REKOR SYSTEMS, INC.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box
[
]
Preliminary Proxy
Statement
[
]
Confidential, for
Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X]
Definitive Proxy
Statement
[
]
Definitive
Additional Materials
[
]
Soliciting Material
Pursuant to Rule Sec.240.14a-12
Rekor
Systems, 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):
[X]
No fee
required
[
]
Fee computed on
table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
(1)
Title of each class
of securities to which transaction applies:
(2)
Aggregate number of
securities to which transaction applies:
(3)
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):
(4)
Proposed maximum
aggregate value of transaction:
(5)
Total fee
paid:
[
]
Fee paid previously
with preliminary materials:
[
]
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.
(1)
Amount previously
paid:
(2)
Form, Schedule or
Registration Statement No.:
(3)
Filing
Party:
(4)
Date
Filed:
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7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
August
31, 2020
Dear
Shareholder,
You are
cordially invited to attend the 2020 Annual Meeting of Shareholders
(the “Annual Meeting”) of Rekor Systems, Inc. to be
held at 10:00 a.m. (local time) on September 30, 2020, virtually
via a live video webcast at
https://www.issuerdirect.com/virtual-event/rekr
.
The Annual Meeting will be a completely virtual meeting of
stockholders which will be conducted exclusively by webcast on the
Internet. The Annual Meeting is being held entirely online due to
the public health impact of the coronavirus pandemic (COVID-19). No
physical meeting will be held. You will be able to attend the
meeting, vote and submit your questions at such website during the
meeting. The attached notice of Annual Meeting and proxy statement
describe the matters to be presented at the Annual Meeting and
provide information about us that you should consider when you vote
your shares.
The
principal business of the meeting will be (i) to elect as directors
the nominees named in this proxy statement to serve until the 2021
Annual Meeting of Shareholders and until their successors are duly
elected and qualified, (ii) to ratify the appointment of Friedman
LLP as our independent public accountant for the fiscal year ending
December 31, 2020, and (iii) to transact such other business as may
be properly brought before the Annual Meeting and any adjournments
thereof.
We hope
you will be able to attend the Annual Meeting. Whether you plan to
attend the Annual Meeting or not, it is important that your shares
are represented. Therefore, when you have finished reading the
proxy statement, you are urged to complete, sign, date and return
the enclosed proxy card promptly in accordance with the
instructions set forth on the card. This will ensure your proper
representation at the Annual Meeting, whether or not you can
attend.
Sincerely,
/s/ Robert A.
Berman
Robert
A. Berman
Chairman of the
Board
YOUR
VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY PROMPTLY.
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7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
be Held September 30, 2020
To the
Shareholders of Rekor Systems, Inc.:
NOTICE
IS HEREBY GIVEN that the 2020 Annual Meeting of Shareholders (the
“Annual Meeting”) of Rekor Systems, Inc., a Delaware
corporation (the “Company”), will be held at 10:00 a.m.
(local time) on September 30, 2020, or such later date or dates as
such Annual Meeting date may be adjourned, virtually, via a live
video webcast on the Internet at
https://www.issuerdirect.com/virtual-event/rekr
,
for the purpose of considering and taking action on the following
proposals:
1.
Elect as directors
the nominees named in the proxy statement;
2.
To ratify the
appointment of Friedman LLP as our independent public accountant
for the fiscal year ending December 31, 2020;
3.
To transact such
other business as may be properly brought before the Annual Meeting
and any adjournments thereof.
The
foregoing business items are more fully described in the following
pages, which are made part of this notice. The Board recommends
that you vote as follows:
●
“
FOR
” for the election of the Board
nominees as directors;
●
“
FOR
” ratification of the selection
of Friedman LLP as our independent public accountant for our fiscal
year ending December 31, 2020;
You may
vote if you were the record owner of the Company’s common
stock at the close of business on August 31, 2020. The Board of
Directors of the Company has fixed the close of business on August
31, 2020 as the record date (the “Record Date”) for the
determination of shareholders entitled to notice of and to vote at
the Annual Meeting and at any adjournments thereof.
As of
the Record Date there were 27,884,197 shares of common stock
outstanding and entitled to vote at the Annual Meeting and 240,861
shares of Series B Convertible Preferred Stock (“Series B
Preferred Stock”) outstanding, of which 503,689 shares of
underlying common stock are entitled to vote at the Annual Meeting.
Holders of the shares of common stock are entitled to one vote for
each share of common stock held. Each holder of Series B Preferred
Stock is entitled to a number of votes equal to the number of
shares of common stock issuable upon conversion of such
holder’s Series B Preferred Stock, but only for the election
of members of the Board of Directors. A list of shareholders of
record will be available at the meeting and, during the 10 days
prior to the meeting, at the office of the Secretary of the Company
at 7172 Columbia Gateway Drive, Suite 400, Columbia, MD
21046.
All
shareholders are cordially invited to attend the Annual Meeting.
Whether you plan to attend the Annual Meeting via live videocast or
not, you are requested to complete, sign, date and return the
enclosed proxy card as soon as possible in accordance with the
instructions on the proxy card. The proxy card will also contain a
Control Identification Number and Request Identification Number
which will serve as your password to enter the virtual Annual
Meeting. A pre-addressed, postage prepaid return envelope is
enclosed for your convenience.
By
Order of the Board of Directors of Rekor Systems,
Inc.,
Sincerely,
/s/ Robert A.
Berman
Robert
A. Berman
Chairman of the
Board
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YOUR
VOTE AT THE ANNUAL MEETING IS IMPORTANT
Your
vote is important. Please vote as promptly as possible even if you
plan to attend the Annual Meeting via live videocast.
For
information on how to vote your shares, please see the instruction
from your broker or other fiduciary, as applicable, as well as
“General Information About the Annual Meeting” in the
proxy statement accompanying this notice.
We
encourage you to vote by completing, signing, and dating the proxy
card, and returning it in the enclosed envelope, or by following
the electronic voting instructions below.
If you
have questions about voting your shares, please contact our
Corporate Secretary at Rekor Systems, Inc., at 7172 Columbia
Gateway Drive, Suite 400, Columbia, MD 21046, telephone number
(410) 762-0800.
If you
decide to change your vote, you may revoke your proxy in the manner
described in the attached proxy statement at any time before it is
voted.
We urge
you to review the accompanying materials carefully and to vote as
promptly as possible. Note that we have enclosed with this notice a
proxy statement/prospectus.
THE PROXY STATEMENT IS
AVAILABLE AT:
https://www.iproxydirect.com/REKR
VOTING IS AVAILABLE AT:
https://
www.iproxydirect.com/REKR
By
Order of the Board of Directors,
Sincerely,
/s/ Robert A.
Berman
Robert
A. Berman
Chairman of the
Board
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IMPORTANT NOTICE REGARDING
THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON September 30, 2020 AT 10:00 A.M.
EDT.
The
Notice of Annual Meeting Shareholders and our Proxy Statement are
available at:
https://www.iproxydirect.com/REKR
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REFERENCES
TO ADDITIONAL INFORMATION
This
proxy statement incorporates important business and financial
information about Rekor Systems, Inc. that is not included in or
delivered with this document. You may obtain this information
without charge through the Securities and Exchange Commission
(“SEC”) website (www.sec.gov) or upon your written or
oral request by contacting the Corporate Secretary of Rekor
Systems, Inc., 7172 Columbia Gateway Drive, Suite 400, Columbia, MD
21046, telephone number (410) 762-0800.
To
ensure timely delivery of these documents, any request should be
made no later than September 14, 2020 to receive them before the
annual meeting.
For
additional details about where you can find information about Rekor
Systems, Inc., please see the section entitled “Where You Can
Find More Information” in this proxy statement.
Table
of Contents
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GENERAL INFORMATION
ABOUT THE ANNUAL MEETING
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1
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SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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5
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ELECTION OF
DIRECTORS
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6
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EXECUTIVE
OFFICERS
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14
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EXECUTIVE
COMPENSATION
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15
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COMPENSATION OF
REKOR DIRECTORS
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18
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
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19
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RATIFICATION OF THE
APPOINTMENT OF FRIEDMAN LLP AS INDEPENDENT PUBLIC ACCOUNTANT FOR
THE FISCAL
YEAR ENDING
DECEMBER 31, 2019
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21
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OTHER
MATTERS
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22
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7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
FOR
REKOR SYSTEMS, INC.
2020
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 30,
2020
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING
This
proxy statement, along with the accompanying notice of the 2020
Annual Meeting of Shareholders, contains information about the 2020
Annual Meeting of Shareholders of Rekor Systems, Inc., including
any adjournments or postponements thereof (referred to herein as
the “Annual Meeting”). We are holding the Annual
Meeting at 10:00 a.m. EDT on September 30, 2020, virtually via a
live video webcast at
https://www.issuerdirect.com/virtual-event/rekr
.
The Annual Meeting will be a completely virtual meeting of
stockholders which will be conducted exclusively by webcast on the
Internet. The Annual Meeting is being held entirely online due to
the public health impact of the coronavirus pandemic (COVID-19). No
physical meeting will be held. You will be able to attend the
meeting, vote and submit your questions at such website during the
meeting, or such later date or dates as such Annual Meeting date
may be adjourned.
In this
proxy statement, we refer to Rekor Systems, Inc. as
“Rekor,” the “Company,” “we,”
“us” or “our.”
Why
Did You Send Me This Proxy Statement?
The
Board of Directors of the Company (referred to herein as the
“Board of Directors” or the “Board”) is
soliciting proxies, in the accompanying form, to be used at the
Annual Meeting on September 30, 2020 at 10:00 a.m. EDT and any
adjournments thereof. This proxy statement along with the
accompanying Notice of Annual Meeting of Shareholders summarizes
the purposes of the Annual Meeting and the information you need to
know to vote at the Annual Meeting.
Important
Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be Held on September 30, 2020: The proxy
statement and annual report to security holders are available at
https://www.iproxydirect.com/REKR
.
The
following documents are being mailed on or about August 28, 2020 to
all shareholders entitled to notice of and to vote at the Annual
Meeting:
1)
This proxy statement,
2) The
accompanying proxy,
3) Our
2019 Annual Report.
The
2019 Annual Report includes our financial statements for the fiscal
year ended December 31, 2019 but is not a part of this proxy
statement. You can also find a copy of our 2019 Annual Report on
Form 10-K on the Internet through the Securities and Exchange
Commission’s electronic data system called EDGAR at
www.sec.gov
or through
the “Investor Relations” section of our website at
www.rekor.ai
Who
Can Vote?
