaq Derivative transactions described in the Company’s periodic reports, including in Item 7 of the Company’s 2022 10-K under the headings “Nasdaq Monetization Transactions” and “Acceleration of Nasdaq Earn-out.” As detailed in that description of the Nasdaq Derivative, on September 28, 2017, the Company received the remaining rights to receive Nasdaq Shares that were first received by BGC Partners in June 2013, which at that time consisted of a total of 14,883,705 shares of Nasdaq, to be paid ratably over 15 years (subject to an earn-out, acceleration and present value discount as described in detail in the above-referenced description) (the “Nasdaq Earn-out”), meaning that in 2017, the Company received the rights to receive approximately 10,900,000 shares of Nasdaq, over the remaining 11 years of the contract provided the Nasdaq Earn-out terms were achieved. At that time, the Company considered the sale of the Nasdaq Derivative as recommended by certain of the Company’s advisors with proceeds in the range of $375-$425 million. Mr. Lutnick chose an alternative route for the Company. In choosing to purchase the long-dated Nasdaq Derivative from a highly rated bank and borrow the potential proceeds of the puts at the bank’s comparatively low cost of funds, Newmark was able to use a portion of the Nasdaq Derivative to repay debt, including debt related to the Berkeley Point Financial (“Berkeley Point”) acquisition without relinquishing the upside of the Nasdaq Earn-out, and while protecting the downside of a portion of the Nasdaq Derivative.
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In 2021, the then-remaining tranches of Nasdaq Shares receivable by the Company pursuant to the Nasdaq Derivative were accelerated on a discounted basis under the terms of the Nasdaq Earn-out, resulting in the Company receiving approximately 6.2 million Nasdaq Shares worth approximately $1.093 billion as the final installment of the Nasdaq Earn-out. The total proceeds received by the Company were significantly in excess of the initial recommendation of value for the Nasdaq Derivative and totaled approximately $1.5 billion, after the cost of hedging and other transaction-related expenses.
In its consideration of the Award, the Compensation Committee carefully reviewed the history of the Company’s transactions in the Nasdaq Shares for the purpose of quantifying the benefit to the Company and its stockholders of the transactions in the Nasdaq Shares described above that were undertaken by Mr. Lutnick for the benefit of the Company and its stockholders, as distinguished from the fact of the Company having received rights to receive the Nasdaq Shares annually over time and the value attributed to the Nasdaq Derivative by the Company’s advisors at the time of the Company’s initial public offering. The Committee determined that Mr. Lutnick’s acumen in personally directing the Company’s transactions in the Nasdaq Shares, including those described above and in Item 7 of the 2022 10-K under the heading “Exchangeable Preferred Partnership Units and Forward Contracts,” played a significant role in maximizing the value of the Nasdaq Shares for the period from 2018 through 2021.
The Compensation Committee determined that the Company’s holdings of the Nasdaq Shares, including the transactions involving such shares as directed by Mr. Lutnick, have played a very significant role in the Company’s financial success, creating a strong balance sheet, producing considerable income and positioning the Company for strategic success. The Committee determined that as a direct result, the Company has:
| • | been able to reduce its reliance on indebtedness to execute its strategic growth plan; |
| • | been able to continue to grow through the hiring of important new employees, and been able to better retain its existing employees, even as the COVID-19 pandemic has caused significant disruption in the commercial real estate industry; |
| • | maintained a strong credit rating during a period of significant disruption in the commercial real estate industry; |
| • | acquired and integrated the Berkeley Point Financial business in a manner that would have been much more difficult without its strong financial base, as well as acquired numerous other real estate services companies; and |
| • | generally continued to thrive throughout the course of the COVID-19 pandemic despite the extremely challenged market conditions created by the pandemic. |
The Compensation Committee further believes that the Nasdaq Shares transactions directed by Mr. Lutnick have been a substantial part of positioning the Company for continued future success and will enable it to continue to execute its business plan at a level that would not be achievable in the absence of Mr. Lutnick’s strategic direction concerning its holdings of, and transactions in, the Nasdaq Shares.
The Retention of Mr. Lutnick as the Company’s Principal Executive Officer
The Compensation Committee believes that the Company and its stockholders benefit from having had, and continuing to have, a strong executive management team. The Committee’s deliberations regarding the Award included extensive discussions regarding the near-term and medium-term future of the executive management team, and determined that it was in the best interests of the Company and its stockholders that the Award be structured in order to incentivize Mr. Lutnick to remain a part of the executive management team and as the Company’s principal executive officer in addition to serving as the Company’s Chairman. As a result, the Committee determined that any one-time bonus for Mr. Lutnick would be structured with a considerable retentive element that was dependent on Mr. Lutnick continuing to serve as both the Company’s principal executive officer and its Chairman in order for future installments of the bonus to be payable. The Committee viewed this retentive element as being an essential component of the Award.
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Form of Payment of the Award
The Compensation Committee conducted extensive deliberations relating to the form of payment of the Award. Among the options considered by the Committee, assisted by its independent compensation consultant and independent counsel, were to pay the Award in the form of (i) cash, (ii) newly issued Company stock, (iii) Nasdaq Shares, (iv) RSUs or (v) a combination thereof.
The Compensation Committee carefully determined that providing for the payment of the Award in cash was in the best interest of the Company and its stockholders, particularly in light of the Company’s ongoing stock repurchase program and the significant cash earnings of the Company including the additional $1,093,000,000 the Company received in respect of the Nasdaq Shares in June 2021. The Committee also considered Mr. Lutnick’s already-substantial holdings of the Company’s common stock and deepening alignment of his interests with those of the Company’s stockholders, the effect of the various forms of payment on the Company’s earnings and the Company’s strong cash position. The Company’s Chief Financial Officer and Aon were consulted in connection with the Committee’s deliberations as to the optimal form of payment from the perspective of the Company and its stockholders. Following the payment of the first installment of the Award, Mr. Lutnick purchased an aggregate of 503,500 shares of Class A common stock on the open market with his net after-tax proceeds with respect to this payment.
Standing Policy for Mr. Lutnick
In March 2018, our Compensation Committee and Audit Committee approved a standing policy that gives Mr. Lutnick the same right, subject to certain conditions, to accept or waive opportunities that have previously been offered, or that may be offered in the future, to other executive officers to (i) participate in any opportunity to monetize or otherwise provide liquidity with respect to some or all of their non-exchangeable limited partnership units; (ii) to accelerate the lapse of or eliminate any restrictions on transferability with respect to shares of restricted stock; or (iii) to participate in transactions that monetize and/or provide liquidity of equity or partnership awards granted to other executive officers, including the right to exchange non-distribution earning units such as NPSUs into distribution-earning units such as PSUs, or convert Preferred Units such as PPSUs into regular, non-Preferred Units, such as PSUs, based upon the highest percentage of distribution earning awards and in the same proportion of regular to Preferred Units held by another executive.
The policy provides generally that Mr. Lutnick shall be treated no less favorably than, and in proportion to, any other executive officer with respect to the change, right or modification of equity or partnership awards, which include, but are not limited to, opportunities (i) to have non-exchangeable units redeemed or replaced by other non-exchangeable units; (ii) to have non-exchangeable units received upon such replacement redeemed by Newmark Holdings for cash, or, with the concurrence of Cantor, granted exchange rights for shares of Newmark’s Class A common stock; (iii) to accelerate the lapse of or eliminate any restrictions on transferability with respect to restricted shares of Class A common stock; and (iv) to replace non-distributing units with distributing units and replace Preferred Units with non-Preferred Units. The policy may also include exchange of units into HDUs or other units with a capital account and the cancellation or redemption of non-exchangeable units and the issuance of new shares or units.
Under the policy, Mr. Lutnick shall have the right to accept or waive in advance some or all of the foregoing opportunities that we may offer to any other executive officer. In each case, Mr. Lutnick’s right to accept or waive any opportunity offered to him to participate in any such opportunity shall be cumulative (and, accordingly, Mr. Lutnick would again have the right to accept or waive the opportunity to participate with respect to such portion previously waived if and when any additional opportunity is offered to any executive officer) and shall be equal to the greatest proportion of outstanding units and the greatest percentage of shares of restricted stock with respect to which any other executive officer has been or is offered with respect to all of such opportunities. This policy may result in grants to him of exchange rights/cash settlement awards, grants of HDUs or other units with a capital account, the cancellation or redemption of non-exchangeable units and the issuance of new shares or units, or the acceleration of the lapse of restrictions on transferability of shares of restricted stock owned by him if a future triggering event under the policy occurs.
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On March 16, 2021, pursuant to the Newmark standing policy for Mr. Lutnick, the Compensation Committee granted exchange rights and/or monetization rights with respect to rights available to Mr. Lutnick. Mr. Lutnick elected to waive such rights one-time with such future opportunities to be cumulative. The aggregate number of Mr. Lutnick’s units for which he waived exchange rights or other monetization rights was 4,015,168 non-exchangeable Newmark Holdings PSUs/NPSUs, inclusive of the PSUs receiving an HDU conversion right and 1,443,850 non-exchangeable Newmark Holdings PPSUs with an aggregate determination amount of $18,369,722 at that time, inclusive of the PPSUs receiving an HDU conversion right.
On April 27, 2021 and June 28, 2021, Mr. Lutnick received monetization rights under the standing policy in connection with the Compensation Committee’s approval of certain monetization rights for Mr. Merkel. The cumulative number of Mr. Lutnick’s units for which he waived exchangeability, with such future opportunities to be cumulative, was 4,658,804 non-exchangeable Newmark Holdings PSUs/PSU-Hs and 1,608,328 non-exchangeable Newmark Holdings PPSUs/PPSU-Hs with an aggregate determination amount of $20,009,722.
In connection with the 2021 Equity Event discussed above, Mr. Lutnick again received monetization rights under the Newmark standing policy. Pursuant to Mr. Lutnick’s acceptance and exercise of certain of his rights under the standing policy at that time, on June 28, 2021, (i) 2,909,819 of Mr. Lutnick’s non-exchangeable Newmark Holdings PSUs were redeemed for zero in connection with the issuance of 2,736,103 shares of our Class A common stock to Mr. Lutnick based upon the exchange ratio of 0.9403, and (ii) 689,183 of Mr. Lutnick’s non-exchangeable Newmark Holdings PPSUs were redeemed for a tax payment of $8,798,546. In addition, pursuant to Mr. Lutnick’s exercise of his HDU conversion rights on June 28, 2021, (i) his 552,482 Newmark Holdings PSU-Hs were converted into 552,482 Newmark Holdings HDUs, and (ii) his 602,462 non-exchangeable Newmark Holdings PPSU-Hs were redeemed for a tax payment of $7,983,000.
On December 21, 2021, Mr. Lutnick elected to redeem all of his 193,530 then exchangeable (for cash) Newmark Holdings PPSUs for a cash payment of $1,465,873. In addition, upon the Compensation Committee’s approval on December 21, 2021 of the monetization of Mr. Gosin’s remaining non-exchangeable Newmark Holdings PPSUs and a number of Mr. Gosin’s non-exchangeable Newmark Holdings PSUs, Mr. Lutnick (i) elected to redeem 188,883 non-exchangeable Newmark Holdings PPSUs for a cash payment of $1,954,728, and 127,799 non-exchangeable Newmark Holdings NPPSUs for a cash payment of $1,284,376, both for which he previously waived, but then accepted, his right under the Company’s standing policy for Mr. Lutnick; and (ii) received the right to monetize, and accepted the monetization of, his remaining 122,201 non-exchangeable Newmark Holdings NPPSUs for a cash payment of $1,228,124, under such standing policy. In connection with the foregoing, Mr. Lutnick accepted the right to monetize approximately $4,406,915 by way of the Company causing 286,511 of Mr. Lutnick’s non-exchangeable Newmark Holdings PSUs to be redeemed for zero and issuing 267,572 shares of Newmark Class A common stock, based upon the closing price of our Class A common stock on the date the Committee approved the transaction (which was $16.47) and a 0.9339 exchange ratio, under the Company’s standing policy applying to Mr. Lutnick, with such acceptance of rights granted in reference to Mr. Gosin’s December 2021 transactions to the extent necessary to effectuate the foregoing (and otherwise Mr. Lutnick waived all remaining rights one-time, with all opportunities to be cumulative).
In connection with Mr. Rispoli’s grant of exchangeability on certain units on September 30, 2022, Mr. Lutnick received monetization rights under the standing policy applicable to him.
On March 30, 2023, Mr. Lutnick received monetization rights under the standing policy in connection with the Compensation Committee’s approval of certain monetization rights for Mr. Gosin.
As of June 30, 2023, the number of Mr. Lutnick’s remaining Newmark Holdings units for which he waived monetization under the Newmark standing policy, with such future opportunities to be cumulative, included 1,113,291 non-exchangeable Newmark Holdings PSUs and 162,549 non-exchangeable Newmark Holdings PPSUs with a determination amount of $2,500,000.
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Partnership Enhancement Programs
We have from time to time undertaken partnership redemption and compensation restructuring programs to enhance our employment arrangements by leveraging our unique partnership structure. Under these programs, participating partners generally may agree to extend the lengths of their employment or service agreements, to accept a larger portion of their compensation in partnership units and to other contractual modifications sought by us. As part of these programs, we may also redeem limited partnership interests for cash and/or other units and grant exchangeability to certain units.
Perquisites
From time to time, we may provide certain of our executive officers with perquisites and other personal benefits that we believe are reasonable. While we do not view perquisites as a significant element of our executive compensation program, we believe that they can be useful in attracting, motivating, and retaining the executive talent for which we compete. From time to time, these perquisites might include travel, transportation, and housing benefits. We believe that these additional benefits may assist our executive officers in performing their duties and provide time efficiencies for them in appropriate circumstances, and we may consider their use in the future. All present or future practices regarding executive officer perquisites will be subject to periodic review and approval by our Compensation Committee.
Mr. Gosin receives the use of a car and driver in connection with Mr. Gosin’s duties as an executive officer. In 2022, such personal benefits had an aggregate incremental cost of approximately $113,426.
We offer medical, dental, life insurance and short and long-term disability insurance and a 401(k) plan to all employees on a non-discriminatory basis. Medical insurance premiums are charged to employees at varying levels based on total cash compensation.
Post-Employment Compensation
Pension Benefits
We do not currently provide pension arrangements or post-retirement health coverage for our employees.
Retirement Benefits
Our executive officers are generally eligible to participate in the 401(k) Plan. Pursuant to the 401(k) Plan, all U.S. eligible employees, including our executive officers, are provided with a means of saving for their retirement. While we have a 401(k) match for some of our employees, we currently do not match any of our executive officers’ contributions to our 401(k) Plan.
Nonqualified Deferred Compensation
We do not provide any nonqualified deferred compensation plans to our employees.
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COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis, which we refer to as the “CDA,” set forth in this document with management of the Company and, based on such review and discussions, the Compensation Committee recommended to the Company’s Board of Directors that the CDA be included in this document.
Dated: August 16, 2023
THE COMPENSATION COMMITTEE
Virginia S. Bauer, Chair
Jay Itzkowitz
Kenneth A. McIntyre
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EXECUTIVE COMPENSATION
Summary Compensation Table
| (a) Name and |
(b) Year (1)(2) |
(c) Salary ($)(3) |
(d) Bonus ($) |
(e) Equity Awards ($)(5) |
(f) Option Awards ($) |
(g) Non-Equity Incentive Plan Compensation ($)(6) |
(h) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
(i) All Other Compensation ($) |
(j) Total ($) |
|||||||||||||||||||||||||||
| Howard W Lutnick, |
2022 | 1,000,000 | 10,000,000 | (4) | — | — | 9,000,000 | — | — | 20,000,000 | ||||||||||||||||||||||||||
| Executive Chairman |
2021 | 1,000,000 | 20,000,000 | (4) | 5,025,000 | — | 9,000,000 | — | — | 35,025,000 | ||||||||||||||||||||||||||
| 2020 | 675,000 | (3) | — | — | — | 3,450,000 | — | — | 4,125,000 | |||||||||||||||||||||||||||
| Barry M. Gosin, |
2022 | 1,000,000 | 1,500,000 | — | — | — | — | 114,072 | (7) | 2,614,072 | (9) | |||||||||||||||||||||||||
| Chief Executive Officer |
2021 | 1,000,000 | — | — | — | 11,500,000 | — | 113,061 | (7) | 12,613,061 | ||||||||||||||||||||||||||
| 2020 | 675,000 | (3) | — | — | — | 7,933,891 | — | 119,821 | (8) | 8,728,712 | ||||||||||||||||||||||||||
| Michael J. Rispoli, |
2022 | 850,000 | — | 5,650,000 | — | 500,000 | — | — | 7,000,000 | |||||||||||||||||||||||||||
| Chief Financial Officer |
2021 | 732,327 | (2) | — | — | — | 1,000,000 | — | — | 1,732,327 | ||||||||||||||||||||||||||
| 2020 | 620,212 | (3) | — | — | — | 392,288 | — | — | 1,012,500 | |||||||||||||||||||||||||||
| Stephen M. Merkel, |
2022 | 500,000 | — | — | — | 1,000,000 | — | — | 1,500,000 | |||||||||||||||||||||||||||
| Chief Legal Officer |
2021 | 500,000 | — | — | — | 1,000,000 | — | — | 1,500,000 | |||||||||||||||||||||||||||
| 2020 | 452,250 | (3) | — | — | — | 579,000 | — | — | 1,031,250 | |||||||||||||||||||||||||||
| (1) | The table does not include certain monetizations of Newmark Holdings units described above under “Compensation Discussion and Analysis—Replacement and Exchange Right Grants in Respect of 2022,” “Compensation Discussion and Analysis—Replacement and Exchange Right Grants in Respect of 2021” and “Compensation Discussion and Analysis—Replacement and Exchange Right Grants Related to the 2021 Equity Event” because these limited partnership units had been granted in partial payment of prior years’ bonuses previously included in column (g) at full notional value. See footnote 5 below for further details. |
| (2) | The amounts set forth in the table and corresponding footnotes reflect the total compensation awarded to each executive officer for all years presented. |
The amount in column (c) for 2021 for Mr. Rispoli reflects a salary rate of $700,000 from January through March 2021, and a salary rate of $750,000 for March through December 2021.
| (3) | On April 27, 2020, in response to the continuing macroeconomic impact of the COVID-19 pandemic, our executive officers volunteered to reduce their annual base salaries by 50% for Messrs. Lutnick and Gosin and by 15% for Messrs. Merkel and Rispoli. These reductions were effective as of April 27, 2020 and remained in place until December 31, 2020. This table reflects actual amounts paid to the executive officers during the year. |
| (4) | Column (d) includes $10,000,000 paid to Mr. Lutnick in 2022 and $20,000,000 paid to Mr. Lutnick in 2021 in connection with the 2021 one-time Award described above under the heading “2021 Lutnick Award.” Column (d) does not include the remaining $20,000,000 of the Award which the Award Agreement provides shall be payable in equal installments in 2023 and 2024 subject to and in accordance with the terms of the Award. For Mr. Gosin, column (d) represents the $1,500,000 cash bonus Mr. Gosin received with respect to his compensation for 2022 pursuant to the terms of the Gosin Employment Agreement. |
| (5) | The 2022 amount of $5,650,000 under column (e) for Mr. Rispoli represents the fair value at the time of grant of the 750,000 Newmark RSUs granted to Mr. Rispoli in connection with the execution of the Rispoli Employment Agreement on September 29, 2022. The award consisted of: (i) 100,000 Newmark RSUs granted as consideration for entering into the Rispoli Employment Agreement and an advance of 100,000 Newmark RSUs against Mr. Rispoli’s compensation for each of calendar years 2022, 2023, 2024, 2025; and (ii) 250,000 Newmark RSUs representing the collective advance of an additional one-time grant award of $500,000 for each of calendar years 2022, 2023, 2024, 2025, and 2026. See “Employment Agreements–Rispoli Employment Agreement” below. Information regarding the assumptions used in computing the fair value of the RSUs is included in “Note 30. Compensation” to the consolidated financial statements included in Item 8 of our 2022 10-K. |
The 2021 amount of $5,025,000 under column (e) for Mr. Lutnick represents the value of the redemption of (i) 227,141 Newmark Holdings PPSUs at the determination price of $10.05 per PPSU in connection with the 2021 Equity Event; and (ii) 272,859 Newmark Holdings PPSUs at the determination price of $10.05 per PPSU in connection with the monetization approved by the Compensation Committee on December 21, 2021. These PPSUs were only redeemable for cash, which was used for tax payments, and were granted to Mr. Lutnick in exchange for certain long-term incentive awards in the form of NPPSUs awarded to Mr. Lutnick in 2019, which were not previously included under column (g) at full notional value.
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Column (e) does not include certain compensatory grants of Newmark Holdings units described below because such grants did not represent a right to acquire shares of Newmark Class A common stock and had no grant date fair value for accounting purposes. Column (e) also does not include certain monetizations of Newmark Holdings units described below that would otherwise be included in column (e) because the Newmark Holdings units involved were the subject of previous dollar-denominated awards under the Incentive Plan included in column (g) at full notional value.
Column (e) does not include the exchanges/monetization that Mr. Lutnick exercised in connection with his rights pursuant to the Newmark standing policy and/or pursuant to the 2021 Equity Event because these units had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
On March 16, 2021, the Compensation Committee granted Mr. Gosin exchange rights into shares of our Class A common stock with respect to 526,828 previously awarded non-exchangeable Newmark Holdings PSUs and 30,871 non-exchangeable Newmark Holdings APSUs held by Mr. Gosin (which, based on the closing price of the Class A common stock of $11.09 per share on such date and using the exchange ratio of 0.9365, had a value of $5,792,139 in the aggregate). In addition, on March 16, 2021, the Compensation Committee approved removing the sale restrictions on Mr. Gosin’s remaining 178,232 restricted shares of Class A common stock in BGC Partners (which were originally issued in 2013) and associated 82,680 remaining restricted shares of Newmark Class A common stock (issued as a result of the Spin-Off in November 2018). Column (e) does not include any of the foregoing units because they had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
For Mr. Gosin, column (e) does not include the monetizations approved by the Compensation Committee on December 21, 2021 in connection with: (i) the redemption of all of Mr. Gosin’s remaining 838,996 non-exchangeable Newmark PPSUs for $8,339,980 in cash and (ii) compensation of approximately $7,357,329 by way of Newmark causing 478,328 of Mr. Gosin’s non-exchangeable Newmark PSUs to be redeemed for zero and issuing 446,711 Class A common shares of Newmark based upon the closing price of our Class A common stock on the date the Committee approved the transaction (which was $16.47) and an exchange ratio of 0.9339. In addition, 2,114,546 BGC Holdings PSUs held by Mr. Gosin were redeemed, and an aggregate of 1,176,745 net shares of BGC Partners Class A common stock were issued at $4.86 price (which was the closing price of BGC Partners Class A common stock on September 21, 2021). Column (e) does not include any of the foregoing units because they had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
Column (e) does not include the exchanges/monetization for Mr. Gosin in connection with the 2021 Equity Event because these units had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
In addition to the above, column (e) does not include the redemption of Mr. Gosin’s 905,371 BGC Holdings HDUs that were redeemed for a cash payment of $3,521,893 based upon a price of $3.89 per unit, which was the closing price of BGC Partners’ Class A common stock on April 14, 2022, as the redemption of such HDUs was not a compensation event.
For Mr. Rispoli, column (e) does not include the exchange rights granted to Mr. Rispoli in connection with the signing of the Rispoli Employment Agreement, because these units had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
On March 16, 2021, the Compensation Committee granted Mr. Rispoli (i) exchange rights into shares of Class A common stock with respect to 6,043 previously awarded non-exchangeable Newmark Holdings PSUs held by Mr. Rispoli (which, based on the closing price of the Class A common stock of $11.09 per share on such date and using the exchange ratio of 0.9365, had a value of $62,758); and (ii) exchange rights into cash with respect to 4,907 previously awarded non-exchangeable Newmark Holdings PPSUs held by Mr. Rispoli (which had an average determination price of $15.57 per unit, for a total of $76,407 in the aggregate to be paid for taxes when (i) is exchanged). Column (e) does not include any of the foregoing units because they had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
Column (e) does not include the exchanges/monetization for Mr. Rispoli in connection with the 2021 Equity Event because these units had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
On March 16, 2021, the Compensation Committee approved the right of Mr. Merkel to convert 30,926 non-exchangeable Newmark Holdings PSUs held by Mr. Merkel into 28,962 shares of Class A common stock (which, based on the closing price of the Class A common stock of $11.09 per share on such date and using the exchange ratio of 0.9365, had a value of $321,189). On March 16, 2021, Mr. Merkel converted these 30,926 non-exchangeable Newmark Holdings PSUs into 28,962 shares of Newmark Class A common stock which the Company repurchased on the same day for $321,189 in total consideration, less applicable taxes and withholding, under its then-current buyback program. Column (e) does not include any of the foregoing units because they had been previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
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Column (e) for Mr. Merkel also does not include the following rights granted by the Compensation Committee to Mr. Merkel: (a) on April 27, 2021, (i) the redemption of 73,387 non-exchangeable Newmark Holdings PSUs held by Mr. Merkel, which, as adjusted by the then applicable exchange ratio of 0.9365, were converted into 68,727 shares of our Class A common stock and then repurchased by the Company for $10.67 per unit (the April 27, 2021 closing price of our Class A common stock), and (ii) the redemption of certain of Mr. Merkel’s non-exchangeable Newmark Holdings PPSUs for a tax payment of $82,560; and (b) on June 28, 2021, (i) the redemption of 51,124.28 non-exchangeable Newmark PSUs held by Mr. Merkel, which, as adjusted by the then applicable exchange ratio of 0.9403, were converted into 48,072 shares of our Class A common stock, and (ii) the redemption of certain of Mr. Merkel’s non-exchangeable PPSUs for a tax payment of $329,155. The foregoing units were previously granted in partial payment of prior years’ Incentive Plan bonuses previously included in column (g) at full notional value.
| (6) | The amounts in column (g) reflect the bonus awards to our named executive officers (“NEOs”) under our Incentive Plan. For 2022, Mr. Lutnick’s Incentive Plan bonus was paid $4,000,000 in cash and $5,000,000 in the form of 772,798 non-exchangeable Newmark Holdings PSUs at $6.47 per unit; Mr. Rispoli’s bonus was paid $500,000 in cash; and Mr. Merkel’s bonus was paid $500,000 in cash and $500,000 in the form of 38,640 non-exchangeable Newmark Holdings PSUs and 38,640 non-exchangeable Newmark Holdings PPSUs at $6.47 per unit. |
For 2021, Mr. Lutnick’s Incentive Plan bonus was paid $4,000,000 in cash and $5,000,000 in the form of 162,549 non-exchangeable Newmark Holdings PSUs and 162,549 non-exchangeable Newmark Holdings PPSUs at $15.38 per unit; Mr. Gosin’s Incentive Plan bonus was paid $5,250,000 in cash and $6,250,000 in the form of 203,186 non-exchangeable Newmark Holdings PSUs and 203,186 non-exchangeable Newmark Holdings PPSUs at $15.38 per unit; Mr. Rispoli’s bonus was paid $416,667 in cash and $583,333 in the form of 18,964 non-exchangeable Newmark Holdings PSUs and 18,964 non exchangeable Newmark Holdings PPSUs at $15.38 per unit; and Mr. Merkel’s bonus was paid $500,000 in cash and $500,000 in the form of 16,255 non-exchangeable Newmark Holdings PSUs and 16,255 non-exchangeable Newmark Holdings PPSUs at $15.38 per unit.
