Unless otherwise directed, the persons named in the accompanying proxy card will vote the proxies held by them in favor of the nominees named below as directors. Should any nominee for director become unable to serve as a director for any reason, the proxies have indicated they will vote for such other nominee as the Board may propose. The Board has no reason to believe that any candidate will be unable to serve if elected and each has consented to being named a nominee.
We know of no arrangements or understandings between a director or nominee and any other person pursuant to which he or she has been selected as a director or nominee except for the amended standstill agreement with Harbert.nominee. There is no family relationship between any of the nominees, our directors or our executive officers.
The process undertaken by the Governance Committee in recommending qualified director candidates is described below under “Corporate Governance – Director Nominations”Nominations and Board Diversity” on page 1114 of this proxy statement. In recommending the following nominees, the Governance Committee found that all of our directors contribute to the Board’s effectiveness through their wealth of business experience, high quality backgrounds including demonstrated personal and professional ethics and integrity, commitment to Qumu and the work of the Board, and diversity of talent and experience.
Set forth below are the biographies of each director nominee, as well as a discussion of the specific experience, qualifications, attributes and skills that led to the conclusion that the nominee should serve as a director of Qumu at this time:
Mr. Hanzlik’sKennedy’s role as our Chief Executive Officer gives him unique insights as a director into our challenges, opportunities and operations, as well as helps ensure a strong alignment between the board’s directives and management’s execution of these directives. Mr. HanzlikKennedy has demonstrated executive leadership abilities, as well as a strong backgroundexpertise in creating, communicating, executingdeveloping and sustainingleading companies and strategic initiatives in the software industry.
their online information and image. He also serves as a Senior Technology & Telecom Advisor to XMS CapitalCMD Global Partners, an independent financial services firm providing M&A and corporate advisory services. From May 2006In August 2015, Mr. Cox was appointed by the U.S. Secretary of Commerce to March 2010, be on the board of directors of First Responder Network Authority (FirstNet.gov), which designed and oversaw the world’s first wireless network for first responders. Mr. Cox also chairs the technology committee of the FirstNet board.
Mr. Cox held roles as President of SecurityLink from Ameritech, President of Ameritech Information Technology Services and with Qwest Communications International, Inc. (NYSE: Q until its acquisition in 2010 by CenturyLink, Inc.). From September 2008 to March 2010,,where he served as the Executive Vice President of Qwest Communications International, with responsibility for business development, product development and IT. From 2004 to 2006, Mr. Cox was a Venture Partner at MK Capital, which invests in emerging technologies and application software. From March 2001 to September 2004, Mr. Cox served as Executive Vice President for the telecommunications sector at Science Applications International Corporation (NYSE: SAIC), a science, engineering and technology applications company. In August 2015, Mr. Cox was appointed by the U.S. Secretary of Commerce to be on the board of directors of FirstNet, which will build the world’s first wireless network for first responders. Mr. Cox also chairs the technology committee of the FirstNet board.
Mr. Cox contributes to the Board through his strong background in executive-level management and deep level of operational experience, particularly with the development and growth of new communications technologies.
Mr. Fishback brings to the Board strong leadership skills developed as an executive of several companies in the software industry and in-depth knowledge of the software industry. Mr. Fishback is also an audit committee financial expert as that term is defined under the rules of the Securities and Exchange Commission.
Academic Excellence. From to August 2010 to August 2012, Mr. Lucas was an associate at Swander Pace Capital, a middle-market private equity firm, and focused on mergers and acquisitions and corporate finance transactions and consulted with portfolio companies on strategy, growth initiatives, and corporate financing options. From 2007 to June 2010, Mr. Lucas was an analyst at Cowen and Company, a middle-market investment bank, where he advised companies on sell-side transactions and strategic alternatives. Since January 2018, Mr. Lucas has served on the board of directors of Streamline Health Solutions, Inc. (Nasdaq: STRM), a provider of integrated solutions, technology-enabled services and analytics supporting revenue cycle optimization for healthcare enterprises.
Mr. Lucas brings to the Board and the CompanyQumu significant experience in equity capital markets, evaluating financing options, assessing corporate strategy, and considering other strategic alternatives. He also contributes to the Board through his perspective aswith our largest shareholder.
Under Minnesota law and our bylaws, directors are elected by a plurality of the votes cast by holders present and entitled to vote on the election of directors at a meeting at which a quorum is present. This means that sinceSince shareholders will be electing sixseven directors, the sixseven nominees receiving the highest number of votes will be elected.