Shareholders who
owned common stock or Series B Preferred Stock at the close of
business on August 31, 2020 (the “Record Date”), are
entitled to vote at the Annual Meeting. On the Record Date, there
were 27,884,197 shares of common stock outstanding and entitled to
vote. There were also 240,861 shares of Series B Preferred Stock
outstanding entitled to vote the equivalent of 503,689 shares of
underlying common stock, but only for the election of members of
the Board of Directors.
You do
not need to attend the Annual Meeting to vote your shares. Shares
represented by valid proxies, received in time for the Annual
Meeting and not revoked prior to the Annual Meeting, will be voted
at the Annual Meeting. A shareholder may revoke a proxy before the
proxy is voted by electronically delivering to our Secretary a
signed statement of revocation or a duly executed proxy card
bearing a later date. Any shareholder who has executed a proxy card
but attends the Annual Meeting virtually may revoke the proxy and
vote at the Annual Meeting by contacting our transfer agent, Issuer
Direct, using the instructions provided during the virtual Annual
Meeting.
1
How
Many Votes Do I Have?
Each
share of common stock that you own entitles you to one vote. Each
holder of Series B Preferred Stock as of the Record Date is
entitled to the number of votes equal to the number of shares of
common stock issuable upon conversion of such holder’s Series
B Preferred Stock as of the Record Date; provided, however, that a
holder is only entitled to vote shares of common stock underlying
the Series B Preferred Stock in the case of a vote to be taken for
the election of members of the Board of Directors.
How
Do I Vote?
Whether
you plan to attend the Annual Meeting or not, we urge you to vote
by proxy. All shares represented by valid proxies that we receive
through this solicitation, and that are not revoked, will be voted
in accordance with your instructions on the proxy card or as
instructed via Internet or telephone. You may specify whether your
shares should be voted for or against each nominee for director,
and how your shares should be voted with respect to each of the
other proposals. Except as set forth below, if you properly submit
a proxy without giving specific voting instructions, your shares
will be voted in accordance with the Board’s recommendations
as noted below. Voting by proxy will not affect your right to
attend the Annual Meeting. If your shares are registered directly
in your name through our stock transfer agent, Issuer Direct
Corporation, or you have stock certificates, you may
vote:
●
By mail.
Complete and mail the enclosed
proxy card in the enclosed postage prepaid envelope. Your proxy
will be voted in accordance with your instructions. If you sign the
proxy card but do not specify how you want your shares voted, they
will be voted as recommended by the Board.
●
In person at the virtual meeting.
If you
attend the virtual meeting, you may electronically deliver your
completed proxy card to the Secretary during the meeting, or you
may vote by completing a ballot electronically by following the
instructions provided during the virtual Annual Meeting or by
contacting Issuer Direct using the instructions provided during the
virtual Annual Meeting
●
Via the Internet at
:
https://
www.iproxydirect.com/REKR
If your
shares are held in “street name” (held in the name of a
bank, broker or other nominee), you must provide the bank, broker
or other nominee with instructions on how to vote your shares and
can do so as follows:
●
By Internet or by telephone.
Follow the
instructions you receive from your broker to vote by Internet or
telephone.
●
By mail.
You will receive instructions
from your broker or other nominee explaining how to vote your
shares.
Due to
the coronavirus (COVID-19) global pandemic this year, we are
sensitive to the public health and travel concerns our shareholders
may have and the protocols that federal, state, and local
governments have imposed. Hosting a virtual annual meeting provides
easy access for our shareholders and facilitates participation
since shareholders can participate from any location around the
world.
You
will be able to participate in the Annual Meeting of Stockholders
online and submit your questions during the meeting by visiting
https://www.issuerdirect.com/virtual-event/rekr
.
To be admitted to the Annual Meeting, you must enter the 8 digit
voter control number included in your proxy materials or on your
proxy card and the password for the Annual Meeting. We encourage
you to allow ample time for online check-in, which will begin at
9:00a.m. Eastern Time on the day of the Annual Meeting. We
recommend that you carefully review the procedures to gain
admission virtually to the Annual Meeting in advance. You will also
be able to vote your shares electronically prior to or during the
Annual Meeting at:
https://
www.iproxydirect.com/REKR
-
if you wish to
change your vote during the virtual Annual Meeting, you can contact
Issuer Direct using the instructions provided during the virtual
Annual Meeting to do so.
How Do I Submit a Question?
If you
want to submit a question during the Annual Meeting, log into
https://www.issuerdirect.com/virtual-event/rekr. using the Control
Identification Number and Request Identification Number provided on
your proxy card as your password. We intend to answer properly
submitted questions that are pertinent to the Company and the
meeting matters, as time permits. However, we reserve the right to
edit inappropriate language and to exclude questions that are not
pertinent to meeting matters or that are otherwise inappropriate.
The questions and answers will be available as soon as practicable
after the Annual Meeting at
https://www.issuerdirect.com/virtual-event/rekr and will remain
available for one week after posting.
Who Do I Contact if I have Technical Difficulties?
If you
encounter any difficulties accessing the virtual meeting during the
check-in or meeting time, please call the technical support number
that will be posted on the Annual Meeting login page.
How
Does The Board Recommend That I Vote On The Proposals?
The
Board recommends that you vote as follows:
●
“
FOR
” for the election of the Board
nominees as directors;
●
“
FOR
” ratification of the selection
of Friedman LLP as our independent public accountant for our fiscal
year ending December 31, 2020;
If any
other matter is presented, the proxy card provides that your shares
will be voted by the proxy holder listed on the proxy card in
accordance with his or her best judgment. At the time this proxy
statement was printed, we knew of no matters that needed to be
acted on at the Annual Meeting, other than those discussed in this
proxy statement.
May
I Change or Revoke My Proxy?
If you
give us your proxy, you may change or revoke it at any time before
the Annual Meeting. You may change or revoke your proxy in any one
of the following ways:
●
signing a new proxy
card and submitting it as instructed above;
●
if your shares are
held in street name, re-voting by Internet or by telephone as
instructed above – only your latest Internet or telephone
vote will be counted;
●
if your shares are
registered in your name, notifying the Company’s Secretary in
writing before the Annual Meeting that you have revoked your proxy;
or
●
attending the
Annual Meeting virtually and voting during the meeting. Attending
the Annual Meeting virtually will not in and of itself revoke a
previously submitted proxy unless you specifically request
it.
2
What
If I Receive More Than One Proxy Card?
You may
receive more than one proxy card or voting instruction form if you
hold shares of our common stock in more than one account, which may
be in registered form or held in street name. Please vote in the
manner described under “How Do I Vote?” on the proxy
card for each account to ensure that all of your shares are
voted.
Will
My Shares Be Voted If I Do Not Return My Proxy Card?
If your
shares are registered in your name or if you have stock
certificates, they will not be voted if you do not return your
proxy card by mail or vote at the Annual Meeting as described above
under “How Do I Vote?” If your broker cannot vote your
shares on a particular matter because it has not received
instructions from you and does not have discretionary voting
authority on that matter, or because your broker chooses not to
vote on a matter for which it does have discretionary voting
authority, this is referred to as a “broker non-vote.”
The New York Stock Exchange (“NYSE”) has rules that
govern brokers who have record ownership of listed company stock
(including stock such as ours that is listed on The Nasdaq Capital
Market) held in brokerage accounts for their clients who
beneficially own the shares. Under these rules, brokers who do not
receive voting instructions from their clients have the discretion
to vote uninstructed shares on certain matters (“routine
matters”), but do not have the discretion to vote
uninstructed shares as to certain other matters (“non-routine
matters”). Under NYSE interpretations, Proposal 1 (election
of directors), is considered a non-routine matter, and Proposal 2
(the ratification of our independent public accountant) is
considered a routine matter. If your shares are held in street name
and you do not provide voting instructions to the bank, broker or
other nominee that holds your shares as described above under
“How Do I Vote?,” the bank, broker or other nominee has
the authority, even if it does not receive instructions from you,
to vote your unvoted shares for Proposal 2 (the ratification of our
independent public accountant), but does not have authority to vote
your unvoted shares for Proposal 1 (election of directors). We
encourage you to provide voting instructions. This ensures your
shares will be voted at the Annual Meeting in the manner you
desire.
What
Vote is Required to Approve Each Proposal and How are Votes
Counted?
Proposal
1:
Election
of Directors
The
nominees for director who receive the affirmative vote of a
majority of the votes present and entitled to vote in the
election will be elected as director. You may vote either FOR all
of the nominees, WITHHOLD your vote from all of the nominees or
WITHHOLD your vote from any one or more of the nominees. Votes that
are withheld will not be included as affirmative votes in the vote
tally for the election of directors. Brokerage firms are not
entitled to vote customers’ unvoted shares held by the firms
in street name for the election of directors. As a result, any
shares not voted by such a beneficial owner will be treated as a
broker non-vote and such broker non-votes will not be included in
the number of votes present and entitled to vote.
Proposal
2: Ratification of the
Appointment
of Friedman
LLP
as our Independent Public Accountant for the Fiscal Year Ending
December 31, 2020
The
affirmative vote of a majority of the votes cast for this proposal
is required to ratify the appointment of the Company’s
independent public accountant. Abstentions will be counted towards
the tabulation of votes cast on this proposal and will have the
same effect as a negative vote. Brokerage firms have authority to
vote customers’ unvoted shares held by the firms in street
name on this proposal. If a broker does not exercise this
authority, such broker non-votes will not be included in the number
of votes present and entitled to vote. We are not required to
obtain the approval of our shareholders to appoint the
Company’s independent accountant. However, if our
shareholders do not ratify the appointment of Friedman LLP as the
Company’s independent public accountant for the fiscal year
ending December 31, 2020, the Audit Committee of the Board may
reconsider its appointment.
What
Constitutes a Quorum for the Annual Meeting?
The
presence, virtually or by proxy, of the holders of a majority of
the Shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. Votes of shareholders of
record who are present at the Annual Meeting virtually or by proxy,
abstentions, and broker non-votes are counted for purposes of
determining whether a quorum exists.
