INUVO, INC.
10-Ks and 10-Qs
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SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment
No. ___)
Filed
by the Registrant
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by a party other than the Registrant
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Preliminary
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for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
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Definitive
Additional Materials
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Soliciting
Material Under Rule 14(a)(12)
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Inuvo, Inc.
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(Name
of Registrant as Specified in Its Charter)
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Not
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computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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of each class of securities to which transaction
applies:
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Aggregate
number of securities to which transaction applies:
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3.
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
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registration statement number, or the Form or Schedule and the date
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Schedule or Registration Statement No.:
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Party:
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Date
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NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS
____________________
TO BE HELD ON JUNE 19, 2017
We will
hold the 2017 annual meeting of stockholders of Inuvo, Inc. at the
Company’s office located at 500 President Clinton Avenue,
Suite 300, Little Rock, Arkansas 72201 on June 19, 2017 at 9:00,
a.m. local time. At the annual meeting you will be asked to vote on
the following matters:
•
the election of
two Class III directors;
•
the ratification
of the appointment of Mayer Hoffman McCann P.C. as our independent
registered public accounting firm;
•
adoption of the
2017 Equity Compensation Plan; and
•
any other business
as may properly come before the meeting.
The
board of directors has fixed the close of business on April 27,
2017 as the record date for determining the stockholders that are
entitled to notice of and to vote at the 2017 annual meeting and
any adjournments thereof.
All
stockholders are invited to attend the annual meeting in person.
Your vote is important regardless of the number of shares you own.
Please vote your shares by proxy over the Internet by following the
instructions provided in the Notice of Internet Availability of
Proxy Materials, or, if you request printed copies of the proxy
materials by mail, you can also vote by mail, by telephone or by
facsimile.
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By Order of the Board of Directors |
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/s/
Richard
K. Howe
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Little Rock,
Arkansas
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Richard K.
Howe
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April 28,
2017
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Chairman and Chief
Executive Officer
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Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting to be Held
on June 19, 2017
: This proxy statement, along with our
Annual Report on Form 10-K for the year ended December 31, 2016,
are available free of charge on our website
www.inuvo.com
.
INUVO, INC.
PROXY STATEMENT
2017 ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
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Page No.
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General
Information
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1
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Proposal
1 - Election of Class III Directors
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3
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Proposal
2 - Ratification of appointment of Mayer Hoffman McCann
P.C.
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5
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Proposal
3 – Adoption of the 2017 Equity Compensation
Plan
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6
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Other
Matters
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9
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Dissenter’s
Rights
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9
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Corporate
Governance
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9
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Executive
Compensation
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16
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Principal
Stockholders
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22
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Certain
Relationships and Related Transactions
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24
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Stockholder
Proposals to be Presented at the Next Annual Meeting
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24
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Availability
of Annual Report on Form 10-K
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25
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Stockholders
Sharing the Same Last Name and Address
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25
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Where
You Can Find More Information
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25
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Appendix
A – 2017 Equity Compensation Plan
FORWARD-LOOKING STATEMENTS
This proxy statement contains
“forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
statements are based on our current expectations and involve risks
and uncertainties which may cause results to differ materially from
those set forth in the statements. The forward-looking statements
may include statements regarding actions to be taken in the future.
We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or
otherwise. Forward-looking statements should be evaluated together
with the many uncertainties that affect our business, particularly
those set forth in the section on forward-looking statements and in
the risk factors in Item 1.A of our Annual Report on Form 10-K for
the fiscal year ended December 31, 2016 as filed with the
Securities and Exchange Commission on February 16, 2017 (the
“
2016
10-K
”).
i
Stockholders Should Read the Entire Proxy Statement
Carefully Prior to Returning Their Proxies
PROXY STATEMENT
FOR
2017 ANNUAL MEETING OF STOCKHOLDERS
General Information
The
accompanying proxy is solicited by the board of directors of Inuvo,
Inc. for use at our 2017 annual meeting of stockholders to be held
on June 19, 2017, or any adjournment or postponement thereof, for
the purposes set forth in the accompanying Notice of 2017 Annual
Meeting of Stockholders. The date of this proxy statement is April
28, 2017, the approximate date on which this proxy statement and
the enclosed proxy were first sent or made available to our
stockholders.
This
proxy statement and the accompanying proxy card are being mailed to
owners of our common shares in connection with the solicitation of
proxies by the board of directors for the 2017 annual meeting of
stockholders. This proxy procedure is necessary to permit all
common stockholders, many of whom live throughout the United States
and are unable to attend the 2017 annual meeting in person, to
vote. We will pay the entire cost of preparing, assembling,
printing, mailing and distributing these proxy materials and
soliciting votes.
Electronic
access
.
To access
our proxy statement and 2016 10-K electronically, please visit our
corporate website at
www.inuvo.com
. The information
which appears on our website is not part of this proxy
statement.
Voting
securities
.
Only our
stockholders of record as of the close of business on April 27,
2017, the record date for the 2017 annual meeting, will be entitled
to vote at the meeting and any adjournment thereof. As of that
date, there were 28,544,272
shares of our common stock issued
and outstanding, all of which are entitled to vote with respect to
all matters to be acted upon at the 2017 annual meeting. Each
holder of record as of that date is entitled to one vote for each
share held. In accordance with our by-laws, the presence of at
least 33 1/3% of the voting power, regardless of whether the proxy
has authority to vote on all matters, constitutes a quorum which is
required in order to hold the 2017 annual meeting and conduct
business. Presence may be in person or by proxy. You will be
considered part of the quorum if you voted on the Internet, by
telephone, by facsimile or by properly submitting a proxy card or
voting instruction form by mail, or if you are present and vote at
the 2017 annual meeting. Votes for and against, abstentions and
“broker non-votes” will each be counted as present for
purposes of determining the presence of a quorum.
Broker
non-votes
.
If you
are a beneficial owner whose shares are held of record by a broker,
bank or other nominee, you must instruct the broker, bank or other
nominee how to vote your shares. If you do not provide voting
instructions, your shares will not be voted on any proposal on
which the broker, bank or other nominee does not have discretionary
authority to vote. This is called a “broker non-vote.”
In these cases, the broker, bank or other nominee can register your
shares as being present at the 2017 annual meeting for purposes of
determining the presence of a quorum, but will not be able to vote
on those matters for which specific authorization is required. Your
broker, bank or other nominee does not have discretionary authority
to vote on the election of the Class III directors
or the adoption of
our 2017 Equity Compensation Plan without instructions from you, in
which case a broker non-vote will occur and your shares will not be
voted on these matters. Your broker, bank or other nominee does
have discretionary voting authority to vote your shares on the
ratification of the independent registered public accounting firm,
even if the broker, bank or other nominee does not receive voting
instructions from you.
In any
event, it is particularly important that you instruct your broker
as to how you wish to vote your shares.
1
Voting of
proxies
.
All valid
proxies received prior to the meeting will be exercised. All shares
represented by a proxy will be voted, and where a proxy specifies a
stockholder’s choice with respect to any matter to be acted
upon, the shares will be voted in accordance with that
specification. If no choice is indicated on the proxy, the shares
will be voted by the individuals named on the proxy card as
recommended by the board of directors. A stockholder giving a proxy
has the power to revoke his or her proxy, at any time prior to the
time it is exercised, by delivering to our corporate secretary a
written instrument revoking the proxy or a duly executed proxy with
a later date, or by attending the meeting and voting in person. A
stockholder wanting to vote in person at the 2017 annual meeting
and holding shares of our common stock in street name must obtain a
proxy card from his or her broker and bring that proxy card to the
2017 annual meeting, together with a copy of a brokerage statement
reflecting such share ownership as of the record date.
Vote required.
The
two nominees receiving the greatest numbers of votes at the
meeting, assuming a quorum is present, will be elected as Class III
directors to serve until their terms expire or until their
successors have been duly elected and qualified. Because directors
are elected by plurality, abstentions from voting and broker
non-votes will be entirely excluded from the vote and will have no
effect on its outcome. Assuming a quorum is present, proposals 2
and 3 must be approved by the affirmative vote of a majority of the
shares of common stock present in person or by proxy at the annual
meeting and entitled to vote. Abstentions will be counted in
tabulations of the votes cast on each such proposal and will have
the same effect as a vote against the proposal, whereas broker
non-votes will be excluded from the vote and will have no effect on
the outcome.
Board of directors
recommendations
.
The
board of directors recommends a vote FOR proposals 1, 2 and
3.
Attendance at the
meeting
. You are invited to attend the annual meeting only
if you were an Inuvo stockholder or joint holder as of the close of
business on April 27, 2017, the record date, or if you hold a valid
proxy for the 2017 annual meeting. In addition, if you are a
stockholder of record (owning shares in your own name), your name
will be verified against the list of registered stockholders on the
record date prior to your being admitted to the annual meeting. If
you are not a stockholder of record but hold shares through a
broker or nominee (in street name), you should provide proof of
beneficial ownership on the record date, such as a recent account
statement or a copy of the voting instruction card provided by your
broker or nominee. The meeting will begin at 9:00 a.m. local time.
Check-in will begin at 8:45 a.m. local time.
Communications with our
board of directors.
You may contact any of our directors by
writing to them c/o Inuvo, Inc., 500 President Clinton Avenue,
Suite 300, Little Rock, Arkansas 72201. Each communication should
specify the applicable director or directors to be contacted as
well as the general topic of the communication. We may initially
receive and process communications before forwarding them to the
applicable director. We generally will not forward to the directors
a stockholder communication that is determined to be primarily
commercial in nature, that relates to an improper or irrelevant
topic, or that requests general information about Inuvo. Concerns
about accounting or auditing matters or communications intended for
non-management directors should be sent to the attention of the
Chairman of the Audit Committee at the address above. Our directors
may at any time review a log of all correspondence received by
Inuvo that is addressed to the independent members of the board and
request copies of any such correspondence.
Who can help answer your
questions?
If you have additional questions after reading
this proxy statement, you may seek answers to your questions by
writing, calling or emailing:
John B.
Pisaris, Esq.
General
Counsel
Inuvo,
Inc.
500
President Clinton Avenue
Suite
300
Little
Rock, Arkansas 72201
Telephone:
(501) 205-8508
Telecopier:
(877) 311-5050
email:
john.pisaris@inuvo.com
2
PROPOSAL 1
ELECTION OF CLASS III DIRECTORS
The
board, upon recommendation by the Nominating, Corporate Governance
and Compensation Committee, has nominated Messrs. Charles D. Morgan
and Patrick Terrell for re-election as Class III directors, each to
hold office until the 2020 annual meeting of stockholders or until
his successor has been duly elected and qualified. In the event
either Mr. Morgan or Mr. Terrell is unable or unwilling to serve as
a director, the individual named as proxy on the proxy card will
vote the shares that he represents for election of such other
person as the board of directors may recommend. The board has no
reason to believe that either Mr. Morgan or Mr. Terrell will be
unable or unwilling to serve.
The
following is biographical information on the current members of our
board of directors:
Directors Standing for Election as Class III Directors
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Name
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Age
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Positions
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Director Since
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Charles
D. Morgan
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74
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Class
III Director
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2009
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Patrick
Terrell
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62
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Class
III Director
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2013
|
Charles D. Morgan.
Mr. Morgan has been a member of our board of directors since June
2009. Since 2008, he has been the Chief Executive Officer of First
Orion Corp., a private company that developed and markets
PrivacyStar, an application that helps protect the mobile phone
users' privacy. He also serves as a member and is the past Chairman
of the Board of Trustees of Hendrix College. Mr. Morgan is also
Chairman of the Board of Querencia, a private real estate
development and golf course in Cabo San Lucas, Mexico. Mr. Morgan
has extensive experience managing and investing in both private and
public companies including Acxiom Corporation (NasdaqGS: ACXM), an
information services company he helped grow from an early stage
company to $1.4 billion in revenues during his tenure as Chief
Executive Officer from 1975 to 2008. Mr. Morgan has served on the
board and in various leadership roles with the Direct Marketing
Association (DMA) throughout his career, serving in 2001 as
chairman of the DMA board. Mr. Morgan was employed by IBM as a
systems engineer for six years prior to joining Acxiom, and he
holds a mechanical engineering degree from the University of
Arkansas.
Patrick Terrell.
Mr.
Terrell has been a member of our board of directors since January
2013. Since 2002 and 2004, respectively, Mr. Terrell has been the
managing member of both PatRick Investments, LLC and Terrell Group
Management, private equity and real estate investment companies. He
also serves on the board of directors of Routeware Inc. Mr. Terrell
served as founder and CEO of Leading Technology, a $300 million per
year manufacturer of personal computers. Additionally, he founded
Byte Shops Northwest, which serviced personal computers, and grew
to $50 million in annual revenues. Mr. Terrell attended Oregon
State University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ELECTION
OF THE CLASS III DIRECTOR NOMINEES.
Directors Not Standing For Election
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Name
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Age
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Positions
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Director Since
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Richard
K. Howe
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54
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Executive
Chairman of the Board and Chief Executive Officer; Class I
Director
|
2008
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Gordon
J. Cameron
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52
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Class I
Director
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2016
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Charles
L. Pope
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65
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Class
II Director
|
2008
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G. Kent
Burnett
|
71
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Class
II Director
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2016
|
3
Class I Directors
Terms Expires at the 2018 Annual Meeting
Richard K. Howe.
Mr.
Howe has been a member of our board of directors since November
2008, and has served as Executive Chairman of the board since March
2012 and as our Chief Executive Officer since December 2012.
Previously, he served as our President and Chief Executive Officer
from November 2008 until March 2012. Prior to joining Inuvo, Mr.
Howe served as Chief Marketing, Strategy and M&A Officer at the
billion dollar multi-channel marketing services leader Acxiom
Corporation (NasdaqGS: ACXM) where, since 2004, he led the
company's transition to online marketing services, the expansion
into China and the development of the big data consulting services
group. From 2001 to 2004, he served as general manager of Global
Marketing Services (GMS) at Fair Isaac & Company (NYSE: FICO),
a leading provider of analytics products and services where he
drove the company's online initiatives. Between 1999 and 2001, Mr.
Howe started, grew and sold private Internet search innovator,
ieWild. Mr. Howe has over his career led the acquisition, merger or
divestiture of a dozen companies on three continents worth many
hundreds of millions of dollars to shareholders. Mr. Howe earned a
bachelor’s degree with distinction in engineering from
Concordia University, Canada, and he earned his master’s
degree in engineering from McGill University, Canada.
