LENDWAY, INC.
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. __)
Filed by a Party
other than the Registrant ☐
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
applies:
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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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maximum aggregate value of transaction:
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fee paid:
☐ Fee
paid previously with preliminary materials.
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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.
(1) Amount
Previously Paid:
(2) Form,
Schedule or Registration Statement No.:
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Party:
(4) Date
Filed:
7308
Aspen Lane N, Suite 153, Minneapolis, MN 55428
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 2021
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 Thursday, June 10, 2021, at 9:00 a.m., Central
Time, at Colonial Warehouse, 212 Third Avenue North, Minneapolis,
Minnesota for the following purposes:
1.
To elect four
nominees named in our proxy statement to serve as
directors;
2.
To approve, by a
non-binding vote, the Company’s executive
compensation;
3.
To ratify the
appointment of Baker Tilly US, LLP as the independent registered
public accounting firm for the year ending December 31, 2021;
and
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,
2021
as the record date
for the determination of shareholders entitled to notice of and to
vote at the meeting.
All shareholders are eligible to attend the meeting in person.
However, to ensure your representation at the meeting and your
safety, 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.
Important Notice Regarding Availability of Proxy Materials for the
Annual Meeting to be held on June 10, 2021:
The Proxy Statement and the Annual Report are available free of
charge at:
https://materials.proxyvote.com/45765Y.
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By
Order of the Board of Directors
Kristine
Glancy
President and Chief
Executive Officer
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Important Information Regarding Meeting Attendance and
Location:
We
intend to hold our annual meeting in person. However, we are
sensitive to the public health and travel concerns our shareholders
may have and recommendations that public health officials may issue
in light of the evolving coronavirus (COVID-19) situation. As a
result, we may impose additional procedures or limitations on
meeting attendees or may decide to hold the meeting in a different
location or solely by means of remote communication (e.g., a
virtual-only meeting). We plan to announce any such updates on our
Investor Relations website at www.insigniasystems.com/Investors,
and we encourage you to check this website prior to the meeting if
you plan to attend.
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PROXY STATEMENT
FOR
2021 ANNUAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
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Page
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GENERAL
INFORMATION
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1
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CORPORATE
GOVERNANCE AND BOARD MATTERS
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4
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PROPOSAL
ONE – ELECTION OF DIRECTORS
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8
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THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
“FOR” EACH OF THE FOUR NOMINEES.
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9
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EXECUTIVE
COMPENSATION
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10
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PROPOSAL
TWO – NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION
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15
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PROPOSAL
THREE – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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16
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AUDIT
COMMITTEE REPORT
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16
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EQUITY
COMPENSATION PLAN INFORMATION
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17
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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18
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CERTAIN
RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
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18
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OTHER
MATTERS
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19
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SUBMISSION
OF SHAREHOLDER PROPOSALS AND NOMINATIONS
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19
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HOUSEHOLDING
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20
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ADDITIONAL
INFORMATION
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20
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i
Annual Meeting of Shareholders
June 10, 2021
_______________________________________
PROXY STATEMENT
___________________________________________________
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
10, 2021, 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 10, 2021
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, 2020 and any amendments or
updates to these documents. The mailing of proxy material and a
proxy card, or a Notice Regarding the Availability of Proxy
Materials (“Notice of Internet Availability”) will
commence on or about April 27, 2021. 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 four 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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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 may attend the Annual Meeting?
The
Annual Meeting is open to holders of our common stock who held such
shares as of the meeting’s record date, April 13, 2021. We
intend to hold our annual meeting in person. However, we are
sensitive to the public health and travel concerns our shareholders
may have and recommendations that public health officials may issue
in light of the evolving coronavirus (COVID-19) situation. As a
result, we may impose additional procedures or limitations on
meeting attendees or may decide to hold the meeting in a different
location or solely by means of remote communication (e.g., a
virtual-only meeting). We plan to announce any such updates on our
Investor Relations website at www.insigniasystems.com/Investors,
and we encourage you to check this website prior to the meeting if
you plan to attend.
1
Who is entitled to vote at the meeting?
As of
the record date, April 13, 2021, there were 1,754,030 shares of
common stock, par value $.01 per share, outstanding and entitled to
vote at the Annual Meeting. Pursuant to the Company’s
Articles of Incorporation, each outstanding share of common stock
is entitled to one vote. Only shareholders of record at the close
of business on the record date, are entitled to attend and 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.
Due to space constraints and potential limitations to ensure the
health of attendees and compliance with applicable laws and
regulations, attendance will be limited to shareholders only.
Admission to the premises for the Annual Meeting will be on a
first-come, first-served basis. A valid government-issued
picture identification and proof of stock ownership as of the
record date may be required in order to attend the meeting. If
you hold shares of our common stock through a broker, bank, trust
or other nominee, you must present a copy of a statement reflecting
your stock ownership as of the record date. If you plan to
attend as the proxy of a shareholder or to vote in person, you must
present a legal proxy. Cameras, recording devices and other
electronic devices will not be permitted.
What is the difference between a “shareholder of
record” and a shareholder who holds stock in “street
name”?
Shareholder of Record.
If your shares
are registered directly in your name with our transfer agent, EQ
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 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. 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
.
Vote in Person
: You can vote in person
at the meeting.
If you
are a
shareholder who
holds our 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 above. 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 choose to vote
your shares in person at the meeting, you must request a
“legal proxy” and present it at the
meeting.
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.
2
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. To calculate whether
a quorum is present, the total number of shares present and
entitled to vote at the meeting will be divided by the total number
of shares outstanding and authorized to vote under the
Company’s Articles of Incorporation.
How many votes are required to approve the proposals?
Unless
a larger proportion or number is required under the Company’s
Articles of Incorporation or Minnesota law, each item of business
properly presented at a meeting of shareholders at which a quorum
is present must be approved by the affirmative vote of the holders
of the greater of (i) a majority of the voting power of the shares
present, in person or by proxy, and entitled to vote on that item
of business, or (ii) a majority of the voting power of the minimum
number of the shares entitled to vote that would constitute a
quorum for the transaction of business at the meeting (each a
“Majority Vote”).