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3
Householding
of Annual Disclosure Documents
The
Securities and Exchange Commission (the “SEC”)
previously adopted a rule concerning the delivery of annual
disclosure documents. The rule allows us or brokers holding our
shares on your behalf to send a single set of our annual report and
proxy statement to any household at which two or more of our
shareholders reside, if either we or the brokers believe that the
shareholders are members of the same family. This practice,
referred to as “householding,” benefits both
shareholders and us. It reduces the volume of duplicate information
received by you and helps to reduce our expenses. The rule applies
to our annual reports, proxy statements and information statements.
Once shareholders receive notice from their brokers or from us that
communications to their addresses will be
“householded,” the practice will continue until
shareholders are otherwise notified or until they revoke their
consent to the practice. Each shareholder will continue to receive
a separate proxy card or voting instruction card.
Those
shareholders who either (i) do not wish to participate in
“householding” and would like to receive their own sets
of our annual disclosure documents in future years or (ii) who
share an address with another one of our shareholders and who would
like to receive only a single set of our annual disclosure
documents should follow the instructions described
below:
●
shareholders whose
shares are registered in their own name should contact our transfer
agent, Issuer Direct Corporation, and inform them of their request
by calling them at 919.744.2722 or writing them at 500 Perimeter
Park Drive, Suite D, Morrisville NC 27560.
●
Shareholders whose
shares are held by a broker or other nominee should contact such
broker or other nominee directly and inform them of their request,
shareholders should be sure to include their name, the name of
their brokerage firm and their account number.
Who
is paying for this proxy solicitation?
In
addition to mailed proxy materials, our directors, officers and
employees may also solicit proxies in person, by telephone, or by
other means of communication. We will not pay our directors,
officers and employees any additional compensation for soliciting
proxies. We may reimburse brokerage firms, banks and other agents
for the cost of forwarding proxy materials to beneficial
owners.
When
are shareholder proposals due for next year’s annual
meeting?
At our
annual meeting each year, our Board of Directors submits to
shareholders its nominees for election as directors. In addition,
the Board of Directors may submit other matters to the shareholders
for action at the annual meeting.
Pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, shareholders may
present proper proposals for inclusion in the Company’s proxy
statement for consideration at the 2020 annual meeting of
shareholders by submitting their proposals to the Company in a
timely manner. These proposals must meet the shareholders
eligibility and other requirements of the SEC. To be considered for
inclusion in next year’s proxy materials, you must submit
your proposal in writing by May 3, 2021 to our Corporate Secretary,
7172 Columbia Gateway Drive, Suite 400, Columbia, MD
21046
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4
The
following table sets forth certain information, as of the Record
Date, with respect to the beneficial ownership of the outstanding
Common Stock by (i) any holder of more than five (5%) percent; (ii)
each of the Company’s executive officers and directors; and
(iii) the Company’s directors and executive officers as a
group. Except as otherwise indicated, each of the shareholders
listed below has sole voting and investment power over the shares
beneficially owned.
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Shares
Beneficially Owned
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Name and address
of beneficial owner (1)
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Number of Shares
beneficially owned (2)
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Percent of
class
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Directors and Named Executive Officers
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Robert A.
Berman
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6,096,274
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(3
)
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21.9
%
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James
McCarthy
|
-
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(4
)
|
*
|
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Richard
Nathan
|
1,615,720
|
(5
)
|
5.8
%
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Matthew
Hill
|
1,586,669
|
(6
)
|
5.7
%
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Paul de
Bary
|
118,499
|
(7
)
|
*
|
|
Glenn
Goord
|
150,999
|
(8
)
|
*
|
|
Christine
Harada
|
70,999
|
(9
)
|
*
|
|
David
Hanlon
|
70,999
|
(9
)
|
*
|
|
Steven
Croxton
|
48,499
|
(10
)
|
*
|
|
Eyal
Hen
|
16,667
|
(11
)
|
*
|
|
Riaz
Latifullah
|
187,929
|
(12
)
|
*
|
|
All directors and
named executive officers as a group (10 persons)
|
9,963,254
|
|
35.7
%
|
|
5% or Greater Shareholders
|
|
|
|
|
Avon Road
Partners, L.P.
|
3,315,104
|
(3
)
|
11.9
%
|
|
Superius
Securities Group Inc Profit Sharing Plan
|
1,090,639
|
(13
)
|
3.9
%
|
|
Cedarview Capital
Management, LP
|
2,409,223
|
(14
)
|
8.6
%
|
* Less
than 1%
(1)
Unless otherwise
indicated, the address of those listed is c/o Rekor Systems, Inc.,
7172 Columbia Gateway Drive, Suite 400, Columbia, MD 21046. Unless
otherwise indicated, all shares are owned directly by the
beneficial owner.
(2)
Based on 27,884,197
shares of our common stock issued and outstanding as of the August
31, 2020.
(3)
As the general
partner of Avon Road, Mr. Berman may be deemed to be the beneficial
owner of 6,062,940 shares of Rekor Systems, Inc. common stock, or
21.7% of the class of securities. He may be deemed to share with
Avon Road (and not with any third-party) the power to vote or
direct the vote of and to dispose or direct the disposition of the
3,315,104 shares of Rekor Systems, Inc. common stock beneficially
owned by Avon Road, or 11.8% of the class of securities. It also
consists of options to purchase 33,334 shares of our common stock
exercisable within 60 days of August 31, 2020. Based on the
Schedule 13D/A Amendment No. 3 filed with the SEC by Avon Road and
Mr. Berman on August 5, 2020.
(4)
On July 23, 2020,
Mr. McCarthy, Chairman of the Board of Directors of the
“Company” retired from the Company's Board. Mr.
McCarthy filed Schedule 13D/A with the SEC.
(5)
Consists of:
1,593,020 shares of our common stock; a Unit Warrant to purchase
4,849 shares of our common stock exercisable within 60 days of
August 31, 2020; and 17,851 shares of our common stock acquirable
through the conversion of 10,000 shares of Rekor Systems, Inc.
Series A Preferred Stock.
(6)
Consists of 961,669
shares of Rekor Systems, Inc. common stock and warrants to purchase
625,000 shares of our common stock.
(7)
Consists of options
to purchase 108,499 shares of our common stock exercisable within
60 days of August 31, 2020, and 10,000 shares of our common
stock.
(8)
Consists of options
to purchase 70,999 shares of our common stock exercisable within 60
days of August 31, 2020, and 80,000 shares of our common
stock.
(9)
Consists of options
to purchase 70,999 shares of our common stock exercisable within 60
days of August 31, 2020.
(10)
Consists of options
to purchase 48,499 shares of our common stock exercisable within 60
days of August 31, 2020.
(11)
Mr. Hen serves as
our Chief Financial Officer and Principal Financial and Accounting
Officer since May 15, 2019 and consists of options to purchase
16,667 shares of our common stock exercisable within 60 days of
August 31, 2020.
(12)
Consists of options
to purchase 187,929 shares of our common stock exercisable within
60 days of August 31, 2020.
(13)
Based on the
Schedule 13G/A Amendment No. 1 as filed with the Securities and
Exchange Commission on January 28, 2020, reporting beneficial
ownership of 5.14% based on 21,027,401 shares issued and
outstanding. The address of the reporting person is 94 Grand Ave,
Englewood, NJ 07631.
(14)
Based on the
Schedule 13G as filed with the Securities and Exchange Commission
on July 14, 2020, reporting beneficial ownership of 8.8% based on
27,292,034 shares issued and outstanding. The address of the
reporting person is One Penn Plaza, 45
th
Floor, New York,
New York 10119
|
|
5
PROPOSAL
NO. 1 ELECTION OF DIRECTORS
Our
Board currently consists of seven members. The Corporate Governance
Committee and Board have unanimously approved the recommended slate
of seven directors.
The
following table shows the Company’s nominees for election to
the Board. Each nominee, if elected, will serve until the next
Annual Meeting of Shareholders and until a successor is named and
qualified, or until his earlier resignation or removal. All
nominees are members of the present Board of Directors. We have no
reason to believe that any of the nominees is unable or will
decline to serve as a director if elected. Unless otherwise
indicated by the shareholder, the accompanying proxy will be voted
for the election of the seven persons named under the heading
“Nominees for Directors.” Although the Company knows of
no reason why any nominee could not serve as a director, if any
nominee shall be unable to serve, the accompanying proxy will be
voted for a substitute nominee.
Nominees
for Director
|
Name
of Nominee
|
Age
|
Principal
Position
|
Director Since
|
|
Robert
Berman
|
60
|
President and Chief
Executive Officer, and Executive Chairman of the Board of
Directors
|
2016
|
|
Paul A.
de Bary
|
73
|
Lead
Director
|
2017
|
|
Richard
Nathan, Ph.D.
|
75
|
Director
|
2016
|
|
Glenn
Goord
|
68
|
Director
|
2016
|
|
Christine
J. Harada
|
47
|
Director
|
2017
|
|
David
Hanlon
|
75
|
Director
|
2018
|
|
Steven
D. Croxton
|
58
|
Director
|
2019
|
The
Governance Committee and the Board seek, and the Board is comprised
of, individuals whose characteristics, skills, expertise, and
experience complement those of other Board members. We have set out
below biographical and professional information about each of the
nominees, along with a brief discussion of the experience,
qualifications, and skills that the Board considered important in
concluding that the individual should serve as a current director
and as a nominee for re-election as a member of our
Board.
|
|
6
Nominees
Biographies
Robert A. Berman, Chief Executive Officer and Director
Robert
Berman has served as our Chief Executive Officer and a member of
our Board of Directors since March 2016 and was appointed Executive
Chairman of the Board of Directors in connection with the
retirement of Mr. James McCarthy from the Board on July 23, 2020.
Since January 2000, Mr. Berman has served as the General Partner of
Avon Road Partners, L.P., a limited partnership investing in real
estate and the broadcast media industry. From 2006 through March
2015, Mr. Berman held the office of Chairman and Chief Executive
Officer at Cinium Financial Services Corporation, a privately-held
specialty finance company, and its predecessor, Upper Hudson
Holdings, LLC. Prior to Cinium, Mr. Berman was Chief Executive
Officer of Empire Resorts, Inc., a NASDAQ-listed gaming company,
from 2002-2005.
Director Qualifications
Mr.
