LIGHTPATH TECHNOLOGIES INC
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed
by the Registrant
☒
Filed
by a Party other than the Registrant
☐
Check
the appropriate box:
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☐
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Preliminary
Proxy Statement
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Confidential,
For use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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☒
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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LIGHTPATH TECHNOLOGIES, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No fee
required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on
which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid
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Fee
paid previously with preliminary 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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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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LightPath Technologies, Inc.
Annual Meeting of Stockholders
November 15, 2018
Notice and Proxy Statement
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Thursday, November 15, 2018
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Dear
Fellow LightPath Stockholders:
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October
1, 2018
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It is
our pleasure to invite you to this year’s Annual Meeting of
the Stockholders of LightPath Technologies, Inc. The meeting will
be held on Thursday, November 15, 2018 at 11:00 a.m. EDT at the
Hyatt Regency Orlando International Airport Hotel. The address is
9300 Airport Boulevard, Orlando, Florida 32827. The purpose of the
Annual Meeting is to vote on the following:
1.
To elect Class II
directors to our Company’s Board of Directors;
2.
To approve our
Company’s 2018 Omnibus Incentive Plan (the “Incentive
Plan”);
3.
To hold a
stockholder advisory vote on the compensation of our named
executive officers disclosed in this Proxy Statement under the
section titled “Executive Compensation,” including the
compensation tables and other narrative executive compensation
disclosures therein, required by Item 402 of Securities and
Exchange Commission Regulation S-K (the “say-on-pay
vote”);
4.
To ratify the
selection of Moore Stephens Lovelace, P.A. (“Moore Stephens
Lovelace”) as our independent registered public accounting
firm; and
5.
To transact such
other business as may properly come before the Annual Meeting or
any postponement or adjournment thereof.
You
will also have the opportunity to hear what has happened in our
business in the past year and to ask questions.
Only
stockholders of record at the close of business on September 17,
2018 will be entitled to receive notice of and to vote at the
Annual Meeting or any postponement or adjournment thereof. The
enclosed Notice and Proxy Statement contain details concerning the
foregoing items and any other business to be conducted at the
Annual Meeting, as well as information on how to vote your shares.
Other detailed information about us and our operations, including
our audited financial statements, are included in our Annual Report
on Form 10-K (the “Annual Report”), a copy of which is
enclosed. We urge you to read and consider these documents
carefully.
Your
vote is very important. Whether or not you expect to attend the
Annual Meeting, we urge you to cast your vote and submit your proxy
in advance of the Annual Meeting. You can vote in person at the
Annual Meeting or by internet, telephone, or mail as
follows:
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By Internet
Visit
www.AALvote.com/LPTH
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By Phone
Call
the telephone number on your proxy card, voting instruction form,
or notice
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By Mail
Sign,
date, and return the enclosed proxy card or voting instruction
form
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In Person
Attend
the Annual Meeting in Orlando
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/s/ J. James Gaynor
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/s/ Robert Ripp
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J.
James Gaynor
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Robert
Ripp
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President
& Chief Executive Officer, Director
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Chairman
of the Board
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2603 Challenger Tech Court, Suite 100 * Orlando, Florida USA 32826
* 407-382-4003
1
LIGHTPATH TECHNOLOGIES, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To be held November 15, 2018
This
Proxy Statement, and the enclosed proxy card, is solicited by the
Board of Directors (the “Board”) of LightPath
Technologies, Inc., a Delaware corporation, for use at the Annual
Meeting of Stockholders (the “Annual Meeting”) to be
held Thursday, November 15, 2018 at 11:00 a.m. EDT, or at any
adjournments or postponements thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at 11:00 a.m. EDT at the Hyatt Regency
Orlando International Airport Hotel located at 9300 Airport
Boulevard, Orlando, Florida 32827.
References in this
Proxy Statement to “LightPath,” “we,”
“us,” “our,” or the “Company”
refers to LightPath Technologies, Inc.
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE MEETING OF
STOCKHOLDERS TO BE HELD ON NOVEMBER 15, 2018.
This
Proxy Statement, the enclosed proxy card, and the Annual Report for
the fiscal year ended on June 30, 2018, are all available on our
website at
www.lightpath.com
.
With respect to the Annual Meeting and all of our future
stockholder meetings, please contact Dorothy Cipolla at
1-800-472-3486 ext. 305, or
dcipolla@lightpath.com
,
to request a copy of the proxy statement, annual report, or proxy
card, or to obtain directions to such meeting.
What is a proxy?
A proxy
is your legal designation of another person to vote the stock you
own and are entitled to vote. The person you designate is your
“proxy,” and, by submitting a proxy card, you give the
proxy the authority to vote your shares. We have designated Robert
Ripp, Chairman of the Board, as proxy for the Annual
Meeting.
Why am I receiving these materials?
You are
receiving this Proxy Statement and the enclosed proxy card because
our Board is soliciting your proxy to vote at the Annual Meeting
for the purposes set forth herein. This Proxy Statement provides
you with information on the matters to be voted on at the Annual
Meeting as well as instructions on how to vote.
We
intend to mail this Proxy Statement and accompanying proxy card on
or about October 1, 2018 to all stockholders of record entitled to
vote at the Annual Meeting.
2
Who can vote at the Annual Meeting?
You can
vote if, as of the close of business on September 17, 2018 (the
“Record Date”), you were a stockholder of record of the
Company’s Class A common stock, par value $0.01 per share
(the “Class A common stock), our only class of common stock
issued and outstanding. On the Record Date, there were 25,773,605
shares of Class A common stock issued and outstanding.
Stockholder of Record: Shares Registered in Your Name
If on
the Record Date, your shares were registered directly in your name
with our transfer agent, Computershare Trust Company, N.A., then
you are a stockholder of record. As a stockholder of record, you
may vote in person at the Annual Meeting or vote by proxy. Whether
or not you plan to attend the Annual Meeting, we urge you to vote
by written proxy, telephone, or the internet to ensure your vote is
counted. Even if you vote by proxy, you may still vote in person if
you are able to attend the Annual Meeting.
Beneficial Owner: Shares Registered in the Name of a Broker or
Bank
If on
the Record Date, your shares were held in an account at a brokerage
firm, bank, dealer, or other similar organization, then you are the
beneficial owner of shares held in “street name” and
these proxy materials are being forwarded to you by that
organization. The organization holding your account is considered
the stockholder of record for purposes of voting at the Annual
Meeting. As a beneficial owner, you have the right to direct your
broker or other agent on how to vote the shares in your account. If
you do not direct your broker how to vote your shares, the broker
will be entitled to vote the shares with respect to
“discretionary” items but will not be permitted to vote
the shares with respect to “non-discretionary” items
(resulting in a “broker non-vote”). The ratification of
the appointment of our independent registered public accounting
firm under Proposal 4 is a “discretionary” matter. The
election of directors under Proposal 1, the approval of the
Incentive Plan under Proposal 2, and the advisory say-on-pay vote
under Proposal 3 are “non-discretionary”
items.
You are
also invited to attend the Annual M
eeting. However, since you are not the stockholder
of record, you may not vote your shares in person at the Annual
Meeting unless you request and obtain a valid proxy from your
broker or other agent.
How
many votes do I have?
On each matter to
be voted upon, you have one vote for each share of Class A common
stock you owned as of the Record Date.
What am I voting on?
The
following matters are scheduled for the Annual Meeting: (i) the
election of three Class II directors to our Board; (ii) the
approval of the Incentive Plan; (iii) an advisory say-on-pay vote;
and (iv) the ratification of the selection of Moore Stephens
Lovelace as our independent registered public accounting firm. A
vote may also be held on any other business as may properly come
before the Annual Meeting or any postponement or adjournment
thereof, although there is no other business anticipated to come
before the Annual Meeting.
3
What are my voting choices for each of the items to be voted on at
the Annual Meeting?
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Proposal
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Board Recommendation
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Voting Choices
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Vote Required for Adoption
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Effect of Abstentions
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Effect of Broker Non-Votes
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1 – Election of Director Nominees
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FOR
each nominee
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●
Vote
“For” any or all of the nominees listed
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Vote
“Withhold” to withhold your vote for any or all of the
nominees listed
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Plurality of the
votes of the shares present in person or by proxy and entitled to
vote at the Annual Meeting
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No
effect
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No
effect
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2 – Approval of the Incentive Plan
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FOR
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●
Vote
“For” the approval of the Incentive Plan
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Vote
“Against” the approval of the Incentive
Plan
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Abstain from voting
on this proposal
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Approved if a
majority of the shares present in person or represented by proxy
and entitled to vote support the proposal
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Treated
as votes against proposal
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No
effect
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3 – Approval of the compensation of our named executive
officers
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FOR
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●
Vote
“For” the approval of the compensation of our named
executive officers
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Vote
“Against” the approval of the compensation of our named
executive officers
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Abstain from voting
on this proposal
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Approved, on a
non-binding advisory basis, if a majority of the shares present in
person or represented by proxy and entitled to vote support the
proposal
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Treated
as votes against proposal
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No
effect
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4 – Ratification of the appointment of Moore Stephens
Lovelace as our independent registered public accounting
firm
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FOR
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●
Vote
“For” the ratification of the appointment
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Vote
“Against” the ratification of the
appointment
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Abstain from voting
on this proposal
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Approved, on a
non-binding advisory basis, if a majority of the shares present in
person or represented by proxy and entitled to vote support the
proposal
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Treated
as votes against proposal
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Brokers
have discretion to vote
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4
How do I vote?
Stockholder of Record: Shares Registered in Your Name
If you
are a stockholder of record, you may vote using the following
methods:
●
In Person.
To vote in person, come to
the Annual Meeting and we will give you a ballot when you
arrive.
●
By Internet or Telephone.
To vote by
proxy via the Internet, simply follow the instructions described on
the notice or proxy card. To vote by proxy via the telephone within
the United States and Canada, use the toll-free number on the
notice or proxy card.
●
By Mail.
To vote by mail using the proxy
card, simply complete, sign, and date the enclosed proxy card and
return it promptly in the envelope provided. If you return your
signed proxy card to us before the Annual Meeting, we will vote
your shares as you direct.
Whether
or not you plan to attend the meeting, we urge you to vote by proxy
to ensure your vote is counted. You may still attend the meeting
and vote in person if you have already voted by proxy.
Beneficial Owner: Shares Registered in the Name of Broker or
Bank
If you
are a beneficial owner of shares registered in the name of your
broker, bank, or other agent, you can vote as follows:
●
In Person.
To vote in person at the
Annual Meeting, you must obtain a valid proxy from your broker,
bank, or other agent. Follow the instructions from your broker or
bank included with these proxy materials, or contact your broker or
bank to request a proxy form.
●
By Internet or Telephone.
You may vote
through the Internet or by telephone only if your broker, bank, or
other agent makes these methods available, in which case the
instructions will be included with the proxy
materials.
●
By Mail.
You should have received a
proxy card and voting instructions with these proxy materials from
the broker, bank, or other agent holding your shares rather than
from us. To vote by mail, simply complete and mail the proxy card
or voting instruction form to ensure that your vote is
counted.
What if I am a stockholder of record and return a proxy card but do
not make specific choices?
You
should specify your choice for each matter on the proxy card. If
you return a signed and dated proxy card without marking any voting
selections, your shares will be voted:
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FOR the nominees
listed under Proposal 1;
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FOR the approval of
the Incentive Plan under Proposal 2;
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FOR the
compensation of our named executive officers under Proposal 3;
and
●
FOR the
ratification of Moore Stephens Lovelace as our independent
registered public accounting firm under Proposal 4.
If any
other matter is properly presented at the meeting, your proxy (the
individual named on your proxy card) will vote your shares using
his or her best judgment.
5
What if I am a beneficial owner and do not give voting instructions
to my broker?
If you
fail to complete a proxy card or provide your broker with voting
instructions at least ten days before the meeting, your broker will
be unable to vote on the non-discretionary matters. Your broker may
use his or her discretion to cast a vote on any other routine or
discretionary matter.
Who is paying for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our directors, officers, and employees may
also solicit proxies by mail, in person, by telephone, or by other
means of communication. Directors, officers, and employees will not
be paid any additional compensation for soliciting proxies. We will
also reimburse brokerage firms, banks, and other agents for the
cost of forwarding proxy materials to beneficial
owners.
What does it mean if I receive more than one proxy
card?
If you
receive more than one proxy card, your shares are registered in
more than one name or are registered in different accounts. Please
complete, sign, and return
each
proxy card to ensure that all of
your shares are voted.
What is “householding”?
The
Securities and Exchange Commission (the “SEC”) has
adopted rules that permit companies and intermediaries such as
brokers to satisfy the delivery requirements for proxy statements
with respect to two or more security holders sharing the same
address by delivering a single proxy statement addressed to those
security holders. This process, which is commonly referred to as
“householding,” potentially means convenience for
security holders and cost savings for companies.
A
number of brokers with account holders who are LightPath
stockholders will be “householding” our proxy
materials. A single proxy statement will be delivered to multiple
stockholders sharing an address unless contrary instructions have
been received from the affected stockholders. Once you have
received notice from your broker or us that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate proxy statement, please notify your
broker and also notify us by sending your written request to
Investor Relations, LightPath Technologies, Inc., 2603 Challenger
Tech Court, Suite 100, Orlando, Florida USA 32826 or by calling
Investor Relations at 407-382-4003, ext. 314. Stockholders who
currently receive multiple copies of the proxy statement at their
address and would like to request “householding” of
their communications should also contact their broker and notify us
in writing or by telephone.
Can I revoke or change my vote after submitting my
proxy?
Yes.
You can revoke your proxy at any time before the final vote at the
Annual Meeting. You may revoke your proxy by:
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submitting a new
proxy with a later date;
●
sending written
notice of revocation to our Corporate Secretary at 2603 Challenger
Tech Court, Suite 100, Orlando, Florida USA 32826 in time for her
to receive it before the Annual Meeting; or
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voting in person at
the Annual Meeting. Simply attending the meeting will not, by
itself, revoke your proxy.
Who will count votes?
Votes
will be counted by the inspector of elections appointed for the
Annual Meeting. The inspector of elections will also determine the
number of shares outstanding, the voting power of each, the number
of shares represented at the Annual Meeting, the existence of a
quorum, and whether or not the proxies and ballots are valid and
effective.
6
What is the quorum requirement?
A
majority of the issued and outstanding shares of Class A common
stock entitled to vote must be present at the Annual Meeting (in
person or represented by proxy) in order for us to hold the Annual
Meeting and conduct business. This is called a quorum. On the
record date, there were 25,773,605 outstanding shares of Class A
common stock (including all restricted stock awards at such date)
entitled to vote. Thus, 12,886,803 shares must be present at the
Annual Meeting (in person or represented by proxy) to have a
quorum.
Your
shares will be counted towards the quorum only if you submit a
valid proxy or vote in person at the Annual Meeting. Abstentions
and broker non-votes will be counted towards the quorum
requirement. If there is no quorum, a majority of the shares
entitled to vote and present at the Annual Meeting (in person or
represented by proxy) may adjourn the meeting to another
date.
How can I find out the results of the voting at the Annual
Meeting?
We will
announce preliminary voting results at the Annual Meeting. We will
report the final voting results in a Current Report on Form 8-K
filed with the SEC within four business days following such results
becoming final.
When are stockholder proposals for the Fiscal 2020 Annual Meeting
due?
Stockholders
interested in presenting a proposal to be considered for inclusion
in next year’s proxy statement and form of proxy may do so by
following the procedures prescribed in Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the “Securities
Exchange Act”), and our Bylaws. To be considered for
inclusion, stockholder proposals must be submitted in writing to
the Corporate Secretary, LightPath Technologies, Inc., 2603
Challenger Tech Court, Suite 100, Orlando, Florida USA 32826 before
June 3, 2019, which is 120 calendar days prior to the anniversary
of the mailing date of this Proxy Statement, and must be in
compliance with all applicable laws and regulations.
If a
stockholder wishes to present a proposal at the fiscal 2020 annual
meeting, but the proposal is not intended to be included in the
Company’s proxy statement relating to the meeting, or
nominate a director for election at the fiscal 2020 annual meeting,
the stockholder must give advance notice to the Company prior to
the deadline for such meeting determined in accordance with our
Bylaws (the “Bylaw Deadline”). Under our Bylaws, in
order for a proposal to be timely, it must be received by us no
earlier than 120 days prior to the anniversary of the fiscal 2019
Annual Meeting, or July 18, 2019, and no later than 90 days prior
to the anniversary date of the fiscal 2019 Annual Meeting, or
August 17, 2019. If a stockholder gives notice of such a proposal
after the Bylaw Deadline, the stockholder will not be permitted to
present the proposal to the stockholders for a vote at the meeting
or nominate a director for election at the meeting.
If a
stockholder fails to meet these deadlines or fails to satisfy the
requirements of SEC Rule 14a-4, the persons named as proxies will
be allowed to use their discretionary voting authority to vote on
any such proposal or nomination as they determine appropriate if
and when the matter is raised at the fiscal 2020 annual
meeting.
How do I get a copy of the exhibits filed with our Annual
Report?
A copy
of our Annual Report for the fiscal year ended June 30, 2018, and
consolidated financial statements, were provided to you with this
Proxy Statement. We will provide copies of the exhibits filed with
our Annual Report upon written request if you are a stockholder as
of the Record Date. Requests for such copies should be directed to
Investor Relations at 2603 Challenger Tech Court, Suite 100,
Orlando, Florida USA 32826. In addition, copies of all of our
electronically filed exhibits may be reviewed and printed from the
SEC website at
http://www.sec.gov
.
7
PROPOSAL 1 – ELECTION OF DIRECTORS
What Am I Voting On?
Stockholders are
being asked to elect three Class II directors, Sohail Khan, Dr.
Steven Brueck and M. Scott Faris, each of who are current members
of the Board, to serve for a term ending at the third successive
annual meeting of stockholders following this Annual Meeting, or
until their successors have been duly elected and
qualified.
If any
of the nominees becomes unable or unwilling to serve as a director
before the Annual Meeting, an event which is not presently
anticipated, the individual named as proxy on the proxy card may
exercise discretionary authority to vote for substitute nominees
proposed by the Board, or, if no substitute is selected by the
Board prior to or at the Annual Meeting, for a motion to reduce the
present membership of the Board to the number of nominees
available.
Voting Recommendation
FOR
the election of each Class II
director nominee.
Board and Committee Composition
Currently, we have
seven directors with each director serving until his successor is
elected and qualified. Our Board is divided into three classes,
denoted as Class I, Class II, and Class III, serving staggered
three-year terms with one class elected at the annual meeting of
stockholders. The Class I directors’ term expires at the
annual meeting of stockholders proposed to be held in fiscal 2020.
The Class III directors’ term expires at the annual meeting
of stockholders proposed to be held in fiscal 2021. The Class II
directors’ term expires at this Annual Meeting.
The
table below lists each director, each such director’s
committee memberships, the chairman of each Board committee, and
each such director’s class.
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Name
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Audit
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Compensation
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Finance
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Nominating & Corporate Governance
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Class
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Robert Ripp
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☑
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☑
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☑
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I
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J. James Gaynor
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I
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Sohail Khan
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☑
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☑
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☑
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II
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Steven Brueck
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☑
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II
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M. Scott Faris
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☑
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☑
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II
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Louis Leeburg
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☑
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☑
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☑
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III
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Craig Dunham
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☑
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III
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Committee Chairman:
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Leeburg
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Ripp
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Khan
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Ripp
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Biographical and Related Information – Director Nominees,
Continuing Directors, and Executive Officers
The
following is an overview of the biographical information for each
of our directors and officers, including their age, the year they
became directors or officers, their principal occupations or
employment for at least the past five years, and certain of their
other directorships.
8
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Class I Directors
Robert
Ripp, 77
Director
(Chairman of the
Board)
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Mr.
Ripp has served as one of our directors since 1999 and as Chairman
of the Board since November 1999. During portions of fiscal year
2002, he also served as our Interim President and Chief Executive
Officer. Previously, Mr. Ripp served on the board of directors of
Ace Limited (“Ace”) from March 1993 to June 2016. In
January 2016, Ace announced its acquisition of Chubb Limited and
changed its name to Chubb Limited. Mr. Ripp also previously served
on the board of directors of PPG Industries (“PPG”)
from March 2003 to June 2016 and Axiall Corporation
(“Axiall”) from February 2013 to June 2016. Ace, PPG,
and Axiall all are listed on the New York Stock Exchange. Mr. Ripp
has previous management experience, including serving as AMP
Incorporated’s Chairman and Chief Executive Officer from
August 1998 until April 1999 and as Vice President and Treasurer of
IBM of Armonk, New York from 1989 to 1993. Mr. Ripp graduated from
Iona College and earned a Master’s degree in Business
Administration from New York University. Mr. Ripp’s extensive
business, executive management, and financial expertise gained from
various executive positions coupled with his ability to provide
leadership skills to access strategic plans, business operational
performance, and potential mergers and acquisitions, qualify him
for service as one of our directors.
|
|
J.
James Gaynor, 67
President
& Chief Executive
Officer,
Director
|
Mr.
Gaynor has served as our President, Chief Executive Officer, and as
a Director since January 2008, and, prior to that, served as
Interim Chief Executive Officer commencing in September 2007. From
July 2006 to September 2007, Mr. Gaynor previously served as our
Corporate Vice President of Operations. Mr. Gaynor is also a
director of LightPath Optical Instrumentation (Shanghai) Co., Ltd.
(“LPOI”), our wholly-owned subsidiary, located in
Jiading, People’s Republic of China, LightPath Optical
Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), our
wholly-owned subsidiary, located in the New City District, of the
Jiangsu province of the People’s Republic of China, ISP
Optics Corporation (“ISP”), our wholly-owned
subsidiary, located in Irvington, New York, and ISP Optics Latvia
SIA (“ISP Latvia”), our wholly-owned subsidiary located
in Riga, Latvia. Mr. Gaynor is a mechanical engineer with over 30
years of business and manufacturing experience in volume component
manufacturing in the electronics and optics industries. Prior to
joining us, Mr. Gaynor served as Director of Operations and
Manufacturing for Puradyn Filter Technologies, the Vice President
of Operations and General Manager for JDS Uniphase
Corporation’s Transmission Systems Division and has also held
various executive positions with Spectrum Control, Rockwell
International, and Corning Glass Works. Mr. Gaynor holds a
Bachelor’s degree in Mechanical Engineering from the Georgia
Institute of Technology and has worked in the manufacturing
industries since 1976. His experience includes various engineering,
manufacturing, and management positions in specialty glass,
electronics, telecommunications components, and mechanical assembly
operations. His global business experience encompasses strategic
planning, budgets, capital investment, employee development, cost
reduction programs with turnaround and startup companies,
acquisitions, and management. Mr. Gaynor has an in-depth knowledge
of the optics industry gained through over 30 years of working in
various capacities in the industry and understands the engineering
aspects of our business, due to his engineering background. Mr.
Gaynor’s experience and knowledge is necessary to lead us and
qualify him for service as one of our directors.
|
9
Class II Directors
|
Sohail
Khan, 64
Director
|
Mr.
Khan has served as one of our directors since February 2005. Since
September 2017, he has served as the managing partner of K5
Innovations, a technology consulting venture, he also served in
such role from July 2011 to April 2013. He served as the President
and Chief Executive Officer of ViSX Systems Inc., a pioneer and
leader in media processing semiconductor solutions for video over
IP streaming solutions from September 2015 until the company was
acquired by Pixelworks in August 2017. From May 2013 to July 2014,
he served as the Chief Executive Officer and a director of
Lilliputian Systems, a developer of portable power products for
consumer electronics. He was the President and Chief Executive
Officer and a member of the board of directors of SiGe
Semiconductor (“SiGe”), a leader in silicon based radio
frequency front-end solutions from April 2007 until it was acquired
by Skyworks Solutions Inc. in June 2011. Prior to SiGe, Mr. Khan
was Entrepreneur in Residence and Operating Partner of Bessemer
Venture Partners, a venture capital group focused on technology
investments. Mr. Khan received a Bachelor of Science in Electrical
Engineering from the University of Engineering and Technology in
Pakistan. Additionally, he received a Master’s of Business
Administration from the University of California at Berkeley. Mr.
Khan previously served on the board of directors and audit
committee of Intersil Corporation, a public company, from October
2014 to March 2017, and the board of directors of VIXS Systems,
Inc., a public company, until the acquisition by Renesas &
Pixelworks in August 2017. Mr. Khan’s experience in venture
financing, specifically technology investments, is an invaluable
asset Mr. Khan contributes to the Board composition. In addition,
Mr. Khan’s significant 35 years of experience in executive
management, particularly with respect to technology businesses,
profit and loss management, mergers and acquisitions, and capital
raising, as well as his background in engineering qualifies him for
service as one of our directors.
|
|
Dr.
Steven Brueck, 74
Director
|
Dr.
Brueck has served as one of our directors since July 2001. Since
July 2016, he has served as Vice President and Chief Scientific
Officer at Armonica Technologies, Inc. He is a Distinguished
Professor, Emeritus of Electrical and Computer Engineering and of
Physics at the University of New Mexico in Albuquerque, New Mexico,
which he joined in 1985. Although he retired in 2014, he remains
active as a University of New Mexico Research Professor. From 1986
to 2013, he served as Director of the Center for High Technology
Materials. He is a graduate of Columbia University with a Bachelor
of Science degree in Electrical Engineering and a graduate of the
Massachusetts Institute of Technology where he received his Masters
and Doctorate of Science degrees in Electrical Engineering. Dr.
Brueck is a fellow of The Optical Society of America, the Institute
of Electrical and Electronics Engineers, the American Association
for the Advancement of Science, and the National Academy of
Inventors. Dr. Brueck’s expertise in optics and optics
applications, as well as his extensive fifty years of research
experience in optics, lasers, detectors, lithography, nonlinear
optics, and related fields qualify him for service as one of our
directors.
|
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10
|
M.
Scott Faris, 53
Director
|
Mr.
Faris has served as a director of the Company since December 2011.
