LENDWAY, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No.
__)
Filed
by the Registrant
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Filed
by a Party other than the Registrant
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Check
the appropriate box:
☐
Preliminary Proxy Statement
☐
Confidential, For Use of the Commission Only
(As Permitted by Rule 14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material under Rule
14a-12
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Insignia Systems, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
☒
No fee required
☐
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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of each class of securities to which transaction
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(2) Aggregate
number of securities to which transaction applies:
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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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fee paid:
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materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form or
schedule and the date of its filing.
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Filed:
8799
Brooklyn Blvd., Minneapolis, MN 55445
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 6, 2017
To the
Shareholders of Insignia Systems, Inc.:
Notice
is hereby given that the Annual Meeting of Shareholders of Insignia
Systems, Inc. (the “Company”), a Minnesota corporation,
will be held on Tuesday, June 6, 2017, at 9:00 a.m., Central Time,
at the Minneapolis Marriott West, located at 9960 Wayzata
Boulevard, Minneapolis, Minnesota for the following
purposes:
1.
To
elect five nominees named in our proxy statement to serve as
directors;
2.
To
approve, by non-binding vote, the Company’s executive
compensation;
3.
To
recommend, by non-binding vote, the frequency of future votes on
executive compensation;
4.
To
ratify the appointment of Baker Tilly Virchow Krause, LLP as the
independent registered public accounting firm for the year ending
December 31, 2017; and
5.
To
transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The
foregoing items of business are more fully described in the proxy
statement accompanying this Notice.
The
Board of Directors has set the close of business on April 13,
2017
as the record date
for the determination of shareholders entitled to notice of and to
vote at the meeting.
All shareholders are cordially invited to attend the meeting in
person. However, to ensure your representation at the meeting, you
are urged to vote by Internet, by telephone, or if the proxy
materials were mailed to you, by completing, signing and mailing
the enclosed proxy card.
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By
Order of the Board of Directors
Kristine
Glancy
President
and Chief Executive Officer
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Important Notice Regarding Availability of Proxy Materials for
the
Shareholder Meeting to Be Held on June 6, 2017:
The Proxy Statement and the Annual Report are available free of
charge at:
https://materials.proxyvote.com/45765Y
PROXY STATEMENT
T
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Annual Meeting of Shareholders
June 6, 2017
_______________________________________
PROXY STATEMENT
___________________________________________________
G
ENERAL
INFORMATION
This
proxy statement is furnished to the shareholders of Insignia
Systems, Inc. (the “Company”) in connection with the
solicitation of proxies by the Board of Directors (the
“Board”) to be voted at the Annual Meeting of
Shareholders (the “Annual Meeting”) to be held on June
6, 2017, and at any adjournment of the meeting.
Important Notice Regarding the Internet Availability of Proxy
Materials
for the Annual Meeting to be Held on June 6, 2017
In
accordance with rules and regulations adopted by the U.S.
Securities and Exchange Commission (the “SEC”), we are
furnishing our proxy materials on the Internet. “Proxy
materials” means this Proxy Statement, our Annual Report for
the fiscal year ended December 31, 2016 and any amendments or
updates to these documents. A Notice Regarding the Availability of
Proxy Materials (“Notice of Internet Availability”)
will be mailed to shareholders on or about April 25, 2017. The
Notice of Internet Availability contains instructions on how to
access our Proxy Statement and Annual Report and how to vote via
the Internet, by telephone or by mail.
What is the purpose of the Annual Meeting and what are the
board’s recommendations?
At our
annual meeting, shareholders will vote on the following items of
business:
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Item of Business
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Board Recommendation
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1.
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Election
of five directors
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FOR
each nominee
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2.
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Advisory,
non-binding vote, to approve the Company’s executive
compensation
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FOR
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3.
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Advisory,
non-binding vote, to approve the frequency of future votes on
executive compensation
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1 YEAR
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4.
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Ratification
of Independent Registered Public Accounting Firm
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FOR
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If any other matters properly come before the Annual Meeting or any
adjournment or postponement thereof, then the shares represented by
the proxies solicited by the Board may be voted by the persons
named therein at their discretion.
Who is entitled to vote at the meeting?
As of
the record date, April 13, 2017, there were 11,760,817 shares of
common stock, par value $.01 per share, outstanding and entitled to
vote at the Annual Meeting. Each share of common stock is entitled
to one vote. Only shareholders of record at the close of business
on April 13, 2017, are entitled to vote at the Annual Meeting and
at any adjournment or postponement thereof. See “How many
shares must be present to hold the meeting?” below for a
discussion of quorum.
What is the difference between a “shareholder of
record” and a shareholder who holds the stock in
“street name”?
Shareholder of Record.
If your shares
are registered directly in your name with our transfer agent, Wells
Fargo Shareowner Services, you are considered, with respect to
those shares, a “shareholder of record” (also known as
a “registered shareholder”). The proxy materials will
be sent directly to you by us or our representative.
Beneficial Owner
. If your shares are
held in a brokerage account or by another nominee, your shares are
said to be held in “street name” and you are considered
the beneficial owner of the shares. Technically, the bank or broker
is the shareholder of record with respect to those shares. In this
case, the proxy materials will be forwarded to you by your broker,
bank or other financial institution or its designated
representative. Through this process, your bank or broker will
collect the voting instructions from all their respective customers
who hold our shares, including you, and then submits those votes to
us.
How do I vote my shares?
If you
are a
shareholder
who holds the stock in street name
,
you must vote your shares using the
method provided by your broker, bank, trust or other designee,
which is similar to the voting procedure for shareholders of record
outlined below. You will receive a voting instruction form (not a
proxy card) to use to direct your broker, bank, trust or other
designee how to vote your shares.
If you
are a
shareholder
of record
,
you can
submit a proxy to be voted at the meeting in the following
ways:
Vote by Internet
: To vote over the internet, go to
www.proxyvote.com
.
You must enter your Control Number that appears on your Notice of
Internet Availability or proxy card that was mailed to you and
follow the instructions. The steps have been designed to
authenticate your identity, allow you to give voting instructions,
and confirm that those instructions have been recorded
properly.
Vote by Telephone
: To vote over the telephone, call the
toll-free number on the Notice of Internet Availability that was
mailed to you. You must enter your Control Number that appears on
your Notice of Internet Availability or proxy card and then follow
the instructions. The steps have been designed to authenticate your
identity, allow you to give voting instructions, and confirm that
those instructions have been recorded properly.
Vote by Mail
: You can vote by mail by requesting a paper
copy of the materials, which will include a proxy card. Mark, sign,
date and return the proxy card in the postage-paid envelope
provided.
Vote in Person
: If you choose to vote your shares in person
at the meeting, you must request a “legal proxy.” To do
so, please follow the instructions at
www.proxyvote.com
or request a paper copy of the materials, which will contain the
appropriate instructions. You may also request a paper or email
copy of the documents by calling 1-800-579-1639 or email your
request to:
sendmaterial@proxyvote.com
.
Any
proxy may be revoked at any time before it is voted by written
notice, mailed or delivered to the Company, or by revocation in
person at the Annual Meeting. If not so revoked, the shares
represented by such proxy will be voted in the manner directed by
the shareholder. If no direction is made, signed proxies received
from shareholders will be voted in accordance with the
Board’s recommendations.
How many shares must be present to hold the meeting?
Under
Minnesota law and our Bylaws, a majority of the voting power of the
shares entitled to vote at the Annual Meeting represent a quorum
for the transaction of business. Votes cast by proxy or in person
at the Annual Meeting will be tabulated at the Annual Meeting to
determine whether or not a quorum is present. Abstentions will be
treated as unvoted for purposes of determining the approval of the
matter submitted to the shareholders for a vote but will be counted
in determining whether a quorum is present at the meeting. If a
broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote
with respect to that matter.
How many votes are required to approve the proposals?
In
general, each item of business properly presented at a meeting of
shareholders at which a quorum is present must be approved by the
vote of the holders of a majority of the shares present, in person
or by proxy, and entitled to vote on that item of business. Under
Minnesota law, however, directors are elected by the affirmative
vote of the holders of a plurality of the shares present and
entitled to vote.
What is the effect of not instructing my bank or broker how to vote
my shares?
If you
are a shareholder of record, and you do not cast your vote, no
votes will be cast on your behalf on any proposals at the Annual
Meeting.