However, in an uncontested election (where, as at the Annual Meeting, the number of nominees does not exceed the number of directors to be elected), any nominee for directorsdirector who receives more votes “withheld” from his or her election than votes “for” his or her election is required under our Governance Guidelines to promptly tender his or her resignation following certification of the shareholder vote. Votes withheld from a nominee’s election do not include broker non-votes. The Governance Committee will consider the resignation offer and recommend to the Board whether to accept it. The Board will act on the Governance Committee’s recommendation within 90 days following certification of the shareholder vote. The Board will promptly disclose its decision whether to accept the director’s resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a Current Report on Form 8-K filed with the Securities and Exchange Commission. Any director who tenders his or
her resignation as described above will not participate in the Governance Committee’s recommendation or Board action regarding whether to accept the resignation offer.
The Governance Committee undertook a review of director independence in February 20192021 as to all seven directors, then serving.all of whom served during 2020. As part of that process, the Governance Committee reviewed all transactions and relationships between each director (or any member of his or her immediate family) and Qumu, our executive officers and our auditors, and other matters bearing on the independence of directors. As a result of this review, the Governance Committee recommended and the Board of Directors affirmatively determined that each director isserving during any part of 2020 was independent at the time of service according to the “independence” definition of the Nasdaq Listing Rules, with the exception of Mr. Hanzlik.Hanzlik and Mr. TJ Kennedy. Mr. Hanzlik iswas not independent under the Nasdaq Listing Rules because he was employed by, and served as an executive officer of, Qumu in 2018.2020 until July 14, 2020. Mr. Kennedy, who was appointed as our President and Chief Executive Officer and was elected as a director on July 20, 2020, is not independent under the Nasdaq Listing Rules because he is employed by, and serves as an executive officer of, Qumu.
The Board has established a Compensation Committee, an Audit Committee and a Governance Committee. The composition and function of these committees are set forth below.
In connection with its review of compensation of executive officers or any form of incentive or performance-based compensation, the Compensation Committee will also review and discuss risks arising from our compensation policies and practices.
The charter of the Compensation Committee requires that this Committee consist of no fewer than two Board members who satisfy the “independence” requirements of the Nasdaq Stock Market and Rule 10C-1 of the Securities Exchange Act of 1934 and the “non-employee director” requirements of SectionRule 16b-3 ofunder the Securities Exchange Act of 1934, and the “outside director” requirements of Section 162(m) of the Internal Revenue Code.1934. Each member of our Compensation Committee meets these requirements. A copy of the current charter of the Compensation Committee is available by following the link toon the Corporate Governance page of the Investor Relations section of our website: www.qumu.com/company/investor-relations/corporate-governance.
The Compensation Committee has delegated authority to the Chief Executive Officer and Chief Financial Officer to grant equity awards under the 2007 Plan to employees who are not executive officers of Qumu. The delegationQumu, subject to limits on the size of authority is limitedaward and reporting to new hire grants to any individual that corresponds to that persons’ position within Qumu, not to exceed the amount set by the Compensation Committee from time to time, if any, or 20,000 equity awards, and the delegation authority may not exceed, in the aggregate, the total amount established on an annual basis by the Compensation Committee. Equity awards mean stock options and restricted shares and unless otherwise determined byThe term of the Compensation Committee, grants of restricted shares shall reduce the limits set forth above on the basis of 2.5 equity awards for each restricted share granted. Further, the Chief Executive Officer and Chief Financial Officer must memorialize the terms of the award in a written form contemporaneously with his approval of the award and must advise the Compensation Committee of such awards at a Compensation Committee meeting following such award. The terms of option and restricted stock awardsgranted by the Chief Executive Officer and Chief Financial Officer must be those contained in our standard formforms of non-qualified stock option agreement or standard formaward agreements and the awards granted have predetermined, fixed grant dates following approval under delegated authority.
Financial Officer to newly-hired non-executive employees, the grant date will be the second Tuesday of the month following the employee’s start date, or if the Nasdaq Stock Market was closed on such second Tuesday, the next succeeding day on which the Nasdaq Stock Market is open for regular trading.
Governance Committee. The Governance Committee operates under a written charter and is charged with the responsibility of identifying, evaluating and approving qualified candidates to serve as directors of our company, ensuring that our Board and governance policies are appropriately structured, developing and recommending a set of corporate governance guidelines, overseeing Board orientation, training and evaluation, and establishing an evaluation process for the Chief Executive Officer. The Governance Committee is also responsible for the leadership structure of our board, including the composition of the Board and its committees, and an annual review of the position of chairman of the Board. As part of its annual review, the Governance Committee is responsible for identifying individuals qualified to serve as Chairman and making recommendationrecommendations to the Board for any changes in such position. The Governance Committee also has responsibility for overseeing our annual process of self-evaluation by members of the committees and the Board as a whole.