Gordon J. Cameron
.
Mr. Cameron has been a member of our board of directors since
November 2016. He is a business transformation executive with three
decades of success in growing businesses while managing risk. Mr.
Cameron is currently an Executive Vice President in Retail Lending
at PNC Financial Services, one of the largest diversified financial
services institutions in the United States, where he serves as a
credit risk executive, a position he has held since 2008. Prior to
PNC Financial Services, Mr. Cameron was the Chief Credit Officer,
Retail and Small Business Lending, at Canadian Imperial Bank of
Commerce from 2005 to 2008. Mr. Cameron was the Chief Scientist
Transaction Analytics, Global Account Management Solutions at Fair
Isaac Corporation FICO from 2001 to 2005. Prior to his tenure with
Fair Isaac Corporation, Mr. Cameron held executive positions at
IeWild Inc., HNC Software Inc., Advanta National Bank/Fleet, The
Cambell Group LTD and Fidelity Bank N.A. Mr. Cameron received a MBA
from Widener University School of Management and a B.S. in Finance
from Pennsylvania State University.
Class II Directors
Terms Expire at the 2019 Annual Meeting
Charles L. Pope
. Mr.
Pope has been a member of our board of directors since September
2008. He served as Chief Operating Officer and Chief Financial
Officer of The Palm Bank, a community bank in Tampa, Florida, from
June 2009 to April 2012. From 2007 through 2009, Mr. Pope served as
Chief Financial Officer of and a consultant to Aerosonic
Corporation, a manufacturer of aircraft instruments and displays.
From February 2005 through April 2007, Mr. Pope served as Chief
Financial Officer for Reptron Manufacturing, a manufacturer of
electronic services and engineering services. From April 2002 until
February 2005, Mr. Pope served as Chief Financial Officer for
SRI/Surgical, a provider to hospitals of reusable and disposable
products used in surgical procedures. Previously, Mr. Pope served
as Chief Financial Officer for UTEK Corporation, a business
development company that acquires and funds the development of new
university technologies. Mr. Pope was a member of the Board of
Directors of Innovaro Inc. (OTCQB: INNI) from February 2010 to
August 2012 and was Chairman of its Audit Committee. Since June
2010, he has been a member of the Board of Directors of Oragenics,
Inc. (OTCBB: OGEN) and is Chairman of its Audit Committee. Mr. Pope
was with PricewaterhouseCoopers LLP and left as a partner. Mr. Pope
holds a B.S. in economics and accounting from Auburn University,
and he is a Certified Public Accountant in Florida.
G. Kent
Burnett
.
Mr. Burnett
has been a member of our board of directors since November 2016. He
is a retired technology and ecommerce executive. Mr. Burnett joined
Dillard’s, Inc., one of the nation’s largest fashion
retailers, in 1979. Mr. Burnett held various executive level
technology positions at Dillard’s, including Chief
Information Officer, Western Division Chairman and from 2009 to
2016 was Vice President of Technology and Ecommerce. Prior to
joining Dillard’s Mr. Burnett held various marketing,
technology and engineering positions with IBM. Since 2012 he has
been a member of the Board of Directors of First Orion Corp., a
phone call protection and data provider, and from February 2012 to
April 2013 he served as a member of the Board of Directors of
Acumen Brands, an ecommerce retailer. Mr. Burnett received his
undergraduate degree from the University of Arkansas.
There
are no family relationships between any of the
directors.
4
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF MAYER HOFFMAN MCCANN
P.C.
The
Audit Committee has appointed Mayer Hoffman McCann P.C. as our
independent registered public accounting firm to audit our
consolidated financial statements for the fiscal year ending
December 31, 2017. Representatives of Mayer Hoffman McCann P.C.
will be present at the 2017 annual meeting and will have an
opportunity to make a statement or to respond to appropriate
questions from stockholders. Although stockholder ratification of
the appointment of our independent auditor is not required by our
bylaws or otherwise, we are submitting the selection of Mayer
Hoffman McCann P.C. to our stockholders for ratification to permit
stockholders to participate in this important corporate decision.
If not ratified, the Audit Committee will reconsider the selection,
although the Audit Committee will not be required to select a
different independent auditor for our company. Even if the
appointment is ratified, the Audit Committee, in its discretion,
may direct the appointment of a different independent registered
public accounting firm at any time during the year if the Audit
Committee determines that such a change would be in our best
interests.
Fees
and services
The
following table shows the fees that were billed for the audit and
other services provided for the years indicated.
|
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2016
|
2015
|
|
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|
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|
Audit
Fees
|
$
254,088
|
$
252,883
|
|
Audit-Related
Fees
|
-
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19,000
|
|
Tax
Fees
|
2,280
|
70,540
|
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All Other
Fees
|
-
|
-
|
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Total
|
$
256,368
|
$
342,423
|
Audit Fees
— This category
includes the audit of our annual financial statements, review of
financial statements included in our quarterly reports on Form 10-Q
and services that are normally provided by the independent
registered public accounting firm in connection with engagements
for those fiscal years. This category also includes advice on audit
and accounting matters that arose during, or as a result of, the
audit or the review of interim financial statements.
Audit-Related Fees
— This
category consists of assurance and related services by the
independent registered public accounting firm that are reasonably
related to the performance of the audit or review of our financial
statements and are not reported above under “Audit
Fees.” The services for the fees disclosed under this
category include consultation regarding our correspondence with the
Securities and Exchange Commission and other accounting
consulting.
Tax Fees
— This category consists
of professional services rendered by CBIZ MHM, an affiliate of our
independent registered public accounting firm, for tax compliance
and tax advice. The services for the fees disclosed under this
category include tax return preparation and technical tax
advice.
All Other Fees
— This category
consists of fees for other miscellaneous items.
Mayer
Hoffman McCann P.C. leases substantially all of its personnel, who
work under the control of Mayer Hoffman McCann P.C. shareholders,
from wholly-owned subsidiaries of CBIZ, Inc., in an alternative
practice structure.
Our
board of directors has adopted a procedure for pre-approval of all
fees charged by our independent registered public accounting firm.
Under the procedure, the Audit Committee of the board approves the
engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Audit Committee of
the board. The audit and tax fees paid to the auditors with respect
to 2016 were pre-approved by the Audit Committee of the board of
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
RATIFICATION
OF THE APPOINTMENT OF MAYER HOFFMAN MCCANN P.C.
5
PROPOSAL 3
APPROVAL OF THE 2017 EQUITY COMPENSATION PLAN
On April 18, 2017, our board of directors approved
the 2017 Equity Compensation Plan (the “
2017
Plan
”), and recommended
the adoption of the 2017 Plan by our stockholders. The 2017 Plan
will reserve 2,000,000 shares of our common stock for issuance
pursuant to the terms of the plan upon the grant of restricted
stock awards, deferred stock grants, stock appreciation rights
and/or the exercise of options granted under the 2017 Plan. The
2017 Plan also contains an “evergreen formula” pursuant
to which the number of shares of common stock available for
issuance under the 2017 Plan will automatically increase on the
first trading day of January each calendar year during the term of
the 2017 Plan, beginning with calendar year 2018, by an amount
equal to 1% of the total number of shares of common stock
outstanding on the last trading day in December of the immediately
preceding calendar year, up to a maximum annual increase of 150,000
shares of common stock.
The 2017 Plan provides for the grant of restricted
stock awards, deferred stock grants, stock appreciation rights,
incentive stock options (“
ISOs
”)
and non-statutory stock options (“
NSOs
”).
The terms and provisions of the 2017 Plan are summarized below,
which summary is qualified in its entirety by reference to the 2017
Plan, a copy of which is attached as
Appendix A
to this proxy
statement.
The
purpose of the 2017 Plan is to advance the interests of our company
by providing an incentive to attract, retain and motivate highly
qualified and competent persons who are important to us and upon
whose efforts and judgment the success of our company is largely
dependent. Grants to be made under the 2017 Plan may be made to our
employees, our executive officers and members of our board of
directors. The recipient of any grant under the 2017 Plan, and the
amount and terms of a specific grant, will be determined by the
Compensation Committee of our board of directors. No grants have
been made under the 2017 Plan since its adoption by the board of
directors and no grants will be made until the plan is approved by
our stockholders. If the 2017 Plan is not approved at the annual
meeting, the board of directors will terminate the
plan.
Administration and eligibility
The
2017 Plan will be administered by the Compensation Committee of our
board of directors. The Compensation Committee will determine, from
time to time, those of our employees, executive officers and/or
directors to whom stock awards or plan options will be granted, the
terms and provisions of each such grant, the dates such grants will
become exercisable, the number of shares subject to each grant, the
purchase price of such shares and the form of payment of such
purchase price. All other questions relating to the administration
of the 2017 Plan and the interpretation of the provisions thereof
are to be resolved at the sole discretion of the Compensation
Committee.
Amendment and termination of the 2017 Plan
The
board of directors may amend, suspend or terminate the 2017 Plan at
any time, except that no amendment shall be made
which:
•
increases the total number of shares subject to the plan in excess
of the evergreen formula or changes the minimum purchase price
therefore (except in either case in the event of adjustments due to
changes in our capitalization);
•
affects outstanding options or any exercise right
thereunder;
•
extends the term of any option beyond 10 years; or
•
extends the termination date of the plan.
Unless
the plan is suspended or terminated by the board of directors, the
2017 Plan will terminate 10 years from the date of the plan’s
adoption by our board of directors. Any termination of the 2017
Plan will not affect the validity of any options previously granted
thereunder.
6
Grants under the 2017 Plan
Plan
options under the 2017 Plan may either be options qualifying as
ISOs under Section 422 of the Internal Revenue Code, or options
that do not so qualify which are known as NSOs. Any option granted
under the 2017 Plan must provide for an exercise price of not less
than 100% of the fair market value of the underlying shares on the
date of such grant, but the exercise price of any ISO granted to an
eligible employee owning more than 10% of our common stock must be
at least 110% of such fair market value as determined on the date
of the grant.
In
addition, the 2017 Plan allows for the inclusion of a reload option
provision, which permits an eligible person to pay the exercise
price of the option with shares of common stock owned by the
eligible person and receive a new option to purchase shares of
common stock equal in number to the tendered shares. Furthermore,
restricted stock grants may also be made, as well as deferred stock
grants and stock appreciation rights.
Subject
to the limitation on the aggregate number of shares issuable under
the plan, there is no maximum or minimum number of shares as to
which a stock grant or plan option may be granted to any person.
Shares used for stock grants and plan options may be authorized and
unissued shares or shares reacquired by us, including shares
purchased in the open market.
Adjustment upon changes in capitalization or other corporate
event
The
2017 Plan provides that, in the event of any dividend (other than a
cash dividend) payable on shares of our common stock, stock split,
reverse stock split, combination or exchange of shares, or other
similar event occurring after the grant of an award which results
in a change in the shares of our common stock as a
whole:
•
the number of shares issuable in connection with any such award and
the purchase price thereof, if any, will be proportionately
adjusted to reflect the occurrence of any such event;
and
•
the Compensation
Committee will determine whether such change requires an adjustment
in the aggregate number of shares reserved for issuance under the
2017 Plan or to retain the number of shares reserved and available
under the plan in their sole discretion.
Any
adjustment, however, does not change the total purchase price
payable for the shares subject to outstanding options. In the event
of our proposed dissolution or liquidation, a proposed sale of all
or substantially all of our assets, a merger or tender offer for
our shares of common stock, the Compensation Committee may declare
that each option granted under the plan shall terminate as of a
date to be fixed by the committee; provided that not less than 30
days written notice of the date so fixed shall be given to each
participant holding an option, and each such participant shall have
the right, during the period of 30 days preceding such termination,
to exercise the participant’s option, in whole or in part,
including as to options not otherwise exercisable.
Assignability of plan options and termination of
employment
All
plan options are nonassignable and nontransferable, except by will
or by the laws of descent and distribution, and during the lifetime
of the optionee, may be exercised only by such optionee, except as
provided by the Compensation Committee. If an optionee shall die
while our employee or within three months after termination of
employment by us because of disability, retirement or otherwise,
such options may be exercised, to the extent that the optionee
shall have been entitled to do so on the date of death or
termination of employment, by the person or persons to whom the
optionee’s right under the option pass by will or applicable
law, or if no such person has such right, by his executors or
administrators. Options are also subject to termination by the
Compensation Committee under certain conditions.
7
In
the event of termination of employment because of death while an
employee, or because of disability, the optionee’s options
may be exercised not later than the expiration date specified in
the option or one year after the optionee’s death, whichever
date is earlier, or in the event of termination of employment
because of retirement or otherwise, not later than the expiration
date specified in the option or one year after the optionee’s
death, whichever date is earlier. If an optionee’s employment
by us terminates because of disability and such optionee does not
die within the following three months after termination, the
options may be exercised, to the extent that the optionee shall
have been entitled to do so at the date of the termination of
employment, at any time, or from time to time, but not later than
the expiration date specified in the option or one year after
termination of employment, whichever date is earlier. If an
optionee’s employment terminates for any reason other than
death or disability, the optionee may exercise the options to the
same extent that the options were exercisable on the date of
termination, for up to three months following such termination, or
on or before the expiration date of the options, whichever occurs
first. In the event that the optionee was not entitled to exercise
the options at the date of termination or if the optionee does not
exercise such options (which were then exercisable) within the time
specified herein, the options shall terminate. If an
optionee’s employment terminates for any reason other than
death, disability or retirement, all rights to exercise the option
will terminate not later than 90 days following the date of such
termination of employment, except as otherwise provided under the
plan. Non-qualified options are not subject to the foregoing
restrictions unless specified by the compensation
committee.
Summary of Federal Tax Consequences
The
following is only a brief summary of the effect of federal income
taxation on an optionee under the 2017 Plan. Effective January 1,
2006, we adopted FASB ASC Topic 718. This Statement requires that
compensation costs related to share-based payment transactions,
such as stock options or restricted stock award, be recognized in
the financial statements. Under ASC Topic 718, an optionee,
recipient of a restricted stock award and our company will be
subject to certain tax consequences and accounting charges,
regardless of the type of option or restricted stock
award.