If you
hold your shares in street name, your bank or broker cannot vote
your shares with respect to the election of directors (Proposal
One) or the advisory vote to approve executive compensation
(Proposal Two), or the advisory vote to approve the frequency of
future votes on executive compensation (Proposal Three) unless you
provide voting instructions to them. Therefore, if you hold your
shares in street name and you do not instruct your bank or broker
how to vote, no votes will be cast on your behalf on those
proposals. Your bank or broker may exercise discretion and vote
uninstructed shares on the ratification of our independent
registered public accounting firm (Proposal Four). We strongly
encourage you to return your voting instruction form and exercise
your full voting rights.
Who pays for the cost of proxy preparation and
solicitation?
All
expenses in connection with solicitation of proxies will be borne
by the Company. The Company will pay brokers, nominees,
fiduciaries, or other custodians their reasonable expenses for
sending proxy material to, and obtaining instructions from, persons
for whom they hold stock of the Company. The Company expects to
solicit proxies by mail, but directors, officers, and other
employees of the Company may also solicit in person, by telephone
or by mail.
C
ORPORATE
GOVERNANCE AND BOARD MATTERS
The
business and affairs of the Company are conducted under the
direction of the Board in accordance with the Company’s
Articles of Incorporation and Bylaws, the Minnesota Business
Corporations Act, federal securities laws and regulations,
applicable NASDAQ Rules, Board committee charters and the
Company’s Code of Ethics. Members of the Board are informed
of the Company’s business through discussions with
management, by reviewing Board meeting materials provided to them
and by participating in meetings of the Board and its committees,
among other activities. Our corporate governance practices are
summarized below.
Election to the Board of Directors
All of
the Company’s directors are elected annually. Our Bylaws, as
amended, provide that the Board shall consist of between two and no
more than nine members, as designated by resolution of the Board
from time to time. Pursuant to the recommendation of the Nominating
and Corporate Governance Committee, the Board has set the size of
the Board to be elected at the 2017 Annual Meeting at
five.
Majority Independent Board
The
listing rules of the NASDAQ Stock Market (“NASDAQ
Rules”) require that a majority of our Board be
“independent directors” as that term is defined in the
rules. Our Board has determined each of our three current Board
members to be “independent directors.”
Meetings of the Board of Directors and Director
Attendance
The
Board held twelve meetings during 2016. Each director attended more
than 75% of all meetings of the Board and committees of the Board
on which he served. Although the Board does not have a policy
regarding attendance at the Company’s annual meetings of
shareholders, four of the eight directors then serving on the Board
attended the 2016 Annual Meeting of Shareholders. Directors are
expected to attend substantially all the meetings of the Board and
the committees on which they serve, as well as the annual meeting
of shareholders, except for good cause. Directors who have
excessive absences without good cause will not be nominated for
re-election or, in extreme cases, will be asked to resign or be
removed.
Committees of the Board of Directors
The
current membership of the Board’s three standing committees
is set forth in the following table.
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Director
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Audit
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Compensation
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Nominating and Corporate Governance
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Independent Director
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Michael
C. Howe
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Member
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Chair
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Member
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Yes
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F.
Peter Zaballos
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Member
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Member
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Chair
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Yes
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Steven
R. Zenz
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Chair
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Member
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Member
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Yes
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Audit Committee
Independence
. Each of the members of
the Audit Committee is an “independent director” as
that term is defined by the NASDAQ Rules and
“independent” as that term is defined by Rule
10A-3(b)(1) under the Securities Exchange Act of 1934.
Duties and Responsibilities
. The Audit
Committee provides independent objective oversight of the
Company’s financial reporting system. As part of its
responsibilities, the Committee reviews and evaluates significant
matters relating to the annual audit and the internal controls of
the Company and communicates its analysis with management, reviews
the scope and results of annual independent audits by, and the
recommendations of, the Company’s independent auditors,
reviews the independent auditor’s qualifications and
independence and approves additional services to be provided by the
auditors. The Audit Committee is solely responsible for appointing,
setting the compensation of and evaluating the independent
auditors.
In
addition, the Committee: (i) meets separately with management and
the independent auditors on a periodic basis; (ii) receives the
independent auditors’ report on all critical accounting
policies and practices and other written communications; (iii)
reviews management’s statements concerning its assessment of
the effectiveness of internal controls and the independent
auditors’ report on such statements, as applicable; and (iv)
reviews and discusses with management and the independent auditors
the Company’s interim and annual financial statements and
disclosures (including Management’s Discussion and Analysis)
in its Quarterly Reports on Form 10-Q and Annual Report on Form
10-K and the results of the quarterly financial reviews and the
annual audit. The Committee has direct access to the
Company’s independent auditors. The Committee also reviews
and approves all related-party transactions.
The
foregoing is a general summary of the Committee’s duties and
activities. The Audit Committee operates pursuant to a written
charter, which is available on the
Investor Relations
section of the
Company’s website at
www.insigniasystems.com
. This charter
further describes the role of the Audit Committee in overseeing the
Company’s financial reporting process. References to the
Company’s website are for informational purposes and are not
intended to, and do not, incorporate information found on the
website into this proxy statement.
Committee Meetings
. The Committee held
five meetings during 2016. In addition to fulfillment of the
Committee’s regular duties and responsibilities, these
meetings were designed to facilitate and encourage private
communication between the Audit Committee and the Company’s
independent auditors. Please refer to the Report of the Audit
Committee appearing later in this proxy statement.
Audit Committee Financial Expert
. Mr.
Zenz has been designated by the Board as an “audit committee
financial expert,” as that term is defined by the rules of
the SEC. Through his extensive experience as a former partner of
the audit and advisory firm KPMG LLP, he possesses: (i) an
understanding of generally accepted accounting principles and
financial statements; (ii) the ability to assess the general
application of such principles in connection with the accounting
for estimates, accruals and reserves; (iii) experience preparing,
auditing, analyzing or evaluating financial statements with a
breadth and level of complexity commensurate with those presented
by the Company’s financial statements; (iv) an understanding
of internal control over financial reporting; and (v) an
understanding of audit committee functions.
Compensation Committee
Independence.
Each of
the members of the Compensation
Committee are “independent directors” as that term is
defined by the NASDAQ Rules, including the independence criteria
specific to compensation committee members, “non-employee
directors” as that term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, and “outside
directors” as that term is used in Section 162(m) of the
Internal Revenue Code.
Duties and Responsibilities.
The
Compensation Committee operates pursuant to a written charter,
which is available on the
Investor
Relations
section of the Company’s website at
www.insigniasystems.com
.
The Committee’s main duties, as described in its charter,
are: (i) to review and approve annual base salary and
incentive compensation levels, employment agreements, and benefits
of the President and Chief Executive Officer and other key
executives; (ii) to review the performance of the President and
Chief Executive Officer; (iii) to review and assess performance
target goals established for bonus plans and determine if goals
were achieved at the end of the plan year; (iv) to act as the
administrative committee for the Company’s stock plans, and
any other incentive plans established by the Company; (v) to
consider and approve grants of incentive stock options,
non-qualified stock options, restricted stock or any combination to
any employee; and (vi) to oversee the filing of required
compensation-related reports or disclosures in the Company’s
SEC reports, proxy statement and other filings.
In
pursuing its duties, the Committee has the authority to retain and
has, from time to time, retained an outside compensation consultant
to advise it on compensation matters. The Committee also consults
with the President and Chief Executive Officer, and from time to
time, other senior management on compensation issues regarding the
other executive officers.
Committee Meetings
. The Compensation
Committee held ten meetings during 2016.
Nominating and Corporate Governance Committee
Independence.
Each of the members of
the Nominating and Corporate Governance Committee is an
“independent director” as that term is defined in the
NASDAQ Rules.
Duties and Responsibilities
. Among
other duties, the Committee is responsible for nominating the slate
of directors to be considered for election at the Company’s
annual meeting of shareholders. In accordance with its committee
charter, the Nominating and Corporate Governance Committee
typically evaluates candidates for election as directors using the
following criteria: education, reputation, experience, industry
knowledge, independence, leadership qualities, personal integrity,
diversity, and such other criteria as the Committee deems relevant.
The Committee will consider candidates recommended by the Board,
management, shareholders, and others. The charter authorizes the
Committee to retain and pay advisors to assist it in identifying
and evaluating candidates. For further information concerning the
Committee’s duties and responsibilities please refer to the
Committee’s charter, which is available in the
Investor Relations
section of the
Company’s website at
www.insigniasystems.com
.
Notwithstanding the foregoing, the full Board, which at the time
consisted entirely of independent directors, conducted the
evaluation and approval of director nominees for election at this
year’s annual meeting of shareholders.
Policies Concerning Nomination Process
.