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Item of Business
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Vote Requirement
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1.
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Election
of four directors
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Plurality Vote
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2.
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Advisory,
non-binding vote, to approve the Company’s executive
compensation
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Majority Vote
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3.
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Ratification
of Independent Registered Public Accounting Firm
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Majority Vote
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For
Proposal 1, directors are elected by the affirmative vote of the
holders of a plurality of the shares present and entitled to vote.
Shareholders are not entitled to cumulate their votes for the
election of directors. Broker Non-votes and abstentions will have
no effect on this proposal.
Proposal
2 is an advisory, non-binding vote, and will be deemed approved by
a Majority Vote. Broker Non-votes will have no effect on Proposal
2. Abstentions will have effect of a vote against Proposal
2.
Proposal
3 must be approved by a Majority Vote. Broker Non-votes and
abstentions will have the same effect as a vote against Proposal
3.
What is the effect of not voting or 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 1)
and the advisory vote to approve executive compensation (Proposal
2). 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 (a “Broker
Non-vote”). Your bank or broker may exercise discretion and
vote uninstructed shares on the ratification of our independent
registered public accounting firm (Proposal 3). We strongly
encourage you to return your voting instruction form and exercise
your full voting rights. See “How do I vote my shares?”
above for a discussion of how Interested Shares should be
voted.
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.
3
CORPORATE 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 rules of the Nasdaq Stock Market (“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 its
Governance, Compensation and Nominating Committee, the Board has
set the size of the Board to be elected at the Annual Meeting at
four.
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
Nasdaq Rules. Our Board has determined that each of our
non-employee directors, namely Jacob Berning, Chad Johnson and
Loren Unterseher, are “independent
directors.”
Meetings of the Board of Directors and Director
Attendance
The
Board held six meetings during 2020. Each director attended more
than 75% of all meetings of the Board and committees of the Board
on which he or she served. Although the Board does not have a
policy regarding attendance at the Company’s annual meetings
of shareholders, all four of our directors, Mr. Berning, Ms.
Glancy, Mr. Johnson and Mr. Unterseher attended the annual meeting
of shareholders held in 2020. 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 standing committees is set
forth in the following table.
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Director
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Audit
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Governance, Compensation and Nominating
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Independent Director
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Jacob
J. Berning
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Member
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Chair
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✓
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Kristine
A. Glancy
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Chad B.
Johnson
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Member
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Member
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✓
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Loren
A. Unterseher
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Chair
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Member
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✓
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Audit Committee
Independence; Qualifications
. 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. The Board
has also determined that Mr. Unterseher has acquired the attributes
necessary to qualify him as an “audit committee financial
expert,” as that term is defined by the rules of the SEC. The
determination for Mr. Unterseher was based primarily on experience
analyzing and evaluating financial statements and financial
performance of companies as Director of Mergers and Acquisitions
for Craig-Hallum and in similar roles at Lazard Middle Market and
RBC.
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 committee is solely responsible for appointing,
setting the compensation of and evaluating the independent
auditors.
4
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 Audit 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 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 Audit Committee
held five meetings during 2020. In addition to fulfillment of the
Audit Committee’s regular duties and responsibilities, these
meetings were designed to facilitate and encourage private
communication between the committee and the Company’s
independent auditors. Please refer to the Report of the Audit
Committee appearing later in this proxy statement.
Governance, Compensation and Nominating Committee
Independence.
Each of
the members of the Governance,
Compensation and Nominating Committee (the “GCN
Committee”) are “independent directors” as that
term is defined by the Nasdaq Rules, including the independence
criteria specific to compensation committee members, and
“non-employee directors” as that term is defined in
Rule 16b-3 under the Securities Exchange Act of 1934.
Duties and Responsibilities.
The GCN
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 nominate a slate of directors to be considered for
election at the Company’s annual meeting of shareholders,
(ii) to review, approve and recommend for Board ratification
of annual base salary and incentive compensation levels, employment
agreements, and benefits of the President and Chief Executive
Officer and other key executives; (iii) to review the performance
of the President and Chief Executive Officer; (iv) to review and
assess performance target goals established for bonus plans and
determine if goals were achieved at the end of the plan year; (v)
to act as the administrative committee for the Company’s
stock plans, and any other incentive plans established by the
Company; (vi) to consider and approve grants of incentive stock
options, non-qualified stock options, restricted stock or any
combination to any employee; and (vii) to oversee the filing of
required compensation-related reports or disclosures in the
Company’s SEC reports, proxy statement and other filings.
From time to time, the committee consults with the President and
Chief Executive Officer on executive compensation matters (other
than with respect to their own compensation).
Compensation Consultant.
In pursuing
its duties, the GCN Committee has the authority to retain and has,
from time to time, retained outside compensation consultants to
advise it on compensation matters. In setting 2020 compensation,
the committee did not retain a compensation consultant. The
committee referenced materials prepared by Willis Towers Watson in
2018 for compensation matters.
Nomination and Candidate Evaluation
Processes
. Shareholders who wish to recommend candidates to
the Board or its GCN Committee should submit the names and
qualifications of the candidates at least 120 days before the date
on which the Company’s proxy statement for the previous
year’s annual meeting became available to the shareholders.
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.
In
accordance with its committee charter, the GCN 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 committee is also
authorized to retain and pay advisors to assist it in identifying
and evaluating candidates.
Committee Meetings
. The GCN Committee
held three meetings in 2020.
5
Leadership Structure of the Board of Directors
The
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. Ms. Glancy serves as our
President and Chief Executive Officer and Mr. Berning 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.
The
Board is actively involved in overseeing risk management, and it
exercises its oversight both through the full Board and through the
two standing committees of the Board – the Audit and GCN
Committees. The two 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 two 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
We have
in place a “code of ethics” within the meaning of Rule
406 of Regulation S-K, which is applicable to our senior financial
management, including specifically our principal executive officer
and principal financial officer. A copy of the Code of Ethics is
available on our website (
www.insigniasystems.com
) under the
“Investor Relations - Corporate Governance” caption. We
intend to satisfy our disclosure obligations regarding any
amendment to, or a waiver from, a provision of this code of ethics
by posting such information on the same website.