Options
granted under the 2017 Plan may be either ISOs which satisfy the
requirements of Section 422 of the Internal Revenue Code or NSOs
which do not meet such requirements. The federal income tax
treatment for the two types of options differs, as summarized
below.
•
ISOs
. No taxable income is recognized by an optionee
at the time of the grant of an ISO, and no taxable income is
generally recognized at the time an ISO is exercised. However, the
excess of the fair market value of the common stock received upon
the exercise of an ISO over the exercise price is includable in the
employee’s alternative minimum taxable income and may be
subject to the alternative minimum tax (“
AMT
”). For AMT purposes only, the basis of the
common stock received upon exercise of an ISO is increased by the
amount of such excess.
An
optionee will recognize taxable income in the year in which the
purchased shares acquired upon exercise of an ISO are sold or
otherwise disposed. For federal tax purposes, dispositions are
divided into two categories: (i) qualifying; and (ii)
disqualifying. An optionee will make a qualifying disposition of
the purchased shares if the sale or disposition is made more than
two years after the grant date of the option and more than one year
after the exercise date. If an optionee fails to satisfy either of
these two holding periods prior to sale or disposition, then a
disqualifying disposition of the purchased shares will
result.
Upon
a qualifying disposition, an optionee will recognize long-term
capital gain or loss in an amount equal to the difference between
the amount realized upon the sale or other disposition of the
purchased shares and the exercise price paid for the shares except
that, for AMT purposes, the gain or loss would be the difference
between the amount realized upon the sale or other disposition of
the purchased shares and the employee’s basis increased as
described above. If there is a disqualifying disposition of the
shares, then the optionee will generally recognize ordinary income
to the extent of the lesser of the difference between the exercise
price and (i) the fair market value of the common stock on the date
of exercise, or (ii) the amount realized on such disqualifying
disposition. Any additional gain recognized upon the disposition
will be capital gain. If the amount realized is less than the
exercise price, the optionee will, in general, recognize a capital
loss. If the optionee makes a disqualifying disposition of the
purchased shares, then we will be entitled to an income tax
deduction, for the taxable year in which such disposition occurs,
to the extent the optionee recognizes ordinary income. In no other
instance will we be allowed a deduction with respect to the
optionee’s disposition of the purchased shares.
8
•
NSOs
. No taxable income is recognized by an optionee
upon the grant of an NSO. The optionee will in general recognize
ordinary income, in the year in which an NSO is exercised, equal to
the excess of the fair market value of purchased shares on the date
of exercise over the exercise price paid for such shares, and the
optionee will be required to satisfy the tax withholding
requirements applicable to such income. Upon a subsequent sale of
the purchased shares, the optionee will generally recognize either
a capital gain or a capital loss depending on whether the amount
realized is more or less than the exercise price. We will be
entitled to a business expense deduction equal to the amount of
ordinary income recognized by the optionee with respect to an
exercised NSO. The deduction will in general be allowed for our
taxable year in which ordinary income is recognized by the optionee
in connection with the acquisition of the option
shares.
•
Restricted
Stock.
Unless the recipient of
a restricted stock grant elects to treat such grant as ordinary
income at the time the grant is made, the recipient does not
recognize taxable income upon the grant of restricted stock.
Instead, the recipient will recognize ordinary income at the time
of vesting (
i.e.
when the restrictions on the grant lapse) equal to
the fair market value of the restricted shares on the vesting date
minus any amount paid for the restricted shares. At the time that
the recipient recognizes ordinary income in respect of the
restricted stock grant, we would be entitled to a tax deduction for
compensation expense equal to the amount of ordinary income
recognized by the recipient.
The foregoing is only a summary of the effect of federal income
taxation upon us and the participants under the 2017 Plan. It does
not purport to be complete, and does not discuss all of the tax
consequences of a participant’s death or the provisions of
the income tax laws of any state, municipality, or foreign country
in which the participants may reside.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL
OF THE 2017 PLAN.
OTHER MATTERS
As of
the date hereof, there are no other matters that we intend to
present, or have reason to believe others will present, at the 2017
annual meeting. If, however, other matters properly come before the
2017 annual meeting, the accompanying proxy authorizes the person
named as proxy or his substitute to vote on such matters as he
determines appropriate.
DISSENTER'S RIGHTS
Under
Nevada law there are no dissenter's rights available to our
stockholders in connection with any matter submitted to a vote of
our stockholders at the 2017 annual meeting.
CORPORATE GOVERNANCE
We are
committed to maintaining the highest standards of honest and
ethical conduct in running our business efficiently, serving our
stockholders interests and maintaining our integrity in the
marketplace. To further this commitment, we have adopted our Code
of Conduct and Business Code of Ethics, which applies to all our
directors, officers and employees. To assist in its governance, our
board has formed two standing committees composed entirely of
independent directors, Audit and Nominating, Corporate Governance
and Compensation. A discussion of each committee’s function
is set forth below. Additionally, we have adopted and published to
all employees our Whistleblower Notice establishing procedures by
which any employee may bring to the attention of our Audit
Committee any disclosure regarding accounting, internal control or
other auditing issues affecting our company or any improper
activities of any officer or employee. Disclosure may be made
anonymously.
Our
bylaws, the charters of each board committee, the independent
status of a majority of our board of directors, our Code of Conduct
and Business Code of Ethics and our Whistleblower Notice provide
the framework for our corporate governance. Copies of our bylaws,
committee charters, Code of Conduct and Business Code of Ethics and
Whistleblower Notice may be found on our website at
www.inuvo.com
. Copies of these
materials also are available without charge upon written request to
our corporate secretary.
9
Board of directors
The
board of directors oversees our business affairs and monitors the
performance of management. In accordance with our corporate
governance principles, the board of directors does not involve
itself in day-to-day operations. The directors keep themselves
informed through discussions with the Executive Chairman and Chief
Executive Officer and our Chief Financial Officer and by reading
the reports and other materials that we send them and by
participating in board of directors and committee meetings.
Commencing with our 2008 annual meeting, our directors were divided
into three classes and designated Class I, Class II and Class III.
Directors may be assigned to each class in accordance with a
resolution or resolutions adopted by the board of directors.
Directors are elected for a full term of three years. Our directors
hold office until their successors have been elected and duly
qualified unless the director resigns or by reason of death or
other cause is unable to serve in the capacity of director. If any
director resigns, dies or is otherwise unable to serve out his or
her term, or if the board increases the number of directors, the
board may fill any vacancy by a vote of a majority of the directors
then in office, although less than a quorum exists. A director
elected to fill a vacancy shall serve for the unexpired term of his
or her predecessor. Vacancies occurring by reason of the removal of
directors without cause may only be filled by vote of the
stockholders.
Board leadership structure and board’s role in risk
oversight
Mr.
Richard K. Howe serves as both the Executive Chairman of our board
of directors and our Chief Executive Officer. Mr. Charles D.
Morgan, an independent director, serves as our Lead Independent
Director. Our board believes our current structure provides
independence and oversight, and facilitates the communication
between senior management and the full board of directors regarding
risk oversight, which the board believes strengthens its risk
oversight activities. Moreover, the structure allows the Executive
Chairman and Chief Executive Officer to better focus on his
responsibilities of running the company, enhancing stockholder
value and expanding and strengthening our business, while allowing
the Lead Independent Director to lead the board in its fundamental
role of providing independent oversight of management.
Risk is
inherent with every business, and how well a business manages risk
can ultimately determine its success. We face a number of risks,
including credit risk, interest rate risk, liquidity risk,
operational risk, strategic risk and reputation risk. Management is
responsible for the day-to-day management of the risks we face,
while the board, as a whole and through its committees, has
responsibility for the oversight of risk management. In its risk
oversight role, the board of directors has the responsibility to
satisfy itself that the risk management processes designed and
implemented by management are adequate and functioning as designed.
To do this, the board of directors meets regularly with management,
as well as independently, to review Inuvo's risks. Both our General
Counsel and our Chief Financial Officer attend many of the board
meetings and are available to address any questions or concerns
raised by any member of the board on risk management and any other
matter. The independent members of the board work together to
provide strong, independent oversight of our management and affairs
through the board's standing committees and, when necessary,
special meetings of independent directors. Our independent
directors may meet at any time in their sole discretion without any
other directors or representatives of management present. Each
independent director has access to the members of our management
team or other employees as well as full access to our books and
records. We have no policy limiting, and exert no control over,
meetings of our independent directors.
10
Board committees
The
board of directors has standing Audit and Nominating, Corporate
Governance and Compensation Committees. Each committee has a
written charter. The charters are available on our website at
www.inuvo.com
.
Except as set forth below, all committee members are independent
directors. Information concerning the current membership and
function of each committee is as follows:
|
Director
|
Audit Committee Member
|
|
Nominating, Corporate Governance and Compensation Committee
Member
|
|
|
Charles
D. Morgan
|
|
|
✓
|
|
|
Charles
L. Pope
|
✓
(1)
|
|
|
|
|
Patrick
Terrell
|
✓
|
|
✓
|
|
|
Gordon
J. Cameron
|
✓
|
|
|
|
|
G. Kent
Burnett
|
|
|
✓
(1)
|
|
(1)
Denotes
Chairperson.
Audit
Committee
.
The Audit
Committee assists the board in fulfilling its oversight
responsibility relating to:
•
the integrity of
our financial statements;
•
our compliance
with legal and regulatory requirements; and
•
the qualifications
and independence of our independent registered public
accountants.
The
Audit Committee is composed of three directors, all of whom have
been determined by the board of directors to be independent as
defined by the NYSE MKT Company Guide. The board has determined
that each member of the Audit Committee, qualifies as an
“audit committee financial expert” as defined by the
SEC. During 2016, the Audit Committee held four
meetings.
Nominating, Corporate
Governance and Compensation Committee
. The Nominating,
Corporate Governance and Compensation Committee is responsible
for:
•
overseeing our
compensation programs and practices, including our executive
compensation plans and incentive compensation plans;
•
recommending the
slate of director nominees for election to our board of
directors;
•
identifying and
recommending candidates to fill vacancies occurring between annual
stockholder meetings;
•
reviewing the
composition of board committees; and
•
monitoring
compliance with, reviews, and recommends changes to our various
corporate governance policies and guidelines.
The
Chief Executive Officer provides input to the committee with
respect to the individual performance and compensation
recommendations for the other executive officers. The
committee’s charter authorizes the committee to retain an
independent consultant, and from time to time. The committee did
not retain a consultant in 2016. The committee also prepares and
supervises the board’s annual review of director independence
and the board’s annual self-evaluation.
A
majority of the persons serving on our board of directors must be
independent. Thus, the committee has considered transactions and
relationships between each director or any member of his immediate
family and us or our affiliates, including those reported under
“Certain Relationships and Related Transactions” below.
The committee also reviewed transactions and relationships between
directors or their affiliates and members of our senior management
or their affiliates. As a result of this review, the committee
affirmatively determined that each of Messrs. Pope, Morgan,
Terrell, Cameron and Burnett are independent as defined by the NYSE
MKT Company Guide.
11
The
committee considers all qualified candidates for our board of
directors identified by members of the committee, by other members
of the board of directors, by senior management and by our
stockholders. The committee reviews each candidate including each
candidate’s independence, skills and expertise based on a
variety of factors, including the person’s experience or
background in management, finance, regulatory matters and corporate
governance. Further, when identifying nominees to serve as
director, while we do not have a policy regarding the consideration
of diversity in selecting directors, the committee seeks to create
a board that is strong in its collective knowledge and has a
diversity of skills and experience with respect to accounting and
finance, management and leadership, vision and strategy, business
operations, business judgment, industry knowledge and corporate
governance. In addition, prior to nominating an existing director
for re-election to the board of directors, the committee will
consider and review an existing director’s board and
committee attendance and performance, length of board service,
experience, skills and contributions that the existing director
brings to the board, equity ownership in Inuvo and
independence.
The
committee follows the same process and uses the same criteria for
evaluating candidates proposed by stockholders, members of the
board of directors and members of senior management. Based on its
assessment of each candidate, the committee recommends candidates
to the board. However, there is no assurance that there will be any
vacancy on the board at the time of any submission or that the
committee will recommend any candidate for the board.
During
2016 the Nominating, Corporate Governance and Compensation
Committee was composed of three directors, all of whom have been
determined by the board of directors to be independent as defined
by the NYSE MKT Company Guide. Mr. Burnett serves as Chairman of
the Nominating, Corporate Governance and Compensation Committee.
Prior to his resignation from our board in November 2016, Mr. F.
William Conner served as chairman of this committee. During 2016,
the Nominating, Corporate Governance and Compensation Committee
held two meetings.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(“
Dodd-Frank
”)
Dodd-Frank requires
public companies to provide stockholders with an advisory vote on
compensation of the most highly compensated executives, which are
sometimes referred to as “say on pay” as well as an
advisory vote on how often the company will present say on pay
votes to its stockholders. At our 2015 annual meeting of
stockholders held on June 25, 2015, our stockholders approved a
non-binding proposal that the frequency of an advisory vote on our
executive compensation would be held every three years together
with a non-binding resolution approving our executive compensation
as described in that proxy statement. As such, this proxy statement
does not contain a non-binding say on pay proposal for the approval
of our current executive compensation structure.
The
Securities and Exchange Commission has also approved NYSE listing
standards relating to compensation committees of listed companies,
including companies on the NYSE MKT. The listing requirements were
added pursuant to Dodd-Frank and address:
•
enhanced
independence requirement for compensation committee
members,
•
compensation
committee authority relating to compensation consultants, counsel
and other advisers, and
•
the responsibility
of the compensation committee to consider potential conflicts of
interests when choosing consultants, counsel and other
advisers.
Listed
companies had until the earlier of the first annual meeting after
January 15, 2014, or October 31, 2014 to comply with the new
compensation committee independence and were required to comply
with other new standards, including those relating to the authority
of the compensation committee, beginning on July 1, 2013. A smaller
reporting company such as Inuvo is not subject to the requirements
of these recent compensation committee rules, except that a smaller
reporting company must have, and certify that it has and will
continue to have, a compensation committee of at least two members,
each of whom must be an independent director as defined under the
current NYSE MKT independence rules. Our Nominating, Corporate
Governance and Compensation Committee meets this
requirements.