Mr. Faris is an experienced entrepreneur with almost two decades of
operating, venture-financing, and commercialization experience,
involving more than 20 start-up and emerging-growth technology
companies. In September 2016, Mr. Faris was named the Chief
Business Officer of Luminar Technologies, Inc., a leading developer
of autonomous vehicle systems technologies including Lidar sensor
suites. Mr. Faris has also served as a director of Luminar
Technologies, Inc. since August 2016. In June 2013, Mr. Faris
founded Aerosonix, Inc. (formerly MicroVapor Devices, LLC), a
privately held developer and manufacturer of advanced medical
devices, and served as its Chief Executive Officer until August
2016 and has served as Chairman of the board of directors since
June 2013. In 2002, Mr. Faris also founded the Astralis Group, a
strategy advisor that provides consulting to start-up companies
and, since 2004, Mr. Faris has served as its Chief Executive
Officer. In August 2007, Mr. Faris founded Planar Energy, a company
that developed transformational ceramic solid-state battery
technology and products, and served as its Chief Executive Officer
until June 2013. Planar Energy is a spin-out of the U.S. Department
of Energy’s National Renewable Energy Laboratory. From
October 2004 to June 2007, Mr. Faris was a partner with Corporate
IP Ventures (formerly known as MetaTech Ventures), an early stage
venture fund specializing in defense technologies. Mr. Faris also
previously served as the Chairman and Chief Executive Officer of
Waveguide Solutions, a developer of planar optical light wave
circuit and micro system products, and as a director and Chief
Operating Officer of Ocean Optics, Inc., a
precision-optical-component and fiber-optic-instrument spin-out of
the University of South Florida. Mr. Faris was also the founder and
Chief Executive Officer of Enterprise Corporation, a technology
accelerator, served as a director of the Florida Seed Capital Fund
and Technology Commercialization at the Center for Microelectronics
Research, and the chairman of the Metro Orlando EDC. Mr. Farris
received a Bachelor of Science degree in Management Information
Systems from Penn State University in 1988. Mr. Faris is currently
on the board of directors of Open Photonics, Inc. and Aerosonix,
Inc., both of which are private companies. Mr. Faris’s
significant experience in executive management positions at various
optical component companies, his experience in the
commercialization of optical and opto-electronic component
technology, and his background in optics, technology, and venture
capital qualify him for service as one of our
directors.
|
Class III Directors
|
Louis
Leeburg, 64
Director
|
Mr.
Leeburg has served as one of our directors since May 1996. Mr.
Leeburg is currently a self-employed business consultant. Since
1993, Mr. Leeburg has served as the senior financial advisor of The
Fetzer Institute, and before that, he served as the Vice President
for Finance. Mr. Leeburg was an audit manager for Price Waterhouse
& Co. until 1980. He is a member of Financial Foundation
Officers Group and the chairman and trustee for the John E. Fetzer
Memorial Trust Fund. Mr. Leeburg received a Bachelor of Science
degree in Accounting from Arizona State University.
Mr. Leeburg has a broad range of experience in accounting and
financial matters. His expertise gained in various roles in
financial management and investment oversight for over thirty
years, coupled with his knowledge gained as a certified public
accountant, add invaluable knowledge to our Board and qualify him
for service as one of our directors.
|
11
|
Craig
Dunham, 62
Director
|
Mr.
Dunham has served as one of our directors since April 2016, and
prior to his appointment to the Board, he served as a consultant to
the Board beginning in March 2014. Since April 2015, he has been
providing business and M&A consulting. From May 2011 until
March 2015, Mr. Dunham served as the Chief Executive Officer of
Applied Pulsed Power Inc. (“APP”), a pulsed power
components and systems company near Ithaca, New York. Mr. Dunham
currently serves as a director of APP. From 2004 until 2011, Mr.
Dunham was President, Chief Executive Officer and director of
Dynasil Corporation (“Dynasil”), a NASDAQ listed
company. He continues to be a director at Dynasil and is a member
of their audit committee. Prior to joining Dynasil, Mr. Dunham
spent approximately one year partnering with a private equity group
to pursue acquisitions of mid-market manufacturing companies. From
2000 to 2003, he was Vice President/General Manager of the Tubular
Division at Kimble Glass Corporation. From 1979 to 2000, he held
progressively increasing leadership responsibilities at Corning
Incorporated (“Corning”) in manufacturing, engineering,
commercial, and general management positions. At Corning, Mr.
Dunham delivered results in various glass and ceramics businesses
including optics and photonics businesses. Mr. Dunham earned a
Bachelor of Science degree in Mechanical Engineering and a
Master’s degree in Business Administration from Cornell
University. Mr. Dunham’s expertise in executive leadership,
financial, strategic planning, operations and management, business
acumen, optics/photonics market knowledge, and knowledge of the
acquisitions process, qualifies him for service as one of our
directors.
|
12
Executive Officers Who Do Not Serve as Directors
|
Donald
O. Retreage, Jr., 64
Chief
Financial Officer
|
Mr.
Retreage was appointed chief Financial Officer on June 18, 2018. He
most recently served as Senior Vice President of Houser Logistics
from April 2017 to June 2018, where he was responsible for aligning
strategic initiatives with corporate targets for customer service,
revenue, and cost control. Prior to that, during a portion of 2017,
Mr. Retreage was a Financial Specialist at Robert Half /
Accountemps, and from October 2016 to January 2017, Mr. Retreage
served as a Senior Business Consultant for International Services
Inc., during which he worked with business owners to develop
management processes, practices, and policies to drive
profitability and grow businesses. From 2008 to 2015, Mr. Retreage
served as Deputy Managing Director & Financial Director at
Seaboard Management Corporation, a division of Seaboard
Corporation. He received a Bachelor of Science in Business
Administration, Accounting and Finance from University of Louisiana
at Lafayette. Mr. Retreage is experienced in directing
international business operations and aligning strategic
initiatives with corporate targets for revenue, cost control, and
employee development and engagement.
|
|
|
|
|
Dorothy
Cipolla, 62
Vice
President and Executive Director of Compliance, Treasury and
Tax;
Secretary
and Treasurer
|
Ms.
Cipolla was appointed as our Vice President and Executive Director
of Compliance, Treasury and Tax in June 2018. She also serves as
our Secretary and Treasurer since February 2006. Prior to June
2018, Ms. Cipolla served as our Chief Financial Officer from
February 2006 until June 2018. Ms. Cipolla is also a director of
LPOI, our wholly owned subsidiary, located in Jiading,
People’s Republic of China, LPOIZ, our wholly owned
subsidiary, located in the New City District, of the Jiangsu
province of the People’s Republic of China, ISP, our wholly
owned subsidiary located in Irvington, New York, and ISP Latvia,
our wholly-owned subsidiary located in Riga, Latvia. From March
2004 to February 2006, Ms. Cipolla was the Chief Financial Officer
and Secretary of LaserSight Technologies, Inc.
(“LaserSight”). Prior to joining LaserSight, she served
in various financial management positions. From 1994 to 1999, she
was Chief Financial Officer and Treasurer of Network Six, Inc., a
NASDAQ-listed professional services firm. From 1999 to 2002, Ms.
Cipolla was Vice President of Finance with Goliath Networks, Inc.,
a privately held network consulting company. From 2002 to 2003, Ms.
Cipolla was Department Controller of Alliant Energy Corporation, a
regulated utility. She received a Bachelor of Science degree in
Accounting from Northeastern University and is a Certified Public
Accountant in Massachusetts.
|
|
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Alan
Symmons, 46
Executive
Vice President of Operations
|
Mr.
Symmons has served as our Executive Vice President of Operations
since January 2015. Previously, Mr. Symmons served as our Vice
President of Corporate Engineering beginning in August 2010 until
January 2015 and our Director of Engineering from December 2008 to
August 2010. Prior to that, Mr. Symmons served as our
Opto-Mechanical Manager from October 2006 to December 2008. Prior
to joining us, Mr. Symmons was Engineering Manager for Aurora
Optical, a subsidiary of Multi-Fineline Electronix
(“MFLEX”), dedicated to the manufacture of cell phone
camera modules. From 2000 to 2006, Mr. Symmons worked for Applied
Image Group – Optics (“AIG/O”), a recognized
leader in precision injection molded plastic optical components and
assemblies, working up to Engineering Manager. AIG/O was purchased
by MFLEX in 2006. Prior to 2000, Mr. Symmons held engineering
positions at Ryobi N.A., SatCon Technologies, and General Dynamics.
Mr. Symmons has a Bachelor of Science degree in Mechanical
Engineering from Rensselaer Polytechnic Institute and a
Master’s degree in Business Administration from the Eller
School of Management at the University of Arizona.
|
13
CORPORATE GOVERNANCE
Meetings of the Board and its Committees
The
Board has an Audit Committee, a Compensation Committee, Nominating
and Corporate Governance Committee, and a Finance Committee. The
entire Board met five times, including telephonic meetings, during
fiscal 2018. Five directors attended 100% of the Board meetings and
the other two directors attended 80% of the Board meetings.
Directors attended 100% of the meetings held by committees of the
Board on which they served. All of the then elected directors
attended the fiscal 2018 Annual Meeting of Stockholders on
October 26, 2017.
It is
our policy that all of our directors are required to make a
concerted and conscientious effort to attend our annual
stockholders’ meeting in each year during which that director
serves as a member of the Board.
Audit Committee.
The
Audit Committee, which consists of Dr. Steven Brueck, M. Scott
Faris, Craig Dunham, and Louis Leeburg (Chairman), met seven times
during fiscal 2018. The meetings included discussions with
management and with our independent registered public accounting
firm to discuss our interim and annual financial statements and our
annual report, and the effectiveness of our financial and
accounting functions and organization.
The
Audit Committee acts pursuant to a written charter adopted by the
Board, a copy of which is available on our website at
www.lightpath.com
under the “Investor” tab. The Audit Committee’s
responsibilities include, among others, engaging and terminating
our independent registered public accounting firm, oversight of the
independent registered public accounting firm
,
and determining the compensation for
their engagement(s). The Board has determined that the Audit
Committee is comprised entirely of independent members as defined
under applicable listing standards set out by the SEC and The
NASDAQ Capital Market (the “NCM”). The Board has also
determined that three members of the Audit Committee, Mr. Leeburg,
Mr. Faris, and Mr. Dunham, are “audit committee financial
experts” as defined by SEC rules and qualify as independent
in accordance with the NCM rules. Mr. Leesburg’s, Mr.
Faris’, and Mr. Dunham’s respective business experience
that qualifies each director to be determined as “audit
committee financial expert” is described above.
Compensation
Committee.
The Compensation Committee, which consisted of
Sohail Khan, Robert Ripp (Chairman), and Louis Leeburg, met twice
during fiscal 2018. The Compensation Committee acts pursuant to a
written charter adopted by the Board, a copy of which is available
on our website at
www.lightpath.com
under the “Investor” tab.
The
Compensation Committee is responsible for establishing,
implementing, and continually monitoring our compensation policies
and philosophy, including administering our Amended and Restated
Omnibus Incentive Plan, pursuant to which incentive awards,
including stock options, are granted to our directors, executive
officers, and key employees. The Compensation Committee is
responsible for determining executive compensation, including
approving recommendations regarding equity awards to all of our
executive officers. However, the Compensation Committee does rely
on the annual reviews made by the Chief Executive Officer with
respect to the performance of each of our other executive officers.
The conclusions reached and recommendations based on these reviews,
including with respect to salary adjustments and annual award
amounts, are presented to the Compensation Committee. The
Compensation Committee can exercise its discretion in modifying any
recommended adjustments or awards to executive officers. In the
case of the Chief Executive Officer, compensation is determined
solely based on the review conducted by the Compensation
Committee.
The
Compensation Committee also annually reviews director compensation
to ensure non-employee directors are adequately compensated for the
time expended in fulfilling their duties to us, as well as the
skill-level required by us of members of the Board. After the
Compensation Committee completes their annual review, they make
recommendations to the Board regarding director
compensation.
14
In
fiscal 2017, the Compensation Committee retained Meridian
Consulting Partners, LLC (the “Consultant”), as a
compensation consultant, to assist with the Compensation
Committee’s responsibilities related to our executive
compensation program and the director compensation program. The
Consultant’s engagement by the Compensation Committee
included reviewing and recommending the structure of our
compensation program and advising on all significant aspects of
executive compensation, including base salaries, annual incentives,
and long-term equity incentives for our named executive officers,
as well as director compensation. At the request of the
Compensation Committee, the Consultant collected relevant market
data to allow the Compensation Committee to compare components of
our compensation program to those of our peers, provided
information on executive compensation trends and implications, and
made other recommendations to the Compensation Committee regarding
our executive and director compensation programs. In determining
the form and amount of compensation to be paid to the named
executive officers for fiscal 2018, the Compensation Committee
considered the information gathered by and recommended by the
Consultant. The Compensation Committee evaluated the independence
of the Consultant at the time of engagement and determined that the
Consultant was independent pursuant to the factors set forth in
Section 10C-1 of the Securities Exchange Act, as amended. The
Compensation Committee plans to engage the Consultant every two
years to review and make recommendations on the Company’s
executive compensation plans. No services were provided by the
Consultant during fiscal 2018.
Finance Committee.
The Finance Committee, which consists of Sohail Khan (Chairman)
Robert Ripp, and M. Scott Faris, met three times during fiscal
2018. The Finance Committee acts pursuant to a written charter
adopted by the Board, a copy of which is available on our website
at
www.lightpath.com
under the “Investor” tab. The Finance Committee
oversees our financial management, including overseeing our
strategic and transactional planning and activities, global
financing, capital structure objectives and plans, insurance
programs, tax structure, and investment program and
policies.
Nominating and Corporate
Governance Committee.
The Nominating and Corporate
Governance Committee, which consists of Robert Ripp (Chairman),
Sohail Khan and Louis Leeburg, met once during fiscal 2018. The
Nominating and Corporate Governance Committee acts pursuant to a
written charter adopted by the Board, a copy of which is available
on our website at
www.lightpath.com
under the “Investor” tab. The Nominating and Corporate
Governance carries out the responsibilities delegated by the Board
relating to our director nominations process and procedures, and
developing, maintaining, and monitoring compliance with the
Company’s corporate governance policies, guidelines, and
activities.
All
current committee members are expected to be reappointed to the
same committees at the Board meeting to be held immediately
following the Annual Meeting.
Nominations Process and Criteria
The
Nominating and Corporate Governance Committee determines the
qualifications, qualities, skills, and other expertise required to
be a director and to develop, and recommend to the Board for its
approval, criteria to be considered in selecting nominees for
director. The Committee and the Board believe that at this time, it
is unnecessary to adopt criteria for the selection of directors.
Instead, the Committee and the Board believes that the desirable
background of a new individual member of the Board may change over
time and that a thoughtful, thorough selection process is more
important than adopting criteria for directors.
They
will also identify, recruit, and screen candidates for the Board,
consistent with criteria approved by the Board. The Committee and
Board is fully open to utilizing whatever methodology is efficient
in identifying new, qualified directors when needed, including
industry contacts of our directors or professional search firms.
The Committee also considers any director candidates recommended by
our stockholders pursuant to the procedures described in this Proxy
Statement and any nominations of director candidates validly made
by stockholders in accordance with applicable laws, rules, and
regulations, and the provisions of our charter
documents.
There
were no fees paid or due to third parties in fiscal 2018 to
identify or evaluate, or to assist in evaluating or identifying,
potential director nominees.
15
Any
stockholder wishing to propose that a person be nominated for or
appointed to the Board may submit such a proposal, according to the
procedure described in the stockholder proposal section on page 7
of this Proxy Statement, to:
Corporate
Secretary
LightPath
Technologies, Inc.
2603
Challenger Tech Court, Suite 100
Orlando,
Florida 32826
The
Corporate Secretary will promptly forward any such correspondence
to the Chairman of the Nominating and Corporate Governance
Committee for review and consideration by the Nominating and
Corporate Governance Committee in accordance with the criteria
described above.
Director Independence
In
accordance with NCM and SEC rules, the Board affirmatively
determines the independence of each director and director nominee
in accordance with guidelines it has adopted, which include all
elements of independence set forth in the NCM listing standards.
Based on these standards, the Board has determined that each of the
following non-employee directors serving during fiscal 2018 is
independent and has no relationship with us, except as one of our
directors and stockholders.
|
Robert
Ripp
|
Sohail
Khan
|
|
Steven
Brueck
|
Louis
Leeburg
|
|
M.
Scott Faris
|
Craig
Dunham
|
All of
the members of the Audit, Finance, Nominating and Corporate
Governance, and Compensation Committees are also
independent.
The
Board approved an Amended and Restated Code of Business Conduct and
Ethics (the “Code”) on April 28, 2016. The Code applies
to all of our employees, officers, and directors, including our
principal executive officers, principal financial officers, and
principal accounting officer or controller, or persons performing
similar functions. The Board also approved an Amended and Restated
Code of Business Conduct and Ethics for Senior Financial Officers
(the “Senior Financial Officer Code”), which applies to
our Chief Executive Officer, Chief Financial Officer, principal
accounting officer, controller, accounting manager, and persons
performing similar functions. Copies of the Code and the Senior
Financial Officer Code are available on our website at
www.lightpath.com
,
under the “Investor” tab, or may be obtained free of
charge by writing to: Corporate Secretary, LightPath Technologies,
Inc., 2603 Challenger Tech Court, Suite 100, Orlando, Florida
32826.
Related Party Transactions
When
we are contemplating entering into any transaction in which any
executive officer, director, director nominee, or any family member
of the foregoing would have any direct or indirect interest,
regardless of the amount involved, the terms of such transaction
have to be presented to the Audit Committee (other than any
interested director) for approval or disapproval. Neither the Audit
Committee nor the Board have adopted a written policy for reviewing
related party transactions but when presented with such
transaction, the transaction is discussed by the Audit Committee
and documented in its meeting minutes.
Our
Code also requires our employees, officers, and directors to
provide prompt and full disclosure of all potential conflicts of
interest to the appropriate person. These conflicts of interest may
be specific to the individual or may extend to his or her family
members. Any officer who has a conflict of interest with respect to
any matter is required to disclose the matter to our Chief
Executive Officer or, in the case of the Chief Executive Officer,
to the Chairman of the Audit Committee. All other employees are
required to make prompt and full disclosure of any conflict of
interest to his or her immediate supervisor, who will then make
prompt and full disclosure to our Chief Executive Officer.
Directors are required to disclose any conflict of interests to the
Chairman of the Audit Committee and are prohibited from voting on
any matter(s) in which they have a conflict of interest. In
addition, directors and executive officers are required to disclose
in an annual questionnaire, any current or proposed conflict of
interests (including related party transactions).
16
From
the period beginning July 1, 2017 and ending October 1, 2018, there
were no current or proposed related party
transactions.
Board of Directors Leadership Structure and Role in Risk
Oversight
Board Leadership Structure
Our
Board has chosen to separate the positions of Chairman and Chief
Executive Officer, with Mr. Robert Ripp serving as Chairman
and Mr. J. James Gaynor serving as President and Chief
Executive Officer. As President and Chief Executive Officer,
Mr. Gaynor is responsible for our day-to-day leadership and
performance, with the Board being responsible for setting our
strategic direction, as well as overseeing and advising our
management. The Board believes that the current independent
leadership of the Board by our non-executive Chairman enhances the
effectiveness of its oversight of management and provides a
perspective that is separate and distinct from that of
management.
Role of the Board in Risk Oversight
Our
Board is responsible for the oversight of our operational risk
management process. Our Board has delegated authority for
addressing certain risks, and accessing the steps management has
taken to monitor, control, and report such risks, to our Audit and
Finance Committees. Such risks include risks relating to execution
of our growth strategy, the effects of the contracting in the
global economy and general financial condition and outlook on
customer purchases, component inventory supply, or ability to
expand our partner network, communication with investors, certain
actions of our competitors, the protection of our intellectual
property, sufficiency of our capital, inventory investment and risk
of obsolescence, security of information systems and data,
integration of new information systems, credit risk, product
liability, and costs of reliance on external advisors. The Audit or
Finance Committee, as applicable, then reports such risks as
appropriate to the Board. The Board initiates discussions with
appropriate members of our senior management if, after discussion
of such risks, the Board determines that such risks raise questions
or concerns about the status of operational risks then facing
us.
Our
Board relies on our Compensation Committee to address significant
risk exposures we face with respect to compensation, including
risks relating to retention of key employees, protection of partner
relationships, management succession, and benefit costs, and, when
appropriate, reports these risks to the full Board.
Stockholder Communications with the Board
Stockholders and
other parties interested in communicating directly with the Board,
a committee of the Board, or any individual director, may do so by
sending a written communication to the attention of the intended
recipient(s) in care of the Corporate Secretary, LightPath
Technologies, Inc., 2603 Challenger Tech Court, Suite 100, Orlando,
Florida USA 32826. The Corporate Secretary will forward all
appropriate communications to the Chairman of the Audit
Committee.
17
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of September 17, 2018, the number
and percentage of outstanding shares of our Class A common stock,
owned by: (i) each of our directors (which includes all nominees),
(ii) each of the named executive officers, (iii) our directors and
named executive officers as a group, and (iv) each person known by
us to be the beneficial owner of more than 5% of our outstanding
Class A common stock. The number of shares of Class A common stock
outstanding as of September 17, 2018 was 25,773,605.
The number of shares beneficially owned by each
director, named executive officer, and greater than 5% beneficial
owner is determined under SEC rules, and the information is not
necessarily indicative of the beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares
to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the
right to acquire within 60 days of September 17, 2018, through the
exercise of any stock option or other right to purchase, such as a
warrant. Unless otherwise indicated, each person has sole
investment and voting power (or shares such power with his or her
spouse) with respect to the shares set forth in the following
table. In certain instances, the number of shares listed may
include, in addition to shares owned directly, shares held by the
spouse or children of the person, or by a trust or estate of which
the person is a trustee or an executor or in which the person may
have a beneficial interest. The table that follows is based upon
information supplied in a questionnaire completed by each named
executive officer and director and stockholders beneficially owning
greater than 5% of our Class A common stock.
18
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Securities
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Percent
Owned
|
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Class
A Common Stock
|
|
|
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(%)
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Name
and Address (1)(10)
|
Restricted
(2)
|
Unrestricted
|
Options
|
Amount
of Shares of Class A Common Stock Beneficially Owned
|
|
|
|
Robert Ripp,
Director
|
316,167
|
723,751
|
—
|
1,039,918
|
(3
)
|
4.0
%
|
|
Louis Leeburg,
Director
|
316,167
|
92,691
|
—
|
408,858
|
(4
)
|
1.6
%
|
|
Sohail Khan,
Director
|
317,367
|
20,661
|
—
|
338,028
|
|
1.3
%
|
|
Dr. Steven Brueck,
Director
|
316,167
|
70,870
|
—
|
387,037
|
(5
)
|
1.5
%
|
|
M. Scott Faris,
Director
|
215,467
|
—
|
—
|
215,467
|
|
*
|
|
Craig Dunham,
Director
|
125,007
|
33,000
|
—
|
158,007
|
|
*
|
|
J. James Gaynor,
President, CEO & Director
|
25,354
|
172,147
|
464,948
|
662,449
|
(6
)
|
2.5
%
|
|
Dorothy Cipolla, VP
& Executive Director, Secretary & Treasurer
|
8,602
|
23,925
|
164,340
|
196,867
|
(7
)
|
*
|
|
Alan Symmons,
Executive Vice President of Operations
|
9,055
|
14,636
|
175,884
|
199,575
|
(8
)
|
*
|
|
|
|
|
|
|
|
|
|
All
directors and named executive officers currently holding office as
a group (9 persons)
|
1,649,353
|
1,151,681
|
805,172
|
3,606,206
|
|
12.8
%
|
|
|
|
|
|
|
|
|
|
Wellington Trust
Company
|
—
|
2,136,825
|
—
|
2,136,825
|
|
8.3
%
|
|
Pudong Science and
Technology Investment (Cayman) Co., Ltd.
|
—
|
2,270,026
|
—
|
2,270,026
|
(9
)
|
8.8
%
|
*Less
than 1%
Notes:
(1)
Except
as otherwise noted, each of the parties listed above has sole
voting and investment power over the securities listed. The address
for all directors and officers is “in care of”
LightPath Technologies, Inc., 2603 Challenger Tech Court, Suite
100, Orlando, Florida 32826. The address for Pudong Science and
Technology (Cayman) Co. Ltd., as filed on a Schedule 13G filed on
August 15, 2013, is 13 Building, No. 439, Chunxiao Rd., Zhangjiang
High-tech Park, Pudong, Shanghai 201203, People’s Republic of
China. The address for Wellington Trust Company, as filed on a
Schedule 13G filed on February 8, 2018, is 280 Congress Street,
Boston, Massachusetts 02210.
(2)
Restricted stock
units awarded to our directors vest over three years. All directors
have elected to defer receipt of the vested shares until after they
leave the Board, either by reason of resignation, termination, or
otherwise. Therefore, these vested shares remain unissued. All of
the director’s unvested restricted stock units will vest upon
such director’s resignation or termination from the Board.
The amounts of restricted stock set forth above reflects both
vested and unvested shares included in the restricted stock unit
awards. The amounts of vested shares for each director, other than
Mr. Gaynor, are as follows: Mr. Ripp – 263,005, Mr. Leeburg
– 263,005, Mr. Khan – 264,205, Dr. Brueck –
263,005, Mr. Faris – 162,305, and Mr. Dunham –
71,845.
(3)
Does
not include 7,812 shares of Class A common stock, which are owned
by trusts for Mr. Ripp's adult children and for which he disclaims
beneficial ownership.
(4)
Includes 92,691
shares of Class A common stock, which are held jointly with his
wife and for which he shares voting and investment
power.
19
(5)
Includes 70,870
shares of Class A common stock held by a family trust for which he
shares voting and investment power.
(6)
Includes 464,948
shares of Class A common stock with respect to which Mr. Gaynor has
the right to acquire. Mr. Gaynor holds options that are currently
exercisable for an aggregate of 464,948 shares of Class A common
stock. This amount does not include 55,381 shares of Class A common
stock underlying options that remain unvested.
(7)
Includes 164,340
shares of Class A common stock with respect to which Ms. Cipolla
has the right to acquire. Specifically, Ms. Cipolla holds options
that are currently exercisable for an aggregate of 164,340 shares
of Class A common stock. This amount does not include 19,089 shares
of Class A common stock underlying options that remain
unvested.
(8)
Includes 175,884
shares of Class A common stock with respect to which Mr. Symmons
has the right to acquire. Mr. Symmons holds options that are
currently exercisable for an aggregate of 175,884 shares of Class A
common stock. This amount does not include 20,725 shares of Class A
common stock underlying options that remain unvested.
(9)
Pudong
Science and Technology Investment (Cayman) Co., Ltd. is wholly
owned by Shanghai Pudong Science and Technology Investment Co.,
Ltd., and for purposes hereof is also deemed as a beneficial owner
of the shares.
(10)
Mr.
Donald Retreage, Jr. was appointed Chief Financial Officer on June
18, 2018. He was not considered a named executive officer for
fiscal 2018; thus, he is not included in the table
above.
Change-in-Control Arrangements
We do
not know of any arrangements, which may, at a subsequent date,
result in a change in control.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act, requires that our directors
and executive officers, and persons who beneficially own more than
10% of our common stock (referred to herein as the “Reporting
Persons”) file with the SEC various reports as to their
ownership of and activities relating to our Class A common stock.
To the best of our knowledge, all Reporting Persons complied on a
timely basis with all filing requirements applicable to them with
respect to transactions during our most recent fiscal year. In
making these statements, we have relied solely on our review of
copies of the reports furnished to us, representations that no
other reports were required, and other knowledge relating to
transactions involving the Reporting Persons.
20
EXECUTIVE COMPENSATION
Compensation Philosophy and Objectives
Our
compensation policy is designed to attract and retain qualified key
executive officers critical to our achievement of reaching and
maintaining profitability and positive cash flow, and subsequently
our growth and long-term success. To attract, retain, and motivate
the executives officers required to accomplish our business
strategy, the Compensation Committee establishes our executive
compensation policies and oversees our executive compensation
practices.