Shareholders who wish to recommend candidates to the Board or its
Nominating and Corporate Governance Committee should submit the
names and qualifications of the candidates at least 120 days before
the date of the Company’s proxy statement for the previous
year’s annual meeting. Submittals should be in writing and
addressed to the Committee at the Company’s headquarters.
Candidates recommended by shareholders will be evaluated using the
same criteria applicable to other candidates.
Committee Meetings.
The Committee did
not meet during 2016.
Leadership Structure of the Board of Directors
Our
Board does not have a policy regarding the separation of the roles
of Chief Executive Officer and Chairman of the Board. The Board
believes it is in the best interests of the Company to make such a
determination periodically, based on available information. The
positions of Chief Executive Officer and Chairman of the Board are
not currently held by the same person. Kristine Glancy serves as
our President and Chief Executive Officer and F. Peter Zaballos
serves as Chairman of the Board. Under this structure, our
President and Chief Executive Officer and other senior management
under her supervision are primarily responsible for setting the
strategic direction of the Company and managing the day-to-day
leadership and performance of the Company, while the Chairman
provides guidance to the President and Chief Executive Officer and
senior management, sets the agenda for meetings of the Board and
presides over meetings of the full Board. The Board believes the
current leadership structure strengthens the role of the Board in
fulfilling its oversight responsibility and fiduciary duties to the
Company’s shareholders while recognizing the day-to-day
management direction of the Company by Ms. Glancy and other senior
management.
Board Role in Risk Oversight
The
Company faces a number of risks, including financial,
technological, operational, strategic and competitive risks.
Management is responsible for the day-to-day management of risks we
face, while the Board has responsibility for the oversight of risk
management. In its risk oversight role, the Board ensures that the
processes for identification, management and mitigation of risk by
our management are adequate and functioning as
designed.
Our
Board is actively involved in overseeing risk management, and it
exercises its oversight both through the full Board and through the
three standing committees of the Board – the Audit,
Compensation and Nominating and Corporate Governance Committees.
The three standing committees exercise oversight of the risks
within their areas of responsibility, as disclosed in the
descriptions of each of the committees above and in the charters of
each of the committees.
The
Board and the three standing committees receive information used in
fulfilling their oversight responsibilities through the
Company’s executive officers and its advisors, including our
legal counsel, our independent registered public accounting firm,
and the compensation consultants we have engaged from time to time.
At meetings of the Board, management makes presentations to the
Board regarding our business strategy, operations, financial
performance, fiscal year budgets, technology and other matters.
Many of these presentations include information relating to the
challenges and risks to our business and the Board and management
actively engage in discussion on these topics. Each of the
committees also receives reports from management regarding matters
relevant to the work of that committee. These management reports
are supplemented by information relating to risk from our advisors.
Additionally, the Board receives reports by each committee chair
regarding the committee’s considerations and actions. In this
way, the Board also receives additional information regarding the
risk oversight functions performed by each of these
committees.
Shareholder Communications with the Board
Shareholders
may send written communications to the Board or to any individual
director at any time. Communications should be addressed to the
Board or the individual director at the address of the
Company’s headquarters. The Board will respond to shareholder
communications when it deems a response to be
appropriate.
Code of Ethics
The
Board has adopted a Code of Ethics which applies to all of our
employees, directors and contractors to promote the highest honest
and ethical conduct and compliance with laws, regulations and
Company policies. The Code of Ethics is available in the
Investor Relations
section
of the Company’s website at
www.insigniasystems.com
.
Compensation of Non-Employee Directors
The
following table summarizes the compensation paid to our
non-employee directors for 2016.
|
Name
|
Fees Earned or Paid in
Cash
(1)
|
Stock Awards
(2)
|
Option Awards
(3)
|
Total
|
|
Jacob J.
Berning
(4)
|
$
3,500
|
$
–
|
$
–
|
$
3,500
|
|
Sardar
Biglari
(5)
|
$
18,510
|
$
25,893
|
$
5,638
|
$
50,041
|
|
David L.
Boehnen
(6)
|
$
3,750
|
$
6,863
|
$
-
|
$
10,613
|
|
Philip A.
Cooley
(5)
|
$
17,500
|
$
15,000
|
$
5,638
|
$
38,138
|
|
Edward A.
Corcoran
(7)
|
$
4,488
|
$
–
|
$
–
|
$
4,488
|
|
Michael C.
Howe
|
$
20,750
|
$
15,000
|
$
–
|
$
35,750
|
|
Nicholas J.
Swenson
(8)
|
$
16,500
|
$
15,000
|
$
–
|
$
31,500
|
|
F. Peter
Zaballos
|
$
20,260
|
$
25,893
|
$
–
|
$
46,153
|
|
Steven R.
Zenz
|
$
19,750
|
$
15,000
|
$
–
|
$
34,750
|
_________________________
(1)
Reflects annual
board retainer and fees for attending Board, committee and
conference call meetings earned during 2016.
(2)
On
June 23, 2016, each non-employee director received a grant of
unrestricted shares of the Company’s common stock pursuant to
our 2013 Omnibus Stock and Incentive Plan worth $15,000 based on
the closing price of the Company’s common stock on the date
of grant. On May 20, 2016, additional prorated stock grants were
made to Messrs. Boehnen, Biglari and Zaballos for their service as
Chairmen in 2015.
(3)
Represents
non-qualified stock option awards granted pursuant to our 2013
Omnibus Stock and Incentive Plan during 2016. The dollar value of
the options represents the estimated grant date fair value in
accordance with FASB ASC Topic 718 pursuant to the Black-Scholes
option pricing model, which requires several significant judgments
and assumptions. Please refer to Note 8, “Shareholders’
Equity,” to the Company’s financial statements in its
Form 10-K for the year ended December 31, 2016, for information
regarding the assumptions used to determine the fair value of
options granted. All options granted to the directors immediately
vest upon grant. The aggregate number of option awards outstanding
at December 31, 2016, for each director were as follows: Mr.
Biglari – 10,000;
Mr. Cooley – 10,000;
Mr. Howe – 10,000;
Mr. Swenson – 10,000;
Mr. Zaballos – 10,000; and
Mr. Zenz – 10,000.
(4)
Did
not stand for re-election at the 2016 Annual Meeting of
Shareholders, but is a current Nominee.
(5)
Mr.
Biglari and Mr. Cooley joined the Board in December 2015 and in
January 2016 received a one-time grant of a non-qualified stock
option to purchase up to 10,000. Mr. Biglari and Mr. Cooley
resigned from the Board on March 1, 2017.
(6)
Did
not stand for re-election at the 2016 Annual Meeting of
Shareholders.
(7)
Mr.
Corcoran resigned from the Board on March 31, 2016.
(8)
Mr.
Swenson resigned from the Board on February 17, 2017
For
2016, non-employee directors were eligible to receive an annual
cash retainer of $10,000 per year and the Co-Chairmen of the Board
were eligible to receive and additional annual cash retainer of
$2,500 each. Each such retainer is allocated to a director for the
portion of the year served in each role.
All
non-employee directors were eligible to receive $1,000 for each
Board meeting ($250 for each conference call meeting) that they
attended. In addition, the chair of each committee was eligible to
receive $1,000 for each in-person meeting of the committee over
which they presided ($500 for each conference call meeting).
Members of committees were eligible to receive $500 for each
committee meeting they attended in person on days separate from
regular Board meetings ($250 for each conference call
meeting).
In
2016, each non-employee director received a grant of shares of
common stock based on a target grant date fair value of $15,000.
These equity grants were made on June 23, 2016 pursuant to the 2013
Omnibus Stock and Incentive Plan. Each non-employee director was
granted 6,849 vested shares, and the non-employee Co-Chairs were
granted 10,273 vested shares, based on a closing price of $2.19 for
a share of the Company’s common stock on the date of grant as
reported by The NASDAQ Stock Market. On May 20, 2016, Messrs.
Boehnen, Biglari and Zaballos were issued a prorated grant of
shares for their service as Chairmen in 2015 of 3,064, 1,515 and
1,515 shares, respectively.
P
ROPOSAL ONE
–
ELECTION OF DIRECTORS
Nominations
The
Board believes it is important that the Board be composed of
members whose collective judgment, experience, qualifications,
attributes and skills ensure that the Board will be able to fulfill
its responsibilities to see that the Company is governed in a
manner consistent with the interests of the shareholders of the
Company and in compliance with applicable laws, regulations, rules
and orders, and to satisfy its oversight responsibilities
effectively.