For 2020, Mr. Lutnick’s Incentive Plan bonus was paid $3,450,000 in the form of 166,025 non-exchangeable Newmark Holdings PSUs and 166,025 non-exchangeable Newmark Holdings PPSUs; Mr. Gosin’s Incentive Plan bonus was paid $7,933,891 in the form of 381,804 non-exchangeable Newmark Holdings PSUs and 381,804 non-exchangeable Newmark Holdings PPSUs; Mr. Rispoli’s bonus was paid $392,288 the form of 18,878 non-exchangeable Newmark Holdings PSUs and 18,878 non-exchangeable Newmark Holdings PPSUs and Mr. Merkel’s bonus was paid $579,000 in the form of 27,864 non-exchangeable Newmark Holdings PSUs and 27,864 non-exchangeable Newmark Holdings PPSUs.
| (7) | For 2022, Mr. Gosin received commissions in the amount of $646 payable in connection with brokerage transactions. This amount was paid in $65 in cash and $581 in the form of 1,519 non-exchangeable Newmark Holdings NPSUs. |
| (8) | Mr. Gosin receives the use of a car and driver in connection with Mr. Gosin’s duties. Such personal benefits had an aggregate incremental cost of approximately $103,712 in 2020, $113,061 in 2021, and $113,426 in 2022. |
| (9) | The Summary Compensation Table excludes $10,000,000 awarded to Mr. Gosin pursuant to the Gosin Employment Agreement that the Compensation Committee attributed to compensation year 2022 when determining his compensation. Including this amount, Mr. Gosin’s total compensation for 2022 was $12,614,072. This amount was represented by 25% of the 4,581,900 non-exchangeable Newmark Holdings NPSUs issued in 2023 to Mr. Gosin at $8.73 (which was the price of our Class A common stock on February 10, 2023). The aggregate amount of these non-exchangeable Newmark Holdings NPSUs represented a collective advance against Mr. Gosin’s compensation with respect to each of calendar years 2022, 2023, 2024 and 2025. Under applicable SEC rules, because the award of Newmark Holdings NPSUs was made in 2023, it will be reflected in the 2023 Summary Compensation Table. See the heading “Employment Agreements—Gosin Employment Agreement” below for more information. |
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Grants of Plan-Based Awards
The following table shows all grants of plan-based awards to the named executive officers in 2022:
| (a) |
(b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | |||||||||||||||||||||||||||||||||
| Estimated Possible Payouts Under Non-Equity Incentive Plan |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Grant Awards: Number of Shares of Stock or Units(2) (#) |
All Other Grant Awards: Number of Securities Underlying Options (#) |
Exercise of Base Price of Option Awards ($/Sh) |
Grant Date Fair Value of Stock and Option Awards ($) |
|||||||||||||||||||||||||||||||||||||||
| Name |
Grant Date |
Threshold |
Target ($) |
Maximum ($)(1) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||||||||||
| Howard W. Lutnick |
— | — | 25,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Barry M. Gosin(3) |
— | — | 25,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Michael J. Rispoli |
— | — | 25,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 10/1/22 | 750,000 | 5,650,000 | ||||||||||||||||||||||||||||||||||||||||||
| Stephen M. Merkel |
— | — | 25,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| (1) | The amounts in column (e) reflect the maximum possible individual payment under the Incentive Plan. During 2022, there were no specific minimum and target levels under the Incentive Plan. The $25,000,000 maximum amount was the maximum annual amount available for payment to any one executive officer under the Incentive Plan for 2022, and our Compensation Committee retained negative discretion to award less than this amount. Actual amounts paid to each named executive officer for 2022 are set forth in column (g) of the Summary Compensation Table. |
| (2) | On October 1, 2022, Mr. Rispoli was granted 750,000 Newmark RSUs in connection with the execution of the Rispoli Employment Agreement on September 29, 2022. All such RSUs are currently unvested. Please refer to footnote (3) to the “Outstanding Equity Awards at Fiscal Year End” table for information regarding the vesting schedule of these RSUs. |
| (3) | On February 10, 2023, Mr. Gosin executed the Gosin Employment Agreement, pursuant to which he received an aggregate of 4,581,900 non-exchangeable NPSUs which will receive exchange rights as scheduled in the Gosin Employment Agreement, and which had an aggregate grant date fair value of $40,000,000. This award will appear in the 2023 Summary Compensation Table and the 2023 Grants of Plan-Based Awards table. |
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Outstanding Equity Awards at Fiscal Year End
None of the named executive officers held any unexercised options as of December 31, 2022. The following table shows all exchangeable units representing a right to acquire shares of our Class A common stock and unvested RSUs held by each of the named executive officers as of December 31, 2022:
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| (a) Name |
(b) Number of Securities Underlying Unexercised Options/ Exchangeable Units Exercisable/ Exchangeable(1) (#) |
(c) Number of Securities Underlying Unexercised Options/ Exchangeable Units Unexercisable/ Unexchangeable(2) (#) |
(d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
(e) Option Exercise Price ($) |
(f) Option Expiration Date |
(g) Number of Shares or Units of Stock That Have Not Vested (#)(3) |
(h) Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
(i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
(j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|||||||||||||||||||||||||||
| Howard W. Lutnick |
260,228 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Barry M. Gosin |
575,458 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Michael J. Rispoli |
19,217 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| 750,000 | 5,977,500 | |||||||||||||||||||||||||||||||||||
| Stephen M. Merkel |
0 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| (1) | For Mr. Lutnick, column (b) represents 193,348 exchangeable Newmark Holdings PSUs, and 86,377 exchangeable Newmark Holdings SPUs granted in connection with the Spin-Off (for purposes herein, referred to as SPUs) held as of December 31, 2022. |
For Mr. Gosin, column (b) represents 434,363 exchangeable Newmark Holdings PSUs, 123,336 exchangeable Newmark Holdings APSUs, and 60,873 exchangeable Newmark Holdings SPUs held as of December 31, 2022.
For Mr. Rispoli, column (b) represents 436 exchangeable Newmark Holdings SPUs and 20,221 exchangeable Newmark Holdings SPUs held as of December 31, 2022.
These exchangeable Newmark Holdings SPUs, PSUs, and Newmark Holdings APSUs were issued in connection with the Separation and Distribution Agreement and may be exchanged at any time on a 1:0.9303 basis (based on the exchange ratio as of December 31, 2022 for shares of Newmark’s Class A common stock, subject to adjustment and the terms of the Separation and Distribution Agreement). As of December 30, 2022, the closing market price of a share of Class A common stock was $7.97.
As of December 31, 2022, the executives held the following non-exchangeable Newmark Holdings PSUs, NPSUs or APSUs that are eligible to be granted exchange rights into Newmark Class A common stock: Mr. Lutnick: 1,306,914 units; Mr. Gosin: 1,088,267 units; Mr. Rispoli: 67,858 units; and Mr. Merkel: 64,993 units.
As of December 31, 2022, Messrs. Gosin, Rispoli and Merkel did not hold any non-exchangeable Newmark Holdings NPSUs that are eligible to be replaced by non-exchangeable Newmark Holdings PSUs/PPSUs, which in turn would be eligible to be granted exchange rights for shares of Newmark Class A common stock or cash.
| (2) | Column (c) does not include non-exchangeable Newmark Holdings PPSUs held as of December 31,2022 because they did not represent a right to acquire our Class A common stock. As of December 31, 2022, the non-exchangeable Newmark Holdings PPSUs held by the named executive officers were as follows: Mr. Lutnick: 162,549 units; Mr. Gosin: 203,186 units; Mr. Rispoli: 63,487 units; and Mr. Merkel: 64,992 units. |
| (3) | In connection with the execution of the Rispoli Employment Agreement on September 29, 2022, Mr. Rispoli was granted a total of 750,000 Newmark RSUs as follows: |
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| • | a first award of 500,000 Newmark RSUs (the “First Award”), which represents 100,000 Newmark RSUs attributed to the execution of the Rispoli Employment Agreement and an advance of 100,000 Newmark RSUs against Mr. Rispoli’s compensation for each of calendar years 2022, 2023, 2024 and 2025, vesting according to the following schedule: |
| # of RSUs in First Award |
Ratable Portion of the 100,000 Tranche Vesting Per Year |
Vesting Dates | ||||||
| 100,000 |
1/7th | October 1 of 2023-2029 | ||||||
| 100,000 |
1/7th | March 15 of 2024-2030 | ||||||
| 100,000 |
1/7th | March 15 of 2025-2031 | ||||||
| 100,000 |
1/7th | March 15 of 2026-2032 | ||||||
| 100,000 |
1/7th | March 15 of 2027-2033 | ||||||
| • | a second award of 250,000 Newmark RSUs (the “Second Award”), which represents the collective advance of an additional one-time award of $500,000 for each of calendar years 2022, 2023, 2024, 2025, and 2026, at a notional price of $10 per RSU, with each tranche vesting according to the following schedule: |
| % of Second Award |
Ratable Portion of the 20% Vesting Per Year |
Vesting Dates | ||||||
| 20% |
1/7th | March 15 of 2024-2030 | ||||||
| 20% |
1/7th | March 15 of 2025-2031 | ||||||
| 20% |
1/7th | March 15 of 2026-2032 | ||||||
| 20% |
1/7th | March 15 of 2027-2033 | ||||||
| 20% |
1/7th | March 15 of 2028-2034 | ||||||
Mr. Rispoli’s 750,000 Newmark RSUs had an aggregate market value of $5,977,500 as of December 31, 2022, based on the closing price of our Class A common stock of $7.97 on December 30, 2022.
Option Exercises and Stock Vested
During 2022, Newmark had no outstanding stock options, no options were exercised by any of the named executive officers and no stock vested for any of the named executive officers.
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Potential Payments upon Termination and Change in Control
The following table provides information regarding the estimated amounts payable to the named executive officers listed below, upon either termination or continued employment if such change in control had occurred on December 31, 2022 under their change in control and other agreements, described below, as in effect on December 31, 2022. Therefore, the table does not reflect the change of control provisions under the Gosin Employment Agreement. See “Employment Agreements—2017 Gosin Employment Agreement” below for more information regarding Mr. Gosin’s arrangements in effect on December 31, 2022. For Mr. Gosin, we have reflected 100% of the amounts he would be paid on a termination of his employment without “cause,” because the payments would have been the same whether or not a change in control of BGC Partners or Newmark had occurred. Mr. Merkel is not eligible for additional benefits upon termination or a change in control. All amounts are determined, where applicable, using the $7.97 closing market price of our Class A common stock as of December 30, 2022, and the exchange ratio of 0.9303 as of December 31, 2022 (to the extent applicable), in accordance with SEC rules. All amounts, including estimated vesting of equity compensation and tax gross-up payments, are subject to the specific terms and conditions set forth in the applicable change in control or other agreements and applicable law:
| Name |
Base Salary |
Bonus ($)(7) |
Earned but Unpaid Commissions |
Lump-Sum Payment |
Non- Compete Payments ($) |
Vesting of Equity Compensation ($) |
Welfare Benefit Continuation ($) |
Tax Gross- Up Payment ($)(6) |
Total ($) |
|||||||||||||||||||||||||||
| Howard W. Lutnick |
||||||||||||||||||||||||||||||||||||
| Termination of Employment in connection with a Change in Control(1) |
2,000,000 | 18,000,000 | — | — | — | — | 100,475 | — | 20,100,475 | |||||||||||||||||||||||||||
| Extension of Employment in connection with a Change in Control |
1,000,000 | 9,000,000 | — | — | — | — | 100,475 | — | 10,100,475 | |||||||||||||||||||||||||||
| Termination of Employment without Cause or involuntary removal from the position of Chairman on or after a Change in Control(6) |
— | 20,000,000 | — | — | — | — | — | — | 20,000,000 | |||||||||||||||||||||||||||
| Barry M. Gosin |
||||||||||||||||||||||||||||||||||||
| Termination of Employment without Cause prior to a Change in Control(2) |
1,000,000 | (4) | — | — | — | 2,000,000 | (5) | — | — | — | 3,000,000 | |||||||||||||||||||||||||
| Termination of Employment without Cause in connection with a Change in Control(3) |
1,000,000 | (4) | — | — | — | 2,000,000 | (5) | — | — | — | 3,000,000 | |||||||||||||||||||||||||
| Any Termination of Employment |
— | — | — | — | 2,000,000 | (5) | — | — | — | 2,000,000 | ||||||||||||||||||||||||||
| Michael Rispoli |
||||||||||||||||||||||||||||||||||||
| Termination of Employment without Cause in connection with a Change in Control(8) |
— | — | — | 1,500,000 | (9) | — | — | 28,017 | — | 1,528,017 | ||||||||||||||||||||||||||
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| (1) | Upon a change in control on December 31, 2022, Mr. Lutnick would have had the right to receive (i) replacement of any partnership units ineligible for exchange rights with new partnership units eligible for such exchange rights; (ii) grants of immediately exchangeable exchange rights into stock or cash, as applicable, with respect to any non-exchangeable limited partnership units (including those replacement units described in clause (i)); and (iii) the immediate lapse of any restrictions on transferability of any shares of restricted stock held by him at such time. |
At December 31, 2022, Mr. Lutnick held 1,306,914 of such non-exchangeable, non-preferred Newmark Holdings limited partnership units including PSUs and NPSUs. Based on the closing price of Newmark Class A common stock of $7.97 on December 30, 2022 and the exchange ratio of 0.9303 as of December 31, 2022 with respect to the distribution earning units (i.e., the exchange ratio is not applicable to the NPSUs), the aggregate fair value of the shares and cash underlying such grants would have been $9,759,538.
As of December 31, 2022, Mr. Lutnick held 162,549 Newmark Holdings PPSUs with a determination amount of $2,500,004.
As of December 31, 2022, Mr. Lutnick did not hold any shares of our restricted stock. In each case, the units exclude any units subject to redemption for zero or for cash in accordance with applicable agreements. See “—Change of Control Agreements.”
| (2) | Upon a termination of Mr. Gosin’s employment without cause, any unvested compensatory partnership units held by Mr. Gosin would vest immediately. At December 31, 2022, Mr. Gosin had no unvested partnership units. See “—Employment Agreements—2017 Gosin Employment Agreement” below. |
| (3) | Upon a change in control on December 31, 2022, any non-exchangeable APSUs / PSUs held by Mr. Gosin in Newmark Holdings and as of such date would have been immediately exchangeable into restricted shares of Class A common stock of Newmark, transferable ratably over the first through third anniversaries of the Change in Control, subject to certain conditions. See “—Change of Control Agreements.” |
The above does not reflect the revised change in control terms in the Gosin Employment Agreement (See “—Employment Agreements—Gosin Employment Agreement” below).
As of December 31, 2022, Mr. Gosin held 1,088,267 of such non-exchangeable Newmark Holdings PSU and APSU units. Based on the closing price of our Class A common stock of $7.97 on December 30, 2022 and the exchange ratio of 0.9303 as of December 30, 2022, the value of the shares underlying such grants of exchange rights would have been $8,068,946.
At December 31, 2022, Mr. Gosin did not hold any shares of Newmark restricted stock.
| (4) | On December 31, 2022, Mr. Gosin’s base salary was $1,000,000 payable in cash. |
| (5) | As of December 31, 2022, following a termination of Mr. Gosin’s employment for any reason, he would be eligible to receive a monthly cash payment equal to $83,333 in exchange for his compliance with non-compete obligations for up to 24 months; provided that the Company may elect to release Mr. Gosin from his non-compete obligations and cease making such payments at any time. If the Company elected to enforce Mr. Gosin’s non-compete obligations for the full 24-month period, the value of such payment would be $2,000,000. The table above does not reflect the effect of the change of control provisions relating to Mr. Gosin’s amended and restated employment agreement effective as of February 10, 2023. See “—Employment Agreements—Gosin Employment Agreement” below for more information. |
| (6) | Mr. Lutnick is also entitled to a tax gross-up for excess parachute payments, if any, that would be due in respect of the impact a change in control would have on certain of his outstanding partnership units as stated in footnote (1). There is no aggregate tax-gross up payment upon either a termination of employment, or upon an extension of employment, in connection with a change of control due when calculated based upon the equity compensation in footnote (1), base salary, bonus, and welfare benefit continuation as of December 31, 2022. |
| (7) | Subject to and in accordance with the terms of Mr. Lutnick’s 2021 one-time Award, in the event of a “Vesting Termination” (defined in the Award Agreement as (i) a termination of Mr. Lutnick’s employment by the Company without “Cause” (as that term is defined in the Award Agreement) or (ii) an involuntary removal of the Executive from the position of Chairman of the Board on or after the occurrence of a Change in Control (as that term is defined in the Change of Control Agreement)), any amounts not vested will immediately become fully vested. The provisions of the Change of Control Agreement do not apply to Mr. Lutnick’s Award. |
| (8) | Upon a change in control at December 31, 2022, (i) any PSUs / PPSUs held by Mr. Rispoli in Newmark Holdings units will be redeemed for cash or stock ratably over the first through third anniversaries of such change of control, or exchanged into restricted stock that becomes transferable ratably over the first through third anniversaries of such change of control, in each case as adjusted by the then-current exchange ratio and determined by Newmark Holdings, and (ii) any then-unvested Newmark RSUs held by Mr. Rispoli that would not otherwise vest under their terms by the third anniversary of such change of control will vest into stock or cash ratably over the first through third anniversaries of such change in control, provided that Mr. Rispoli remains employed and in good standing pursuant to the employment agreement. See “—Change of Control Agreements.” |
As of December 31, 2022, Mr. Rispoli held 67,858 non-exchangeable Newmark Holdings PSUs units. Based on the closing price of our Class A common stock of $7.97 on December 30, 2022 and the exchange ratio of 0.9303 as of December 31, 2022, the value of the shares underlying such grants of exchange rights would have been $503,133.
As of December 31, 2022, Mr. Rispoli held 63,487 Newmark Holdings PPSUs with a determination amount of $733,570.
As of December 31, 2022, Mr. Rispoli held 750,000 Newmark RSUs. Based on the closing price of Newmark Class A common stock of $7.97 on December 30, 2022, these 750,000 RSUs had a value of $5,977,500.
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| (9) | Additionally, in the event that, during the three-year period immediately following a change of control, Mr. Rispoli’s employment is terminated without Cause (as defined in the Rispoli Employment Agreement), Mr. Rispoli will be entitled to a lump-sum payment of $1,500,000 subject to delivery by Mr. Rispoli to the Company of an irrevocable release of claims in favor of the Company and its affiliates in customary form. See “—Employment Agreements—Rispoli Employment Agreement.” |
Change of Control Agreements
On December 13, 2017, Mr. Lutnick entered into the Change of Control Agreement with us providing that, upon a change in control, all stock options, RSUs, restricted stock, and other awards based on shares of our Class A common stock held by him immediately prior to such change in control shall vest in full and become immediately exercisable, and all limited partnership units in Newmark Holdings shall, if applicable, vest in full and be granted immediately exchangeable exchange rights for shares of our Class A common stock. The Change of Control Agreement also contains provisions relating to the continuation of medical and life insurance benefits for two years following termination or extension of employment, as applicable.
Under the Change of Control Agreement, if a change in control of the Company occurs (which will occur in the event that none of Cantor or any of its affiliates has a controlling interest in us) and Mr. Lutnick elects to terminate his employment with us upon the change in control pursuant to a written notice of his resignation provided at any time prior to the change in control, he will receive in a lump sum in cash an amount equal to two times the sum of his annual base salary and his prior year’s annual bonus, and receive medical benefits for two years after the termination of his employment (provided that, if Mr. Lutnick becomes re-employed and is eligible to receive medical benefits under another employer-provided plan, the former medical benefits will be secondary to the latter). If a change in control occurs and Mr. Lutnick does not so elect to terminate his employment with us, he will receive in a lump sum in cash an amount equal to his annual base salary and his prior year’s annual bonus, and receive medical benefits, provided that in the event that, during the three-year period following the change in control, his employment is terminated by us (other than by reason of his death or disability), he will receive in a lump sum in cash an amount equal to his annual base salary and his prior year’s annual bonus. The Change of Control Agreement further provides for certain tax gross-up payments, provide for no duty of Mr. Lutnick to mitigate amounts due by seeking other employment and provide for payment of legal fees and expenses as a result of any dispute with respect to the Change of Control Agreement. The Change of Control Agreement further provides for indemnification of Mr. Lutnick in connection with a challenge thereof. In the event of death or disability, or termination in the absence of a change in control, Mr. Lutnick will be paid only his accrued salary to the date of death, disability, or termination. The Change of Control Agreement is terminable by the Company upon two years’ advance notice on or after the 10-year anniversary of the closing of the IPO.
As of the date hereof, Mr. Lutnick is party to a substantially similar change of control agreement with BGC.
Additionally, in connection with our IPO, in December 2017 Mr. Gosin entered into letter agreements with each of BGC Holdings and Newmark Holdings providing that in the event that BGC Partners or Newmark are no longer controlled by Cantor, Mr. Lutnick or one of their affiliates, any PSUs relating to BGC Holdings or Newmark Holdings, as applicable, then held by Mr. Gosin at the time of the change in control shall be exchanged into restricted shares of the applicable BGC or Newmark Class A common stock (subject to reduction for taxes and withholdings). Such shares shall be transferable ratably over the first through third anniversaries of such change in control, provided that Mr. Gosin continues to satisfy the non-compete, non-solicitation and non-disparagement conditions set forth in the share documentation through the applicable transfer date. On February 10, 2023, Mr. Gosin entered into an amended and restated employment agreement with Newmark OpCo and Newmark Holdings which includes amended change of control provisions. See the heading “Employment Agreements—Gosin Employment Agreement” below for more information.
On September 29, 2022, Mr. Rispoli entered into an employment agreement with Newmark OpCo and Newmark Holdings which includes change of control provisions. See the heading “Employment Agreements—Rispoli Employment Agreement” below for more information.
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2021 Lutnick Award Agreement
On December 27, 2021, the Compensation Committee approved the one-time bonus Award to Mr. Lutnick which was evidenced by the execution and delivery of a Retention Bonus Agreement, dated December 28, 2021, and described in detail above under the heading “2021 Lutnick Award.” The provisions of the Change of Control Agreement do not apply to the Award.
Employment Agreements
Gosin Employment Agreement
On February 10, 2023, Mr. Gosin entered into the Gosin Employment Agreement with Newmark OpCo and Newmark Holdings. In connection with the Gosin Employment Agreement, the Compensation Committee approved (i) for a term through at least 2024, with the term running through 2025, an annual cash bonus of $1,500,000; (ii) an upfront advance award of four tranches of 1,145,475 Newmark NPSUs each (calculated by dividing $10,000,000 by the Company’s stock price of $8.73 on February 10, 2023) attributable to each year of the term and (iii) the continued ability to receive discretionary bonuses, if any, subject to approval of the Compensation Committee.
In accordance with the Gosin Employment Agreement, Mr. Gosin’s non-exchangeable NPSUs award has the following features: (i) 25% of such non-exchangeable NPSUs shall convert into non-exchangeable PSUs, with the first 25% installment effective as of April 1, 2023 and the remaining three 25% installments effective as of December 31 of 2023 through 2025 (each a “Conversion Date”), as adjusted upwards by dividing such number of NPSUs by the then-current exchange ratio upon the applicable Conversion Date, provided that, as of each applicable Conversion Date:(x) Newmark, inclusive of its affiliates, earns, in the aggregate, at least $10,000,000 in gross revenues in the calendar quarter in which the applicable award of PSUs is to be granted and (y) Mr. Gosin is still performing substantial services exclusively for Newmark or an affiliate, has not given notice of termination of his services except for circumstances set forth in the Gosin Employment Agreement, and has not breached his obligations under the Newmark Holdings limited partnership agreement; and (ii) such PSUs as converted from NPSUs shall become exchangeable in ratable portions beginning December 31, 2023 and ending December 31, 2029, in accordance with the terms and conditions as set forth in the Gosin Employment Agreement.
The Gosin Employment Agreement provides that Mr. Gosin’s yearly salary will remain at $1,000,000. The employment agreement provides for a term through at least 2024, with the term running through 2025.