The
Compensation Committee believes that the most effective executive
compensation program is one that is designed to recognize the
achievement of our specific short-term and long-term goals, and
which aligns executives’ interests with those of the
stockholders by rewarding performance that meets or exceeds
established goals, with the ultimate objective of improving
stockholder value.
It is
the objective of the Compensation Committee to have a portion of
each named executive officer’s compensation contingent upon
our performance as well as upon the individual’s personal
performance. Accordingly, each named executive officer’s
compensation package is comprised of two elements: (i) base salary,
which reflects individual performance and expertise and (ii)
short-term and long-term incentive awards, which are tied to the
achievement of certain performance goals that the Compensation
Committee establishes from time to time. The Compensation Committee
has structured compensation of our named executive officers to
incentivize achievement of our business goals and reward our named
executive officers for achieving such goals.
The
Compensation Committee also evaluates our compensation program to
ensure that we maintain the ability to attract and retain superior
employees in key positions and that compensation provided to key
employees remains competitive relative to the compensation paid to
similarly situated executive officers.
In
accordance with the advisory “say-on-frequency” vote of
our stockholders at the fiscal 2018 annual meeting of stockholders,
held in October 2017, and as approved by the Board, we will include
an annual advisory “say-on-pay” vote in our proxy
statement, including this Proxy Statement for the fiscal 2019
Annual Meeting. Our next required stockholder advisory
“say-on-frequency” vote will occur at our fiscal 2023
annual stockholders’ meeting. The most recent
“say-on-pay” advisory vote occurred at the fiscal 2018
annual meeting, at which our stockholders approved, on an advisory
basis, the compensation of our named executive
officers.
Setting Executive Compensation
In
making compensation decisions, the Compensation Committee relies on
the following:
●
the annual reviews
made by the Chief Executive Officer with respect to the performance
of each of our other named executive officers;
●
the annual review
conducted by the Compensation Committee with respect to the
performance of the Chief Executive Officer;
●
compensation paid
to executive officers of other manufacturing companies similar in
size and scope as us and our competitors; and
●
our annual
performance with respect to our short-term and long-term strategic
plan.
There
is no pre-established policy or target for the allocation between
either cash and non-cash or short-term and long-term incentive
compensation. Rather, the Compensation Committee annually reviews
information to determine the appropriate level and mix of incentive
compensation when determining our executive compensation plan.
Based on these factors, the Compensation Committee makes
compensation decisions, including salary adjustments, annual
short-term cash incentive awards, and long-term equity incentive
awards for our named executive officers.
21
Retirement Benefits
We
offer a qualified 401(k) defined contribution plan. The ability of
named executive officers to participate fully in this plan is
limited under the requirements of the Internal Revenue Code of
1986, as amended, and Employment Retirement Income Security Act of
1974, as amended. The Company currently matches 100% of the first
2% of employee contributions.
Executive Compensation and Risk
Although a
substantial portion of the compensation paid to our named executive
officers is performance-based, we believe our executive
compensation programs do not encourage excessive and unnecessary
risk-taking by our named executive officers because these programs
are designed to encourage our named executive officers to remain
focused on both our short-term and long-term operation and
financial goals. We achieve this balance through a combination of
elements in our overall compensation plans, including: (i) elements
that reward different aspects of short-term and long-term
performance; (ii) incentive compensation that rewards performance
on a variety of different measures; and (iii) cash awards and stock
option awards, to encourage alignment with the interests of
stockholders.
Executive Officer Stock Ownership Requirements
Effective as of
January 1, 2016, our Board established certain guidelines requiring
that each of our executive officers acquire and maintain a minimum
level of ownership of our securities during the period in which he
or she is an executive officer. The Board modified the minimum
level of ownership in fiscal 2018. As modified, the guidelines set
the target ownership level at five times the annual base cash
compensation for our Chief Executive Officer and three times the
annual base cash compensation for each of our other executive
officers, as measured at fiscal year-end. The Board reviews the
target ownership levels on an annual basis to determine whether
such target ownership levels should be increased.
For
purposes of determining ownership levels, all forms of equity and
derivative securities, including stock, stock options, restricted
stock, and restricted stock units, count towards satisfaction of
the ownership guidelines; however, with respect to any stock option
award, only the number of shares equal to (i) the difference
between the closing price of the Class A common stock as reported
on the NCM at the end of the fiscal year and the exercise price of
the stock option multiplied by (ii) the number of shares underlying
the stock option, then (iii) divided by the closing price of the
Class A common stock as reported on the NCM at the end of the
fiscal year, are included for purposes of determining whether the
stock ownership target is met. For example, if an officer is
awarded a stock option of 100 shares of Class A common stock, with
an exercise price of $1.00 per share, and the closing price of the
Class A common stock as reported on the NCM on June 30, 2018 is
$2.00, the number of shares of Class A common stock included from
such stock option award for purposes of meeting the stock ownership
target is 50 shares.
The
Board may grant waivers of the guidelines in the event of financial
hardship or other good cause. Once an executive officer attains his
or her required stock ownership level, he or she will remain in
compliance with the guidelines despite future changes in the stock
price and base salary, as long as the executive officer’s
holdings do not decline below the number of shares owned at the
time the required stock ownership level was met. Each executive
officer will have until December 31, 2021, or five years after his
or her date of becoming an executive officer, whichever is later,
to meet the required ownership level.
As of
June 30, 2018, Mr. Gaynor’s level of ownership was 1.91 times
his base salary; thus has not yet met his target of 5.00. As of
June 30, 2018, Ms. Cipolla’s level of ownership was 0.86
times her base salary, thus has not yet met her target of 3.00. As
of June 30, 2018, Mr. Symmons’ level of ownership was 0.78
times his base salary; thus has not yet met his target of
3.00.
22
|
Name
|
Class
A common stock
|
Options
|
Total
Amount of Shares of Class A Common Stock Beneficially
Owned
|
Stock
Price at June 30, 2018
|
Market
Value at June 30, 2018
|
Base
Salary
|
% of
Salary
|
|
J. James
Gaynor
|
87,709
|
174,257
|
261,966
|
$
2.30
|
$
602,522
|
$
315,000
|
191
%
|
|
Dorothy
Cipolla
|
22,884
|
51,817
|
74,701
|
$
2.30
|
$
171,812
|
$
200,000
|
86
%
|
|
Alan
Symmons
|
13,458
|
57,512
|
70,970
|
$
2.30
|
$
163,231
|
$
210,000
|
78
%
|
2018 Incentive Program
Our
fiscal 2018 incentive program has two key components: (i) the
Short-Term Incentive (“STI”) program, and (ii) the
Long-Term Incentive (“LTI”) program. The STI program is
comprised of awards based on our achievement of specific fiscal
year financial objectives (the “STI Award”), which were
set prior to the beginning of fiscal 2018. The LTI program is
comprised of (i) a discretionary stock option award, based on
achievement of subjective larger corporate goals evaluated over a
one-year performance period (the “LTI Annual Award”),
which goals were set prior to the beginning of fiscal 2018 and (ii)
an equity award based on the achievement of pre-established
financial performance metrics evaluated over a three-year
performance period (the “LTI Multi-Year Award” and,
together with the LTI Annual Award, the “LTI Awards”),
which metrics were set prior to the beginning of fiscal
2018.
Our
incentive program includes different levels of bonus opportunity
based on a participant’s position with the Company. For
fiscal 2018, Mr. Gaynor was the only “level one”
participant and Ms. Cipolla and Mr. Symmons were the only
“level two” participants. Bonus opportunities for level
one and level two participants for fiscal 2018 were calculated by
applying designated portions of their respective bonus pool
amounts, which were set by the Compensation Committee, to formulas
for each of the components of the STI and LTI
programs.
For
fiscal 2018, (i) Mr. Gaynor’s bonus pool amount for the STI
Award was set at $215,000 and his bonus pool amount for the LTI
Awards was set at $125,000; (ii) Ms. Cipolla’s bonus pool
amount for the STI Award was set at $80,000 and her bonus pool
amount for the LTI Awards was set at $50,000; and (ii) Mr.
Symmon’s bonus pool amount for the STI Award was set at
$85,000 and his bonus pool amount for the LTI Awards was set at
$50,000.
STI Program
In
order to determine a participant’s STI Award, the portion of
such participant’s bonus pool amount applicable to the STI
Award calculation ($215,000 in the case of Mr. Gaynor, $80,000 in
the case of Ms. Cipolla, and $85,000 in the case of Mr. Symmons),
was multiplied by approximately 33.3% and the product was used as a
baseline for determining the bonus for each component of the STI
Award (“STI Baseline”). The STI Baseline for each of
the components was $71,595, $26,640, and $28,305 for Mr. Gaynor,
Ms. Cipolla, and Mr. Symmons, respectively.
Our
fiscal 2018 financial objectives upon which the STI Award was based
were as follows: (i) revenue growth over that of the prior fiscal
year (the “Revenue Component”); (ii) adjusted EBITDA
growth (which is earnings before income, taxes, depreciation, and
amortization, as adjusted to exclude the effect of the non-cash
income or expense associated with the mark-to-market adjustments
related to our June 2012 warrants) (the “Adjusted EBITDA
Component”); and (iii) return on assets (adjusted to exclude
the effect of goodwill and the non-cash income or expense
associated with the mark-to-market adjustments to our June 2012
warrants) (the “ROA Component”). Each component of the
STI Award is evaluated independently of the other components, and
the LTI Awards are evaluated independently of the STI
Award.
23
The
Compensation Committee determined that achievement of the STI Award
would be paid 50% in cash and 50% in restricted stock units;
however, the Compensation Committee retained the discretion to
adjust the allocation of the STI Award between cash and restricted
stock units prior to payment. As discussed below, since we did not
achieve any of the components of the STI Award in fiscal 2018, none
of the participants earned the STI Award.
Revenue Component
The
Revenue Component was based on our achievement of year-over-year
revenue growth of at least 12% in fiscal 2018. The Compensation
Committee determined that, for purposes of the year-over-year
comparison, revenue for fiscal 2017 would be adjusted to include
revenues generated by ISP as if the acquisition occurred on July 1,
2016, instead of December 21, 2016, resulting in the inclusion of
revenues generated by ISP, on a pro forma basis, for the entire
fiscal year 2017. If we achieved or exceeded the target of 12% of
year-over-year growth in fiscal 2018, our participants would be
entitled to a bonus award under the Revenue Component equal to such
participant’s STI Baseline multiplied by the sum of (i) 100%
plus (ii) the sum of the actual year-over-year growth in total
revenues less the target of 12%.
Without
the pro forma adjustment to revenue in fiscal 2017, our revenue in
fiscal 2018 increased by 15%, as compared to fiscal 2017. However,
with the pro forma adjustment to revenue in fiscal 2017 (to include
ISP's revenue, on a pro forma basis, for the entire fiscal year
2017), we had no year-over-year revenue growth, compared to the
fiscal 2017. Accordingly, the target was not met and the
participants did not earn the Revenue Component of the STI
Award.
Adjusted EBITDA Component
In
order for our participants to earn a bonus with respect to the
Adjusted EBITDA Component, we had to meet or exceed a minimum
adjusted EBITDA margin target established by the Compensation
Committee for fiscal 2018. The adjusted EBITDA margin was
calculated by dividing the fiscal 2018 adjusted EBITDA by the
fiscal 2018 revenues and the target was set at 28% for fiscal 2018.
If our adjusted EBITDA margin for fiscal 2018 equaled or exceeded
the target, then each participant would earn a bonus equal to such
participant’s STI Baseline multiplied by the sum of (i) 100%
plus (ii) the percentage that adjusted EBITDA for fiscal 2018
exceeded adjusted EBITDA for fiscal 2017, up to a maximum growth
rate of 50%. If we did not achieve at least the adjusted EBITDA
margin target, or there was no growth year-over-year in adjusted
EBITDA, our participants would not earn a bonus with respect to the
Adjusted EBITDA Component.
We did
not meet the adjusted EBITDA margin target for fiscal 2018.
Accordingly, the participants did not earn the Adjusted EBITDA
Component of the STI Award.
ROA Component
The ROA
Component was based on achieving a return on assets target of at
least 16% for fiscal 2018. If the return on assets for fiscal 2018
equaled or exceeded the target, then the participants would be
entitled to a bonus award under the ROA Component equal to such
participant’s STI Baseline multiplied by 100%. For fiscal
2018, the actual return on assets equaled 2%, which did not meet
the target. Accordingly, the participants did not earn the ROA
Component of the STI Award.
24
The
following table sets forth (i) each participant’s STI Award
bonus pool amount for fiscal 2018, (ii) the STI Baseline dollar
amount, used in the calculation of the STI Award bonus, and (iii)
the amount earned for each component of the STI Award:
|
|
|
|
Bonus Award Earned
|
||
|
Participant
|
Total 2018 STI Award Bonus Pool ($)
|
Baseline for Each Component of STI Award ($)
|
Revenue ($)
|
Adjusted EBITDA ($)
|
ROA ($)
|
|
J. James Gaynor
|
215,000
|
71,595
|
0
|
0
|
0
|
|
Dorothy Cipolla
|
80,000
|
26,640
|
0
|
0
|
0
|
|
Alan Symmons
|
85,000
|
28,305
|
0
|
0
|
0
|
LTI Program
The LTI
Awards are comprised of two components: (i) the LTI Annual Award
and (ii) the LTI Multi-Year Award.
LTI Annual Award
The LTI
Annual Award is a discretionary award made by our Compensation
Committee that was based on the achievement of certain corporate
goals set by the Compensation Committee for fiscal 2018. In order
to determine a participant’s LTI Annual Award bonus
opportunity, the portion of such participant’s bonus pool
amount applicable to the LTI Awards calculation ($125,000 in the
case of Mr. Gaynor, $50,000 in the case of Ms. Cipolla, and $50,000
in the case of Mr. Symmons), was multiplied by 40%. Thus, the bonus
opportunity for the LTI Annual Award was $50,000, $20,000, and
$20,000 for Mr. Gaynor, Ms. Cipolla, and Mr. Symmons, respectively.
Participants can earn any portion of the bonus opportunity for the
LTI Annual Award. The Compensation Committee determined that if
earned, the LTI Annual Award would be paid as a stock option, with
one-third of the stock option vesting on each of the first, second,
and third anniversaries of the grant date.
For
fiscal 2018, the corporate goals were: (i) complete the full
integration of ISP and meet the planned ISP revenue goal for fiscal
2018, (ii) fully deploy the Visual ERP system to include ISP
Latvia's facility in Riga, Latvia, (iii) implement capacity
increases at LPOIZ's facility in Zhenjiang China and ISP Latvia's
facility in Riga, Latvia to support planned infrared growth,
including increasing coating capacity for germanium at LPOIZ's
facility, fully qualifying our new BD6 germanium-free coating,
expanding our diamond turning capacity, and improving our diamond
turning productivity at ISP Latvia's facility, and (iv) ensure
tooling manufacturing in Orlando is increased to meet growing
demand particularly for infrared products.
At the
end of fiscal 2018, our Chief Executive Officer provided an
executive summary to the Compensation Committee, which summarized
our achievements with respect to the corporate goals. The
Compensation Committee determined whether the corporate goals were
met and whether LTI Annual Awards would be made.
After
reviewing our Chief Executive Officer’s executive summary,
the Compensation Committee determined that each participant
partially met the corporate goals established for the LTI Annual
Award. Accordingly, the Compensation Committee granted a stock
option award with a value of $7,500, $3,000, and $3,000 for Mr.
Gaynor, Ms. Cipolla, and Mr. Symmons, respectively. The stock
option awards will have an exercise price equal to 115% of the
then-current market price at the date of issuance, which is
currently expected to be in November 2018. The stock option awards
will be subject to a three-year vesting period.
25
LTI Multi-Year Award
The LTI
Multi-Year Award is an equity award based on the achievement of
pre-established financial performance metrics over a three-year
performance period. In order to determine a participant’s LTI
Multi-Year Award bonus opportunity, the portion of such
participant’s bonus pool amount applicable to the LTI Awards
calculation ($125,000 in the case of Mr. Gaynor, $50,000 in the
case of Ms. Cipolla, and $50,000 in the case of Mr. Symmons), was
multiplied by 60%. Thus, the bonus opportunity for the LTI
Multi-Year Award was $75,000, $30,000, and $30,000 for Mr. Gaynor,
Ms. Cipolla, and Mr. Symmons, respectively.
The
performance metrics upon which the LTI Multi-Year Award was based
are as follows: (i) revenue (the “LT Revenue
Component”); (ii) book value per share of Class A common
stock (the “LT Book Value Component”); and (iii)
adjusted EBITDA margin (the “LT EBITDA Component”). The
Compensation Committee set a target for each component for each
year during the three-year period (July 1, 2017 through June 30,
2020). Each performance component was valued at “one
point” for each year during the three-year period. For each
performance component for which the target is achieved, the
participants each earn “one point.” Thus, the LT
Revenue Component is worth one point per year during the three-year
performance period, the LT Book Value Component is worth one point
per year during the three-year performance period, and the LT
EBITDA Component is worth one point per year during the three-year
performance period.
The
payout opportunity based on the number of total points earned
during the three-year performance period is shown in the table
below.
|
Number
of Points Earned
|
Percentage
of Payout of LTI Multi-Year Award
|
|
0-3
|
0
%
|
|
4
|
50
%
|
|
5
|
60
%
|
|
6
|
75
%
|
|
7
|
100
%
|
|
8
|
110
%
|
|
9
|
125
%
|
Each
component of the LTI Multi-Year Award is evaluated independently of
the other components during each year of the performance. The
Compensation Committee determined that if earned at the end of the
three-year performance period, the LTI Multi-Year Award would be
paid as restricted stock units.
LT
Revenue Component – Fiscal 2018
The
Compensation Committee set the LT Revenue Component for fiscal 2018
at $38.5 million, which represents year-over-year revenue growth of
12%,compared to fiscal 2017. The Compensation Committee determined
that, for purposes of the year-over-year comparison, revenue for
fiscal 2017 would be adjusted to include revenues generated by ISP
as if the acquisition occurred on July 1, 2016, instead of December
21, 2016, resulting in the inclusion of revenues generated by ISP,
on a pro forma basis, for the entire fiscal year 2017. Our total
revenue for fiscal 2018 was less than the target; thus, the
participants did not earn a point for the LT Revenue Component in
fiscal 2018.
LT Book Value Component – Fiscal
2018
The
Compensation Committee set the LT Book Value Component for fiscal
2018 at $1.20 book value per share of Class A common stock. Our
book value per share of Class A common stock for fiscal 2018 was
$1.37; thus, the participants each earned one point.
LT EBITDA Component – Fiscal
2018
The
Compensation Committee set the LT EBITDA Component for fiscal 2018
at an adjusted EBITDA margin of 28%. Our adjusted EBITDA margin for
fiscal 2018 was less than the target; thus, the participants did
not earn a point for the LT EBITDA Component in fiscal
2018.
26
2017 Incentive Program
Our
fiscal 2017 inventive bonus program was comprised of three types of
awards: (i) awards based on the achievement of specific fiscal year
financial objectives of the Company (the “Corporate
Performance Award”); (ii) discretionary awards based on the
achievement of subjective larger corporate goals (the
“Discretionary Performance Award”); and (iii) awards
based on the achievement of specific fiscal year financial
objectives related to the acquisition of ISP (“ISP
Award”). The Corporate Performance Award and Discretionary
Performance Award were set prior to the beginning of fiscal 2017
and prior to the consummation of the ISP acquisition. Following the
consummation of the ISP acquisition, the Compensation Committee
determined that the Corporate Performance Award and Discretionary
Performance Award should be based solely on the performance of our
base business, excluding any financial results or corporate goals
as a result of the ISP acquisition. Simultaneously, the
Compensation Committee determined to set financial objectives
related to the ISP Award.
Our
incentive bonus program includes different levels of bonus
opportunity based on a participant’s position with the
Company. For fiscal 2017, Mr. Gaynor was the only “level
one” participant and Ms. Cipolla and Mr. Symmons were the
only “level two” participants. Bonus opportunities for
level one and level two participants for fiscal 2017 were
calculated by applying designated portions of their respective
bonus pool amounts, which were set by the Compensation Committee,
to formulas for the Discretionary Performance Award and each of the
four components of the Corporate Performance Award.
For
fiscal 2017, 75% of Mr. Gaynor’s bonus pool amount was used
to calculate his Corporate Performance Award and 25% of his bonus
pool amount was used to calculate his Discretionary Performance
Award. For fiscal 2017, 37.5% of Ms. Cipolla’s and Mr.
Symmons’ respective bonus pool amounts were used to calculate
their respective Corporate Performance Awards and 12.5% of their
respective bonus pool amounts were used to calculate their
respective Discretionary Performance Awards. For fiscal 2017, the
ISP Award was calculated based on a fixed dollar amount of $36,700
for Mr. Gaynor, $12,400 for Ms. Cipolla, and $13,000 for Mr.
Symmons.
Corporate Performance Awards
In
order to determine a participant’s Corporate Performance
Award, the portion of such participant’s bonus pool amount
applicable to the Corporate Performance Award calculation (75% in
the case of Mr. Gaynor and 37.5% in the case of Ms. Cipolla and Mr.
Symmons), was divided by four and the quotient was used as a
baseline for determining the bonus for each component of the
Corporate Performance Award (for each component, the
“Corporate Baseline”). The Corporate Baseline was
$55,125, $18,703, and $19,688 for Mr. Gaynor, Ms. Cipolla, and Mr.
Symmons, respectively.
Our
fiscal 2017 corporate financial objectives upon which the Corporate
Performance Awards were based were as follows: (i) revenue growth
over that of the prior fiscal year (the “2017 Revenue
Component”); (ii) strategic revenue growth (which is based
upon the revenues generated by certain product lines and customers
specified by the Compensation Committee at the time that the
incentive bonus program was established for fiscal 2017) over that
of the prior fiscal year (the “2017 Strategic Revenue
Component”); (iii) adjusted EBITDA (which is earnings before
income, taxes, depreciation, and amortization, as adjusted to
exclude the effect of the non-cash income or expense associated
with the mark-to-market adjustments related to our June 2012
warrants) (the “2017 Adjusted EBITDA Component”); and
(iv) return on assets (adjusted to exclude the effect of the
non-cash income or expense associated with the mark-to-market
adjustments to our June 2012 warrants) (the “2017 ROA
Component”). The 2017 Revenue Component, 2017 Strategic
Revenue Component, 2017 Adjusted EBITDA Component, and the 2017 ROA
Component were based solely on the financial results of
LightPath’s base business, and did not take into account any
financial results generated by ISP’s business. Each component
of the Corporate Performance Award was evaluated independently of
the other components, and the Discretionary Performance Award was
evaluated independently of the Corporate Performance
Award.
27
2017 Revenue Component
The
2017 Revenue Component was based on the Company achieving
year-over-year revenue growth of at least 20.128% in fiscal 2017.
If we achieved or exceeded the target of 20.128% of year-over-year
growth in fiscal 2017, our participants would be entitled to a
bonus award under the revenue component equal to such
participant’s Corporate Baseline multiplied by the sum of (i)
100% plus (ii) the sum of the actual year-over-year growth in total
revenues less the target of 20.128%. If we did not achieve the
target, our participants would be entitled to a bonus award under
the 2017 Revenue Component equal to such officer’s Corporate
Baseline multiplied by the quotient of (i) the actual revenue
growth percentage in fiscal 2017 divided by (ii) the target revenue
growth percentage for fiscal 2017.
LightPath revenue
in fiscal 2017 increased by 18% compared to fiscal 2016.
Accordingly, under the formula used to calculate each
participant’s 2017 Revenue Component bonus (Corporate
Baseline x 89.43%), Mr. Gaynor earned $49,297, Ms. Cipolla earned
$16,726, and Mr. Symmons earned $17,606.
2017 Strategic Revenue Component
If the
total LightPath strategic revenue in fiscal 2017 exceeded the total
LightPath strategic revenue for fiscal 2016, our participants would
be entitled to a bonus award under the 2017 Strategic Revenue
Component equal to such participant’s Corporate Baseline
multiplied by the sum of (i) 100% plus (ii) the percentage that
actual strategic revenue for fiscal 2017 exceeded the actual
strategic revenue for fiscal 2016, up to a maximum growth rate of
50%. If we did not achieve at least the LightPath strategic revenue
target, or if there was no growth year-over-year in strategic
revenue, our participants would not earn a bonus with respect to
the 2017 Strategic Revenue Component.
The
total LightPath strategic revenue in fiscal 2017 was less than the
total LightPath strategic revenue in fiscal 2016. Accordingly, the
participants did not earn the 2017 Strategic Revenue Component
bonus.
2017 Adjusted EBITDA Component
In
order for our participants to earn a bonus with respect to the 2017
Adjusted EBITDA Component, we had to meet or exceed a minimum
adjusted EBITDA margin target established by the Compensation
Committee for fiscal 2017. The adjusted EBITDA margin was
calculated by dividing the LightPath adjusted EBITDA for fiscal
2017 by the LightPath revenues for fiscal 2017 and the target was
set at 20% for fiscal 2017. If our adjusted EBITDA margin for
fiscal 2017 equaled or exceeded the target, then each participant
earned a bonus equal to such participant’s Corporate Baseline
multiplied by the sum of (i) 100% plus (ii) the percentage that the
LightPath adjusted EBITDA for fiscal 2017 exceeded the LightPath
adjusted EBITDA for fiscal 2016, up to a maximum growth rate of
50%. If we did not achieve at least the LightPath adjusted EBITDA
margin target, or if there was no growth year-over-year in adjusted
EBITDA, our participants would not earn a bonus with respect to the
2017 Adjusted EBITDA Component.
The
actual LightPath adjusted EBITDA margin for fiscal 2017 equaled
22%, which satisfied the adjusted EBITDA margin target requirement.
For fiscal 2017, our adjusted EBITDA was 78% higher than that for
fiscal 2016. Accordingly, under the formula used to calculate each
participant’s 2017 Adjusted EBITDA Component bonus (Corporate
Baseline x 150%), Mr. Gaynor earned $82,688, Ms. Cipolla earned
$28,055, and Mr. Symmons earned $29,532.
2017 ROA Component
The
2017 ROA Component was based on achieving a return on LightPath
assets target of at least 16% for fiscal 2017. If the return on
LightPath assets for fiscal 2017 equaled or exceeded the target,
then the participants would be entitled to a bonus award under the
2017 ROA Component equal to such participant’s Corporate
Baseline multiplied by 100%.
28
For
fiscal 2017, the actual return on LightPath assets equaled 19%,
which met the target. Accordingly, under the formula used to
calculate each participant’s 2017 ROA Component bonus
(Corporate Baseline x 100%), Mr. Gaynor earned $55,125, Ms. Cipolla
earned $18,703, and Mr. Symmons earned $19,688.