As part of its annual review of its charter, the Governance Committee recommended and our Board of Directors approved an amendment in February 2021 to require the Governance Committee to periodically review and assess our significant environmental, social, and governance (ESG) issues, risks, and trends, and oversee Qumu’s engagement with and disclosures to shareholders and other interested parties concerning ESG matters.
The charter of the Governance Committee requires that this Committee consist of no fewer than two Board members who satisfy the “independence” requirements of the Nasdaq Stock Market. Each member of our Governance Committee meets these requirements. A copy of the current charter of the Governance Committee is available by following the link toon the Corporate Governance page of the Investor Relations section of our website: www.qumu.com/company/investor-relations/corporate-governance. A copy of our current Governance Guidelines is also available in this same section. TheSince the beginning of 2020, the members of the Governance Committee in 2018 were Thomas F. Madisonhave been Edward D. Horowitz (Chair), Kimberly K. Nelson, Kenan Lucas and Neil E. Cox.Cox, and Robert F. Olson. During 2018,2020, the Governance Committee met threetwo times.
Audit Committee. The Audit Committee assists the Board by reviewing the integrity of our financial reporting processes and controls; the qualifications, independence and performance of the independent auditors; and compliance by us with certain legal and regulatory requirements. The Audit Committee has the sole authority to retain, compensate, oversee and terminate the independent auditors. The Audit Committee reviews our annual audited financial statements, quarterly financial statements and filings with the Securities and Exchange Commission. The Audit Committee reviews reports on various matters, including our critical accounting policies, significant changes in our selection or application of accounting principles and our internal control processes. Under its charter, the Audit Committee exercises oversight of significant risks relating to financial reporting and internal control over financial reporting, including discussing these risks with management and the independent auditor and assessing the steps management has taken to minimize these risks. The Audit Committee also pre-approves all audit and non-audit services performed by the independent auditor.
The Audit Committee operates under a written charter and a copy of the current Audit Committee charter is available by following the link toon the Corporate Governance page of the Investor Relations section of our website: www.qumu.com/company/investor-relations/corporate-governance. TheSince the beginning of 2020, the members of the Audit Committee during 2018 were Kimberly K. Nelsonhave been Mary E. Chowning (Chair), Thomas F. Madison,Kenan Lucas, and Kenan Lucas.Edward D. Horowitz. During 2018,2020, the Audit Committee met nine times, including sixnine times in executive session without management present.
The Board has determined that all members of the Audit Committee are “independent” directors under the rules of the Nasdaq Stock Market and the rules of the Securities and Exchange Commission. Our Governance Committee and Board have reviewed the education, experience and other qualifications of each of the members of its Audit Committee. After review, upon recommendation of the Governance Committee, the Board has determined that the Audit Committee membersmember Ms. NelsonChowning and Mr. MadisonLucas each meet the Securities and Exchange Commission definition of an “audit committee financial expert.” The members of the Audit Committee also meet the Nasdaq Stock Market requirements regarding the financial sophistication and the financial literacy of members of the audit committee. A report of the Audit Committee is set forth below.
Board Leadership Structure
Currently, the leadership structure of Qumu’s Board consists of a non-executive chairmanchair of the Board, currently Robert F. Olson,Neil E. Cox, and three standing committees that are each led by a separate chair and consist of only directors that meet the independence requirement under the Nasdaq Listing Rules and the other similar requirements applicable to that
committee. The Chief Executive Officer is a director, but does not serve as chairmanchair of the Board and does not serve on any committee.
The Governance Committee believes that the current Board leadership structure is appropriate for Qumu at this time because it allows the Board and its committees to fulfill their responsibilities, draws upon the experience and talents of all directors, encourages management accountability to the Board, and helps maintain good communication among Board members and with management.
Board’s Role in Risk Oversight
Qumu faces a number of risks, including financial, technological, operational, strategic and competitive risks. Management is responsible for the day-to-day management of risks we face, while the Board has responsibility for the oversight of risk management. In its risk oversight role, the Board ensures that the processes for identification, management and mitigation of risk by our management are adequate and functioning as designed.