During Mr. Gosin’s term of employment, Newmark OpCo may terminate the Gosin Employment Agreement for “Cause,” as defined therein, without further obligation, or due to Mr. Gosin’s death or disability. If Mr. Gosin is terminated without Cause (other than due to Mr. Gosin’s death or disability), (i) he shall be entitled to receive, subject to his execution and delivery of a customary release, (x) his salary through the remainder of the term of employment and (y) any unpaid cash bonus amounts on the originally scheduled payment dates and (ii) Mr. Gosin’s then non-exchangeable partnership units will, as determined by the General Partner of Newmark OpCo, be (a) redeemed for cash or stock ratably over the first (1st) through third (3rd) anniversaries of such termination; or (b) exchanged into restricted shares of stock and become transferable ratably over first (1st) through third (3rd) anniversaries of such termination (provided that, with respect to clauses (a) and (b), Mr. Gosin continues to satisfy the non-compete, non-solicitation and non-disparagement conditions set forth in the Gosin Employment Agreement through the applicable transfer date). If Mr. Gosin is terminated due to his death or permanent physical disability, (i) he shall be entitled to receive, subject to his execution of a customary release, (a) his salary through the date of termination, (b) any unpaid cash bonus amount due with respect to a completed calendar year paid in full and (c) any unpaid cash bonus amounts due with respect to the calendar year in which the date of termination occurs, paid pro-rata for the period of January 1 of such year to the date of termination, (ii) a prorated number of the NPSUs issued as described above and scheduled to convert into PSUs on the next conversion date will so convert (and any remaining NPSUs shall be forfeited), and (iii) Mr. Gosin’s PSUs (but excluding the NPSU award described above) will, as determined by the applicable General Partner, be (y) redeemed for cash or stock ratably over the first (1st) through third (3rd) anniversaries of such termination or (z) exchanged into restricted shares of stock and become transferable ratably over first (1st) through third (3rd) anniversaries of such termination (provided that, with respect to clauses (y) and (z), in the case of disability, Mr. Gosin continues to satisfy the non-compete, non-solicitation and non-disparagement conditions set forth in the Gosin Employment Agreement through the applicable transfer date).
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In the event of a change of control, which will occur if the Company is, or substantially all of the real estate brokerage and related businesses of the Company are, no longer controlled by Cantor, Mr. Lutnick, or a person or entity controlled by, controlling or under common control with Cantor, exclusive of limited ownership changes, the Gosin Employment Agreement provides that Mr. Gosin’s then non-exchangeable partnership units will, as determined by the applicable General Partner, be (a) redeemed for cash or stock ratably over the first (1st) through third (3rd) anniversaries of such change of control or (b) exchanged into restricted shares of stock and become transferable ratably over first (1st) through third (3rd) anniversaries of such change of control or as soon as practicable thereafter, provided that Mr. Gosin remains employed in good standing through each applicable redemption or vesting or transfer date. Additionally, in the event that, during the three-year period immediately following a change of control, Mr. Gosin’s employment is terminated without Cause (as defined in the Gosin Employment Agreement), subject to Mr. Gosin’s execution and delivery of a customary release, Mr. Gosin will be entitled to a lump-sum payment of $12,500,000 and certain medical benefits as described in the Gosin Employment Agreement, and Mr. Gosin’s then non-exchangeable partnership units will, as determined by the applicable General Partner, be (y) redeemed for cash or stock ratably over the first (1st) through third (3rd) anniversaries of such termination or (z) exchanged into restricted shares of stock and become transferable ratably over first (1st) through third (3rd) anniversaries of such termination (provided that, with respect to clauses (y) and (z), Mr. Gosin continues to satisfy the non-compete, non-solicitation and non-disparagement conditions set forth in the Gosin Employment Agreement through the applicable transfer date).
In the event of Mr. Gosin’s permanent retirement from the Company and the real estate brokerage industry, and only if Mr. Gosin is employed in good standing through December 31, 2025, it is the current intention of the General Partner of Newmark Holdings that, subject to Mr. Gosin’s execution and delivery of a customary release, (i) Mr. Gosin will receive his cash bonus for the applicable year, (ii) Mr. Gosin’s then non-exchangeable partnership units held at the time of retirement (excluding the NPSU award described above) shall, at Mr. Gosin’s election, either be (a) as determined by the General Partner of Newmark Holdings, redeemed for cash or stock ratably over the first (1st) through fourth (4th) anniversaries of such retirement or (b) exchanged into restricted shares of stock or deferred cash upon such retirement and become transferable ratably over the first (1st) through fourth (4th) anniversaries of such retirement, and (iii) the NPSU award described above shall be treated in accordance with the conversion and exchangeability schedules described above; provided that Mr. Gosin continues to be retired and satisfy the non-compete, non-solicitation and non-disparagement conditions set forth in the share documentation through the applicable transfer, redemption or distribution date.
The Gosin Employment Agreement provides for “Permitted Activities” that Mr. Gosin can engage in both during and following his employment, including conditions for which Mr. Gosin may purchase or invest in real estate, including with an institutional real estate fund, in certain non-competitive circumstances. Subject to the foregoing, the Gosin Employment Agreement provides that during Mr. Gosin’s term of employment and for a period of two (2) years thereafter, Mr. Gosin may not compete with the Company or any affiliate (subject to customary exceptions including ownership of less than 5% of the securities of a publicly traded competitor and certain investments in ownership of real property). Mr. Gosin also may not, during the non-compete period, solicit, entice away, perform services for or engage in any transaction or arrangement with, any clients or prospective clients of the Company or any affiliate. Subject to Mr. Gosin’s execution and delivery of a customary release, among other requirements, Mr. Gosin is entitled to receive $83,333.33 per month during the non-compete period (unless Mr. Gosin breaches the Gosin Employment Agreement, at which time any such payments will cease). Additionally, the Gosin Employment Agreement provides that during Mr. Gosin’s term of employment and for a period of five (5) years thereafter, Mr. Gosin may not solicit, hire, affiliate for profit with or retain for his benefit or the benefit of anyone other than the Company or any affiliate, the employment or other services of any employees, consultants or independent contractors of the Company or any affiliate.
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2017 Gosin Employment Agreement
The table above reflects certain payments payable in accordance with the employment agreement, as amended from time to time, effective as of December 1, 2017 (the “2017 Gosin Employment Agreement”) that was in place with Mr. Gosin on December 31, 2022. In connection with the completion of the IPO, Newmark OpCo and Barry M. Gosin entered into the 2017 Gosin Employment Agreement, pursuant to which Mr. Gosin served as Chief Executive Officer of Newmark, reporting directly to Mr. Lutnick. The 2017 Gosin Employment Agreement provided for a term commencing as of December 1, 2017 and ending on the earlier of (i) the twelve-month anniversary of the date on which either party notifies the other party in writing of its intention to terminate the agreement and (ii) the date the agreement was otherwise terminated in accordance with its terms. The Gosin Employment Agreement superseded and replaced the 2017 Gosin Employment Agreement as of February 10, 2023.
The 2017 Gosin Employment Agreement provided that Mr. Gosin was entitled to receive (i) an annual base salary of $1,000,000, all of which shall have been paid in cash, (ii) commissions under the terms and conditions applicable to Mr. Gosin and in accordance with Newmark’s then-current policies, provided that the payment of any such Commissions were approved by our Compensation Committee, and (iii) a discretionary annual bonus, subject to the approval of and achievement by Mr. Gosin of any performance goals or targets as may have been established by our Compensation Committee.
During the term of the 2017 Gosin Employment Agreement, Newmark OpCo could terminate the agreement for “Cause,” as defined therein, without further obligation, upon death or disability, or without Cause. Amounts payable upon termination for death or disability shall have been determined in accordance with Newmark’s then-current policies. If Mr. Gosin was terminated without Cause, he would have been entitled to receive, subject to his execution of a customary release, (i) his salary through the remainder of the term of the 2017 Gosin Employment Agreement and (ii) if applicable, Mr. Gosin’s non-exchangeable BGC Holdings and Newmark Holdings units would have, as determined by the applicable General Partner, been (y) redeemed for cash or stock ratably over the first four anniversaries of such termination or (z) exchanged into restricted shares of stock and became transferable ratably over the first through fourth anniversaries of such termination (provided that, with respect to clauses (x) and (y), Mr. Gosin continued to satisfy the non-compete, non-solicitation and non-disparagement conditions set forth in the share documentation through the applicable transfer date).
In addition, pursuant to the letter agreements between Mr. Gosin and each of BGC Holdings and Newmark Holdings, which were also superseded and replaced by the Gosin Employment Agreement, in the event of Mr. Gosin’s permanent retirement from Newmark and the real estate brokerage industry, it was the intention of the General Partner of BGC Holdings and the General Partner of Newmark Holdings that Mr. Gosin’s PSUs held at the time of retirement would, at Mr. Gosin’s election, either have been (i) redeemed for cash or BGC Partners or Newmark Class A common stock, as applicable, ratably over the first through fourth anniversaries of such retirement or (ii) exchanged into BGC Partners or Newmark restricted shares of Class A common stock, as applicable, upon such retirement and became transferable ratably over the first through fourth anniversaries of such retirement; provided that Mr. Gosin continued to satisfy the non-compete, non-solicitation and non-disparagement conditions set forth in the share documentation through the applicable transfer date. Mr. Gosin may have also requested to remain a partner in BGC Holdings.
Under the 2017 Gosin Employment Agreement, Mr. Gosin was subject to confidentiality, non-competition, non-solicitation and non-disparagement obligations. For as long as Mr. Gosin did not compete with Newmark, subject to customary exceptions including ownership of less than 1% of the securities of a publicly traded competitor and certain investments in ownership of real property, during the 24 months after any termination, and, provided that he executed and delivered a customary release, among other requirements, Mr. Gosin was entitled to receive $83,333.33 per month during the non-compete period (unless Newmark OpCo elected not to continue to enforce the non-compete, at which time payments would have ceased). He also agreed not to solicit or perform services for any clients or prospective clients of Newmark for such 24-month period and not to solicit any employees, consultants or independent contractors of Newmark for a five-year period following termination of his employment.
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Rispoli Employment Agreement
On September 29, 2022, Mr. Rispoli entered into the Rispoli Employment Agreement with Newmark OpCo and Newmark Holdings. In connection with the Rispoli Employment Agreement, the Compensation Committee approved the following for Mr. Rispoli: (i) an award of 500,000 Newmark RSUs, divided into tranches of 100,000 RSUs each that vest on a seven-year schedule, and (ii) an award of 250,000 Newmark RSUs, divided into tranches of 50,000 RSUs each that vest on a seven-year schedule.
The Rispoli Employment Agreement provides that Mr. Rispoli’s yearly salary will remain at $850,000. Under the Rispoli Employment Agreement, Mr. Rispoli is provided an initial term of employment of five (5) years, and thereafter the term of employment will be extended automatically for successive one-year periods unless either party notifies the other party in writing at least ninety (90) days prior to the expiration of the initial term of employment or any renewal period of such party’s intention not to extend the term of employment.
In the event of a change of control, which will occur if the Company is, or substantially all of the real estate brokerage and related businesses of the Company are, no longer controlled by Cantor, Mr. Lutnick, or a person or entity controlled by, controlling or under common control with Cantor, exclusive of limited ownership changes (i) Mr. Rispoli’s then-non-exchangeable Newmark Holdings units will be redeemed for cash or stock ratably over the first through third anniversaries of such change of control, or exchanged into restricted stock that becomes transferable ratably over the first through third anniversaries of such change of control, in each case as adjusted by the then-current exchange ratio and determined by Newmark Holdings, and (ii) Mr. Rispoli’s then-unvested Newmark RSUs that would not otherwise vest under their terms by the third anniversary of such change of control will vest into stock or cash ratably over the first through third anniversaries of such change of control or as soon as practicable thereafter, provided that Mr. Rispoli remains employed and in good standing pursuant to the Rispoli Employment Agreement. Additionally, in the event that, during the three-year period immediately following a change of control, Mr. Rispoli’s employment is terminated without Cause (as defined in the Rispoli Employment Agreement), Mr. Rispoli will be entitled to a lump-sum payment of $1,500,000 and certain medical benefits as described in the Rispoli Employment Agreement in addition to the awards described above, with such additional payments and benefits being subject to delivery by Mr. Rispoli to the Company of an irrevocable release of claims in favor of the Company and its affiliates in customary form.
The Rispoli Employment Agreement provides that Mr. Rispoli may not (i) compete with the Company or its affiliates or solicit clients or prospective clients of the Company or any affiliate for a period of two (2) years after the termination of his employment, or (ii) solicit or hire employees or certain former employees of the Company or any affiliate to leave their employment of or to discontinue the supply of their services to the Company or any affiliate for a period of three (3) years after the termination of his employment. The Rispoli Employment Agreement also contains customary confidentiality and non-disparagement provisions.
2022 Principal Executive Officer Pay Ratio
The following information contains the relationship of the median annual total compensation of employees and brokers of Newmark and its subsidiaries to the annual total compensation of Mr. Lutnick, our Executive Chairman and principal executive officer.
For 2022, we used the same median employee we used in 2021 as permitted by the SEC. Our median employee was an Administrative Assistant in the United States. There has been no change in organizational structure, employee demographics or any employee compensation arrangements that would significantly affect our ability to use the previously identified median employee for this disclosure.
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The pay ratio for the annual total compensation of the median employee to the principal executive officer was calculated for the 2022 fiscal year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K and the pay ratio was determined to be as follows:
| • | the annual total compensation of the median employee of the Company (other than the Executive Chairman) was $90,988; |
| • | the annual total compensation of the Executive Chairman, as reported in the Summary Compensation Table, was $20,000,000; and |
| • | the ratio of the annual total compensation of the Executive Chairman to the median employee of the Company was approximately 220 to 1. |
The foregoing comparison includes the payment to Mr. Lutnick of his 2022 tranche of his Award in the amount of $10,000,000. If the 2022 tranche of his Award is excluded for the year, his annual total compensation would have been $10,000,000 and the ratio of the annual total compensation of the Executive Chairman to the median employee of the Company would have been approximately 110 to 1.
As an additional comparison, the pay ratio for the annual total compensation of the median employee to Mr. Gosin, our Chief Executive Officer, calculated on the same basis was approximately 137 to 1.
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Year |
Summary Compensation Table Total for PEO(1) |
Compensation Actually Paid to PEO(1) |
Average Summary Compensation Table Total for Non-PEO NEOs(2) |
Average Compensation Actually Paid to Non-PEO NEOs(2) |
Value of Initial Fixed $100 Investment Based On: |
Net Income (in thousands) |
Total Revenues(4) |
|||||||||||||||||||||||||
Total Shareholder Return |
Peer Group Total Shareholder Return(3) |
|||||||||||||||||||||||||||||||
(a) |
(b) |
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
(i) |
||||||||||||||||||||||||
2022 |
$ | (1) | $ | (5) | $ | $ | (5) | $ | $ | $ | $ | |||||||||||||||||||||
2021 |
$ | (1) | $ | (5) | $ | $ | (5) | $ | $ | $ | $ | |||||||||||||||||||||
2020 |
$ | $ | (5) | $ | $ | (5) | $ | $ | $ | $ | ||||||||||||||||||||||
| (1) | The PEO was one-time Award which was approved by the Compensation Committee on December 27, 2021 in consideration of his success in managing certain aspects of the Company’s performance as its PEO and Chairman. Mr. Lutnick has purchased Newmark Class A Common Stock with the after-tax proceeds of the initial tranche of the Award. The amount reported for Mr. Lutnick for 2022 includes $10,000,000 paid to Mr. Lutnick for the 2022 tranche of the Award. For further information on the Award, see “Compensation, Discussion and Analysis—2021 Lutnick Award .” |
| (2) | non-PEO NEOs in fiscal years 2022, 2021 and 2020 consisted of Messrs. Gosin, Rispoli and Merkel. |
| (3) |
| (4) | The Company selected |
| (5) | For each year, “Compensation Actually Paid to PEO” in column (c) and “Average Compensation Actually Paid to Non-PEO NEOs” in column (e) reflect the following adjustments from Total Compensation amounts reported in the Summary Compensation Table (all amounts are averages for the non-PEO NEOs): |
Adjustments to Determine Compensation Actually Paid to PEO |
2022 |
2021 |
2020 |
|||||||||
Deduction for change in actuarial present value of accumulated benefit under all defined benefit and actuarial pension plans reported in the Summary Compensation Table |
||||||||||||
Increase for aggregate of service cost and prior service cost for all defined benefit and actuarial pension plans reported in the Summary Compensation Table |
||||||||||||
Deduction for amounts reported under the “Stock Awards” column in the Summary Compensation Table |
($ | ) | ||||||||||
Deduction for amounts reported under the “Option Awards” column in the Summary Compensation Table |
||||||||||||
Increase for fair value of stock and option awards granted during year that are outstanding and unvested as of year-end |
||||||||||||
Increase/deduction for change in fair value as of year-end (from prior year-end) of stock and option awards granted in any prior year that were outstanding and unvested as of year-end |
$ | |||||||||||
Increase for fair value as of vesting date of stock and option awards granted and vested in the same year |
||||||||||||
Increase/deduction for change in fair value as of vesting date (from prior year-end) of stock and option awards granted in any prior year for which all vesting conditions were satisfied during year or at year-end |
||||||||||||
Deduction for fair value as of prior year-end of stock and option awards granted in any prior year that were forfeited during year |
||||||||||||
Increase for dollar value of any dividends or other earnings paid on stock or option awards in the year prior to the vesting date that are not otherwise included in total compensation for the year |
$ | $ | $ | |||||||||
Total Adjustments |
$ | $ | $ | |||||||||
Adjustments to Determine Average Compensation Actually Paid to Non-PEO NEOs |
2022 |
2021 |
2020 |
|||||||||
Deduction for change in actuarial present value of accumulated benefit under all defined benefit and actuarial pension plans reported in the Summary Compensation Table |
||||||||||||
Increase for aggregate of service cost and prior service cost for all defined benefit and actuarial pension plans reported in the Summary Compensation Table |
||||||||||||
Deduction for amounts reported under the “Stock Awards” column in the Summary Compensation Table |
$ | ( |
) | |||||||||
Deduction for amounts reported under the “Option Awards” column in the Summary Compensation Table |
||||||||||||
Increase for fair value of stock and option awards granted during year that are outstanding and unvested as of year-end |
||||||||||||
Increase/deduction for change in fair value as of year-end (from prior year-end) of stock and option awards granted in any prior year that were outstanding and unvested as of year-end |
||||||||||||
Increase for fair value as of vesting date of stock and option awards granted and vested in the same year |
||||||||||||
Increase/deduction for change in fair value as of vesting date (from prior year-end) of stock and option awards granted in any prior year for which all vesting conditions were satisfied during year or at year-end |
$ | |||||||||||
Deduction for fair value as of prior year-end of stock and option awards granted in any prior year that were forfeited during year |
||||||||||||
Increase for dollar value of any dividends or other earnings paid on stock or option awards in the year prior to the vesting date that are not otherwise included in total compensation for the year |
$ | $ | $ | |||||||||
Total Adjustments |
$ | ( |
) | $ | $ | |||||||
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Performance Measures Tabular List
The table below lists our most important performance measures, including the Company Selected Measure, used to link compensation actually paid for our NEOs to Company performance for the fiscal year ended December 31, 2022. The performance measures included in this table are not ranked by relative importance.
Performance Measures
| Total Revenues |
||||
| Pre-tax Adjusted Earnings | ||||
| Origination and Mortgage Broker Market Share | ||||
| Catalyst Transactions and Hires, Acquisitions, and Strategy Development | ||||
| Fees from Management Services, Servicing, and Other |
Compensation of Directors
Directors who are also our employees do not receive additional compensation for serving as director. The compensation schedule for our non-employee directors is as follows:
| • | an annual cash retainer of $100,000, |
| • | an annual stipend for the chair of our Compensation Committee of $15,000, |
| • | an annual stipend for the chair of our ESG Committee of $15,000, and |
| • | an annual stipend for the chair of our Audit Committee of $25,000. |
We also pay each non-employee director $2,000 for each meeting of our Board of Directors and $1,000 for each meeting of a Committee of our Board actually attended, whether in person or by telephone. Additional fees may be paid for service or special ad hoc committees from time to time. Under our policy, none of our non-employee directors is to be paid more than $3,000 in the aggregate for attendance at meetings held on the same date. Only one meeting of our Board and Committees shall occur on each calendar day for which payment shall be provided. Non-employee directors may also receive additional per diem fees for services as a director at the rate of $1,000 per day, with a limit of $5,000 per matter, for additional time spent on Board or Committee matters as directed from time to time by our Board. Non-employee directors also are reimbursed for all out-of-pocket expenses incurred in attending meetings of our Board or its Committees on which they serve.
In addition to the cash compensation described above, under our current policy, upon the appointment or initial election of a non-employee director, we grant to such non-employee director RSUs equal to the value of shares of our Class A common stock that could be purchased for $70,000 at the closing price of our Class A common stock on the trading date of the appointment or initial election of the non-employee director (rounded down to the next whole share). These RSUs vest equally on each of the first two anniversaries of the grant date, provided that the non-employee director is a member of our Board at the opening of business on such dates.
Thereafter, we expect to annually grant to each non-employee director RSUs equal to the value of shares of our Class A common stock that could be purchased for $50,000 on the date of his or her re-election in consideration for services provided. These RSUs will vest equally on each of the first two anniversaries of the grant date, provided that the non-employee director is a member of our Board at the opening of business on such dates.
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2022 Director Compensation Payments
The table below summarizes the compensation paid to our non-employee directors for the year ended December 31, 2022.
| (a) Name (1) |
(b) Fees Earned or Paid in Cash ($) |
(c) Stock Awards ($)(2) |
(d) Option Awards ($)(3) |
(e) Non-Equity Incentive Plan Compensation ($) |
(f) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
(g) All Other Compensation ($) |
(h) Total ($) |
|||||||||||||||||||||
| Virginia S. Bauer Director |
168,250 | 50,000 | — | — | — | — | 218,250 | |||||||||||||||||||||
| Jay Itzkowitz (4) Director |
51,750 | 120,000 | — | — | — | — | 171,750 | |||||||||||||||||||||
| Kenneth A. McIntyre Director |
167,250 | 50,000 | — | — | — | — | 217,250 | |||||||||||||||||||||
| Michael Snow Former Director |
128,750 | — | — | — | — | — | 128,750 | |||||||||||||||||||||
| (1) | Howard Lutnick, our Executive Chairman, is not included in this table as he is an employee of our Company and thus received no compensation for his services as director. The compensation received by Mr. Lutnick as an employee of our Company is shown in the Summary Compensation Table. This table includes compensation paid with respect to 2022. Mr. Snow departed the Board and Committees on September 28, 2022 following the 2022 Annual Meeting. |
| (2) | Reflects the grant date fair value of RSUs granted on September 28, 2022 to each of Messrs. McIntyre and Itzkowitz and Ms. Bauer. More information with respect to the calculation of these amounts is included in the notes to our consolidated financial statements included in Item 8 of the 2022 10-K. Mr. Itzkowitz received 6,481 RSUs granted on August 10, 2022 at his initial appointment as a director. On September 28, 2022, each of Messrs. McIntyre and Itzkowitz and Ms. Bauer were granted 6,010 RSUs. As of December 31, 2022, Mr. McIntyre had 7,587 RSUs outstanding, Ms. Bauer had 7,587 RSUs outstanding and Mr. Itzkowitz had 12,491 RSUs outstanding. |
| (3) | No options were granted to non-employee directors in 2022. As of December 31, 2022, none of the non-employee directors had any options outstanding. |
| (4) | Mr. Itzkowitz joined the Board of Directors effective August 10, 2022. |
Compensation Committee Interlocks and Insider Participation
During 2022, the Compensation Committee consisted of Ms. Bauer and Messrs. McIntyre and Itzkowitz. Ms. Bauer has served as Chair since April 29, 2021. Former director Mr. Snow, who departed the Board and Committee on September 28, 2022 following the 2022 Annual Meeting, also served on the Committee during 2022. All of the members who served on the Committee during 2022 were independent directors. No member of the Committee had any relationship with the Company during 2022 pursuant to which disclosure would be required under applicable SEC rules. With the exception of Mr. Lutnick, during 2022, none of our executive officers served as a member of the board of directors or the compensation committee, or similar body, of a corporation where any of its executive officers served on our Committee or on our Board. Mr. Lutnick serves on the board of directors of BGC but does not serve on BGC’s compensation committee.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of July 31, 2023, with respect to the beneficial ownership of our Class A common stock and Class B common stock by: (1) each stockholder, or group of affiliated stockholders, that owns more than 5% of any class of our outstanding capital stock; (2) each of the named executive officers; (3) each director; and (4) the executive officers and directors as a group. Unless otherwise indicated in the footnotes, the principal address of each of the stockholders, executive officers and directors identified below is located at 125 Park Avenue, New York, New York 10017. Shares of our Class B common stock are convertible into shares of our Class A common stock at any time in the discretion of the holder on a one-for-one basis. Accordingly, a holder of Class B common stock is deemed to be the beneficial owner of an equal number of shares of our Class A common stock for purposes of this table. In addition, certain of the limited partnership interests of Newmark Holdings will be exchangeable with us for shares of our Class A common stock or shares of our Class B common stock equal to the exchange ratio (which, as of July 31, 2023, was and is currently 0.9235, but is subject to adjustment as set forth in the Separation and Distribution Agreement (as hereinafter defined)). The table and footnotes below are based on a one-to-0.9235 exchange ratio. See “Certain Relationships and Related Transactions, and Director Independence — Amended and Restated Newmark Holdings Limited Partnership Agreement—Exchanges.”
As of July 31, 2023, Cantor is obligated to distribute an aggregate of 7,284,935 shares of our Class A common stock consisting of (i) 6,469,630 shares to certain partners of Cantor to satisfy certain of Cantor’s deferred stock distribution obligations provided to such partners on April 1, 2008 (the “April 2008 distribution rights shares”), and (ii) 815,305 shares to certain partners of Cantor to satisfy certain of Cantor’s deferred stock distribution obligations provided to such partners on February 14, 2012 in connection with Cantor’s payment of previous quarterly partnership distributions (the “February 2012 distribution rights shares” and, together with the April 2008 distribution rights shares, the “distribution rights shares”), all of which can be distributed within 60 days of July 31, 2023. Certain partners elected to receive their shares and others elected to defer receipt of their shares until a future date. As a result, certain of these distribution rights shares are included both in the number of shares beneficially owned directly by Cantor, and indirectly by CFGM and Mr. Lutnick as a result of their control of Cantor, and in the number of shares beneficially owned directly by CFGM, Mr. Lutnick and the other recipients of distribution rights shares, resulting in substantial duplications in the number of shares set forth in the table below. Once Cantor delivers these 7,284,935 distribution rights shares, these shares will no longer be reflected as beneficially owned directly by Cantor and indirectly by CFGM and Mr. Lutnick as a result of their control of Cantor. Instead, beneficial ownership of the shares will only be reported by CFGM and Mr. Lutnick to the extent of their direct holdings of the shares, and Mr. Lutnick’s indirect holdings as a result of his control of KBCR Management Partners, LLC (“KBCR”) and LFA LLC (“LFA”), and by the other recipients of the distribution rights shares.