The
following table sets forth (i) each participant’s bonus pool
amount for fiscal 2017, (ii) the percentage of bonus pool, and the
corresponding Corporate Baseline dollar amount, used in the
calculation of the Corporate Performance Award bonus, and (iii) the
amount earned for each component of the Corporate Performance
Award:
|
|
|
|
Bonus
Award Earned
|
||||
|
Participant
|
Total
2017
Bonus
Pool ($)
|
Bonus
Pool for Corporate Performance Award Calculation
(%)
|
Baseline
for Each Component of Corporate Performance Award
($)
|
Revenue
($)
|
Strategic
Revenue
($)
|
Adjusted
EBITDA
($)
|
ROA
($)
|
|
J.
James Gaynor
|
294,000
|
75
|
55,125
|
49,297
|
0
|
82,688
|
55,125
|
|
Dorothy
Cipolla
|
199,500
|
37.5
|
18,703
|
16,726
|
0
|
28,055
|
18,703
|
|
Alan
Symmons
|
210,000
|
37.5
|
19,688
|
17,606
|
0
|
29,531
|
19,688
|
Discretionary Performance Awards
In
order to determine a participant’s Discretionary Performance
Award, the portion of such participant’s bonus pool
applicable to the Discretionary Performance Award calculation (25%
in the case of Mr. Gaynor and 12.5% in the case of Ms. Cipolla and
Mr. Symmons), was used as a baseline for determining the bonus
opportunity for the Discretionary Performance Award (the
“Discretionary Baseline”). The Discretionary Baseline
was $73,500, $24,938, and $26,250 for Mr. Gaynor, Ms. Cipolla, and
Mr. Symmons, respectively.
The
Discretionary Performance Awards are discretionary awards made by
our Compensation Committee that are based on the achievement of
certain LightPath corporate goals set by the Compensation Committee
for fiscal 2017. At the end of fiscal 2017, our Chief Executive
Officer provided an executive summary to the Compensation
Committee, which summarized our achievements with respect to each
such corporate goal. The Compensation Committee determined whether
the corporate goals were met and whether Discretionary Performance
Awards would be made.
For
fiscal 2017, the LightPath corporate goals included: (i) the
development of a capacity plan for our major manufacturing
facilities, (ii) obtaining ISO TS16949 certification for our
Zhenjiang manufacturing facility, (iii) improving our strategic
ultra-precision mold/tooling operation, and (iv) successfully
integrating the operations of ISP subsequent to the consummation of
the acquisition of ISP (assuming that the ISP acquisition was
consummated during fiscal 2017).
After
reviewing our Chief Executive Officer’s executive summary,
the Compensation Committee determined that for fiscal 2017, each
participant met the corporate goals established with respect to the
Discretionary Performance Award. Accordingly, under the formula
used to calculate each participant’s Discretionary
Performance Award bonus (Discretionary Baseline x 100%, if the
goals are met), each participant earned a Discretionary Performance
Award as follows:
29
|
Participant
|
Discretionary
Baseline
($)
|
Total
Amount Earned
($)
|
|
J. James
Gaynor
|
73,500
|
73,500
|
|
Dorothy
Cipolla
|
24,938
|
24,938
|
|
Alan
Symmons
|
26,250
|
26,250
|
ISP Awards
Following the
consummation of the acquisition of ISP, the Compensation Committee
met and determined to set the ISP Awards. In order to determine a
participant’s ISP Award, the Compensation Committee set each
named participant’s baseline for determining the bonus
opportunity for the ISP Award (the “ISP Award
Baseline”). The ISP Award Baseline was $36,700, $12,400, and
$13,000 for Mr. Gaynor, Ms. Cipolla, and Mr. Symmons,
respectively.
The ISP
Awards were based on the achievement of certain ISP corporate
financial objectives set by the Compensation Committee for fiscal
2017, following the consummation of the ISP acquisition. For fiscal
2017, the ISP corporate financial objectives upon which the ISP
Awards were based were as follows: (i) generating fiscal 2017
revenue of $6.9 million solely from the sales of ISP products (the
“ISP Revenue Goal”), and (ii) achieving fiscal 2017
EBITDA margin with respect to ISP of 23% (the “ISP EBITDA
Goal”). The ISP Revenue Goal and the ISP EBITDA Goal were
each worth one-half of the ISP Award Baseline and each goal was
evaluated independently of the other goal.
The ISP
fiscal 2017 revenue was $8.0 million; thus, the ISP Revenue Goal
was met. The ISP fiscal EBITDA margin was 31%; thus, the ISP EBITDA
Goal was also met. Accordingly, under the formula used to calculate
each named executive officer’s ISP Award bonus (ISP Award
Baseline x 100%, if both the ISP Revenue Goal and the ISP EBITDA
Goal are met), each participant earned an ISP Award as
follows:
|
Participant
|
ISP
Baseline
($)
|
Total
Amount Earned
($)
|
|
J. James
Gaynor
|
36,700
|
36,700
|
|
Dorothy
Cipolla
|
12,400
|
12,400
|
|
Alan
Symmons
|
13,000
|
13,000
|
Payment of Awards
Corporate
Performance Awards are paid 50% in cash and 50% in restricted stock
units; however, the Compensation Committee retained the discretion
to adjust the allocation of the Corporate Performance Award between
cash and restricted stock units prior to payment. The restricted
stock units will vest on the third anniversary of the date of
grant. The Corporate Performance Awards were paid 50% cash and 50%
in restricted stock units for fiscal 2017.
The
Discretionary Performance Awards were stock option grants, which
vest one-third on each of the first, second, and third
anniversaries of the grant date, and have an exercise price equal
to the closing stock price on the day before the grant date plus a
premium of 15%. The dollar amount of the award will be divided by
the Black-Scholes-Merton value per share to determine the number of
stock options to be issued.
The ISP
Awards were paid in cash.
30
Summary Compensation Table
The following table sets forth certain
compensation awarded to, earned by or paid to (i) our Chief
Executive Officer and (ii) our two other most highly compensated
executive officers serving as executive officers at the end of
fiscal 2018. We did not have any individuals for whom disclosure
would have been required but for the fact that the individual was
not serving as an executive officer as of the end of fiscal 2018.
Our Chief Financial Officer, Donald Retreage
, Jr. was
appointed as Chief Financial Officer in June 2018; thus, for
purposes of fiscal 2018, he did not qualify as one of the two other
most highly compensated executive officers and is not included in
the discussion below.
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive
Plan
|
|
All
Other
|
|
|
Name and
Position
|
Fiscal
|
Salary
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
Total
|
|
|
Year
|
($)
|
|
($)
(1)
|
|
($)
(2)
|
|
($)
|
|
($)
(3)
|
($)
|
|
(a)
|
(b)
|
(c)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(i)
|
(j)
|
|
J. James Gaynor
|
2018
|
315,000
|
(4)
|
—
|
|
7,500
|
(5)
|
—
|
|
14,383
|
336,883
|
|
President & Chief Executive
Officer
|
2017
|
284,712
|
(4)
|
93,555
|
(6)
|
73,500
|
(6)
|
130,255
|
(6)
|
—
|
582,022
|
|
Dorothy M.
Cipolla
|
2018
|
200,000
|
(7)
|
—
|
|
3,000
|
(5)
|
—
|
|
14,135
|
217,135
|
|
Vice President and Executive
Director, Treasurer & Secretary
|
2017
|
195,000
|
(7)
|
31,742
|
(6)
|
24,938
|
(6)
|
44,142
|
(6)
|
—
|
295,822
|
|
Alan Symmons
|
2018
|
210,000
|
(8)
|
—
|
|
3,000
|
(5)
|
—
|
|
42,465
|
255,465
|
|
Executive Vice President of
Operations
|
2017
|
205,192
|
(8)
|
33,412
|
(6)
|
26,250
|
(6)
|
46,412
|
(6)
|
—
|
311,266
|
Notes:
(1)
For valuation
assumptions on stock awards refer to note 10 to the Consolidated
Financial Statements of our Annual Report on Form 10-K for fiscal
2018. The disclosed amounts reflect the fair value of the
restricted stock unit awards that were earned during the fiscal
years ended June 30, 2018 in accordance with FASB ASC Topic
718.
(2)
For valuation
assumptions on stock option awards refer to note 10 to the
Consolidated Financial Statements of our Annual Report on Form 10-K
for fiscal 2018. The disclosed amounts reflect the fair value of
the stock option awards that were earned during the fiscal years
ended June 30, 2018 and 2017 in accordance with FASB ASC Topic
718.
(3)
For fiscal 2017,
Other Compensation, as defined by SEC rules does not include the
amounts that qualify under the applicable de minimis rule for all
periods presented. The de minimis rule does not require reporting
of perquisites and other compensation that totals less than $10,000
in the aggregate. For fiscal 2017 and 2018, the nature of these
compensatory items include our contribution toward the premium
costs for employee and dependent medical, life, and disability
income insurances, benefits generally available to our employees,
vacation buyout and the match on the 401k plan. Amounts for Mr.
Symmons in fiscal 2018 include $25,900 for undocumented living
expenses when he was general manager of the ISP New York
facility.
(4)
Mr. Gaynor’s
base salary was 94% of his total compensation for fiscal 2018 and
49% of his total compensation for fiscal 2017.
(5)
Based on the
achievement of certain criteria set by the Compensation Committee,
the named executive officers did not earn their respective STI
Awards during fiscal 2018. However, the named executive officers
partially earned their respective LTI Annual Awards, which will be
paid as stock options. Even though the LTI Annual Awards were
earned in fiscal 2018, the awards will not be granted until fiscal
2019. For additional information, please see “Discussion of
Summary Compensation Table of Named Executive Officers”
below.
31
(6)
Based on the
achievement of certain criteria, the named executive officers
earned their respective incentive bonus awards for fiscal 2017.
Pursuant to the terms of the incentive program for 2017, the earned
portion of each named executive officer’s award was paid out
44% in cash and 56% in equity awards; however, even though the
awards were earned for fiscal 2017, neither the cash portion nor
the equity portion were paid in fiscal 2017. For additional
information, please see “Discussion of Summary Compensation
Table of Named Executive Officers” below.
(7)
Ms. Cipolla’s
base salary was 92% of her total compensation for fiscal 2018 and
66% of her total compensation for fiscal 2017.
(8)
Mr. Symmons’
base salary was 82% of his total compensation for fiscal 2018 and
66% of his total compensation for fiscal 2017.
Narrative Discussion of Summary Compensation Table of Executive
Officers
The
following is a narrative discussion of the material information
that we believe is necessary to understand the information is
disclosed in the foregoing Summary Compensation Table. The
following narrative disclosure is separated into sections, with a
separate section for each of our named executive
officers.
With
respect to fiscal 2018, each named executive officer received a
base salary and a LTI Annual Award and was eligible for STI Awards.
Information on the specific components of executive compensation
for fiscal 2018 can be found above under the heading “2018
Incentive Program.” With respect to fiscal 2017, each named
executive officer received a base salary and incentive awards.
Information on the specific components of executive compensation
for fiscal 2017 can be found above under the heading “2017
Incentive Program.”
32
Additional details
regarding the stock options and restricted stock units granted to
each named executive officer is set forth below.
|
J.
James Gaynor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Expense (2)
|
||||
|
Stock Option Grants
(1)
|
|
|
|
|
||||
|
Grant
Date
|
Number of
Shares
|
Number of
Vested
Shares
|
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/25/12
|
40,000
|
40,000
|
(3)
|
1,188
|
-
|
-
|
-
|
-
|
|
1/31/13
|
13,000
|
13,000
|
(3)
|
678
|
-
|
-
|
-
|
-
|
|
10/31/13
|
50,000
|
50,000
|
(3)
|
8,772
|
2,192
|
-
|
-
|
-
|
|
10/30/14
|
50,000
|
37,500
|
(3)
|
8,439
|
8,439
|
2,109
|
-
|
-
|
|
10/29/15
|
23,000
|
11,500
|
(3)
|
4,194
|
4,194
|
4,194
|
1,048
|
-
|
|
10/27/16
|
117,108
|
117,108
|
(4)
|
137,930
|
-
|
-
|
-
|
-
|
|
10/27/16
|
60,870
|
15,218
|
(3)
|
70,017
|
-
|
-
|
-
|
-
|
|
10/26/17
|
28,795
|
-
|
(5)
|
-
|
73,500
|
-
|
-
|
-
|
|
|
|
|
|
231,218
|
88,325
|
6,303
|
1,048
|
-
|
|
Restricted Stock
Units
|
|
|
|
|
|
|
|
|
|
10/26/17
|
25,354
|
25,354
|
(6)
|
-
|
93,556
|
-
|
-
|
-
|
(1)
This
table includes the stock options award of 177,978 shares that Mr.
Gaynor earned during fiscal 2016, but was granted during fiscal
2017, based on the achievement of certain performance goals in
fiscal 2016. This table includes the restricted stock unit award of
25,354 shares and stock option awards of 28,795 shares that Mr.
Gaynor earned during fiscal 2017, but was granted during fiscal
2018, based on the achievement of certain performance goals in
fiscal 2017.
(2)
Compensation
expense for grants of stock options is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
Represents the
number of shares vested as of June 30, 2018. One-fourth of the
stock option shares vests on each of the first, second, third and
fourth anniversaries of the grant date.
(4)
Represents the
number of shares vested as of June 30, 2018. Stock options granted
as part of the incentive bonus program vested
immediately.
(5)
Represents the
number of shares vested as of June 30, 2018. Stock options granted
as part of the incentive bonus program vests on each of the first,
second and third anniversaries of the grant date.
(6)
Represents the
number of shares vested as of June 30, 2018. Restricted Stock Units
granted as part of the incentive bonus program vests on each of the
first, second and third anniversaries of the grant
date.
33
|
Dorothy
Cipolla
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grants (1)
|
|
|
|
Compensation Expense
(2)
|
||||
|
Grant
Date
|
Number of
Shares
|
Number of
Shares
|
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/25/12
|
12,500
|
12,500
|
(3)
|
371
|
-
|
-
|
-
|
-
|
|
1/31/13
|
4,000
|
4,000
|
(3)
|
208
|
-
|
-
|
-
|
-
|
|
10/31/13
|
15,000
|
15,000
|
(3)
|
2,632
|
658
|
-
|
-
|
-
|
|
10/30/14
|
15,000
|
11,250
|
(3)
|
2,532
|
2,532
|
633
|
-
|
-
|
|
10/29/15
|
7,000
|
3,500
|
(3)
|
1,276
|
1,276
|
1,276
|
318
|
-
|
|
10/26/16
|
20,652
|
20,652
|
(4)
|
23,755
|
-
|
-
|
-
|
-
|
|
10/26/16
|
39,733
|
39,733
|
(4)
|
46,798
|
-
|
-
|
-
|
-
|
|
10/26/17
|
9,770
|
-
|
(5)
|
-
|
24,938
|
-
|
-
|
-
|
|
|
|
|
|
77,572
|
29,404
|
1,909
|
318
|
-
|
|
Restricted Stock
Units
|
|
|
|
|
|
|
|
|
|
10/26/17
|
8,602
|
8,602
|
(6)
|
-
|
31,741
|
-
|
-
|
-
|
(1)
This
table includes the stock options award of 60,385 shares that Ms.
Cipolla earned during fiscal 2016, but that was granted during
fiscal 2017, based on the achievement of certain performance goals
in fiscal 2016. This table includes restricted stock unit wards of
8,602 shares and stock option awards of 9,770 shares that Ms.
Cipolla earned
during fiscal
2017,
but that was granted during fiscal 2018, based on the
achievement of certain performance goals in fiscal
2017.
(2)
Compensation
expense for grants of stock options is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
Represents the
number of shares vested as of June 30, 2018. One-fourth of the
stock option shares vests on each of the first, second, third and
fourth anniversaries of the grant date.
(4)
Represents the
number of shares vested as of June 30, 2018. Stock options granted
as part of the incentive bonus program vested
immediately.
(5)
Represents the
number of shares vested as of June 30, 2018. Stock options granted
as part of the incentive bonus program vests on each of the first,
second and third anniversaries of the grant date.
(6)
Represents the
number of shares vested as of June 30, 2018. Restricted Stock Units
granted as part of the incentive bonus program vests on each of the
first, second and third anniversaries of the grant
date.
34
|
Alan
Symmons
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grants (1)
|
|
|
|
Compensation Expense
(2)
|
||||
|
Grant
Date
|
Number of
Shares
|
Number of
Vested
Shares
(3)
|
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/25/12
|
12,500
|
12,500
|
(3)
|
371
|
-
|
-
|
-
|
-
|
|
1/31/13
|
4,000
|
4,000
|
(3)
|
208
|
-
|
-
|
-
|
-
|
|
10/31/13
|
15,000
|
15,000
|
(3)
|
2,632
|
658
|
-
|
-
|
-
|
|
10/30/14
|
15,000
|
11,250
|
(3)
|
2,532
|
2,532
|
633
|
-
|
-
|
|
1/12/15
|
10,000
|
7,500
|
(3)
|
1,572
|
1,569
|
784
|
-
|
-
|
|
10/29/15
|
7,000
|
3,500
|
(3)
|
1,276
|
1,276
|
1,276
|
318
|
-
|
|
10/27/16
|
21,739
|
5,435
|
(4)
|
25,006
|
-
|
-
|
-
|
-
|
|
10/27/16
|
41,824
|
41,824
|
(4)
|
49,260
|
-
|
-
|
-
|
-
|
|
10/27/17
|
10,284
|
-
|
(5)
|
-
|
26,250
|
-
|
-
|
-
|
|
|
|
|
|
82,857
|
32,285
|
2,693
|
318
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
Units
|
|
|
|
|
|
|
|
|
|
10/26/17
|
9,055
|
9,055
|
(6)
|
-
|
33,413
|
-
|
-
|
-
|
(1)
This
table includes the stock options award of 63,563 shares that Mr.
Symmons earned during fiscal 2016, but that was granted during
fiscal 2017, based on the achievement of certain performance goals
in fiscal 2016. This table includes the restricted stock unit of
9,055 shares and stock option awards of 10,284 shares that Mr.
Symmons earned during fiscal 2017, but was granted during fiscal
2018, based on the achievement of certain certain performance goals
in fiscal 2017.
(2)
Compensation
expense for grants of stock options is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
Represents the
number of shares vested as of June 30, 2018. One-fourth of the
stock option shares vests on each of the first, second, third and
fourth anniversaries of the grant date.
(4)
Represents the
number of shares vested as of June 30, 2018. Stock options granted
as part of the incentive bonus program vested
immediately.
(5)
Represents the
number of shares vested as of June 30, 2018. Stock options granted
as part of the incentive bonus program vests on each of the first,
second and third anniversaries of the grant date.
(6)
Represents the
number of shares vested as of June 30, 2018. Restricted Stock Units
granted as part of the incentive bonus program vests on each of the
first, second and third anniversaries of the grant
date.
35
Potential Payments Upon Termination or
Change-of-Control
Mr.
Gaynor is our only named executive officer entitled to any payments
upon termination. If Mr. Gaynor is terminated without cause, he is
entitled to a severance payment equal to three months’
salary, as well as three months’ paid COBRA
benefits.
All of
our named executive officers are entitled to certain payments in
the event of a change-of-control. The following table sets forth
the change-of-control payments due to each of our named executive
officers.
|
|
Amount of
Payment Upon
|
|
Executive
Officer
|
A Change of
Control (1)
|
|
J. James Gaynor
(2)
|
$
630,000
|
|
Dorothy Cipolla
(3)
|
$
50,000
|
|
Alan Symmons
(3)
|
$
52,500
|
(1)
A change-of-control
is defined as any of the following transactions
occurring:
●
The dissolution or
liquidation of the Company;
●
Our stockholders
approve an agreement providing for a sale, lease, or other
disposition of all or substantially all of our assets and the
transactions contemplated by such agreement are
consummated;
●
A merger or a
consolidation in which we are not the surviving
entity;
●
Any person acquires
the beneficial ownership of securities of the Company representing
at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors; and
●
The individuals
who, prior to the transaction, are members of the Board (the
“Incumbent Board”) cease for any reason to constitute
at lease fifty percent (50%) of the Board, except that if the
election of or nomination for election by the stockholders of any
new director was approved by a vote of at least fifty percent (50%)
of the Incumbent Board, such new director shall be deemed to be a
member of the Incumbent Board.
Notwithstanding the
foregoing, a public offering of our common stock shall not be
considered a change-of-control.
(2) Mr.
Gaynor is entitled to twenty-four months’ compensation in the
event of a change-of-control. Payments made pursuant to a
change-of-control to Mr. Gaynor would be paid in a lump sum
and would only be paid out in the event Mr. Gaynor was no
longer employed by us. All of Mr. Gaynor’s unvested stock
options immediately vest upon a change-of-control.
(3) Ms.
Cipolla and Mr. Symmons are entitled to three months’
compensation in the event of a change-of-control. Payments made
pursuant to a change-of-control to Ms. Cipolla or Mr. Symmons would
occur according to our normal payroll schedule and would only be
paid out in the event they were no longer employed by
us.
36
Outstanding
Equity Awards at Fiscal Year-End
|
|
Option
Awards
|
|
|
|
|
|
(a)
|
(b)
|
(c)
|
(e)
|
|
(f)
|
|
Name
|
Number
of
|
Number
of
|
Option
|
Vesting
|
Option
|
|
|
Securities
|
Securities
|
Exercise
|
Schedule
|
Expiration
|
|
|
Underlying
|
Underlying
|
Price
($)
|
|
Date
|
|
|
Unexercised
|
Unexercised
|
|
|
|
|
|
Options
(#)
|
Options
(#)
|
|
|
|
|
|
Exercisable
|
Unexercisable
|
|
|
|
|
J. James Gaynor
(1)
|
50,000
|
—
|
$
2.66
|
25%/yr for 4
yrs
|
2/4/2020
|
|
|
25,000
|
—
|
$
2.69
|
25%/yr for 4
yrs
|
11/3/2020
|
|
|
40,000
|
—
|
$
1.39
|
25%/yr for 4
yrs
|
10/27/2021
|
|
|
20,000
|
—
|
$
0.98
|
25%/yr for 4
yrs
|
10/25/2022
|
|
|
50,000
|
—
|
$
1.41
|
25%/yr for 4
yrs
|
10/31/2023
|
|
|
37,500
|
12,500
|
$
1.37
|
25%/yr for 4
yrs
|
10/30/2024
|
|
|
11,500
|
11,500
|
$
1.48
|
25%/yr for 4
yrs
|
10/29/2025
|
|
|
55,556
|
—
|
$
1.48
|
immediate
|
10/29/2025
|
|
|
15,218
|
45,652
|
$
1.78
|
25%/yr for 4
yrs
|
10/27/2026
|
|
|
117,108
|
—
|
$
1.56
|
immediate
|
10/27/2026
|
|
|
—
|
28,795
|
$
4.24
|
33%/yr for 3
yrs
|
10/26/2027
|
|
Dorothy Cipolla
(2)
|
10,000
|
—
|
$
2.66
|
25%/yr for 4
yrs
|
2/4/2020
|
|
|
9,000
|
—
|
$
2.69
|
25%/yr for 4
yrs
|
11/3/2020
|
|
|
12,500
|
—
|
$
1.39
|
25%/yr for 4
yrs
|
10/27/2021
|
|
|
12,500
|
—
|
$
0.98
|
25%/yr for 4
yrs
|
10/25/2022
|
|
|
4,000
|
—
|
$
0.87
|
25%/yr for 4
yrs
|
1/31/2023
|
|
|
15,000
|
—
|
$
1.41
|
25%/yr for 4
yrs
|
10/31/2023
|
|
|
11,250
|
3,750
|
$
1.37
|
25%/yr for 4
yrs
|
10/30/2024
|
|
|
28,274
|
—
|
$
1.48
|
immediate
|
10/29/2025
|
|
|
3,500
|
3,500
|
$
1.48
|
25%/yr for 4
yrs
|
10/29/2025
|
|
|
39,733
|
—
|
$
1.56
|
immediate
|
10/27/2026
|
|
|
5,163
|
15,489
|
$
1.78
|
25%/yr for 4
yrs
|
10/27/2027
|
|
|
—
|
9,770
|
$
4.24
|
33%/yr for 3
yrs
|
10/26/2027
|
|
Alan Symmons
(3)
|
10,000
|
—
|
$
2.66
|
25%/yr for 4
yrs
|
2/4/2020
|
|
|
7,000
|
—
|
$
2.69
|
25%/yr for 4
yrs
|
11/3/2020
|
|
|
12,500
|
—
|
$
1.39
|
25%/yr for 4
yrs
|
10/27/2021
|
|
|
12,500
|
—
|
$
0.98
|
25%/yr for 4
yrs
|
10/25/2022
|
|
|
4,000
|
—
|
$
0.87
|
25%/yr for 4
yrs
|
1/31/2023
|
|
|
15,000
|
—
|
$
1.41
|
25%/yr for 4
yrs
|
10/31/2023
|
|
|
11,250
|
3,750
|
$
1.37
|
25%/yr for 4
yrs
|
10/30/2024
|
|
|
7,500
|
2,500
|
$
1.27
|
25%/yr for 4
yrs
|
1/12/2025
|
|
|
29,762
|
—
|
$
1.48
|
immediate
|
10/29/2025
|
|
|
3,500
|
3,500
|
$
1.48
|
25%/yr for 4
yrs
|
10/29/2025
|
|
|
41,824
|
—
|
$
1.56
|
immediate
|
10/27/2026
|
|
|
5,435
|
16,304
|
$
1.78
|
25%/yr for 4
yrs
|
10/27/2026
|
|
|
—
|
10,284
|
$
4.24
|
33%/yr for 3
yrs
|
10/26/2027
|
37
(1)
This table does not
include the stock option award equal to $7,500 that Mr. Gaynor
earned, based on the achievement of certain performance goals in
fiscal 2018. This table also does not include the restricted stock
unit award, representing 25,354 shares of Class A common stock,
which Mr. Gaynor earned based on the achievement of certain
performance goals in fiscal 2017. All shares immediately vested on
the grant date.
(2)
This table does not
include the stock option award equal to $3,000 that Ms. Cipolla
earned, based on the achievement of certain performance goals in
fiscal 2018. This table also does not include the restricted stock
unit award, representing 8,602 shares of Class A common stock,
which Ms. Cipolla earned based on the achievement of certain
performance goals in fiscal 2017. All shares immediately vested on
the grant date.
(3)
This table does not
include the stock option award equal to $3,000 that Mr. Symmons
earned, based on the achievement of certain performance goals in
fiscal 2018. This table also does not include the restricted stock
unit award, representing 9,055 shares of Class A common stock,
which Mr. Symmons earned based on the achievement of certain
performance goals in fiscal 2017. All shares immediately vested on
the grant date.
The
stock options were issued pursuant to the Amended and Restated
Omnibus Incentive Plan and have a ten-year life. The options will
terminate 90 days after termination of employment, or in the case
of termination due to death or permanent disability, the options
will terminate one year after the date of termination.