Berman has extensive experience in the private equity and public
company markets. We believe his strong understanding of the
financial markets and the M&A process, and his previous senior
executive roles with public companies make him a qualified member
of our Board of Directors and to serve as our Chief Executive
Officer and Executive Chairman.
Richard Nathan, PhD, Director
Richard
Nathan, Ph.D., has served on our Board of Directors since March
2016. From April 2016 until his retirement in February 2018, Dr.
Nathan served as our Chief Operating Officer. Prior to that, Dr.
Nathan was the Chief Executive Officer of AOC Key Solutions, where
he worked for over 17 years. Dr. Nathan has over 45 years of
corporate management, program management and business and proposal
development experience and experience managing service and
technical contracts for federal departments and agencies and state
governments. Dr. Nathan holds a BS in Chemistry from the
Massachusetts Institute of Technology and a PhD in Chemistry from
the Polytechnic Institute of Brooklyn.
Director Qualifications
Dr.
Nathan has a strong technical background and extensive experience
in the government contracting area, which includes a significant
portion of Rekor’s business. We believe this expertise, when
combined with his entrepreneurial background having built strong
operating companies, makes him a qualified member of our Board of
Directors.
Glenn Goord, Director
Glenn
Goord has served on our Board of Directors since March 2016. From
1996 until his retirement in 2006, Mr. Goord served as Commissioner
of the New York State Department of Correctional Services
(“NYSDCS”), where he oversaw the state prison system.
Mr. Goord received the Carl Robison Award, the highest honor
bestowed by the Middle Atlantic States Correctional Association, in
1997. In 1998 he received the Charles Evans Hughes Award for public
service from the Albany based Capital Area Chapter for the American
Society for Public Administration (ASPA). In 2002, ASPA awarded Mr.
Goord its highest honor, the Governor Alfred E. Smith Award, for
his direction of the NYSDCA’s efforts to aid New York City
following the September 11, 2001 terrorist attack. Mr. Goord holds
a BA in Psychology from Fairleigh Dickinson
University.
Director Qualifications
Mr.
Goord has a strong background in government operations and
procurement. His insights into how government operates is a key
skill for board decision making on Rekor strategy in certain
industry segments. We believe his management and operational
experience makes him a qualified member of our Board of Directors
and the committees on which he participates.
Paul A. de Bary, Lead Director
Paul A.
de Bary has served on our Board of Directors since January 2017 and
as Lead Director since November 2017. As an attorney, financial
advisor and investment banker, Mr. de Bary has had extensive
experience with financial markets, governmental operations and
private businesses. From 1996 to 2015, he was a managing director
at Marquette de Bary Co., Inc., a New York based broker-dealer,
where he served as a financial advisor for state and local
government agencies, public and private corporations and non-profit
organizations, as well as general counsel. He previously served as
a director of Empire Resorts, Inc. (Nasdaq: NYNY) from 1996 to
2010, where he served as chairman of its audit committee as well
as, at various times throughout his tenure as a director, a member
of the governance and compensation committees and various special
committees. Mr. de Bary has also served as Chairman of the Board of
Ethics of the Town of Greenwich, Connecticut since 2008. Mr. de
Bary is a member of the American Bar Association, the New York
State Bar Association and the Association of the Bar of the City of
New York. Mr. de Bary holds a JD, an MBA and an A.B. from Columbia
University.
Director Qualifications
Mr. de
Bary has a diverse background that includes experience as a lawyer,
investment banker, corporate officer and member of several boards
of directors, including those of public companies. We believe these
experiences, combined with his skills and knowledge related to
public market decision-making and audit committee roles and
responsibilities, makes him qualified member of our Board of
Directors and the committees on which he participates.
7
Christine J. Harada, Director
Christine J. Harada
has served on our Board of Directors since August 2017. Ms. Harada
has over 25 years of experience leading government and management
consulting organizations. She served as the Federal Chief
Sustainability Officer during the Obama administration. Prior to
that role, Ms. Harada was the Acting Chief of Staff of the U.S.
General Services Administration (“GSA”), and also
served as Associate Administrator, Government-wide Policy and Chief
Acquisition Officer. Ms. Harada’s private sector experience
includes 10 years in management consulting at the Boston Consulting
Group and Booz Allen Hamilton. Ms. Harada holds an M.A., in
International Studies from the Lauder Institute and an MBA, Finance
from the Wharton School at the University of Pennsylvania. She also
holds an M.S. in Aeronautics/Astronautics from Stanford University
and a B.S. Aeronautics/Astronautics from the Massachusetts
Institute of Technology.
Director Qualifications
Ms.
Harada has in-depth knowledge of the federal government, as well as
detailed background in organizational policy and corporate best
practices. We believe her skills and experiences in engineering,
finance, operations and governmental policy make her a qualified
member of our Board of Directors and the committees on which she
participates.
David P. Hanlon,
David
Hanlon has served on our Board of Directors since November 2018.
Mr. Hanlon is a founding principal of Executive Hospitality
Partners, a strategic and asset management firm. Since 2008, he has
served as Chief Executive Officer of Hanlon Investments which
provides project development consulting services to casinos, hotels
and resorts. Mr. Hanlon has served as a member of Cornell
University’s Industry Advisory Board, as well as on the Board
of Directors of the Cornell Football Association and was elected to
be a lifetime member of the Cornell University Administrative
Advisory Board. He was also an advisor to the Wharton
Entrepreneurial Program. Mr. Hanlon holds a B.S. in Hotel
Administration from Cornell, an MBA in Finance and an M.S. in
Accounting from the Wharton School at the University of
Pennsylvania and graduated from the Advanced Management Program at
the Harvard Business School.
Director Qualifications
Mr.
Hanlon has extensive leadership and executive management experience
and experience serving on public company boards of directors. We
believe his skills and experience make him a qualified member of
our Board of Directors and the committees on which he
participates.
Steven D. Croxton, Director
Mr.
Croxton, is Managing Director of Rice, Voelker, LLC and has more
than 30 years’ experience in investment and commercial
banking. During his career, Mr. Croxton has been involved in
financing and advisory transactions totaling more than $35 billion
for a variety of public and private corporations. He has previously
served on the Board of Directors of Peninsula Gaming, LLC, and has
held leadership roles with responsibilities related to investment,
corporate, and international banking. Mr. Croxton earned a B.S. in
Finance from Louisiana State University, and a Master of
International Management from the American Graduate School of
International Management (now Thunderbird School of Global
Management), and holds FINRA Series 7, 24, 63, and 79
licenses.
Director Qualifications
Mr.
Croxton has in-depth knowledge of the capital markets, as well as
extensive background in financing and advisory of public
corporations. We believe his skills and experiences make him a
qualified member of our Board of Directors and the committees on
which he participates.
Unless
authority to vote for the nominees named above is withheld, the
shares represented by the enclosed proxy will be voted FOR the
election of such nominees as directors. In the event that any of
the nominees shall become unable or unwilling to serve, the shares
represented by the enclosed proxy will be voted for the election of
such other person as the Board may recommend in such
nominee’s place. The Board has no reason to believe that any
of the nominees will be unable or unwilling to serve.
8
Family
Relationships
There
are no family relationships among our executive officers and
directors.
Involvement
in Certain Legal Proceedings
During
the past ten years, none of our directors, executive officers,
promoters, control persons, or nominees has been:
●
the subject of any
bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time;
●
convicted in a
criminal proceeding or is subject to a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
●
subject to any
order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction or any Federal or
State authority, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities;
●
found by a court of
competent jurisdiction (in a civil action), the Commission or the
Commodity Futures Trading Commission to have violated a federal or
state securities or commodities law;
●
the subject of, or
a party to, any Federal or State judicial or administrative order,
judgment, decree, or finding, not subsequently reversed, suspended
or vacated, relating to an alleged violation of (a) any Federal or
State securities or commodities law or regulation; (b) any law or
regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary or permanent injunction,
order of disgorgement or restitution, civil money penalty or
temporary or permanent cease-and- desist order, or removal or
prohibition order; or (c) any law or regulation prohibiting mail or
wire fraud or fraud in connection with any business entity;
or
●
the subject of, or
a party to, any sanction or order, not subsequently reversed,
suspended or vacated, of any self-regulatory organization (as
defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.
78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with
a member.
Vote
Required
The
nominees for director who receive the affirmative votes of a
majority of the votes present and entitled to vote election will be
elected as director. You may vote either FOR all of the nominees,
WITHHOLD your vote from all of the nominees or WITHHOLD your vote
from any one or more of the nominees. Votes that are withheld will
not be included as affirmative votes in the vote tally for the
election of directors. Brokerage firms are not entitled to vote
customers’ unvoted shares held by the firms in street name
for the election of directors. As a result, any shares not voted by
such a beneficial owner will be treated as a broker non-vote and
such broker non- votes not be included in the number of votes
present and entitled to vote.
THE
BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
ABOVE AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE
VOTED IN FAVOR THEREOF UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE
ON THE PROXY.
9
Information
about the Board of Directors and Committees
Corporate
Governance
Independence
of Directors
Our
Board is currently comprised of seven members, five of whom are
independent directors. Messrs. Nathan and Berman are not
independent directors.
The
Board, upon recommendation of the Governance Committee, unanimously
determined that each of our five non-employee directors is
“independent,” as such term is defined in the Nasdaq
Stock Market Rules (“Stock Market Rules”).
The
definition of “independent director” included in the
Stock Market Rules includes a series of objective tests, such as
that the director is not an employee of the Company, has not
engaged in various types of specified business dealings with the
Company, and does not have an affiliation with an organization that
has had specified business dealings with the Company. Consistent
with the Company’s Corporate Governance Principles, the
Board’s determination of independence is made in accordance
with the Stock Market Rules, as the Board has not adopted
supplemental independence standards. As required by the Stock
Market Rules, the Board also has made a subjective determination
with respect to each director that such director has no material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a relationship
with the Company), even if the director otherwise satisfies the
objective independence tests included in the definition of an
“independent director” included in the Stock Market
Rules.
In
determining that each individual who served as a member of the
Board is independent, the Board considered that, in the ordinary
course of business, transactions may occur between the Company and
entities with which some of our directors are affiliated. The Board
unanimously determined that the relationships discussed below in
the section entitled “CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE” were not material to
an independence determination. No unusual discounts or terms were
extended.