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| Class B Common Stock |
Class A Common Stock |
|||||||||||||||
| Name |
Shares | % | Shares | % | ||||||||||||
| 5% Beneficial Owners(1): |
||||||||||||||||
| Cantor Fitzgerald, L.P. |
45,793,980 | (2) | 99.2 | (3) | 45,793,980 | (4) | 23.1 | (5) | ||||||||
| CF Group Management, Inc.(6) |
46,147,306 | (7) | 100.0 | (3) | 47,172,918 | (8) | 23.7 | (9) | ||||||||
| The Vanguard Group(1) |
— | — | 20,768,590 | 13.6 | ||||||||||||
| BlackRock, Inc.(1) |
— | — | 9,775,945 | 6.4 | ||||||||||||
| Executive Officers and Directors(1): |
||||||||||||||||
| Executive Officers |
||||||||||||||||
| Howard W. Lutnick(10) |
46,147,306 | (11) | 100.0 | (3) | 60,626,098 | (12) | 29.5 | (13) | ||||||||
| Barry M. Gosin |
— | — | 4,759,873 | (14) | 3.1 | (15) | ||||||||||
| Stephen M. Merkel |
— | — | 49,162 | (16) | * | |||||||||||
| Michael J. Rispoli |
— | — | 44,994 | (17) | * | |||||||||||
| Directors |
||||||||||||||||
| Virginia S. Bauer |
41,355 | (18) | * | |||||||||||||
| Kenneth A. McIntyre |
— | — | 22,096 | (19) | * | |||||||||||
| Jay Itzkowitz |
— | — | 22,341 | (20) | * | |||||||||||
| All executive officers and directors as a group (7 persons) |
46,147,306 | 100.0 | (3) | 65,565,919 | 31.8 | (21) | ||||||||||
| * | Less than 1% |
| (1) | Based upon information supplied by directors, executive officers and 5% beneficial owners in filings under Sections 13(d) and 16(a) of the Exchange Act. The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. |
| (2) | Consists of (a) 20,932,207 shares of our Class B common stock held directly and (b) 24,861,773 shares of our Class B common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor. |
| (3) | Percentage based on (a) 21,285,533 shares of our Class B common stock outstanding as of July 31, 2023 and (b) 24,861,773 shares of our Class B common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor. |
| (4) | Consists of (a) 20,932,207 shares of our Class A common stock acquirable upon conversion of 20,932,207 shares of our Class B common stock held directly by Cantor and (b) 24,861,773 shares of our Class A common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor. |
| (5) | Percentage based on (a) 152,188,129 shares of our Class A common stock outstanding as of July 31, 2023, (b) 20,932,207 shares of our Class A common stock acquirable upon conversion of 20,932,207 shares of our Class B common stock held by Cantor, and (c) 24,861,773 shares of our Class A common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor. |
| (6) | CFGM is the managing general partner of Cantor. |
| (7) | Consists of (a) 353,326 shares of our Class B common stock held by CFGM, (b) 20,932,207 shares of our Class B common stock held by Cantor, and (c) 24,861,773 shares of our Class B common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor. |
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| (8) | Consists of (a) 353,326 shares of our Class A common stock acquirable upon conversion of 353,326 shares of our Class B common stock held by CFGM, (b) 951,076 April 2008 distribution rights shares receivable by CFGM, receipt of which has been deferred, (c) 74,536 February 2012 distribution rights shares receivable by CFGM, receipt of which has been deferred, (d) 20,932,207 shares of our Class A common stock acquirable upon conversion of 20,932,207 shares of our Class B common stock held by Cantor, and (e) 24,861,773 shares of our Class A common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor. |
| (9) | Percentage based on (a) 152,188,129 shares of our Class A common stock outstanding as of July 31, 2023, (b) 21,285,533 shares of our Class A common stock acquirable upon conversion of 21,285,533 shares of our Class B common stock held by Cantor and CFGM, (c) 24,861,773 shares of our Class A common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor, (d) 951,076 April 2008 distribution rights shares receivable by CFGM, receipt of which has been deferred, and (e) 74,536 February 2012 distribution rights shares receivable by CFGM, receipt of which has been deferred. |
| (10) | Mr. Lutnick is the Chairman and Chief Executive Officer of CFGM and also the trustee of an entity that is the sole shareholder of CFGM. CFGM is the managing general partner of Cantor. |
| (11) | Consists of (a) 353,326 shares of our Class B common stock held by CFGM, (b) 20,932,207 shares of our Class B common stock held by Cantor, and (c) 24,861,773 shares of our Class B common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor. |
| (12) | Mr. Lutnick’s holdings consist of: |
| (i) | 2,330,973 shares of our Class A common stock held directly; |
| (ii) | 238,216 shares of our Class A common stock held in Mr. Lutnick’s 401(k) account; |
| (iii) | 4,229,886 shares of our Class A common stock held in various trust, retirement and custodial accounts consisting of (a) 907,803 shares held by a trust for the benefit of descendants of Mr. Lutnick and his immediate family (the “Trust”), of which Mr. Lutnick’s wife is one of two trustees and Mr. Lutnick has limited powers to remove and replace such trustees, (b) 112,405 shares held in a Keogh retirement account for Mr. Lutnick, (c) 249,498 shares held by trust accounts for the benefit of Mr. Lutnick and members of his immediate family, (d) 935,022 shares held in Mr. Lutnick’s personal asset trust, of which he is the sole trustee, (e) 13,268 shares held in other retirement accounts, (f) 7,827 shares held in custodial accounts for the benefit of certain members of Mr. Lutnick’s family under the Uniform Gifts to Minors Act, (g) 4,063 shares held in other retirement accounts for Mr. Lutnick’s spouse, and (h) 2,000,000 shares held in Mr. Lutnick’s grantor retained annuity trust; |
| (iv) | 353,326 shares of our Class A common stock acquirable upon conversion of 353,326 shares of our Class B common stock held by CFGM; |
| (v) | 20,932,207 shares of our Class A common stock acquirable upon conversion of 20,932,207 shares of our Class B common stock held by Cantor; |
| (vi) | 24,861,773 shares of our Class A common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership interests held by Cantor; |
| (vii) | 3,591,626 April 2008 distribution rights shares receivable by Mr. Lutnick, receipt of which has been deferred; |
| (viii) | 571,238 February 2012 distribution rights shares receivable by Mr. Lutnick, receipt of which has been deferred; |
| (ix) | 951,076 April 2008 distribution rights shares receivable by CFGM, receipt of which has been deferred; |
| (x) | 74,536 February 2012 distribution rights shares receivable by CFGM, receipt of which has been deferred; |
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| (xi) | 746,955 April 2008 distribution rights shares receivable by the Trust, receipt of which has been deferred; |
| (xii) | 950,057 April 2008 distribution rights shares receivable by KBCR, by virtue of Mr. Lutnick being the managing member of KBCR, which is a non-managing General Partner of Cantor, receipt of which has been deferred; |
| (xiii) | 133,587 February 2012 distribution rights shares receivable by KBCR, receipt of which has been deferred; |
| (xiv) | 75,077 April 2008 distribution rights shares receivable by LFA, receipt of which has been deferred; |
| (xv) | 7,512 February 2012 distribution rights shares receivable by LFA, receipt of which has been deferred; |
| (xvi) | 278,772 shares of our Class A common stock owned of record by KBCR; |
| (xvii) | 16,557 shares of our Class A common stock owned of record by LFA; and |
| (xviii) | 258,326 shares of Class A common stock acquirable upon exchange of 279,725 Newmark Holdings exchangeable limited partnership units by Mr. Lutnick. |
These amounts include an aggregate of 7,284,935 distribution rights shares consisting of (a) 6,469,630 April 2008 distribution rights shares and (b) 815,305 February 2012 distribution rights shares, which may generally be issued to such partners upon request.
| (13) | Percentage based on (a) 152,188,129 shares of our Class A common stock outstanding as of July 31, 2023, (b) 21,285,533 shares of our Class A common stock acquirable upon conversion of 21,285,533 shares of our Class B common stock held by Cantor and CFGM, (c) 24,861,773 shares of Class A common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership interests held by Cantor, (d) 3,591,626 April 2008 distribution rights shares receivable by Mr. Lutnick, receipt of which has been deferred, (e) 571,238 February 2012 distribution rights shares receivable by Mr. Lutnick, receipt of which has been deferred, (f) 951,076 April 2008 distribution rights shares receivable by CFGM, receipt of which has been deferred, (g) 74,536 February 2012 distribution rights shares receivable by CFGM, receipt of which has been deferred, (h) 746,955 April 2008 distribution rights shares receivable by the Trust, receipt of which has been deferred, (i) 950,057 April 2008 distribution rights shares receivable by KBCR, receipt of which has been deferred, (j) 133,587 February 2012 distribution rights shares receivable by KBCR, receipt of which has been deferred, (k) 75,077 April 2008 distribution rights shares receivable by LFA, receipt of which has been deferred, (l) 7,512 February 2012 distribution rights shares receivable by LFA, receipt of which has been deferred and (m) 258,326 shares of our Class A common stock acquirable upon exchange of 279,725 Newmark Holdings exchangeable limited partnership units by Mr. Lutnick. |
| (14) | Mr. Gosin’s holdings consists of (a) 4,188,622 shares of our Class A common stock held directly, and (b) 571,251 shares of our Class A common stock acquirable upon exchange of 618,572 Newmark Holdings exchangeable limited partnership units. |
| (15) | Percentage based on (a) 152,188,129 shares of our Class A common stock outstanding as of July 31, 2023, and (b) 571,251 shares of our Class A common stock acquirable upon exchange of 618,572 Newmark Holdings exchangeable limited partnership units held by Mr. Gosin. |
| (16) | Mr. Merkel’s holdings consist of (a) 35,006 shares of our Class A common stock held directly, (b) 2,901 shares of our Class A common stock held in trusts for the benefit of the Mr. Merkel’s immediate family, of which Mr. Merkel’s spouse is the sole trustee of each trust and Mr. Merkel has the power to remove and replace such trustee, and (c) 11,255 shares of our Class A common stock held in Mr. Merkel’s 401(k) account. |
| (17) | Mr. Rispoli’s holdings consists of 25,926 shares of our Class A common stock held directly and 19,076 shares of our Class A common stock acquirable upon exchange of 20,657 Newmark Holdings exchangeable limited partnership units. |
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| (18) | Ms. Bauer’s holdings consist of 38,350 shares of our Class A common stock held directly and 3,005 shares of our Class A common stock receivable pursuant to 3,005 RSUs held directly. |
| (19) | Mr. McIntyre’s holdings consist of 19,091 shares of our Class A common stock held directly and 3,005 shares of our Class A common stock receivable pursuant to 3,005 RSUs held directly. |
| (20) | Mr. Itzkowitz’s holdings consist of 19,336 shares of our Class A common stock held directly and 3,005 shares of our Class A common stock receivable pursuant to 3,005 RSUs held directly. |
| (21) | Percentage based on (a) 152,188,129 shares of our Class A common stock outstanding as of July 31, 2023, (b) 21,285,533 shares of our Class A common stock acquirable upon conversion of 21,285,533 shares of our Class B common stock, (c) 24,861,773 shares of our Class A common stock acquirable upon exchange of 26,921,248 Newmark Holdings exchangeable limited partnership units held by Cantor, (d) 848,654 shares of our Class A common stock acquirable upon exchange of 918,954 Newmark Holdings exchangeable limited partnership units held by our executive officers and directors, (e) 3,591,626 April 2008 distribution rights shares receivable by Mr. Lutnick, receipt of which has been deferred, (f) 571,238 February 2012 distribution rights shares receivable by Mr. Lutnick, receipt of which has been deferred, (g) 951,076 April 2008 distribution rights shares receivable by CFGM, receipt of which has been deferred, (h) 74,536 February 2012 distribution rights shares receivable by CFGM, receipt of which has been deferred, (i) 746,955 April 2008 distribution rights shares receivable by the Trust, receipt of which has been deferred, (j) 950,057 April 2008 distribution rights shares receivable by KBCR, receipt of which has been deferred, (k) 133,587 February 2012 distribution rights shares receivable by KBCR, receipt of which has been deferred, (l) 75,077 April 2008 distribution rights shares receivable by LFA, receipt of which has been deferred, and (m) 7,512 February 2012 distribution rights shares receivable by LFA, receipt of which has been deferred. |
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Equity Compensation Plan Information as of December 31, 2022
| Number of securities to be issued upon exercise of outstanding restricted stock units, options, warrants and rights (a) |
Weighted-average exercise price of outstanding options, warrants and rights (b) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
||||||||||
| Equity Plan (approved by security holders) |
14,496,923 | $ | 10.62 | 330,022,211 | ||||||||
| Equity compensation plans not approved by security holders |
— | — | — | |||||||||
| Total |
14,496,923 | $ | 10.62 | 330,022,211 | ||||||||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees incurred by us for audit and other services rendered by Ernst Young, during the years ended December 31, 2022 and 2021:
| Year Ended December 31, |
||||||||
| 2022 | 2021 | |||||||
| Audit fees |
$ | 3,453,830 | $ | 3,497,960 | ||||
| Audit-related fees |
311,600 | 317,904 | ||||||
| Tax fees |
1,541,940 | 1,482,590 | ||||||
| All other fees |
— | — | ||||||
| Total |
5,307,370 | 5,298,454 | ||||||
“Audit-related fees” are fees for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and internal control over financial reporting, including audit fees for the Company’s employee benefit plan. Audit-related fees includes fees for registration statements. “Tax fees” are fees for tax compliance, tax advice and tax planning, and “all other fees” are fees for any services not included in the other categories.
AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES
During 2023, our Audit Committee specifically approved the appointment of Ernst Young to be our independent auditors for the year ended December 31, 2023. Ernst Young was also approved to perform reviews of our quarterly financial reports within the year ended December 31, 2023 and certain other audit-related services such as accounting consultations. Pursuant to our Audit Committee Charter, the Committee will pre-approve audit services, internal control-related services and permitted non-audit services to be performed for us by Ernst Young.
REPORT OF THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS
The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) is made up solely of independent directors, as defined under applicable Nasdaq Global Select Stock Market and Securities and Exchange Commission (“SEC”) rules, and it operates under a written Charter adopted by the Board and the Committee. The composition of the Committee, the attributes of its members and its responsibilities, as reflected in its Charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Committee reviews and assesses the adequacy of its Charter and its performance on an annual basis. A copy of the Audit Committee Charter is available on the Company’s website at https://ir.nmrk.com/disclaimer-and-legal- information under the heading “Charter of the Audit Committee of the Board of Directors,” or upon written request from the Company free of charge.
As described more fully in its Charter, the primary function of the Committee is to assist the Board in its general oversight of the Company’s financial reporting, internal control over financial reporting and audit process. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements; accounting and financial reporting principles; internal control over financial reporting; and procedures designed to ensure compliance with accounting standards, and applicable laws and regulations. The Company’s independent registered public accounting firm (the “Auditors”) is responsible for performing an independent audit of the Company’s annual consolidated financial statements, and a review of its quarterly consolidated financial statements, in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”), and an independent audit of the Company’s internal control over financial reporting and on the effectiveness of such control.
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The Committee has the sole authority to appoint or replace the Auditors and is directly responsible for the oversight of the scope of the Auditors’ role and the determination of its compensation. We are submitting the appointment of Ernst Young for the year ending December 31, 2023 to the stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the appointment, the Board and the Committee will reconsider the appointment. Even if the appointment of Ernst Young is ratified, the Committee retains the discretion to appoint a different independent auditor at any time if it determines that such a change is in the best interests of the Company and its stockholders.
Although each of the members of the Committee has experience that qualifies him or her as an audit committee financial expert, none of the Committee members is currently a professional accountant or auditor, and the Committee’s functions are not intended to duplicate or to certify the activities of management and the Auditors, nor can the Committee certify that the Auditors are “independent” under applicable rules. The Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and the Auditors on the basis of the information it receives, discussions with management and the Auditors, and the experience of the Committee’s members in business, financial and accounting matters.
The Committee has an annual agenda that includes reviewing the Company’s financial statements, internal control, and audit matters, as well as related party transactions. The Committee meets each quarter with management and the Auditors to review the Company’s interim financial results before the publication of the Company’s quarterly and annual financial results press releases, and periodically in executive sessions. Management’s and the Auditors’ presentations to and discussions with the Committee cover various topics and events that may have significant financial impact and/or are the subject of discussions between management and the Auditors.
In accordance with Committee policy and the requirements of law, all services to be provided by the Auditors and their affiliates are subject to pre-approval by the Committee. This includes audit services, audit-related services, and any permitted non-audit tax and other services. In addition, the Committee regularly evaluates the performance and independence of the Auditors. Accordingly, the Committee has reviewed and pre-approved all services provided by Ernst Young subsequent to the firm’s engagement in connection with our IPO in December 2017.
In fulfilling its responsibilities, the Committee has met and held discussions with management and Ernst Young regarding the fair and complete presentation of the Company’s financial results. The Committee has discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. The Committee has met to review and discuss the Company’s annual audited and quarterly consolidated financial statements for the fiscal year ended December 31, 2022 (including the disclosures contained in the Company’s Annual Report on Form 10-K filed with the SEC under the heading “Item 8 – Financial Statements and Supplementary Data” and Quarterly Reports on Form 10-Q filed with the SEC under the heading “Item 1 – Financial Statements (unaudited)” with management and Ernst Young. The Committee also reviewed and discussed with management, the internal auditors, and Ernst Young the Company’s compliance with Section 404 of the Sarbanes-Oxley Act, namely, management’s annual report on the Company’s internal control over financial reporting.
The Committee has discussed with Ernst Young the matters required to be discussed by PCAOB Auditing Standard No. 1301, “Communications with Audit Committees” (AS 1301). In addition, the Committee has received and reviewed the written disclosures and the letter from Ernst Young required by applicable requirements of the PCAOB regarding the communications of Ernst Young with the Committee concerning independence, and has discussed with Ernst Young the firm’s independence from the Company and management, including all relationships between the firm and the Company or its management. The Committee also has considered whether the provision of permitted non-audit services by Ernst Young is compatible with maintaining the firm’s independence.
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In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, the inclusion of the audited financial statements of the Company in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 16, 2023.
Dated: August 16, 2023
| THE AUDIT COMMITTEE |
| Kenneth A. McIntyre, Chair |
| Virginia S. Bauer |
| Jay Itzkowitz |
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PROPOSAL 2— RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst Young as our independent registered public accounting firm for fiscal year ending December 31, 2023. We are asking stockholders to ratify the appointment of Ernst Young as our independent registered public accounting firm at the Annual Meeting. Representatives of Ernst Young are expected to participate in the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Our Amended and Restated Bylaws (“Bylaws”) do not require that the stockholders ratify the appointment of Ernst Young as our independent auditors for fiscal year 2023. However, we are submitting the appointment of Ernst Young to the stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the appointment, the Board and the Audit Committee will re-consider the appointment. Even if the appointment of Ernst Young is ratified, the Audit Committee retains the discretion to appoint a different independent auditor at any time if it determines that such a change is in the best interests of the Company and its stockholders. At this time, the Board and the Audit Committee believe that the continued retention of Ernst Young to serve as our independent auditors is in the best interest of the Company and its stockholders.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the Total Voting Power present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve this proposal to ratify the appointment of Ernst Young. Abstentions will have the same effect as a vote against the proposal.
RECOMMENDATION OF OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE
OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE RECOMMEND THAT ALL STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF ERNST YOUNG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2023.
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PROPOSAL 3—APPROVAL OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board is committed to sound compensation governance and recognizes the interest of stockholders in executive compensation matters. On an annual basis, we provide our stockholders with an opportunity to cast an advisory vote to approve the compensation of our named executive officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and narratives of this Proxy Statement.
This stockholder advisory vote will not be binding on the Company, the Board, or the Compensation Committee. Nevertheless, the Board and the Compensation Committee will take into account the outcome of the stockholder advisory vote when making future executive compensation decisions.
As discussed in our Compensation Discussion and Analysis, our executive compensation program, which is under the direction and control of our Compensation Committee, is designed to integrate our executive compensation with the achievement of our short-term and long-term business objectives and to assist us in attracting, motivating and retaining the highest quality executive officers and rewarding them for superior performance. Different components of our executive compensation program are geared to short-term and longer-term performance, with the goal of increasing stockholder value over the long term.
We believe that the compensation of our executive officers should reflect their success in attaining key corporate objectives, such as growth or maintenance of market position, success in attracting and retaining qualified brokers and other professionals, increasing or maintaining revenues and/or profitability, developing new products and marketplaces, completing acquisitions, dispositions, restructurings, and other value-enhancing transactions and integrating any such transactions, as applicable, meeting established goals for operating earnings, earnings per share and increasing the total return for stockholders, including stock price and dividend increases, and maintaining and developing customer relationships and long-term competitive advantage. We also believe that executive compensation should reflect achievement of individual managerial objectives established for specific executive officers at the beginning of the fiscal year as well as reflect specific achievements by such individuals over the course of the year. We further believe that specific significant events led by executives, including acquisitions, dispositions and other significant transactions, should be given significant weight. We believe that the performance of our executives in managing our Company, considered in light of general economic and specific Company, industry and competitive conditions, should be the basis for determining their overall compensation.
From time to time, our Compensation Committee also makes one-time awards in consideration of specific events and achievements, including, for example, the December 2021 Award to Mr. Lutnick in consideration of his delivering superior financial results and creating substantial value as described above under “2021 Lutnick Award.” The 2021 Lutnick Award was the subject of two legal challenges, that have since been consolidated into a single action (the “Consolidated Action” (as defined herein)). See “Certain Relationships and Related Transactions, and Director Independence—Derivative Suit.”
We also believe that the compensation of our executive officers should not generally be based on the short-term performance of our Class A common stock, whether favorable or unfavorable, but rather that the price of our stock will, in the long term, reflect our overall performance and, ultimately, the management of our Company by our executives. We believe that the long-term performance of our stock is reflected in executive compensation through the grant of awards, including limited partnership units and related exchange rights and cash settlement awards, restricted stock, RSUs, and other equity and partnership awards.
Stockholders are encouraged to read our Compensation Discussion and Analysis in this Proxy Statement for more detailed information about our executive compensation program and how it reflects our philosophy and is linked to our performance. The non-binding stockholder advisory vote on executive compensation is not intended to address any specific component of our executive compensation program; rather, the vote relates to the overall compensation of our named executive officers, as described in this Proxy Statement in accordance with the compensation disclosure rules of the SEC.
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We will ask our stockholders to approve the following resolution at the Annual Meeting:
RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 2023 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narratives.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the Total Voting Power present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the resolution. Abstentions will have the same effect as a vote against the proposal, but broker non-votes will have no effect on the vote. However, the stockholder vote on executive compensation is advisory and, therefore, not binding on the Company, the Board of Directors, or the Compensation Committee. Nevertheless, the Board and the Committee will take into account the outcome of the stockholder advisory vote when making future executive compensation decisions.
RECOMMENDATION OF OUR BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
OUR BOARD OF DIRECTORS AND COMPENSATION COMMITTEE RECOMMEND THAT ALL STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE RESOLUTION.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Review, Approval and Ratification of Transactions with Related Persons
The general policy of the Company and our Audit Committee is that all material transactions with a related party, including transactions with BGC and Cantor, the relationships between us and BGC and Cantor and agreements with related parties, as well as all material transactions in which there is an actual, or in some cases, perceived, conflict of interest, including repurchases of Class A common stock or purchases of Newmark Holdings limited partnership interests or other equity interests in our subsidiaries, including from Cantor or our executive officers, are subject to prior review and approval by the Committee and its independent members, which will determine whether such transactions or proposals are fair and reasonable to the Company and its stockholders. In general, potential related-party transactions will be identified by our management and discussed with the Committee at their meetings. Detailed proposals, including, where applicable, financial and legal analyses, alternatives and management recommendations, will be provided to the Committee with respect to each issue under consideration and decisions will be made by the Committee with respect to the foregoing related-party transactions after opportunity for discussion and review of materials. When applicable, the Committee will request further information and, from time to time, will request guidance or confirmation from internal or external counsel or auditors. Our policies and procedures regarding related-party transactions are set forth in our Audit Committee Charter and Code of Ethics, both of which are publicly available on our websites at ir.nmrk.com/disclaimer-and-legal-information/ under the heading “Charter of the Audit Committee of the Board of Directors,” and at www.nmrk.com/esg/governance under the heading “Code of Business Conduct Ethics and Professional Integrity,” respectively. Related party transactions with BGC are also reviewed by the BGC board and its audit committee under their own policies.
In December 2017, prior to our Separation and IPO, all intercompany arrangements and agreements that were previously approved by the audit committee of BGC Partners with respect to BGC Partners and its subsidiaries and Cantor and its subsidiaries were also approved by our Board of Directors with respect to the relationships between us and our subsidiaries and Cantor and its subsidiaries following our IPO on the terms and conditions approved by the BGC Audit Committee during such time that our business was owned by BGC Partners. These arrangements include, but are not limited to, the following: (i) an authorization to provide Cantor real estate and related services, including real estate advice, brokerage, property or facilities management, valuation and advisory and other services; (ii) an authorization to enter into brokerage and similar agreements with respect to the provision of ordinary course brokerage services in circumstances in which such entities customarily provide brokerage services to third-party customers; (iii) an authorization to enter into agreements with Cantor and/or its affiliates, to provide services, including finding and reviewing suitable acquisition or partner candidates, structuring transactions and negotiating and due diligence services in connection with acquisitions and other business strategies in commercial real estate and other businesses from time to time; and (iv) an arrangement to jointly manage exposure to changes in foreign exchange rates.