Anti-Hedging Policy
Each of
our directors, officers, other employees and their designees are
prohibited from (i) purchasing financial instruments (including
prepaid variable forward contracts, equity swaps, collars and
exchange funds) that hedge or offset, or are designed to hedge of
offset, any decrease in the market value of our equity securities
and (ii) otherwise engaging in transactions that hedge or offset,
or are designed to hedge of offset, any decrease in the market
value of our equity securities. Notwithstanding the foregoing,
portfolio diversification transactions and investments in
broad-based index funds is generally permitted. The prohibition
applies to securities granted to the covered persons as part of
compensation for their service to the Company plus any other
Company securities held by them, whether directly or
indirectly.
6
Compensation of Non-Employee Directors
The
following table summarizes the compensation paid to our
non-employee directors for 2020.
|
Name
|
Fees
Earned or
Paid
Cash
(1)
|
Stock
Awards
(2)
|
Total
|
|
Jacob J.
Berning
|
$
22,000
|
$
15,000
|
$
37,000
|
|
Suzanne L.
Clarridge
(3)
|
$
1,417
|
$
–
|
$
1,417
|
|
Chad B.
Johnson
(4)
|
$
14,167
|
$
15,000
|
$
29,167
|
|
Loren A.
Unterseher
|
$
22,000
|
$
15,000
|
$
37,000
|
(1)
Reflects annual
board retainer and fees for attending Board, committee and
conference call meetings earned during 2020 inclusive of amounts
related to the Director Deferred Compensation Plan for Director. As
of December 31, 2020, the following director held shares under the
plan: Mr. Berning held 4,911 shares, and Mr. Unterseher held 2,919
shares.
(2)
On December 22,
2020, each non-employee director received restricted stock unit
grants pursuant to the 2018 Equity Incentive Plan (the “2018
Plan”) worth $15,000 based on the closing price of the
Company’s common stock on the date of grant.
(3)
Ms. Clarridge
ceased service as a director on January 31, 2020.
(4)
Mr. Johnson was
elected to the Board on February 27, 2020.
In
2020, non-employee directors received an annual cash retainer of
$17,000 per year of service and the Chairman of the Board and each
Committee Chair were eligible to receive an additional annual cash
retainer of $5,000.
In
2020, each non-employee director received a restricted stock unit
grant of shares of common stock based on a target grant date fair
value of $15,000. These restricted stock grants were made on
December 22, 2020 pursuant to the 2018 Plan. Each non-employee
director was granted 2,500 restricted stock units, which amount was
based on a closing price of $5.9983 for a share of the
Company’s common stock on the date of grant as reported by
The Nasdaq Stock Market. Each restricted stock unit is scheduled to
vest and settle in a share of common stock on the earlier of (i)
the day before the next annual meeting of shareholders and (ii)
December 22, 2021.
Director Deferred Compensation
Each of
our non-employee directors is eligible to participate in our
director deferred compensation plan (the “Director Deferred
Compensation Plan”), which allows a director to make
voluntary deferrals of up to 100% of their annual cash retainer and
any additional committee chair cash retainer. The Company does not
match any contributions to the Director Deferred Compensation Plan.
Deferred cash retainer amounts, if any, are deemed to be invested
in common stock equivalents having a value equal to the deferred
cash retainer amounts based on the fair market value of a share of
our common stock on the dates such amount would have otherwise been
paid to the participant. Dividends, if any, accrued on such commons
stock equivalents are deemed to be similarly deferred and credited
to the director’s deferred stock account. A participating
director will receive a distribution of their deferred stock
account, consisting of one share of stock for each common stock
equivalent credited to their deferred stock account as of the date
of distribution, as soon as practicable following the
director’s separation from service as a director of the
Company.
7
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 well-positioned
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 for election to serve as directors of the
Company, the Board first determined that the Board would consist of
four members as of the Annual Meeting. The Board, in conjunction
with its GCN Committee, then considered the qualifications and
experience and any other desirable skills, experience or knowledge.
The Board, upon recommendation by its GCN Committee, then approved
a slate of directors to be nominated for election at the Annual
Meeting.
When
identifying and evaluating candidates for director nominees, the
Board and its applicable committee (if any) historically 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 maintains a detailed set of
criteria aligned with these objectives and has historically
evaluated potential candidates against these criteria. The Board
and its applicable committee (if any) 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.
Director Nominees
All
directors of the Company hold office until the next annual meeting
of the shareholders or until their successors have been elected and
qualified. Our Bylaws, as amended, provide that our Board of
Directors (the “Board”) shall consist of between two
and no more than nine members, as designated by resolution of the
Board from time to time.
The
Board has nominated four current directors 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. 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, proxy holders will vote
all proxies received for each of the nominees.
The
specific qualifications of each nominee and current director,
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.
|
Director & Nominee
|
|
Age
|
|
Position
|
|
Director Since
|
|
Jacob
J. Berning
|
|
48
|
|
Director,
Chairman of the Board
|
|
June 2017
(1)
|
|
Kristine
A. Glancy
|
|
43
|
|
Director,
President, Chief Executive Officer & Secretary
|
|
June 2017
|
|
Chad B.
Johnson
|
|
50
|
|
Director
|
|
February
2020
|
|
Loren
A. Unterseher
|
|
56
|
|
Director
|
|
May 2018
|
(1) Mr.
Berning also served as a director of the Company from
December 2014 to June 2016
Jacob J. Berning
has served as Chairman of the Board since
May 2018 and has served as President of Food Service at The
Schwan Company since September 2018. Prior to that role, Mr.
Berning has held several positions since he joined The Schwan
Company in 2014. Mr. Berning has extensive leadership experience
across a diverse set of businesses and teams in the
consumer-packaged goods industry. His 20 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
8
Kristine A. Glancy
has served as our President and Chief
Executive Officer since May 2016.