Our Board is actively involved in overseeing risk management, and it exercises its oversight both through the full Board and through the three standing committees of the Board, the Audit Committee, the Compensation Committee and the Governance Committee. The three standing committees exercise oversight of the risks within their areas of responsibility, as disclosed in the descriptions of each of the committees above and in the charters of each of the committees. In February 2021, the Board determined that the Governance Committee would exercise oversight of environmental, social and governance issues and the charter of the Governance Committee was amended accordingly.
The Board and the three committees receive information used in fulfilling their oversight responsibilities through Qumu’s executive officers and its advisors, including our legal counsel, our independent registered public accounting firm, our consulting firm for internal controls over financial reporting, and the compensation consultants we have engaged from time to time. At meetings of the Board, management makes presentations to the Board regarding our business strategy, operations, financial performance, annual budgets, technology, ESG and other matters. Many of these presentations include information relating to the challenges and risks to our business and the Board and management actively engage in discussion on these topics. Each of the committees also receives reports from management regarding matters relevant to the work of that committee. These management reports are supplemented by information relating to risk from our advisors. Additionally, following committee meetings, the Board receives reports by each committee chair regarding the committee’s considerations and actions. In this way, the Board also receives additional information regarding the risk oversight functions performed by each of these committees.
Our Environmental, Social and Governance Principles
We are committed to operating in a sustainable and socially responsible manner. As an industry leader, transparency is embedded in our core values and is practiced in our day-to-day interactions, including in the development of our ESG programs, our progress in achieving our ESG initiatives, and our measurement and reporting on our ESG impact. Our governance principles and practices are summarized in this Corporate Governance section, in the Executive Compensation section and elsewhere in this proxy statement. Below are summaries of our environmental sustainability and social sustainability programs.
Environmental Sustainability
Qumu provides Enterprise Video as a Service to businesses worldwide, but the benefits of our services and focus of our operations do not stop there. Qumu is committed to the protection and conservation of the environment and is contributing to environmental sustainability in several ways.
Qumu Services and Customers
First, Qumu is in the business of helping organizations use video on a global scale to increase the agility and sustainability of their enterprise—large or small—by communicating more effectively and collaborating more nimbly. Our products often contribute to helping ensure the continuity of our customers’ operations in the face of environmental, health and social events that can cause disruption, and facilitate the ability to reduce environmental impact through reduced energy consumption through reduction in need for physical locations, commuting and business travel.
Qumu’s Internal Operations
Second, Qumu is practicing what it preaches in the market by now fully leveraging our video platform and other forms of remote communications to conduct our own internal business operations. Qumu has closed three of our physical locations and is now a “work from wherever, forever” company, virtually eliminating employee commuting, significantly reducing travel, and minimizing environmental impacts associated with the use of physical office locations.
Qumu’s Technology
Third, Qumu is now primarily a software as a service (SaaS) based business, leveraging the cloud for the majority of our services, resulting in predictable and sustainable revenue. This move from primarily a provider of on-premise hardware and software solutions to a SaaS-based cloud offering has also reduced our hardware and energy requirements. In addition, Qumu is now leveraging cloud hosting services for our SaaS products, with the service provider matching 100% of its electricity consumption with renewable energy purchases and planning to fully decarbonize its electricity supply by 2030.
At Qumu, we are striving to improve the efficiency of our operations, and explore new initiatives to help protect the environment for our customers, the communities we serve, and the global good.
Social Sustainability
Qumu is not only a leader in the services we provide to our customers, but we care deeply about all of the individuals and organizations that operate within and in conjunction with the Qumu ecosystem. We believe it is our responsibility to conduct our business in a socially sustainable and supportive manner, advocating for the overall health, wellness and success of our employees, partners and customers. Qumu has undertaken several initiatives aimed at improving the social wellness of its employees and stakeholders and promoting socially responsible causes.
Work from Wherever, Forever
Qumu’s "Work from Wherever, Forever" policy has afforded our personnel the ability to have greater control over their lives while maintaining or increasing productivity. Our employees are able to work from just about anywhere, which affords them a greater work–life balance. Commutes have all but been eliminated and business travel, due in part to the Covid-19 pandemic, has been significantly reduced, which we anticipate to continue throughout 2021. Due to this virtual approach to work, Qumu is able to offer new work opportunities to individuals who, based on location alone, may not have otherwise been eligible for such positions in the past, greatly expanding the pool of great talent available to Qumu and making the opportunities at Qumu more broadly available to a global audience.
