8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 5, 2019

Hilton Grand Vacations Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-37794	81-2545345
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

6355 MetroWest Boulevard, Suite 180

Orlando, Florida 32835

(Address of principal executive offices, including zip code)

(407) 613-3100

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On March 5, 2019, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of Hilton Grand Vacations Inc. (the “Company” or “our”) approved our 2019 short-term incentive and long-term incentive awards for the following executive officers, including our principal executive officer and principal financial officer (these officers are collectively referred to in this Form 8-K as the “named executive officers”):

• Mark D. Wang, President and Chief Executive Officer;

• Daniel J. Mathewes, Executive Vice President and Chief Financial Officer;

• Dennis DeLorenzo, Executive Vice President and Chief Sales Officer;

• Charles R. Corbin, Executive Vice President, Chief Legal Officer and Chief Development Officer; and

• Barbara L. Hollkamp, Executive Vice President and Chief Human Resources Officer.

2019 Short-Term Cash Incentive Awards

The Compensation Committee approved target annual and quarterly cash bonus award opportunities for the 2019 fiscal year for the named executive officers as follows:

Name	Target Annual Cash Incentive Opportunity as a % of Base Salary	Target Quarterly Cash Incentive Opportunity as a % of Base Salary
Mark D. Wang	150%	—
Daniel J. Mathewes	125%	—
Dennis DeLorenzo	100%	100%
Charles R. Corbin	100%	—
Barbara L. Hollkamp	75%	—

Each named executive officer will be eligible to earn up to a maximum of 200% of his or her target annual award based on the achievement of certain performance goals established by the Compensation Committee. Mr. Wang’s annual cash incentive award will be earned based on the achievement of both individual and Company performance objectives for the 2019 fiscal year, as follows: (i) 70% of the award will be earned based on the achievement of corporate performance objectives linked to the Company’s consolidated Economic Adjusted EBITDA (as defined below); and (ii) the remaining 30% of the award will be earned based on the achievement of Mr. Wang’s performance goals and objectives related to net owner growth, corporate development and talent strategy. For all other named executive officers, the annual cash incentive awards will be earned based on the achievement of both individual and Company performance objectives for the 2019 fiscal year, as follows: (i) 60% of the award will be earned based on the achievement of corporate performance objectives linked to the Company’s consolidated Economic Adjusted EBITDA; and (ii) the remaining 40% of the award will be earned based on the achievement of each officer’s performance goals and objectives.

Mr. DeLorenzo, the only named executive officer eligible to participate in our quarterly cash bonus program, was granted a target quarterly cash bonus award opportunity equal to 100% of his base salary. He will be eligible to earn up to a maximum of 200% of his target quarterly award based on the achievement of both individual and Company performance objectives for the 2019 fiscal year established by the Compensation Committee, as follows: (i) 20% of the award will be earned based on the achievement of corporate performance objectives linked to the Company’s Economic Adjusted EBITDA for the real estate and financing segment only; (ii) 25% of the award will be earned based on the Company’s net sales volume; (iii) 20% of the award will be earned based on cost savings linked to the Company’s sales and marketing expense; and (iv) the remaining 35% of the award will be earned based on the achievement of certain sales performance goals and objectives.

2019 Long-Term Equity Incentive Awards

The Compensation Committee also approved certain 2019 long-term incentive equity-based awards under the Hilton Grand Vacations Inc. 2017 Omnibus Incentive Plan (as amended, the “2017 Plan”) to our named executive officers. The awards are comprised of stock options, service-based restricted stock units (“Service RSUs”) and performance-based restricted stock units (“Performance RSUs”). For the 2019 fiscal year, the Compensation Committee determined that (a) 50% of the long-term incentive compensation awarded to Mr. Wang would be in the form of Performance RSUs, along with 30% Service RSUs and 20% stock options, and (b) 40% of the long-term incentive compensation awarded to our other named executive officers would be in the form of Performance RSUs, along with 30% Service RSUs and 30% stock options. Both Service RSUs and stock options vest in three equal annual installments beginning on the first anniversary of the grant date, subject to his or her continued employment at the Company through each applicable vesting date or otherwise provided under the terms of the applicable award agreement or applicable severance agreement.

Each officer will be eligible to earn up to a maximum of 200% of his or her target Performance RSUs based on the achievement of certain performance goals established by the Compensation Committee for a three-year performance period beginning on January 1, 2019 and ending on December 31, 2021, as follows: (i) 70% of the award will be earned based on the achievement of corporate performance objectives linked to the Company’s consolidated Economic Adjusted EBITDA; and (ii) the remaining 30% of the award will be earned based on the achievement of the Company’s contract sales performance objectives. The Performance RSUs vest, if at all, on the last day of the performance period and will be paid out in shares of our common stock following the Compensation Committee’s certification of the performance based on such three-year performance period, subject to each respective named executive officer’s continued service through the last day of the performance period or as other provided under the terms of the applicable award agreement or applicable severance agreement.