As of January 2021, Ms. Glancy also serves
as
Interim Principal Financial Officer. 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.
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.
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.
Chad B. Johnson
is a Senior Director of Marketing of C.H.
Robinson Inc., a third-party logistics and supply chain management
provider, a position he has held since July 2018. Prior to that
role, Mr. Johnson was a Business Unit Director for General Mills
Inc. from July 2000 to July 2018. Mr. Johnson has extensive
marketing and leadership experience in the consumer-packaged goods
industry. He holds a Bachelor of Arts degree in Economics and
Chemistry from St. Olaf College and an MBA – Marketing and
Finance from the University of Minnesota - Carlson School. These
experiences provide knowledge and understanding of the industry
representing the majority of our customer base.
Loren A. Unterseher
is the Managing Partner of Oxbow
Industries, LLC, a holding company investing in middle-market
private companies, which position he has held since 2004. Over his
career, Mr. Unterseher has completed over $2.5 billion in corporate
finance transactions. Prior to Oxbow Industries, Mr. Unterseher was
a Principal/Shareholder & Director of Mergers and Acquisitions
for Craig-Hallum Capital Group. Prior to Craig-Hallum, he was
Director of Private Equity for Lazard Middle Market (f/k/a
Goldsmith Agio Helms). Mr. Unterseher started his investment
banking career as a Vice-President in Mergers and Acquisitions at
RBC (f/k/a Dain Rauscher). He began his professional career as an
attorney and was a Partner at Stinson Leonard Street (f/k/a
Leonard, Street & Deinard), a major Minneapolis based law firm.
Mr. Unterseher is currently Chairman of the Board of Inno-flex,
LLC, a private company (a director since 2016), and serves on the
boards of SkyWater Technology Foundry, Inc. (since 2017), Town
& Country Fence, LLC (since 2017) and FactRight (since 2018),
each of which is a private company. Mr. Unterseher has served on
several private company and not for profit boards of directors. He
holds a Bachelor of Business Administration degree in Finance from
the University of Iowa and a J.D. from the University of North
Dakota. We believe Mr. Unterseher’s investment, mergers and
acquisitions, and finance experience benefit the Board in addition
to his leadership of its Audit Committee.
Required Vote
Directors
are elected by the affirmative vote of the holders of a plurality
of the shares present and entitled to vote.
“FOR”
EACH OF THE FOUR NOMINEES.
9
Current Executive Officers
The
following individuals are our current executive
officers:
|
Name
|
|
Age
|
|
Position
|
|
Kristine
A. Glancy
|
|
43
|
|
Director,
President, Chief Executive Officer, Secretary and Interim Principal
Financial Officer
|
|
Adam D.
May
|
|
37
|
|
Chief
Growth Officer
|
|
Zackery
A. Weber
|
|
42
|
|
Senior
Director of Financial Planning and Analysis, Interim Principal
Accounting Officer
|
Summary Compensation Table
The
following table sets forth information about all compensation (cash
and non-cash) awarded to, earned by or paid to our Chief Executive
Officer, Chief Financial Officer and Chief Growth Officer serving
at the end of fiscal 2020 (collectively, our “Named Executive
Officers”) for the fiscal years ended December 31, 2020
and 2019.
|
Name and Position
|
|
Year
|
Salary
|
Bonus
|
Stock Awards
(1
)
|
Non-Equity Incentive Plan Compensation
|
All Other Compensation
|
Total
|
|
Kristine
A. Glancy
|
|
2020
|
$
314,600
|
$
–
|
$
64,266
(2)
|
$
–
|
$
4,275
(3)
|
$
383,141
|
|
President, Chief Executive Officer and Secretary
|
|
2019
|
$
314,600
|
$
–
|
$
–
|
$
–
|
$
4,200
(3)
|
$
318,800
|
|
|
|
|
|
|
|
|
|
|
|
Adam
D. May
|
|
2020
|
$
220,000
|
$
–
|
$
17,137
(4)
|
$
38,388
|
$
13,702
(5)
|
$
289,227
|
|
Chief Growth Officer
|
|
2019
|
$
182,631
|
$
47,394
|
$
–
|
$
–
|
$
14,282
(5)
|
$
244,307
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey A. Jagerson
(6
)
|
|
2020
|
$
246,750
|
$
–
|
$
–
|
$
–
|
$
3,844
(3)
|
$
250,594
|
|
Former Vice President of Finance, Chief Financial Officer and
Treasurer
|
|
2019
|
$
246,750
|
$
–
|
$
–
|
$
–
|
$
4,200
(3)
|
$
250,950
|
(1)
Amounts shown in the Stock Awards column represent
the aggregate grant date fair value of restricted stock and
restricted stock unit awards granted during the applicable year.
Grant date fair values are computed in accordance with ASC Topic
718 using assumptions discussed in Note 8 to the financial
statements appearing in our annual report on Form 10-K for the
fiscal year ended December 31, 2020.
(2)
Consists of 10,714 restricted
stock units granted on December 22, 2020 (based on a closing stock
price of $5.9983 on the date of grant and scheduled to vest on
December 31, 2021).
(3)
Amount
represents employer 401(k) contribution match.
(4)
Consists of 2,857 restricted
stock units granted on December 22, 2020 (based on a closing stock
price of $5.9983 on the date of grant and scheduled to vest on
December 31, 2021).
(5)
Amount represents annual car
allowance and employer 401(k) contribution
match.
(6)
Mr. Jagerson departed all
positions with the Company on January 8, 2021.
Fiscal 2020 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 Incentive Plan; and (iii) long-term, equity-based
incentive compensation in the form of 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
Incentive Plan
In
January 2020
, the
Board, as recommended by its Governance, Compensation and
Nominating Committee (the “GCN Committee”), approved
the 2020 Executive Cash Incentive Plan (the “2020 Cash
Plan”). Members of the Company’s senior management,
including all three of the Company’s executive officers, Ms.