The following is a description of certain relationships and transactions that have existed or that we have entered into with our directors, executive officers, or stockholders who are known to us to beneficially own more than five percent of our Class A common stock or Class B common stock, including Cantor, and their immediate family members as well as certain other transactions. The following summary does not purport to describe all the terms of such agreements or transactions and is qualified in its entirety by reference to the complete text of these agreements, to the extent filed as exhibits to the 2022 10-K, our Amendment No. 1 to the 2022 10-K filed on Form 10-K/A and our other filings with the SEC. We urge you to read the full text of these agreements.
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Separation, Initial Public Offering, and Spin-Off Separation and Distribution Agreement
On December 13, 2017, prior to the closing of the IPO, BGC Partners, BGC Holdings, BGC U.S. OpCo, Newmark, Newmark Holdings, Newmark OpCo and, solely for the provisions listed therein, Cantor and BGC Global OpCo entered into the Separation and Distribution Agreement which sets forth the agreements among BGC Partners, Cantor, Newmark and their respective subsidiaries regarding, among other things:
| • | the principal corporate transactions pursuant to which the BGC group transferred to the Newmark group the assets and liabilities of the BGC group relating to BGC’s Real Estate Services business, which we call the “Separation”; |
| • | the proportional distribution in the Separation of interests in Newmark Holdings to holders of interests in BGC Holdings; |
| • | the IPO and certain pre-IPO contributions of assets by BGC Partners to Newmark in exchange for additional shares thereof; |
| • | the assumption and repayment of indebtedness by the BGC group and the Newmark group, as further described below; |
| • | the Spin-Off, including the termination of certain arrangements between the BGC group and the Newmark group immediately prior thereto; |
| • | future access to information, records and personnel necessary or appropriate to comply with regulatory requests or inquiries, for the preparation of financial statements or tax returns, or to conduct litigation; and |
| • | other agreements governing the relationship between BGC, Newmark and Cantor. |
Initial Public Offering
In December 2017, we completed our IPO of 23,000,000 shares of Class A common stock. Prior to the IPO, we were a wholly owned subsidiary of BGC Partners. We received approximately $295.4 million in aggregate net proceeds from the IPO, all of which we used to partially repay indebtedness under a certain term loan that we assumed from BGC Partners prior to the closing of our IPO.
New Newmark
To facilitate tax-free exchanges of the Newmark Holdings exchangeable limited partnership interests, Cantor has a one-time right, exercisable at any time after the second anniversary of the Spin-Off and otherwise subject to preserving the tax-free treatment of the Spin-Off to BGC Partners, at Newmark Holdings’ expense to (1) incorporate, or cause the incorporation of, a newly formed, wholly owned subsidiary of ours (which we refer to as “New Newmark”), (2) incorporate, or cause the incorporation of, a newly formed, wholly owned subsidiary of New Newmark (which we refer to as “New Newmark Sub”) and (3) cause the merger of New Newmark Sub with us, with the surviving corporation being a wholly owned subsidiary of New Newmark. In connection with such a merger, our Class A common stock and Class B common stock will each hold equivalent common stock in New Newmark, with identical rights to the applicable class of shares held prior to such merger. As a condition to such merger, we will have received an opinion of counsel, reasonably satisfactory to our Audit Committee, to the effect that such merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Cantor will indemnify us to the extent that we incur any material income taxes as a result of the transactions related to such merger.
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Indemnification
Newmark OpCo agreed to indemnify, defend and hold harmless the Cantor group, the BGC group and the Newmark group (other than Newmark OpCo and its subsidiaries) and each of their respective directors, officers, general partners, managers and employees, from and against all liabilities to the extent relating to, arising out of or resulting from:
| • | the transferred liabilities; |
| • | the failure of any member of the Newmark group or any other person to pay, perform or otherwise promptly discharge any of the transferred liabilities in accordance with their terms, whether prior to, at or after the Separation; |
| • | any breach by any member of the Newmark group of the Separation and Distribution Agreement or any of the ancillary agreements, other than the transition services agreement or the administrative services agreement; |
| • | except to the extent relating to an excluded liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement or arrangement for the benefit of any member of the Newmark group by any member of the BGC group that survives following the Separation; and |
| • | any untrue statement or alleged untrue statement of a material fact in our registration statement on Form S-1 with respect to our IPO other than statements made explicitly in the name of a member of the BGC group (including the reasons of the board of directors of BGC Partners for the Separation) or specifically relating to the BGC group or the BGC businesses. |
BGC U.S. OpCo and BGC Global OpCo agreed to indemnify, defend and hold harmless the Cantor group, the Newmark group and the BGC group (other than BGC U.S. OpCo, BGC Global OpCo and their respective subsidiaries) and each of their respective directors, officers, general partners, managers and employees from and against all liabilities to the extent relating to, arising out of or resulting from:
| • | the excluded liabilities; |
| • | the failure of any member of the BGC group or any other person to pay, perform or otherwise promptly discharge any of the excluded liabilities in accordance with their terms, whether prior to, at or after the Separation; |
| • | any breach by any member of the BGC group of the Separation and Distribution Agreement or any of the ancillary agreements, other than the transition services agreement; |
| • | except to the extent relating to a transferred liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement or arrangement for the benefit of any member of the BGC group by any member of the Newmark group that survives following the Separation; and |
| • | any untrue statement or alleged untrue statement of a material fact in our registration statement on Form S-1 with respect to our IPO, but only with respect to statements made explicitly in the name of a member of the BGC group (including the reasons of the board of directors of BGC Partners for the Separation) or specifically relating to the BGC group or the BGC businesses. |
The Separation and Distribution Agreement specified procedures with respect to claims subject to indemnification and related matters.
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Employee Matters
In general, any employee of BGC Partners or its subsidiaries primarily engaged in the conduct of the Newmark business immediately prior to the Separation, except those employees employed by BGC Partners primarily in corporate or executive level functions, were transferred to us. As promptly as practicable following each fiscal quarter, our management will provide a report to our Audit Committee specifying all of the founding partners who have been terminated by us. Our management will also give the Committee notice prior to such termination if the capital account underlying the Newmark Holdings founding partner interests held by a founding partner or, in the case of a series of related terminations, by a group of founding partners, exceeds $2.0 million on the date of termination.
In connection with the Spin-Off, the compensation committee of the board of directors of BGC Partners had the exclusive authority to determine the treatment of restricted stock awards and RSU awards outstanding under the BGC Equity Plan. BGC Partners restricted stock awards participated in the distribution as if such holder held unrestricted shares of BGC Partners common stock, and following the Spin-Off, any shares of Newmark common stock issued in respect of restricted BGC Partners common stock remained subject to any vesting, lapse or forfeiture restrictions applicable to the restricted BGC Partners shares prior to the Spin-Off. RSU awards outstanding under the BGC Equity Plan were adjusted so that each holder of a BGC Partners RSU award continued to hold a BGC RSU award covering BGC Partners Class A common shares, but also received a Newmark RSU award covering Newmark Class A common shares on an “as distributed basis” in order to reflect the impact of the Spin-Off on the pre-Spin-Off BGC Partners RSU awards. Such RSUs generally have the same terms, including vesting terms, as the pre-Spin-Off BGC Partners RSU awards, subject to any adjustments made by the compensation committee of the board of directors of BGC Partners.
Exchange Agreement
In connection with the Separation on December 13, 2017, we entered into the exchange agreement, which provides BGC Partners, Cantor, CFGM and any other qualified Class B holder entitled to hold Class B common stock under our Amended and Restated Certificate of Incorporation (our “certificate of incorporation”) with the right to exchange at any time and from time to time, on a one-to-one basis, shares of our Class A common stock now owned or subsequently acquired by such persons for shares of our Class B common stock, up to the number of shares of Class B common stock that are authorized but unissued under our certificate of incorporation. Our Audit Committee and Board of Directors have determined that the exchange agreement is in the best interests of Newmark and its stockholders because, among other things, it will help ensure that Cantor retains its exchangeable limited partnership units in Newmark Holdings, which is the same partnership in which Newmark’s partner employees participate, thus continuing to align the interests of Cantor with those of the partner employees.
The Spin-Off
On November 30, 2018, BGC Partners completed the Spin-Off to its stockholders of all of the shares of our common stock owned by BGC Partners as of immediately prior to the effective time of the Spin-Off, with shares of our Class A common stock distributed to the holders of shares of BGC Partners’ Class A common stock (including directors and executive officers of BGC Partners) of record as of the close of business on November 23, 2018 (the “Spin-Off Record Date”), and shares of our Class B common stock distributed to the holders of shares of BGC Partners’ Class B common stock (consisting of Cantor and CFGM as holders of record as of the close of business on the Spin-Off Record Date).
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On November 30, 2018, BGC Partners also caused its subsidiary, BGC Holdings, to distribute pro rata all of the 1,458,931 exchangeable limited partnership units of Newmark Holdings held by BGC Holdings immediately prior to the effective time of the BGC Holdings distribution to its limited partners entitled to receive distributions on their BGC Holdings units (including Cantor and executive officers of BGC Partners) who were holders of record of such units as of the Spin-Off Record Date. The Newmark Holdings units distributed to BGC Holdings partners in the BGC Holdings distribution are exchangeable for shares of Newmark Class A common stock, and in the case of the 449,917 Newmark Holdings units received by Cantor also into shares of Newmark Class B common stock, at the applicable exchange ratio (subject to adjustment).
Following the Spin-Off and the BGC Holdings distribution, BGC Partners ceased to be our controlling stockholder, and BGC Partners and its subsidiaries no longer held any shares of our common stock or other equity interests in us or our subsidiaries. Cantor continues to control Newmark and its subsidiaries following the Spin-Off and the BGC Holdings distribution.
Amended and Restated Newmark Holdings Limited Partnership Agreement
On December 13, 2017, we entered into the Amended and Restated Agreement of Limited Partnership of Newmark Holdings, which we refer to as the “Newmark Holdings limited partnership agreement,” and which is described below.
Management
Newmark Holdings is managed by its general partner, which is a wholly owned subsidiary of Newmark. Through our ownership of the general partner of Newmark Holdings, we hold the Newmark Holdings general partnership interest and the Newmark Holdings special voting limited partnership interest, which entitles us to control Newmark Holdings and to remove and appoint the general partner of Newmark Holdings.
Under the Newmark Holdings limited partnership agreement, the Newmark Holdings general partner manages the business and affairs of Newmark Holdings. However, Cantor’s consent is required for amendments to the Newmark Holdings limited partnership agreement, to decrease distributions to Newmark Holdings limited partners to less than 100% of net income received by Newmark Holdings (other than with respect to selected extraordinary items as described below), to transfer any Newmark OpCo partnership interests beneficially owned by Newmark Holdings and to take any other actions that may adversely affect Cantor’s exercise of its co-investment rights to acquire Newmark Holdings limited partnership interests, its right to purchase Newmark Holdings founding partner interests and its right to exchange the Newmark Holdings exchangeable limited partnership interests. Cantor’s consent is also required in connection with transfers of Newmark Holdings limited partnership interests by other limited partners and the issuance of additional Newmark Holdings limited partnership interests outside of the Participation Plan or certain other limited circumstances.
The Newmark Holdings limited partnership agreement also provides that Newmark Holdings, in its capacity as the general partner of Newmark OpCo, requires Cantor’s consent to amend the terms of the Newmark OpCo limited partnership agreement or take any other action that may interfere with Cantor’s exercise of its co-investment rights to acquire Newmark Holdings limited partnership interests (and the corresponding investment in Newmark OpCo by Newmark Holdings) or its rights to exchange the Newmark Holdings exchangeable limited partnership interests. Founding/working partners and limited partnership unit holders do not have any voting rights with respect to their ownership of Newmark Holdings limited partnership interests, other than limited consent rights concerning certain amendments to the terms of the Newmark Holdings limited partnership agreement.
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Classes of Interests in Newmark Holdings
Newmark Holdings has the following outstanding interests:
| • | a general partnership interest, which is held indirectly by us; |
| • | a special voting limited partnership interest, which is held indirectly by us and which entitles us to remove and appoint the general partner of Newmark Holdings; |
| • | Newmark Holdings exchangeable limited partnership interests, which are held by Cantor; |
| • | Newmark Holdings founding partner interests, which are limited partnership interests that were issued in the Separation in respect of BGC Holdings founding partner interests (which were issued to certain partners in connection with the 2008 separation of BGC Partners from Cantor); |
| • | Newmark Holdings limited partnership interests and units, including REU and AREU interests and working partner interests (including RPU, ARPU, PSI, PSE, APSI, PSU, APSU, HDU, LPU and NPSU interests and Preferred Units (as defined below)); and |
| • | Preferred Units (“Preferred Units”), which are working partner units that may be awarded to holders of, or contemporaneous with the grant of, PSUs, PSIs, PSEs, LPUs, REUs, RPUs and AREUs and which carry the same name as the underlying unit, with the insertion of an additional “P” to designate them as Preferred Units. Preferred Units cannot be made exchangeable into shares of Class A common stock, and they can only be exchanged for cash, at the determination price on the date of grant, Newmark Holdings founding/working partner interests are divided into a number of different classes of Newmark Holdings units underlying such partner’s Newmark Holdings founding partner interests and Newmark Holdings working partner interests, respectively. Each class of Newmark Holdings units held by founding/working partners (other than certain non-participating units) generally entitles the holder to receive a pro rata share of the distributions of income received by Newmark Holdings. See “—Distributions” below. The terms of each class of limited partnership interests vary and are described in the Newmark Holdings limited partnership agreement. |
The general partner of Newmark Holdings may determine the total number of authorized Newmark Holdings units.
Any authorized but unissued Newmark Holdings units may be issued:
| • | pursuant to the Separation or as otherwise contemplated by the Separation and Distribution Agreement or the Newmark Holdings limited partnership agreement; |
| • | to Cantor and members of the Cantor group, (1) in connection with a reinvestment in Newmark Holdings or (2) in the event of a termination or bankruptcy of a founding/working partner or limited partnership unit holder or the redemption of a founding/working partner interest or limited partnership unit pursuant to the Newmark Holdings limited partnership agreement; |
| • | with respect to Newmark Holdings founding/working partner interests, to an eligible recipient, which means any limited partner or member of the Cantor group or any affiliate, employee service provider or partner thereof, in each case as directed by a Newmark Holdings exchangeable limited partner majority in interest (provided that such person or entity is not primarily engaged in a business that competes with Newmark Holdings or its subsidiaries); |
| • | as otherwise agreed by the general partner and a Newmark Holdings exchangeable limited partner interest majority in interest; |
| • | pursuant to the Participation Plan; |
| • | to any then-current founding/working partner or limited partnership unit holder pursuant to the Newmark Holdings limited partnership agreement; or |
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| • | to any Newmark Holdings partner in connection with a conversion of an issued unit and interest into a different class or type of unit and interest. |
In the event that Newmark Holdings redeems outstanding units under certain circumstances, our Audit Committee has authorized management to sell to the members of the Cantor group exchangeable units equal in number to such redeemed units at a price per exchangeable unit to be determined based on an average daily closing price of the Class A common stock.
The Newmark Holdings limited partnership agreement provides that (1) where either current, terminating or terminated partners are permitted by us to exchange any portion of their founding partner units and Cantor consents to such exchangeability, we will offer to Cantor the opportunity for Cantor to purchase the same number of new exchangeable limited partnership interests in Newmark Holdings at the price that Cantor would have paid for the founding partner units had we redeemed them; and (2) the exchangeable limited partnership interests to be offered to Cantor pursuant to clause (1) above would be subject to, and granted in accordance with, applicable laws, rules and regulations then in effect.
Exchanges
Each unit of the Newmark Holdings limited partnership interests held by Cantor is generally exchangeable with us for a number of shares of Class B common stock (or, at Cantor’s option or if there are no additional authorized but unissued shares of Class B common stock, a number of shares of Class A common stock) equal to the current exchange ratio. The exchange ratio was initially one, but is subject to adjustment as set forth in the Separation and Distribution Agreement and was 0.9235 as of June 30, 2023.
The Newmark Holdings founding partner interests (which were issued in the Separation to holders of BGC Holdings founding partner interests, who received such founding partner interests in connection with the separation of BGC Partners from Cantor in 2008) will not be exchangeable with us unless (1) Cantor reacquires such interests from Newmark Holdings upon termination or bankruptcy of the founding partners or redemption of their units (which it has the right to do under certain circumstances), in which case such interests will be exchangeable with us for Class A common stock or Class B common stock as described above or (2) Cantor determines that such interests can be exchanged by such founding partners with us for Class A common stock, in which case each such Newmark Holdings unit will be exchangeable with us for a number of shares of our Class A common stock equal to the then-current exchange ratio, on terms and conditions to be determined by Cantor. Once a Newmark Holdings founding partner interest becomes exchangeable, such founding partner interest is automatically exchanged upon a termination or bankruptcy with us for our Class A common stock.
In particular, Cantor has provided that 211,668 Newmark Holdings founding partner interests will be exchangeable with us for a number of shares of Class A common stock equal to the then-current exchange ratio, in accordance with the terms of the Newmark Holdings limited partnership agreement.
We provide exchangeability for partnership units into shares of our Class A common stock in connection with (1) our partnership redemption, compensation and restructuring programs, (2) other incentive compensation arrangements and (3) business combination transactions.
Working partner interests will not be exchangeable with us unless otherwise determined by us with the written consent of a Newmark Holdings exchangeable limited partnership interest majority in interest, in accordance with the terms of the Newmark Holdings limited partnership agreement.
The limited partnership units will only be exchangeable for Class A common stock in accordance with the terms and conditions of the grant of such units, which terms and conditions will be determined in our sole discretion, as the general partner of Newmark Holdings, with the written consent of the Newmark Holdings exchangeable limited partnership interest majority in interest with respect to the grant of any exchange right, in accordance with the terms of the Newmark Holdings limited partnership agreement.
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We refer to BGC Holdings units outstanding as of immediately prior to the Separation and Newmark Holdings units issued in the Separation in respect of such BGC Holdings units as “legacy BGC Holdings units” and “legacy Newmark Holdings units,” respectively. As described above under “Executive Compensation—Introduction—Effect of BGC’s Corporate Conversion on Executive Compensation,” all BGC Holdings units held by Newmark employees and executive officers (including all legacy BGC Holdings units) were redeemed or exchanged through a series of transactions prior to and in connection with the Corporate Conversion. As a result of the closing of BGC’s Corporate Conversion on July 1, 2023, there are no longer any BGC Holdings units outstanding.
Notwithstanding the foregoing, to the extent that legacy Newmark Holdings were not exchangeable as of immediately after the
Separation, the determination of whether to grant an exchange right with respect to such legacy Newmark Holdings units will be made as follows:
| • | if the legacy Newmark Holdings units are held by an employee of the BGC group providing services solely to the BGC group, then BGC Group shall make such determination; |
| • | if the Newmark Holdings units are held by an employee of the Newmark group providing services solely to the Newmark group, then Newmark shall make such determination; and |
| • | if the legacy Newmark Holdings units are held by an employee of the BGC group, the Newmark group or the Cantor group providing services to both the BGC group and the Newmark group, then BGC Group shall make such determination to the extent that the grant of the exchange right relates to compensation for services by such employee to the BGC group, and Newmark shall make such determination to the extent that the grant of the exchange right relates to compensation for services by such employee to the Newmark group. Grants of exchangeability may be made at any time in the discretion of the relevant service recipient, and future grant practices may differ from prior practices, including without limitation in connection with performance achievement, changes in incentive arrangements, accounting principles, and tax laws (including deductibility of compensation) and other applicable laws. |
Prior to the completion of the Corporate Conversion, BGC Holdings limited partnership interests and Newmark Holdings limited partnership interests were each entitled to receive cash distributions from BGC Holdings and Newmark Holdings, respectively, in accordance with the terms of such partnership’s respective limited partnership agreement; holders of Newmark Holdings limited partnership interests continue to be entitled to receive cash distributions from Newmark Holdings.
Upon our receipt of any Newmark Holdings exchangeable limited partnership interest, or Newmark Holdings founding partner interest, working partner interest or limited partnership unit that is exchangeable, pursuant to an exchange, such interest being so exchanged will cease to be outstanding and will be automatically and fully cancelled, and such interest will automatically be designated as a Newmark Holdings regular limited partnership interest, will have all rights and obligations of a holder of Newmark Holdings regular limited partnership interests and will cease to be designated as a Newmark Holdings exchangeable interest, or Newmark Holdings founding partner interest, working partner interest or limited partnership unit that is exchangeable, and will not be exchangeable.
With each exchange, our direct and indirect interest in Newmark OpCo will proportionately increase, because immediately following an exchange, Newmark Holdings will redeem the Newmark Holdings unit so acquired for the Newmark OpCo limited partnership interest underlying such Newmark Holdings unit.
In addition, upon a transfer of a Newmark Holdings exchangeable limited partnership interest that is not permitted by the Newmark Holdings limited partnership agreement (see “—Transfers of Interests” below), such interest will cease to be designated as a Newmark Holdings exchangeable limited partnership interest and will automatically be designated as a regular limited partnership interest.
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In the case of an exchange of an exchangeable limited partnership interest or a founding partner interest (or portion thereof), the aggregate capital account of the Newmark Holdings unit so exchanged will equal a pro rata portion of the total aggregate capital account of all exchangeable limited partnership units and founding partner units then outstanding, reflecting the portion of all such exchangeable limited partnership units and founding partner units then outstanding represented by the unit so exchanged. The aggregate capital account of such exchanging partner in such partner’s remaining exchangeable limited partnership units and/or founding partner units will be reduced by an equivalent amount. If the aggregate capital account of such partner is insufficient to permit such a reduction without resulting in a negative capital account, the amount of such insufficiency will be satisfied by reallocating capital from the capital accounts of the exchangeable limited partners and the founding partners to the capital account of the unit so exchanged, pro rata based on the number of units underlying the outstanding exchangeable limited partnership interests and the founding partner interests or based on other factors as determined by a Newmark Holdings exchangeable limited partnership interest majority in interest.
In the case of an exchange of an REU interest or working partner interest or portion thereof, the aggregate capital account of the Newmark Holdings units so exchanged will equal the capital account of the REU interest or working partner interest (or portion thereof), as the case may be, represented by such Newmark Holdings units.
We agreed to reserve, out of our authorized but unissued Class B common stock and Class A common stock, a sufficient number of shares of Class B common stock and Class A common stock to effect the exchange of all then outstanding Newmark Holdings exchangeable limited partnership interests, the Newmark Holdings founding/working partner interests, if exchangeable, and Newmark Holdings limited partnership units, if exchangeable, into shares of Class B common stock or Class A common stock pursuant to the exchanges and a sufficient number of shares of Class A common stock to effect the exchange of shares of Class B common stock issued or issuable in respect of exchangeable Newmark Holdings limited partnership interests (subject, in each case, to the maximum number of shares authorized but unissued under our certificate of incorporation as then in effect). We have agreed that all shares of Class B common stock and Class A common stock issued in an exchange will be duly authorized, validly issued, fully paid and non-assessable and will be free from pre-emptive rights and free of any encumbrances.
The Company also provides for exchangeability of certain working partner units without a capital account for other working partner units with a capital account in connection with compensatory arrangements.
Distributions
The profit and loss of Newmark OpCo are generally allocated based on the total number of Newmark OpCo units outstanding. The profit and loss of Newmark Holdings are generally allocated based on the total number of Newmark Holdings units outstanding. The minimum distribution for each RPU interest issued after the IPO is $0.005 per quarter.
Pursuant to the terms of the Newmark Holdings limited partnership agreement, distributions by Newmark Holdings to its partners may not be decreased below 100% of net income received by Newmark Holdings from Newmark OpCo (other than with respect to selected extraordinary items with respect to founding/working partners or limited partnership unit holders, such as the disposition directly or indirectly of partnership assets outside of the ordinary course of business) unless we determine otherwise, subject to Cantor’s consent (as the holder of the Newmark Holdings exchangeable limited partnership interest majority in interest).
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In addition, the Newmark Holdings general partner, with the consent of Cantor, as holder of a majority of the Newmark Holdings exchangeable limited partnership interests, in its sole and absolute discretion, may direct Newmark Holdings, upon a founding/working partner’s or a limited partnership unit holder’s death, retirement, withdrawal from Newmark Holdings or other full or partial redemption of Newmark Holdings units, to distribute to such partner (or to his or her personal representative, as the case may be) a number of publicly traded shares or an amount of other property that the Newmark Holdings general partner determines is appropriate in light of the goodwill associated with such partner and his, her or its Newmark Holdings units, such partner’s length of service, responsibilities and contributions to Newmark Holdings and/or other factors deemed to be relevant by the Newmark Holdings general partner.
In the discretion of the Newmark Holdings general partner, distributions with respect to selected extraordinary transactions, as described below, may be withheld from the founding/working partners and the limited partnership unit holders and distributed over time subject to the satisfaction of conditions set by us, as the general partner of Newmark Holdings, such as continued service to us. These distributions that may be withheld relate to income items from nonrecurring events, including, without limitation, items that would be considered “extraordinary items” under GAAP and recoveries with respect to claims for expenses, costs and damages (excluding any recovery that does not result in monetary payments to Newmark Holdings) attributable to extraordinary events affecting Newmark Holdings.
Cantor’s Right to Purchase Exchangeable Newmark Holding Limited Partnership Interests Upon Redemption or Exchange of Newmark Holdings Founding Partner Interests
The terms of the Newmark Holdings founding partner interests are substantially the same as the terms of the BGC Holdings founding partner interests. There are no Newmark Holdings founding partner interests outstanding other than from the mathematical carryover from the BGC Holdings founding partner interests (i.e., the Newmark Holdings founding partner interests distributed in the Separation in respect of the outstanding BGC Holdings founding partner interests). No holder of Newmark Holdings founding partner interests is currently employed by us.