Diversity, Equity & Inclusion
Talent unbridled by geographic limitations also creates the opportunity for greater diversity. Qumu is dedicated to increasing diversity of its workforce and working with partners who emphasize the importance and benefits of a diverse workforce. In 2020, Qumu established a new Diversity, Equity and Inclusion (DE&I) Committee comprised of employees from all of Qumu’s functions and levels. The Committee is charged with recommending and helping implement Qumu’s DE&I vision to ensure that Qumu is leveraging the most diverse set of viewpoints, perspectives and skills sets making us a stronger and inclusive enterprise. Qumu is committed to achieving diversity and inclusiveness within our workplace through an ongoing process for creating change through education, collaboration and vigilance.
Health and Wellness
With the increase in remote work, in particular due to the COVID-19 pandemic, in person interactions have decreased and we expect even after the pandemic is under control that our remote work force will have reduced levels of in-person interactions compared to pre-pandemic levels. As such, Qumu has adjusted its approach to interacting with employees and has focused on new health and wellness initiatives to ensure employees remain healthy and productive as they conduct their work. Some of these measures include communicating appropriate social distancing and mask wearing guidelines as applicable consistent with state and CDC guidance; leveraging multimedia communications, including video, to
conduct most daily business operations; and weekly tips and guidance on maintaining both physical and mental health. In addition, to help employees remain productive and enable more focused work, Qumu has implemented the “Focus Fridays” program where all non-necessary video and conference calls have been eliminated freeing up time to enable Qumu personnel to focus on productive, priority work on Fridays without unnecessary distractions.
Data Center/Cyber Security
Qumu is a provider of enterprise video services that carry some of our customer’s most sensitive data. Organizations of all sizes and in all verticals rely on Qumu to securely deliver the best possible video experience at scale, for both internal and external audiences. Qumu takes a holistic approach to user and content security—one that spans video encryption, Single Sign On, advanced user security, retention policies, audit trails and more. Qumu is a trusted choice for industries that have high requirements for security and compliance: Banking, Financial Services, Health Care, Life Sciences, Manufacturing, Professional Services, Technology and Telecommunications to name a few.
Giving Back
Finally, Qumu’s socially responsible efforts don’t end with our own personnel, but extend to our services and customer relationships. For example, in 2020, we provided our Qumu Cloud video platform and support services free of charge to the American Foundation for Suicide Prevention (AFSP) to virtualize its largest annual giving event—and ultimately exceed its fundraising goals. Through the donation of our time and resources, Qumu helped The AFSP re-imagine and pivot its traditionally in-person event to a powerful virtual experience, ultimately sustaining its important mission—saving lives and bringing hope to those affected by suicide.
Employee, Officer and Director Hedging
Qumu’s insider trading policy prohibits our directors, executive officers, employees, consultants and their related persons from engaging in hedging transactions that are designed to hedge or speculate on any change in the market value of equity securities of Qumu (including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds). Short sales, including a “sale against the box,” are prohibited, and persons subject to Qumu’s insider trading policy are strongly discouraged from trading in puts and calls with respect to Qumu securities. Qumu’s directors and executive officers subject to Section 16 of the Securities Exchange Act of 1934 may not purchase Qumu securities on margin, borrow against any account in which Qumu securities are held, or pledge Qumu securities as collateral for a loan. Standing orders (except orders under approved 10b5-1 plans) may be used only for a very brief period of time.
Director Nominations and Board Diversity
The Governance Committee will consider candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. Shareholders who wish to recommend a prospective nominee should follow the procedures set forth in Section 3.14 of our bylaws as described in this Director Nominations section under “Shareholder Proposals for Nominees.” The Governance Committee has not adopted a formal policy for increasing or decreasing the size of the Board. Our Governance Guidelines provides that the Board should generally have between six and nine directors. The Governance Committee believes that a six-personseven-person Board is appropriate for Qumu in that it allows the Board to have a diversity of talent and experience to draw upon and allows the Board to appropriately staff the committees of the Board and engage the directors in Board and committee service. Immediately following the 2018 Annual Meeting, we reduced the number of authorized directors to seven and will cause the authorized number of directors to remain at seven at all times during the standstill period in accordance with the standstill agreement with Harbert, which is discussed under “Summary of Amended Standstill Agreement.” If appropriate, the Board may determine to increase or decrease its size, including in order to accommodate the availability of an outstanding candidate, subject to the terms of the standstill agreement, as amended.