The dollar value, the number of stock options, the number of Service RSUs, and the target number of Performance RSUs awarded to our named executive officers are set forth below. The dollar value for the RSUs and the exercise price for the stock options are based on $33.32 per share, the closing price of our common stock at the close of market on the date of the grant, which was March 5, 2019. The number of stock options granted was determined based on the Black-Scholes option value as of the grant date.

Name	Total Value		Value of Options		Value of Service RSUs		Target Value of Performance RSUs		Number of Options		Number of Service RSUs		Target Number of Performance RSUs
Mark D. Wang	$	3,800,000	$	760,000	$	1,140,000	$	1,900,000		61,838		34,213		57,022
Daniel J. Mathewes	$	956,250	$	286,875	$	286,875	$	382,500		23,342		8,609		11,479
Dennis DeLorenzo	$	954,810	$	286,443	$	286,443	$	381,924		23,306		8,596		11,462
Charles R. Corbin	$	927,000	$	278,100	$	278,100	$	370,800		22,628		8,346		11,128
Barbara L. Hollkamp	$	742,630	$	222,789	$	222,789	$	297,052		18,127		6,686		8,915

Except as described below, all of the foregoing long-term incentive awards were granted under the 2017 Plan, using the forms of equity award agreements previously filed by the Company. The description of the Performance RSUs above for all named executive officers are qualified in their entirety by reference to the forms of the Amended and Restated Performance and Service Based Restricted Stock Unit Agreement (each the “PSU Agreement,” and collectively, the “PSU Agreements”) previously filed, and the form of the amendment described below under “Amendment to Adjusted EBITDA Metric for 2018 Performance RSUs” and filed herewith as Exhibit 10.1, the terms of which are, in all cases, incorporated herein by reference.

Amendment to Adjusted EBITDA Metric for 2018 Performance RSUs

On March 5, 2019, the Compensation Committee approved an amendment (the “2018 PSU Amendment”) to the PSU Agreements relating to the 2018 Performance RSUs that the Compensation Committee previously had awarded to our executive officers, including our named executive officers, in 2018.

As required by the Generally Accepted Accounting Principles of the United States, for periods after January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), which requires the Company to defer revenues and certain expenses from the sales of vacation ownership interests (“VOIs”) under construction until construction is complete. For periods prior to January 1, 2018, the Company’s results of operations, including consolidated Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), were prepared under Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition, and ASC 978-605, Real Estate – Time Sharing Activities, Revenue Recognition, which required the Company to recognize revenues and certain expenses from the sales of VOIs under construction using the percentage of completion method (“POC”). At the time of grant, seventy percent (70%) of the 2018 Performance RSUs would be earned based on the achievement of the Company’s consolidated Adjusted EBITDA over the three-year cumulative performance period ending on December 31, 2020 prepared using POC method to recognize revenues and certain expenses for sales of VOIs under construction (“POC Adjusted EBITDA”).

In light of the adoption of ASC 606, the Compensation Committee determined that the more appropriate metric to assess management performance is “Economic Adjusted EBITDA,” which is also the metric that the Company uses to assess its performance and manage its business since the adoption of ASC 606. Economic Adjusted EBITDA is defined as Adjusted EBITDA, as further adjusted for net recognitions and deferrals of revenues and certain expenses from the sales of VOIs under construction. Accordingly, the Compensation Committee authorized the amendment of the 2018 Performance RSUs to substitute Economic Adjusted EBITDA for POC Adjusted EBITDA as one of the two performance metrics for the three-year cumulative performance period ending on December 31, 2020, and to revise the individual threshold, target and maximum performance objectives to reflect the differences between POC Adjusted EBITDA and Economic Adjusted EBITDA for such three-year cumulative performance period. At this time, achievement of the performance objectives applicable to the 2018 Performance RSUs is substantially uncertain.

Any Performance RSUs awarded in 2019 as described in this Form 8-K, and any Performance RSUs that may be awarded in the future, will have been made or will be made, as the case may be, pursuant to the PSU Agreements for our eligible executive officers, updated to reflect the 2018 PSU Amendment, until such time as PSU the Agreements may be further modified or amended. The foregoing description of the 2018 PSU Amendment is a summary and is qualified in its entirety by reference to the form of Amendment to Amended and Restated Performance and Service Based Restricted Stock Unit Agreement, filed herewith as Exhibit 10.1, and the terms of which are incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.

Exhibit No.	Description
Exhibit 10.1	Form of Amendment to Amended and Restated Performance and Service Based Restricted Stock Unit Agreement (for 2018 Performance RSUs)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

HILTON GRAND VACATIONS INC.
By:	/s/ Charles R. Corbin
	Charles R. Corbin Executive Vice President, Chief Legal Officer, Chief Development Officer and Secretary

Date: March 8, 2019

EX-10.1

Exhibit 10.1

AMENDMENT TO

AMENDED AND RESTATED

PERFORMANCE- AND SERVICE-BASED

RESTRICTED STOCK UNIT AGREEMENT

HILTON GRAND VACATIONS INC.