Cantor has a right to purchase from Newmark Holdings exchangeable limited partnership interests in the event that any Newmark Holdings founding partner interests that have not become exchangeable are redeemed by Newmark Holdings upon termination or bankruptcy of a founding partner or upon mutual consent of the general partner of Newmark Holdings and Cantor. Cantor has the right to purchase such Newmark Holdings exchangeable limited partnership interests at a price equal to the lesser of (1) the amount that Newmark Holdings would be required to pay to redeem and purchase such Newmark Holdings founding partner interests and (2) the amount equal to (a) the number of units underlying such founding partner interests, multiplied by (b) the exchange ratio as of the date of such purchase, multiplied by (c) the then-current market price of our Class A common stock. Cantor may pay such price using cash, publicly traded shares or other property, or a combination of the foregoing. If Cantor (or the other member of the Cantor group acquiring such limited partnership interests, as the case may be) so purchases such limited partnership interests at a price equal to clause (2) above, neither Cantor nor any member of the Cantor group nor Newmark Holdings nor any other person is obligated to pay Newmark Holdings or the holder of such founding partner interests any amount in excess of the amount set forth in clause (2) above.
In addition, the Newmark Holdings limited partnership agreement provides that (1) where either current, terminating or terminated partners are permitted by us to exchange any portion of their founding partner units and Cantor consents to such exchangeability, we will offer to Cantor the opportunity for Cantor to purchase the same number of new exchangeable limited partnership interests in Newmark Holdings at the price that Cantor would have paid for exchangeable limited partnership interests in the event we had redeemed the founding partner units; and (2) the exchangeable limited partnership interests to be offered to Cantor pursuant to clause (1) above would be subject to, and granted in accordance with, applicable laws, rules and regulations then in effect.
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If Cantor acquires any units as a result of the purchase or redemption by Newmark Holdings of any founding partner interests, Cantor will be entitled to the benefits (including distributions) of the units it acquires from the date of termination or bankruptcy of the applicable founding partner. In addition, any such units will be exchangeable by Cantor for a number of shares of our Class B common stock or, at Cantor’s election, shares of our Class A common stock, in each case, equal to the then-current exchange ratio, on the same basis as the limited partnership interests held by Cantor, and will be designated as Newmark Holdings exchangeable limited partnership interests when acquired by Cantor. The exchange ratio was initially one, but is subject to adjustment as set forth in the Separation and Distribution Agreement and was 0.9235 as of June 30, 2023. This may permit Cantor to receive a larger share of income generated by our business at a less expensive price than through purchasing shares of our Class A common stock, which is a result of the price payable by Cantor to Newmark.
On May 17, 2022, Cantor purchased from Newmark Holdings an aggregate of (i) 184,714 exchangeable limited partnership interests for aggregate consideration of $763,064 as a result of the redemption of 184,714 founding partner interests, and (ii) 23,562 exchangeable limited partnership interests for aggregate consideration of $100,079 as a result of the exchange of 23,562 founding partner interests.
On October 25, 2022, Cantor purchased from Newmark Holdings an aggregate of (i) 104,701 exchangeable limited partnership interests for aggregate consideration of $446,647 as a result of the redemption of 104,701 founding partner interests, and (ii) 102,454 exchangeable limited partnership interests for aggregate consideration of $272,100 as a result of the exchange of 102,454 founding partner interests.
On April 17, 2023, Cantor purchased from Newmark Holdings an aggregate of (i) 309,631 exchangeable limited partnership interests for aggregate consideration of $1,282,265 as a result of the redemption of 309,631 founding partner interests, and (ii) 38,989 exchangeable limited partnership interests for aggregate consideration of $166,364 as a result of the exchange of 38,989 founding partner interests.
On June 30, 2023, Cantor purchased from Newmark Holdings an aggregate of 74,026 exchangeable limited partnership interests for aggregate consideration of $310,976 as a result of the redemption of 74,026 founding partner interests.
As of June 30, 2023 there were 2,852,004 founding partner interests in Newmark Holdings remaining which Newmark Holdings had the right to redeem or exchange and with respect to which Cantor would have the right to purchase an equivalent number of Cantor units following such redemption or exchange.
Newmark Holdings Working Partner Interests and Newmark Holdings Limited Partnership Units
Cantor has a right to purchase any Newmark Holdings working partner interests or Newmark Holdings limited partnership units (in each case that have not become exchangeable), as the case may be, that are redeemable by Newmark Holdings if Newmark Holdings elects to transfer the right to purchase such interests to a Newmark Holdings partner rather than redeem such interests itself. Cantor has the right to purchase such interests on the same terms that such Newmark Holdings partner would have a right to purchase such interests.
Newmark from time to time may enter into various compensatory arrangements with partners, including founding partners who hold non-exchangeable founding partner units that Cantor has not elected to make exchangeable into shares of Class A common stock. These arrangements, which may be entered into prior to or in connection with the termination of such partners, include but are not limited to the grant of shares or other awards under the Equity Plan, payments of cash or other property, or partnership awards under the Participation Plan or other partnership adjustments, which arrangements may result in the repayment by such partners of any partnership loans or other amounts payable to or guaranteed by Cantor earlier than might otherwise be the case, and for which Newmark may incur compensation charges that it might not otherwise have incurred had such arrangements not been entered into.
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Partner Obligations
Each of the founding/working partners and each of the limited partnership unit holders are subject to certain partner obligations, which we refer to as “partner obligations.” The partner obligations constitute an undertaking by each of the founding/working partners and each of the limited partnership unit holders that they have a duty of loyalty to Newmark Holdings and that, during the period from the date on which a person first becomes a partner through the applicable specified period following the date on which such partner ceases, for any reason, to be a partner, not to, directly or indirectly (including by or through an affiliate):
| • | breach a founding/working partner’s or limited partnership unit holder’s, as the case may be, duty of loyalty to Newmark Holdings, through the two-year period following the date on which such partner ceases, for any reason, to be a founding/working partner or limited partnership unit holder; |
| • | while a founding/working partner or limited partnership unit holder and through the six (6)-month anniversary of the termination of such founding/working partner or limited partnership unit holder, engage in, represent in any way, or be connected with (as partner, director, officer, employee, consultant, or active participant, in each case, other than on a de minimis basis) any activity, practice or act with a competing business (as defined below) if: (1) it involves a Client or Client Representative (as defined in the Newmark Holdings limited partnership agreement) and a service that is the same or similar to a service such partner provided for a Protected Affiliate (as defined in Newmark Holdings limited partnership agreement) or (2) it involves (y) a product, product line or type, or service of a Protected Affiliate (including any for which it took substantial steps to offer prior to the termination of such partner), and (z) a service that is the same or similar to a service the founding/working partner or limited partnership unit holder provided for a Protected Affiliate within a geographic market covering where the founding/working partner or limited partnership unit holder and/or the Protected Affiliate provided services or had responsibilities and/or within a 100-mile radius of any Client, Client Representative, Protected Affiliate, or Partner while a Partner; or (3) the Partner had substantial confidential information of the Newmark Holdings or a Protected Affiliate and the disclosure of such information to the Competing Business is likely to be inevitable; |
| • | while a founding/working partner or limited partnership unit holder and through the six (6)-month anniversary of the termination of such founding/working partner or limited partnership unit holder, solicit any of the customers of a Protected Affiliate for purposes of engaging in a competing business; |
| • | while a founding/working partner or limited partnership unit holder and through the first (1st)-year anniversary of the termination of such founding/working partner or limited partnership unit holder, induce such customers or their employees to reduce their volume of business with, terminate their relationship with, or otherwise adversely affect their relationship with, a Protected Affiliate; |
| • | while a founding/working partner or limited partnership unit holder and through the second (2nd)-year anniversary of the termination of such founding/working partner or limited partnership unit holder, solicit, induce, or influence, or attempt to solicit, induce, or influence, any person who was an employee, member, partner, or consultant of a Protected Affiliate or an affiliate to terminate his/her/their employment or association with any such Protected Affiliate or affiliate or hire, employ, engage (including as a consultant or partner), or otherwise enter into a Competing Business with any such person; |
| • | while a founding/working partner or limited partnership unit holder and through the fourth (4th)-year anniversary of the termination of such founding/working partner or limited partnership unit holder, make or participate in the making of (including through the limited partner’s or any of its affiliates’ respective agents and representatives) any comments to the media (print, broadcast, electronic or otherwise) that are disparaging regarding Newmark or the senior executive officers of Newmark or are otherwise contrary to the interests of Newmark as determined by the Newmark Holdings general partner in its sole and absolute discretion; |
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| • | except as permitted with respect to corporate opportunities and fiduciary duties in the Newmark Holdings limited partnership agreement (see “—Corporate Opportunity; Fiduciary Duty” below) take advantage of, or provide another person with the opportunity to take advantage of, a Newmark “corporate opportunity” (as such term would apply to Newmark Holdings if it were a corporation) including opportunities related to intellectual property, which for this purpose requires granting Newmark a right of first refusal to acquire any assets, stock or other ownership interest in a business being sold by any partner or affiliate of such partner if an investment in such business would constitute a “corporate opportunity” (as such term would apply to Newmark Holdings if it were a corporation), that has not been presented to and rejected by Newmark or that Newmark rejects but reserves for possible further action by Newmark in writing, unless otherwise consented to by the Newmark Holdings general partner in writing in its sole and absolute discretion, or otherwise take any action to harm, that harms or that reasonably could be expected to harm, Newmark for a two-year period following the date on which a founding/working partner or a limited partnership unit holder, as the case may be, ceases, for any reason, to be a founding/working partner or a limited partnership unit holder, as the case may be, including any breach of its confidentiality obligations. |
A founding/working partner or limited partnership unit holder is considered to have engaged in a “competitive activity” if such partner (including by or through his, her or its affiliates), during the applicable restricted period, engages in one of the following activities, which we collectively refer to as the “competitive activities”:
| (1) | at any time while a founding/working partner or limited partnership unit holder and through the second (2nd)-year anniversary of the termination of such partner, directly or indirectly, or by action in concert with others, solicits, induces, or influences, or attempts to solicit, induce or influence, any other partner, employee, member, partner or consultant of Cantor, Newmark or any member of the Cantor group or affiliated entity to terminate their employment or other business arrangements with Cantor, Newmark or any member of the Cantor group or affiliated entity, or to engage in any competing business (as defined below) or hires, employs, engages (including as a consultant or partner) or otherwise enters into a competing business with any such person; |
| (2) | at any time while a founding/working partner or limited partnership unit holder and through the second (2nd)-year anniversary of the termination of such partner, solicits any of the customers of Cantor, Newmark or any member of the Cantor group or affiliated entity (or any of their employees), induces such customers or their employees to reduce their volume of business with, terminate their relationship with or otherwise adversely affect their relationship with, Cantor, Newmark or any member of the Cantor group or affiliated entity; |
| (3) | at any time while a founding/working partner or limited partnership unit holder and through the second (2nd)-year anniversary of the termination of such partner, engages in, represents in any way, or is connected with (as partner, director, officer, employee, consultant, or active participant, in each case, other than on a de minimis basis) any activity, practice or act with a Competing Business if: (1) it involves a Client or Client Representative and a service that is the same or similar to a service the founding/working partner or limited partnership unit holder provided for a Protected Affiliate; (2) it involves (y) a product, product line or type, or service of a Protected Affiliate (including any for which it took substantial steps to offer prior to the termination of such founding/working partner or limited partnership unit holder), and (z) a service that is the same or similar to a service the founding/working partner or limited partnership unit holder provided for a Protected Affiliate within a geographic market covering where the Partner and/or the Protected Affiliate provided services or had responsibilities and/or within a 100-mile radius of any Client, Client Representative, Protected Affiliate, or founding/working partner or limited partnership unit holder while a founding/working partner or limited partnership unit holder; or (3) the founding/working partner or limited partnership unit holder had substantial confidential information of the Cantor, Newmark or any member of the Cantor group or affiliated entity and the disclosure of such information to the Competing Business is likely to be inevitable. |
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Notwithstanding anything to the contrary, and unless Cantor determines otherwise, none of such partner obligations apply to any founding/working partner or limited partnership unit holder that is also a Cantor Company. “Cantor Company” means Cantor or any of its affiliates (other than, if applicable, Newmark and any of our subsidiaries). Such partners are exempt from these partner obligations.
The determination of whether a founding/working partner or limited partnership unit holder has breached his or her partner obligations will be made in good faith by the Newmark Holdings general partner in its sole and absolute discretion, which determination will be final and binding. If a founding/working partner or a limited partnership unit holder breaches his, her or its partner obligations, then, in addition to any other rights or remedies that the Newmark Holdings general partner may have, and unless otherwise determined by the Newmark Holdings general partner in its sole and absolute discretion, Newmark Holdings will redeem all of the units held by such partner for a redemption price equal to their base amount, and such partner will have no right to receive any further distributions, or payments of cash, stock or property, to which such partner otherwise might be entitled.
A founding/working partner or a limited partnership unit holder, as the case may be, will become a bankrupt partner upon (a) making an assignment for the benefit of creditors, (b) filing a voluntary petition in bankruptcy, (c) the adjudication of such partner as bankrupt or insolvent, or the entry against such partner of an order for relief in any bankruptcy or insolvency proceeding; provided that such order for relief or involuntary proceeding is not stayed or dismissed within 120 days, (d) the filing by such partner of a petition or answer seeking for himself, herself or itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy statute, law or regulation, (e) the filing by such partner of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of that nature, or (f) the appointment of or seeking of the appointment of (in each case by any person) a trustee, receiver or liquidator of it or of all or any substantial part of the properties of such founding/working partner. With respect to a corporate founding/working partner, bankruptcy will also include the occurrence of any of the foregoing events with respect to the beneficial owner of the majority of the stock of such partner. Notwithstanding the foregoing, no event constitutes a bankruptcy of a founding/working partner or limited partnership unit holder, as the case may be, unless the Newmark Holdings general partner so determines in its sole and absolute discretion.
Transfers of Interests
The Newmark Holdings limited partnership agreement contains restrictions on the transfer of interests in Newmark Holdings. In general, a partner may not transfer or agree or otherwise commit to transfer all or any portion of, or any rights, title and interest in and to, its interest in Newmark Holdings, except in the circumstances described in the Newmark Holdings limited partnership agreement.
Amendments
The Newmark Holdings limited partnership agreement cannot be amended except with the approval of each of the general partner and the exchangeable limited partners (by the affirmative vote of a Newmark Holdings exchangeable limited partnership interest majority in interest) of Newmark Holdings. In addition, the Newmark Holdings limited partnership agreement cannot be amended to:
| • | alter the interest of any partner in the amount or timing of distributions or the allocation of profits, losses or credits, if such alteration would either materially adversely affect the economic interest of a partner or would materially adversely affect the value of interests, without the consent of the partners holding at least two-thirds of all units, in the case of an amendment applying in substantially similar manner to all classes of interests, or two-thirds in interest of the affected class or classes of the partners, in the case of any other amendment; or |
| • | alter the special voting limited partner’s ability to remove a general partner. |
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The general partner of Newmark Holdings may authorize any amendment to correct any technically incorrect statement or error apparent on the face thereof in order to further the parties’ intent or to correct any formality or error or incorrect statement or defect in the execution of the Newmark Holdings limited partnership agreement.
Corporate Opportunity; Fiduciary Duty
The Newmark Holdings limited partnership agreement contains similar corporate opportunity provisions to those included in our certificate of incorporation with respect to Newmark, BGC and/or Cantor and their respective representatives. See “—Potential Conflicts of Interest and Competition with BGC and Cantor.”
Parity of Interests
The Newmark Holdings limited partnership agreement provides that it is the non-binding intention of Newmark Holdings and each of the partners of Newmark Holdings that the aggregate number of Newmark OpCo units held by Newmark Holdings and its subsidiaries (other than Newmark OpCo and its subsidiaries) at a given time divided by the aggregate number of Newmark Holdings units issued and outstanding at such time is at all times equal to one, which ratio is referred to herein as the “Newmark Holdings ratio.” It is the non-binding intention of each of the partners of Newmark Holdings and of Newmark Holdings that there be a parallel issuance or repurchase transaction by Newmark Holdings in the event of any issuance or repurchase by Newmark OpCo of Newmark OpCo units to or held by Newmark Holdings so that the Newmark Holdings ratio at all times equals one.
First Amendment to Newmark Holdings Limited Partnership Agreement
On March 10, 2023, Newmark Holdings entered into an amendment to the Newmark Holdings limited partnership agreement (the “LPA Amendment”). The LPA Amendment revises certain restrictive covenants pertaining to the “Partner Obligations” and “Competitive Activity” provisions in the Newmark Holdings limited partnership agreement. Specifically, the LPA Amendment (i) reduces the length of the post-termination period during which a partner must refrain from soliciting or doing business with customers, soliciting employees, engaging in a “Competing Business” (as defined therein), or otherwise refraining from harming the partnership; and (ii) revises the scope of the non-compete provisions under the “Partner Obligations” and “Competitive Activity” provisions in the Newmark Holdings limited partnership agreement to cover “Competing Businesses” for which a partner performs the same or similar services as provided to a “Protected Affiliate” (as defined therein) and (a) involving a product, product line or type, or service of a “Protected Affiliate” within a specific geographic area, (b) involving a “Client” or a “Client Representative” (each as defined therein) of a Protected Affiliate, or (c) for which the disclosure of confidential information is likely to be inevitable. The LPA Amendment was approved by the Company’s Board of Directors and Audit and Compensation Committees.
Amended and Restated Limited Partnership Agreement of Newmark OpCo
On December 13, 2017, we entered into the Amended and Restated Agreement of Limited Partnership of Newmark OpCo, which we refer to as the “Newmark OpCo limited partnership agreement,” and which is described below.
Management
Newmark OpCo is managed by its general partner, which is owned by Newmark Holdings. The Newmark OpCo general partner holds the Newmark OpCo general partnership interest and the Newmark OpCo special voting limited partnership interest, which entitles the holder thereof to remove and appoint the general partner of Newmark OpCo and serves as the general partner of Newmark OpCo, which entitles Newmark Holdings (and thereby, Newmark) to control Newmark OpCo, subject to limited consent rights of Cantor and to the rights of Newmark Holdings as the special voting limited partner. Newmark Holdings holds its Newmark OpCo general partnership interest through a Delaware limited liability company, Newmark Holdings, LLC.
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Cantor’s “consent rights” means that Newmark Holdings, in its capacity as general partner of Newmark OpCo, is required to obtain Cantor’s consent to amend the terms of the Newmark OpCo limited partnership agreement or take any other action that may adversely affect Cantor’s exercise of its co-investment rights to acquire Newmark Holdings limited partnership interests (and the corresponding investment in Newmark OpCo by Newmark Holdings) or right to exchange Newmark Holdings exchangeable limited partnership interests.
Classes of Interests in Newmark OpCo
Newmark OpCo has the following outstanding interests:
| • | a general partnership interest, which is held indirectly by Newmark Holdings; |
| • | limited partnership interests, which are held by Newmark and Newmark Holdings; and |
| • | a special voting limited partnership interest, which is held indirectly by Newmark Holdings and which entitles the holder thereof to remove and appoint the general partner of Newmark OpCo. |
The general partner of Newmark OpCo determines the aggregate number of authorized units in Newmark OpCo.
Any authorized but unissued units in Newmark OpCo may be issued:
| • | to Newmark and/or Newmark Holdings and members of their group, as the case may be, in connection with an investment in Newmark OpCo; |
| • | to Newmark Holdings or members of its group in connection with a redemption pursuant to the Newmark Holdings limited partnership agreement; |
| • | as otherwise agreed by each of the general partner and the limited partners (by affirmative vote of the limited partners holding a majority of the units underlying limited partnership interests outstanding of Newmark OpCo (except that if Newmark Holdings and its group holds a majority in interest and Cantor and its group holds a majority of units underlying the Newmark Holdings exchangeable limited partnership interests, then majority of interest means Cantor) (which we refer to as a “Newmark OpCo majority in interest”)); |
| • | to Newmark or Newmark Holdings in connection with a grant of equity by Newmark or Newmark Holdings; and |
| • | to any Newmark OpCo partner in connection with a conversion of an issued unit and interest into a different class or type of unit and interest. |
There will be no additional classes of partnership interests in Newmark OpCo.
Distributions
The profit and loss of Newmark OpCo is generally allocated based on the total number of Newmark OpCo units outstanding.
Transfers of Interests
The Newmark OpCo partnership agreement contains restrictions on the transfer of interests in Newmark OpCo. In general, a partner may not transfer or agree or otherwise commit to transfer all or any portion of, or any rights, title and interest in and to, its interest in Newmark OpCo, except in the circumstances described in the Newmark OpCo limited partnership agreement.
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Amendments
The Newmark OpCo limited partnership agreement cannot be amended except with the approval of each of the general partner and the limited partners (by the affirmative vote of a Newmark OpCo majority in interest) of Newmark OpCo. In addition, the Newmark OpCo limited partnership agreement cannot be amended to:
| • | alter the interest of any partner in the amount or timing of distributions or the allocation of profits, losses or credits, if such alteration would either materially adversely affect the economic interest of a partner or would materially adversely affect the value of interests, without the consent of the partners holding at least two-thirds of all units, in the case of an amendment applying in substantially similar manner to all classes of interests, or two-thirds in interest of the affected class or classes of the partners, in the case of any other amendment; or |
| • | alter the special voting limited partner’s ability to remove a general partner. |
The general partner of Newmark OpCo may authorize any amendment to correct any technically incorrect statement or error in order to further the parties’ intent or to correct any formality or error or defect in the execution of the Newmark OpCo limited partnership agreement.
Corporate Opportunity; Fiduciary Duty
The Newmark OpCo limited partnership agreement contains similar corporate opportunity provisions to those included in our certificate of incorporation with respect to Newmark and/or Newmark Holdings and their respective representatives. See “—Potential Conflicts of Interest and Competition with BGC and Cantor.”
Parity of Interests
The Newmark OpCo limited partnership agreement provides that, at the election of Newmark, in connection with a repurchase of our Class A common stock or similar actions, Newmark OpCo will redeem and repurchase from Newmark a number of units in Newmark OpCo equivalent to the number of shares of Class A common stock repurchased by Newmark in exchange for cash in the amount of the gross proceeds to be paid in connection with such stock repurchase.
Adjustment to Exchange Ratio
Each unit of an exchangeable Newmark Holdings limited partnership interest will be exchangeable with Newmark for a number of shares of Newmark common stock equal to the exchange ratio. The exchange ratio was initially one, but is subject to adjustment as set forth in the Separation and Distribution Agreement and was 0.9235 as of June 30, 2023.
For reinvestment, acquisition or other purposes, Newmark may determine to distribute to its stockholders a smaller percentage than Newmark Holdings distributes to its equity holders (excluding tax distributions from Newmark Holdings) of cash that it receives from Newmark OpCo. In such circumstances, the Separation and Distribution Agreement provides that the exchange ratio will be reduced to reflect the amount of additional cash retained by Newmark as a result of the distribution of such smaller percentage, after the payment of taxes (which we refer to as “Reinvestment Cash”).
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The Separation and Distribution Agreement provides that in the event that there shall be any Reinvestment Cash (as defined in the Separation and Distribution Agreement) in any fiscal quarter, the exchange ratio shall be adjusted so that it shall be equal to (i) the number of fully diluted outstanding shares of Newmark common stock (as defined in the Separation and Distribution Agreement) as of immediately prior to such adjustment, divided by (ii) the sum of (A) the number of fully diluted outstanding shares of Newmark common stock as of immediately prior to such adjustment, plus (B) the Adjustment Factor (as defined below) for such fiscal quarter, plus (C) the sum of the aggregate Adjustment Factors for all prior fiscal quarters following the initial public offering of Newmark Class A common stock, where:
| • | the Adjustment Factor shall be equal to the Reinvestment Cash divided by the Newmark Current Market Price (as defined in the Separation and Distribution Agreement) as of the day prior to the date on which the adjustment to the exchange ratio is made for such fiscal quarter; provided that |
| • | if, in any subsequent fiscal quarter, the exchange ratio shall be further adjusted and the Newmark Current Market Price as of the day prior to the date on which such further adjustment is made is greater than the Newmark Current Market Price used in the bullet above, then the Adjustment Factor for such prior fiscal quarter shall be re-calculated using such greater Newmark Current Market Price. |
Use of Reinvestment Cash
We receive significant tax benefits from the partnership structure of Newmark OpCo and Newmark Holdings. Specifically, in connection with an exchange of an exchangeable Newmark Holdings limited partnership interest with Newmark for shares of Newmark common stock, Newmark OpCo receives a tax deduction. We, in turn, benefit from the majority of this tax deduction as a result of our ownership interest in Newmark OpCo. In a typical up-C structure, we would normally receive a much smaller portion of these tax benefits.
In light of these tax benefits and the fact that the exchange ratio is adjusted downward if there is any Reinvestment Cash, and in order to induce the holder of a majority of the Newmark exchangeable limited partnership interest to consent to the partnership structure, we have agreed in the Separation and Distribution Agreement that, to the extent that there is any Reinvestment Cash, we will contribute such cash to Newmark OpCo as an additional capital contribution with respect to our existing limited partnership interest in Newmark OpCo, unless we and the holder of a majority of the Newmark exchangeable limited partnership interests agree otherwise.
Reinvestments in Newmark OpCo by Newmark; Co-Investment Rights; Distributions to Holders of Our Common Stock and to Newmark Holdings Limited Partners
In order to maintain our economic interest in Newmark OpCo, the Separation and Distribution Agreement provides that any net proceeds received by us from any subsequent issuances of our common stock (other than upon exchange of Newmark Holdings exchangeable limited partnership interests) will be, unless otherwise determined by our Board of Directors, contributed to Newmark OpCo in exchange for Newmark OpCo limited partnership interests consisting of a number of Newmark OpCo units that will equal the number of shares of our common stock issued divided by the exchange ratio as of immediately prior to the issuance of such shares.
In addition, we may elect to purchase from Newmark OpCo a number of Newmark OpCo units through cash or non-cash consideration. The investment price will be based on the then-applicable market price for shares of our Class A common stock. In the future, from time to time, we also may use cash on hand and funds received from distributions, loans or other payments from Newmark OpCo to purchase shares of common stock or Newmark Holdings exchangeable limited partnership interests.