Criteria for Nomination to the Board; Diversity Considerations. The Governance Committee is responsible for identifying, evaluating and approving qualified candidates for nomination as directors. The Governance Committee has not adopted minimum qualifications that nominees must meet in order for the Governance Committee to recommend them to the Board, as the Governance Committee believes that each nominee should be evaluated based on his or her merits as an individual, taking into account the needs of Qumu and the Board. The Governance Committee evaluates each prospective nominee against the standards and qualifications set out in our Governance Guidelines, including:
•Background, including demonstrated high personal and professional ethics and integrity;integrity, and the ability to exercise good business judgment and enhance the Board’s ability to manage and direct our affairs and our business;
•Commitment, including the willingness to devote adequate time to the work of the Board and its committees, and the ability to represent the interests of all shareholders and not a particular interest group;
•Board skills needs, in the context of the existing makeup of the Board, and the candidate’s qualification as independent and qualification to serve on Board committees;
•Business experience, which should reflect a broad experience at the policy-making level in business, government and/or education; and
•Diversity, in terms of gender, race, ethnicity, sexual orientation and other demographic characteristics, as well as diversity in knowledge, experience, skills, expertise, and other characteristics.
In considering candidates for the Board, including the nominees for election at the Annual Meeting, the Governance Committee considers the entirety of each candidate’s credentials with reference to these standards. The Governance Committee also considers such other relevant factors as it deems appropriate.
While the Governance Committee does not have a formal policy with respect to diversity, the Governance Committee does believebelieves it is important that the Board represent diverse viewpoints within the context of these standards. As part of the nominee selection process for the Annual Meeting, the Governance Committee reviewed the knowledge, experience, skills, expertise, and other characteristicsdiversity of the Board, including the demographic information relating to the Board. In particular, the Governance Committee noted that of our seven directors, who are eachone is a woman and one self-identifies as LGBTQ, resulting in 28% of the Board comprised of diverse directors.
Based upon the review of the Governance Committee, it believes that the overall mix of the backgrounds of the nominees for election at the Annual Meeting. The Governance Committee considered how each director contributed to the diversity of the Board. Based upon that review, the Governance Committee believes that the overall mix of their backgroundsMeeting contributes to a diversity of viewpoints that will enhance the quality of the Board’s deliberations and decisions.
In reviewing prospective nominees, the Governance Committee reviews the number of public-company Boards on which a director nominee serves to determine if the nominee will have the ability to devote adequate time to the work of our Board and its committees. Under our Governance Guidelines, non-employee directors generally may not serve on more than four Boards of other publicly owned companies, provided that the service does not adversely affect the director’s ability to perform his or her duties as a Qumu director.
The Governance Committee considers persons recommended by the shareholders using the same standards used for other nominees.
Process for Identifying and Evaluating Nominees. The process for identifying and evaluating nominees to the Board is initiated by identifying a slate of candidates who meet the criteria for selection as a nominee and have the specific qualities or skills being sought based on input from members of the Board and, if the Governance Committee deems appropriate, a third-party search firm. The Governance Committee evaluates these candidates by reviewing the candidates’ biographical information and qualifications and checking the candidates’ references. One or more Governance Committee members will interview the prospective nominees in person or by telephone.telephone or video conference. After completing the evaluation, the Governance Committee makes a recommendation to the full Board of the nominees to be presented for the approval of the shareholders or for election to fill a vacancy.
Board Nominees for the 20192021 Annual Meeting. The Governance Committee selected Messrs. Lucas and Cox as nominees for the Annual Meeting in October 2018 in accordance with the amendment to the standstill agreement with Harbert described below under “Summary of Amended Standstill Agreement.” All other nominees for the Annual Meeting were selected by the Governance Committee in February 2019.2021. The Governance Committee selected all nominees using the standards identified in our Governance Guidelines that are discussed in this section under “Criteria for Nomination to the Board; Diversity Considerations.” In selecting Mr. Madison as a nominee, the Governance Committee determined that, because of his demonstrated availability to the Board and valuable contributions as a Board member, it is in the best interests of Qumu and its shareholders to waive the provisions of our Governance Guidelines relating to maximum age of a nominee. All nominees were elected by shareholders at our 20182020 Annual Meeting.
We have not engaged a third-party search firm to assist us in identifying potential director candidates, but the Governance Committee may choose to do so in the future.