12
Stockholder nominations
Stockholders who
would like to propose a candidate may do so by submitting the
candidate’s name, resume and biographical information to the
attention of our corporate secretary. All proposals for nomination
received by the corporate secretary will be presented to the
committee for appropriate consideration. It is the policy of the
Nominating, Corporate Governance and Compensation Committee to
consider director candidates recommended by stockholders who appear
to be qualified to serve on our board of directors. The Nominating,
Corporate Governance and Compensation Committee may choose not to
consider an unsolicited recommendation if no vacancy exists on the
board of directors and the Nominating, Corporate Governance and
Compensation Committee does not perceive a need to increase the
size of the board of directors. In order to avoid the unnecessary
use of the Nominating, Corporate Governance and Compensation
Committee’s resources, the Nominating, Corporate Governance
and Compensation Committee will consider only those director
candidates recommended in accordance with the procedures set forth
below. To submit a recommendation of a director candidate to the
Nominating, Corporate Governance and Compensation Committee, a
stockholder should submit the following information in writing,
addressed to the corporate secretary of Inuvo at our main
office:
•
the name and
address of the person recommended as a director
candidate;
•
all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended;
•
the written
consent of the person being recommended as a director candidate to
be named in the proxy statement as a nominee and to serve as a
director if elected;
•
as to the person
making the recommendation, the name and address, as they appear on
our books, of such person, and number of shares of our common stock
owned by such person;
provided,
however
, that if the person is not a registered holder of
our common stock, the person should submit his or her name and
address along with a current written statement from the record
holder of the shares that reflects the recommending person’s
beneficial ownership of our common stock; and
•
a statement
disclosing whether the person making the recommendation is acting
with or on behalf of any other person and, if applicable, the
identity of such person.
Director qualification
The
following is a discussion for each director of the specific
experience, qualifications, attributes or skills that led the
Nominating, Corporate Governance and Compensation Committee to
recommend to the board, and for the board to conclude that the
individual should be serving as a director of Inuvo.
13
Class I Directors
Richard K. Howe
–
Mr. Howe’s track record as a successful
high-technology operating and marketing executive in data,
analytics, and marketing services as a result of building and/or
running over a dozen businesses in five countries were factors
considered by the Nominating, Corporate Governance and Compensation
Committee and the board. Specifically, the Nominating, Corporate
Governance and Compensation Committee and the board viewed
favorably his position at companies that include Inuvo as president
and CEO, Acxiom Corporation as chief marketing, business strategy
and M&A officer, Fair Isaac & Company where he served as
general manager, and ieWild, Inc. as co-founder and chairman and
CEO; his service as a board member for the non-profit organization
Business for Diplomatic Action; and his academic achievements at
Concordia University and McGill University in making their
recommendation.
Gordon J. Cameron
– Mr. Cameron's track record as a senior executive in a
variety of business segments and his in excess three decades of
experience in building successful businesses were factors
considered by the Nominating, Corporate Governance and Compensation
Committee and the board. Specifically, the Nominating, Corporate
Governance and Compensation Committee and the board viewed
favorably his position as Executive Vice President in Retail
Lending at PNC Financial Services, one of the largest diversified
financial services institutions in the United States, a well as his
positions with companies such as Canadian Imperial Bank of
Commerce, Fair Isaac Corporation FICO, IeWild Inc., HNC Software
Inc., Advanta National Bank/Fleet, The Cambell Group LTD and
Fidelity Bank N.A and his academic achievements at Widener
University School of Management and Pennsylvania State University
in making their recommendation.
Class II Directors
Charles L. Pope
–
Mr. Pope’s track record as a successful
Tampa-based Chief Financial Officer and board member with decades
of experience in public company accounting and finance were factors
considered by the Nominating, Corporate Governance and Compensation
Committee and the board. Specifically, the Nominating, Corporate
Governance and Compensation Committee and the board viewed
favorably his positions as CFO at companies that include Aerosonic
Corporation, Reptron Manufacturing and UTEK Corporation; his
experience at PricewaterhouseCoopers where he served as partner
during his 20 years with the firm; his certification as a Certified
Public Accountant; and his academic achievements from Auburn
University in making their recommendation.
G. Kent Burnett
–
Mr. Burnett's track
record as a successful technology and ecommerce executive holding
executive level technology positions were factors considered by the
Nominating, Corporate Governance and Compensation Committee of the
board. Specifically, the Nominating, Corporate Governance and
Compensation Committee and the board viewed favorably his
experience at Dillard’s including as Chief Information
Officer, Western Division Chairman and Vice President of Technology
and Ecommerce, as well as his experience in various marketing,
technology and engineering positions with IBM and his membership on
the boards of directors of First Orion Corp. and Acumen Brands in
making their recommendation.
Class III Directors
Charles D. Morgan
–
Mr. Morgan’s successful track record as a
high-technology executive in data, analytics, outsourcing and
marketing services with a network of relationships worldwide as a
result of building a billion dollar annual revenue enterprise as
chairman and chief executive officer were factors considered by the
Nominating, Corporate Governance and Compensation Committee and the
board. Specifically, the Nominating, Corporate Governance and
Compensation Committee and the board viewed favorably his
experience at companies such as Acxiom Corporation as Chairman and
CEO and IBM as a systems engineer; his role as an equity owner of
Bridgehampton Capital Management LLC and a significant investor in
its funds; his service as Chairman of the Advisory Board and
co-manager of investments for Bridgehampton Capital Management LLC;
his leadership on the board and in various leadership roles with
the Direct Marketing Association (DMA) including his service as
chairman of the DMA in 2001; his service as a member and past
chairman of the board of trustees of Hendrix College; and his
academic achievements at the University of Arkansas in making their
recommendation.
Patrick Terrell
– Mr. Terrell’s track record as a successful operating
executive and investor were factors considered by the Nominating,
Corporate Governance and Compensation Committee and the board.
Specifically, the Nominating, Corporate Governance and Compensation
Committee and the board viewed favorably Mr. Terrell’s
services as founder and CEO of Leading Technology, a manufacturer
of personal computers, his founding of Byte Shops Northwest, and
his services as managing member of Terrell Group Management and
PatRick Investments, LLC in making their
recommendation.
14
In
addition to the each of the individual skills and background
described above, the Nominating, Corporate Governance and
Compensation Committee and our board also concluded that each of
these individuals will continue to provide knowledgeable advice to
our other directors and to senior management on numerous issues
facing our company and on the development and execution of our
strategy.
Compensation of directors
Each
independent member of our board of directors receives the following
fees:
•
$30,000 annual
retainer payable quarterly; and
•
$30,000 of
restricted stock units, calculated at fair market value on the date
of grant, vesting March 31.
The
following table provides information concerning the compensation
paid to our independent directors for their services as members of
our board of directors for 2016. The information in the following
table excludes any reimbursement of out-of-pocket travel and
lodging expenses which we may have paid.
|
Director Compensation
|
|||||||
|
Name
|
Fees earned or
paid in cash ($)
|
Stock
awards
($)
|
Option
awards
($)
|
Non-equity
incentive
plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All
other
compensation
($)
|
Total
($)
|
|
Charles D.
Morgan
|
30,000
|
36,349
|
0
|
0
|
0
|
0
|
66,349
|
|
Charles L.
Pope
|
30,000
|
36,349
|
0
|
0
|
0
|
0
|
66,349
|
|
Patrick
Terrell
|
30,000
|
31,088
|
0
|
0
|
0
|
0
|
61,088
|
|
F. William Conner
(1)
|
30,000
|
25,986
|
0
|
0
|
0
|
0
|
55,986
|
|
Gordon J.
Cameron
|
5,000
|
4,726
|
0
|
0
|
0
|
0
|
9,726
|
|
G. Kent
Burnett
|
5,000
|
4,726
|
0
|
0
|
0
|
0
|
9,726
|
(1)
Mr. Conner served
as a member of our board of director until November 1,
2016.
Audit Committee Report
Report of the Audit Committee of the Board of
Directors
The primary function of the Audit Committee is to assist the board
of directors in its oversight of our financial reporting processes.
Management is responsible for the preparation, presentation and
integrity of the financial statements, including establishing
accounting and financial reporting principles and designing systems
of internal control over financial reporting. Our independent
auditors are responsible for expressing an opinion as to the
conformity of our consolidated financial statements with generally
accepted accounting principles and auditing management’s
assessment of the effectiveness of internal control over financial
reporting.
With
respect to the year ended December 31, 2016, in addition to its
other work, the Audit Committee:
•
reviewed and
discussed with management and Mayer Hoffman McCann P.C., our
independent registered public accounting firm, our audited
consolidated financial statements as of December 31, 2016 and the
year then ended;
•
discussed with
Mayer Hoffman McCann P.C. the matters required to be discussed by
Statement on Auditing Standards No. 61, “
Communication with Audit Committees
,” as amended, with respect to its review of the findings of
the independent registered public accounting firm during its
examination of our financial statements; and
•
received from
Mayer Hoffman McCann P.C. written affirmation of its independence
as required by the Independence Standards Board Standard No. 1,
“
Independence Discussions
with Audit Committees
.” In addition, the Audit
Committee discussed with Mayer Hoffman McCann P.C., its
independence and determined that the provision of non-audit
services was compatible with maintaining auditor
independence.
The
audit committee recommended, based on the review and discussion
summarized above, that the board of Directors include the audited
consolidated financial statements in the 2016 10-K for filing with
the SEC.
15
|
Dated
April 28, 2017
|
|
Audit
Committee of the Board of Directors of Inuvo, Inc.
|
|
|
|
|
|
|
|
/s/ Charles L. Pope, Chairman
|
|
|
|
/s/ Gordon J. Cameron
|
|
|
|
/s/Patrick Terrell
|
Compliance with Section 16(a) of the Exchange Act
Based
solely upon a review of Forms 3 and 4 and amendments thereto
furnished to us under Rule 16a-3(d) of the Securities Exchange Act
of 1934 during the year ended December 31, 2016 and Forms 5 and
amendments thereto furnished to us with respect to the year ended
December 31, 2016, as well as any written representation from a
reporting person that no Form 5 is required, we are not aware that
any officer, director or 10% or greater stockholder failed to file
on a timely basis, as disclosed in the aforementioned Forms,
reports required by Section 16(a) of the Securities Exchange Act of
1934 during the year ended December 31, 2016.
EXECUTIVE COMPENSATION
Executive officers
|
Name
|
|
Positions
|
|
Richard
K. Howe
|
|
Chairman
of the Board
|
|
Wallace
D. Ruiz
|
|
Chief
Financial Officer, Secretary
|
|
John B.
Pisaris, Esq.
|
|
General
Counsel
|
|
Don
Walker “Trey” Barrett III
|
|
Chief
Operating Officer
|
Executive officers
of our company are appointed by the board of directors and serve at
the pleasure of the board.
Richard K. Howe.
For
information regarding Mr. Howe, please see “Board of
Directors” which appears earlier in this proxy
statement.
Wallace D. Ruiz.
Mr.
Ruiz, 65, has served as our Chief Financial Officer since June
2010. From 2005 until April 2009, Mr. Ruiz was Chief Financial
Officer and Treasurer of SRI Surgical Express, Inc. (Nasdaq: STRC),
a Tampa, Florida provider of outsourced sterilization and supply
chain management services to healthcare providers. From 1995 until
2004 he was Chief Financial Officer of Novadigm, Inc. (Nasdaq:
NVDM), a developer and worldwide marketer of enterprise
infrastructure software that was acquired by Hewlett-Packard
Company in 2004. Mr. Ruiz received a B.S. in Computer Science from
St. John’s University and a M.B.A. in Accounting and Finance
from Columbia University. Mr. Ruiz is a Certified Public
Accountant.
John B. Pisaris
. Mr.
Pisaris, 51, has served as our General Counsel since March 2012
following our acquisition of Vertro. He served as general counsel
of Vertro from October 2004 until March 2012. From February 2004 to
September 2004, Mr. Pisaris served as vice president of legal of
Vertro, and prior to that was a partner at Porter Wright Morris
& Arthur, LLP, a law firm, from January 2002 to January
2004.
Don Walker
“Trey” Barrett, III.
Mr. Barrett, 52, joined Inuvo in
February 2010 as Senior Vice President of Corporate Strategy and
Business Development, and was promoted to Chief Operating Officer
in February 2013. Prior to joining Inuvo, Mr. Barnett served as
Acxiom Corporation's Director of Interactive Media Products
overseeing the innovation and development of the Relevance-X
product line. With over 25 years of data-driven direct marketing
experience, he has been involved in several successful business
start-ups in the direct and interactive marketing industries. Mr.
Barnett earned a bachelor’s degrees in Marketing and
Economics from the University of Arkansas at
Fayetteville.
16
Compensation philosophy
The fundamental objectives of our executive compensation program
are to attract and retain highly qualified executive officers,
motivate these executive officers to materially contribute to our
long-term business success, and align the interests of our
executive officers and stockholders by rewarding our executives for
individual and corporate performance based on targets established
by the Nominating, Corporate Governance and Compensation
Committee.
We believe that achievement of these compensation program
objectives enhances long-term stockholder value. When designing
compensation packages to reflect these objectives, the Nominating,
Corporate Governance and Compensation Committee has adopted the
following four principles as a guide:
•
Alignment with stockholder interests:
Compensation should be tied, in part, to our stock performance
through the granting of equity awards to align the interests of
executive officers with those of our stockholders;
•
Recognition for business performance:
Compensation should correlate in large part with our overall
financial performance;
•
Accountability for individual
performance:
Compensation should partially depend on the
individual executive’s performance, in order to motivate and
acknowledge the key contributors to our success; and
•
Competition:
Compensation should
generally reflect the competitive marketplace and be consistent
with that of other well-managed companies in our peer group. In
implementing this compensation philosophy, the Nominating,
Corporate Governance and Compensation Committee takes into account
the compensation amounts from the previous years for each of the
named executive officers, and internal compensation equity between
the named executive officers and other employees.
2016 compensation determination process
In
2016, the compensation program for our executive officers consisted
of the following components:
•
base
salary;
•
cash bonus
plan;
•
2010 Plan awards;
and
•
other fringe
benefits and perquisites.