Composition
In
determining the nominees to be recommended for election to serve as
directors of the Company, the Board first determined that the size
of the Board should be reduced to five members in order to
facilitate more efficient Board processes and to establish a size
that it considers to be more appropriate to the size of the
Company. The Board, which at the time consisted entirely of
independent directors, evaluated the existing members of the Board
and qualified candidates, if any, for service on the Board. The
Board then approved a slate of directors to be nominated for
election at the Annual Meeting.
When
identifying and evaluating candidates for director, the Board and
its Nominating and Corporate Governance Committee, as applicable,
consider the general and specific qualifications, experience and
characteristics which may have been approved by the Board or
determined by the Committee from time to time including
qualifications reflecting the individual’s integrity,
reputation, education, experience, industry knowledge, leadership
qualities and independence. Specifically, the Board seeks
independent directors who have experience relevant to the
Company’s business and strategic objectives, specifically
experience in retailing, the consumer packaged goods industry, and
with technology innovation. The Board developed a detailed set of
criteria aligned with these objectives, and evaluated potential
candidates against these criteria. The Board and its Nominating and
Corporate Governance Committee, as applicable, also consider
diversity in a broad sense when evaluating a director nominee,
taking into account various factors, including but not limited to,
differences of viewpoint, professional experience, education,
skill, race, gender and national origin, but does not have a formal
policy regarding diversity of Board members.
When
considering whether directors and nominees have the requisite
judgment, experience, qualifications, attributes and skills, taken
as a whole, to enable the Board to fulfill its responsibilities to
ensure that the Company is governed in a manner consistent with the
interests of the Company’s shareholders, the Board and its
Nominating and Corporate Governance Committee, as applicable, focus
primarily on the information discussed in each of the
directors’ individual biographies set forth
below.
Director Nominees
The
Board has nominated two of the three current members of the Board
and nominated three additional qualified candidates as named below
for election at the Annual Meeting. If elected, each will serve for
a term of one year, or until their successors are elected and
qualified, subject to their prior death, resignation, retirement or
removal from office. In order to facilitate a reduction in the size
of the Board and to pursue other interests, Mr. Howe chose not to
stand for re-election at the 2017 Annual Meeting of
Shareholders.
The
Board has determined that each such nominee is qualified to serve
as a director of the Company based on their ability to meet the
aforementioned criteria. The specific qualifications of each
nominee, including biographical data for at least the last five
years and the particular experience, qualifications, attributes or
skills that led to a conclusion that he or she should serve as a
director of the Company, are set forth below. Should one or more of
these nominees become unavailable to accept nomination or election
as a director (which is not anticipated), the individuals named as
proxies on the enclosed proxy card will vote the shares that they
represent for the election of such other persons as the Board may
recommend, or the Board may reduce the number of directors to be
elected. Unless otherwise instructed by the shareholder, the proxy
holders will vote the proxies received by them for each of the
nominees named below.
Jacob J. Berning
, 44, has served as Marketing Vice President
at The Schwan Food Company since September 2014. Mr. Berning has
extensive leadership experience across a diverse set of businesses
and teams in the consumer packaged goods industry. His 17 years of
marketing experience working with a variety of different brands
also includes time as Marketing Director of WhiteWave Foods Company
from July 2011 to September 2014 and Marketing Manager at General
Mills, Inc. from September 2003 to July 2011. These experiences
provide knowledge and understanding of the industry representing
the majority of our customer base. He served as a director of the
Company from December 2014 until the conclusion of our 2016 Annual
Meeting in June 2016. Mr. Berning’s nomination for election
at the 2017 Annual Meeting did not result from any agreement
between the Company and any third party. He was originally elected
to the Board in accordance with a standstill arrangement among the
Company and a shareholder group composed of Nicholas J. Swenson,
Air T, Inc., Groveland Capital LLC and Groveland Hedged Credit Fund
LLC. He did not stand for re-election at the 2016 Annual
Meeting. He has a BA degree from the University of Minnesota
and an MBA (Finance and Marketing) from New York
University.
Kristine A. Glancy
, 39,
has been our President and Chief
Executive Officer since May 2016. Prior to joining the Company, Ms.
Glancy served in various roles at The Kraft Heinz Company from 1999
to 2016, most recently as Customer Vice President from May 2013 to
April 2016. She held the positions of Director of Sales from June
2012 to May 2013 and National Customer Manager from November 2010
to June 2012. Her more than 17 years as a sales and marketing
executive provide the necessary skills to the Board and Company in
the areas of Sales, Product Strategy, Customer Relations, Business
and Brand Development.
Ms. Glancy
holds a Bachelor of Arts degree in Marketing and International
Business from Saint Mary’s University and an MBA from Fordham
University, New York City.
Rachael B. Vegas
, 41, has served as the Chief Merchant at
Brandless, Inc. since March 2016. She previously served in various
roles at Target Corporation, Food Lion and Hannaford Supermarkets
from 1997 to 2016. Most recently, from February 2014 to February
2016 as Vice President, General Merchandising Manager; Center
Store, Grocery; from February 2013 to February 2014 as Vice
President Merchandising Manager; Dry Grocery, Snacks, Candy; from
February 2011 to February 2013 as Vice President Merchandising
Manager; Snacks, Beverages, Pet Care, Candy and Liquor. Ms.
Vegas’ vast experience in retail and consumer packaged goods
industries are valuable to the Company. Ms. Vegas holds Bachelor of
Arts degree in International Relations from Tufts University and an
MBA from Kenan-Flagler Business School, University of North
Carolina.
F. Peter Zaballos
, 58, has served as a
member of the Board since June 2015. He served as Co-Chairman of
the Board from January 2016 to March 1, 2017 and Chairman of the
Board since March 1, 2017. Mr. Zaballos has served as the Vice
President of Marketing and Product at SPS Commerce since September
2012. Previously, he served as Vice President of Marketing at SPS
Commerce from April 2012 to September 2012. From 2010 to 2011, he
held the positions of Vice President, Product and Vice President,
Marketing and Business Development at StudyBlue, a cloud service
reaching more than a million high school and college students. His
more than 15 years as a marketing executive and board experience
provide knowledge and skills to the Board in the areas of
brand development and marketing,
product strategy, business development and innovation.
Mr. Zaballos has a Bachelor of Science degree from the
University of California, Berkeley, and a Master’s degree
(SM) in Management from the Massachusetts Institute of Technology
(MIT), Sloan School of Management.
Steven R. Zenz
, 63, has served as a member of the Board
since October 2013. He is a former partner of the audit and
advisory firm KPMG, where he served in various capacities in his 33
years with the firm, including partner in charge of the audit group
and partner in charge of the firm’s SEC and technical
accounting practices in KPMG’s Minneapolis, Minnesota and Des
Moines, Iowa, offices as well as lead audit partner for many
publicly-held company clients. Since his retirement from KPMG in
2011, Mr. Zenz has acted as a consultant on several merger and
acquisition transactions providing advice on valuations, SEC
filings, technical accounting and integration, which we believe
will benefit the Company. He also serves on the boards of directors
of RedBrick Health Corporation and Frankly Inc. (Toronto Stock
Exchange). He holds a Bachelor of Science degree in Accounting and
a Masters of Business Taxation degree from the University of
Minnesota.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE
“FOR” EACH OF THE FIVE NOMINEES.
E
XECUTIVE COMPENSATION AND
OTHER INFORMATION
Current Executive Officers
The
following table sets forth certain information regarding our
current executive officers:
|
Name
|
|
Age
|
|
Position
|
|
Kristine
A. Glancy
|
|
39
|
|
President
and Chief Executive Officer
|
|
Mark A.
Cherrey
|
|
34
|
|
Director
of Finance and Controller, Interim Principal Accounting Officer,
Interim Principal Financial Officer and Interim
Treasurer
|
Kristine A. Glancy
, 39,
has been our President and Chief
Executive Officer since May 2016. Prior to joining the Company, Ms.
Glancy served in various roles at The Kraft Heinz Company from 1999
to 2016, most recently as Customer Vice President from May 2013 to
April 2016. She held the positions of Director of Sales from June
2012 to May 2013 and National Customer Manager from November 2010
to June 2012. Her more than 17 years as a sales and marketing
executive provide the necessary skills to the Board and Company in
the areas of Sales, Product Strategy, Customer Relations, Business
and Brand Development.
Ms. Glancy
holds a Bachelor of Arts degree in Marketing and International
Business from Saint Mary’s University and an MBA from Fordham
University, New York City.