Shareholder Proposals for Nominees. The Governance Committee will consider written proposals from shareholders for nominees for director. Any such nominationsproposed nominees should be submitted to the Governance Committee c/o the Secretary of Qumu Corporation and should include the following information: (a) all information relating to
such nominee that is required to be disclosed pursuant to Regulation 14A under the Securities Exchange
Act of 1934 (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (b) the name and record address of the shareholder and of the beneficial owner, if any, on whose behalf the nomination will be made, and (c) the class and number of shares of the corporation owned by the shareholder and beneficially owned by the beneficial owner, if any, on whose behalf the nomination will be made. As to each person the shareholder proposes to nominate, the written notice must also state: (a) the name, age, business address and residence address of the person, (b) the principal occupation or employment of the person and (c) the class and number of shares of the corporation’s capital stock beneficially owned by the person. To be considered, the written notice must be submitted in the time frame described in our bylaws and in the section of this proxy statement entitled “Shareholder Proposals for 20202022 Annual Meeting.”
Summary of Amended Standstill Agreement
On December 19, 2017, we entered into a standstill agreement (the “standstill agreement”) with Harbert Discovery Fund, LP, Harbert Discovery Fund GP, LLC, Harbert Fund Advisors, Inc. and Harbert Management Corporation (collectively, “Harbert”). On October 25, 2018, we entered into an Amendment No. 1 (the “amendment”) to the standstill agreement with Harbert. Below is a summary of certain provisions of the standstill agreement, as amended by the amendment, relating to this 2019 Annual Meeting of Shareholders and beyond.
Messrs. Lucas and Cox were appointed to the Board of Directors on December 19, 2017 in connection with the standstill agreement and were elected by our shareholders to the Board at the 2018 Annual Meeting of Shareholders. Under the standstill agreement, we agreed to cause the authorized number of directors immediately following the 2018 Annual Meeting to remain at seven at all times during the standstill period.
At the time of the amendment, the Governance Committee recommended and the Board approved Messrs. Kenan Lucas and Neil E. Cox as nominees for election as directors at the 2019 Annual Meeting of Shareholders. Mr. Lucas currently serves on the Governance Committee and Audit Committee of the Board. Mr. Cox currently serves on the Governance Committee and Compensation Committee of the Board. Through the amendment, Messrs. Lucas and Cox may agree to other committee assignments.
Through the amendment, Harbert also agreed to appear in person or by proxy at the 2019 Annual Meeting of Shareholders and vote all shares of common stock beneficially owned by it in favor of the election of each of our nominees for election to the Board and in accordance with the Board’s recommendation on all other proposals.
Harbert is also subject to standstill provisions under the standstill agreement restricting Harbert and its affiliates from directly or indirectly taking certain actions in respect of Qumu or our common stock. Through the amendment, such provisions generally remain in effect for a standstill period ending the earlier of (a) 30 days prior to the deadline for the submission of shareholder nominations for our 2020 Annual Meeting of the Shareholders; and (b) the date that is 150 days prior to the first anniversary of the date of our proxy statement for the 2019 Annual Meeting of Shareholders.
Board Attendance at Board, Committee and Annual Shareholder Meetings
During 2018,2020, the Board met six27 times. Each nominee for director attended at least 75% of the meetings of the Board and committees on which he or she served during 2018.2020. The Board regularly meets in executive session without the presence of members of management, including the Chief Executive Officer. We do not have a formal policy on attendance at meetings of our shareholders. However, we encourage all Board members to attend all meetings, including the annual meeting of shareholders. All seven of the directors electednominated for election at the 2018 Annual Meeting of Shareholders attended the 20182020 Annual Meeting of Shareholders.
Communications With Directors
Shareholders may communicate with members of the Board by sending an e-mail to chair.director@qumu.com or by directing the communication in care of the Governance Committee Chair c/o Corporate Secretary, at the address set forth on the front page of this proxy statement. All communications will be received and processed by the Corporate Secretary. You will receive a written acknowledgement from the Corporate Secretary upon receipt of your communication.
Code of Ethics
We have adopted a code of ethics that applies to all directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions. This code of ethics is included in our Code of Ethics and Business Conduct, which is publicly available by following the link toon the Corporate Governance page of the Investors section of our website: www.qumu.com/en/investor-relations/corporate-governance. To the extent permitted, we intend to disclose any amendments to, or waivers from, the code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions or with respect to the required elements of the code of ethics on the page of our website identified above.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD
The following report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as amended, except to the extent that we specifically incorporate it by reference in such filing.
In accordance with its Charter, the Audit Committee has reviewed and discussed our audited financial statements with management. The Audit Committee has discussed with KPMGRSM LLP, our independent registered public accounting firm for 2018 and until March 19, 2019,2020, the matters required to be discussed by the applicable Public Company Accounting Oversight Board standards. The Audit Committee also reviewed and discussed with the independent registered public accounting firm, the firm’s judgments as to the quality of the accounting principles applied in Qumu’s financial reporting and the critical audit matter (‘‘CAM’’) addressed in the audit and the relevant financial statement accounts or disclosures that relate to the CAM.