The
Nominating, Corporate Governance and Compensation Committee
believes that our executive compensation package consists of
elements of compensation that are typically used to incentivize and
reward executive management at other companies of our size, in our
geographic area or in our industry. Each of these components is
designed to meet the program's objectives of providing a
combination of fixed and variable, performance-based compensation
linked to individual and corporate performance. In the course of
setting the initial compensation level for new hires or adjusting
the compensation of existing employees, the Nominating, Corporate
Governance and Compensation Committee considered the advice and
input of our management. Our Chief Executive Officer typically
makes recommendations to the Nominating, Corporate Governance and
Compensation Committee for any proposed changes in salary, as well
as performance-based awards and stock option grants, for the other
named executive officers. The Nominating, Corporate Governance and
Compensation Committee decides any salary change, as well as
performance-based awards and stock option grants, for the Chief
Executive Officer.
Base salary
Base salary is an important component of executive compensation
because it provides executives with an assured-level of income,
assists us in attracting executives and recognizes different levels
of responsibility and authority among executives. The determination
of base salaries is based upon the executive’s qualifications
and experience, scope of responsibility and potential to achieve
the goals and objectives established for the executive.
Additionally, contractual provisions in executive employment
agreements, past performance, internal pay equity and comparison to
competitive salary practices are also considered.
In general, the Nominating, Corporate Governance and Compensation
Committee considers two types of potential base salary increases
including “merit increases” based upon the
executives’ individual performance and/or “market
adjustments” based upon the peer group salary range for
similar executives.
17
Plan awards
The objective of our long-term
incentive program is to provide a long-term retention incentive for
the named executive officers and others and to align their
interests directly with those of our stockholders by way of stock
ownership. Under our 2010 Equity Compensation Plan (the
“
2010
Plan
”), the
board of directors or the Nominating, Corporate Governance and
Compensation Committee has the discretion to determine whether
equity awards will be granted to named executive officers and if
so, the number of shares subject to each award. Both plans allow
the board or the Nominating, Corporate Governance and Compensation
Committee to grant options and restricted stock and other
stock-based awards with respect to up to shares of our common
stock, valued in whole or in part by reference to the fair market
value of the stock. In most instances, these long-term grants vest
over a multi-year basis.
The
board or the Nominating, Corporate Governance and Compensation
Committee determines the recipients of long-term incentive awards
based upon such factors as performance, the length of continuous
employment, managerial level, any prior awards, and recruiting and
retention demands, expectations and needs. All our employees are
eligible for awards. The board or the Nominating, Corporate
Governance and Compensation Committee grants such awards by formal
action, which awards are not final until a stock option agreement
is delivered by us and executed by both the company and the
employee. There is no set schedule for the board or the Nominating,
Corporate Governance and Compensation Committee to consider and
grant awards. The board and the Nominating, Corporate Governance
and Compensation Committee have the discretion to make grants
whenever it deems it appropriate in our best interests. The
Nominating, Corporate Governance and Compensation Committee has
discretion to grant equity awards at any time.
We do not have any program, plan or practice in place to time
option or other award grants with the release of material,
non-public information and does not release such information for
the purpose of affecting the value of executive compensation. The
exercise price of stock subject to options awarded under the our
plans is the fair market value of the stock on the date the grant
is approved by the board or the Nominating, Corporate Governance
and Compensation Committee. Under the terms of each plan, the fair
market value of the stock is the closing sales price of the stock
on the date the grant is approved by the board or the Nominating,
Corporate Governance and Compensation Committee as reported by the
NYSE MKT.
Cash Bonus Plan
For 2016 we approved a 2016 Management Incentive Program. The
program established a variable cash incentive pool which may be
awarded to executive officers and our employees, including our
Chief Executive Officer, based on achieving certain revenue and net
income levels as determined by our 2016 financial results or at the
discretion of the Committee. The program provided that the total
incentive pool which was available for distribution would be
divided between our executive officers (75% in the aggregate) and
other employees (25% in the aggregate), subject to their continued
employment with our company. The percentage of pool participation
by each of our individual executive officers was fixed by the
program and the amount of individual awards to our employees, other
than our executive officers, was determined by our Chief Executive
Officer.
Other compensation and benefits
We have
historically provided perquisites and other types of non-cash
benefits on a very limited basis in an effort to avoid an
entitlement mentality, reinforce a pay-for-performance orientation
and minimize expense. Such benefits, when provided, can include
additional health care benefits and additional life
insurance.
Retirement and other post-termination benefits
Other than our 401(k) plan, employment agreements with our named
executive officers and certain other employment agreements which
provide for severance for termination without cause, we have not
entered into any employment agreements that provide for a
continuation of post-employment benefits. Our benefits plans are
generally the same for all employees, and so as of the date of this
proxy statement, the Nominating, Corporate Governance and
Compensation Committee does not believe that any such plans in
their present forms would continue post-employment, except as
required by law (including with respect to COBRA), or otherwise set
forth in this proxy statement. We do not currently maintain any
other retirement or post-termination benefits plans.
18
Change in control severance policy
We do
not currently maintain any change in control severance plans or
severance policies, except as provided in the executive employment
agreements and the 2010 Plan, both of which are discussed in this
section. Therefore, none of our named executive officers will
receive any cash severance payments in the event we undergo a
change in control, unless their employment agreement otherwise
provides.
Insurance
All
full-time employees, including the named executive officers, are
eligible to participate in our standard medical, dental, long-term
and short-term disability and life insurance plans. The terms of
such benefits for the named executive officers are generally the
same as those for all other company employees, with the exception
of the level of life insurance coverage. We pay approximately 95%
of the annual health insurance premium with employees paying the
balance through payroll deductions. We pay for up to $1,000,000 of
basic life insurance and AD&D insurance for our CEO and CFO.
All other full-time employees can elect basic life insurance and
AD&D insurance coverage equal to their annual salary, up to
$150,000, paid by us.
401(k)
Our
employees can participate in a 401(k) plan, which is a qualified
defined contribution retirement plan, sponsored by Insperity,
professional employer organization that provides services to
us. Participants are provided the opportunity to make salary
reduction contributions to the plan on a pre-tax basis. We have the
ability to make discretionary matching contributions and
discretionary profit sharing contributions to such plan. Our
current practice is to match participant’s contributions up
to the first 4 percent of their annual earnings. The company match
is fully vested when made.
Other benefits
We seek to maintain an open and inclusive culture in our facilities
and operations among executives and other company employees. Thus,
we do not provide executives with separate dining or other
facilities, nor do we have programs for providing personal-benefit
perquisites to executives, such as defraying the cost of personal
entertainment or family travel. Our basic health care and other
insurance programs are generally the same for all eligible
employees, including the named executive officers.
Summary Compensation Table
The
following table summarizes all compensation recorded by us in each
of the last two completed fiscal years for:
•
all individuals
serving as our principal executive officer or acting in a similar
capacity during the year ended December 31, 2016;
•
our two most
highly compensated named executive officers at December 31, 2016
whose annual compensation exceeded $100,000; and
•
up to two
additional individuals for whom disclosure would have been made in
this table but for the fact that the individual was not serving as
a named executive officer of our company at December 31,
2016.
The
value attributable to any option awards is computed in accordance
with FASB ASC Topic 718. The assumptions made in the valuations of
the option awards are included in Note 10 of the notes to our
consolidated financial statements for the year ended December 31,
2016 appearing in our 2016 10-K.
19
|
Name and
principal position
|
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Nonequity
incentive plan compen-sation ($)
|
Non-qualified
deferred compen-sation earnings ($)
|
All
other
compen-sation
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard K.
Howe,
|
|
2016
|
395,000
|
87,500
|
524,482
|
0
|
0
|
0
|
10,600
|
1,017,581
|
|
Chairman and Chief
Executive Officer
|
|
2015
|
395,000
|
242,308
|
486,064
|
0
|
0
|
0
|
10,600
|
1,133,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wallace D.
Ruiz,
|
|
2016
|
275,000
|
37,500
|
169,872
|
0
|
0
|
0
|
8,737
|
491,109
|
|
Chief Financial
Officer
|
|
2015
|
275,000
|
103,846
|
179,012
|
0
|
0
|
0
|
8,760
|
566,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don (Trey) Barrett
III
|
|
2016
|
250,000
|
50,000
|
208,907
|
0
|
0
|
0
|
3,735
|
512,642
|
|
Chief Operating
Officer
|
|
2015
|
249,167
|
138,462
|
204,886
|
0
|
0
|
0
|
2,642
|
595,156
|
On
March 1, 2012, we entered into employment agreements with each of
Messrs. Howe and Ruiz. Mr. Barrett does not have an employment
agreement and his compensation is set by the Nominating, Corporate
Governance and Compensation Committee.
Executive Employment Agreements
The
employment agreements entered into by Messrs. Howe and Ruiz, each
referred to as an executive, have an initial term of one year,
after which each executive’s employment agreement
automatically renews for additional one-year periods on the same
terms and conditions, unless either party to the agreement
exercises the respective termination rights available to such party
in the agreement. The employment agreements provide for a minimum
annual base salary of $395,000 for Mr. Howe, and $275,000 for Mr.
Ruiz. The employment agreements require our company to compensate
the executives and provide them with certain benefits if their
employment is terminated. The compensation and benefits the
executives are entitled to receive upon termination of employment
vary depending on whether their employment is
terminated:
•
by us
for cause (as defined in the employment agreements);
•
by us
without cause, or by the executive for good reason (as defined in
the employment agreements);
•
due to
death or disability; or
•
by the
executive without good reason.
In the
event of a termination by our company without cause or a
termination by the executive for good reason, the executive would
be entitled to receive the following:
•
his earned but
unpaid basic salary through the termination date, plus a portion of
the executive’s bonus based upon the bonus he would have
earned in the year in which his employment was terminated,
pro-rated for the amount of time employed by us during such year
and paid on the original date such bonus would have been
payable;
•
an amount payable
over the 12-month period following termination equal to one times
the sum of his basic salary at the time of termination, plus a
termination bonus equal to the bonus paid to the executive during
the four fiscal quarters prior to the date of termination (except
that if a target bonus has been established for Mr. Howe, each such
person’s termination bonus is equal to his target bonus for
the fiscal year in which the termination occurs, increased or
decreased pursuant to actual performance versus targeted
performance in the then current plan measured as of the end of the
calendar month preceding the termination date), or in the event of
a change of control (as defined below), the greater of the relevant
calculation above or the bonus paid to the executive during the
four fiscal quarters prior to the change of control;
•
any other amounts
or benefits owing to the executive under our then-applicable
employee benefit, long-term incentive, or equity plans and
programs, within the terms of such plans, payable over the 12-month
period following termination; and
•
benefits
(including health, life, and disability) as if the executive was
still an employee during the 12-month period following
termination.
20
Finally, in the
event of a termination without cause by our company, with good
reason by the executive, or following a change of control (as
defined in the employment agreements), any equity award held by the
executive will immediately and fully vest and become exercisable
throughout the full term of such award as if the executive were
still employed by us. In the event of a termination by us with
cause, Messrs. Ruiz and Howe would be entitled to receive the
earned but unpaid portion of such executive’s base salary
through the date of termination.
In the
event of a termination by us of Mr. Ruiz upon the death or
permanent disability of such executive, the executive would be
entitled to receive the earned but unpaid portion of such
executive’s base salary through the date of termination, the
earned but unpaid portion of any vested incentive compensation
under and consistent with plans adopted by us prior to the date of
termination, and over the 12 months following the date of
termination an amount equal to 20% base salary at the time of
termination for each year of employment with us, capped at 100% of
the base salary.
In the
event of a termination by us of Mr. Howe upon the death or
permanent disability of such executive, the executive would be
entitled to receive the earned but unpaid portion of such
executive’s base salary through the date of termination, any
other amounts or benefits owing to the executive under any of our
then-applicable employee benefit, long-term incentive or equity
plans and programs, and over the 12 months following the date of
termination an amount equal to 20% base salary at the time of
termination for each year of employment with us, capped at 100% of
the base salary.
In the
event of a termination by Mr. Ruiz without good reason, such
executive is entitled to receive the earned but unpaid portion of
such executive’s base salary through the date of termination,
and the earned but unpaid portion of any vested incentive
compensation under and consistent with our plans adopted by us
prior to the date of termination. In the event of a termination by
Mr. Howe without good reason, such executive is entitled to receive
the earned but unpaid portion of his base salary through the
termination date and any other amounts and benefits owing to the
executive under our then applicable employee benefit, long term
incentive or equity plans and programs.
The
executive may terminate employment for any reason (other than good
reason) upon giving 30 days’ advance written notice to us. As
to a termination by Mr. Ruiz for any reason other than a good
reason, we will pay the executive the earned but unpaid portion of
his base salary through the termination date and any earned but
unpaid vested incentive compensation under and consistent with
plans adopted by us prior to the date of termination. As to a
termination by Mr. Howe for any reason other than a good reason, we
will pay the executive the earned but unpaid portion of his base
salary through the termination date and any other amounts and
benefits owing to the executive under our then applicable employee
benefit, long term incentive or equity plans and
programs.
21
Outstanding equity awards at year end
The
following table provides information concerning unexercised
options, stock that has not vested and equity incentive plan awards
for each named executive officer outstanding as of December 31,
2016.
|
OPTION
AWARDS
|
STOCK
AWARDS
|
||||||||
|
Name
|
Number of
securities underlying unexercised options
(#)
exercisable
|
Number of
securities underlying unexercised options
(#)
unexercisable
|
Equity incentive
plan awards: Number of securities underlying unexercised unearned
options
(#)
|
Option exercise
price
($)
|
Option expiration
date
|
Number of shares or
units of stock that have not vested (#)
|
Market value of
shares or units of stock that have not vested
($)
|
Equity incentive
plan awards: Number of unearned shares, units or other rights that
have not vested (#)
|
Equity incentive
plan awards: Market or payout value of unearned shares, units or
other rights that have not vested (#)
|
|
Richard K.
Howe
|
120,000
|
0
|
0
|
$
2.93
|
3/14/2021
|
94,500
|
157,815
|
196,000
|
327,320
|
|
|
|
|
|
|
|
|
|
|
|
|
Wallace D.
Ruiz
|
43,000
|
0
|
0
|
$
2.93
|
3/14/2021
|
33,750
|
56,363
|
70,000
|
116,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Don (Trey) Barrett
III
|
40,000
|
0
|
0
|
$
2.93
|
3/14/2021
|
45,000
|
75,150
|
93,334
|
115,868
|
Our equity compensation plans
Information
regarding the material terms of our 2005 Plan and our 2010 Plan is
contained in the 2016 10-K.