Glancy, Mr. Jagerson and Mr. May participated in the 2020 Cash
Plan.
10
The
2020 Cash Plan provided that Ms. Glancy and Mr. Jagerson were
eligible to receive a potential payout based solely on the
Company’s performance against target operating income/loss,
inclusive of all compensation expenses
, excluding expenses specific to significant
pending litigation
. Mr. May was eligible to receive a
potential payout based 50% on the Company’s performance
against target operating income/loss and 50% based on the
Company’s performance against target net revenue. The total
target cash payments under the 2020 Cash Plan for Ms. Glancy and
Mr. Jagerson were equal to 50% of each participant’s
respective base salary and the potential payouts, if any, ranged
from 5% to 75% of each participant’s base salary. The total
target cash payment under the 2020 Cash Plan for Mr. May was equal
to 28.6% of his base salary and the potential payout, if any,
ranged from 3% to 43% of his base pay
.
Similar to 2019, the 2020 Cash Plan provided for a potential
revenue-based multiplier of between 110% and 120% based on Company
performance against target operating income (loss) and total net
sales. All bonus calculations under the 2020 Cash Plan were subject
to review and final approval by the GCN Committee prior to
payment.
Company Performance-Based Payment
For
2020, the GCN Committee established a target operating income,
excluding expenses specific to the Company’s
significant pending litigation
and approved
the following schedule of potential payments under the Executive
Incentive Plan:
|
Pre-Bonus Income Level
|
|
Operating Income (Loss)
|
|
Percent of Target Variable Compensation
|
|
<($0)
|
|
<($0)
|
|
0%
|
|
$79,000
- $786,999
|
|
$1
|
|
10% -
99.99%
|
|
$787,000
- $1,531,999
|
|
$1 -
$429,999
|
|
100% -
139.99%
|
|
$1,532,000
- $1,830,999
|
|
$430,000
- $649,999
|
|
140% -
149.99%
|
|
≥
$1,831,000
|
|
≥
$650,000
|
|
150%
|
Based
on an actual operating loss of $4,601,000 for 2020, as reported in
Part II, Item 8, of the Company’s Annual Report on Form 10-K
and adjusted to exclude the expenses specific to the
pending litigation
, the GCN Committee
determined that no incentives were earned as part of the 2020 Cash
Plan and no payouts were made to Ms. Glancy or Mr. Jagerson under
the 2020 Cash Plan. Based on actual net revenue of $17,669,000 for
2020, Mr. May received a payout of $38,388 of payout.
Retention Bonus
In
December 2020, the Compensation Committee approved a one-time
$50,000 retention bonus opportunity to Mr. May, which will be paid
in full so long as he is continuously employed by the Company
through January 31, 2022.
Actions Relating to Fiscal 2021 Executive Compensation
In
December 2020, the Compensation Committee evaluated the scope of
responsibilities and base salaries of our executive officers and,
as a result, increased Mr. May’s annual base salary to
$220,000 effective January 1, 2021.
The
non-employee directors, as recommended by the GCN Committee,
approved, the 2021 Executive Cash Incentive Plan (the “2021
Cash Plan”). The only employees currently eligible to
participate in the 2021 Cash Plan are the Company’s three
executive officers: Ms. Glancy, Mr. May, and Mr. Weber. The 2021
Cash Plan provides that each of the participants are eligible to
receive a potential payout based solely on the Company’s
performance against target operating income/loss, inclusive of all
compensation expenses
, excluding
expenses specific to significant pending litigation
. The
total target cash payment under the 2021 Cash Plan for Ms. Glancy
is equal to 50% of her base salary and the potential payout, if
any, ranges from 10% to 150% of her base salary. The total target
cash payment under the 2021 Cash Plan for Mr. May is equal to 59%
of his base salary and the potential payout, if any, ranges from 6%
to 89% of his base salary. The total target cash payment under the
2021 Cash Plan for Mr. Weber is equal to 25% of his base salary and
the potential payout, if any, ranges from 3% to 38% of his base
salary. The 2021 Cash Plan has no revenue-based multiplier. All
bonus calculations under the 2021 Cash Plan will be subject to
review and final approval by the GCN Committee prior to
payment.
Long-term, Equity-Based Incentive Compensation
The GCN
Committee has determined that a combination of common stock options
and restricted stock units are each appropriate under certain
circumstances, based upon factors including market practices and
our overall compensation philosophy. Historically, options have a
ten-year term and bear an exercise price equal to the fair market
value of a share of our common stock on the date of grant,
determined in accordance with the applicable equity plan. Each
restricted stock unit generally represents a contingent right to
receive one share of our common stock upon vesting.
11
On
December 22, 2020, Ms. Glancy and Mr. May received 10,714 and 2,857
restricted stock units, respectively, under the 2018 Plan. Each
such award is scheduled to vest on December 31, 2021.
Severance and Change in Control Arrangements with Named Executive
Officers
The
Company
is party to Employment
Agreements and Change in Control Agreements with Ms. Glancy and Mr.
May and was party to an
Employment Agreement and a Change in
Control Agreement with Mr. Jagerson
,
each in substantially the same form.
Each Employment Agreement provides that the employee will receive
an established annual base salary, subject to increase from time to
time, target incentive compensation awards, and participation in
customary benefit plans and programs. In addition, in the event of
the employee’s involuntary termination without cause or
voluntary termination with good reason, she or he will be eligible
to receive accrued and unpaid compensation as well as the following
severance pay and benefits: (1) the annual incentive compensation
they would have been entitled to receive for the year in which
their termination occurs as if they had continued until the end of
that fiscal year, determined based on the Company’s actual
performance for that year relative to any applicable performance
goals, prorated for the number of days in the fiscal year through
the termination date and generally payable in a cash lump sum at
the time such incentive awards are payable to other participants;
(2) a percentage (100% for Ms. Glancy; 50% for Mr. Jagerson; 50%
for Mr. May) of their 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 for Ms. Glancy and for three months
for Mr. Jagerson and Mr. May following termination. In the event of
death, disability, involuntary termination for cause or voluntary
termination without good reason, each will be entitled to accrued
and unpaid compensation as provided in the Employment
Agreement.