Mark A. Cherrey
, 34,
was
appointed Interim Principal Accounting Officer, Interim Principal
Financial Officer and Interim Treasurer in May 2016. Mr. Cherrey
has been the Company’s Director of Finance and Controller
since July 2015. Previously, he served as Accounting Manager of the
Company from 2012 through June 2015. Prior to joining the Company,
Mr. Cherrey worked at Ceridian Corporation as a Senior Sales
Manager on the Client Process Improvement Team from 2011 to 2012.
Mr. Cherrey maintains an active CPA license in the State of
Minnesota and began his career with Grant Thornton, LLP, where he
served in various roles from 2005 to 2011, most recently as a
Manager in the Business Advisory Services
Group.
Executive
officers are elected annually by the Board and serve for a one-year
period. There are no family relationships among any of the
executive officers and directors of the Company.
Summary Compensation Table
The
following table provides certain summary information concerning the
compensation earned for services rendered in all capacities to
Insignia Systems, Inc. during the fiscal years ended December 31,
2016 and 2015 by our President and Chief Executive Officer,
Director of Finance and Controller, former Acting President, Chief
Financial Officer, Secretary and Treasurer and former Chief Sales
and Marketing Officer, together referred to as our “Named
Executive Officers.”
|
Name and Position
|
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
(1)(2)
|
Non-Equity
Incentive Plan Compensation
(3)
|
All Other
Compensation
|
Total
|
|
Kristine A. Glancy
(4)
|
|
2016
|
$
169,231
|
$
120,000
|
$
233,000
(5)
|
$
–
|
$
–
|
$
–
|
$
522,231
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Cherrey
|
|
2016
|
$
117,521
|
$
15,000
|
$
7,455
(6)
|
$
–
|
$
–
|
$
–
|
$
139,976
|
|
Director of Finance and Controller (Interim Principal Accounting
Officer, Interim Principal Financial Officer and Interim
Treasurer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Gonsior
(7)
|
|
2016
|
$
106,442
|
$
–
|
$
–
|
$
–
|
$
–
|
$
–
|
$
106,442
|
|
Former Acting President, Chief Financial Officer, Secretary and
Treasurer
|
|
2015
|
$
229,808
|
$
27,110
|
$
57,420
(8)
|
$
38,492
|
$
72,890
|
$
–
|
$
425,720
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Halfmann
(9)
|
|
2016
|
$
86,538
|
$
–
|
$
–
|
$
–
|
$
–
|
$
7,101
|
$
93,639
|
|
Former Chief Sales and Marketing Officer
|
|
2015
|
$
250,000
|
$
–
|
$
28,200
(10)
|
$
38,492
|
$
76,929
|
$
–
|
$
393,621
|
_______________________
(1)
Amounts shown represent the aggregate grant date fair value of
equity awards granted in the respective fiscal year as computed in
accordance with FASB ASC Topic 718, based on the closing stock
price on the grant date as reported by The NASDAQ Stock Market.
Please refer to Note 8, “Shareholders' Equity” to the
Company's financial statements in its Form 10-K for the year ended
December 31, 2016, for information regarding the assumptions used
to determine the fair value of equity awards granted, including the
Black-Scholes option pricing model used for option
awards.
(2)
Amounts shown for 2016 and 2015 represent option awards granted
pursuant to the 2013 Omnibus Plan.
(3)
Amounts shown were earned under the Executive Officer Incentive
Bonus Plan for the years indicated and were paid in the following
year.
(4)
Ms. Glancy joined the Company on May 9, 2016.
(5)
Amount shown represents the aggregate grant date fair value of
restricted stock granted on May 13, 2016.
(6)
Amount shown represents the aggregate grant date fair value of
restricted stock units granted on August 10, 2016.
(7)
Mr. Gonsior resigned from all positions with the Company on May 27,
2016.
(8)
Amount shown represents the aggregate grant date fair value of
restricted stock units granted on June 9, 2015 and July 14,
2015.
(9)
Mr. Halfmann resigned from all positions with the Company on April
20, 2016.
(10)
Amount shown represents the aggregate grant date fair value of
restricted stock units granted on June 9, 2015.
Executive Compensation
The
principal components of compensation for the Named Executive
Officers are: (i) base salary; (ii) non-equity incentive
compensation in the form of an annual cash bonus under the
Executive Officer Incentive Bonus Plan (“Executive Bonus
Plan”); and (iii) long-term, equity-based incentive
compensation in the form of stock options and restricted stock
units. These components of compensation are summarized below,
followed by a description of each Named Executive Officer’s
individual agreements with the Company and the compensation
received thereunder.
Executive Bonus Plan
The
Executive Bonus Plan was established in 2007 and applies to future
fiscal years until terminated or superseded. The executive officers
are eligible to earn annual cash bonus payments if the Company
meets pre-established financial performance objectives. Ms. Glancy
was eligible to participate in the Executive Bonus Plan in
2016.
Fiscal Year 2016 Performance Targets
|
Bonus Level
|
Minimum Total EBITDA
|
Percent of Target Variable
Compensation
|
|
Minimum
Below
Plan
Plan
Exceed
Plan
Significantly
Exceed Plan
|
80% of
Target
90% of
Target
100% of
Target
110% of
Target
150% of
Target
|
0%
50%
100%
120%
150%
|
For
2016, target EBITDA was established by the Compensation Committee
to be $3,600,000. EBITDA was calculated as loss before taxes less
interest, income tax, depreciation, and amortization. No Executive
Bonus Payments were made under the 2016 Plan as the minimum level
was not achieved.
Long-term, Equity-Based Incentive Compensation (Restricted Stock
Awards and Restricted Stock Units)
The
Compensation Committee has determined that restricted stock awards
are appropriate based on market practices and in accordance with
our overall compensation philosophy. For 2016, the restricted stock
and restricted stock units were granted under our 2013 Omnibus
Plan. The restricted stock was scheduled to vest in one-fifth
increments on the anniversary of the date of grant over five years
and the restricted stock units were scheduled to vest in one-half
increments on the anniversary of the date of the grant over two
years.
On May
13, 2016, Ms. Glancy received a restricted stock award of 100,000
shares. On August 10, 2016, Mr. Cherrey received restricted stock
units of 3,500 units. Each restricted stock unit represents a
contingent right to receive one share of the Company’s common
stock.
Severance and Change in Control Arrangements with Named Executive
Officers
In
connection with Ms. Glancy’s election to serve as the
Company’s Chief Executive Officer, effective May 9, 2016, the
Company and
Ms. Glancy have entered
into an Employment Agreement and a Change in Control Agreement,
each effective as of May 9, 2016. Her Employment Agreement provides
that Ms. Glancy will receive an established annual base salary,
subject to increase from time to time, target incentive
compensation awards beginning with 2016, a cash signing bonus, and
participation in customary benefit plans and programs, in addition
to a one-time equity award.
Pursuant to her Employment Agreement, in the event of Ms.
Glancy’s involuntary termination without cause or voluntary
termination with good reason, she will be eligible to receive
accrued and unpaid compensation as well as the following severance
pay and benefits: (1) the annual incentive compensation she would
have been entitled to receive for the year in which her termination
occurs as if she had continued until the end of that fiscal year,
determined based on the Company’s actual performance for that
year relative to the performance goals applicable to Ms. Glancy,
prorated for the number of days in the fiscal year through her
termination date and generally payable in a cash lump sum at the
time such incentive awards are payable to other participants; (2)
an applicable percentage of Ms. Glancy’s annual base salary
as in effect at the time of Termination, payable in a single lump
sum payment no later than 60 days following the termination date;
and (3) welfare benefit continuation for four months following
termination. In the event of Ms. Glancy’s death, disability,
involuntary termination for cause or voluntary termination without
good reason, Ms. Glancy will be entitled to accrued and unpaid
compensation as provided in the Employment Agreement. The
“applicable percentage” is 50% during the first year of
Ms. Glancy’s employment and 100% thereafter.
“Cause” is defined in Ms. Glancy’s Employment
Agreement as (a) the deliberate and continued failure to
substantially perform the duties and responsibilities; (b) the
criminal felony conviction of, or a plea of guilty or nolo
contendere; (c) the material violation of Company policy; (d) the
act of fraud or dishonesty resulting or intended to result in
personal enrichment at the expense of the Company; (e) the gross
misconduct in performance of duties that results in material
economic harm to the Company; or (f) the material breach of the
Employment Agreement by Ms. Glancy.
“Good
reason” includes demotion, reduction in salary or benefits,
and certain other events.