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In the event that we acquire any additional Newmark OpCo limited partnership interests from Newmark OpCo, Cantor would have the right to cause Newmark Holdings to acquire additional Newmark OpCo limited partnership interests from Newmark OpCo up to the number of Newmark OpCo units that would preserve Cantor’s relative indirect economic percentage interest in Newmark OpCo compared to our and BGC’s aggregate interests immediately prior to the acquisition of such additional Newmark OpCo units by us or BGC, and Cantor would acquire an equivalent number of additional Newmark Holdings limited partnership interests to reflect such relative indirect interest. The purchase price per Newmark OpCo unit for any such Newmark OpCo limited partnership interests issued indirectly to Cantor pursuant to its co-investment rights will be equal to the price paid by us per Newmark OpCo unit. Any such Newmark Holdings limited partnership interests issued to Cantor will be designated as exchangeable limited partnership interests.
Cantor will have 10 days after the related issuance of Newmark OpCo limited partnership interests to elect such reinvestment and will have to close such election no later than 120 days following such election.
In addition, the Participation Plan provides for issuances, in the discretion of our Compensation Committee or its designee, of Newmark Holdings limited partnership interests to current or prospective working partners and executive officers of Newmark. Any net proceeds received by Newmark Holdings for such issuances generally will be contributed to Newmark OpCo in exchange for Newmark OpCo limited partnership interests consisting of a number of Newmark OpCo units equal to the number of Newmark Holdings limited partnership interests being issued so that the cost of such compensation award, if any, is borne pro rata by all holders of the Newmark OpCo units, including by us. Any Newmark Holdings limited partnership interests acquired by the working partners, including any such interests acquired at preferential or historical prices that are less than the prevailing fair market value of our Class A common stock, will be designated as Newmark Holdings working partner interests and will generally receive distributions from Newmark OpCo on an equal basis with all other limited partnership interests.
Newmark Holdings will not have the right to acquire limited partnership interests in Newmark OpCo other than in connection with an investment by Cantor as described above or in connection with issuances of Newmark Holdings interests to the working partners and executive officers under the Participation Plan.
Amendment No. 1 to Newmark OpCo Limited Partnership Agreement
The Newmark OpCo limited partnership agreement was amended, effective as of December 13, 2017, on March 14, 2018 to adjust certain allocations to certain partnership-owned entities.
Second Amendment and Restatement of Newmark OpCo Limited Partnership Agreement
On June 19, 2018, Newmark OpCo amended and restated its limited partnership agreement in connection with certain transactions described under “Nasdaq Monetization Transaction” in the 2022 10-K.
Third Amendment and Restatement of Newmark OpCo Limited Partnership Agreement
On September 26, 2018, Newmark OpCo amended and restated its limited partnership agreement in connection with certain transactions described under “Nasdaq Monetization Transaction” in the 2022 10-K.
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Administrative Services Agreement
On December 13, 2017, we entered into an administrative services agreement with Cantor which is described below.
The administrative services agreement had an initial term of three years, starting on the date of the Separation. Thereafter, the administrative services agreement renews automatically for successive one-year terms, unless any party provides written notice to the other parties of its desire to terminate the agreement at least 120 days before the end of any such year ending during the initial or extended term, in which event the administrative services agreement will end with respect to the terminating party on the last day of such term. In addition, any particular service provided under the administrative services agreement may be cancelled by the receiving party, with at least 90 days’ prior written notice to the providing party, with no effect on the other services. The terminating party will be charged a termination fee equal to the costs incurred by the party providing services as a result of such termination, including any severance or cancellation fees.
Cantor is entitled to continued use of hardware and equipment it used prior to the date of the administrative services agreement on the terms and conditions provided, even in the event we terminate the administrative services agreement, although there is no requirement to repair or replace such hardware or equipment.
During the term of the administrative services agreement, the parties will provide administrative and technical support services to each other, including:
| • | administration and benefits services; |
| • | employee benefits, human resources and payroll services; |
| • | financial and operations services; |
| • | internal auditing services; |
| • | legal related services; |
| • | risk and credit services; |
| • | accounting and general tax services; |
| • | office space; |
| • | personnel, hardware and equipment services; |
| • | communication and data facilities; |
| • | facilities management services; |
| • | promotional, sales and marketing services; |
| • | procuring of insurance coverage; and |
| • | any miscellaneous services to which the parties reasonably agree. |
The administrative services agreement includes provisions for allowing a provider or affiliate to arrange for a third-party to provide for the services.
In consideration for the services provided, the providing party generally charges the other party an amount (including any applicable taxes) equal to (1) the direct cost that the providing party incurs in performing those services, including third-party charges incurred in providing services, plus (2) a reasonable allocation of other costs determined in a consistent and fair manner so as to cover the providing party’s appropriate costs or in such other manner as the parties agree. For the year ended December 31, 2022 and six months ended June 30, 2023, allocated expenses were $28.5 million and $14.6 million, respectively, for these services.
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The administrative services agreement provides that the services recipient generally indemnifies the services provider for liabilities that it incurs arising from the provision of services other than liabilities arising from fraud or willful misconduct of the service provider.
Tax Matters Agreement
On December 13, 2017, BGC Partners, BGC Holdings, BGC U.S. OpCo, Newmark, Newmark Holdings and Newmark OpCo entered into a tax matters agreement in connection with the Separation that governs the parties’ respective rights, responsibilities and obligations after the Separation with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Spin-Off and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes and tax benefits, the preparation and filing of tax returns, the control of audits and other tax proceedings, tax elections, assistance and cooperation in respect of tax matters, procedures and restrictions relating to the Spin-Off, if any, and certain other tax matters.
In addition, the tax matters agreement imposes certain restrictions on Newmark and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that will be designed to preserve the tax-free status of the Spin-Off and certain related transactions. The tax matters agreement provides special rules to allocate tax liabilities in the event the Spin-Off, together with certain related transactions, is not tax-free, as well as any tax liabilities incurred in connection with the Separation. In general, under the tax matters agreement, each party is expected to be responsible for any taxes imposed on BGC Partners or Newmark that arise from the failure of the Spin-Off, together with certain related transactions, to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Code, to the extent that the failure to so qualify is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant representations or covenants made by that party in the tax matters agreement.
Tax Receivable Agreement
On December 13, 2017, Cantor and Newmark entered into a tax receivable agreement which is described below.
Certain interests in Newmark Holdings may be exchanged in the future for a number of shares of Newmark Class A common stock or shares of Newmark Class B common stock equal to the exchange ratio (which is, as of June 30, 2023, 0.9235, but is subject to adjustments as set forth in the Separation and Distribution Agreement). See above under “—Adjustment to Exchange Ratio.” Certain of these exchanges could result in increases to our share of the tax basis of the tangible and intangible assets of Newmark OpCo that otherwise would not have been available, although the Internal Revenue Service (the “IRS”) may challenge all or part of that tax basis increase, and a court could sustain such a challenge by the IRS. These increases in tax basis, if sustained, may reduce the amount of tax that we would otherwise be required to pay in the future.
Our tax receivable agreement with Cantor also provides for the payment by us to Cantor of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to its entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. It is expected that we will benefit from the remaining 15% of cash savings, if any, in income tax that we realize. Pursuant to the tax receivable agreement, we will determine, after consultation with Cantor, the extent to which we are permitted to claim any such tax benefits, and such tax benefits will be taken into account in computing any cash savings so long as our accountants agree that it is at least more likely than not that such tax benefit is available.
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Pursuant to the tax receivable agreement, 20% of each payment that would otherwise be made by us will be deposited into an escrow account until the expiration of the statute of limitations for the tax year to which the payment relates. If the IRS successfully challenges the availability of any tax benefit and determines that a tax benefit is not available, we will be entitled to receive reimbursements from Cantor for amounts we previously paid under the tax receivable agreement and Cantor will indemnify us and hold us harmless with respect to any interest or penalties and any other losses in respect of the disallowance of any deductions which gave rise to the payment under the tax receivable agreement (together with reasonable attorneys’ and accountants’ fees incurred in connection with any related tax contest, but the indemnity for such reasonable attorneys’ and accountants’ fees shall only apply to the extent Cantor is permitted to control such contest). Any such reimbursement or indemnification payment will be satisfied first from the escrow account (to the extent funded in respect of such payments under the tax receivable agreement).
For purposes of the tax receivable agreement, cash savings in income and franchise tax will be computed by comparing our actual income and franchise tax liability to the amount of such taxes that we would have been required to pay had there been no depreciation or amortization deductions available to us that were attributable to an increase in tax basis (or any imputed interest) as a result of an exchange. The tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless we (with the approval by a majority of our independent directors) exercise our right to terminate the tax receivable agreement for an amount based on an agreed value of payments remaining to be made under the agreement, provided that if Cantor and we cannot agree upon a value, the agreement will remain in full force and effect. The actual amount and timing of any payment under the tax receivable agreement will vary depending on a number of factors, including the nature of the interests exchanged, the timing of exchanges, the extent to which such exchanges are taxable and the amount and timing of our income.
Any amendment to the tax receivable agreement will be subject to approval by a majority of our independent directors.
Registration Rights Agreement
In connection with the Separation, on December 13, 2017, we entered into a registration rights agreement with BGC Partners and Cantor which provided Cantor, BGC Partners and their respective affiliates (prior to the Spin-Off) and Cantor and its affiliates (after the Spin-Off) registration rights with respect to shares of our Class A common stock, including shares issued or to be issued upon exchange of the Newmark Holdings exchangeable limited partnership interests held by Cantor, shares of our Class A common stock issued or issuable in respect of or in exchange for any shares of our Class B common stock and any other shares of our Class A common stock that may be acquired by Cantor, or its respective affiliates. We refer to these shares as “registrable securities,” and we refer to the holders of these registrable securities as “holders.”
The registration rights agreement provides that each holder is entitled to unlimited piggyback registration rights with respect to its registrable securities, meaning that each holder can include its registrable securities in registration statements filed by us, including registration effected by us for security holders other than holders, subject to certain limitations. The registration rights agreement also grants Cantor unlimited demand registration rights requiring that we register registrable securities held by Cantor and take all actions reasonably necessary or desirable to expedite or facilitate the disposition of registrable securities. Our obligation to effect demand registration rights will not be relieved to the extent we effect piggyback registration rights.
We will pay the costs incident to our compliance with the registration rights agreement but the holders will pay for any underwriting discounts or commissions or transfer taxes associated with all such registrations.
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We have agreed to indemnify the holders (and their directors, officers, agents and each other person who controls a holder under Section 15 of the Securities Act of 1933, as amended (the “Securities Act”)) registering shares pursuant to the registration rights agreement against certain losses, expenses and liabilities under the Securities Act, common law or otherwise. Holders will similarly indemnify us but such indemnification will be limited to an amount equal to the net proceeds received by such holder under the sale of registrable securities giving rise to the indemnification obligation.
Leases
We currently occupy concurrent computing centers in Weehawken, New Jersey, Secaucus, New Jersey and Trumbull, Connecticut, maintained by Cantor. Under the administrative services agreement, we are obligated to Cantor for our pro rata portion (based on square footage used) of rental expense during the terms of the leases for such spaces.
Legal Proceedings
On August 5, 2022, Robert Garfield filed a complaint in the Delaware Court of Chancery (the “Court of Chancery”), captioned Robert Garfield v. Howard W. Lutnick, et al. (Case No. 2022-0687) (the “Garfield Action”), against the members of the Board and Mr. Lutnick in his capacity as Chairman of the Board and controlling stockholder. This derivative complaint alleges that in connection with the December 2021 bonus Award, payable over a 3 year period, granted to Mr. Lutnick: (i) the Board breached its fiduciary duty, (ii) neither the award nor the approval process employed by the Compensation Committee were entirely fair to the Company and its stockholders, and (iii) the members of the Compensation Committee did not exercise independent judgment. The complaint alleges that Mr. Lutnick breached his fiduciary duty as Chairman and controlling stockholder by forcing the Company to grant the Award and by accepting it. The complaint seeks rescission of the Award and other compensation, as well as damages and other relief.
On October 7, 2022, Cardinal Capital Management, LLC filed a complaint in the Court of Chancery, captioned Cardinal Capital Management, LLC v. Howard W. Lutnick, et al. (Case No. 2022-0909-SG) (the “Cardinal Action”), against Mr. Lutnick, the members of the Compensation Committee in 2021, who were Virginia S. Bauer, Kenneth A. McIntyre and Michael Snow (the “2021 Compensation Committee”), and Barry Gosin, Michael Rispoli and Stephen Merkel (the “Officers”). The derivative complaint alleges that in connection with the Company’s June 2021 partnership units exchange for Mr. Lutnick and Officers and the December 2021 bonus Award, payable over a 3-year period, granted to Mr. Lutnick: (i) the 2021 Compensation Committee and Officers breached their fiduciary duties and wasted corporate assets; and (ii) Mr. Lutnick and the Officers were unjustly enriched. The complaint also alleges that Mr. Lutnick breached his fiduciary duty as Chairman and controlling stockholder, and wasted corporate assets, by forcing the Company to grant the Award and by accepting it. The complaint seeks recoupment of the partnership units exchange and the Award, as well as damages and other relief.
On December 13, 2022, the Court of Chancery entered an order consolidating the Garfield and Cardinal Actions into a single action (the “Consolidated Action”) deemed to have commenced on August 5, 2022, when the Garfield Action was filed. On January 10, 2023, plaintiffs filed a consolidated amended complaint, whose claims, as well as requested relief, mirror the claims and relief sought in the Cardinal Action in all material respects. The Company’s position is that the partnership units exchange was appropriate and in the best interests of the Company, and that the bonus award was properly approved by the Compensation Committee comprised of independent directors (which does not include Mr. Lutnick) after careful consideration of his contributions to the Company, including the Company’s superior financial results, and following an extensive process that included advice from independent legal counsel and an independent compensation. The Company believes the lawsuit has no merit. However, as with any litigation, the outcome cannot be determined with certainty.
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On March 9, 2023, a purported class action complaint was filed against Cantor, BGC Holdings, and Newmark Holdings in the U.S. District Court for the District of Delaware (Civil Action No. 1:23-cv-00265). The collective action, which was filed by seven former limited partners on their own behalf and on behalf of other similarly situated limited partners, alleges a claim for breach of contract against all defendants on the basis that the defendants failed to make payments due under the relevant partnership agreements. Specifically, the plaintiffs allege that the non-compete and economic forfeiture provisions upon which the defendants relied to deny payment are unenforceable under Delaware law. The plaintiffs allege a second claim against Cantor and BGC Holdings for antitrust violations under the Sherman Act on the basis that the Cantor and BGC Holdings partnership agreements constitute unreasonable restraints of trade. In that regard, the plaintiffs allege that the non-compete and economic forfeiture provisions of the Cantor and BGC Holdings partnership agreements, as well as restrictive covenants included in partner separation agreements, cause anticompetitive effects in the labor market, insulate Cantor and BGC Holdings from competition, and limit innovation. The plaintiffs seek a determination that the case may be maintained as a class action, an injunction prohibiting the allegedly anticompetitive conduct, and monetary damages of at least $5,000,000. The Company believes the lawsuit has no merit. However, as with any litigation, the outcome cannot be determined with certainty.
Potential Conflicts of Interest and Competition with BGC and Cantor
Various conflicts of interest between and among us, BGC and Cantor may arise in the future in a number of areas relating to our past and ongoing relationships, including potential acquisitions of businesses or properties, the election of new directors, payment of dividends, incurrence of indebtedness, tax matters, financial commitments, marketing functions, indemnity arrangements, service arrangements, issuances of capital stock, sales or distributions of shares of our common stock and the exercise by Cantor of control over our management and affairs.
Cantor, directly through its ownership of shares of our Class A common stock and Class B common stock, and Mr. Lutnick, indirectly through his control of Cantor, are each able to exercise control over our management and affairs and all matters requiring stockholder approval, including the election of our directors and determinations with respect to acquisitions and dispositions, as well as material expansions or contractions of our business, entry into new lines of business and borrowings and issuances of our Class A common stock and Class B common stock or other securities. Cantor’s voting power may also have the effect of delaying or preventing a change of control of us. This control will also be exercised because Cantor is, controlled by CFGM, its managing general partner, and, ultimately, by Mr. Lutnick, who serves as our Executive Chairman. Mr. Lutnick is also the Chairman of the board of directors and Chief Executive Officer of BGC Group, Cantor, and CFGM as well as the trustee of an entity that is the sole shareholder of CFGM.
Cantor’s and Mr. Lutnick’s ability to exercise control over us could create or appear to create potential conflicts of interest. Conflicts of interest may arise between us and Cantor in a number of areas relating to our past and ongoing relationships, including:
| • | potential acquisitions and dispositions of businesses; |
| • | the issuance, acquisition or disposition of securities by us; |
| • | the election of new or additional directors to our Board of Directors; |
| • | the payment of dividends by us (if any), distribution of profits by Newmark OpCo and/or Newmark Holdings and repurchases of shares of our Class A common stock or purchases of Newmark Holdings limited partnership interests or other equity interests in our subsidiaries, including from Cantor or our executive officers, other employees, partners and others; |
| • | any loans to or from us or Cantor; |
| • | business operations or business opportunities of ours and Cantor’s that would compete with the other party’s business opportunities; |
| • | intellectual property matters; |
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| • | business combinations involving us; and |
| • | the nature, quality and pricing of administrative services and transition services to be provided to or by BGC Group or Cantor or their respective affiliates. |
Potential conflicts of interest could also arise if we decide to enter into any new commercial arrangements with Cantor in the future or in connection with Cantor’s desire to enter into new commercial arrangements with third parties.
We also expect Cantor to manage its ownership of us so that it will not be deemed to be an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”) including by maintaining its voting power in us above a majority absent an applicable exemption from the Investment Company Act. This may result in conflicts with us, including those relating to acquisitions or offerings by us involving issuances of shares of our Class A common stock, or securities convertible or exchangeable into shares of Class A common stock, that would dilute Cantor’s voting power in us.
In addition, Cantor has from time to time in the past and may in the future consider possible strategic realignments of its own businesses and/or of the relationships that exist between and among Cantor and its other affiliates and us. Any future material related-party transaction or arrangement between Cantor and its other affiliates and us is subject to the prior approval by our Audit Committee, but generally does not require the separate approval of our stockholders, and if such stockholder approval is required, Cantor may retain sufficient voting power to provide any such requisite approval without the affirmative consent of our other stockholders. Further, our regulators may require the consolidation, for regulatory purposes, of Cantor and/or its other affiliates and us or require other restructuring of the group. There is no assurance that such consolidation or restructuring would not result in a material expense or disruption to our business.
Cantor has existing real estate-related businesses, and Newmark and Cantor are partners in a real estate-related joint venture, CF Real Estate Finance Holdings, L.P. (“Real Estate LP”). While these businesses do not currently compete with Newmark, it is possible that, in the future, real estate-related opportunities in which Newmark would be interested may also be pursued by Cantor and/or Real Estate LP, and Real Estate LP may conduct activities in any real estate-related business or asset-backed securities-related business or any extensions thereof and ancillary activities thereto. For example, Cantor’s commercial lending business has historically offered conduit loans to the multifamily market. While conduit loans have certain key differences versus multifamily agency loans, such as those offered by our real estate capital markets business, there can be no assurance that Cantor’s and/or Real Estate LP’s lending businesses will not seek to offer multifamily loans to our existing and potential multifamily customer base.
Moreover, the service of officers or partners of Cantor as our executive officers and directors, and those persons’ ownership interests in and payments from Cantor and its affiliates, could create conflicts of interest when we and those directors or executive officers are faced with decisions that could have different implications for us and them.
We also have entered into agreements that provide certain rights to the holder of a majority of the Newmark Holdings exchangeable limited partnership interest, which is currently Cantor. For example, the Separation and Distribution Agreement provides that dividends for a year to our common stockholders that are 25% or more of our post-tax Adjusted Earnings per fully diluted share for such year shall require the consent of the holder of a majority of the Newmark Holdings exchangeable limited partnership interests. In addition, the Separation and Distribution Agreement requires Newmark to contribute any Reinvestment Cash, as an additional capital contribution with respect to its existing limited partnership interest in Newmark OpCo, unless Newmark and the holder of a majority of the Newmark Holdings exchangeable limited partnership interests agree otherwise. It is possible that Cantor, as the holder of a majority of the Newmark Holdings exchangeable limited partnership interest, will not agree to a higher dividend percentage or a different use of Reinvestment Cash, even if doing so might be more advantageous to the Newmark stockholders.
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Our agreements and other arrangements with BGC and Cantor, including the Separation and Distribution Agreement, may be amended upon agreement of the parties to those agreements and approval of our Audit Committee. During the time that we are controlled by Cantor, Cantor may be able to require us to agree to amendments to these agreements. We may not be able to resolve any potential conflicts, and, even if we do, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.
In order to address potential conflicts of interest between or among BGC, Cantor and their respective representatives and us, our certificate of incorporation contains provisions regulating and defining the conduct of our affairs as they may involve BGC and/or Cantor and their respective representatives, and our powers, rights, duties and liabilities and those of our representatives in connection therewith. Our certificate of incorporation provides that, to the greatest extent permitted by law, no Cantor Company or BGC Partners Company, each as defined in our certificate of incorporation, or any of the representatives, as defined in our certificate of incorporation, of a Cantor Company or BGC Partners Company will, in its capacity as our stockholder or affiliate, owe or be liable for breach of any fiduciary duty to us or any of our stockholders. In addition, to the greatest extent permitted by law, none of any Cantor Company, BGC Partners Company or any of their respective representatives will owe any duty to refrain from engaging in the same or similar activities or lines of business as us or our representatives or doing business with any of our or our representatives’ clients or customers. If any Cantor Company, BGC Partners Company or any of their respective representatives acquires knowledge of a potential transaction or matter that may be a corporate opportunity (as defined in our certificate of incorporation) for any such person, on the one hand, and us or any of our representatives, on the other hand, such person will have no duty to communicate or offer such corporate opportunity to us or any of our representatives, and will not be liable to us, any of our stockholders or any of our representatives for breach of any fiduciary duty by reason of the fact that they pursue or acquire such corporate opportunity for themselves, direct such corporate opportunity to another person or do not present such corporate opportunity to us or any of our representatives, subject to the requirement described in the following sentence. If a third-party presents a corporate opportunity to a person who is both our representative and a representative of a BGC Partners Company and/or a Cantor Company, expressly and solely in such person’s capacity as our representative, and such person acts in good faith in a manner consistent with the policy that such corporate opportunity belongs to us, then such person will be deemed to have fully satisfied and fulfilled any fiduciary duty that such person has to us as our representative with respect to such corporate opportunity, provided that any BGC Partners Company, any Cantor Company or any of their respective representatives may pursue such corporate opportunity if we decide not to pursue such corporate opportunity.
No contract, agreement, arrangement or transaction between any BGC Partners Company, any Cantor Company or any of their respective representatives, on the one hand, and us or any of our representatives, on the other hand, will be void or voidable solely because any BGC Partners Company, any Cantor Company or any of their respective representatives has a direct or indirect interest in such contract, agreement, arrangement or transaction, and any BGC Partners Company, any Cantor Company or any of their respective representatives (i) shall have fully satisfied and fulfilled its duties and obligations to us and our stockholders with respect thereto; and (ii) shall not be liable to us or our stockholders for any breach of any duty or obligation by reason of the entering into, performance or consummation of any such contract, agreement, arrangement or transaction, if:
| • | such contract, agreement, arrangement or transaction is approved by our Board of Directors or any committee thereof by the affirmative vote of a majority of the disinterested directors, even if the disinterested directors constitute less than a quorum; |
| • | such contract, agreement, arrangement or transaction is approved by our stockholders by the affirmative vote of a majority of the voting power of all of our outstanding shares of capital stock entitled to vote thereon, excluding from such calculation shares of capital stock that are beneficially owned (as such term is defined in Rule 16a-1(a)(2) promulgated by the SEC under the Exchange Act) by a BGC Partners Company or a Cantor Company, respectively; or |
| • | such contract, agreement, arrangement or transaction, judged according to the circumstances at the time of the commitment, is fair to us. |
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While the satisfaction of the foregoing conditions shall be sufficient to show that any BGC Partners Company, any Cantor Company or any of their respective representatives (i) shall have fully satisfied and fulfilled its duties and obligations to us and our stockholders with respect thereto; and (ii) shall not be liable to us or our stockholders for any breach of any duty or obligation by reason of the entering into, performance or consummation of any such contract, agreement, arrangement or transaction, none of the foregoing conditions shall be required to be satisfied for such showing.
Our directors who are also directors or officers of any BGC Partners Company, any Cantor Company or any of their respective representatives may be counted in determining the presence of a quorum at a meeting of our Board of Directors or of a committee that authorizes such contract, agreement, arrangement or transaction. Shares of our common stock owned by any BGC Partners Company, any Cantor Company or any of their respective representatives may be counted in determining the presence of a quorum at a meeting of stockholders called to authorize such contract, agreement, arrangement or transaction. Our directors who are also directors or officers of any BGC Partners Company, any Cantor Company or any of their respective representatives shall not owe or be liable for breach of any fiduciary duty to us or any of our stockholders for any action taken by any BGC Partners Company, any Cantor Company or their respective representatives, in their capacity as our stockholder or affiliate.
For purposes of the above:
| • | “BGC Partners Company” means BGC Partners or any of its affiliates (other than us and our subsidiaries); |
| • | “Cantor Company” means Cantor or any of its affiliates (other than us and our subsidiaries); |
| • | “representatives” means, with respect to any person, the directors, officers, employees, general partners or managing member of such person; and |
| • | “corporate opportunity” means any business opportunity that we are financially able to undertake, that is, from its nature, in our lines of business, is of practical advantage to us and is one in which we have an interest or a reasonable expectancy, and in which, by embracing the opportunities, the self-interest of a BGC Partners Company or a Cantor Company or any of their respective representatives, as the case may be, will be brought into conflict with our self-interest. |
Transactions by Cantor with Newmark in Equity Securities
Our Board of Directors has determined that Cantor is a “deputized” director of the Company for purposes of Rule 16b-3 under the Exchange Act with respect to the transactions contemplated by the Separation and the Spin-Off. Rule 16b-3 exempts from the short-swing profits liability provisions of Section 16(b) of the Exchange Act certain transactions in an issuer’s securities between the issuer or its majority-owned subsidiaries and its officers and directors if, among other things, the transaction is approved in advance by the issuer’s board of directors or a disinterested committee of the issuer’s board of directors. The Rule 16b-3 exemption extends to any such transactions by an entity beneficially owning more than 10% of a class of an issuer’s equity securities if the entity is a “deputized” director because it has a representative on the issuer’s board of directors. Our Board of Directors’ intent in determining that Cantor is a “deputized” director is that acquisitions or dispositions by Cantor of shares of our common stock or interests in our common stock from or to us or its majority-owned subsidiaries will be eligible for the Rule 16b-3 exemption from the short-swing profits liability provisions of Section 16(b) of the Exchange Act.