2017 OMNIBUS INCENTIVE PLAN

THIS AMENDMENT TO THE AMENDED AND RESTATED PERFORMANCE- AND SERVICE-BASED RESTRICTED STOCK UNIT AGREEMENT (the “Amendment”), effective as of the 5th day of March, 2019, is between Hilton Grand Vacations Inc., a Delaware corporation (the “Company”), and [______________], an employee of the Company (the “Participant”).

R E C I T A L S :

WHEREAS, the Company maintains the Hilton Grand Vacations Inc. 2017 Omnibus Incentive Plan (as it may be amended, the “Plan”), pursuant to which the Compensation Committee (the “Committee”) of the Board of the Directors of the Company has the authority, as Administrator of the Plan, to determine the terms and conditions of awards granted under the Plan and to amend any outstanding award, consistent with the provisions of the Plan; and

WHEREAS, pursuant to the Plan, the Company has granted to the Participant that certain performance- and service-based restricted stock unit award (the “Award”), which Award is subject to certain performance- and service-based vesting conditions, and is evidenced by an Amended and Restated Performance- and Service-Based Restricted Stock Unit Award Agreement, dated as of [___________], for a target number of [________] restricted stock units (the “Award Agreement”); and

WHEREAS, none of the performance- and service-based restricted stock units (“Performance RSUs”) subject to the Award are vested as of the date of this Amendment; and

WHEREAS, as a result of changes to certain accounting guidance followed by the Company, the definition of “Adjusted EBITDA” and related Adjusted EBITDA performance goals set forth in the Award Agreement no longer serve to align the efforts of the Participant with the Company’s performance; and

WHEREAS, the Company and the Participant desire to amend the Award Agreement to substitute the definition of “Adjusted EBITDA” with a new definition of “Adjusted EBITDA” in light of the new accounting guidance, and revise the individual Adjusted EBITDA performance goals to reflect the differences between the EBITDA definitions; and

WHEREAS, except as otherwise set forth herein, all other terms and conditions of the Award Agreement, including, without limitation, the three-year cumulative performance period, will remain unchanged, and the vesting of the Performance RSUs is substantially uncertain as of the date of this Amendment;

NOW, THEREFORE, in furtherance of the purposes described herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Participant hereby agree as follows:

1.    Replacement of Adjusted EBITDA Table in Section 2 of the Award Notice. The Adjusted EBITDA Table in Section 2 of the Award Notice shall be replaced in its entirety as follows:

Level of Achievement	Adjusted EBITDA Position	Percentage of Award Earned
Below Threshold	Less than $[______]M	0%
Threshold	$[______]M	50%
Target	$[______]M	100%
Maximum	$[______]M	200%

2.    Replacement of Section 3(b) of the Award Agreement. Section 3(b) of the Award Notice shall be replaced in its entirety as follows:

“(b)    “Adjusted EBITDA” means the Company’s earnings before interest expense, taxes and depreciation and amortization, (i) adjusted to exclude gains, losses and expenses in connection with (A) asset dispositions, (B) foreign currency transactions, (C) debt restructurings/retirements, (D) non-cash impairment losses, (E) reorganization costs, including severance and relocation costs, (F) share-based and certain other compensation expenses, (G) costs related to the spin-off, and (H) other items, and (ii) further adjusted for net construction related recognition and deferral activity.”

3.    Remaining Effect. By entering into this Amendment, the Participant hereby expressly acknowledges and agrees that except for the changes to the Award Agreement set forth in this Amendment, the Award Agreement shall continue in full force and effect. The Participant further agrees to be bound by the terms of the Plan, Award Agreement and the Amendment. Terms that are capitalized in the Amendment but not defined herein shall have the meaning given in the respective Plan or Award Agreement unless the Company determines otherwise.

4.    Amendment; Successors in Interest; Waiver. This Amendment may be modified, amended or terminated only by the written consent of the parties hereto. Notwithstanding the foregoing, the Company shall have unilateral authority to amend this Amendment (without Participant consent) to the extent necessary to comply with applicable laws, rules and regulations or changes to applicable laws, rules and regulations. All obligations imposed upon the Participant and all rights granted to the Company under this Amendment shall be final, binding and conclusive upon the Participant’s heirs, executors, administrators and successors. The waiver by the Company of a breach of any provision of this Amendment by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

5.    Governing Law. Except as otherwise provided in the Plan or the Award Agreement, this Amendment shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof.

6.    Prior Understandings. This Amendment contains the entire agreement between the parties to this Amendment with respect to the subject matter of this Amendment and supersedes all prior understanding, agreements, representations and warranties, if any, with respect to such subject matter.

7.    Counterparts. This Amendment may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one in the same agreement.

[Signatures follow]

2

IN WITNESS WHEREOF, the parties have caused this Amendment to be effective as of the day and year first written above.

HILTON GRAND VACATIONS INC.
By:
	[Name]
	[Title]

Acknowledged and Agreed:

Participant Signature

[Signature Page to Amendment to Amended and Restated Performance- and Service-Based Restricted Stock Unit Agreement]