38
DIRECTOR COMPENSATION
Director
Compensation
The
table below summarizes the compensation paid by us to non-employee
directors for fiscal 2018.
|
|
Fees Earned or
|
Stock
|
All
Other
|
|
|
|
Paid
in Cash
|
Awards
|
Compensation
|
Total
|
|
Name (1)
|
($)(2)
|
($)(3)
|
($)
|
($)
|
|
(a)
|
(b)
|
(c)
|
(g)
|
(h)
|
|
Robert
Ripp
|
$
100,000
|
$
59,999
|
$
-
|
$
159,999
|
|
Sohail
Khan
|
$
40,000
|
$
59,999
|
$
-
|
$
99,999
|
|
Dr. Steven
Brueck
|
$
36,000
|
$
59,999
|
$
-
|
$
95,999
|
|
Louis
Leeburg
|
$
44,000
|
$
59,999
|
$
-
|
$
103,999
|
|
M. Scott
Faris
|
$
36,000
|
$
59,999
|
$
-
|
$
95,999
|
|
Craig
Dunham
|
$
36,000
|
$
59,999
|
$
-
|
$
95,999
|
|
(1)
|
J.
James Gaynor, our President and Chief Executive Officer during
fiscal 2018, is not included in this table as he was an employee,
and, thus, received no compensation for his services as a director.
The compensation received by Mr. Gaynor as an employee is
disclosed in the Summary Compensation Table on page
31.
|
|
(2)
|
Total
fees earned for fiscal 2018 includes all fees earned, including
earned but unpaid fees. The amounts of unpaid fees for each
director are as follows: Mr. Ripp - $25,000, Mr. Leeburg - $11,000,
Dr. Brueck - $9,000, Mr. Khan - $10,000, Mr. Faris - $9,000, and
Mr. Dunham - $9,000.
|
|
(3)
|
Reflects
the fair value amount for restricted stock units granted for the
fiscal year ended June 30, 2018 in accordance with ASC Topic
718.
|
Discussion of the Summary Compensation Table of
Directors
The
following is a discussion of the material information that we
believe is necessary to understand the information disclosed in the
Summary Compensation Table. We use a combination of cash and
stock-based incentive compensation to attract and retain qualified
candidates to serve on our Board. In setting director compensation,
we consider the significant amount of time that directors expend in
fulfilling their duties as a director as well as the skill-level
required by us of members of our Board. For fiscal 2018, the Board
increased the cash and stock-based incentive compensation awarded
to directors. The annual cash portion of the directors’
compensation increased from $30,000 to $36,000 and the annual value
of restricted stock awards increased from $50,000 to
$60,000.
Cash Compensation Paid to Board Members
During
fiscal 2018, directors received a monthly retainer of $3,000 per
month. There are no meeting attendance fees paid unless, by action
of the Board, such fees are deemed advisable due to a special
project or other effort requiring extra-normal commitment of time
and effort. Additionally, fees are paid to the Chairman of the
Board and Committee Chairmen for their additional responsibilities
in overseeing their respective functions. The following table sets
forth the annual fees paid to each director for fiscal
2018:
39
|
Name
|
Board Fee
|
Chairman Fee
|
Committee Chair Fee
|
Total Fees Earned for Fiscal Year 2018
|
|
Robert
Ripp
|
$
36,000
|
$
60,000
|
$
4,000
|
$
100,000
|
|
J.
James Gaynor (1)
|
$
-
|
|
|
$
-
|
|
Sohail
Khan
|
$
36,000
|
|
$
4,000
|
$
40,000
|
|
Steven
Brueck
|
$
36,000
|
|
|
$
36,000
|
|
M.
Scott Faris
|
$
36,000
|
|
|
$
36,000
|
|
Louis
Leeburg
|
$
36,000
|
|
$
8,000
|
$
44,000
|
|
Craig
Dunham
|
$
36,000
|
|
|
$
36,000
|
(1)
Mr. Gaynor did not
receive any compensation for his service as a director because he
is also an employee.
Stock Option/Restricted Stock Program
All
directors are eligible to receive equity incentives under the
Amended and Restated Omnibus Incentive Plan, including stock
options, restricted stock awards, or units. In fiscal 2018, the
following directors received grants under the Amended and Restated
Omnibus Incentive Plan:
|
|
Restricted
Stock Units
|
||
|
Name
of Director (1)
|
Number
of Units Granted
|
Grant
Date
|
Fair
Value Price Per Share
|
|
Dr.
Steven Brueck
|
16,260
|
10/26/2017
|
$
3.69
|
|
Sohail
Khan
|
16,260
|
10/26/2017
|
$
3.69
|
|
Louis
Leeburg
|
16,260
|
10/26/2017
|
$
3.69
|
|
Robert
Ripp
|
16,260
|
10/26/2017
|
$
3.69
|
|
M.
Scott Faris
|
16,260
|
10/26/2017
|
$
3.69
|
|
Craig
Dunham
|
16,260
|
10/26/2017
|
$
3.69
|
|
|
97,560
|
|
|
(1)
Mr. Gaynor did not
receive any compensation for his service as a director because he
is also an employee.
Additional details
regarding the restricted stock units granted to each director,
other than Mr. Gaynor, is set forth below.
40
Robert Ripp
|
Restricted Stock
Units
|
|
Compensation Expense
(1)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Number of
Vested
Shares
(2)
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/31/13
|
35,460
|
35,460
|
4,173
|
-
|
-
|
-
|
-
|
|
10/30/14
|
36,500
|
36,500
|
16,608
|
4,151
|
-
|
-
|
-
|
|
10/29/15
|
33,785
|
22,523
|
16,668
|
16,668
|
4,165
|
-
|
-
|
|
10/27/16
|
38,462
|
12,821
|
15,003
|
20,001
|
19,999
|
4,998
|
-
|
|
10/26/17
|
16,260
|
-
|
-
|
15,011
|
20,000
|
19,992
|
4,996
|
|
|
|
|
52,452
|
55,830
|
44,164
|
24,991
|
4,996
|
Positions:
Chairman of the Board, Compensation Committee Chairman, Nominating
& Corporate Governance Committee Chairman
Committees:
Compensation, Finance and Nominating & Corporate Governance
Committees
(1)
Compensation
expense for grants of restricted stock units is recognized or
expected to be recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The
number of shares vested are as of June 30, 2018. One-third of the
restricted stock unit shares vests on each of the first, second and
third anniversaries of the grant date.
Sohail Khan
|
Restricted Stock
Units
|
|
Compensation Expense
(1)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Number of
Vested
Shares
(2)
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/31/13
|
35,460
|
35,460
|
4,173
|
-
|
-
|
-
|
-
|
|
10/30/14
|
36,500
|
36,500
|
16,608
|
4,151
|
-
|
-
|
-
|
|
10/29/15
|
33,785
|
22,523
|
16,668
|
16,668
|
4,165
|
-
|
-
|
|
10/27/16
|
38,462
|
12,821
|
15,003
|
20,001
|
19,999
|
4,998
|
-
|
|
10/26/17
|
16,260
|
-
|
-
|
15,011
|
20,000
|
19,992
|
4,996
|
|
|
|
|
52,452
|
55,830
|
44,164
|
24,991
|
4,996
|
Positions:
Finance Committee Chairman
Committees:
Finance, Compensation and Nominating & Corporate Governance
Committees
(1)
Compensation
expense for grants of restricted stock units is recognized or
expected to be recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The
number of shares vested are as of June 30, 2018. One-third of the
restricted stock unit shares vests on each of the first, second and
third anniversaries of the grant date.
41
Dr. Steven Brueck
|
Restricted Stock
Units
|
|
Compensation Expense
(1)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Number of
Vested
Shares
(2)
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/31/13
|
35,460
|
35,460
|
4,173
|
-
|
-
|
-
|
-
|
|
10/30/14
|
36,500
|
36,500
|
16,608
|
4,151
|
-
|
-
|
-
|
|
10/29/15
|
33,785
|
22,523
|
16,668
|
16,668
|
4,165
|
-
|
-
|
|
10/27/16
|
38,462
|
12,821
|
15,003
|
20,001
|
19,999
|
4,998
|
-
|
|
10/26/17
|
16,260
|
-
|
-
|
15,011
|
20,000
|
19,992
|
4,996
|
|
|
|
|
52,452
|
55,830
|
44,164
|
24,991
|
4,996
|
Committees:
Audit Committee
(1)
Compensation
expense for grants of restricted stock units is recognized or
expected to be recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The
number of shares vested are as of June 30, 2018. One-third of the
restricted stock unit shares vests on each of the first, second and
third anniversaries of the grant date.
Louis Leeburg
|
Restricted Stock
Units
|
|
Compensation Expense
(1)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Number of
Vested
Shares
(2)
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/31/13
|
35,460
|
35,460
|
4,173
|
-
|
-
|
-
|
-
|
|
10/30/14
|
36,500
|
36,500
|
16,608
|
4,151
|
-
|
-
|
-
|
|
10/29/15
|
33,785
|
22,523
|
16,668
|
16,668
|
4,165
|
-
|
-
|
|
10/27/16
|
38,462
|
12,821
|
15,003
|
20,001
|
19,999
|
4,998
|
-
|
|
10/26/17
|
16,260
|
-
|
-
|
15,011
|
20,000
|
19,992
|
4,996
|
|
|
|
|
52,452
|
55,830
|
44,164
|
24,991
|
4,996
|
Positions:
Audit Committee Chairman
Committees:
Audit, Compensation and Nominating & Corporate Governance
Committees
(1)
Compensation
expense for grants of restricted stock units is recognized or
expected to be recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The
number of shares vested are as of June 30, 2018. One-third of the
restricted stock unit shares vests on each of the first, second and
third anniversaries of the grant date.
42
M. Scott Faris
|
Restricted Stock
Units
|
|
Compensation Expense
(1)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Number of
Vested
Shares
(2)
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/31/13
|
35,460
|
35,460
|
4,173
|
-
|
-
|
-
|
-
|
|
10/30/14
|
36,500
|
36,500
|
16,608
|
4,151
|
-
|
-
|
-
|
|
10/29/15
|
33,785
|
22,523
|
16,668
|
16,668
|
4,165
|
-
|
-
|
|
10/27/16
|
38,462
|
12,821
|
15,003
|
20,001
|
19,999
|
4,998
|
-
|
|
10/26/17
|
16,260
|
-
|
-
|
15,011
|
20,000
|
19,992
|
4,996
|
|
|
|
|
52,452
|
55,830
|
44,164
|
24,991
|
4,996
|
Committees:
Audit and Finance Committees
(1)
Compensation
expense for grants of restricted stock units is recognized or
expected to be recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The
number of shares vested are as of June 30, 2018. One-third of the
restricted stock unit shares vests on each of the first, second and
third anniversaries of the grant date.
Craig Dunham (1)
|
Restricted Stock
Units
|
|
Compensation Expense
(1)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Nnumber of
Vested
Shares
(3)
|
Actual
Fiscal 2017
$
|
Actual
Fiscal 2018
$
|
Projected
Fiscal 2019
$
|
Projected
Fiscal 2020
$
|
Projected
Fiscal 2021
$
|
|
10/30/14
|
36,500
|
36,500
|
16,608
|
4,151
|
-
|
-
|
-
|
|
10/29/15
|
33,785
|
22,523
|
16,608
|
16,668
|
4,165
|
-
|
-
|
|
10/27/16
|
38,462
|
12,821
|
15,003
|
20,001
|
19,999
|
4,998
|
-
|
|
10/26/17
|
16,260
|
-
|
-
|
15,011
|
20,000
|
19,992
|
4,996
|
|
|
|
|
48,219
|
55,830
|
44,164
|
24,991
|
4,996
|
Committees:
Audit Committee
(1)
Mr.
Dunham served as a consultant to the Board from March 2014 until
April 2016. In April 2016, he was appointed as a director. During
the time period Mr. Dunham served as a consultant to the Board, he
earned compensation equivalent to the compensation paid to the
directors. The amounts disclosed include the compensation he earned
as a consultant and director.
(2)
Compensation
expense for grants of restricted stock units is recognized or
expected to be recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
The
number of shares vested are as of June 30, 2018. One-third of the
restricted stock unit shares vests on each of the first, second and
third anniversaries of the grant date.
43
EQUITY COMPENSATION PLAN INFORMATION
Equity Compensation Plan Information
The
following table sets forth as of June 30, 2018, the end of our
most recent fiscal year, information regarding (i) all
compensation plans previously approved by our stockholders and
(ii) all compensation plans not previously approved by our
stockholders:
|
Plan
category
|
Number of securities
to be issued upon exercise of outstanding options, warrants and
rights
|
Weighted average
exercise and grant price of outstanding options, warrants and
rights
|
Number of securities
remaining available for future issuance
|
|
Equity compensation
plans approved by security holders
|
5,115,625
(1)
|
$
1.77
(2)
|
1,650,870
|
|
Equity compensation
plans not approved by security holders
|
—
|
—
|
—
|
(1)
Represents the
number of underlying shares of Class A common stock associated with
outstanding stock options and restricted stock units and shares
available to be issued under the Amended and Restated Omnibus
Incentive Plan.
(2)
Represents
weight-average exercise price of stock options outstanding under
the Amended and Restated Omnibus Incentive Plan. The
weighted-average exercise price does not include the restricted
stock unit awards.
44
PROPOSAL 2 – APPROVAL OF THE 2018 OMNIBUS INCENTIVE
PLAN
What Am I Voting On?
Stockholders are
being asked to approve the Incentive Plan, which was approved by
our Board on August 30, 2018. The Incentive Plan will become
effective on the date it is approved by our stockholders, and will
replace our Amended and Restated Omnibus Incentive Plan, which is
the only plan under which equity awards are currently being
granted.
Voting Recommendation
FOR
the approval of the Incentive Plan
because it includes a number of features that we believe are
consistent with the interests of our stockholders and sound
corporate governance practices. If the Incentive Plan is not
approved by our stockholders, the Amended and Restated Omnibus
Incentive Plan in its current form will remain in
effect.
General
The
purpose of the Incentive Plan is to enhance stockholder value by
linking the compensation of our officers, directors, key employees,
and consultants to increases in the price of our Class A common
stock and the achievement of other performance objections and to
encourage ownership in the Company by key personnel whose long-term
employment is considered essential to our continued progress and
success. The Incentive Plan is also intended to assist us in
recruiting new employees and to motivate, retain, and encourage
such employees and directors to act in our stockholders’
interest and share in the our success.
Term
The
Incentive Plan will become effective upon approval by our
stockholders and will continue in effect from that date until it is
terminated in accordance with the terms of the Incentive
Plan.
Administration
The
Incentive Plan may be administered by the Board, a committee
designated by the Board, and/or their respective delegates. The
Board currently contemplates that the Compensation Committee will
administer the Incentive Plan. The administrator has the power to
determine the directors, employees, and consultants who may
participate in the Incentive Plan and the amounts and other terms
and conditions of awards to be granted under the Incentive Plan.
All questions of interpretation and administration with respect to
the Incentive Plan will be determined by the administrator. The
administrator also will have the complete authority to adopt,
amend, rescind, and enforce rules and regulations pertaining to the
administration of the Incentive Plan; to correct administrative
errors; to make all other determinations deemed necessary or
advisable for administering the Incentive Plan and any award
granted under the Incentive Plan; and to authorize any person to
execute on behalf of the Company all agreements and documents
previously approved by the administrator, among other
items.
Eligibility
Any of
our directors, employees, or consultants, or any directors,
employees, or consultants of any of our affiliates (except that
with respect to incentive stock options, only employees of the
Company or any of our subsidiaries are eligible), are eligible to
participate in the Incentive Plan.
45
Available Shares
Subject
to the adjustment provisions included in the Incentive Plan, a
total of 1,650,870 shares of our Class A common stock, less one
share for every one share granted under the Amended and Restated
Omnibus Incentive Plan after June 30, 2018, would be authorized for
awards granted under the Incentive Plan. The amount of available
shares reflects the carrying over to the new Incentive Plan of the
number of shares reserved for issuance under the Amended and
Restated Omnibus Incentive Plan as of June 30, 2018. Shares subject
to awards that have been canceled, expired, settled in cash, or not
issued or forfeited for any reason (in whole or in part), will not
reduce the aggregate number of shares which may be subject to or
delivered under awards granted under the Incentive Plan and will be
available for future awards granted under the Incentive Plan. In
addition, if any shares subject to an award under the Amended and
Restated Omnibus Incentive Plan are canceled, expired, settled in
cash, or not issued or forfeited for any reason (in whole or in
part) after June 30, 2018, then such shares subject to an award
under the Amended and Restated Omnibus Incentive Plan will, to the
extent of such cancellation, expiration, settlement in cash,
non-issuance, or forfeiture, again be available for grant under the
Incentive Plan on a one-for-one basis.
Types of Awards
We may
grant the following types of awards under the Incentive Plan: stock
awards; options; stock appreciation rights; stock units; or other
stock-based awards.
Stock Awards
. The Incentive Plan
authorizes the grant of stock awards to eligible participants. The
administrator determines (i) the number of shares subject to the
stock award or a formula for determining such number, (ii) the
purchase price of the shares, if any, (iii) the means of payment
for the shares, (iv) the performance criteria, if any, and the
level of achievement versus these criteria, (v) the grant,
issuance, vesting, and/or forfeiture of the shares, (vi)
restrictions on transferability, and such other terms and
conditions determined by the administrator.
Options.
The Incentive Plan authorizes
the grant of non-qualified and/or incentive options to eligible
participants, which options give the participant the right, after
satisfaction of any vesting conditions and prior to the expiration
or termination of the option, to purchase shares of our Class A
common stock at a fixed price. The administrator determines the
exercise price for each share subject to an option granted under
the Incentive Plan, which exercise price cannot be less than the
fair market value (as defined in the Incentive Plan) of our Class A
common stock on the grant date. The administrator also determines
the number of shares subject to each option, the time or times when
each option becomes exercisable, and the term of each option (which
cannot exceed ten (10) years from the grant date).
Stock Appreciation Rights.
The
Incentive Plan authorizes the grant of stock appreciation rights to
eligible participants, which stock appreciation rights give the
participant the right, after satisfaction of any vesting conditions
and prior to the expiration or termination of the stock
appreciation right, to receive in cash or shares of Class A common
stock the excess of the fair market value (as defined in the
Incentive Plan) of our Class A common stock on the date of exercise
over the exercise price of the stock appreciation right. All stock
appreciation rights under the Incentive Plan shall be granted
subject to the same terms and conditions applicable to options
granted under the Incentive Plan. Stock appreciation rights may be
granted to awardees either alone or in addition to or in tandem
with other awards granted under the Incentive Plan and may, but
need not, relate to a specific option granted under the Incentive
Plan.
Stock Unit Awards and Other Stock-Based
Awards.
In addition to the award types described above, the
administrator may grant any other type of award payable by delivery
of our Class A common stock in such amounts and subject to such
terms and conditions as the administrator determines in its sole
discretion, subject to the terms of the Incentive Plan. Such awards
may be made in addition to or in conjunction with other awards
under the Incentive Plan. Such awards may include unrestricted
shares of our Class A common stock, which may be awarded, without
limitation (except as provided in the Incentive Plan), as a bonus,
in payment of director fees, in lieu of cash compensation, in
exchange for cancellation of a compensation right, or upon the
attainment of performance goals or otherwise, or rights to acquire
shares of our Class A common stock from us.
46
Award Limits
Subject
to the terms of the Incentive Plan, the aggregate number of shares
that may be subject to all incentive stock options granted under
the Incentive Plan cannot exceed the total aggregate number of
shares that may be subject to or delivered under awards under the
Incentive Plan. Notwithstanding any other provisions of the
Incentive Plan to the contrary, the aggregate grant date fair value
(computed as specified in the Incentive Plan) of all awards granted
to any non-employee director during any single calendar year shall
not exceed one hundred thousand (100,000) shares.
New Plan Benefits
The
amounts of future grants under the Incentive Plan are not
determinable as awards under the Incentive Plan will be granted at
the sole discretion of the administrator. We cannot determinate at
this time either the persons who will receive awards under the
Incentive Plan or the amount or types of such any such awards.
Information regarding awards granted under the Amended and Restated
Omnibus Incentive Plan during fiscal 2018 for our directors and
named executive officers can be found under “Executive
Compensation” and “Director
Compensation.”
Transferability
Unless
determined otherwise by the administrator, an award may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by beneficiary designation, will, or by
the laws of descent or distribution, including but not limited to
any attempted assignment or transfer in connection with the
settlement of marital property or other rights incident to a
divorce or dissolution, and any such attempted sale, assignment, or
transfer shall be of no effect prior o the date an award is vested
and settled.
Termination of Employment or Board Membership
At the
grant date, the administrator is authorized to determine the effect
a termination from membership on the Board by a non-employee
director for any reason or a termination of employment (as defined
in the Incentive Plan) due to disability (as defined in the
Incentive Plan), retirement (as defined in the Incentive Plan),
death, or otherwise (including termination for cause (as defined in
the Incentive Plan)) will have on any award. Unless otherwise
provided in the award agreement:
●
Upon termination
from membership on the Board by a non-employee director for any
reason other than disability or death, any option or stock
appreciation right held by such director that (i) has not vested
and is not exercisable as of the termination effective date will be
subject to immediate cancellation and forfeiture, or (ii) is vested
and exercisable as of the effective date of such termination shall
remain exercisable for one year thereafter, or the remaining term
of the option or stock appreciation right, if less. Any unvested
stock award, stock unit award, or other stock based award held by a
non-employee director at the time of termination from membership on
the Board for a reason other than disability or death will
immediately be cancelled and forfeited.
●
Termination from
membership on the Board by a non-employee director due to
disability or death will result in full vesting of any outstanding
option or stock appreciation rights and vesting of a prorated
portion of any stock award, stock unit award, or other stock based
award based upon the full months of the applicable performance
period, vesting period or other period of restriction elapsed as of
the end of the month in which the termination from membership on
the Board by a non-employee director due to disability or death
occurs over the total number of months in such period. Any option
or stock appreciation right that vests upon disability or death
will remain exercisable for one year thereafter, or the remaining
term of the option or stock appreciation right, if less. In the
case of any stock award, stock unit award, or other stock based
award that vests on the basis of attainment of performance criteria
(as defined in the Incentive Plan), the pro rata vested amount will
be based upon the target award.
47
●
Upon termination of
employment due to disability or death, any option or stock
appreciation right held by an employee will, if not already fully
vested, become fully vested and exercisable as of the effective
date of such termination of employment due to disability or death,
or, in either case, the remaining term of the option or stock
appreciation right, if less. Termination of employment due to
disability or death shall result in vesting of a prorated portion
of any stock award, stock unit award, or other stock based award
based upon the full months of the applicable performance period,
vesting period or other period of restriction elapsed as of the end
of the month in which the termination of employment due to
disability or death occurs over the total number of months in such
period. In the case of any stock award, stock unit award or other
stock based award that vests on the basis of attainment of
performance criteria, the pro-rata vested amount will be based upon
the target award.
●
Any option or stock
appreciation right held by an awardee at retirement that occurs at
least one year after the grant date of the option or stock
appreciation right will remain outstanding for the remaining term
of the option or stock appreciation right and continue to vest; any
stock award, stock unit award, or other stock based award held by
an awardee at retirement that occurs at least one year after the
grant date of the award shall also continue to vest and remain
outstanding for the remainder of the term of the
award.
●
Any other
termination of employment shall result in immediate cancellation
and forfeiture of all outstanding awards that have not vested as of
the effective date of such termination of employment, and any
vested and exercisable options and stock appreciation rights held
at the time of such termination of such termination of employment
shall remain exercisable for ninety (90) days thereafter, or the
remaining term of the option or stock appreciation right, if less.
Notwithstanding the foregoing, all outstanding and unexercised
options and stock appreciation rights will be immediately cancelled
in the event of a termination for cause.
Change of Control
In the
event of a change of control (as defined in the Incentive Plan),
unless other determined by the administrator as of the grant date
of a particular award, the following acceleration, exercisability,
and valuation provisions apply:
●
On the date that a
change of control occurs, all options and stock appreciation rights
awarded under the Incentive Plan not previously exercisable and
vested will, if not assumed, or substituted with a new award, by
the successor to the Company, become fully exercisable and vested,
and if the successor to the Company assumes such options or stock
appreciation rights or substitutes other awards for such awards,
such awards (or their substitutes) shall become fully exercisable
and vested if the participant’s employment is terminated
(other than a termination for cause) within two years following the
change of control.
●
Except as may be
provided in an individual severance or employment agreement (or
severance plan) to which an awardee is a party, in the event of an
awardee’s termination of employment within two years after a
change of control for any reason other than because of the
awardee’s death, retirement, disability, or termination for
cause, each option and stock appreciation right held by the awardee
(or a transferee) that is vested following such termination of
employment will remain exercisable until the earlier of the third
anniversary of such termination of employment (or any later date
until which it would remain exercisable under such circumstances by
its terms) or the expiration of its original term. In the event of
an awardee’s termination of employment more than two years
after a change of control, or within two years after a change of
control because of the awardee’s death, retirement,
disability, or termination for cause, the regular provisions of the
Incentive Plan regarding employment termination (described above)
will govern (as applicable).
48
●
On the date that a
change of control occurs, the restrictions and conditions
applicable to any or all stock awards, stock unit awards, and other
stock-based awards that are not assumed, or substituted with a new
award, by the successor to the Company will lapse and such awards
will be fully vested. Unless otherwise provided in an award
agreement at the grant date, upon the occurrence of a change of
control without assumption or substitution of the awards by the
successor, any performance-based award will be deemed fully earned
at the target amount as of the date on which the change of control
occurs. All stock awards, stock unit awards, and other stock-based
awards shall be settled or paid within thirty (30) days of vesting.
Notwithstanding the foregoing, if the change of control would not
qualify as a permissible date of distribution under Section
409A(a)(2)(A) of the Internal Revenue Code, and the regulations
thereunder, the awardee shall be entitled to receive the award from
the Company on the date that would have applied absent this
provision. If the successor to the Company does assume (or
substitute with a new award) any stock awards, stock unit awards,
and other stock-based awards, all such awards shall become fully
vested if the participant’s employment is terminated (other
than a termination for cause) within two years following the change
of control, and any performance based award will be deemed fully
earned at the target amount effective as of the termination of
employment.
●
The administrator,
in its discretion, may determine that, upon the occurrence of a
change of control of the Company, each option and stock
appreciation right outstanding will terminate within a specified
number of days after notice to the participant, and/or that each
participant receives, with respect to each share subject to such
option or stock appreciation right, an amount equal to the excess
of the fair market value of such share immediately prior to the
occurrence of such change of control over the exercise price per
share of such option and/or stock appreciation right; such amount
to be payable in cash in one or more kinds of stock or property
(including the stock or property, if any, payable in the
transaction) or in a combination thereof, as the administrator, in
its discretion, determines, and if there is no excess value, the
administrator may, in its discretion, cancel such
awards.