PRINCIPAL STOCKHOLDERS
At
April 27, 2017, we had 28,544,272 of common stock issued and
outstanding. The following table sets forth information known to us
as of April 27, 2017 relating to the beneficial ownership of shares
of our common stock by:
|
|
•
|
each
person who is known by us to be the beneficial owner of more than
5% of our outstanding common stock;
|
|
|
•
|
each
director and nominee;
|
|
|
•
|
each
named executive officer; and
|
|
|
•
|
all
named executive officers and directors as a group.
|
Unless
otherwise indicated, the address of each beneficial owner in the
table set forth below is care of 500 President Clinton Avenue,
Suite 300, Little Rock, Arkansas 72201. We believe that all
persons, unless otherwise noted, named in the table have sole
voting and investment power with respect to all shares of common
stock shown as being owned by them. Under securities laws, a person
is considered to be the beneficial owner of securities owned by him
(or certain persons whose ownership is attributed to him) and that
can be acquired by him within 60 days from April 27, 2017,
including upon the exercise of options, warrants or convertible
securities. We determine a beneficial owner’s percentage
ownership by assuming that options, warrants or convertible
securities that are held by him, but not those held by any other
person, and which are exercisable within 60 days of the that date,
have been exercised or converted.
22
|
Name of
Beneficial Owner
|
No. of Shares
Beneficially Owned
|
% of
Class
|
|
|
|
|
|
Charles
Morgan
|
1,974,963
|
6.9
%
|
|
Richard K. Howe
(1)
|
914,865
|
3.2
%
|
|
Patrick
Terrell
|
622,477
|
2.2
%
|
|
Wallace D. Ruiz
(2)
|
312,084
|
1.1
%
|
|
John
B. Pisaris
(3)
|
290,987
|
1.0
%
|
|
Don Walker
“Trey” Barrett III
(4)
|
254,118
|
0.9
%
|
|
Charles L.
Pope
|
131,591
|
0.5
%
|
|
G. Kent
Burnett
|
111,468
|
0.4
%
|
|
Gordon J. Cameron
(5)
|
58,598
|
0.2
%
|
|
All named executive
officers, directors and director nominees as a group (nine persons)
(1)(2)(3)(4)(5)
|
4,671,152
|
16.2
%
|
———————
(1)
Includes 120,000
shares of common stock issuable pursuant to the exercise of stock
options.
(2)
Includes 43,000
shares of common stock issuable pursuant to the exercise of stock
options.
(3)
Includes 186 shares
and 1,985 shares, respectively, held by Mr. Pisaris' minor
children.
(4)
Includes 40,000
shares of common stock issuable pursuant to the exercise of stock
options.
(5)
Includes 6,630
shares held by Mrs. Cameron.
23
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table sets forth securities authorized for issuance under
any equity compensation plans approved by our stockholders as well
as any equity compensation plans not approved by our stockholders
as of December 31, 2016.
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights(a)
|
Weighted average
exercise price of outstanding options, warrants and
rights
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a)
|
|
|
|
|
|
|
Plans approved by
our stockholders:
|
|
|
|
|
2005 Long-Term
Incentive Plan
|
13,748
|
$
2.97
|
0
|
|
2010 Equity
Compensation Plan
|
1,006,005
|
$
2.84
|
605,356
|
|
Plans not approved
by stockholders
|
0
|
0
|
0
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In
January 2013, we entered into a Sublease with First Orion Corp., an
affiliate of Charles D. Morgan, one of our principal stockholders
and director, and G. Kent Burnett, one of our directors. Under the
terms of the Sublease, which expired in February 2015, we leased
approximately 5,834 square feet of office space in Conway, Arkansas
for a monthly rental of $8,400. In April 2013, we entered into a
Services Agreement with First Orion Corp. whereby we provided each
other with office and technical support services on a cost plus 30%
basis. The fees under the Services Agreement fluctuated depending
on usage and i
n 2016 and
2015, we received a total of $101,884 and $107,196, respectively
from First Orion Corp. for providing services.
On
February 19, 2015, we entered into an Aircraft Time Sharing
Agreement with CD Morg., Inc., an affiliate of Mr. Morgan,
regarding our business use of an aircraft owned by CD Morg., Inc.
The fees under the Aircraft Time Sharing Agreement fluctuate
depending on usage. In 2016 and 2015 these fees were not
material.
Other
than these transactions, there have been no transactions since
January 1, 2015 nor are there any currently proposed transactions
in which we were or are to be participant in which any related
person had or will have a direct or indirect material
interest.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL
MEETING
As of
the date of this proxy statement, we had not received notice of any
stockholder proposals for the 2017 annual meeting described herein
and proposals received subsequent to the date of this proxy
statement will be considered untimely. For a stockholder proposal
to be considered for inclusion in our proxy statement for the 2018
annual meeting, the corporate secretary must receive the written
proposal at our principal executive offices no later than the
deadline stated below. Such proposals must comply with SEC
regulations under Rule 14a-8 regarding the inclusion of stockholder
proposals in company-sponsored proxy materials. Proposals should be
addressed to:
Inuvo,
Inc.
Attention:
Corporate Secretary
500
President Clinton Avenue
Suite
300
Little
Rock, Arkansas 72201
Facsimile:
(877) 311-5050
24
Under
Rule 14a-8, to be timely, a stockholder’s notice must be
received at our principal executive offices not less than 120
calendar days before the date of our proxy statement release to
stockholders in connection with the previous year’s annual
meeting. However, if we did not hold an annual meeting in the
previous year or if the date of this year’s annual meeting
has been changed by more than 30 days from the date of the previous
year’s annual meeting, then the deadline is a reasonable time
before we begin to print and send our proxy materials. Therefore,
stockholder proposals intended to be presented at the 2018 annual
meeting must be received by us at our principal executive office no
later than December 13, 2017 in order to be eligible for inclusion
in our 2018 proxy statement and proxy relating to that meeting.
Upon receipt of any proposal, we will determine whether to include
such proposal in accordance with regulations governing the
solicitation of proxies.
You may
propose director candidates for consideration by the board’s
Nominating, Corporate Governance and Compensation Committee. Any
such recommendations should include the nominee’s name and
qualifications for board membership, information regarding the
candidate as would be required to be included in a proxy statement
filed pursuant to SEC regulations, and a written indication by the
recommended candidate of her or his willingness to serve, and
should be directed to the Corporate Secretary of Inuvo at our
principal executive offices: Inuvo, Inc., 500 President Clinton
Avenue, Suite 300, Little Rock, Arkansas 72201 within the time
period described above for proposals other than matters brought
under SEC Rule 14a-8.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
As
required, we have filed our 2016 10-K with the SEC. Stockholders
may obtain, free of charge, a copy of the 206 10-K by writing to us
at 500 President Clinton Avenue, Suite 300, Little Rock, Arkansas
72201, Attention: Corporate Secretary, or from our website,
www.inuvo.com
.
STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
The SEC
has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for proxy statements with
respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those
stockholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience
for stockholders and cost savings for companies. We and some
brokers household proxy materials, delivering a single proxy
statement to multiple stockholders sharing an address unless
contrary instructions have been received from the affected
stockholders. Once you have received notice from your broker or us
that they are or we will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish
to participate in householding and would prefer to receive a
separate proxy statement, or if you currently receive multiple
proxy statements and would prefer to participate in householding,
please notify your broker if your shares are held in a brokerage
account or us if you hold registered shares. You can notify us by
sending a written request to Inuvo, Inc., Attention: Corporate
Secretary, 500 President Clinton Avenue, Suite 300, Little Rock,
Arkansas 72201 or by faxing a communication to: (877)
311-5050.
WHERE YOU CAN FIND MORE INFORMATION
This
proxy statement refers to certain documents that are not presented
herein or delivered herewith. Such documents are available to any
person, including any beneficial owner of our shares, to whom this
proxy statement is delivered upon oral or written request, without
charge. Requests for such documents should be directed to Corporate
Secretary, Inuvo, Inc., 500 President Clinton Avenue, Suite 300,
Little Rock, Arkansas 72201. Please note that additional
information can be obtained from our website at
www.inuvo.com
.
We file
annual and special reports and other information with the SEC.
Certain of our SEC filings are available over the Internet at the
SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference
facilities:
Public
Reference Room Office
100 F
Street, N.E.
Room
1580
Washington,
D.C. 20549
25
You may
also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. Callers in the United States can
also call 1-202-551-8090 for further information on the operations
of the public reference facilities.
|
|
|
BY ORDER OF THE BOARD OF DIRECTORS |
|
|
|
|
|
|
|
|
By:
|
/s/
Richard
K. Howe
|
|
|
|
|
Richard K.
Howe,
|
|
|
|
|
Chairman and Chief
Executive Officer
|
|
April
28, 2017
26
Appendix A
INUVO, INC.
2017 EQUITY COMPENSATION PLAN
1.
Purpose.
1.1
Purpose
.
The purpose of Plan is to enable the Company to offer to its
employees, officers, directors and consultants whose past, present
and/or potential contributions to the Company and its Subsidiaries
have been, are or will be important to the success of the Company,
an opportunity to acquire an equity interest in the Company. The
types of long-term incentive Awards that may be provided under the
Plan will enable the Company to respond to changes in compensation
practices, tax laws, accounting regulations and the size and
diversity of its businesses.
2.
Definitions.
2.1
Definitions
.
For purposes of the Plan, the following terms shall be defined as
set forth below:
(a)
“
Agreement
”
means the agreement between the Company and the Holder setting
forth the terms and conditions of an Award under the Plan.
Agreements shall be in the form(s) attached
hereto.
(b)
“
Award
”
means Stock Options, Restricted Stock and/or other Stock Based
Awards awarded under the Plan.
(c)
“
Board
”
means the Board of Directors of the Company.
(d)
“
Code
”
means the Internal Revenue Code of 1986, as amended from time to
time.
(e)
“
Committee
”
means the Compensation Committee of the Board or any other
committee of the Board that the Board may designate to administer
the Plan or any portion thereof. If no Committee is so designated,
then all references in this Plan to “Committee” shall
mean the Board.
(f)
“
Common
Stock
” means the common
stock of the Company, $0.001 par value per
share.
(g)
“
Company
”
means Inuvo, Inc., a corporation organized under the laws of the
State of Nevada.
(h)
“
Disability
”
means physical or mental impairment as determined under procedures
established by the Committee for purposes of the
Plan.
(i)
“
Effective
Date
” means the date set
forth in Section 12.1, below.
(j)
“
Fair Market
Value
” unless otherwise
required by any applicable provision of the Code or any regulations
issued thereunder, means, as of any given date: (i) if the Common
Stock is listed on a national securities exchange, the closing
price of the Common Stock in the principal trading market for the
Common Stock on such date, as reported by the exchange (or on the
last preceding trading date if such security was not traded on such
date); (ii) if the Common Stock is not listed on a national
securities exchange, but is traded in the over-the-counter market,
the closing bid price for the Common Stock on such date, as
reported by the OTC Bulletin Board or the Pink OTC Markets Inc. or
similar publisher of such quotations; and (iii) if the fair market
value of the Common Stock cannot be determined pursuant to clause
(i) or (ii) above, such price as the Committee shall determine, in
good faith.
A-1
(k)
“
Holder
”
means a person who has received an Award under the
Plan.
(l)
“
Incentive Stock
Option
” means any Stock
Option intended to be and designated as an “incentive stock
option” within the meaning of Section 422 of the
Code.
(m)
“
Nonqualified Stock
Option
” means any Stock
Option that is not an Incentive Stock Option.
(n)
“
Normal
Retirement
” means
retirement from active employment with the Company or any
Subsidiary, other than for Cause or due to death or disability, of
a Holder who; (i) has reached the age of 65; (ii) has reached the
age of 62 and has completed five years of service with the Company;
or (iii) has reached the age of 60 and has completed 10 years of
service with the Company.
(o)
“
Other Stock-Based
Award
” means an Award
under Section 9, below, that is valued in whole or in part by
reference to, or is otherwise based upon, Common
Stock.
(p)
“
Parent
”
means any present or future “parent corporation” of the
Company, as such term is defined in Section 424(e) of the
Code.
(q)
“
Plan
”
means the Inuvo, Inc. 2017 Equity Compensation Plan, as hereinafter
amended from time to time.
(r)
“
Repurchase
Value
” shall mean the
Fair Market Value in the event the Award to be repurchased under
Section 10.2 is comprised of shares of Common Stock and the
difference between Fair Market Value and the Exercise Price (if
lower than Fair Market Value) in the event the Award is a Stock
Option or Stock Appreciation Right; in each case, multiplied by the
number of shares subject to the Award.
(s)
“
Restricted
Stock
” means Common
Stock, received under an Award made pursuant to Section 8, below
that is subject to restrictions under said Section
8.
(t)
“
SAR
Value
” means the excess
of the Fair Market Value (on the exercise date) over the exercise
price that the participant would have otherwise had to pay to
exercise the related Stock Option, multiplied by the number of
shares for which the Stock Appreciation Right is
exercised.
(u)
“
Stock Appreciation
Right
” means the right to
receive from the Company, on surrender of all or part of the
related Stock Option, without a cash payment to the Company, a
number of shares of Common Stock equal to the SAR Value divided by
the Fair Market Value (on the exercise date).
(v)
“
Stock
Option
” or
“
Option
”
means any option to purchase shares of Common Stock that is granted
pursuant to the Plan.
(w)
“
Subsidiary
”
means any present or future “subsidiary corporation” of
the Company, as such term is defined in Section 424(f) of the
Code.
A-2
3.
Administration.
3.1
Committee
Membership
. The Plan shall be
administered by the Committee, the Board or a committee designated
by the Board. Committee members shall serve for such term as the
Board may in each case determine, and shall be subject to removal
at any time by the Board. The Committee members, to the extent
deemed to be appropriate by the Board, shall be “non-employee
directors” as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended
(“
Exchange
Act
”), and “outside
directors” within the meaning of Section 162(m) of the Code.
The Committee shall conduct itself in conformance with the
provisions of the Compensation Committee
Charter.