Board
Leadership Structure
Our
Board of Directors is currently led by its Executive Chairman,
Robert Berman, following the retirement of Mr. James McCarthy from
the Board on July 23, 2020. Our Board of Directors recognizes that
it is important to determine an optimal Board leadership structure
to ensure the independent oversight of management as the Company
continues to grow. We historically have separated the roles of
Chief Executive Officer and Chairman of the Board, but in
connection with the previously announced new strategic direction of
the Company and its focus on its technology business, we believe at
the present time that Mr. Berman is in the best position to serve
as both Executive Chairman of the Board of Directors and Chief
Executive Officer, and that combining these two roles at this time
is in the best interests of the Company and its shareholders. The
Company may revisit this decision in the future as circumstances
warrant.
Our
organizational guidelines provide for a Lead Director to be elected
whenever the Chair of the Board of Directors is not an independent
director. The responsibilities of the Lead Director are to: 1)
preside at meetings of our stockholders and Board of Directors if
the Chair is absent; 2) call meetings and executive sessions of the
independent directors of the Board; 3) establish the agenda and
preside at all executive sessions and other meetings of the
independent directors of the Board and communicate the results of
meetings of the independent directors to the Chair and other
members of management, as appropriate; 4) communicate with the
independent directors of the Board between meetings as necessary or
appropriate, serve as a liaison between the Chair and the
independent directors and communicate independent director
consensus on important issues to the Chair;
5)
approve Board
meeting agendas and schedules for regular meetings of the Board of
Directors to assure there is sufficient time for discussion of all
agenda items and approve meeting materials and other information to
be sent to the Board in advance of regular meetings; 6) evaluate
the quality and timeliness of information sent to the Board by the
Chief Executive Officer and other members of management; 7) oversee
the evaluation of the Chief Executive Officer and assist the Board
Chair on matters of Board succession planning and crisis
management; 8) assist the Chair of the Governance Committee with
individual director evaluations; and 9) be available for
consultation and direct communication at the request of major
stockholders. Mr. de Bary currently serves as Lead
Director.
10
Director
Attendance at Board, Committee, and Other Meetings
Directors are
expected to attend Board meetings and meetings of the committees on
which they serve, with the understanding that on occasion a
director may be unable to attend a meeting. The Board does not have
a policy on director attendance at the Company’s annual
meeting.
The
non-management directors (who also constitute all of the
independent directors) meet in executive sessions in connection
with regularly scheduled Board meetings and at such other times as
the non-management directors deem appropriate. These sessions are
led by the Lead Director.
In
2019, the Board held six regular and special meetings, the
non-management directors held two meetings and no special executive
sessions, the Audit Committee held seven regular and special
meetings, the Compensation Committee held five regular and special
meetings, and the Governance Committee held four regular and
special meetings. Each director attended 100% of the regular and
special meetings of the Board and of the committees on which he or
she served that were held during his or her term of office. Each of
the non-management (and independent) directors attended 100% of the
regular and special executive sessions that were held during his or
her term of office.
Board
Role in Risk Oversight
Our
Board of Directors has responsibility for the oversight of our risk
management processes and, either as a whole or through its
committees, regularly discusses with management our major risk
exposures, their potential impact on our business and the steps we
take to manage them. The risk oversight process includes receiving
regular reports from Board committees and members of senior
management to enable our Board to understand the Company’s
risk identification, risk management and risk mitigation strategies
with respect to areas of potential material risk, including
operations, finance, legal, regulatory, strategic and reputational
risk.
The
Audit Committee reviews information regarding liquidity and
operations and oversees our management of financial risks.
Periodically, the Audit Committee reviews our policies with respect
to risk assessment, risk management, loss prevention and regulatory
compliance. Oversight by the Audit Committee includes direct
communication with our external auditors, and discussions with
management regarding significant risk exposures and the actions
management has taken to limit, monitor or control such exposures.
The Compensation Committee is responsible for assessing whether any
of our compensation policies or programs has the potential to
encourage excessive risk-taking. The Governance Committee manages
risks associated with the independence of the board, corporate
disclosure practices, and potential conflicts of interest. While
each committee is responsible for evaluating certain risks and
overseeing the management of such risks, the entire Board is
regularly informed through committee reports about such risks.
Matters of significant strategic risk are considered by our Board
as a whole.
Committees
of the Board
Our
Board has three standing committees: Audit, Compensation, and
Governance. Each of the committees is solely comprised of and
chaired by independent directors, each of whom the Board has
affirmatively determined is independent pursuant to the Stock
Market Rules. Each of the committees operates pursuant to its
charter. The committee Charters are reviewed annually by the
Governance Committee. If appropriate, and in consultation with the
chairs of the other committees, the Corporate Governance Committee
proposes revisions to the charters. The responsibilities of each
committee are described in more detail below. The charters for the
three committees are available on the Company’s website at
www.rekor.ai
by
following the link to “Investors” and then to
“Corporate Governance.”
Audit
Committee
We have
an Audit Committee comprised of directors who are
“independent” within the meaning of Nasdaq Rule
5605(b)(1). The Audit Committee assists our Board in overseeing the
financial reporting process and maintaining the integrity of our
financial statements, and of our financial reporting processes and
systems of internal audit controls, and our compliance with legal
and regulatory requirements. The Audit Committee is responsible for
reviewing the qualifications, independence and performance of our
independent registered public accounting firm and review our
internal controls, financial management practices and investment
functions and compliance with financial legal and regulatory
requirements. The Audit Committee is also responsible for
performing risk and risk management assessments as well as
preparing any report of the Audit Committee that may be required by
the proxy rules of the SEC to be included in the
Corporation’s annual proxy statement. Our Board has
identified and appointed Paul de Bary as its “audit committee
financial expert,” as defined by the SEC in Item 407 of
Regulation S-K. Mr. de Bary serves as the Chair of the Audit
Committee, and is joined on the committee by Ms. Harada, Mr.
Croxton, and Mr. Goord.
11
Compensation
Committee
We have
a Compensation Committee comprised of members who are
“Non-Employee Directors” within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and “outside directors”
within the meaning of Section 162(m) of the Code. They are also
“independent” directors within the meaning of NASDAQ
Rule 5605(b)(1). The Compensation Committee is responsible for
overseeing the establishment and maintenance of our overall
compensation and incentive programs to discharge the Board’s
responsibilities relating to compensation of our executive officers
and directors, including establishing criteria for evaluating
performance and setting appropriate levels of compensation, and to
produce an annual report on executive compensation for inclusion in
the Corporation’s proxy statement in accordance with the
rules and regulations of the SEC. The Compensation Committee
advises and makes recommendations to our Board on all matters
concerning director compensation. Mr.
Goord
serves as Chair of the Compensation Committee and is joined by Ms.
Harada, Mr. Croxton and Mr. Hanlon.
Compensation
Committee Interlocks and Insider Participation
None of
the members of the Compensation Committee has been, during 2016,
2017, 2018 or 2019, an officer or employee of Rekor or any of its
subsidiaries or predecessor companies, or was formerly an officer
of Rekor or any of its subsidiaries or predecessor companies or had
any relationship requiring disclosure by us under Item 404 of
Regulation S-K. No interlocking relationship as described in Item
407(e)(4) of Regulation S-K exists between any of our executive
officers or Compensation Committee members, on the one hand, and
the executive officers or Compensation Committee members of any
other entity, on the other hand, nor has any such interlocking
relationship existed in the past.
Governance
Committee
Our
Board has a Governance Committee that that (1) reviews and
recommends improvements to our governance guidelines and corporate
policies; (2) monitors compliance with our Code of Conduct; (3)
trains new members of the Board of Directors; (4) reviews the
performance of the Board of Directors and its various committees
and makes recommendations intended to improve that performance, (5)
evaluates and makes recommendations concerning changes in the
charters of the various Committees of the Board of Directors, (6)
evaluates the performance of the Chief Executive Officer of the
Corporation, (7) oversees the development and implementation of
succession planning for Corporation senior management positions;
(8) identifies and recommends candidates for nomination as members
of the Board of Directors and its committees; and (9) such other
matters as may be required to ensure compliance with applicable
federal and state laws or the requirements of any exchange on which
the Company maintains a listing for its securities. The committee
is required to be comprised of entirely “independent”
directors within the meaning of NASDAQ Rule
5605(b)(1).
Ms.
Harada currently serves as the Chair of the Governance Committee
and is joined on the committee by Mr. Hanlon and Mr. de
Bary.
The
Chair and members of each committee are summarized in the table
below:
|
Name
|
Audit
Committee
|
Compensation
Committee
|
Corporate
Governance
Committee
|
|
Christine
Harada – (Independent)
|
Member
|
Member
|
Chair
|
|
Paul de
Bary – (Independent)
|
Chair
|
-
|
Member
|
|
Glenn
Goord – (Independent)
|
Member
|
Chair
|
-
|
|
David
P. Hanlon – (Independent)
|
-
|
Member
|
Member
|
|
Steven
D. Croxton – (Independent)
|
Member
|
Member
|
-
|
12
Consideration
of Director Nominees
We seek
directors with the highest standards of ethics and integrity, sound
business judgment, and the willingness to make a strong commitment
to the Company and its success. The Governance Committee works with
the Board on an annual basis to determine the appropriate and
desirable mix of characteristics, skills, expertise, and experience
for the full Board and each committee, taking into account both
existing directors and all nominees for election as directors, as
well as any diversity considerations and the membership criteria
applied by the Governance Committee. The Governance Committee and
the Board, which do not have a formal diversity policy, consider
diversity in a broad sense when evaluating board composition and
nominations; and they seek to include directors with a diversity of
experience, professions, viewpoints, skills, and backgrounds that
will enable them to make significant contributions to the Board and
the Company, both as individuals and as part of a group of
directors. The Board evaluates each individual in the context of
the full Board, with the objective of recommending a group that can
best contribute to the success of the business and represent
shareholder interests through the exercise of sound judgment. In
determining whether to recommend a director for re-election, the
Governance Committee also considers the director’s attendance
at meetings and participation in and contributions to the
activities of the Board and its committees.
The
Governance Committee will consider director candidates recommended
by shareholders, and its process for considering such
recommendations is no different than its process for screening and
evaluating candidates suggested by directors, management of the
Company, or third parties.
Corporate
Governance Matters
We are
committed to maintaining strong corporate governance practices that
benefit the long-term interests of our shareholders by providing
for effective oversight and management of the Company. Our
governance policies, including our Code of Conduct and Committee
Charters can be found on our website at
www.rekor.ai
by following the
link to “Investors” and then to “Corporate
Governance.”