●
An option, stock
appreciation right, stock award, stock unit award, or other
stock-based award will be considered assumed or substituted for if
following the change of control the award confers the right to
purchase or receive, for each share subject to the option, stock
appreciation right, stock award, stock unit award, or other
stock-based award immediately prior to the change of control, the
consideration (whether stock, cash, or other securities or
property) received in the transaction constituting a change of
control by holders of shares for each share held on the effective
date of such transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares); provided, however, that if
such consideration received in the transaction constituting a
change of control is not solely common stock of the successor
company, the administrator may, with the consent of the successor
company, provide that the consideration to be received upon the
exercise or vesting of an option, stock appreciation right, stock
award, stock unit award, or other stock-based award, for each share
subject thereto, will be solely common stock of the successor
company with a fair market value substantially equal to the per
share consideration received by holders of shares in the
transaction constituting a change of control. The determination of
whether fair market value is substantially equal shall be made to
the administrator in its sole discretion and its determination will
be conclusive and binding.
U.S. Federal Income Tax Treatment
The
following discussion is intended only as a brief summary of the
federal income tax rules that are generally relevant to awards as
of the date of this Proxy Statement. The laws governing the tax
aspects of awards are highly technical and such laws are subject to
change.
Non-Qualified Options.
With respect to
non-qualified options granted to participants under the Incentive
Plan, (i) no income is realized by the participant at the time the
non-qualified option is granted, (ii) at exercise, ordinary income
is realized by the participant in an amount equal to the difference
between the option price and the fair market value of our Class A
common stock on the date of exercise, such amount is treated as
compensation and is subject to both income and wage tax
withholding, and we may claim a tax deduction for the same amount,
and (iii) on disposition, appreciation, or depreciation after the
date of exercise is treated as either short-term or long-term
capital gain or loss depending on the holding period.
49
Incentive Stock Options
. With respect
to incentive stock options, there is no tax to the participant at
the time of the grant. Additionally, if applicable holding period
requirements (a minimum of two years from the grant date and one
year from the exercise date) are met, the participant will not
recognize taxable income at the time of the exercise. However, the
excess of the fair market value of the shares acquired at the time
of exercise over the aggregate exercise price is an item of tax
preference income potentially subject to the alternative minimum
tax. If shares acquired upon exercise of an incentive stock option
are held for the holding period described above, the gain or loss
(in an amount equal to the difference between the fair market value
on the date of sale and the exercise price) upon disposition of the
shares will be treated as a long-term capital gain or loss, and the
Company will not be entitled to any deduction. If the shares
acquired on option exercise are disposed of in a non-qualifying
disposition before the holding period requirements are met, the
participant will generally realize ordinary income at the time of
the disposition of the shares, in an amount equal to the lesser of
(i) the excess of the fair market value of the shares on the date
of exercise over the exercise price, or (ii) the excess, if any, of
the amount realized upon disposition of the shares over the
exercise price, and the Company will be entitled to a corresponding
tax deduction. Any amount realized in excess of the value of the
shares on the date of exercise will be capital gain. If the amount
realized is less than the exercise price, the participant will not
recognize ordinary income, and the participant will generally
recognize a capital loss equal to the excess of the exercise price
over the amount realized upon the disposition of the
shares.
Other Awards.
The current federal
income tax consequences of other awards authorized under the
Incentive Plan generally follow certain basic patterns. An award of
restricted stock results in income recognition by a participant in
an amount equal to the fair market value of the shares received at
the time the restrictions lapse and the shares vest, unless the
participant elects under Internal Revenue Code Section 83(b) to
accelerate income recognition and the taxability of the award to
the grant date. Stock unit awards generally result in income
recognition by a participant at the time payment of such an award
is made in an amount equal to the amount paid in cash or the
then-current fair market value of the shares received, as
applicable. Stock appreciation right awards result in income
recognition by a participant at the time such an award is exercised
in an amount equal to the amount paid in cash or the then-current
fair market value of the shares received by the participant, as
applicable. In each of the foregoing cases, the Company will
generally have a corresponding deduction at the time the
participant recognizes ordinary income, subject to Internal Revenue
Code Section 162(m) with respect to covered employees.
Section 162(m) of the Internal Revenue
Code.
Internal Revenue Code Section 162(m) denies a
deduction to any publicly-held corporation for compensation paid to
certain “covered employees” in a taxable year to the
extent that compensation to a covered employee exceeds $1,000,000.
“Covered employees” generally includes the Chief
Executive Officer, the Chief Financial, and the three other most
highly compensated executive officers.
Section 409A of the Internal Revenue
Code.
Awards granted under the Incentive Plan will generally
be designed and administered in such a manner that they are either
exempt from the application of, or comply with the requirements of,
Section 409A of the Internal Revenue Code. Section 409A of the
Internal Revenue Code imposes restrictions on nonqualified deferred
compensation. Failure to satisfy these rules results in accelerated
taxation, an additional tax to the holder in an amount equal to 20%
of the deferred amount, and a possible interest charge. Options
granted with an exercise price that is not less than the fair
market value of the underlying shares on the date of grant will not
give rise to “deferred compensation” for this purpose
unless they involve additional deferral features.
Other Tax Considerations
. This summary
is not intended to be a complete explanation of all of the federal
income tax consequences of participating in the Incentive Plan. A
participant should consult his or her personal tax advisor to
determine the particular tax consequences of the Incentive Plan,
including the application and effect of foreign state and local
taxes, and any changes in the tax laws after the date of this Proxy
Statement.
50
Amendment and Termination
The
administrator may amend, alter, or discontinue the Incentive Plan
or any award agreement, but any such amendment is subject to the
approval of the Company’s stockholders in the manner and to
the extent required by applicable law. In addition, without
limiting the foregoing, unless approved by the Company’s
stockholders and subject to the terms of the Incentive Plan, no
such amendment shall be made that would (i) increase the maximum
aggregate number of shares that may be subject to awards granted
under the Incentive Plan; (ii) reduce the minimum exercise price
for options or stock appreciation rights granted under the
Incentive Plan; or (iii) reduce the exercise price of outstanding
options or stock appreciation rights, as prohibited by the terms of
the Incentive Plan without stockholder approval.
No
amendment, suspension or termination of the Incentive Plan will
impair the rights of any participant with respect to an outstanding
award, unless mutually agreed otherwise between the participant and
the administrator, which agreement must be in writing and signed by
the participant and the Company, except that no such agreement will
be required if the administrator determines in its sole discretion
that such amendment either (i) is required or advisable in order
for the Company, the Incentive Plan, or the award to satisfy any
applicable law or to meet the requirements of any accounting
standard, or (ii) is not reasonably likely to significantly
diminish the benefits provided under such award, or that any such
diminishment has been adequately compensated, except that this
exception shall not apply following a change of control.
Termination of the Incentive Plan will not affect the
administrator’s ability to exercise the powers granted to it
hereunder with respect to awards granted under the Incentive Plan
prior to the date of such termination.
51
PROPOSAL 3 – ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION
What Am I Voting On?
Stockholders are
being asked to approve, on a non-binding, advisory basis, the
compensation of our named executive officers.
Voting Recommendation
FOR
the non-binding, advisory vote to
approve the executive compensation of our named executive officers
disclosed in this Proxy Statement under the section titled
“executive compensation,” including the compensation
tables and other narrative execution compensation disclosures
therein, required by Item 402 of SEC Regulation S-K.
Summary
We
believe executive compensation is an important matter for our
stockholders. A fundamental principle of our executive compensation
philosophy and practice continues to be to pay for performance. An
executive officer’s compensation package is comprised of two
components: (i) a base salary, which reflects individual
performance and expertise and (ii) short-term and long-term
incentive awards, tied to the achievement of certain performance
goals that the Compensation Committee establishes from time to time
for us. We believe that this type of compensation program is
consistent with our strategy, competitive practice, sound corporate
governance principles, and stockholder interests and concerns. We
urge you to read this Proxy Statement for additional details on our
executive compensation, including our compensation philosophy and
objectives and the fiscal year 2018 compensation of the named
executive officers.
This
proposal, commonly known as a “say-on-pay” proposal,
gives you as a stockholder the opportunity to endorse or not
endorse our executive pay philosophy, policies, and procedures.
This vote is intended to provide an overall assessment of our
executive compensation program rather than focus on any specific
item of compensation. Given the information provided above and
elsewhere in this Proxy Statement, the Board asks you to approve
the following resolution:
“RESOLVED
, that the
Company’s stockholders approve the compensation of the
Company’s named executive officers described in the Proxy
Statement under the section titled “Executive
Compensation”, including the compensation tables and other
narrative executive compensation disclosures therein, required by
Item 402 of Regulation S-K.”
As an
advisory vote, this proposal is non-binding on us. However, the
Board and the Compensation Committee value the opinions of our
stockholders and will consider the outcome of the vote when making
future compensation decisions for our named executive
officers.
52
PROPOSAL 4 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
What Am I Voting On?
It is
the responsibility of the Audit Committee to select and retain our
independent registered public accounting firms. Our Audit Committee
has appointed Moore Stephens Lovelace, as our independent
registered public accounting firm for our fiscal year ending
June 30, 2019. Although stockholder ratification of the Audit
Committee’s selection of our independent registered public
accounting firm is not required by our Bylaws or otherwise, we are
submitting the selection of Moore Stephens Lovelace to stockholder
ratification so that our stockholders may participate in this
important corporate decision. If not ratified, the Audit Committee
will reconsider the selection, although the Audit Committee will
not be required to select different independent registered public
accounting firm for us.
Voting Recommendation
FOR
the ratification of the appointment
of Moore Stephens Lovelace as our independent registered public
accounting firm.
Change in Independent Registered Public Accounting
Firm
As
previously disclosed by us in a Current Report on Form 8-K filed on
December 8, 2017 with the SEC, the Audit Committee conducted a
competitive process to determine our independent registered public
accounting firm for the fiscal year ending June 30, 2018. We
invited several independent registered public accounting firms to
participate in this process, including our then-current independent
registered public accounting firm for our fiscal years ended June
30, 2017 and 2016. Following a review of proposals from the firms
that participated in the process, on December 4, 2017, the Audit
Committee approved, and the Board ratified the Audit
Committee’s approval of, the dismissal of our then-current
independent registered public accounting firm BDO USA LLP
(“BDO”), our independent registered public accounting
firm for the fiscal years ended June 30, 2017 and 2016. On the same
date, the Audit Committee engaged Moore Stephens Lovelace, an
independent member of the Moore Stephens International Limited
association network of firms, as the new independent registered
public accounting firm for the fiscal year ending June 30, 2018.
Moore Stephens Lovelace’s engagement was ratified by the
Board.
BDO’s reports
on our consolidated financial statements as of and for the fiscal
years ended June 30, 2017 and 2016 did not contain an adverse
opinion or disclaimer of opinion, nor were they modified or
qualified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended June 30, 2017 and 2016, and the
subsequent interim periods through December 4, 2017, there were no
disagreements within the meaning of Item 304(a)(1)(iv) of
Regulation S-K and the related instructions between us and BDO on
any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of BDO, would
have caused BDO to make reference in connection with its opinion to
the subject matter of the disagreement.
As
previously reported and as discussed under Item 9A of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2017,
management did not identify any material weaknesses in the our
internal control over financial reporting. There are no reportable
events under Item 304(a)(1)(v) of Regulation S-K promulgated under
the Exchange Act that occurred during the fiscal years ended June
30, 2017 and 2016 and through December 4, 2017.
Prior
to engaging Moore Stephens Lovelace, we did not consult with Moore
Stephens Lovelace regarding (a) the application of accounting
principles to a specific completed or contemplated transaction
regarding the type of audit opinions that might be rendered by
Moore Stephens Lovelace on our financial statements, and Moore
Stephens Lovelace did not provide any written or oral advice that
was an important factor considered by us in reaching a decision as
to any such accounting, auditing, or financial reporting issue, or
(b) a disagreement or reportable event as described under Item
304(a)(2)(11) of Regulation S-K.
The
report of independent registered public accounting firm issued by
BDO regarding our financial statements for the fiscal year ended
June 30, 2017 and 2016 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
53
Representatives of
Moore Stephens Lovelace will be present at the Annual Meeting and
will have an opportunity to make a statement and respond to
questions from stockholders present at the meeting.
Audit Fees
The
following table presents fees paid or to be paid for professional
audit services rendered by Moore Stephens Lovelace and BDO for the
audit of our annual financial statements during the years ended
June 30, 2018 and 2017, review of financial statements included in
our quarterly reports during the years ended June 30, 2018 and
2017, and fees billed for other services rendered by
BDO:
|
|
Fiscal
2018
|
Fiscal
2018
|
Fiscal
2017
|
|
|
Moore
Stephens Lovelace
|
BDO
|
BDO
|
|
|
|
|
|
|
Audit Fees
(1)
|
$
140,000
|
$
10,000
|
$
184,831
|
|
Audit-Related Fees
(2)
|
|
30,000
|
92,579
|
|
Tax
Fees
|
20,000
|
|
20,725
|
|
All Other Fees
(3)
|
|
|
27,860
|
|
|
|
|
|
|
Total
All Fees
|
$
160,000
|
$
40,000
|
$
326,095
|
(1)
Audit Fees
consisted of fees billed for professional services rendered for the
audit of our annual financial statements and review of the interim
financial statements included in quarterly reports, and review of
other documents filed with the SEC within those fiscal
years.
(2)
Audit-related fees
in fiscal 2017 pertained to work performed concerning the due
diligence and audit of ISP. We acquired ISP, and its wholly owned
subsidiary, ISP Optics Latvia, SIA on December 21,
2016.
(3)
All Other Fees
consist of fees billed for professional services rendered for
transfer pricing studies.
The
Audit Committee has adopted policies and procedures to oversee the
external audit process including engagement letters, estimated fees
and solely pre-approving all permitted audit and non-audit work
performed by Moore Stephens Lovelace, as applicable.
The Audit Committee has
pre-approved all fees for audit, audit related and non-audit work
performed.
54
AUDIT COMMITTEE REPORT
The
Audit Committee is responsible for, among other things, reviewing
and discussing the Company’s audited financial statements
with management, discussing with our independent auditors
information relating to the auditors’ judgments about the
quality of our accounting principles, recommending to the Board
that we include the audited financial statements in our Annual
Report, and overseeing compliance with the SEC requirements for
disclosure of auditors’ services and activities.
Review of Audited Financial Statements
The
Audit Committee reviewed our financial statements for the fiscal
year ended June 30, 2018, as audited by Moore Stephens Lovelace our
independent registered public accounting firm, and discussed these
financial statements with management. In addition, the Audit
Committee has discussed with Moore Stephens Lovelace the matters
required to be discussed by Auditing Standards No. 1301,
Communications with Audit
Committees,
as adopted by the Public Company Accounting
Oversight Board (“PCAOB”), as may be modified or
supplemented. Furthermore, the Audit Committee has received the
written disclosures and the letter from Moore Stephens Lovelace
required by the Independence Standards Board Standard No. 1, as may
be modified or supplemented, and has discussed with BDO its
independence.
Generally, the
members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting and are not experts in the
fields of accounting or auditing, or in determining auditor
independence. However, the Board has determined that each member of
the Audit Committee meets the independence criteria set forth in
the applicable rules of the NCM and the SEC, and that three members
of the Audit Committee, Mr. Leeburg, Mr. Faris, and Mr.
Dunham, qualify as “audit committee financial experts”
as defined by SEC rules. Members of the Audit Committee rely,
without independent verification, on the information provided to
them and on the representations made by management. Accordingly,
the Audit Committee's oversight does not currently provide an
independent basis to determine that management has maintained
procedures designed to assure compliance with accounting standards
and applicable laws and regulations.
Recommendation
Based
upon the foregoing review and discussion, the Audit Committee
recommended to the Board that the audited financial statements for
the fiscal year ended June 30, 2018, be included in our Annual
Report for such fiscal year.
|
|
Audit Committee:
Louis
Leeburg, Chairman
Dr.
Steven Brueck
M.
Scott Faris
Craig
Dunham
|
55
OTHER BUSINESS
The
Board is not aware of any other business to be considered or acted
upon at the Annual Meeting other than that for which notice is
provided in this Proxy Statement and the accompanying notice. In
the event any other matters properly come before the Annual
Meeting, it is expected that the shares represented by proxy will
be voted with respect thereto in accordance with the judgment of
the persons voting them.
2018 ANNUAL REPORT ON FORM 10-K
Copies
of our Annual Report for fiscal 2018, which contains our Form 10-K
for the fiscal year ended June 30, 2018, and consolidated financial
statements, as filed with the SEC, have been included in this
mailing. Additional copies may be obtained without charge to
stockholders upon written request to Investor Relations at 2603
Challenger Tech Court, Suite 100, Orlando, Florida USA 32826. In
addition, copies of this document, the Annual Report and all other
documents filed electronically by us may be reviewed and printed
from the SEC’s website at:
http://www.sec.gov
.
|
|
By
Order of the Board of Directors,
J. James Gaynor
President &
Chief Executive Officer
Orlando,
Florida
October
1, 2018
|
56
APPENDIX
A
PROPOSED 2018 STOCK AND INCENTIVE COMPENSATION PLAN
1.
Purpose
of the Plan.
The
purpose of this Plan is to enhance shareholder value by linking the
compensation of officers, directors, key employees and consultants
of the Company to increases in the price of LightPath Technologies,
Inc. common stock and the achievement of other performance
objectives, and to encourage ownership in the Company by key
personnel whose long-term employment is considered essential to the
Company’s continued progress and success. The Plan is also
intended to assist the Company in the recruitment of new employees
and to motivate, retain and encourage such employees and directors
to act in the shareholders’ interest and share in the
Company’s success.
2.
Definitions.
As used
herein, the following definitions shall apply:
(a)
“Administrator”
means the Board, any Committee or such delegates as shall be
administering the Plan in accordance with Section 4 of the
Plan.
(b)
“Affiliate”
means any Subsidiary or other entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a
significant ownership interest as determined by the Administrator.
The Administrator shall, in its sole discretion, determine which
entities are classified as Affiliates and designated as eligible to
participate in this Plan.
(c)
“Applicable Law”
means the requirements relating to the administration of stock
option plans under U.S. federal and state laws, any stock exchange
or quotation system on which the Company has listed or submitted
for quotation the Common Shares to the extent provided under the
terms of the Company’s agreement with such exchange or
quotation system and, with respect to Awards subject to the laws of
any foreign jurisdiction where Awards are, or will be, granted
under the Plan, the laws of such jurisdiction.
(d)
“Award”
means a
Stock Award, Option, Stock Appreciation Right, Stock Unit, or Other
Stock-Based Award granted in accordance with the terms of the Plan,
or any other property (including cash) granted pursuant to the
provisions of the Plan.
(e)
“Awardee”
means
an Employee, Director or Consultant who has been granted an Award
under the Plan.
(f)
“Award
Agreement”
means a Stock Award Agreement, Option
Agreement, Stock Appreciation Right Agreement, Restricted Stock
Unit Agreement or Other Stock-Based Award Agreement, which may be
in written or electronic format, in such form and with such terms
as may be specified by the Administrator, evidencing the terms and
conditions of an individual Award. Each Award Agreement is subject
to the terms and conditions of the Plan. The Award Agreement shall
be delivered to the Participant receiving such Award upon, or as
promptly, as is reasonably practicable following, the grant of such
Award. The effectiveness of an Award shall not be subject to the
Award Agreement’s being signed by the Company and/or the
Participant receiving the Award unless specifically so provided in
the Award Agreement.
(g)
“Board”
means
the Board of Directors of the Company.
A-1
(h)
“Change of
Control”
shall mean, except as otherwise provided in
an Award Agreement, one of the following shall have taken place
after the date of this Agreement:
(i)
any one
person, or group of owners of another corporation who, acting
together through a merger, consolidation, purchase, acquisition of
stock or the like (a "Group"), acquires ownership of Shares of the
Company that, together with the Shares held by such person or
Group, constitutes more than fifty percent (50%) of the total fair
market value or total voting power of the Shares of the Company (or
other voting securities of the Company then outstanding). However,
if such person or Group is considered to own more than fifty
percent (50%) of the total fair market value or total voting power
of the Shares (or other voting securities of the Company then
outstanding) before this transfer of the Company's Shares (or other
voting securities of the Company then outstanding), the acquisition
of additional Shares (or other voting securities of the Company
then outstanding) by the same person or Group shall not be
considered to cause a Change of Control of the Company;
or
(ii)
any
one person or Group acquires (or has acquired during the twelve
(12) month period ending on the date of the most recent acquisition
by such person or persons) ownership of Shares (or other voting
securities of the Company then outstanding) of the Company
possessing thirty percent (30%) or more of the total voting power
of the Shares (or other voting securities then outstanding) of the
Company where such person or Group is not merely acquiring
additional control of the Company; or
(iii)
a
majority of members of the Company's Board is replaced during any
twelve (12) month period by directors whose appointment or election
is not endorsed by a majority of the members of the Company's Board
prior to the date of the appointment or election (the
“Incumbent Board”), but excluding, for purposes of
determining whether a majority of the Incumbent Board has endorsed
any candidate for election to the Board, any individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a person or Group other than the
Company’s Board; or
(iv)
any
one person or Group acquires (or has acquired during the twelve
(12) month period ending on the date of the most recent acquisition
by such person or Group) all or substantially all of the assets
from the Company that have a total gross fair market value equal to
or more than forty percent (40%) of the total fair market value of
all assets of the Company immediately prior to such acquisition or
acquisitions. For this purpose, gross fair market value means the
value of the assets of the Company, or the value of the assets
being disposed of, determined without regard to any liabilities
associated with such assets. A transfer of assets by the Company
will not result in a Change of Control if the assets are
transferred to:
(1)
a stockholder of
the Company (immediately before the asset transfer) in exchange for
or with respect to its stock;
(2)
an entity, fifty
percent (50%) or more of the total value or voting power of which
is owned, directly or indirectly, by the Company immediately after
the transfer of assets;
(3)
a person or Group
that owns, directly or indirectly, fifty percent (50%) or more of
the total value or voting power of all the outstanding stock of the
Company; or
(4)
an entity, at least
fifty percent (50%) of the total value or voting power of which is
owned directly or indirectly, by a person described in subparagraph
(h)(i), above; or
(v)
Shareholders
of the Company approve a plan of complete liquidation or
dissolution of the Company.
A-2
Notwithstanding the
foregoing, if any payment or distribution event applicable to an
Award is subject to the requirements of Section 409A(a)(2)(A) of
the Code, the determination of the occurrence of a Change of
Control shall be governed by applicable provisions of Section
409A(a)(2)(A) of the Code and regulations and rulings issued
thereunder for purposes of determining whether such payment or
distribution may then occur.
(i)
“Code”
means the
United States Internal Revenue Code of 1986, as amended, and any
successor thereto, the Treasury Regulations thereunder and other
relevant interpretive guidance issued by the Internal Revenue
Service or the Treasury Department. Reference to any specific
section of the Code shall be deemed to include such regulations and
guidance, as well as any successor provision of the
Code.
(j)
“Committee”
means a committee of Directors appointed by the Board in accordance
with Section 4 of the Plan or, in the absence of any such special
appointment, the Compensation Committee of the Board.
(k)
“Common Shares”
means the Class A Common Stock of the Company, or any security of
the Company issued in substitution, exchange or lieu
thereof.
(l)
“Company”
means
LightPath Technologies, Inc., a Delaware corporation, or, except as
utilized in the definition of Change of Control, its
successor.
(m)
“Consultant”
means an individual providing services to the Company or any of its
Affiliates as an independent contractor, and includes prospective
consultants who have accepted offers of consultancy for the Company
or any of its Affiliates, so long as such person (i) renders bona
fide services that are not in connection with the offer and sale of
the Company’s securities in a capital-raising transaction,
(ii) does not directly or indirectly promote or maintain a market
for the Company’s securities, and (iii) otherwise qualifies
as a consultant under the applicable rules of the SEC for
registration of shares of stock on a Form S-8 registration
statement.
(n)
“
Conversion
Award
” has the meaning set forth in Section 4(b)(xii)
of the Plan.
(o)
“Director”
means
a member of the Board. Any Director who does not serve as an
employee of the Company is referred to herein as a
“
Non-employee
Director
.”
(p)
“Disability”
means (i) “Disability” as defined in any employment,
consulting or similar agreement to which the Participant is a
party, or (ii) if there is no such agreement or it does not define
“Disability,” (A) permanent and total disability as
determined under the Company’s long-term disability plan
applicable to the Participant, or (B) if there is no such plan
applicable to the Participant or the Committee determines otherwise
in an applicable Award Agreement, “Disability” shall
mean the Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not
less than 12 months, as determined by the Committee.
Notwithstanding the above, with respect to an Incentive Stock
Option, Disability shall mean permanent and total disability as
defined in Section 22(e)(3) of the Code and, with respect to any
Award that constitutes “nonqualified deferred
compensation” within the meaning of Section 409A of the Code,
the foregoing definition shall apply for purposes of vesting of
such Award, provided that such Award shall not be settled until the
earliest of: (x) the Participant’s “disability”
within the meaning of Section 409A of the Code, (y) the
Participant’s “separation from service” within
the meaning of Section 409A of the Code and (z) the date such Award
would otherwise be settled pursuant to the terms of the Award
Agreement.
(q)
“Disaffiliation”
means a Subsidiary’s or Affiliate’s ceasing to be a
Subsidiary or Affiliate for any reason (including, without
limitation, as a result of a public offering, or a spin-off or sale
by the Company, of the stock of the Subsidiary or Affiliate) or a
sale of a division of the Company and its Affiliates.
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(r)
“Employee”
means
a regular, active employee of the Company or any Affiliate,
including an Officer or Director who is also a regular, active
employee of the Company or any Affiliate. The Administrator shall
determine whether the Chairman of the Board qualifies as an
“Employee.” For any and all purposes under the Plan,
the term “Employee” shall not include a person hired as
a leased employee, Consultant or a person otherwise designated by
the Administrator, the Company or an Affiliate at the time of hire
as not eligible to participate in or receive benefits under the
Plan or not on the payroll, even if such ineligible person is
subsequently determined to be a common law employee of the Company
or an Affiliate or otherwise an employee by any governmental or
judicial authority. Unless otherwise determined by the
Administrator in its sole discretion, for purposes of the Plan, an
Employee shall be considered to have terminated employment and to
have ceased to be an Employee if his or her employer ceases to be
an Affiliate, even if he or she continues to be employed by such
employer.
(s)
“Exchange Act”
means the United States Securities Exchange Act of 1934, as amended
and any successor thereto.
(t)
“Fair Market
Value”
means the closing price for the Common Shares
reported on a consolidated basis on the primary national securities
exchange on which such Common Shares are traded on the date of
measurement, or if the Common Shares were not traded on such
measurement date, then on the next preceding date on which Common
Shares were traded, all as reported by such source as the Committee
may select. If the Common Shares are not listed on a national
securities exchange, Fair Market Value shall be determined by the
Committee in its good faith discretion, taking into account, to the
extent appropriate, the requirements of Section 409A of the
Code.