“Cause” is defined in each 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
the employee.
“Good reason” includes demotion,
reduction in salary or benefits, and certain other
events.
Under their respective Change in Control Agreements, as amended,
upon a qualifying termination, employee 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 a
percentage (200% for Ms. Glancy; 75% for Mr. Jagerson and for Mr.
May) of their annual base salary, (2) cash payment equal to
the sum of (x) unpaid incentive compensation that has been
allocated or awarded to them 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
specified period (12 months for Ms. Glancy; 6 months for
Mr. Jagerson and for Mr. May), (4) certain post-retirement health
care or life insurance benefits if they 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.
Each of the Change in Control Agreements defines
“qualifying termination” as a termination by the
Company without cause or a termination by the employee 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 in the Change in Control
Agreements as (i) the deliberate and continued failure to devote
substantially all business time and best efforts to the performance
of the his or her duties after demand for substantial performance
is delivered to the employee by the Board which the demand
specifically identifies the manner in which the employee has not
substantially performed such 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.
12
All of the Employment Agreements and Change in Control Agreements
define “good reason” to include demotion, reduction in
salary or benefits, and certain other events.
Mr. Jagerson was not entitled to receive, and did not receive, any
severance or other benefits in connection with his departure from
the Company.
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, 2020. The market value of restricted stock units
that had not vested equals $5.8793, which was the closing price of
a share of our common stock on that date.
|
|
|
|
Option
Awards
|
Stock
Awards
|
||||
|
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
|
|
|
|
|
2,857
(1)
|
$
16,797
|
|
|
|
6/13/2018
|
|
|
|
|
2,380
(1)
|
$
13,993
|
|
|
|
8/10/2018
|
|
|
|
|
5,142
(2)
|
$
30,231
|
|
|
|
8/10/2018
|
2,570
|
5,142
(2)
|
$
13.65
|
8/10/2028
|
|
|
|
|
|
12/22/2020
|
|
|
|
|
10,714
(3)
|
$
62,991
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey A.
Jagerson
(4)
|
|
6/13/2018
|
|
|
|
|
1,047
(1)
|
$
6,156
|
|
|
|
8/10/2018
|
|
|
|
|
1,292
(2)
|
$
7,596
|
|
|
|
8/10/2018
|
646
|
1,292
(2)
|
$
13.65
|
8/10/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam A.
May
|
|
6/13/2018
|
|
|
|
|
1,047
(1)
|
$
6,156
|
|
|
|
8/10/2018
|
|
|
|
|
1,292
(2)
|
$
7,596
|
|
|
|
8/10/2018
|
646
|
1,292
(2)
|
$
13.65
|
8/10/2028
|
|
|
|
|
|
12/22/2020
|
|
|
|
|
2,857
(3)
|
$
16,797
|
__________________
(1)
Remainder scheduled
to vest in one annual installment on the anniversary of the grant
date.
(2)
Scheduled to vest
in two equal annual installments on each of the next two
anniversaries of the grant date.
(3)
Scheduled to vest
on December 31, 2021.
(4)
As a result of Mr.
Jagerson’s departure from the Company on January 8, 2021, all
unvested restricted stock units were immediately forfeited and all
outstanding unvested or unexercised options expired on April 8,
2021.
13
Tax and Accounting Considerations
Due to the enactment of the Tax Cuts and Jobs Act of 2017 in
December 2017, compensation paid the chief executive officer, chief
financial officer, the three highest compensated executive officers
(other than the CEO and CFO) and anyone who previously was a
covered person under that section in excess of $1 million will
not be deductible under Section 162(m) of the Code unless it
qualifies for transitional relief applicable to certain binding,
written performance-based compensation arrangements that were in
place as of November 2, 2017. No assurance can be given that
the compensation associated with these awards will qualify for the
transitional relief. While the Committee is mindful of the benefit
to us of the deductibility of compensation, the Committee continues
to believe that stockholder interests are best served if its
discretion and flexibility in structuring and awarding compensation
is not restricted, even though some compensation awards may have
resulted in the past, and are expected to result in the future, in
non-deductible compensation expenses to the Company. The
Committee's ability to continue to provide a competitive
compensation package to attract, motivate and retain the Company's
most senior executives is considered critical to the Company's
success and to advancing the interests of its
stockholders.
On March 11, 2021, The American Rescue Plan Act of 2021 (the
“ARPA”) was signed into law to assist in the economic
and health recovery brought on by the COVID-19 pandemic. Beginning
on or after January 1, 2027, the ARPA expands the applicability of
Section 162(m) to also include the next five highest paid corporate
officers so that the total number of covered employees subject to
the $1 million deduction limitation will at least be
10.
Section 409A of the Internal Revenue Code also affects the
payments of certain types of deferred compensation to key employees
and includes requirements relating to when payments under such
arrangements can be made, acceleration of benefits, and timing of
elections under such arrangements. Failure to satisfy these
requirements will generally lead to an acceleration of the timing
for including deferred compensation in an employee's income, as
well as certain penalties and interest.
14
NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION
At the
annual meeting held in 2020, shareholders voted to continue 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. 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.
Our executive compensation received substantial shareholder support
and was approved, on an advisory basis, by approximately 97.9% of
the votes cast “for” or “against” the
corresponding proposal at the annual meeting of shareholders held
in 2020. The non-employee directors, based on the recommendation of
the GCN Committee, believe that this vote reflected our
shareholders’ support of the compensation decisions made by
its predecessor, the Compensation Committee, for our named
executive officers for 2020.