The
Governance Committee regularly reviews our Code of Conduct and
Committee Charters to ensure that they take into account
developments at the Company, changes in regulations and listing
requirements, and the continuing evolution of best practices in the
area of corporate governance.
The
Board conducts an annual self-evaluation in order to assess whether
the directors, the committees, and the Board are functioning
effectively.
Code
of Conduct
We have
adopted a Code of Conduct, which serves as our Code of Ethics,
which applies to all of our employees, including our Chief
Executive Officer and our Chief Financial Officer. Our Code of
Conduct is available on our website at
www.rekor.ai.
If we amend or
grant a waiver of one or more of the provisions of our Code of
Conduct, we intend to satisfy the requirements under Item 5.05 of
Item 8-K regarding the disclosure of amendments to or waivers from
provisions of our Code of Conduct that apply to our Principal
Executive and Principal Financial Officer by posting the required
information on our website at the above address. Our website is not
part of this Proxy Statement.
Communications
with the Board of Directors
Shareholders and
other parties may communicate directly with the Board of Directors
or the relevant board member by addressing communications to: Rekor
Systems, Inc.
c/o
Corporate Secretary
7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
All
shareholder correspondence will be compiled by our corporate
secretary. Communications will be distributed to the Board of
Directors, or to any individual director or directors as
appropriate, depending on the facts and circumstances outlined in
the communications. Items that are unrelated to the duties and
responsibilities of the Board of Directors may be excluded, such
as:
●
junk mail and mass
mailings;
●
resumes and other
forms of job inquiries;
●
surveys;
and
●
solicitations and
advertisements.
In
addition, any material that is unduly hostile, threatening, or
illegal in nature may be excluded, provided that any communication
that is filtered out will be made available to any outside director
upon request.
13
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires the
Company’s directors, executive officers, and shareholders who
own more than 10% of the Company’s stock to file forms with
the SEC to report their ownership of the Company’s stock and
any changes in ownership. The Company assists its directors and
executives by identifying reportable transactions of which it is
aware and preparing and filing the forms on their behalf. All
persons required to file forms with the SEC must also send copies
of the forms to the Company. We have reviewed all forms provided to
us. Based on that review and on written information given to us by
our executive officers and directors, we believe that all Section
16(a) filings during the past fiscal year were filed on a timely
basis and that all directors, executive officers and 10% beneficial
owners have fully complied with such requirements during the past
fiscal year except for the following: (i) a delinquent Form 4 filed
by Mr. Eyal Hen on May 23, 2019 relating to an option grant on May
15, 2019; (ii) delinquent Form 4s filed by Messrs. de Bary, Goord,
Hanlon, Latifullah, and Berman, and Ms. Harada on May 23, 2019
relating to an option grant on May 8, 2019, and (iii) a delinquent
Form 3 filed by Mr. Croxton on July 8, 2019 relating to his
appointment to the Board of Directors on June 19, 2019 and a
delinquent Form 4 filed by Mr. Croxton on July 8, 2019 relating to
an option grant on June 19, 2019.
The
following persons are our executive officers and hold the offices
set forth opposite their names.
|
Name
|
Age
|
Principal
Occupation
|
Officer Since
|
|
Robert
A. Berman
|
60 |
Chief
Executive Officer, President and Member of the
Board
|
2017
|
|
Eyal
Hen
|
47
|
Chief
Financial Officer
|
2019
|
|
Riaz
Latifullah
|
63
|
Executive
Vice President, Corporate Development
|
2017
|
Robert A. Berman, Chief Executive Officer, President and Executive
Chairman of the Board
The
biography for Robert A. Berman is set forth above in the section
entitled “Nominees Biographies -
Robert A. Berman, Chief
Executive Officer and Director.”
Eyal Hen, Chief Financial Officer
Mr. Hen
has served as our Chief Financial Officer since May of 2019. He has
more than 17 years’ experience as a global finance and
business management executive in corporate environments, most
recently with VAYA Pharma Inc. and Ormat Technologies, Inc.
(NYSE:ORA). His expertise working as a finance executive in the
public markets, where he oversaw financial reporting, compliance
initiatives, investor communications, and financing, will be
instrumental as the Company continues its growth. Mr. Hen holds a
BA in Economics and Accounting from Ben Gurion University (Israel)
and an MBA from the University of Phoenix.
Riaz Latifullah, Executive Vice President, Corporate
Development
Mr.
Latifullah currently serves as Executive Vice President, Corporate
Development. On May 1, 2018, Mr. Latifullah was appointed as our
Principal Financial and Accounting Officer, a role he assumed on an
interim basis upon the resignation of our former Chief Financial
Officer until the hiring of Mr. Eyal Hen as set forth above. Prior
to joining Rekor, Mr. Latifullah served as the Chief Financial
Officer of the American Grandparents Association /
Grandparents.com. Mr. Latifullah spent 13 years with AARP, a
non-profit organization that advocates on behalf of people over age
50. With AARP he served as Vice President, Financial Management,
Senior Director Strategic Markets and Director Brand Operations. As
an in-house entrepreneur with AARP he created and launched five
start-up operations bringing significant changes to the
organization. In other positions before AARP Mr. Latifullah served
as General Manager for TV on the WEB, an internet video production
company, a Government Relations Representative for the U.S.
Merchant Marine Academy Alumni Foundation and an Investment Banking
Associate for Ryan, Lee and Company. Mr. Latifullah holds an MBA
from Stanford University, an MSE in Naval Architecture and Marine
Engineering from the University of Michigan and a BS in Marine
Engineering from the U.S. Merchant Marine Academy.
14
The
following table sets forth information about the annual paid
compensation of our: Principal Executive Officer, Mr. Berman; two
most highly compensated executive officers other than the Principal
Executive Officer, Messrs. Hen and Latifullah, who were serving as
executive officers as of December 31, 2019; The information in this
table for the Company’s most recently completed fiscal year
is based on the information available to the Company as of the date
of the Company’s Annual Report on Form 10-K for the year
ended 2019.
|
Name/Capacities
in which compensation was received
|
Year
|
Base
Salary
|
|
Bonus
|
Equity incentive
awards
|
|
All other
compensation
|
|
Total
|
|
Robert
Berman
|
2019
|
$
453,205
|
(1
)
|
$
-
|
$
46,605
|
(2
)
|
$
18,194
|
(3
)
|
$
518,004
|
|
Chief Executive
Officer
|
2018
|
395,000
|
|
-
|
-
|
|
-
|
|
395,000
|
|
Eyal
Hen
|
2019
|
202,074
|
(4
)
|
-
|
26,415
|
(5
)
|
2,488
|
(3
)
|
230,977
|
|
Chief Financial
Officer
|
2018
|
-
|
|
-
|
-
|
|
-
|
|
-
|
|
Riaz
Latifullah
|
2019
|
289,680
|
(6
)
|
-
|
10,566
|
(7
)
|
17,700
|
(3
)
|
317,946
|
|
EVP Corporate
Development
|
2018
|
271,667
|
|
100,000
(8)
|
-
|
|
-
|
|
371,667
|
(1)
In 2019, we
increased Mr. Berman’s base salary from $395,000 to $495,000
per year effective May 15, 2019.
(2)
Amount represents
the fair value of the issuance of 100,000 stock options to Mr.
Berman on May 8, 2019.
(3)
Amount represents
401(k) matching and health insurance contributions.
(4)
Mr. Hen has served
as Chief Financial Officer since May 15, 2019.
(5)
Amount represents
the fair value of the issuance of 50,000 stock options to Mr. Hen
on May 15, 2019.
(6)
In 2019, we
increased Mr. Latifullah’s base salary from $285,000 to
$305,000 per year effective May 15, 2019 and in 2018, we increased
from $225,000 to $285,000 per year effective March 1,
2018.
(7)
Amount represents
the fair value of the issuance of 20,000 stock options to Mr.
Latifullah on May 8, 2019.
(8)
Amount represents
subjective bonus.
15
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information with respect to unexercised
stock options, stock that has not vested, and equity incentive plan
awards held by our named executive officers at December 31,
2019.
|
|
Option
Awards
|
||||
|
Name
|
Number of
Securities Underlying Unexercised Option -
Exercisable
|
Number of
Securities Underlying Unexercised Options -
Unexercisable
|
|
Option Exercise
Price
|
Option
Expiration Date
|
|
Robert
Berman
|
-
|
50,000
|
(1
)
|
$
1.00
|
5/8/2029
|
|
Robert
Berman
|
-
|
50,000
|
(1
)
|
1.50
|
5/8/2029
|
|
Eyal
Hen
|
-
|
50,000
|
(1
)
|
0.78
|
5/15/2029
|
|
Riaz
Latifullah
|
174,595
|
-
|
|
1.42
|
12/31/2026
|
|
Riaz
Latifullah
|
-
|
50,000
|
(1
)
|
0.80
|
5/8/2029
|
Compensation
Committee Interlocks and Insider Participation
No
member of our Compensation Committee is a current or former officer
or employee of Rekor or its subsidiaries. No executive officer of
Rekor served as a director or member of the Compensation Committee
of any entity that has one or more executive officers serving as a
member of our Board of Directors or Compensation
Committee.
Employment
Agreements
We have
entered into employment agreements with our executives in
connection with his or her commencement of employment with
us.
Berman Employment Agreement
The
Employment Agreement entered into May 15, 2019 with Robert Berman
(“Berman Employment Agreement”) provides that Mr.
Berman will serve as our Chief Executive Officer and President. The
agreement has a term of five years with automatically renewing
one-year terms thereafter. This agreement supersedes Mr.
Berman’s previous employment agreement which otherwise would
have expired by its terms on March 31, 2022. Mr. Berman’s
base salary is $495,000 per annum, and he is eligible for a bonus
as determined by our Compensation Committee. Mr. Berman is also
eligible to receive all such other benefits as are provided to
other management employees.
Mr.
Berman was granted options to purchase 100,000 shares of common
stock of the Company with an exercise price per share as follows:
50,000 shares at $1.00 and 50,000 shares at $1.50.