3.2
Powers of
Committee
. The Committee shall
have the authority and responsibility to recommend to the Board for
approval, Awards for Board members, executive officers,
non-executive employees and consultants of the Company, pursuant to
the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Restricted Stock, and/or (iv) Other Stock-Based
Awards. For purposes of illustration and not of limitation, the
Committee shall have the authority (subject to the express
provisions of this Plan):
(a)
to select the officers, employees, directors and consultants of the
Company or any Subsidiary to whom Stock Options, Stock Appreciation
Rights, Restricted Stock, and/or Other Stock-Based Awards may from
time to time be awarded hereunder.
(b)
to determine the terms and conditions, not inconsistent with the
terms of the Plan or requisite Board approval, of any Award granted
hereunder including, but not limited to, number of shares, share
exercise price or types of consideration paid upon exercise of
Stock Options and the purchase price of Common Stock awarded under
the Plan (including without limitation by a Holder’s
conversion of deferred salary or other indebtedness of the Company
to the Holder), such as other securities of the Company or other
property, any restrictions or limitations, and any vesting,
exchange, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions, as the Committee shall
determine;
(c)
to determine any specified performance goals or such other factors
or criteria which need to be attained for the vesting of an Award
granted hereunder;
(d)
to determine the terms and conditions under which Awards granted
hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other equity awarded under this Plan and cash
Awards made by the Company or any Subsidiary outside of this Plan;
and
(e)
to determine the extent and circumstances under which Common Stock
and other amounts payable with respect to an Award hereunder shall
be deferred that may be either automatic or at the election of the
Holder; and
3.3
Interpretation of
Plan
.
(a)
Committee
Authority
. Subject to Section
11, below, the Committee shall have the authority to adopt, alter
and repeal such administrative rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable,
to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and to determine the form and substance of
all Agreements relating thereto), and to otherwise supervise the
administration of the Plan. Subject to Section 11, below, all
decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee’s sole discretion,
subject to Board authorization if indicated, and shall be final and
binding upon all persons, including the Company, its Subsidiaries
and Holders.
A-3
(b)
Incentive
Stock Options
. Anything in the
Plan to the contrary notwithstanding, no term or provision of the
Plan relating to Incentive Stock Options (including but limited to
Stock Appreciation rights granted in conjunction with an Incentive
Stock Option) or any Agreement providing for Incentive Stock
Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so
as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the Holder(s) affected, to disqualify any
Incentive Stock Option under such Section 422.
4.
Stock Subject to Plan.
4.1
Number of
Shares
. The total number of
shares of Common Stock reserved and available for issuance under
the Plan shall be two (2) million shares. Shares of Common Stock
under the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares. The number of shares of Common
Stock available for issuance under the Plan shall automatically
increase on the first trading day of January each calendar year
during the term of the Plan, beginning with calendar year 2018, by
an amount equal to one percent (1%) of the total number of shares
of Common Stock outstanding on the last trading day in December of
the immediately preceding calendar year, but in no event shall any
such annual increase exceed 150,000 shares of Common Stock. If any
shares of Common Stock that have been granted pursuant to a Stock
Option cease to be subject to a Stock Option, or if any shares of
Common Stock that are subject to any Stock Appreciation Right,
Restricted Stock, Deferred Stock Award, or Other Stock-Based Award
granted hereunder are forfeited or any such Award otherwise
terminates without a payment being made to the Holder in the form
of Common Stock, such shares shall again be available for
distribution in connection with future grants and Awards under the
Plan.
4.2
Adjustment
Upon Changes in Capitalization, Etc
. In the event of any dividend (other than a cash
dividend) payable on shares of Common Stock, stock split, reverse
stock split, combination or exchange of shares, or other similar
event (not addressed in Section 4.3, below) occurring after the
grant of an Award, which results in a change in the shares of
Common Stock of the Company as a whole, (i) the number of shares
issuable in connection with any such Award and the purchase price
thereof, if any, shall be proportionately adjusted to reflect the
occurrence of any such event and (ii)
the Committee shall
determine whether such change requires an adjustment in the
aggregate number of shares reserved for issuance under the Plan or
to retain the number of shares reserved and available under the
Plan in their sole discretion
. Any
adjustment required by this Section 4.2 shall be made by the
Committee, in good faith, subject to Board authorization if
indicated, whose determination will be final, binding and
conclusive.
4.3
Certain
Mergers and Similar Transactions
. In the event of (a) a dissolution or liquidation
of the Company, (b) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in
which there is no substantial change in the stockholders of the
Company or their relative stock holdings and the Awards granted
under this Plan are assumed, converted or replaced by the successor
corporation, which assumption will be binding on all Awardees, (c)
a merger in which the Company is the surviving corporation but
after which the stockholders of the Company immediately prior to
such merger (other than any stockholder that merges, or which owns
or controls another corporation that merges, with the Company in
such merger) cease to own their shares or other equity interest in
the Company, (d) the sale of substantially all of the assets of the
Company, or (e) the acquisition, sale, or transfer of more than 50%
of the outstanding shares of the Company by tender offer or similar
transaction, any or all outstanding Awards may be assumed,
converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all
Awardees. In the alternative, the successor corporation may
substitute equivalent Awards or provide substantially similar
consideration to Awardees as was provided to stockholders (after
taking into account the existing provisions of the Awards). The
successor corporation may also issue, in place of outstanding
Shares of the Company held by the Holder, substantially similar
shares or other property subject to repurchase restrictions no less
favorable to the Holder. In the event such successor corporation
(if any) refuses or otherwise declines to assume or substitute
Awards, as provided above, (i) the vesting of any or all Awards
granted pursuant to this Plan will accelerate immediately prior to
the effective date of a transaction described in this Section 4.3
and (ii) any or all Options granted pursuant to this Plan will
become exercisable in full prior to the consummation of such event
at such time and on such conditions as the Committee determines. If
such Options are not exercised prior to the consummation of the
corporate transaction, they shall terminate at such time as
determined by the Committee. Subject to any greater rights granted
to Awardees under the foregoing provisions of this Section 4.3, in
the event of the occurrence of any transaction described in this
Section 4.3, any outstanding Awards will be treated as provided in
the applicable agreement or plan of merger, consolidation,
dissolution, liquidation, or sale of assets.
A-4
5.
Eligibility.
Awards
may be made or granted to employees, officers, directors and
consultants who are deemed to have rendered or to be able to render
significant services to the Company or its Subsidiaries and who are
deemed to have contributed or to have the potential to contribute
to the success of the Company. No Incentive Stock Option shall be
granted to any person who is not an employee of the Company or a
Subsidiary at the time of grant. Notwithstanding anything to the
contrary contained in the Plan, Awards covered or to be covered
under a registration statement on Form S-8 may be made under the
Plan only if (a) they are made to natural persons, (b) who provide
bona fide services to the Company or its Subsidiaries, and (c) the
services are not in connection with the offer and sale of
securities in a capital raising transaction, and do not directly or
indirectly promote or maintain a market for the Company’s
securities.
6.
Stock Options.
6.1
Grant and
Exercise
. Stock Options granted
under the Plan may be of two types: (i) Incentive Stock Options and
(ii) Nonqualified Stock Options. Any Stock Option granted under the
Plan shall contain such terms, not inconsistent with this Plan, or
with respect to Incentive Stock Options, not inconsistent with the
Plan and the Code, as the Committee may from time to time approve.
The Committee shall have the authority to grant Incentive Stock
Options or Non-qualified Stock Options, or both types of Stock
Options, which may be granted alone or in addition to other Awards
granted under the Plan. To the extent that any Stock Option
intended to qualify as an Incentive Stock Option does not so
qualify, it shall constitute a separate Nonqualified Stock
Option.
6.2
Terms and
Conditions
. Stock Options
granted under the Plan shall be subject to the following terms and
conditions:
(a)
Option
Term
. The term of each Stock
Option shall be fixed by the Committee; provided, however, that an
Incentive Stock Option may be granted only within the ten-year
period commencing from the Effective Date and may only be exercised
within ten years of the date of grant (or five years in the case of
an Incentive Stock Option granted to an optionee who, at the time
of grant, owns Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company
(“
10%
Stockholder
”).
(b)
Exercise
Price
. The exercise price per
share of Common Stock purchasable under a Stock Option shall be
determined by the Committee at the time of grant and may not be
less than 100% of the Fair Market Value on the day of grant;
provided, however, that the exercise price of an Incentive Stock
Option granted to a 10% Stockholder shall not be less than 110% of
the Fair Market Value on the date of grant.
(c)
Exercisability
.
Stock Options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the
Committee and as set forth in Section 10, below. If the Committee
provides, in its discretion, that any Stock Option is exercisable
only in installments, i.e., that it vests over time, the Committee
may waive such installment exercise provisions at any time at or
after the time of grant in whole or in part, based upon such
factors as the Committee shall determine.
A-5
(d)
Method of
Exercise
. Subject to whatever
installment, exercise and waiting period provisions are applicable
in a particular case; Stock Options may be exercised in whole or in
part at any time during the term of the Option, by giving written
notice of exercise to the Company specifying the number of shares
of Common Stock to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, which shall be in cash
or, if provided in the Agreement, either in shares of Common Stock
(including Restricted Stock and other contingent Awards under this
Plan) or partly in cash and partly in such Common Stock, or such
other means which the Committee determines are consistent with the
Plan’s purpose and applicable law. Cash payments shall be
made by wire transfer, certified or bank check or personal check,
in each case payable to the order of the Company; provided,
however, that the Company shall not be required to deliver
certificates for shares of Common Stock with respect to which an
Option is exercised until the Company has confirmed the receipt of
good and available funds in payment of the purchase price thereof.
Payments in the form of Common Stock shall be valued at the Fair
Market Value on the date prior to the date of exercise. Such
payments shall be made by delivery of stock certificates in
negotiable form that are effective to transfer good and valid title
thereto to the Company, free of any liens or encumbrances. A Holder
shall have none of the rights of a Stockholder with respect to the
shares subject to the Option until such shares shall be transferred
to the Holder upon the exercise of the Option.
(e)
Transferability
.
Except as may be set forth in the Agreement, no Stock Option shall
be transferable by the Holder other than by will or by the laws of
descent and distribution, and all Stock Options shall be
exercisable, during the Holder’s lifetime, only by the Holder
(or, to the extent of legal incapacity or incompetency, the
Holder’s guardian or legal
representative).
(f)
Termination by Reason
of Death
. If a Holder’s
employment by the Company or a Subsidiary terminates by reason of
death, any Stock Option held by such Holder, unless otherwise
determined by the Committee at the time of grant and set forth in
the Agreement, shall thereupon automatically terminate, except that
the portion of such Stock Option that has vested on the date of
death may thereafter be exercised by the legal representative of
the estate or by the legatee of the Holder under the will of the
Holder, for a period of one year (or such other greater or lesser
period as the Committee may specify at grant) from the date of such
death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(g)
Termination by Reason
of Disability
. If a
Holder’s employment by the Company or any Subsidiary
terminates by reason of Disability, any Stock Option held by such
Holder, unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, shall there upon
automatically terminate, except that the portion of such Stock
Option that has vested on the date of termination may thereafter be
exercised by the Holder for a period of one year (or such other
greater or lesser period as the Committee may specify at the time
of grant) from the date of such termination of employment or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(h)
Other
Termination
. Subject to the
provisions of Section 13, below, and unless otherwise determined by
the Committee at the time of grant and set forth in the Agreement,
if a Holder is an employee of the Company or a Subsidiary at the
time of grant and if such Holder’s employment by the Company
or any Subsidiary terminates for any reason other than death or
Disability, the Stock Option shall thereupon automatically
terminate, except that if the Holder’s employment is
terminated by the Company or a Subsidiary without cause or due to
Normal Retirement, then the portion of such Stock Option that has
vested on the date of termination of employment may be exercised
for the lesser of three months after termination of employment or
the balance of such Stock Option’s term.
(i)
Additional
Incentive Stock Option Limitation
. In the case of an Incentive Stock Option, the
aggregate Fair Market Value (on the date of grant of the Option)
with respect to which Incentive Stock Options become exercisable
for the first time by a Holder during any calendar year (under all
such plans of the Company and its Parent and Subsidiary) shall not
exceed $100,000.
A-6
(j)
Buyout and
Settlement Provisions
. The
Committee may at any time, subject to Board authorization, if
indicated, offer to repurchase a Stock Option previously granted,
based upon such terms and conditions as the Committee shall
establish and communicate to the Holder at the time that such offer
is made.
7.
Stock Appreciation Rights.
7.1
Grant and
Exercise
. The Committee,
subject to Board authorization, if indicated, may grant Stock
Appreciation Rights to participants who have been, or are being
granted, Stock Options under the Plan as a means of allowing such
participants to exercise their Stock Options without the need to
pay the exercise price in cash. In the case of a Nonqualified Stock
Option, a Stock Appreciation Right may be granted either at or
after the time of the grant of such Nonqualified Stock Option. In
the case of an Incentive Stock Option, a Stock Appreciation Right
may be granted only at the time of the grant of such Incentive
Stock Option.
7.2
Terms and
Conditions
. Stock Appreciation
Rights shall be subject to the following terms and
conditions:
(a)
Exercisability
.
Stock Appreciation Rights shall be exercisable as shall be
determined by the Committee and set forth in the Agreement, subject
to the limitations, if any, imposed by the Code, with respect to
related Incentive Stock Options.
(b)
Termination
.
A Stock Appreciation Right shall terminate and shall no longer be
exercisable upon the termination or exercise of the related Stock
Option.
(c)
Method of
Exercise
. Stock Appreciation
Rights shall be exercisable upon such terms and conditions as shall
be determined by the Committee and set forth in the Agreement and
by surrendering the applicable portion of the related Stock Option.
Upon such exercise and surrender, the Holder shall be entitled to
receive a number of shares of Common Stock equal to the SAR Value
divided by the Fair Market Value on the date the Stock Appreciation
Right is exercised.
(d)
Shares
Affected Upon Plan
. The
granting of a Stock Appreciation Right shall not affect the number
of shares of Common Stock available for Awards under the Plan. The
number of shares available for Awards under the Plan will, however,
may be reduced by the number of shares of Common Stock acquirable
upon exercise of the Stock Option to which such Stock Appreciation
Right relates.
8.
Restricted Stock.
8.1
Grant
.