Compensation Philosophy and Compensation of our Named Executive
Officers
Our
discussion of the authority and processes of the GCN Committee in
this proxy statement explains the responsibilities of the
applicable committee of the Board. The narrative disclosure of our
Executive Compensation, beginning on page 10 provides information
concerning the compensation philosophy, plans and policies under
which we paid the Named Executive Officers for 2020. As set forth
in the Summary Compensation Table on page 10 and the narrative
disclosure of Fiscal 2020 Executive Compensation that follows that
table, 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 non-employee directors and the GCN Committee 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 Named
Executive Officers, as disclosed in this proxy statement pursuant
to the compensation disclosure rules of the SEC, including the
summary compensation table and other related tables and narrative
disclosure.
Required Vote; Effect of Proposal
This
proposal is an advisory, non-binding vote, and will be deemed
approved if approved by a Majority Vote. The approval or
disapproval of this proposal by shareholder will not require the
Board or its GCN Committee to take any action regarding our
executive compensation practices. The final decision on the
compensation and benefits of our executive officers and on whether,
and if so, how, to address any shareholder disapproval remains with
the Board and the applicable committee.
Notwithstanding
the foregoing, the Board values the opinions of our shareholders as
expressed through their votes and other communications. Although
this proposal is non-binding, the Board and its GCN Committee will
carefully consider the outcome of the advisory vote on executive
compensation and shareholder opinions received from other
communications when making future compensation
decisions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE
“FOR” THE ADVISORY APPROVAL OF THE COMPANY’S
EXECUTIVE COMPENSATION.
15
PROPOSAL THREE –
RATIFICATION
OF APPOINTMENT
OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board has appointed Baker Tilly US, LLP
(“Baker Tilly”) as our independent registered public
accounting firm for the year ending December 31, 2021.
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.
Required Vote; Effect of Proposal
The
affirmative vote of the holders of a majority of the outstanding
shares of our common stock of the entitled to vote on this item and
present in person or by proxy at the Annual Meeting is required for
approval of this proposal. Proxies solicited by the Board will be
voted for approval of this proposal, unless otherwise specified. If
shareholder approval is not obtained, then the Audit Committee
would reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE
“FOR” RATIFICATION OF THE APPOINTMENT OF BAKER TILLY AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2021.
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, 2020 and 2019.
|
|
2020
|
2019
|
|
Audit
Fees
(1)
|
$
148,000
|
$
144,000
|
|
Total
|
$
148,000
|
$
144,000
|
__________________
(1)
Audit fees
represent fees for professional services provided in connection
with the audit of the Company’s financial statements and
review of quarterly financial statements.
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 2020
and 2019 were pre-approved by the Company’s Audit
Committee.
AUDIT 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 with the Company’s independent
registered public 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 requirements of
the Public Company Oversight Board and the SEC; and
●
Received the
written disclosures and the letter from the Company’s
independent registered public accounting firm required by
applicable requirements of the Public Company Accounting Oversight
Board regarding such firm’s communications with the audit
committee concerning independence and discussed with
representatives of such firm its independence from management and
the Company.
16
Based
on the foregoing and 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, 2020, for filing with the
SEC.
Audit
Committee Members:
Jacob J.
Berning
Chad B.
Johnson
Loren A.
Unterseher, Chairman
The preceding Audit Committee 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.
EQUITY
COMPENSATION PLAN INFORMATION
The following table
presents certain information regarding our equity compensation
plans, the 2003 Stock Plan (the “2003 Plan”), the 2013
Omnibus Stock and Incentive Plan (the “2013 Plan”), the
2018 Plan and our Employee Stock Purchase Plan, as of
December 31, 2020.
|
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
|
80,841
(1)
|
$
14.69
|
122,628
(2)
|
|
Equity compensation
plans not approved by security holders
|
–
|
–
|
–
|
|
Total
|
80,841
|
$
14.69
|
122,628
|
__________________
(1)
Includes 55,218
awards under the 2018 Plan, 15,328 awards under the 2013 Plan and
10,295 awards under the 2003 Plan. We ceased issuing awards under
the 2003 Plan upon approval of the 2013 Plan in 2013, and we ceased
issuing awards under the 2013 Plan upon approval of the 2018 Plan
in 2018.
(2)
Includes 28,977
shares available for issuance under our Employee Stock Purchase
Plan and 93,651 shares available for issuance pursuant to future
awards under the 2018 Plan. The Company maintains the Employee
Stock Purchase Plan, pursuant to which eligible employees,
including named 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.
17
The
following table presents information provided to the Company as to
the beneficial ownership of common stock as of April 13, 2021, 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 and executive officer is 7308 Aspen Lane N, Suite
153, Minneapolis, Minnesota 55428. Beneficial ownership includes
shares available for purchase under options and subject to
settlement under restricted stock units within 60 days after April
13, 2021. 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
|
|
|
|
Air
T, Inc., et al.
|
557,906
(2)
|
32.3
%
|
|
5930
Balsom Ridge Road
|
|
|
|
Denver,
NC 28037
|
|
|
|
|
|
|
|
Renaissance
Technologies LLC
|
131,612
(3)
|
7.3
%
|
|
800
Third Avenue
|
|
|
|
New
York, NY 10022
|
|
|
|
|
|
|
|
Directors, Nominees and Executive Officers
|
|
|
|
Kristine
A. Glancy
|
26,947
|
1.5
%
|
|
Jacob
J. Berning
|
11,561
|
*
|
|
Adam
D. May
|
9,339
|
*
|
|
Loren
A. Unterseher
|
8,411
|
*
|
|
Zackery
A. Weber
|
7,274
|
*
|
|
Chad
B. Johnson
|
2,500
|
*
|
|
|
|
|
|
All
current directors, nominees and executive officers as a group (6
persons)
|
66,032
|
3.8
%
|
__________________
*
Less than one
percent.
(1)
Does not include
4,911 and 2,919 common stock equivalents held by Mr. Berning and
Mr. Unterseher, respectively, under the Insignia Systems Inc.
Deferred Compensation Plan for Directors. These common stock
equivalents carry no voting rights and the recipient does not have
the right to acquire any underlying shares within 60 days of April
13, 2021.