In the
event of a “Change of Control”, as defined in the
Berman Employment Agreement, whether during the initial term or
thereafter, we shall have the right to terminate the Berman
Employment Agreement. Mr. Berman is eligible to receive two times
his base salary then in effect if his employment with the Company
is terminated within 120 days of a change in control (as such is
defined in the Berman Employment Agreement).
Mr.
Berman also agreed as consideration for entering into the Berman
Employment Agreement, that for the period during his employment and
for twelve months thereafter, (i) he will not compete with the
Company in the “Geographic Area”, as defined in the
Berman Employment Agreement, and
(ii)
he will not solicit
any of our existing employees, suppliers or customers.
16
Hen Employment Agreement
The
Employment Agreement with Eyal Hen (the “Hen Employment
Agreement”) provides that Mr. Hen will serve as our Chief
Financial Officer for an initial three-year term that began on May
15, 2019, subject to automatic extension. His base salary of
$335,000 per annum and will be eligible for a bonus as determined
by the Board of Directors of the Company (the “Board”)
in its sole discretion. Mr. Hen is also eligible to receive all
such other benefits as are provided to other management
employees.
Mr. Hen
was granted options to purchase 50,000 shares of common stock of
the Company, $0.0001 par value per share (“ Common
Stock”), pursuant to the Company’s 2017 Equity Award
Plan (the “2017 Plan”), which will vest in three equal
annual installments on the first (May 15, 2020), second (May 15,
2021), and third (May 15, 2022) anniversaries of the grant date, at
a strike price of $0.78 per share, the closing price of the
Company’s Common Stock on May 15, 2019.
Mr. Hen
is eligible to receive two times his base salary then in effect if
his employment with the Company is terminated within 120 days of a
change of control (as such term is defined in the Hen Employment
Agreement).
Mr. Hen
also agreed as consideration for entering into the Hen Employment
Agreement, that for the period during his employment and for twelve
months thereafter, (i) he will not compete with the Company in the
“Geographic Area”, as defined in the Hen Employment
Agreement, and (ii) he will not solicit any of our existing
employees, suppliers or customers.
Latifullah Employment Agreement
The
employment agreement with Riaz Latifullah (the “Latifullah
Employment Agreement”) provides that Mr. Latifullah shall be
Executive Vice President of Corporate Development, effective May
15, 2019, for an initial term to end on April 7, 2022, subject to
automatic extension. Mr.
Latifullah’s
annual base salary is $305,000, and he will be eligible for a bonus
as determined by the Board in its sole discretion. Mr. Latifullah
is also eligible to receive all such other benefits as are provided
to other management employees.
On May
8, 2019, pursuant to the Latifullah Employment Agreement, Mr.
Latifullah was granted options to purchase 20,000 shares of Common
Stock, pursuant to the 2017 Plan, which will vest in three equal
annual installments on the first (May 8, 2020), second (May 8,
2021), and third (May 8, 2022) anniversaries of the grant date, at
a strike price of $0.80 per share, the closing price of the
Company’s Common Stock on May 8, 2019.
Mr.
Latifullah is eligible to receive two times his base salary then in
effect if Mr. Latifullah’s employment with the Company is
terminated within 120 days of a change of control (as such term is
defined in the Latifullah Employment Agreement).
Mr.
Latifullah also agreed as consideration for entering into the
Latifullah Employment Agreement, that for the period during his
employment and for twelve months thereafter, (i) he will not
compete with the Company in the “Geographic Area”, as
defined in the Latifullah Employment Agreement, and (ii) he will
not solicit any of our existing employees, suppliers or
customers.
Bonus
Eligibility
Bonuses
for our executive officers may be conditioned on the achievement of
objective goals, which may not be waived after being set, based on
one or more of the following performance measures: earnings;
operating profits (including measures of earnings before interest,
taxes, depreciation and amortization); free cash flow or adjusted
free cash flow; cash from operating activities; revenues; net
income (before or after tax); financial return ratios; market
performance; stockholder return and/or value; net profits; earnings
per share; profit returns and margins; stock price; working
capital; capital investments; returns on assets; returns on equity;
returns on capital investments; selling, general and administrative
expenses; discounted cash flows; productivity; expense targets;
market share; cost control measures; strategic initiatives; changes
between years or periods that are determined with respect to any of
the above-listed performance criteria; net present value; sales
volume; cash conversion costs; leverage ratios; maintenance of
liquidity; integration of acquired businesses; operational
efficiencies; regulatory compliance, including the Sarbanes-Oxley
Act of 2002; and economic profit.
17
The
following table provides the total compensation for each person who
served as a non-employee member of our Board of Directors during
fiscal year 2019, including all compensation awarded to, earned by
or paid to each person who served as a non-employee director for
some portion or all of fiscal year 2019:
|
|
Fees earned or
paid in cash
|
Option
awards
|
|
Total
|
|
Name
|
($)
|
($)
(1)
|
|
($)
|
|
Paul de Bary
(2)
|
$
72,000
|
$
31,276
|
(2
)
|
$
103,276
|
|
Glenn Goord
(3)
|
47,000
|
11,465
|
(3
)
|
58,465
|
|
Christine Harada
(4)
|
52,250
|
11,465
|
(4
)
|
63,715
|
|
Richard Nathan,
Ph. D.
|
30,000
|
-
|
|
30,000
|
|
David
Hanlon
|
39,750
|
11,465
|
(5
)
|
51,215
|
|
Steven D. Croxton
(6)
|
15,755
|
47,122
|
(7
)
|
62,877
|
(1)
The amount shown
reflects the aggregate grant date fair value of option awards
computed in accordance with Financial Accounting Standards Board
Accounting Standards Codification 718.
(2)
Amount represents
the fair value of the issuances of 10,000 and 50,000 stock options
to Mr. de Bary on March 26, 2019 and May 8, 2019,
respectively.
(3)
Amount represents
the fair value of the issuances of 10,000 and 12,500 stock options
to Mr. Goord on March 26, 2019 and May 8, 2019,
respectively.
(4)
Amount represents
the fair value of the issuances of 10,000 and 12,500 stock options
to Mrs. Harada on March 26, 2019 and May 8, 2019,
respectively.
(5)
Amount represents
the fair value of the issuances of 10,000 and 12,500 stock options
to Mr. Hanlon on March 26, 2019 and May 8, 2019,
respectively.
(6)
Mr. Croxton has
served as director since June 19, 2019.
(7)
Amount represents
the fair value of the issuance of 48,499 stock options to Mr.
Croxton on June 19, 2019.
Effective August
23, 2017 and as presently in effect, our non-employee directors are
compensated for their services as follows:
|
|
|
Board Meeting
Fee
|
Committee
Meeting Fee
|
||
|
Position
|
Annual
Fee
|
In
Person
|
Telephonic
|
In
Person
|
Telephonic
|
|
Position
|
($)
(1)
|
($)
|
($)
|
($)
|
($)
|
|
Board
Member
|
25,000
|
1,000
|
500
|
500
|
250
|
|
Audit Committee
Chair
|
20,000
|
1,500
|
500
|
500
|
250
|
|
Compensation
Committee Chair
|
10,000
|
1,500
|
500
|
500
|
250
|
|
Governance
Committee Chair
|
10,000
|
1,500
|
500
|
500
|
250
|
|
Special
Committee
|
-
|
500
|
250
|
500
|
250
|
|
Lead
Director
|
10,000
|
-
|
-
|
-
|
-
|
(1)
Payments are made on a quarterly basis.
Directors who are
officers or employees of Rekor or its subsidiaries do not receive
any compensation for service on our Board, but employee directors
will be reimbursed for expenses incurred in attending meetings of
our Board or any committees thereof.
18
The
Governance Committee has responsibility for reviewing and, if
appropriate, for approving any related party transactions that
would be required to be disclosed pursuant to applicable SEC
rules.
Described below are
any transactions since January 1, 2017 through August 31, 2020 and
any currently proposed or subsequent transactions to which the
Company was a party in which:
●
The amounts
involved exceeded or will exceed the lower of either $120,000 or 1%
of the average of the Company’s total assets at year- end for
the last two completed fiscal years; and
●
A director,
executive officer, holder of more than 5% of the outstanding
capital stock of the Company, or any member of such person’s
immediate family had or will have a direct or indirect material
interest.
Review
and Approval, or Ratification of Transactions with Related
Parties
Prior
to adoption of the Company’s Code of Conduct in August 2017,
we had no formal, written policy or procedure for the review and
approval of related-party transactions. The Code of Conduct
requires all Company personnel to seek review of and obtain
approval or ratification of any Company transaction which involves
them or certain family members or businesses they have economic
interests in. The Charter of our Governance Committee also requires
that any transaction with a related person that must be reported
under applicable rules of the SEC must be reviewed and either
approved, disapproved or ratified by our Governance
Committee.
In
February 2020, to further implement these requirements, the Board
of Directors adopted a Conflict of Interest and Related Parties
Transaction Policy upon the recommendation of the Governance
Committee. In the case of all directors and senior officers, this
policy requires review and approval of such transactions to be
obtained from the Governance Committee.
Except
with respect to the Avon Road Note Purchase Agreement, which was
reviewed and approved by officers and directors other than Mr.
Berman, each of the transactions described below was approved by
the Board of Directors after review and recommendation by the
Governance Committee, which consists entirely of officers and
directors without any personal, business or family interest in the
transactions described:
Avon
Road Note Purchase Agreement
On
March 16, 2016, we entered into a Subordinated Note and Warrant
Purchase Agreement (the “Avon Road Note Purchase
Agreement”) pursuant to which we agreed to issue up to
$1,000,000 in subordinated debt (the “Avon Road Note”)
and warrants to purchase up to 242,493 shares of our common stock
(the “Avon Road Subordinated Note Warrants”). The
exercise price for the Avon Road Subordinated Note Warrants was
$1.031 per share of common stock. Subordinated notes with a face
amount of $500,000 and Avon Road Subordinated Note Warrants to
purchase 121,247 shares of our common stock have been issued
pursuant to the Avon Road Note Purchase Agreement to Avon Road, an
affiliate of Robert Berman, Rekor’s Chief Executive Officer
and a member of our Board of Directors. The Avon Road Subordinated
Note Warrants expired on March 16, 2019.
The
Avon Road Note accrued simple interest on the unpaid principal of
the note at a rate of 9% per annum. Interest was payable monthly
with a maturity date of March 16, 2019. The effective interest rate
of the Avon Road Note was 12.9%. On October 23, 2018, the maturity
date of this note was extended to March 16, 2020. On March 12,
2019, the $500,000 balance due on the Avon Road Note was retired in
its entirety.