Transactions with Cantor Commercial Real Estate Company, L.P.
We have a referral agreement in place with Cantor Commercial Real Estate Company, L.P. (“CCRE”), in which our brokers are incentivized to refer business to CCRE through a revenue-share agreement. Newmark did not recognize any revenues from these referrals for the year ended December 31, 2022 or the six months ended June 30, 2023.
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We have an additional revenue-share agreement with CCRE, in which we pay CCRE for referrals for leasing or other services. In connection with this agreement, we did not make any payments under this agreement to CCRE for the year ended December 31, 2022 or the six months ended June 30, 2023.
We also have a loan referral agreement in place with CCRE, in which either party can refer a loan to the other. We did not have any revenues from these referrals for the year ended December 31, 2022 or the six months ended June 30, 2023.
We did not purchase any primary servicing rights during the year ended December 31, 2022. We also service loans for CCRE on a “fee for service” basis, generally prior to a loan’s sale or securitization, and for which no mortgage servicing rights are recognized. We recognized servicing revenues (excluding interest and placement fees) from servicing rights purchased from CCRE on a “fee for service” basis of $3.6 million and $1.5 million for the year ended December 31, 2022 and the six months ended June 30, 2023, respectively.
Berkeley Point and Real Estate LP
On September 8, 2017, pursuant to a transaction agreement (which we refer to as the “BP transaction agreement”) with Cantor, CCRE, the general partner of CCRE, Real Estate LP and CF Real Estate Holdings GP, LLC, the general partner of Real Estate LP (which we refer to as the “Real Estate LP general partner”), BGC Partners purchased from CCRE all of the outstanding membership interests of Berkeley Point. The total consideration for the acquisition of Berkeley Point was $875 million, subject to certain adjustments. Concurrently with the acquisition of Berkeley Point, (i) BGC Partners invested $100 million of cash in Real Estate LP for approximately 27% of the capital of Real Estate LP, and (ii) Cantor contributed approximately $267 million of cash for approximately 73% of the capital of Real Estate LP. We refer to these transactions, collectively, as the “BP Transaction.” As part of the Separation prior to the completion of the IPO, the BGC group contributed its interests in Berkeley Point and Real Estate LP to Newmark. Newmark accounts for its minority interest in Real Estate LP as an equity investment, and it is not consolidated in Newmark’s financial statements.
CF Real Estate Finance Holdings, LP
Contemporaneously with the acquisition of Berkeley Point, on September 8, 2017, Newmark invested $100.0 million in a newly formed commercial real estate-related financial and investment business, Real Estate LP, which is controlled and managed by Cantor. Real Estate LP may conduct activities in any real estate related business or asset backed securities related business or any extensions thereof and ancillary activities thereto. As of December 31, 2022, Newmark’s investment was accounted for under the equity method. Newmark holds a redemption option in which Real Estate LP can redeem in full Newmark’s investment in Real Estate LP in exchange for Newmark’s capital account balance in Real Estate LP as of such time.
Amendment of Real Estate LP Joint Venture Agreement and Payment of Administrative Fee
In December 2022, the Audit Committee authorized a subsidiary of Newmark to rescind its July 20, 2022 written notice exercising the optional redemption of its 27.2% ownership interest in Real Estate LP and amend the joint venture agreement between Newmark and Real Estate LP to provide for a redemption option for this investment after July 1, 2023, with proceeds to be received within 20 days of the redemption notice. A payment of a $44.0 thousand administrative fee was made to Newmark in connection with such amendment. On July 1, 2023, Newmark exercised its redemption option and received payment of $104.7 million from Cantor in July of 2023, terminating Newmark’s interest in Real Estate LP.
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Additional Terms of the BP Transaction Agreement
The BP transaction agreement includes customary representations, warranties and covenants, including covenants related to intercompany referral arrangements among Cantor, Newmark and their respective subsidiaries. These referral arrangements provide for profit-sharing and fee-sharing arrangements at various rates depending on the nature of a particular referral. The parties have further agreed that, subject to limited exceptions, for so long as a member of the Newmark group maintains an investment in Real Estate LP, Real Estate LP and the Cantor group will seek certain government-sponsored and government-funded loan financing exclusively through Berkeley Point.
Redemption of BGC Holdings HDUs in Connection with Corporate Conversion
In connection with the Corporate Conversion, on May 18, 2023, Mr. Lutnick’s 1,474,930 BGC Holdings HDUs were redeemed for a cash capital account payment of $9.1 million, $7.0 million of which was paid by Newmark, with the remainder paid by BGC. The $7.0 million HDU liability was included in “Accrued Compensation” on the accompanying unaudited condensed consolidated balance sheet as of December 31, 2022, and related to services provided by Mr. Lutnick to Newmark prior to the Spin-off. Newmark recorded the related compensation expense and took the compensation tax deductions in prior years.
Commercial Real Estate Loan
On July 22, 2019, Cantor Commercial Real Estate Lending, L.P. (“CCRE Lending”), a wholly-owned subsidiary of Real Estate LP, made a $146.6 million commercial real estate loan (the “Loan”) to a single-purpose company (the “Borrower”) in which Barry Gosin, owns a 19% interest. The Loan is secured by the Borrower’s interest in property in Pennsylvania that is subject to a ground lease. While CCRE Lending initially provided the full loan amount, on August 16, 2019, a third-party bank purchased approximately 80% of the Loan value from CCRE Lending, with CCRE Lending retaining approximately 20%. The Loan matures on August 6, 2029 and is payable monthly at a fixed interest rate of 4.38% per annum. Newmark provided certain commercial loan brokerage services to the Borrower in the ordinary course of its business, and the Borrower paid Newmark a fee, as the broker of the Loan, of $0.7 million. The Audit Committee approved the commercial loan brokerage services and the related fee amount received.
Acquisition of Spring11 Ownership Interest from Cantor
In February 2023, Newmark’s subsidiary, Newmark S11 Holdings, LLC (“Newmark S11”) entered into an equity purchase agreement with CFS11 Holdings, LLC (“CFS11”), a subsidiary of Cantor, pursuant to which Newmark acquired CFS11’s 33.78% ownership interest in Newmark S11 LP, LLC, the joint venture that owns a controlling interest in Spring11 Holdings, LP (“Spring11”), for a total purchase price of $11,530,598. The transaction, which also included Newmark S11 buying the remaining minority interests from other third-party owners on substantially the same terms, resulted in Newmark S11 owning 100% of Spring11. The CFS11 transaction was approved by our Audit Committee.
Related Party Receivables and Payables
As of June 30, 2023, the current portion of payables to related parties was $9.3 million.
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Market Making and Related-Party Borrowings
Market-Making Transactions
On March 25, 2022, we filed an immediately effective registration statement on Form S-3, pursuant to which Cantor Fitzgerald Co. (“CFCo”) may make offers and sales of our 6.125% Senior Notes due 2023 in connection with ongoing market-making transactions which may occur from time to time. This registration statement replaced a prior market-making registration statement that has expired. Such market-making transactions in these securities may occur in the open market or may be privately negotiated at prevailing market prices at a time of resale or at related or negotiated prices. Neither CFCo, nor any other of our affiliates, has any obligation to make a market in our securities, and CFCo or any such other affiliate may discontinue market-making activities at any time without notice. Newmark does not receive any proceeds from market making activities in these securities by CFCo. (or any of its affiliates).
CF Secured Borrowing Facility
On August 2, 2021, Newmark OpCo, entered into a Master Repurchase Agreement (the “Repurchase Agreement”) with CF Secured, LLC (“CF Secured”), an affiliate of Cantor, pursuant to which Newmark may seek, from time-to-time, to execute short-term secured financing transactions. Repurchase agreements effect equity financing. The Company, under the Repurchase Agreement, may seek to sell securities, in this case common shares of Nasdaq, owned by the Company, to CF Secured, under the Repurchase Agreement, and agrees to repurchase those securities on a date certain at a repurchase price generally equal to the original purchase price plus interest.
Pursuant to the Repurchase Agreement, the Company and CF Secured agreed to enter into a repurchase transaction, wherein CF Secured will deliver the cash of such repurchase transaction to the Company on an overnight basis at an initial rate of 0.95% per annum (approximately 1.00% less expensive than Newmark’s revolving credit facility), and the Company will deliver to CF Secured the number of shares of Nasdaq as collateral so that the market value of such shares equals 130% of such cash proceeds. The Nasdaq shares will be marked to market daily, and the minimum maintenance margin requirement, should the share price decline, will be 120% of such cash proceeds. The Company will be required to transfer additional collateral (securities and/or cash) in the event of a margin percentage decline below 120%.
The initial repurchase or financing transaction was executed on August 2, 2021 and consisted of Newmark receiving $260 million in cash and delivering 1,818,000 Nasdaq shares as collateral. The repurchase transaction may be rolled over daily (or for a term greater than one day at a time), subject to terms mutually acceptable to the Company and CF Secured, including the rate and minimum margin requirement, both of which can fluctuate based upon general funding rates and other factors in the repurchase funding market.
The Repurchase Agreement is subject to ongoing compliance with various covenants and contains customary events of default. If an event of default occurs, the repurchase date for each transaction under the Repurchase Agreement may be accelerated to the date of default. For events of default relating to insolvency and receivership, the repurchase date for each transaction under the Repurchase Agreement is automatically accelerated to the date of default.
Pursuant to this agreement, as of December 31, 2021 the Company had 866,791 Nasdaq shares pledged in the amount of $182.0 million, against which Newmark received $140.0 million. In the first quarter of 2022, Newmark repaid an amount of $140.0 million to CF Secured. As of June 30, 2023 and December 31, 2022, there were no repurchase agreements and securities loaned.
The Repurchase Agreement and related initial repurchase transaction are on market terms and rates and were approved by our Audit Committee.
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Cantor Credit Agreement
On November 30, 2018, Newmark entered into an unsecured credit agreement with Cantor (the “Cantor Credit Agreement”). The Cantor Credit Agreement provides for each party to issue loans to the other party in the lender’s discretion. Pursuant to the Cantor Credit Agreement, the parties and their respective subsidiaries (with respect to Cantor, other than BGC and its subsidiaries) may borrow up to an aggregate principal amount of $250.0 million from each other from time to time at an interest rate which is the higher of Cantor’s or Newmark’s short-term borrowing rate then in effect, plus 1.0%. As of June 30, 2023 there were no borrowings outstanding under the Cantor Credit Agreement.
Financial Advisor Agreement
In November 2018, the Audit Committee authorized Newmark to enter into an engagement agreement with CFCo. and its affiliates to act as financial advisor in connection with one or more third-party business combination transactions as requested by Newmark on behalf of its affiliates from time to time on specified terms, conditions and fees.
GSE Loan and Related Party Limits
In February 2019, the Audit Committee of the Company authorized Newmark and its subsidiaries to originate and service GSE loans to Cantor and its affiliates (other than BGC) and service loans originated by Cantor and its affiliates (other than BGC) on prices, rates and terms no less favorable to Newmark and its subsidiaries than those charged by third parties. The authorization is subject to certain terms and conditions, including but not limited to: (i) a maximum amount up to $100.0 million per loan, (ii) a $250.0 million limit on loans that have not yet been acquired or sold to a GSE at any given time, and (iii) a separate $250.0 million limit on originated Fannie Mae loans outstanding to Cantor at any given time.
Services Agreement with CFE Dubai
In May 2020, the Audit Committee of the Company authorized Newmark Company Real Estate, Inc. (“Newmark Co.”), a subsidiary of Newmark, to enter into an agreement with Cantor Fitzgerald Europe (DIFC Branch) (“CFE Dubai”) pursuant to which CFE Dubai will employ and support an individual who is a resident of Dubai in order to enhance Newmark’s capital markets platform, in exchange for a fee. CFE Dubai and Newmark Co. negotiated a Services Agreement memorializing the arrangement between the parties (the “Services Agreement”). The Services Agreement provides that Newmark Co. will reimburse CFE Dubai for the individual’s fully allocated costs, plus a mark-up of seven percent (7%). In addition, the Audit Committee of the Company authorized the Company and its subsidiaries to enter into similar arrangements in respect of any jurisdiction, in the future, with Cantor and its subsidiaries, provided that the applicable agreements contain customary terms for arrangements of this type and that the mark-up charged by the party employing one or more individuals for the benefit of the other is between 3% and 7.5%, depending on the level of support required for the employed individual(s).
Sublease to Cantor Fitzgerald, L.P.
In January 2022, Cantor entered into an agreement to sublease excess space from RKF Retail Holdings LLC, a subsidiary of ours, for a period of six months until June 30, 2022 at a rate of $0.1 million per month. In July 2022, the sublease was extended one year to June 30, 2023. In June 2023, the sublease was extended three months to September 30, 2023. Newmark received $1.0 million and $0.5 million from Cantor pursuant to this sublease for the year ended December 31, 2022 and the six months ended June 30, 2023, respectively.
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Transactions Related to Ordinary Course Real Estate Services
On November 4, 2020, our Audit Committee authorized entities in which executive officers have a non-controlling interest to engage Newmark to provide ordinary course real estate services to them as long as Newmark’s fees are consistent with the fees that Newmark ordinarily charges for these services.
Arrangement with View, Inc.
On November 30, 2020, we entered into an arrangement to assist View, Inc. (“View”) in the sale of its products and services to real estate clients in exchange for commissions. View is a Silicon Valley-based producer of high-efficiency dynamic glass that controls light, heat, and glare, providing unobstructed views and privacy using a low voltage control system. In connection with the arrangement, View also agreed to engage us as its exclusive provider of real estate services for a period of at least five years. While View is not under common control with us, it was, at the time that the agreement was executed, the target of a merger with CF Finance Acquisition Corp. II, a special purpose acquisition company sponsored by Cantor.
Knotel Assets
As part of the Knotel acquisition on March 24, 2021, we assigned the rights to acquire certain Knotel assets to a subsidiary of Cantor, on the terms that if the subsidiary monetized the sale of these assets, we would receive 10% of the proceeds of the sale after the subsidiary recoups its investment in the assets.
Employment Matter
On June 28, 2021, our Audit Committee authorized us to hire a son of our Executive Chairman as a full-time employee of our Knotel business with an annual base salary of $125,000 and an annual discretionary bonus of up to 30%. The arrangement includes a potential profit participation consistent with other entrepreneurial arrangements in the event of certain liquidity events related to businesses developed by him. In June 2022, the Audit Committee approved ordinary course compensation adjustments and expense, travel and housing reimbursement for him in accordance with standard Company policies up to $250,000 in total compensation.
Debt Repurchase Program
On June 16, 2020, our Board of Directors and Audit Committee authorized a debt repurchase program for the repurchase by us of up to $50.0 million of our 6.125% Senior Notes due 2023 and any future debt securities issued by us hereafter (collectively, “Company debt securities”). Repurchases of Company debt securities, if any, are expected to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption.
Under the authorization, we may make repurchases of Company debt securities for cash from time to time in the open market or in privately negotiated transactions upon such terms and at such prices as management may determine. Additionally, we are authorized to make any such repurchases of Company debt securities through CFCo (or its affiliates), in its capacity as agent or principal, or such other broker-dealers as management shall determine to utilize from time to time upon customary market terms or commissions.
The timing and amount of Company debt securities repurchased under the program, if any, will be at the discretion of management, and will depend on the optimal uses of capital as determined by management, available cash, market conditions, the cost to repurchase such securities as compared to other forms of debt repayment (including debt under our revolving credit facility), and other considerations. Therefore, there can be no assurance as to the aggregate principal amount of Company debt securities, if any, repurchased. We may discontinue the repurchase program at any time. As of June 30, 2023, we had $50.0 million remaining under our debt repurchase authorization.
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Share Repurchase Program
On August 5, 2021, and again on February 10, 2022, our Board of Directors and Audit Committee re-authorized share repurchases of Newmark Class A common stock and purchases of limited partnership interests or other equity interests in Newmark’s subsidiaries up to $400 million. This authorization includes repurchases of shares or purchase of units from executive officers, other employees and partners, including of BGC and Cantor, as well as other affiliated persons or entities. From time to time, Newmark may actively continue to repurchase shares and/or purchase units. During the year ended December 31, 2022, and the six months ended June 30, 2023, Newmark repurchased 24,918,482 shares and 2,354,217 shares of Class A common stock, respectively, at an average price of $11.83 and $5.68, respectively. As of June 30, 2023, Newmark had $378.9 million remaining from its share repurchase and unit purchase authorization.
Referral Fees to Cantor
In September 2021, our Audit Committee approved the payment of a referral fee from us to Cantor Realty Capital Advisors, L.P. (“CRCA”), a subsidiary of Cantor, in relation to CRCA’s referral to us of a sale and lease back transaction for a portfolio of medical office properties. We paid CRCA approximately $0.3 million for the referral of the portfolio sale. Our management negotiated the referral arrangement with CRCA on an arm’s-length basis and the arrangement is reasonable and consistent with referral arrangements of its type between unrelated parties.
Additionally, in September 2021, our Audit Committee authorized us and our subsidiaries to pay referral fees to Cantor and its subsidiaries (other than us and our subsidiaries) in respect of referred business, pursuant to ordinary course arrangements in circumstances where we would customarily pay referral fees to unrelated third parties and where we are paying a referral fee to Cantor in an amount that is no more than the applicable percentage rate set forth in our intra-company referral policies, as then in effect, with such fees to be at referral rates no less favorable to us than would be paid to unrelated third parties.
Placement Agent Authorization with CFCo
On August 8, 2023, our Audit Committee authorized us to engage CFCo as a non-exclusive placement agent on behalf of us or our subsidiaries in connection with certain capital markets transactions (with the ability to also mandate certain third-party banks as additional advisors and co-placement agents alongside CFCo), pursuant to customary terms and conditions, including percentage of proceeds, and provided the terms are no less favorable to us than terms that an unaffiliated third-party investment bank would provide to us in similar transactions.
EXPENSES OF SOLICITATION
The total cost of the proxy solicitation will be borne by us. In addition to the mails, proxies may be solicited by our directors and officers by personal interviews, telephone, or e-mail. It is anticipated that banks, brokerage houses and other custodians, nominees and fiduciaries will forward soliciting material to the beneficial owners of shares of Common Equity entitled to vote at the Annual Meeting and that such persons will be reimbursed for their out-of-pocket expenses incurred in this connection. If you choose to access the proxy materials and/or vote on the Internet, you are responsible for Internet access charges you may incur.
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2024 STOCKHOLDER PROPOSALS
If a stockholder desires to present a proposal for inclusion in next year’s proxy statement for our 2024 annual meeting of stockholders (assuming such meeting were to take place on approximately the same date as the Annual Meeting), the proposal must be submitted in writing to us for receipt not later than April 24, 2024. Additionally, to be included in the 2024 proxy materials, proposals must comply with the proxy rules relating to stockholder proposals, in particular Rule 14a-8 under the Exchange Act. Stockholders who wish to raise a proposal, including nominations for the election of directors, for consideration at our 2024 annual meeting of stockholders, but who do not wish to submit the proposal for inclusion in our proxy materials pursuant to Rule 14a-8 under the Exchange Act, should comply with our Bylaws and deliver to us a copy of their proposal by April 24, 2024. In addition to satisfying the requirements of the advance notice provisions of our Bylaws, stockholders who intend to solicit proxies in support of director nominees other than our nominees must provide us with the information required by Rule 14a-19(b) under the Exchange Act. If a stockholder fails to timely provide such notice, the respective proposal need not be addressed in the proxy materials and the proxies may exercise their discretionary voting authority if the proposal is raised at the annual meeting. In all cases, proposals should be sent to Newmark Group, Inc., 125 Park Avenue, New York, NY 10017, Attention: Corporate Secretary.
CERTAIN MATTERS RELATING TO PROXY MATERIALS AND ANNUAL REPORTS
The Company may satisfy SEC rules regarding delivery of Notices of Internet Availability of Proxy Materials, proxy statements and annual reports by delivering a single copy of these materials to an address shared by two or more Company stockholders. This delivery method is referred to as “householding” and can result in meaningful cost savings for the Company. In order to take advantage of this opportunity, the Company will deliver only one Notice of Internet Availability of Proxy Materials to multiple stockholders who share an address and one proxy statement and annual report to multiple stockholders who share an address, and who do not participate in electronic delivery of proxy materials, unless contrary instructions are received from impacted stockholders prior to the mailing date.
We undertake to deliver promptly upon written or oral request a separate copy of the Proxy Statement and/ or the 2022 Annual Report, as requested, to a stockholder at a shared address to which a single copy of these documents was delivered. If you hold stock as a registered stockholder and prefer to receive separate copies of proxy statements or annual reports either now or in the future, please contact the Company via the contact page at ir.nmrk.com/investors/contact-us/contact-us/default.aspx or via phone at (212) 829-7124. If your stock is held through a broker or bank and you prefer to receive separate copies of proxy statements or annual reports either now or in the future, please contact such broker or bank.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors, executive officers and any person holding more than 10% of our Class A common stock, are required to file initial forms of ownership of our Class A common stock and reports of changes in that ownership with the SEC. Based solely on our review of the copies of such forms received by us with respect to 2022 and 2023 through the date hereof, the Company believes that all reports were filed on a timely basis with respect to transactions in 2022 and 2023 through the date hereof.
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CODE OF ETHICS AND WHISTLEBLOWER PROCEDURES
Our Board of Directors has adopted a Code of Ethics that applies to members of our Board of Directors, our executive officers, other officers and our covered employees globally. The Code of Ethics is publicly available on our website at www.nmrk.com/esg/governance under the heading “Code of Business Conduct and Ethics and Professional Integrity.” If we amend or grant any waiver from a provision of our Code of Ethics that applies to our executive officers, we intend to publicly disclose such amendment or waiver by posting information about such amendment or waiver on our website.
In accordance with the requirements of the Sarbanes-Oxley Act, the Audit Committee has established our Whistleblower Policy, which sets forth procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls, or auditing matters, and for the confidential, anonymous reporting of employee concerns regarding questionable accounting or auditing matters. The Chief Legal Officer and the Corporate Secretary, and his, her or their designees and the Chair of the Audit Committee will direct the investigation of any such complaints in accordance with the procedures. Our Whistleblower Policy is publicly available on our website at https://www.nmrk.com/esg/governance under the heading “Whistleblower Complaint and Investigation Procedures for Accounting, Internal Controls, Auditing Matters and Employment and Labor Practices.” Information available on our website is not incorporated herein by reference.
MISCELLANEOUS
Our Board knows of no other business to be presented at the Annual Meeting. If, however, other matters properly do come before the Annual Meeting, it is intended that the proxies in the accompanying form will be voted thereon in accordance with the judgment of the person or persons holding such proxies.
YOU ARE URGED TO CAST YOUR VOTE AS INDICATED IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS. PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING, AND YOUR COOPERATION WILL BE APPRECIATED.
By Order of the Board of Directors,
CAROLINE A. KOSTER
Corporate Secretary
New York, NY August 16, 2023
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NEWMARK GROUP, INC.
125 PARK AVENUE NEW
YORK, NY 10017
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. Eastern Time on October 4, 2023 for shares held directly and by 11:59 P.M. Eastern Time on October 2, 2023 for shares held in the Newmark 401(k) Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/nmrk2023
You may participate in the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. There will be NO physical location at which stockholders may attend the meeting.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Time on October 4, 2023 for shares held directly and by 11:59 P.M. Eastern Time on October 2, 2023 for shares held in the Newmark 401(k) Plan. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
D62273-Z81304 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| NEWMARK GROUP, INC.
The Board of Directors recommends you vote FOR the following nominees: |
For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||
| ☐ | ☐ | ☐ |
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| 1. Election of Directors |
| Nominees: |
| 01) Howard W. Lutnick |
| 02) Virginia S. Bauer |
| 03) Kenneth A. McIntyre |
| 04) Jay Itzkowitz |
| The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | |||
| 2. Approval of the ratification of Ernst Young LLP as the Company’s independent registered public accounting firm for fiscal year 2023. |
☐ | ☐ | ☐ | |||
| The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | |||
| 3. Approval, on an advisory basis, of executive compensation. |
☐ | ☐ | ☐ | |||
NOTE: To vote by mail, please sign, date and return a proxy card using the enclosed envelope. To vote by Internet before the meeting date, please visit www.proxyvote.com, and follow the instructions. To vote via the Internet during the meeting, please visit www.virtualshareholdermeeting.com/nmrk2023 and follow the instructions. To vote by telephone, call 1-800-690-6903 and then follow the instructions. In addition, the proxy holders may vote in their discretion on such other business as may properly come before the meeting or any adjournment or postponement thereof.
| Yes | No | |||||||||
| HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household. | ☐ | ☐ | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
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| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice of Internet Availability of Proxy Materials and Proxy Statement and Annual
Report are available at www.proxyvote.com.
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D62274-Z81304
Newmark Group, Inc.
2023 Annual Meeting of Stockholders – October 5, 2023
The undersigned hereby appoints Howard W. Lutnick and Joshua Davis, and each of them, proxies, with full power of substitution, to appear on behalf of the undersigned and to vote all shares of Class A common stock (par value $0.01 per share) and Class B common stock (par value $0.01 per share) of Newmark Group, Inc. (the “Company”) that the undersigned is entitled to vote at the 2023 Annual Meeting of Stockholders of the Company to be held online on October 5, 2023, commencing at 10:00 a.m. (Eastern Time), and at any adjournment or postponement thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF ALL LISTED NOMINEES AS DIRECTORS, “FOR” PROPOSAL 2, AND “FOR” PROPOSAL 3.
Continued and to be signed on reverse side