(2)
Based on Amendment
No. 13 to Schedule 13D filed with the SEC on November 18, 2020 by
Air T., Groveland Capital, LLC, AO Partners I, L.P. (“AO
Partners Fund”), AO Partners, LLC (“AO
Partners”), Glenhurst Co., and Nicholas J. Swenson, reporting
ownership as of November 12, 2020,
after giving effect to the 7:1
reverse stock split effected subsequent to the date of the filing.
Mr. Swenson is the Chief Executive Officer and a director of Air T,
Inc. Air T, Inc. has sole dispositive and voting power over
3,409,742 shares and disclaims beneficial ownership of the
securities held by Groveland, AO Partners Fund, AO Partners,
Glenhurst and Mr. Swenson. Groveland owns 422,000 shares and each
of Groveland and Mr. Swenson share dispositive and voting power
over all 422,000 shares. Mr. Swenson personally owns 92,168 shares
of common stock. AO Partners, the general partner of AO Partners
Fund, beneficially owns 26,432 shares. AO Partners shares with Mr.
Swenson dispositive and voting power over all 26,432 shares.
Glenhurst owns 80,000 shares and shares with Mr. Swenson
dispositive and voting power over all 80,000. Mr. Swenson disclaims
beneficial ownership of the securities held by Air T .
(3)
Based on Amendment
No. 4 to Schedule 13G filed with the SEC on February 11, 2021 by
Renaissance Technologies LLC and Renaissance Technologies Holdings
Corporation, reporting ownership as of December 31,
2020,
after giving effect
to the 7:1 reverse stock split effected subsequent to the date of
the report. Shares are beneficially owned by Renaissance
Technologies Holdings Corporation, which is a majority owner of
Renaissance Technologies LLC.
CERTAIN 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.
The
Company was party to a Cooperation Agreement, dated May 17, 2018
(the “Cooperation Agreement”), with Air T, Inc.
(“Air T”), Groveland Capital LLC
(“Groveland”), and Nicholas J. Swenson (collectively
the “Shareholder Group”). Prior to the execution of the
Cooperation Agreement, on March 23, 2018, the Company received
a letter from Air T containing
18
proposals for
certain governance changes, including changes to the composition of
the Board. In response, members of the Board, on behalf of the
Company, commenced increased engagement with representatives of Air
T, including Mr. Swenson and its legal counsel. On April 6,
2018, the Company received from the Shareholder Group written
notice of the nomination of five director candidates, including Ms.
Clarridge and Mr. Unterseher, for election at the 2018 Annual
Meeting. After substantial and continuous engagement among
representatives of the Company and representatives of the
Shareholder Group, the Company entered into the Cooperation
Agreement on May 17, 2018, to, among other things, minimize
reputational damage to the Company as a result of a distracting and
expensive potential contested proxy solicitation and to ensure that
the majority of the Board is representative of all
shareholders.
Pursuant
to the terms of the Cooperation Agreement, the Company promptly
(i) increased the size of the Board to six and
(ii) appointed Suzanne Clarridge and Mr. Unterseher to serve
as additional directors. The Cooperation Agreement resulted in Air
T’s withdrawal of its prior nomination of five director
candidates. It also required the Company to include Ms. Clarridge
and Mr. Unterseher in its slate of nominees for election at the
Company’s 2018 and 2019 Annual Meetings of Shareholders and
to solicit proxies with a recommendation that shareholders vote in
favor of their election at each such meeting. Also pursuant to the
Cooperation Agreement, our former director, Peter Zaballos retired
from the Board and all committees. Mr. Zenz retired from the Board
as of June 5, 2019.
With
respect to the annual meetings held in 2018 and 2019, the
Shareholder Group agreed to, among other things, vote in favor of
the Company’s director nominees and in accordance with the
Board’s recommendation on all other proposals. The
Shareholder Group also agreed to certain customary standstill
provisions, effective as of the date of the Cooperation Agreement
through 60 days prior to the expiration of the applicable notice
period specified in the Company’s Bylaws related to the
nominations of directors at its 2020 annual meeting of
shareholders.
Additionally,
on February 27, 2020, our Board appointed Mr. Johnson to serve as
an additional director to fill a vacancy on the Board pursuant to
the nomination and evaluation procedures for substitute nominees
set forth in the Cooperation Agreement.
During
fiscal years 2019 and 2020, the Company did not engage in any other
transaction, or series of similar transactions, to which it was 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.
OTHER 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.
Proposals
by shareholders (other than director nominations) that are
submitted for inclusion in the Company’s proxy statement for
its 2021 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 28, 2021. If the date of the 2022 Annual Meeting of
Shareholders is more than 30 days before or after the anniversary
of the 2021 Annual Meeting of Shareholders, then such notice will
instead be timely only if delivered within a reasonable time before
the Company begins to print and send its proxy
materials.
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 2022 Annual Meeting of
Shareholders, such notice must be given between March 12, 2022 and
April 11, 2022 and must comply with all applicable statutes and
regulations, as well as provide all information required pursuant
to the Company’s Bylaws.
19
We have
adopted a procedure approved by the SEC called
“householding,” by which certain shareholders who do
not participate in electronic delivery of proxy materials but who
have the same address and appear to be members of the same family
receive only one copy of our annual report and proxy statement.
Each shareholder participating in householding continues to receive
a separate proxy card. Householding reduces both the environmental
impact of our annual meetings and our mailing and printing
expenses.
If you
would like to change your householding election, request that a
single copy of the proxy materials be sent to your address, or
request a separate copy of the proxy materials, please contact
Broadridge Financial Solutions, Inc., by calling (866) 540-7095 or
by writing to Broadridge Householding Department, 51 Mercedes Way,
Edgewood, New York 11717. We will promptly deliver the notice of
internet availability or proxy materials to you upon receipt of
your request. If you hold your shares in street name, please
contact your bank, broker, or other record holder to request
information about householding.
The
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2020, 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., 7308 Aspen Lane N, Suite 153, Minneapolis, MN
55428.
|
|
By
Order of the Board of Directors
Kristine
Glancy
President, Chief
Executive Officer and Secretary
|
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.
20
TABLE OF CONTENTS