Shares of Restricted Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee,
subject to Board authorization, if indicated, shall determine the
eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be
awarded, the price (if any) to be paid by the Holder, the time or
times within which such Awards may be subject to forfeiture
(“
Restriction
Period
”), the vesting
schedule and rights to acceleration thereof, and all other terms
and conditions of the Awards.
8.2
Terms and
Conditions
. Each Restricted
Stock Award shall be subject to the following terms and
conditions:
(a)
Certificates
.
Restricted Stock, when issued, will be represented by a stock
certificate or certificates registered in the name of the Holder to
whom such Restricted Stock shall have been awarded. During the
Restriction Period, certificates representing the Restricted Stock
and any securities constituting Retained Distributions (as defined
below) shall bear a legend to the effect that ownership of the
Restricted Stock (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the
restrictions, terms and conditions provided in the Plan and the
Agreement. Such certificates shall be deposited by the Holder with
the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to
the Company of all or any portion of the Restricted Stock and any
securities constituting Retained Distributions that shall be
forfeited or that shall not become vested in accordance with the
Plan and the Agreement.
A-7
(b)
Rights of
Holder
. Restricted Stock shall
constitute issued and outstanding shares of Common Stock for all
corporate purposes. The Holder will have the right to vote such
Restricted Stock, to receive and retain all regular cash dividends
and other cash equivalent distributions as the Board may in its
sole discretion designate, pay or distribute on such Restricted
Stock and to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such Restricted Stock, with
the exceptions that (i) the Holder will not be entitled to delivery
of the stock certificate or certificates representing such
Restricted Stock until the Restriction Period shall have expired
and unless all other vesting requirements with respect thereto
shall have been fulfilled; (ii) the Company will retain custody of
the stock certificate or certificates representing the Restricted
Stock during the Restriction Period; (iii) other than regular cash
dividends and other cash equivalent distributions as the Board may
in its sole discretion designate, pay or distribute, the Company
will retain custody of all distributions (“Retained
Distributions”) made or declared with respect to the
Restricted Stock (and such Retained Distributions will be subject
to the same restrictions, terms and conditions as are applicable to
the Restricted Stock) until such time, if ever, as the Restricted
Stock with respect to which such Retained Distributions shall have
been made, paid or declared shall have become vested and with
respect to which the Restriction Period shall have expired; (iv) a
breach of any of the restrictions, terms or conditions contained in
this Plan or the Agreement or otherwise established by the
Committee with respect to any Restricted Stock or Retained
Distributions will cause a forfeiture of such Restricted Stock and
any Retained Distributions with respect
thereto.
(c)
Vesting;
Forfeiture
. Upon the expiration
of the Restriction Period with respect to each Award of Restricted
Stock and the satisfaction of any other applicable restrictions,
terms and conditions (i) all or part of such Restricted Stock shall
become vested in accordance with the terms of the Agreement,
subject to Section 10, below, and (ii) any Retained Distributions
with respect to such Restricted Stock shall become vested to the
extent that the Restricted Stock related thereto shall have become
vested, subject to Section 10, below. Any such Restricted Stock and
Retained Distributions that do not vest shall be forfeited to the
Company and the Holder shall not thereafter have any rights with
respect to such Restricted Stock and Retained Distributions that
shall have been so forfeited.
9.
Other Stock-Based Awards.
Other
Stock-Based Awards may be awarded, subject to limitations under
applicable law, that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on, or related to,
shares of Common Stock, as deemed by the Committee to be consistent
with the purposes of the Plan, including, without limitation,
purchase rights, shares of Common Stock awarded which are not
subject to any restrictions or conditions, or other rights
convertible into shares of Common Stock and Awards valued by
reference to the value of securities of or the performance of
specified Subsidiaries. Other Stock-Based Awards may be awarded
either alone or in addition to or in tandem with any other Awards
under this Plan or any other plan of the Company. Each other
Stock-Based Award shall be subject to such terms and conditions as
may be determined by the Committee.
10.
Accelerated Vesting and Exercisability.
10.1
Non-Approved
Transactions
. If any
“person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the “beneficial
owner” (as referred in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company’s
then outstanding securities in one or more transactions, and the
Board does not authorize or otherwise approve such acquisition,
then the vesting periods of any and all Stock Options and other
Awards granted and outstanding under the Plan shall be accelerated
and all such Stock Options and Awards will immediately and entirely
vest, and the respective holders thereof will have the immediate
right to purchase and/or receive any and all Common Stock subject
to such Stock Options and Awards on the terms set forth in this
Plan and the respective agreements respecting such Stock Options
and Awards.
A-8
10.2
Approved
Transactions
. The Committee
may, subject to Board authorization, if indicated, in the event of
an acquisition of substantially all of the Company’s assets
or at least 50% of the combined voting power of the Company’s
then outstanding securities in one or more transactions (including
by way of merger or reorganization) which has been approved by the
Company’s Board of Directors, (i) accelerate the vesting of
any and all Stock Options and other Awards granted and outstanding
under the Plan, and (ii) require a Holder of any Award granted
under this Plan to relinquish such Award to the Company upon the
tender by the Company to Holder of cash in an amount equal to the
Repurchase Value of such Award.
11.
Amendment and Termination.
The
Board may at any time, and from time to time, amend alter, suspend
or discontinue any of the provisions of the Plan, but no amendment,
alteration, suspension or discontinuance shall be made that would
impair the rights of a Holder under any Agreement theretofore
entered into hereunder, without the Holder’s
consent.
12.
Term of Plan.
12.1
Effective
Date
. The Plan shall become
effective at such time as the Plan is approved and adopted by the
Company’s Board of Directors (the “
Effective
Date
”), subject to the
following provisions:
(a)
to the extent that the Plan authorizes the Award of Incentive Stock
Options, stockholder approval for the Plan shall be obtained within
12 months of the Effective Date; and
(b)
the failure to obtain stockholder for the Plan as contemplated by
subparagraph (a) of this Section 12 shall not invalidate the Plan;
provided, however, that (i) in the absence of such stockholder
approval, Incentive Stock Options may not be awarded under the Plan
and (ii) any Incentive Stock Options theretofore awarded under the
Plan shall be converted into Non-Qualified Options upon terms and
conditions determined by the Committee to reflect, as nearly as is
reasonably practicable in its sole determination, the terms and
conditions of the Incentive Stock Options being so
converted.
12.2
Termination
Date
. Unless otherwise
terminated by the Board, this Plan shall continue to remain
effective until the earlier of ten (10) years from the Effective
Date or such time as no further Awards may be granted and all
Awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options
may be made only during the ten-year period following the Effective
Date.
13.
General Provisions.
13.1
Written
Agreements
. Each Award granted
under the Plan shall be confirmed by, and shall be subject to the
terms, of the Agreement executed by the Company and the Holder. The
Committee may terminate any Award made under the Plan if the
Agreement relating thereto is not executed and returned to the
Company within 10 days after the Agreement has been delivered to
the Holder for his or her execution.
13.2
Unfunded
Status of Plan
. The Plan is
intended to constitute an “unfunded” plan for incentive
and deferred compensation. With respect to any payments not yet
made to a Holder by the Company, nothing contained herein shall
give any such Holder any rights that are greater than those of a
general creditor of the Company.
A-9
13.3
Employees
.
(a)
Engaging
in Competition with the Company; Disclosure of Confidential
Information
. If a
Holder’s employment with the Company or a Subsidiary is
terminated for any reason whatsoever, and within three months after
the date thereof such Holder either (i) accepts employment with any
competitor of, or otherwise engages in competition with, the
Company or (ii) discloses to anyone outside the Company or uses any
confidential information or material of the Company in violation of
the Company’s policies or any agreement between the Holder
and the Company, the Committee, in its sole discretion, may require
such Holder to return to the Company the economic value of any
Award that was realized or obtained by such Holder at any time
following the grant date of any such Award.
(b)
Termination for
Cause
. If a Holder’s
employment with the Company or a Subsidiary is terminated for
cause, subsequent to the grant of any Award under this Plan to such
employee, the Committee, in its sole discretion, may require such
Holder to return to the Company the economic value of any Award
that was realized or obtained by such Holder at any time following
the grant date of such Award.
(c)
No Right
of Employment
. Nothing
contained in the Plan or in any Award hereunder shall be deemed to
confer upon any Holder who is an employee of the Company or any
Subsidiary any right to continued employment with the Company or
any Subsidiary, nor shall it interfere in any way with the right of
the Company or any Subsidiary to terminate the employment of any
Holder who is an employee at any time.
13.4.
Investment
Representations; Company Policy
. The Committee may require each person acquiring
shares of Common Stock pursuant to a Stock Option or other Award
under the Plan to represent to and agree with the Company in
writing that the Holder is acquiring the shares for investment
without a view to distribution thereof. Each person acquiring
shares of Common Stock pursuant to a Stock Option or other Award
under the Plan shall be required to abide by all policies of the
Company in effect at the time of such acquisition and thereafter
with respect to the ownership and trading of the Company’s
securities.
13.5
Additional
Incentive Arrangements
. Nothing
contained in the Plan shall prevent the Board from adopting such
other or additional incentive arrangements as it may deem
desirable, including, but not limited to, the granting of Stock
Options and the Awarding of Common Stock and cash otherwise than
under the Plan; and such arrangements may be either generally
applicable or applicable only in specific
cases.
13.6
Withholding
Taxes
. Not later than the date
as of which an amount must first be included in the gross income of
the Holder for Federal income tax purposes with respect to any
option or other Award under the Plan, the Holder shall pay to the
Company, or make arrangements satisfactory to the Committee
regarding the payment of, any Federal, state and local taxes of any
kind required by law to be withheld or paid with respect to such
amount. If permitted by the Committee, tax withholding or payment
obligations may be settled with Common Stock, including Common
Stock that is part of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditioned upon such payment or arrangements and the Company or
the Holder’s employer (if not the Company) shall, to the
extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Holder from the
Company or any Subsidiary.
13.7
Governing
Law
. The Plan and all Awards
made and actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of
Nevada.
13.8
Other
Benefit Plans
. Any Award
granted under the Plan shall not be deemed compensation for
purposes of computing benefits under any retirement plan of the
Company or any Subsidiary and shall not affect any benefits under
any other benefit plan now or subsequently in effect under which
the availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such
other plan to Awards under this Plan).
A-10
13.9
Non-Transferability
.
Except as otherwise expressly provided in the Plan or the
Agreement, no right or benefit under the Plan may be alienated,
sold, assigned, hypothecated, pledged, exchanged, transferred,
encumbered or charged, and any attempt to alienate, sell, assign,
hypothecate, pledge, exchange, transfer, encumber or charge the
same shall be void.
13.10
Applicable
Laws
. The obligations of the
Company with respect to all Stock Options and Awards under the Plan
shall be subject to (i) all applicable laws, rules and regulations
and such approvals by any governmental agencies as may be required,
including, without limitation, the Securities Act of 1933, as
amended, and (ii) the rules and regulations of any securities
exchange on which the Common Stock may be
listed.
13.11
Conflicts.
If any of the terms or provisions of
the Plan or an Agreement conflict with the requirements of Section
422 of the Code, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with such requirements.
Additionally, if this Plan or any Agreement does not contain any
provision required to be included herein under Section 422 of the
Code, such provision shall be deemed to be incorporated herein and
therein with the same force and effect as if such provision had
been set out at length herein and therein. If any of the terms or
provisions of any Agreement conflict with any terms or provisions
of the Plan, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of
the Plan. Additionally, if any Agreement does not contain any
provision required to be included therein under the Plan, such
provision shall be deemed to be incorporated therein with the same
force and effect as if such provision had been set out at length
therein.
13.12
Non-Registered
Stock
. The shares of Common
Stock to be distributed under this Plan have not been, as of the
Effective Date, registered under the Securities Act of 1933, as
amended, or any applicable state or foreign securities laws and the
Company has no obligation to any Holder to register the Common
Stock or to assist the Holder in obtaining an exemption from the
various registration requirements, or to list the Common Stock on a
national securities exchange or any other trading or quotation
system.
A-11
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INUVO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS ON JUNE 19, 2017 AT 9:00 A.M. LOCAL
TIME
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CONTROL ID:
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REQUEST ID:
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The undersigned, a stockholder of Inuvo, Inc. (the
“
Company
”),
hereby revoking any proxy heretofore given, does hereby appoint
John B. Pisaris and Wallace D. Ruiz, and each of them, proxy, with
power of substitution, for and in the name of the undersigned to
attend the 2017 Annual Meeting of Stockholders of the Company to be
held at the Company's offices located at 500 President Clinton
Boulevard, Suite 300, Little Rock, AR 72201 on June 19, 2017 at
9:00 a.m. local time, or at any adjournment or postponement
thereof, and there to vote, as designated
below:
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please mark, sign, date, and return this Proxy Card promptly using
the enclosed envelope.
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FAX:
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Complete the reverse portion of this Proxy Card and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/INUV
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PHONE:
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1-866-752-VOTE(8683)
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2017 ANNUAL MEETING OF THE STOCKHOLDERS OF INUVO, INC.
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PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE:
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal 1
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FOR ALL
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AGAINST
ALL
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FOR ALL
EXCEPT
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Election of two Class III Directors:
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Charles
D. Morgan
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Patrick
Terrell
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CONTROL ID:
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REQUEST ID:
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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The ratification of the appointment of Mayer Hoffman McCann P.C. as
the Company's independent registered public accounting
firm.
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☐
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☐
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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Adoption of the 2017 Equity Compensation Plan
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☐
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MARK “X” HERE IF YOU PLAN
TO ATTEND THE MEETING:
☐
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In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the 2017 Annual Meeting,
and any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
CLASS III DIRECTOR NOMINEES AND "FOR" PROPOSALS 2 AND
3.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY INSTRUCTION IS
INDICATED, THE VOTE OF THE UNDERSIGNED WILL BE CAST
“FOR” PROPOSALS 1, 2 AND 3. IF ANY OTHER BUSINESS IS
PRESENTED AT THE 2017 ANNUAL MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE 2017 ANNUAL MEETING.
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MARK HERE FOR ADDRESS CHANGE
☐
New Address (if applicable):
_______________________________
IMPORTANT:
Please sign exactly
as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
Dated: ________________________, 2017
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(Print Name of Stockholder and/or Joint Tenant)
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(Signature of Stockholder)
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(Second Signature if held jointly)
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TABLE OF CONTENTS