(u)
“Grant Date”
means, with respect to each Award, the date upon which the Award is
granted to an Awardee pursuant to this Plan, which may be a
designated future date as of which such Award will be effective, as
determined by the Committee.
(v)
“Incentive Stock
Option”
means an Option that is identified in the
Option Agreement as intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder, and that actually does so
qualify.
(w)
“Nonqualified Stock
Option”
means an Option that is not an Incentive Stock
Option.
(x)
“Officer”
means
a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(y)
“Option”
means a
right granted under Section 8 of the Plan to purchase a number of
Shares at such exercise price, at such times, and on such other
terms and conditions as are specified in the agreement or other
documents evidencing the Award (the “Option
Agreement”). Both Incentive Stock Options and Nonqualified
Stock Options may be granted under the Plan.
(z)
“Other Stock-Based
Award”
means an Award granted pursuant to Section 12
of the Plan on such terms and conditions as are specified in the
agreement or other documents evidencing the Award (the “Other
Stock-Based Award Agreement”).
(aa)
“Participant”
means the Awardee or any person (including any estate) to whom an
Award has been assigned or transferred as permitted
hereunder.
(bb)
“Performance
Criteria”
shall have the meaning set forth in Section
13(b) of the Plan.
(cc)
“Plan”
means this 2018 Stock and Incentive Compensation Plan, as set forth
herein and as hereafter amended from time to time.
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(dd)
“Retirement”
means, unless the Administrator determines otherwise, voluntary
Termination of Employment by a Participant from the Company and its
Affiliates after attaining age 60 and having completed at least 10
years of service for the Company and its Affiliates, excluding
service with an Affiliate of the Company prior to the time that
such Affiliate became an Affiliate of the Company.
(ee)
“Securities
Act”
means the United States Securities Act of 1933,
as amended.
(ff)
“Share”
means a Common Share, as adjusted in accordance with Section 15 of
the Plan.
(gg)
“Stock
Appreciation Right”
means a right granted under
Section 10 of the Plan on such terms and conditions as are
specified in the agreement or other documents evidencing the Award
(the “Stock Appreciation Right
Agreement”).
(hh)
“Stock
Award”
means an award or issuance of Shares made under
Section 11 of the Plan, the grant, issuance, retention, vesting
and/or transferability of which is subject during specified periods
of time to such conditions (including, without limitation,
continued employment or performance conditions) and terms as are
expressed in the agreement or other documents evidencing the Award
(the “Stock Award Agreement”).
(ii)
“Stock
Unit”
means a bookkeeping entry representing an amount
equivalent to the Fair Market Value of one Share, payable in cash,
property or Shares. Stock Units represent an unfunded and unsecured
obligation of the Company, except as otherwise provided for by the
Administrator.
(jj)
“Stock
Unit Award”
means an award or issuance of Stock Units
made under Section 12 of the Plan, the grant, issuance, retention,
vesting and/or transferability of which is subject during specified
periods of time to such conditions (including, without limitation,
continued employment or performance conditions) and terms as are
expressed in the agreement or other documents evidencing the Award
(the “Stock Unit Award Agreement”).
(kk)
“Subsidiary”
means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company, provided each company
in the unbroken chain (other than the Company) owns, at the time of
determination, stock possessing 50% or more of the total combined
voting power of all classes of stock, in one of the other
corporations in such chain.
(ll)
“Termination
for Cause”
means, unless otherwise provided in an
Award Agreement, Termination of Employment on account of any act of
fraud or intentional misrepresentation or embezzlement,
misappropriation or conversion of assets of the Company or any
Affiliate, or the intentional and repeated violation of the written
policies or procedures of the Company, provided that, for an
Employee who is party to an individual severance or employment
agreement defining Cause, “Cause” shall have the
meaning set forth in such agreement except as may be otherwise
provided in such agreement. For purposes of this Plan, a
Participant’s Termination of Employment shall be deemed to be
a Termination for Cause if, after the Participant’s
employment has terminated, facts and circumstances are discovered
that would have justified, in the opinion of the Committee, a
Termination for Cause.
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(mm)
“Termination
of Employment”
means, for purposes of this Plan,
unless otherwise determined by the Administrator, ceasing to be an
Employee (as determined in accordance with Section 3401(c) of the
Code and the regulations promulgated thereunder) of the Company and
any of its Subsidiaries or Affiliates. Unless otherwise determined
by the Committee in the terms of an Award Agreement or otherwise,
if a Participant’s employment with the Company and its
Affiliates terminates but such Participant continues to provide
services to the Company and its Affiliates in a Non-employee
Director capacity, such change in status shall not be deemed a
Termination of Employment. A Participant employed by, or performing
services for, a Subsidiary or an Affiliate or a division of the
Company and its Affiliates shall be deemed to incur a Termination
of Employment if, as a result of a Disaffiliation, such Subsidiary,
Affiliate, or division ceases to be a Subsidiary, Affiliate or
division, as the case may be, and the Participant does not
immediately thereafter become an Employee of (or service provider
for), or member of the board of directors of, the Company or
another Subsidiary or Affiliate. Temporary absences from employment
because of illness, vacation or leave of absence and transfers
among the Company and its Subsidiaries and Affiliates shall not be
considered Terminations of Employment. In addition, Termination of
Employment shall mean a “separation from service” as
defined in regulations issued under Code Section 409A whenever
necessary to ensure compliance therewith for any payment or
settlement of a benefit conferred under this Plan that is subject
to such Code section, and, for such purposes, shall be determined
based upon a reduction in the bona fide level of services performed
to a level equal to twenty percent (20%) or less of the average
level of services performed by the Employee during the immediately
preceding 36-month period.
3.
Stock
Subject to the Plan.
(a)
Aggregate Limit.
Subject to
the provisions of Section 15(a) of the Plan, the maximum aggregate
number of Shares which may be subject to or delivered under Awards
granted under the Plan is 1,650,870 Shares, less one Share for
every one Share granted under any prior plan after June 30, 2018.
After the Effective Date of the Plan (as provided in Section 6), no
awards may be granted under any prior plan. Shares subject to or
delivered under Conversion Awards shall not reduce the aggregate
number of Shares which may be subject to or delivered under Awards
granted under this Plan. The Shares issued under the Plan may be
either Shares reacquired by the Company, including Shares purchased
in the open market, or authorized but unissued Shares. Prior plans
include the Amended and Restated LightPath Technologies, Inc.
Omnibus Incentive Plan.
(b)
Code Section 422
Limits; Limit on Awards to
Directors.
Subject to the provisions of Section 15(a) of the
Plan, the aggregate number of Shares that may be subject to all
Incentive Stock Options granted under the Plan shall not exceed the
total aggregate number of Shares that may be subject to or
delivered under Awards under the Plan, as the same may be amended
from time to time. Notwithstanding any other provision of the Plan
to the contrary, the aggregate grant date fair value (computed as
of the date of grant in accordance with applicable financial
accounting rules) of all Awards granted to any Non-employee
Director during any single calendar year shall not exceed one
hundred thousand (100,000) Shares.
(c)
Share
Counting Rules
.
(i)
For
purposes of this Section 3 of the Plan, Shares subject to Awards
that have been canceled, expired, settled in cash, or not issued or
forfeited for any reason (in whole or in part) shall not reduce the
aggregate number of Shares which may be subject to or delivered
under Awards granted under this Plan and shall be available for
future Awards granted under this Plan. In addition, if any Shares
subject to an award under any prior plan are canceled, expired,
settled in cash, or not issued or forfeited for any reason (in
whole or in part) after June 30, 2018, then such Shares subject to
an award under any prior plan shall, to the extent of such
cancellation, expiration, settlement in cash, non-issuance or
forfeiture, again be available for grant under this Plan on a
one-for-one basis.
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(ii)
Shares
subject to Awards that have been retained by the Company in payment
or satisfaction of the purchase price of an Award or the tax
withholding obligation of an Awardee, and Shares that have been
delivered (either actually or constructively by attestation) to the
Company in payment or satisfaction of the purchase price of an
Award or the tax withholding obligation of an Awardee, shall not be
available for grant under the Plan. Similarly, if any Shares
subject to an award under any prior plan are, after December 31,
2017, either retained by the Company in payment or satisfaction of
the purchase price of an award or the tax withholding obligation of
an awardee, or if Shares are delivered (either actually or
constructively by attestation) to the Company in payment or
satisfaction of the purchase price of an award or the tax
withholding obligation of an awardee under a prior plan, then such
Shares subject to an award under any prior plan shall not, to the
extent of such tendering or withholding, again be available for
grant under this Plan.
(iii)
Conversion
Awards shall not reduce the Shares authorized for grant under the
Plan or the limitations on Awards to a Participant under subsection
(b), above, nor shall Shares subject to a Conversion Award again be
available for an Award under the Plan as provided in this
subsection (c).
4.
Administration
of the Plan.
(a)
Procedure
.
(i)
Multiple Administrative
Bodies.
The Plan shall be administered by the Board, a
Committee designated by the Board to so administer this Plan and/or
their respective delegates.
(ii)
Rule
16b-3
. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3 promulgated under the Exchange
Act (“Rule 16b-3”), Awards to Officers and Directors
shall be made by the entire Board or a Committee of two or more
“non-employee directors” within the meaning of Rule
16b-3.
(iii)
Other
Administration.
To the extent required by the rules of the
principal U.S. national securities exchange on which the Shares are
traded, the members of the Committee shall also qualify as
“independent directors” as set forth in such rules.
Except to the extent prohibited by Applicable Law, the Board or a
Committee may delegate to a Committee of one or more Directors or
to authorized officers of the Company the power to approve Awards
to persons eligible to receive Awards under the Plan who are not
subject to Section 16 of the Exchange Act.
(iv)
Awards
to Directors
. The Board shall have the power and authority
to grant Awards to Non-employee Directors, including the authority
to determine the number and type of awards to be granted; determine
the terms and conditions, not inconsistent with the terms of this
Plan, of any award; and to take any other actions the Board
considers appropriate in connection with the administration of the
Plan.
(v)
Delegation of Authority for the
Day-to-Day Administration of the Plan.
Except to the extent
prohibited by Applicable Law, the Administrator may delegate to one
or more individuals the day-to-day administration of the Plan and
any of the functions assigned to it in this Plan. Such delegation
may be revoked at any time.
(b)
Powers of the
Administrator.
Subject to the provisions of the Plan and, in
the case of a Committee or delegates acting as the Administrator,
subject to the specific duties delegated to such Committee or
delegates, the Administrator shall have the authority, in its
discretion:
(i)
to
select the Non-employee Directors, Consultants and Employees of the
Company or its Affiliates to whom Awards are to be granted
hereunder;
(ii)
to
determine the number of Common Shares to be covered by each Award
granted hereunder;
(iii)
to
determine the type of Award to be granted to the selected
Employees,
Consultants
and Non-employee Directors;
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(iv)
to
approve forms of Award Agreements;
(v)
to
determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise and/or
purchase price, the time or times when an Award may be exercised
(which may or may not be based on Performance Criteria), the
vesting schedule, any vesting and/or exercisability provisions,
terms regarding acceleration of Awards or waiver of forfeiture
restrictions, the acceptable forms of consideration for payment for
an Award, the term, and any restriction or limitation regarding any
Award or the Shares relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall
determine and may be established at the time an Award is granted or
thereafter;
(vi)
to
correct administrative errors;
(vii)
to
construe and interpret the terms of the Plan (including sub-plans
and Plan addenda) and Awards granted pursuant to the
Plan;
(viii)
to
adopt rules and procedures relating to the operation and
administration of the Plan to accommodate the specific requirements
of local laws and procedures. Without limiting the generality of
the foregoing, the Administrator is specifically authorized (A) to
adopt rules and procedures regarding the conversion of local
currency, the shift of tax liability from employer to employee
(where legally permitted) and withholding procedures and handling
of stock certificates which vary with local requirements, and (B)
to adopt sub-plans and Plan addenda as the Administrator deems
desirable, to accommodate foreign laws, regulations and
practice;
(ix)
to
prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans and
Plan addenda;
(x)
to
modify or amend each Award, including, but not limited to, the
acceleration of vesting and/or exercisability, provided, however,
that any such modification or amendment (A) is subject to the
minimum vesting provisions under the Plan, if any, and the plan
amendment provisions set forth in Section 16 of the Plan, and (B)
may not materially impair any outstanding Award unless agreed to in
writing by the Participant, except that such agreement shall not be
required if the Administrator determines in its sole discretion
that such modification or amendment either (Y) is required or
advisable in order for the Company, the Plan or the Award to
satisfy any Applicable Law or to meet the requirements of any
accounting standard, or (Z) is not reasonably likely to
significantly diminish the benefits provided under such Award, or
that adequate compensation has been provided for any such
diminishment, except following a Change of Control;
(xi)
to
allow or require Participants to satisfy withholding tax amounts by
electing to have the Company withhold from the Shares to be issued
upon exercise of a Nonqualified Stock Option or vesting of a Stock
Award or Stock Unit Award that number of Shares having a Fair
Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined in
such manner and on such date that the Administrator shall determine
or, in the absence of provision otherwise, on the date that the
amount of tax to be withheld is to be determined. All elections by
a Participant to have Shares withheld for this purpose shall be
made in such form and under such conditions as the Administrator
may provide;
(xii)
to
authorize conversion or substitution under the Plan of any or all
stock options, stock appreciation rights or other stock awards held
by awardees of an entity acquired by the Company (the
“Conversion Awards”). Any conversion or substitution
shall be effective as of the close of the merger or acquisition.
The Conversion Awards may be Nonqualified Stock Options or
Incentive Stock Options, as determined by the Administrator, with
respect to options granted by the acquired entity;
(xiii)
to
authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously
granted by the Administrator;
A-8
(xiv)
to
impose such restrictions, conditions or limitations as it
determines appropriate as to the timing and manner of any resale by
a Participant or of other subsequent transfers by the Participant
of any Shares issued as a result of or under an Award or upon the
exercise of an Award, including, without limitation, (A)
restrictions under an insider trading policy, (B) restrictions as
to the use of a specified brokerage firm for such resale or other
transfers, and (C) institution of “blackout” periods on
exercises of Awards;
(xv)
to
provide, either at the time an Award is granted or by subsequent
action, that an Award shall contain as a term thereof, a right,
either in tandem with the other rights under the Award or as an
alternative thereto, of the Participant to receive, without payment
to the Company, a number of Shares, cash or a combination thereof,
the amount of which is determined by reference to the value of the
Award; and
(xvi)
to
make all other determinations deemed necessary or advisable for
administering the Plan and any Award granted
hereunder.
(c)
Effect of Administrator’s
Decision.
All questions arising under the Plan or under any
Award shall be decided by the Administrator in its total and
absolute discretion. All decisions, determinations and
interpretations by the Administrator regarding the Plan, any rules
and regulations under the Plan and the terms and conditions of any
Award granted hereunder, shall be final and binding on all
Participants. The Administrator shall consider such factors as it
deems relevant, in its sole and absolute discretion, to making such
decisions, determinations and interpretations, including, without
limitation, the recommendations or advice of any officer or other
employee of the Company and such attorneys, consultants and
accountants as it may select.
(d)
Indemnity.
To the extent allowable under Applicable Law, each member of the
Committee or of the Board and any person to whom the Committee has
delegated any of its authority under the Plan shall be indemnified
and held harmless by the Company from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such
person in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action or failure to act
pursuant to the Plan, and against and from any and all amounts paid
by him or her in satisfaction of judgment in such action, suit, or
proceeding against him or her; provided he or she gives the Company
an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her
own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such
persons may be entitled pursuant to the Company’s Articles of
Incorporation or By-laws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them
harmless.
5.
Eligibility.
Awards
may be granted only to Directors, Employees and Consultants of the
Company or any of its Affiliates; provided, however, that Incentive
Stock Options may be granted only to Employees of the Company and
its Subsidiaries (within the meaning of Section 424(f) of the
Code).
6.
Term
of Plan.
The
Plan shall become effective upon its approval by shareholders of
the Company. It shall continue in effect from the date the Plan is
approved by the shareholders of the Company (the “Effective
Date”) until terminated under Section 16 of the
Plan.
7.
Term
of Award.
Subject
to the provisions of the Plan, the term of each Award shall be
determined by the Administrator and stated in the Award Agreement,
and may extend beyond the termination of the Plan. In the case of
an Option or a Stock Appreciation Right, the term shall be ten (10)
years from the Grant Date or such shorter term as may be provided
in the Award Agreement. Notwithstanding the foregoing, the term of
Awards other than Awards that are structured to qualify as
Incentive Stock Options under Section 9 shall be extended
automatically if the Award would expire at a time when trading in
Common Shares is prohibited by law or the Company’s insider
trading policy to the 30th day after the expiration of the
prohibition.
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8.
Options.
The
Administrator may grant an Option or provide for the grant of an
Option, either from time to time in the discretion of the
Administrator or automatically upon the occurrence of specified
events, including, without limitation, the achievement of
performance goals.
(a)
Option Agreement.
Each
Option Agreement shall contain provisions regarding (i) the number
of Shares that may be issued upon exercise of the Option, (ii) the
type of Option, (iii) the exercise price of the Option and the
means of payment of such exercise price, (iv) the term of the
Option, (v) such terms and conditions regarding the vesting and/or
exercisability of an Option as may be determined from time to time
by the Administrator, (vi) restrictions on the transfer of the
Option and forfeiture provisions, and (vii) such further terms and
conditions, in each case not inconsistent with this Plan, as may be
determined from time to time by the Administrator.
(b)
Exercise Price
. The per
share exercise price for the Shares to be issued upon exercise of
an Option shall be determined by the Administrator, except that the
per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the Grant Date, except with respect to
Conversion Awards.
(c)
No Option Repricings.
Subject to Section 15(a) of the Plan, the exercise price of an
Option may not be reduced without shareholder approval, nor may
outstanding Options be cancelled in exchange for cash, other Awards
or Options with an exercise price that is less than the exercise
price of the original Option without shareholder
approval.
(d)
No Reload Grants.
Options
shall not be granted under the Plan in consideration for and shall
not be conditioned upon the delivery of Shares to the Company in
payment of the exercise price and/or tax withholding obligation
under any other employee stock option.
(e)
Vesting Period and Exercise
Dates.
Options granted under this Plan shall vest and/or be
exercisable at such time and in such installments during the period
prior to the expiration of the Option’s term as determined by
the Administrator and as specified in the Option Agreement. The
Administrator shall have the right to make the timing of the
ability to exercise any Option granted under this Plan subject to
continued active employment, the passage of time and/or such
performance requirements as deemed appropriate by the
Administrator. Unless otherwise provided in the Award Agreement, no
Option shall vest and be exercisable sooner than one year after its
Grant Date. At any time after the grant of an Option, the
Administrator may reduce or eliminate any restrictions surrounding
any Participant’s right to exercise all or part of the
Option.
(f)
Form of Consideration.
The
Administrator shall determine the acceptable form of consideration
for exercising an Option, including the method of payment, either
through the terms of the Option Agreement or at the time of
exercise of an Option. Acceptable forms of consideration may
include:
(i)
cash;
(ii)
check
or wire transfer (denominated in U.S. Dollars);
(iii)
subject
to any conditions or limitations established by the Administrator,
other Shares which were held for a period of more than six (6)
months on the date of surrender and which have a Fair Market Value
on the date of surrender equal to or greater than the aggregate
exercise price of the Shares as to which said Option shall be
exercised (it being agreed that the excess of the Fair Market Value
over the aggregate exercise price, if any, shall be refunded to the
Awardee in cash);
(iv)
subject
to any conditions or limitations established by the Administrator,
the Company withholding Shares otherwise issuable upon exercise of
an Option;
(v)
consideration
received by the Company under a broker-assisted sale and remittance
program acceptable to the Administrator and in compliance with
Applicable Law;
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(vi)
such
other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Law; or
(vii)
any
combination of the foregoing methods of payment.
(g)
Procedure for Exercise; Rights as
a Shareholder
.
(i)
Any
Option granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such conditions as
determined by the Administrator and set forth in the applicable
Option Agreement.
(ii)
An
Option shall be deemed exercised when (A) the Company receives (1)
written or electronic notice of exercise (in accordance with the
Option Agreement or procedures established by the Administrator)
from the person entitled to exercise the Option and (2) full
payment for the Shares with respect to which the related Option is
exercised, and (B) with respect to Nonqualified Stock Options,
provisions acceptable to the Administrator have been made for
payment of all applicable withholding taxes.
(iii)
Unless
provided otherwise by the Administrator or pursuant to this Plan,
until the Shares are issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent
of the Company), no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Shares
subject to an Option, notwithstanding the exercise of the
Option.
(iv)
The
Company shall issue (or cause to be issued) such Shares as soon as
administratively practicable after the Option is exercised. An
Option may not be exercised for a fraction of a Share.
9.
Incentive
Stock Option Limitations/Terms.
(a)
Eligibility.
Only Employees
(who qualify as employees under Section 3401(c) of the Code and the
regulations promulgated thereunder) of the Company or any of its
Subsidiaries may be granted Incentive Stock Options. No Incentive
Stock Option shall be granted to any such Employee who as of the
Grant Date owns stock possessing more than 10% of the total
combined voting power of the Company.
(b)
$100,000 Limitation.
Notwithstanding the designation “Incentive Stock
Option” in an Option Agreement, if and to the extent that the
aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by the
Awardee during any calendar year (under all plans of the Company
and any of its Subsidiaries) exceeds U.S. $100,000, such Options
shall be treated as Nonqualified Stock Options. For purposes of
this Section 9(b) of the Plan, Incentive Stock Options shall be
taken into account in the order in which they were granted. The
Fair Market Value of the Shares shall be determined as of the Grant
Date.
(c)
Transferability.
The Option
Agreement must provide that an Incentive Stock Option is not
transferable by the Awardee otherwise than by will or the laws of
descent and distribution, and, during the lifetime of such Awardee,
must not be exercisable by any other person. If the terms of an
Incentive Stock Option are amended to permit transferability, the
Option will be treated for tax purposes as a Nonqualified Stock
Option.
(d)
Exercise Price.
The per
Share exercise price of an Incentive Stock Option shall in no event
be inconsistent with the requirements for qualification of the
Incentive Stock Option under Section 422 of the Code.
(e)
Other Terms.
Option
Agreements evidencing Incentive Stock Options shall contain such
other terms and conditions as may be necessary to qualify, to the
extent determined desirable by the Administrator, with the
applicable provisions of Section 422 of the Code. If any such terms
and conditions, as of the Grant Date or any later date, do not so
comply, the Option will be treated thereafter for tax purposes as a
Nonqualified Stock Option.
A-11
10.
Stock
Appreciation Rights.
A
“Stock Appreciation Right” or “SAR” is a
right that entitles the Awardee to receive, in cash or Shares (as
determined by the Administrator), value equal to or otherwise based
on the excess of (i) the Fair Market Value of a specified number of
Shares at the time of exercise over (ii) the aggregate exercise
price of the right, as established by the Administrator on the
Grant Date. All Stock Appreciation Rights under the Plan shall be
granted subject to the same terms and conditions applicable to
Options as set forth in Section 8 of the Plan. Stock Appreciation
Rights may be granted to Awardees either alone
(“freestanding”) or in addition to or in tandem with
other Awards granted under the Plan and may, but need not, relate
to a specific Option granted under Section 8 of the Plan. However,
any Stock Appreciation Right granted in tandem with an Option may
be granted at the same time such Option is granted or at any time
thereafter before exercise or expiration of such Option, and shall
be based on the Fair Market Value of one Share on the Grant Date
or, if applicable, on the Grant Date of the Option with respect to
a Stock Appreciation Right granted in exchange for or in tandem
with, but subsequent to, the Option (subject to the requirements of
Section 409A of the Code). Subject to the provisions of Section 8
of the Plan, the Administrator may impose such other conditions or
restrictions on any Stock Appreciation Right as it shall deem
appropriate.
11.
Stock
Awards.
(a)
Stock Award Agreement.
Each
Stock Award Agreement shall contain provisions regarding (i) the
number of Shares subject to such Stock Award or a formula for
determining such number, (ii) the purchase price of the Shares, if
any, and the means of payment for the Shares, (iii) the Performance
Criteria, if any, and level of achievement versus these criteria
that shall determine the number of Shares granted, issued,
retainable and/or vested, (iv) such terms and conditions on the
grant, issuance, vesting and/or forfeiture of the Shares as may be
determined from time to time by the Administrator, (v) restrictions
on the transferability of the Stock Award, and (vi) such further
terms and conditions, in each case not inconsistent with this Plan,
as may be determined from time to time by the Administrator. Unless
otherwise provided in the Award Agreement, no Stock Award shall
vest sooner than one year after its Grant Date. The Committee may,
in its sole discretion, waive the vesting restrictions and any
other conditions set forth in any Award Agreement under such terms
and conditions as the Committee shall deem
appropriate.
(b)
Restrictions and Performance
Criteria.
The grant, issuance, retention and/or vesting of
Stock Awards issued to Employees may be subject to such Performance
Criteria and level of achievement versus these criteria as the
Administrator shall determine, which criteria may be based on
financial performance, personal performance evaluations and/or
completion of service by the Awardee. Awards with vesting
conditions that are based upon Performance Criteria and level of
achievement versus such criteria are referred to as
“Performance Stock Awards” and Awards with vesting
conditions that are based upon continued employment or the passage
of time are referred to as “Restricted Stock
Awards.”
(c)
Rights as a Shareholder.
Unless otherwise provided for by the Administrator, the Participant
shall have the rights equivalent to those of a shareholder and
shall be a shareholder only after Shares are issued (as evidenced
by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) to the Participant. Any
certificate issued in respect of a Restricted Stock Award shall be
registered in the name of the applicable Participant and shall bear
an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award. The Committee may require
that the certificates evidencing such Shares be held in custody by
the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the
applicable Participant shall have delivered a stock power, endorsed
in blank, relating to the Common Shares covered by such Award. The
Participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber a Stock Award.
A-12
12.
Stock
Unit Awards and Other Stock-Based Awards.
(a)
Stock
Unit Awards
. Each Stock Unit Award Agreement shall contain
provisions regarding (i) the number of Shares subject to such Stock
Unit Award or a formula for determining such number, (ii) the
Performance Criteria, if any, and level of achievement versus these
criteria that shall determine the number of Shares granted, issued,
and/or vested, (iii) such terms and conditions on the grant,
issuance, vesting and/or forfeiture of the Shares as may be
determined from time to time by the Administrator, (iv)
restrictions on the transferability of the Stock Unit Award, and
(v) such further terms and conditions, in each case not
inconsistent with this Plan, as may be determined from time to time
by the Administrator. Unless otherwise provided in the Award
Agreement, no Stock Unit Award shall vest sooner than one year
after its Grant Date. The Committee may, in its sole discretion,
waive the vesting restrictions and any other conditions set forth
in any Award Agreement under such terms and conditions as the
Committee shall deem appropriate.
(b)
Restrictions and Performance
Criteria.