Under Ms. Glancy’s Change in Control Agreement, upon a
qualifying termination, she would be eligible to receive the
following, subject to offset by the amount of any severance
previously paid to her under any employment agreement with the
Company: (1) a lump sum severance payment equal to one-hundred
percent of her base salary, (2) cash payment equal to the sum
of (x) unpaid incentive compensation that has been allocated or
awarded to Ms. Glancy for a completed fiscal year preceding the
date of the Qualifying Termination which is contingent only upon
the continued employment to a subsequent date plus (y) a pro rata
portion to the date of the Qualifying Termination of her target
bonus for the year calculated through the date of the Qualifying
Termination, (3) welfare benefit continuation for a period of
12 months, (4) certain post-retirement health care or life
insurance benefits if Ms. Glancy would have become eligible for
such benefits during the 24 months after the date of termination,
(5) a lump sum payment equal to all earned but unused paid time off
days, and (6) outplacement fees not to exceed $5,000. The
Change in Control Agreement defines “qualifying
termination” as a termination by the Company without cause or
a termination by Ms. Glancy with good reason, in each case
either concurrent with or within 24 months following a change
in control or a termination by the Company without cause within
six months prior to a change in control if termination is in
connection with or in anticipation of the change in control.
“Change in control” is defined as a sale of all or
substantially all of the assets of the Company, a merger in which
the shareholders of the Company own less than 50% of the surviving
entity, the acquisition of 40% or more of the Company’s
outstanding stock by a single person or a group, or the election of
a majority of the Company’s directors who consist of persons
who were not nominated by the Company’s prior Board.
“
Cause” is defined as (i)
the deliberate and continued failure to devote substantially all
business time and best efforts to the performance of the Ms.
Glancy’s duties; (ii) the deliberate engaging in gross
misconduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise; or (iii) conviction of, or plea
of guilty or nolo contendere to, a felony or any criminal charge
involving moral turpitude. “Good reason” is defined in
the agreement to include demotion, reduction in salary or benefits,
and certain other events.
Outstanding Equity Awards at Fiscal Year End
The
following table sets forth summary information regarding the
outstanding equity awards held by our Named Executive Officers at
December 31, 2016, excluding Mr. Gonsior, Mr. Halfmann and Mr.
Dall, who resigned on May 27, 2016, April 30, 2016 and July 8,
2015, respectively, and had no outstanding equity awards at
December 31, 2016.
|
|
|
Option Awards
(1)
|
Stock Awards
(2)
|
||||
|
Name
|
Grant Date
|
Number of Securities Underlying
Unexercised Options Exercisable
|
Number of Securities Underlying
Unexercised Options Unexercisable
|
Option Exercise Price
|
Option Expiration Date
|
Number of Units of Stock That Have
Not Vested
|
Market Value of Units of Stock That
Have Not Vested
|
|
Kristine
A. Glancy
|
5/13/2016
|
|
|
|
|
100,000
|
$233,000
|
|
Mark A.
Cherrey
|
5/21/2014
|
5,000
|
2,500
|
$3.03
|
5/21/2024
|
|
|
|
|
7/15/2015
|
|
|
|
|
1,000
|
$2,650
|
|
|
8/10/2016
|
|
|
|
|
3,500
|
$7,455
|
__________________________
(1)
Each
option is scheduled to vest and become exercisable in three equal
annual installments over the three-year period measured from the
grant date, subject to continued employment through each vesting
date.
(2)
The
restricted stock units granted on July 15, 2015 and August 10, 2016
are scheduled to vest in two equal annual installments over a
two-year period measured from the grant date. The restricted stock
granted on May 13, 2016 is scheduled to vest in five equal annual
installments over a five-year period measured from the grant
date.
Supplemental Compensation
In
January 2016, the Compensation Committee awarded Mr. Gonsior a
$50,000 retention bonus, which was scheduled to be paid in cash if
he had remained employed with the Company through the later of
March 15, 2017 and the completion and acceptance of the audit of
the financial statement for the fiscal year ending December 31,
2016. No amounts were paid to Mr. Gonsior under this
arrangement.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code contains special rules
regarding the federal income tax deductibility of compensation paid
to certain executive officers. It also limits the federal income
tax deductibility of compensation paid to the executive officers
named in the Summary Compensation Table for a given year.
Compensation paid to any of these specified executive officers will
be deductible by the Company only to the extent that it does not
exceed $1,000,000 for a taxable year or qualifies as
“performance-based” compensation under Section 162(m).
The deductibility of some types of compensation payments can depend
upon the timing of the vesting or an executive’s exercise of
previously granted equity awards. Interpretations of and changes to
applicable tax laws and regulations as well as other factors beyond
our control also can affect deductibility of compensation. The
Committee considers the anticipated tax treatment to the Company as
one of a variety of factors when determining executive
compensation, and seeks to preserve the deductibility of
compensation payments and benefits to the extent reasonably
practicable, consistent with our compensation policies and what we
believe is in the best interests of our shareholders. However, for
the above reasons, and in order to maintain the flexibility to be
able to compensate our named executive officers in a manner
designed to promote varying corporate goals, the Committee may
provide non-deductible compensation in situations where the
Committee believes it to be appropriate.
P
ROPOSAL TWO
–
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
At the
annual meeting held in 2011, shareholders voted to cast advisory,
non-binding votes on executive compensation on an annual basis.
Accordingly, we are requesting this non-binding advisory vote on
the executive compensation paid to our Named Executive
Officers.
Effect of Vote
Under
the Dodd-Frank Wall Street Reform and Consumer Protection Act and
SEC rules, the vote of the shareholders on this resolution is a
“non-binding” advisory vote. The purpose of the vote is
for the shareholders to give their opinion to the Board on the
Company’s executive compensation. The Board is not required
by law to take any action in response to the shareholder vote.
However, the Board values the opinion of the shareholders, and the
Board and the Compensation Committee will evaluate the results of
the 2017 vote carefully when making future decisions regarding
compensation of the Named Executive Officers.
Our executive compensation received substantial shareholder support
and was approved, on an advisory basis, by approximately 91.8% of
the votes cast FOR or AGAINST the corresponding proposal at the
annual meeting of shareholders held in 2016. The Compensation
Committee believes that this vote reflected our shareholders’
strong support of the compensation decisions made by the Committee
for our named executive officers for 2015.
Compensation Philosophy and Compensation of our Named Executive
Officers
Our
discussion of the authority and processes of the Compensation
Committee and its committee charter beginning on page 6 of this
proxy statement explains the responsibilities of our Compensation
Committee. This summary and the Narrative Disclosure of Executive
Compensation beginning on page 11
provide information concerning the
compensation philosophy, plans and policies under which we paid the
Named Executive Officers. As set forth in the Summary Compensation
Table on page 11 and the Narrative Disclosure of Executive
Compensation, our compensation policies and procedures are centered
on a pay-for-performance philosophy and are strongly aligned with
the long-term interests of our shareholders.
Given
the pay-for-performance structure of our executive compensation
program, the Compensation Committee and the Board believe that the
compensation of our Named Executive Officers is reasonable and
appropriate and justified by the performance of the Company in a
challenging environment.
Form of Resolution
The
shareholders are being asked at the Annual Meeting to vote
“FOR” or “AGAINST” the following
resolution:
RESOLVED
, that the holders of the Company’s common
stock approve the compensation of the Company’s executives
named in the Summary Compensation Table, as disclosed in the
Company’s 2017 proxy statement pursuant to the compensation
disclosure rules of the SEC.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE
“FOR” THE ADVISORY APPROVAL OF THE COMPANY’S
EXECUTIVE COMPENSATION.
P
ROPOSAL THREE
–
NON-BINDING ADVISORY VOTE ON FREQUENCY OF
EXECUTIVE COMPENSATION VOTES
As
required under the Dodd-Frank Act and SEC rules, shareholders have
an opportunity at annual meetings of shareholders to cast a
non-binding advisory vote on how frequently future executive
compensation votes should be conducted by the Company. Shareholders
may indicate whether they prefer a vote on executive compensation
every one, two or three years, or abstain on the question. The
Company is required to solicit shareholder votes on the frequency
of future executive compensation votes at least once every six
years, although we may seek shareholder input more
frequently.
The
Board recommends that the shareholders select a frequency of annual
voting. The Board has determined that a vote each year is
preferable because it would provide more consistent feedback on our
compensation programs, policies and decisions.
Effect of Vote
The
frequency selected by the shareholders for future executive
compensation votes is not binding on the Board. However, the Board
will give the frequency selected by the shareholders due
consideration in setting future votes on executive
compensation.
At the
annual meeting held in 2011, shareholders expressed a preference
for holding an advisory, non-binding vote on executive compensation
on an annual basis.