AOC
Key Solutions Transaction
On
March 16, 2020 the Corporation announced that it had received an
offer to purchase its AOC Key Solutions subsidiary, for an
aggregate price of $4 million, from PurpleReign, LLC
(“PurpleReign”), an entity formed by Mr. Greg McCarthy,
the then Chief Executive Officer of AOC Key Solutions. As founders
of AOC Key Solutions and persons related to a principal in
PurpleReign and a key executive of AOC Key Solutions , Mr. James
McCarthy, the then-Chair of our Board of Directors, and Dr. Richard
Nathan, as a member of our Board of Directors, recused themselves
from participation in any discussions with management or the Board
concerning the potential sale. In connection with its review of the
transaction, the Governance Committee retained the investment
banking services of B. Riley FBR, Inc. (“BRFBR”) to
review the terms of the proposed transaction and advise the Company
whether the consideration to be received was fair to the
Company’s public stockholders. On March 31, 2020, the Company
divested its AOC Key Solutions subsidiary.
19
Investment
in 2019 Promissory Notes and Exchange for Equity
On
March 12, 2019, we financed the acquisition of certain assets
through an agreement pursuant to which investors loaned us
$20,000,000 in exchange for promissory notes (the “2019
Notes”) and we issued warrants to purchase 2,500,000 shares
of our common stock to the investors. The investors included Avon
Road, an affiliate of Robert Berman, Rekor’s Chief Executive
Officer and a member of our Board of Directors and Matt Hill, a
principal in the company selling the assets, who is now the
Company’s Chief Science Officer. On July 15, 2020, the
“Company completed an exchange provided for in connection
with the 2019 Notes. Approximately $15.1 million aggregate
principal amount of the 2019 Notes were exchanged for 4,349,497
shares of the Company’s common stock pursuant to the
previously disclosed Exchange Agreements dated June 30, 2020. As
part of the exchange, Matt Hill, Chief Science Officer exchanged
$1,726,676 into 431,669 common shares. After this transaction Matt
Hill owns 961,669 common shares.
McCarthy
– Berman Stock Purchase Agreement
On
August 5, 2020, our former Chairman, Mr. James McCarthy entered
into a privately negotiated Stock Purchase Agreement with Mr.
Robert A. Berman, our current CEO, President, and Executive
Chairman, to sell Mr. Berman 2,725,836 shares of the
Company’s common stock, at a price per share of approximately
$2.57. The transfer of the shares is conditioned upon Mr. Berman's
full payment of the purchase price of $7,000,000 within forty-five
days, after which Mr. McCarthy will cease to be a beneficial owner
of the Company’s common stock.
Director
Independence
Paul de
Bary, Glen Goord, Christina Harada, Steven D. Croxton, and David P.
Hanlon are each “independent” within the meaning of
Nasdaq Rule 5605(b)(1).
20
PROPOSAL
NO. 2
RATIFICATION
OF THE APPOINTMENT OF FRIEDMAN LLP AS INDEPENDENT PUBLIC ACCOUNTANT
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020
Effective June 30,
2020, the Audit Committee has appointed Friedman LLP, independent
public accountant, to audit our financial statements for the fiscal
year ending December 31, 2020. A representative of Friedman LLP is
expected to be virtually present at the 2020 Annual Meeting and
will have an opportunity to make a statement if he or she desires
to do so. It is also expected that such representative will be
available to respond to appropriate questions.
The
Audit Committee retained Friedman LLP as the Company’s
independent registered public accounting firm to perform the audit
of the Company’s consolidated financial statements for the
fiscal year ending December 31, 2020, and the audit of the
Company’s internal control over financial reporting as of
December 31, 2020.
Our
independent registered public accounting firm for 2018 and 2017 was
BD & Company, Inc., (“BD & Company”). BD &
Company served as our principal auditor from May 2017 until June
2019.
The
Audit Committee has considered whether the provision of services,
other than services rendered in connection with the audit of our
annual financial statements, was compatible with maintaining BD
& Company’s independence. The Audit Committee has
determined that the rendering of non-audit services by BD &
Company during 2018 was compatible with maintaining the
firm’s independence.
Aggregate fees
billed or incurred related to the following years for professional
services rendered by Friedman for 2019 and 2018 are set forth
below.
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For the Year Ended
December 31,
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2019
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2018
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(Dollars in
thousands)
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Audit
fees
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$
168
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$
-
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Audit-related
fees
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-
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-
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Tax
fees
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-
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-
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All other
fees
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13
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-
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Total
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$
181
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$
-
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21
Aggregate fees
billed or incurred related to the following years for professional
services rendered by BD & Company for 2019 and 2018 are set
forth below.
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For the Year Ended
December 31,
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2019
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2018
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(Dollars in thousands)
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Audit
fees
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$
110
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$
205
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Audit-related
fees
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-
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104
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Tax
fees
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18
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40
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All other
fees
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73
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-
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Total
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$
201
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$
349
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Audit
Fees for 2019 and 2018 include fees associated with the audits of
the annual financial statements and the quarterly reviews of the
unaudited interim financial statements included in the
Company’s Quarterly Reports on Form 10-Q. Audit-related fees
for 2019 primarily include costs associated with SEC filings and
the supplemental audit and disclosure documents. Tax fees for 2019
and 2018 include fees associated with the preparation and reviews
of tax returns, advising on the impact of local tax laws, and tax
planning. All other fees for 2019 include fees associated with the
Sales Agreement with B. Riley and transition costs from BD &
Company to Friedman. In June 2019, BD & Company became our tax
provision and tax return preparer, and the fees associated with
these services are presented as tax fees in the table
above.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
Consistent with SEC
policies and guidelines regarding audit independence, the Audit
Committee is responsible for the pre-approval of all audit and
permissible non-audit services provided by our principal
accountants on a case-by-case basis. Our Audit Committee has
established a policy regarding approval of all audit and
permissible non-audit services provided by our principal
accountants. Our Audit Committee pre-approves these services by
category and service. Our Audit Committee has pre-approved all of
the services provided by our principal accountants.
No
Appraisal Rights
Under
Delaware law, our shareholders are not entitled to appraisal rights
with respect to our proposed ratification of the appointment of
Friedman LLP as our independent public accountant and we will not
independently provide our shareholders with any such
rights.
Vote
Required
The
affirmative vote of a majority of the votes cast for this proposal
is required to ratify the appointment of the Company’s
independent public accountant. Abstentions will be counted towards
the tabulation of votes cast on this proposal and will have the
same effect as a negative vote. Brokerage firms have authority to
vote customers’ unvoted shares held by the firms in street
name on this proposal. If a broker does not exercise this
authority, such broker non-votes will have no effect on the results
of this vote. We are not required to obtain the approval of our
shareholders to appoint the Company’s independent accountant.
However, if our shareholders do not ratify the appointment of
Friedman LLP as the Company’s independent public accountant
for the fiscal year ending December 31, 2020, the Audit Committee
may reconsider its appointment.
THE
BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
FRIEDMAN LLP AS INDEPENDENT PUBLIC ACCOUNTANT, AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
SHAREHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
As of
the date of this Proxy Statement, the Board knows of no other
business that will be presented at the Annual Meeting. If any other
business is properly brought before the Annual Meeting, it is
intended that proxies in the enclosed form will be voted in respect
thereof in accordance with the best judgment and in the discretion
of the persons voting the proxies.
22
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REKOR SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF SHAREHOLDERS – SEPTEMBER 30, 2020 AT 10:00 AM EDT
TIME
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CONTROL ID:
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REQUEST ID:
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The
undersigned hereby appoints Robert A Berman, President, CEO and
Chairman, and Eyal Hen, Chief Financial Officer, as proxy of the
undersigned, with power of substitution, to vote all shares held by
the undersigned which are entitled to be voted at the Meeting of
the Shareholders of Rekor Systems, Inc. (the “Company”)
to be held September 30, 2020, or such later date or dates as such
Annual Meeting date may be adjourned, virtually, via a live video
webcast on the Internet at: https://www.issuerdirect.com/virtual
-event/rekr, for the purpose of considering and taking action on
the following proposals:
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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Important Notice Regarding the Availability of Proxy
Materials
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for the Shareholder Meeting To Be Held on September 30,
2020
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The
Notice of the Meeting, Proxy Statement, Proxy Card, Annual Report
on Form 10-K
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are available at
www.iproxydirect.com/rekr
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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FAX:
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Complete the reverse portion of this Proxy Card
and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/
REKR
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL MEETING OF THE SHAREHOLDERS OFREKOR SYSTEMS,
INC.
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PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE:
☒
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal
1
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FOR
ALL
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WITHHOLD
ALL
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FOR
ALL
EXCEPT
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Election
of Directors.
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☐
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☐
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Robert
Berman
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☐
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CONTROL ID:
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Dr.
Richard Nathan
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☐
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REQUEST ID:
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Paul
Goord
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☐
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Paul
A. de Bary
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☐
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Christine
J. Harada
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☐
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David
P. Hanlon
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☐
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Steven
D. Croxton
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☐
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Proposal
2
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FOR
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AGAINST
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ABSTAIN
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Ratify
the appointment of Friedman LLP as our independent public
accountant for the fiscal year ending December 31,
2020.
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☐
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☐
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☐
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Proposal
3
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FOR
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AGAINST
|
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ABSTAIN
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To transact such
other business as may be properly brought before the Annual Meeting
and any adjournments thereof.
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☐
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☐
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☐
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MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING:
☐
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR ALL
PERSONS LISTED IN PROPOSAL 1 AND A VOTE FOR PROPOSALS 2 AND
3.
The
undersigned hereby revokes any proxy or proxies heretofore given to
vote or act with respect to the capital stock of the Company and
hereby ratifies and confirms all that the Proxy, or his
substitutes, or any of them, may lawfully do by virtue
hereof.
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MARK HERE FOR ADDRESS CHANGE
☐
New
Address (if applicable):
_________________________
_________________________
_________________________
IMPORTANT:
Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized
person.
Dated:
________________________, 2020
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(Print Name of
Shareholder and/or Joint Tenant)
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(Signature of
Shareholder)
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(Second Signature
if held jointly)
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TABLE OF CONTENTS