The grant, issuance, retention and/or vesting of
Stock Unit Awards issued to Employees may be subject to such
Performance Criteria and level of achievement versus these criteria
as the Administrator shall determine, which criteria may be based
on financial performance, personal performance evaluations and/or
completion of service by the Awardee. Awards with vesting
conditions that are based upon Performance Criteria and level of
achievement versus such criteria are referred to as
“Performance Stock Unit Awards” and Awards with vesting
conditions that are based upon continued employment or the passage
of time are referred to as “Restricted Stock Unit
Awards.”
(c)
Rights as a Shareholder.
Unless otherwise provided for by the Administrator, the Participant
shall have the rights equivalent to those of a shareholder and
shall be a shareholder only after Shares are issued (as evidenced
by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) to the
Participant.
(d)
Other
Stock-Based Award.
An “Other Stock-Based Award”
means any other type of equity-based or equity-related Award not
otherwise described by the terms of this Plan (including the grant
or offer for sale of unrestricted Shares), as well as any cash
based bonus based on the attainment of Performance Criteria as
described in Section 13(b), in such amount and subject to such
terms and conditions as the Administrator shall determine. Such
Awards may involve the transfer of actual Shares to Participants,
or payment in cash or otherwise of amounts based on the value of
Shares or pursuant to attainment of a performance goal. Each Other
Stock-Based Award will be evidenced by an Award Agreement
containing such terms and conditions as may be determined by the
Administrator.
(e)
Value of Other Stock-Based
Awards
. Each Other Stock-Based Award shall be expressed in
terms of Shares or units based on Shares or a target amount of
cash, as determined by the Administrator. The Administrator may
establish Performance Criteria in its discretion. If the
Administrator exercises its discretion to establish Performance
Criteria, the number and/or value of Other Stock-Based Awards that
will be paid out to the Participant will depend on the extent to
which the performance goals are met.
(f)
Payment of Other Stock-Based
Awards
. Payment, if any, with respect to Other Stock-Based
Awards shall be made in accordance with the terms of the Award, in
cash or Shares as the Administrator determines.
13.
Other
Provisions Applicable to Awards.
(a)
Non-Transferability of
Awards.
Unless determined otherwise by the Administrator, an
Award may not be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by beneficiary designation,
will or by the laws of descent or distribution, including but not
limited to any attempted assignment or transfer in connection with
the settlement of marital property or other rights incident to a
divorce or dissolution, and any such attempted sale, assignment or
transfer shall be of no effect prior to the date an Award is vested
and settled. The Administrator may only make an Award transferable
to an Awardee’s family member or any other person or entity
provided the Awardee does not receive consideration for such
transfer. If the Administrator makes an Award transferable, either
as of the Grant Date or thereafter, such Award shall contain such
additional terms and conditions as the Administrator deems
appropriate, and any transferee shall be deemed to be bound by such
terms upon acceptance of such transfer.
A-13
(b)
Performance Criteria.
For
purposes of this Plan, the term “Performance Criteria”
shall mean any one or more criteria based on financial performance,
personal performance evaluations and/or completion of service,
either individually, alternatively or in any combination, applied,
as applicable, to either the Company as a whole or to a Subsidiary,
business unit, Affiliate or business segment, either individually,
alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous years’
results or to a designated comparison group, in each case as
specified by the Committee in the Award or by duly adopted
resolution. The Administrator may establish specific performance
targets (including thresholds and whether to exclude certain
extraordinary, non-recurring, or similar items) and Award amounts,
subject to the right of the Administrator to exercise discretion to
adjust payment amounts, either up or down, following the conclusion
of the performance period on the basis of such further
considerations as the Administrator in its sole discretion shall
determine. Extraordinary, non-recurring items that may be the basis
of adjustment include, but are not limited to, acquisitions or
divestitures, restructurings, discontinued operations,
extraordinary items, and other unusual or non-recurring charges, an
event either not directly related to the operations of the Company,
Subsidiary, division, business segment or business unit or not
within the reasonable control of management, the cumulative effects
of tax or accounting changes in accordance with U.S. generally
accepted accounting principles, and foreign exchange gains or
losses.
(c)
Termination of Employment or Board
Membership.
The Administrator shall determine as of the
Grant Date (subject to modification subsequent to the Grant Date)
the effect a termination from membership on the Board by a
Non-employee Director for any reason or a Termination of Employment
due to Disability, Retirement, death, or otherwise (including
Termination for Cause) shall have on any Award. Unless otherwise
provided in the Award Agreement:
(i)
Upon
termination from membership on the Board by a Non-employee Director
for any reason other than Disability or death, any Option or SAR
held by such Director that (1) has not vested and is not
exercisable as of the effective date of such termination from
membership on the Board shall be subject to immediate cancellation
and forfeiture, or (2) is vested and exercisable as of the
effective date of such termination shall remain exercisable for one
year thereafter, or the remaining term of the Option or SAR, if
less. Any unvested Stock Award, Stock Unit Award or Other Stock
Based Award held by a Non-employee Director at the time of
termination from membership on the Board for a reason other than
Disability or death shall be immediately cancelled and
forfeited.
(ii)
Termination
from membership on the Board by a Non-employee Director due to
Disability or death shall result in full vesting of any outstanding
Options or SARs and vesting of a prorated portion of any Stock
Award, Stock Unit Award or Other Stock Based Award based upon the
full months of the applicable performance period, vesting period or
other period of restriction elapsed as of the end of the month in
which the termination from membership on the Board by a
Non-employee Director due to Disability or death occurs over the
total number of months in such period. Any Options or SARs that
vest upon Disability or death shall remain exercisable for one year
thereafter, or the remaining term of the Option or SAR, if less. In
the case of any Stock Award, Stock Unit Award or Other Stock Based
Award that vests on the basis of attainment of Performance
Criteria, the pro-rata vested amount shall be based upon the target
award.
(iii)
Upon
Termination of Employment due to Disability or death, any Option or
SAR held by an Employee shall, if not already fully vested, become
fully vested and exercisable as of the effective date of such
Termination of Employment and shall remain exercisable for one year
after such Termination of Employment due to Disability or death,
or, in either case, the remaining term of the Option or SAR, if
less. Termination of Employment due to Disability or death shall
result in vesting of a prorated portion of any Stock Award, Stock
Unit Award or Other Stock Based Award based upon the full months of
the applicable performance period, vesting period or other period
of restriction elapsed as of the end of the month in which the
Termination of Employment due to Disability or death occurs over
the total number of months in such period. In the case of any Stock
Award, Stock Unit Award or Other Stock Based Award that vests on
the basis of attainment of Performance Criteria, the pro-rata
vested amount shall be based upon the target award.
A-14
(iv)
Any
Option or SAR held by an Awardee at Retirement that occurs at least
one year after the Grant Date of the Option or SAR will remain
outstanding for the remaining term of the Option or SAR and
continue to vest; any Stock Award, Stock Unit Award or Other Stock
Based Award held by an Awardee at Retirement that occurs at least
one year after the Grant Date of the Award shall also continue to
vest and remain outstanding for the remainder of the term of the
Award.
(v)
Any
other Termination of Employment shall result in immediate
cancellation and forfeiture of all outstanding Awards that have not
vested as of the effective date of such Termination of Employment,
and any vested and exercisable Options and SARs held at the time of
such Termination of Employment shall remain exercisable for ninety
(90) days thereafter, or the remaining term of the Option or SAR,
if less. Notwithstanding the foregoing, all outstanding and
unexercised Options and SARs shall be immediately cancelled in the
event of a Termination for Cause.
14.
Dividends
and Dividend Equivalents.
Awards
other than Options and Stock Appreciation Rights may provide the
Awardee with the right to receive dividend payments or dividend
equivalent payments on the Shares subject to the Award, whether or
not such Award is vested. Notwithstanding the foregoing, dividends
or dividend equivalents shall not be paid with respect to Stock
Awards, Stock Unit Awards or Other Stock-Based Awards that vest
based on the achievement of performance goals prior to the date the
performance goals are satisfied and the Award is earned, and then
shall be payable only with respect to the number of Shares or Stock
Units actually earned under the Award. Such payments may be made in
cash, Shares or Stock Units or may be credited as cash or Stock
Units to an Awardee’s account and later settled in cash or
Shares or a combination thereof, as determined by the
Administrator. Such payments and credits may be subject to such
conditions and contingencies as the Administrator may
establish.
15.
Adjustments
upon Changes in Capitalization, Organic Change or Change of
Control.
(a)
Adjustment Clause.
In the
event of (i) a stock dividend, extraordinary cash dividend, stock
split, reverse stock split, share combination, or recapitalization
or similar event affecting the capital structure of the Company
(each, a “Share Change”), or (ii) a merger,
consolidation, acquisition of property or shares, separation,
spin-off, reorganization, stock rights offering, liquidation,
Disaffiliation, or similar event affecting the Company or any of
its Subsidiaries (each, an “Organic Change”), the
Administrator or the Board shall make such substitutions or
adjustments as it deems appropriate and equitable to (i) the Share
limitations set forth in Section 3 of the Plan, (ii) the number and
kind of Shares covered by each outstanding Award, and (iii) the
price per Share subject to each such outstanding Award. In the case
of Organic Changes, such adjustments may include, without
limitation, (x) the cancellation of outstanding Awards in exchange
for payments of cash, property or a combination thereof having an
aggregate value equal to the value of such Awards, as determined by
the Administrator or the Board in its sole discretion (it being
understood that in the case of an Organic Change with respect to
which shareholders receive consideration other than publicly traded
equity securities of the ultimate surviving entity, any such
determination by the Administrator that the value of an Option or
Stock Appreciation Right shall for this purpose be deemed to equal
the excess, if any, of the value of the consideration being paid
for each Share pursuant to such Organic Change over the exercise
price of such Option or Stock Appreciation Right shall conclusively
be deemed valid); (y) the substitution of other property
(including, without limitation, cash or other securities of the
Company and securities of entities other than the Company) for the
Shares subject to outstanding Awards; and (z) in connection with
any Disaffiliation, arranging for the assumption of Awards, or
replacement of Awards with new awards based on other property or
other securities (including, without limitation, other securities
of the Company and securities of entities other than the Company),
by the affected Subsidiary, Affiliate, or division or by the entity
that controls such Subsidiary, Affiliate, or division following
such Disaffiliation (as well as any corresponding adjustments to
Awards that remain based upon Company securities). The Committee
may adjust in its sole discretion the Performance Criteria
applicable to any Awards to reflect any Share Change and any
Organic Change and any unusual or non-recurring events and other
extraordinary items, impact of charges for restructurings,
discontinued operations, and the cumulative effects of accounting
or tax changes, each as defined by generally accepted accounting
principles or as identified in the Company’s financial
statements, notes to the financial statements, management’s
discussion and analysis or the Company’s other SEC filings.
Any adjustment under this Section 15(a) need not be the same for
all Participants.
A-15
(b)
Change of Control.
In the
event of a Change of Control, unless otherwise determined by the
Administrator as of the Grant Date of a particular Award (or
subsequent to the Grant Date), the following acceleration,
exercisability and valuation provisions shall apply:
(i)
On the
date that such Change of Control occurs, any or all Options and
Stock Appreciation Rights awarded under this Plan not previously
exercisable and vested shall, if not assumed, or substituted with a
new award, by the successor to the Company, become fully
exercisable and vested, and if the successor to the Company assumes
such Options or Stock Appreciation Rights or substitutes other
awards for such Awards, such Awards (or their substitutes) shall
become fully exercisable and vested if the Participant’s
employment is terminated (other than a Termination for Cause)
within two years following the Change of Control.
(ii)
Except
as may be provided in an individual severance or employment
agreement (or severance plan) to which an Awardee is a party, in
the event of an Awardee’s Termination of Employment within
two years after a Change of Control for any reason other than
because of the Awardee’s death, Retirement, Disability or
Termination for Cause, each Option and Stock Appreciation Right
held by the Awardee (or a transferee) that is vested following such
Termination of Employment shall remain exercisable until the
earlier of the third anniversary of such Termination of Employment
(or any later date until which it would remain exercisable under
such circumstances by its terms) or the expiration of its original
term. In the event of an Awardee’s Termination of Employment
more than two years after a Change of Control, or within two years
after a Change of Control because of the Awardee’s death,
Retirement, Disability or Termination for Cause, the provisions of
Section 13(c) of the Plan shall govern (as
applicable).
(iii)
On
the date that such Change of Control occurs, the restrictions and
conditions applicable to any or all Stock Awards, Stock Unit Awards
and Other Stock-Based Awards that are not assumed, or substituted
with a new award, by the successor to the Company shall lapse and
such Awards shall be fully vested. Unless otherwise provided in an
Award Agreement at the Grant Date, upon the occurrence of a Change
of Control without assumption or substitution of the Awards by the
successor, any performance based Award shall be deemed fully earned
at the target amount as of the date on which the Change of Control
occurs. All Stock Awards, Stock Unit Awards and Other Stock-Based
Awards shall be settled or paid within thirty (30) days of vesting
hereunder. Notwithstanding the foregoing, if the Change of Control
would not qualify as a permissible date of distribution under
Section 409A(a)(2)(A) of the Code, and the regulations thereunder,
the Awardee shall be entitled to receive the Award from the Company
on the date that would have applied absent this provision. If the
successor to the Company does assume (or substitute with a new
award) any Stock Awards, Stock Unit Awards and Other Stock-Based
Awards, all such Awards shall become fully vested if the
Participant’s employment is terminated (other than a
Termination for Cause) within two years following the Change of
Control, and any performance based Award shall be deemed fully
earned at the target amount effective as of such Termination of
Employment.
(iv)
The
Committee, in its discretion, may determine that, upon the
occurrence of a Change of Control of the Company, each Option and
Stock Appreciation Right outstanding shall terminate within a
specified number of days after notice to the Participant, and/or
that each Participant shall receive, with respect to each Share
subject to such Option or Stock Appreciation Right, an amount equal
to the excess of the Fair Market Value of such Share immediately
prior to the occurrence of such Change of Control over the exercise
price per Share of such Option and/or Stock Appreciation Right;
such amount to be payable in cash, in one or more kinds of stock or
property (including the stock or property, if any, payable in the
transaction) or in a combination thereof, as the Committee, in its
discretion, shall determine, and if there is no excess value, the
Committee may, in its discretion, cancel such Awards.
A-16
(v)
An
Option, Stock Appreciation Right, Stock Award, Stock Unit Award or
Other Stock-Based Award shall be considered assumed or substituted
for if following the Change of Control the Award confers the right
to purchase or receive, for each Share subject to the Option, Stock
Appreciation Right, Stock Award, Stock Unit Award or Other
Stock-Based Award immediately prior to the Change of Control, the
consideration (whether stock, cash or other securities or property)
received in the transaction constituting a Change of Control by
holders of Shares for each Share held on the effective date of such
transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such
consideration received in the transaction constituting a Change of
Control is not solely common stock of the successor company, the
Committee may, with the consent of the successor company, provide
that the consideration to be received upon the exercise or vesting
of an Option, Stock Appreciation Right, Stock Award, Stock Unit
Award or Other Stock-Based Award, for each Share subject thereto,
will be solely common stock of the successor company with a fair
market value substantially equal to the per Share consideration
received by holders of Shares in the transaction constituting a
Change of Control. The determination of whether fair market value
is substantially equal shall be made by the Committee in its sole
discretion and its determination shall be conclusive and
binding.
(c)
Section 409A
.
Notwithstanding the foregoing: (i) any adjustments made pursuant to
Section 15(a) of the Plan to Awards that are considered
“deferred compensation” within the meaning of Section
409A of the Code shall be made in compliance with the requirements
of Section 409A of the Code; (ii) any adjustments made pursuant to
Section 15(a) of the Plan to Awards that are not considered
“deferred compensation” subject to Section 409A of the
Code shall be made in such a manner as to ensure that, after such
adjustment, the Awards either continue not to be subject to Section
409A of the Code or comply with the requirements of Section 409A of
the Code; (iii) the Administrator shall not have the authority to
make any adjustments pursuant to Section 15(a) of the Plan to the
extent that the existence of such authority would cause an Award
that is not intended to be subject to Section 409A of the Code to
be subject thereto; and (iv) if any Award is subject to Section
409A of the Code, Section 15(b) of the Plan shall be applicable
only to the extent specifically provided in the Award Agreement and
permitted pursuant to Section 24 of the Plan in order to ensure
that such Award complies with Code Section 409A.
16.
Amendment
and Termination of the Plan.
(a)
Amendment and Termination.
The Administrator may amend, alter or discontinue the Plan or any
Award Agreement, but any such amendment shall be subject to
approval of the shareholders of the Company in the manner and to
the extent required by Applicable Law. In addition, without
limiting the foregoing, unless approved by the shareholders of the
Company and subject to Section 16(b), no such amendment shall be
made that would:
(i)
increase
the maximum aggregate number of Shares which may be subject to
Awards granted under the Plan;
(ii)
reduce
the minimum exercise price for Options or Stock Appreciation Rights
granted under the Plan; or
(iii)
reduce
the exercise price of outstanding Options or Stock Appreciation
Rights, as prohibited by Section 8(c) without shareholder
approval.
(b)
Effect of Amendment or
Termination.
No amendment, suspension or termination of the
Plan shall impair the rights of any Participant with respect to an
outstanding Award, unless mutually agreed otherwise between the
Participant and the Administrator, which agreement must be in
writing and signed by the Participant and the Company, except that
no such agreement shall be required if the Administrator determines
in its sole discretion that such amendment either (i) is required
or advisable in order for the Company, the Plan or the Award to
satisfy any Applicable Law or to meet the requirements of any
accounting standard, or (ii) is not reasonably likely to
significantly diminish the benefits provided under such Award, or
that any such diminishment has been adequately compensated, except
that this exception shall not apply following a Change of Control.
Termination of the Plan shall not affect the Administrator’s
ability to exercise the powers granted to it hereunder with respect
to Awards granted under the Plan prior to the date of such
termination.
A-17
(c)
Effect of the Plan on Other
Arrangements.
Neither the adoption of the Plan by the Board
or a Committee nor the submission of the Plan to the shareholders
of the Company for approval shall be construed as creating any
limitations on the power of the Board or any Committee to adopt
such other incentive arrangements as it or they may deem desirable,
including without limitation, the granting of restricted shares or
restricted share units or stock options otherwise than under the
Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
17.
Designation
of Beneficiary.
(a)
An
Awardee may file a written designation of a beneficiary who is to
receive the Awardee’s rights pursuant to Awardee’s
Awards or the Awardee may include his or her Awards in an omnibus
beneficiary designation for all benefits under the Plan. To the
extent that Awardee has completed a designation of beneficiary
while employed with the Company or an Affiliate, such beneficiary
designation shall remain in effect with respect to any Award
hereunder until changed by the Awardee to the extent enforceable
under Applicable Law.
(b)
Such
designation of beneficiary may be changed by the Awardee at any
time by written notice. In the event of the death of an Awardee and
in the absence of a beneficiary validly designated under the Plan
who is living at the time of such Awardee’s death, the
Company shall allow the legal representative of the Awardee’s
estate to exercise the Award.
18.
No
Right to Awards or to Employment.
No
person shall have any claim or right to be granted an Award and the
grant of any Award shall not be construed as giving an Awardee the
right to continue in the employ of the Company or its Affiliates.
Further, the Company and its Affiliates expressly reserve the
right, at any time, to dismiss any Employee or Awardee at any time
without liability or any claim under the Plan, except as provided
herein or in any Award Agreement entered into
hereunder.
19.
Legal
Compliance.
Shares
shall not be issued pursuant to an Option, Stock Appreciation
Right, Stock Award, Stock Unit Award or Other Stock-Based Award
unless such Option, Stock Appreciation Right, Stock Award or Other
Stock-Based Award and the issuance and delivery of such Shares
shall comply with Applicable Law and shall be further subject to
the approval of counsel for the Company with respect to such
compliance. Unless the Awards and Shares covered by this Plan have
been registered under the Securities Act or the Company has
determined that such registration is unnecessary, each person
receiving an Award and/or Shares pursuant to any Award may be
required by the Company to give a representation in writing that
such person is acquiring such Shares for his or her own account for
investment and not with a view to, or for sale in connection with,
the distribution of any part thereof.
20.
Inability
to Obtain Authority.
To the
extent the Company is unable to or the Administrator deems it
unfeasible to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s
counsel to be advisable or necessary to the lawful issuance and
sale of any Shares hereunder, the Company shall be relieved of any
liability with respect to the failure to issue or sell such Shares
as to which such requisite authority shall not have been
obtained.
21.
Reservation
of Shares.
The
Company, during the term of this Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
A-18
22.
Notice.
Any
written notice to the Company required by any provisions of this
Plan shall be addressed to the Secretary of the Company and shall
be effective when received. Any notice to a Participant hereunder
shall be addressed to the last address of record with the Company
and shall be effective when sent via first class mail, courier
service, or electronic mail to such last address of
record.
23.
Governing
Law; Interpretation of Plan and Awards.
(a)
This
Plan and all determinations made and actions taken pursuant hereto
shall be governed by the substantive laws, but not the choice of
law rules, of the state of Delaware, except as to matters governed
by U.S. federal law.
(b)
In the
event that any provision of the Plan or any Award granted under the
Plan is declared to be illegal, invalid or otherwise unenforceable
by a court of competent jurisdiction, such provision shall be
reformed, if possible, to the extent necessary to render it legal,
valid and enforceable, or otherwise deleted, and the remainder of
the terms of the Plan and/or Award shall not be affected except to
the extent necessary to reform or delete such illegal, invalid or
unenforceable provision.
(c)
The
headings preceding the text of each section hereof are inserted
solely for convenience of reference, and shall not constitute a
part of the Plan, nor shall they affect its meaning, construction
or effect.
(d)
The
terms of the Plan and any Award shall inure to the benefit of and
be binding upon the parties hereto and their respective permitted
heirs, beneficiaries, successors and assigns.
24.
Section
409A.
It is
the intention of the Company that no Award shall be “deferred
compensation” subject to Section 409A of the Code, unless and
to the extent that the Administrator specifically determines
otherwise, and the Plan and the terms and conditions of all Awards
shall be interpreted accordingly. The terms and conditions
governing any Awards that the Administrator determines will be
subject to Section 409A of the Code, including any rules for
elective or mandatory deferral of the delivery of cash or Shares
pursuant thereto and any rules regarding treatment of such Awards
in the event of a Change of Control, shall be set forth in the
applicable Award Agreement, deferral election forms and procedures,
and rules established by the Administrator, and shall comply in all
respects with Section 409A of the Code. The following rules will
apply to Awards intended to be subject to Section 409A of the Code
(“409A Awards”):
(a)
If a
Participant is permitted to elect to defer an Award or any payment
under an Award, such election will be permitted only at times in
compliance with Code Section 409A.
(b)
The
Company shall have no authority to accelerate distributions
relating to 409A Awards in excess of the authority permitted under
Section 409A.
(c)
Any
distribution of a 409A Award following a Termination of Employment
that would be subject to Code Section 409A(a)(2)(A)(i) as a
distribution following a separation from service of a
“specified employee” as defined under Code Section
409A(a)(2)(B)(i), shall occur no earlier than the expiration of the
six-month period following such Termination of
Employment.
(d)
In the
case of any distribution of a 409A Award, if the timing of such
distribution is not otherwise specified in the Plan or an Award
Agreement or other governing document, the distribution shall be
made not later than the end of the calendar year during which the
settlement of the 409A Award is specified to occur.
(e)
In the
case of an Award providing for distribution or settlement upon
vesting or the lapse of a risk of forfeiture, if the time of such
distribution or settlement is not otherwise specified in the Plan
or an Award Agreement or other governing document, the distribution
or settlement shall be made not later than March 15 of the year
following the year in which the Award vested or the risk of
forfeiture lapsed.
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(f)
Notwithstanding
anything herein to the contrary, neither the Company nor the
Administrator makes any representation or guarantee that the Plan
or its administration shall comply with Code Section 409A, and in
no event shall the Company or the Administrator be liable for the
payment of, or any gross up payment in connection with, any taxes
or penalties owed by the Participant pursuant to Code Section
409A.
25.
Limitation
on Liability.
The
Company and any Affiliate which is in existence or hereafter comes
into existence shall not be liable to a Participant, an Employee,
an Awardee or any other persons as to:
(a)
The Non-Issuance of Shares.
The non-issuance or sale of Shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the
authority deemed by the Company’s counsel to be necessary to
the lawful issuance and sale of any shares hereunder;
and
(b)
Tax or Exchange Control
Consequences.
Any tax consequence expected, but not
realized, or any exchange control obligation owed, by any
Participant, Employee, Awardee or other person due to the receipt,
exercise or settlement of any Option or other Award granted
hereunder.
26.
Unfunded
Plan.
Insofar
as it provides for Awards, the Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Awardees
who are granted Stock Awards, Stock Unit Awards or Other
Stock-Based Awards under this Plan, any such accounts will be used
merely as a bookkeeping convenience. The Company shall not be
required to segregate any assets which may at any time be
represented by Awards, nor shall this Plan be construed as
providing for such segregation. Neither the Company nor the
Administrator shall be deemed to be a trustee of Shares or cash to
be awarded under the Plan. Any liability of the Company to any
Participant with respect to an Award shall be based solely upon any
contractual obligations which may be created by the Plan; no such
obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither
the Company nor the Administrator shall be required to give any
security or bond for the performance of any obligation which may be
created by this Plan.
27.
Foreign
Employees and Consultants.
Awards
may be granted hereunder to Employees and Consultants who are
foreign nationals, who are located outside the United States or who
are not compensated from a payroll maintained in the United States,
or who are otherwise subject to (or could cause the Company to be
subject to) legal or regulatory provisions of countries or
jurisdictions outside the United States, on such terms and
conditions different from those specified in the Plan as may, in
the judgment of the Administrator, be necessary or desirable to
foster and promote achievement of the purposes of the Plan, and, in
furtherance of such purposes, the Administrator may make such
modifications, amendments, procedures, or subplans as may be
necessary or advisable to comply with such legal or regulatory
provisions.
28.
Tax
Withholding.
Each
Participant shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be
withheld with respect to any Award under the Plan no later than the
date as of which any amount under such Award first becomes
includible in the gross income of the Participant for any tax
purposes with respect to which the Company has a tax withholding
obligation. Unless otherwise determined by the Company, withholding
obligations may be settled with Shares, including Shares that are
part of the Award that gives rise to the withholding requirement;
provided, however, that not more than the maximum statutory
withholding requirement may be settled with Shares that are part of
the Award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company and
its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any vested Shares or any other
payment due to the Participant at that time or at any future time.
The Administrator may establish such procedures as it deems
appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Shares.
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29.
Cancellation
of Award; Forfeiture of Gain.
Notwithstanding
anything to the contrary contained herein, an Award Agreement may
provide that the Award will be cancelled and the Participant will
forfeit the Shares or cash received or payable on the vesting or
exercise of the Award, and that the amount of any proceeds of the
sale or gain realized on the vesting or exercise of the Award must
be repaid to the Company, under such conditions as may be required
by Applicable Law or established by the Committee in its sole
discretion.
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