In light of that
preference, the Board determined that it would include a nonbinding
advisory vote to approve the compensation of our named executive
officers in our company’s proxy materials every year until
the next required advisory vote on the frequency of shareholder
votes to approve named executive officer
compensation.
Form of Vote
The
proxy card provides shareholders with the opportunity to choose
among four options (conducting the executive compensation vote
every one, two or three years, or abstaining from voting on this
item). As a result, shareholders will not be voting to approve or
disapprove the recommendation of the Board of
Directors.
Proxies
will be voted for the option of annual frequency (every year)
unless shareholders specify otherwise in their proxies. The voting
option that receives the highest number of votes will be considered
the preference of the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE OPTION
OF
“1 YEAR” FOR THE FREQUENCY OF FUTURE VOTES ON EXECUTIVE
COMPENSATION.
P
ROPOSAL FOUR
–
RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board has appointed Baker Tilly Virchow
Krause, LLP (“Baker Tilly”) as our independent
registered public accounting firm for the year ending December 31,
2017. Although we are not required to do so, the Board is
submitting the appointment of Baker Tilly for ratification in order
to ascertain the views of our shareholders on this appointment. If
the appointment is not ratified by the shareholders, the Audit
Committee will reconsider its selection. Baker Tilly has been the
Company’s auditor since July 2011. A representative of Baker
Tilly is expected to be present at the Annual Meeting, and will be
given the opportunity to make a statement and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE
“FOR” RATIFICATION OF THE APPOINTMENT OF BAKER TILLY
VIRCHOW KRAUSE, LLP AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2017.
Fees Paid to Independent Registered Public Accounting
Firm
The
following table shows the fees for services rendered by Baker Tilly
for the years ended December 31, 2016 and December 31, 2015,
respectively.
|
|
2016
|
2015
|
|
Audit
Fees
(1)
|
$
122,300
|
$
112,100
|
|
Audit-Related
Fees
(2)
|
10,400
|
10,000
|
|
Tax
Fees
|
–
|
–
|
|
All Other
Fees
(3)
|
6,000
|
–
|
|
Total
|
$
138,700
|
$
122,100
|
__________________________
(1)
Audit
fees represent fees for professional services provided in
connection with the audit of the Company’s financial
statements, review of quarterly financial statements, and filings
of registration statements related to shares reserved for issuance
under the Company’s stock plans.
(2)
Audit-related fees
represent fees for the audit of the Company’s 401(k)
plan.
(3)
All
other fees represent fees for non-audit related services associated
with the one-time special dividend of $0.70 per share declared on
November 28, 2016.
Audit Committee Pre-Approval Policy
The
Company’s Audit Committee Charter states that before the
principal accountant is engaged by the Company to render audit or
non-audit services in any year, the engagement will be approved by
the Company’s Audit Committee. All of the fees paid in 2016
and 2015 were pre-approved by the Company’s Audit
Committee.
A
UDIT
COMMITTEE REPORT
The Audit Committee provides independent and objective oversight of
our financial reporting. Management has primary responsibility for
our financial statements and reporting process, including our
systems of internal controls.
Our independent registered public accounting firm is responsible
for expressing an opinion on the conformity of our financial
statements with accounting principles generally accepted in the
United States.
In performing its functions, the Audit Committee:
●
Met with the Company’s independent registered public
accounting firm, with and without management present, to discuss
the overall scope and plans for their audit, the results of their
audit and their evaluation of the Company’s internal
controls;
●
Reviewed and discussed with management and the independent
registered accounting firm the audited financial statements
included in our Annual Report;
●
Discussed with the Company’s independent registered public
accounting firm the matters required to be discussed by the
applicable Public Company Oversight Board standards;
and
●
Received from the independent registered public accounting firm the
written disclosures and the letter regarding its independence as
required by applicable requirements of the Public Company
Accounting Oversight Board, and discussed with representatives of
such firm its independence from management and the
Company.
Based on the discussions with management and the Company’s
independent registered public accounting firm, the Audit
Committee’s review of the representations of management and
the report of such firm, the Audit Committee recommended to the
Board that the audited financial statements be included in the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2016, for filing with the SEC.
Submitted by the Audit Committee:
|
Steven
R. Zenz, Chairman
|
Michael
C. Howe
|
F.
Peter Zaballos
|
The preceding report shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 (the
“1933 Act”) or the Securities Exchange Act of 1934 (the
“1934 Act”), except to the extent the Company
specifically incorporates this information by reference, and shall
not otherwise be deemed filed under the 1933 Act or the 1934
Act.
E
QUITY
COMPENSATION PLAN INFORMATION
The
following table presents certain information regarding our equity
compensation plans, the 2003 Stock Plan, the 2013 Omnibus Plan and
our Employee Stock Purchase Plan, as of December 31,
2016.
|
Plan Category
|
Number of
Securities to be Issued Upon Exercise of Outstanding Options,
Warrants and Rights
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights
|
Number of
Securities Remaining Available for Future Issuance under Equity
Compensation Plans
|
|
Equity
compensation plans approved by security holders
|
419,162
(1)
|
$
3.18
|
635,663
(2)
|
|
Equity
compensation plans not approved by security holders
|
–
|
–
|
–
|
|
Total
|
419,162
|
$
3.18
|
635,663
|
_____________________________
(1)
This
number includes 172,000 options exercisable under the 2013 Omnibus
Plan. The 2003 Stock Plan expired on February 24, 2013, but 247,162
options remain exercisable under December 2022.
(2)
This
number includes 134,041 shares available for issuance under the
Employee Stock Purchase Plan. The Company maintains the Employee
Stock Purchase Plan, pursuant to which eligible employees,
including all executive officers, can contribute up to ten percent
of their base pay per year to purchase shares of Common Stock. The
shares are issued by the Company at a price per share equal to 85%
of market value on the first day of the offering period or the last
day of the plan year, whichever is lower. This number also includes
501,622 shares available for issuance under the 2013 Omnibus
Plan.
S
ECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table presents information provided to the Company as to
the beneficial ownership of common stock as of April 13, 2017, by:
(i) persons known to the Company to hold 5% or more of such stock;
(ii) each of the directors and nominees of the Company; (iii) each
of the Named Executive Officers; and (iv) by all directors,
nominees and current executive officers as a group. The address of
each director, nominee and executive officer is 8799 Brooklyn
Boulevard, Minneapolis, Minnesota 55445. Beneficial ownership
includes shares available for purchase under options and subject to
settlement under restricted stock units within 60 days after April
13, 2017. Unless otherwise indicated, each person had sole voting
power and sole investment power for all such shares beneficially
held.
|
Name and Address of Beneficial Owner
|
Amount and Nature
of Beneficial Ownership
(1)
|
Percent of
Shares
|
|
Shareholders / Shareholder Groups
|
|
|
|
Biglari
Capital Corp., et al.
|
2,313,200
(2)
|
19.7%
|
|
17802
IH 10 West, Suite 400
|
|
|
|
San
Antonio, TX 78257
|
|
|
|
|
|
|
|
Air
T, Inc., et al.
|
2,076,103
(3)
|
17.7%
|
|
3524
Airport Road
|
|
|
|
Maiden,
NC 28650
|
|
|
|
|
|
|
|
Cable
Car Capital LLC
|
731,124
(4)
|
6.2%
|
|
1449
Washington Street #6
|
|
|
|
San
Francisco, CA 94109
|
|
|
|
|
|
|
|
Renaissance
Technologies LLC
|
592,300
(5)
|
5.0%
|
|
800
Third Avenue
|
|
|
|
New
York, NY 10022
|
|
|
|
|
|
|
|
Directors, Nominees and Executive Officers
|
|
|
|
Kristine
A. Glancy
|
100,000
|
*
|
|
Steven
R. Zenz
|
36,355
|
*
|
|
F.
Peter Zaballos
|
30,768
|
*
|
|
Michael
C. Howe
|
25,829
|
*
|
|
Mark
A. Cherrey
|
19,923
|
*
|
|
Jacob
J. Berning
|
5,319
|
*
|
|
Rachael
B. Vegas
|
–
|
–
|
|
John C. Gonsior
(6)
|
–
|
–
|
|
Timothy J. Halfmann
(7)
|
–
|
–
|
|
All
current directors, nominees and current executive officers as a
group (7 persons)
|
218,194
(8)
|
1.8%
|
_____________________________
* Less
than one percent.
(1)
Includes the
following shares subject to options exercisable within 60 days
after April 13, 2017, as adjusted to accommodate the special
dividend paid on January 6, 2017.
|
Name
|
Shares
|
|
Mr.
Cherrey
|
10,246
|
|
Mr.
Howe
|
13,661
|
|
Mr.
Zaballos
|
13,661
|
|
Mr.
Zenz
|
13,661
|
(2)
Based
on Amendment No. 3 to Schedule 13D filed with the SEC on March 2,
2017 by Biglari Capital Corp., The Lion Fund II, L.P., and Sardar
Biglari, reporting holdings as of March 1, 2017. Biglari Capital
Corp. is the general partner of The Lion Fund II. Sardar Biglari is
the Chairman and Chief Executive Officer of Biglari Capital Corp.
and has investment discretion over the securities owned by The Lion
Fund II. By virtue of these relationships, Biglari Capital Corp.
and Sardar Biglari may be deemed to beneficially own the shares
owned directly by The Lion Fund II.
(3)
Based
on Amendment No. 6 to Schedule 13D filed with the SEC on February
16, 2017 by Air T., Inc., Groveland Capital LLC, Groveland Hedged
Credit Fund LLC, and Nicholas J. Swenson, reporting ownership as of
February 16, 2017. Mr. Swenson is the Chief Executive Officer and a
director of Air T. Air T, Inc. has sole dispositive and voting
power over 1,654,103 shares and disclaims beneficial ownership of
the securities held by the Groveland entities. Groveland Hedged
Credit Fund LLC owns the remaining 422,000 shares and each of
Groveland Capital LLC, Groveland Hedged Credit Fund LLC and Mr.
Swenson share dispositive and voting power over all 422,000 shares.
The Groveland entities each disclaim beneficial ownership of the
securities held by Air T.
(4)
Based
on Schedule 13D filed with the SEC on March 13, 2017 by Cable Car
Capital LLC and Jacob Haft Ma-Weaver, reporting ownership as of
March 3, 2017. Mr. Ma-Weaver is the Managing Member and investment
advisor of Cable Car Capital LLC.
(5)
Based
on Schedule 13G filed with the SEC on February 14, 2017 by
Renaissance Technologies LLC and Renaissance Technologies Holdings
Corporation, reporting ownership as of March 14, 2016. Shares are
beneficially owned by Renaissance Technologies Holdings
Corporation, which is a majority ownership of Renaissance
Technologies LLC.
(6)
Mr. Gonsior resigned from all positions with the Company on May 27,
2016.
(7)
Mr. Halfmann resigned from all positions with the Company on April
20, 2016.
(8)
Includes 51,229
shares subject to options.
S
ECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers and persons who own more than 10% of our
securities to file initial reports of ownership of those securities
on Form 3 and reports of changes in ownership on Form 4 or Form 5
with the SEC. Specific due dates for these reports have been
established by the SEC, and we are required to disclose in this
proxy statement any failure to timely file the required reports by
these dates. Based solely on our review of the copies of these
reports received by us and written representations from our
directors and executive officers, we believe that our directors and
executive officers complied with all Section 16(a) filing
requirements for the fiscal year ended December 31, 2016. The
Company knows of no failures to file a report required under
Section 16(a) of the Securities Exchange Act of 1934.
C
ERTAIN RELATIONSHIPS AND RELATED-PARTY
TRANSACTIONS
The SEC
has specific disclosure requirements covering certain types of
transactions that we engage in with our directors, executive
officers or other specified parties. The Company receives an
informational questionnaire from each director, nominee for
director, executive officer, and greater than five percent
shareholder which contains information about related-party
transactions between them and the Company. The Company’s
Audit Committee Charter assigns to the Audit Committee the
responsibility to review and approve all related-party
transactions. The Audit Committee reviews each related-party
transaction to determine that it is fair and reasonable to the
Company, and that the price and other terms included in any
transaction are comparable to the terms that would be included in
an arms-length transaction between the Company and an unrelated
third party.
In
October 2014, the Company introduced The Like Machine
TM
, which is an in-store consumer approval
device. The Company licenses this product from TLM Holdings, LLC
(“TLMH”), a company in which Insignia’s former
Chief Sales and Marketing Officer, Timothy Halfmann, is a majority
owner and, prior to his resignation from the Company, served as a
principal. During 2014, our Company paid a total of $250,000 to TLM
Holdings, LLC pursuant to this arrangement for the licensing
agreement and a minority equity ownership interest. During 2015,
our Company paid a total of $28,000 to TLMH pursuant to this
arrangement for the licensing agreement and other ancillary
services. In March 2016, the Company and TLMH signed a new
distribution agreement for the sale of The Like Machine to
Insignia’s customers. This new agreement replaces the
Company’s prior license agreement with TLMH. Mr. Halfmann
resigned from all positions with the Company, effective April 30,
2016. During 2016, the Company paid a total of $721,000 to TLMH
pursuant to the 2014 and 2016 agreements for licensing,
distribution, and other ancillary services.
During
fiscal year 2016, we did not engage in any other transaction, or
series of similar transactions, to which we were a party, in which
the amount involved exceeded the lesser of $120,000 or one percent
of the average of our total assets at year-end for the last two
completed fiscal years in which any of our directors, executive
officers, nominees for election as a director, beneficial owners of
more than 5% of our common stock or members of their immediate
family had a direct or indirect material interest. We do not have
any currently proposed transaction or series of similar
transactions.
O
THER
MATTERS
Management
of the Company knows of no matters other than the foregoing to be
properly brought before the Annual Meeting. However, if any other
matters properly come before the Annual Meeting or any adjournment
or postponement thereof, then the shares represented by the proxies
solicited by the Board may be voted by the persons named therein at
their discretion.
S
UBMISSION OF
SHAREHOLDERS PROPOSALS AND NOMINATIONS
Proposals
by shareholders (other than director nominations) that are
submitted for inclusion in the Company’s proxy statement for
its 2018 Annual Meeting of Shareholders must follow the procedures
provided in Rule 14a-8 under the Securities Exchange Act of 1934
and the Company’s Bylaws. To be timely, such proposals must
be given, either by personal delivery or by United States mail,
postage prepaid, to the Company’s Secretary on or before
December 30, 2017.
If a
shareholder intends to propose an item of business to be considered
at an annual meeting of shareholders, but not have it included in
the Company’s proxy statement, or if the shareholder intends
to nominate a person for election as a director at an annual
meeting of shareholders, then the shareholder must provide timely
written notice of such proposal or nomination to the
Company’s Secretary. To be timely under our Bylaws, such
notice must be given, either by personal delivery or by United
States mail, postage prepaid, to the Company’s Secretary not
less than sixty days nor more than ninety days prior to a meeting
date corresponding to the previous year’s annual meeting of
shareholders. For the Company’s 2018 Annual Meeting of
Shareholders, such notice must be given between March 8, 2018 and
April 6, 2018, and must comply with all applicable statutes and
regulations, as well as provide all information required pursuant
to the Company’s Bylaws.
A
DDITIONAL INFORMATION
The
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2016, accompanies the delivery of this proxy
statement and a copy of such annual report, as filed with the SEC,
is also available on the SEC’s website, www.sec.gov, and our
corporate website, www.insigniasystems.com. In addition, a copy of
the Annual Report on Form 10-K may be sent to any shareholder
without charge (except for exhibits, if requested, for which a
reasonable fee will be charged), upon written request to Insignia
Systems, Inc., 8799 Brooklyn Blvd., Minneapolis, MN
55445.
|
|
By
Order of the Board of Directors
Kristine
Glancy
President
and Chief Executive Officer
|
Whether or not you plan to attend the meeting, vote your shares
over the Internet or by telephone by following the instructions on
the proxy notice, or, if the proxy materials were mailed to you, by
completing, signing, dating and mailing the enclosed proxy card
promptly in the envelope provided with the proxy card.
23
TABLE OF CONTENTS
GENERAL INFORMATIONCORPORATE GOVERNANCE AND BOARD MATTERSPROPOSAL ONE - ELECTION OF DIRECTORSEXECUTIVE COMPENSATION AND OTHER INFORMATIONPROPOSAL TWO - NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATIONPROPOSAL THREE - NON-BINDING ADVISORY VOTE ON FREQUENCY OF EXECUTIVE COMPENSATION VOTESPROPOSAL FOUR - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMAUDIT COMMITTEE REPORTEQUITY COMPENSATION PLAN INFORMATIONSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCECERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSOTHER MATTERSSUBMISSION OF SHAREHOLDERS PROPOSALS AND NOMINATIONSADDITIONAL INFORMATION