The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence.
Based on the review and discussions referred to above, the Audit Committee recommended to our Board that our audited financial statements be included in our Annual Report on Form 10-K for the year ending December 31, 2018.2020.
By the Audit Committee of the Board:
Kimberly K. NelsonMary E. Chowning (Chair)
Thomas F. Madison
Kenan Lucas
Edward D. Horowitz
EXECUTIVE OFFICERS
Set forth below is biographical and other information for our current executive officers. Information about Vern Hanzlik,TJ Kennedy, our President and Chief Executive Officer, may be found in this proxy statement under the heading “Election of Directors.”
David G. Ristow, age 49,51, was hired as our Chief Financial Officer on December 15, 2017 after serving as our interim Chief Financial Officer on a consulting basis from November 7, 2017. From April 2017 until November 2017, Mr. Ristow acted as Chief Financial Officer of Ascent Solutions, a consulting companyprofessional services business delivering cybersecurity, cloud, IT strategy, and infrastructure enablement services. From July 2016 to April 2017, Mr. Ristow acted as Chief Financial Officer for eGrowcery, an Australian based international e-commerce software business. From January 2016 to June 2016, Mr. Ristow acted as the Chief Financial Officer of Noribachi, a manufacturer of high output commercial lighting technology solutions operatingdeveloped on an Internet Of Things platform. From 2012 to 2016, Mr. Ristow acted as Chief Financial Officer of portfolio companies and Director of Investments for Eurovestech Plc.Plc, an AIM listed organization in the UK, overseeing all new and existing investments of the fund. From 2007 to 2012, Mr. Ristow acted as Chief Financial Officer of KSS Retail, ana UK based international software business providing price optimization solutions to retailers throughout the world, which was sold in January 2010. Mr. Ristow has a B.S. in Accounting from the University of Southern California and began his finance career with Deloitte. Mr. Ristow is a licensed Certified Public Accountant (inactive status), active member of the AICPA, CGMA and veteran of the USMC.
EXECUTIVE COMPENSATION
Explanation of Compensation
The following describes our compensation objectives and policies as applied to the following executive officers who are referred to in this proxy statement as the named executive officers:
•TJ Kennedy, who served as President and Chief Executive Officer in 2020 beginning on July 20, 2020;
•David G. Ristow, who served as Chief Financial Officer in 2020; and
•Vern Hanzlik, who served as President and Chief Executive Officer in 2018;2020 until July 17, 2020.
David G. Ristow, who served as Chief Financial Officer in 2018.
Our Compensation Philosophy
Our philosophy with respect to the compensation of executive officers is based upon the following principles:
•Executive base compensation levels should be established by comparison of job responsibility to similar positions in comparable companies and be adequate to retain highly-qualified personnel; and
•Variable compensation should be established by comparison of job responsibility to similar positions in comparable companies and be adequate to retain highly-qualified personnel and should provide incentives to improve performance and shareholder value.
The Compensation Committee reviews compensation philosophy and programs regularly (no less than annually). The Compensation Committee’s review is two-fold: first, to ensure our philosophy and programs meet our objectives of providing compensation that attracts and retains executive talent and encourages our executive officers to achieve our business goals and second, to identify changes and trends in executive compensation policies and practices that may be applicable to Qumu.
2018 2020 Compensation Elements and Determinations
The Compensation Committee followed the guiding principles outlined above in the development and administration of compensation programs for the named executive officers. During 2018,2020, the components of our executive compensation programs consisted of the following:
•Base salary;
•Short-term incentive compensation delivered through the 2018 Incentive2020 Company Bonus Plan, the annual incentive plan for 2018;2020; and
•Long-term equity compensation.
The namedDuring 2020, the implementation of our executive compensation program was significantly impacted by our proposed merger with Synacor, Inc. and the merger agreement we entered into with Synacor, Inc. on February 11, 2020 and terminated on June 29, 2020. As part of the covenants of the merger agreement, we were required to conduct our business in the ordinary course during the period between the execution of the merger agreement and the termination of the merger agreement. We were also prohibited from taking certain compensation and other actions with respect to our executive officers were also eligible to participate inand other employees, including changing base salaries, granting or changing the same benefit programs as were available to our other employees. Becauseterms of equity awards, or implementing any new compensation program. Historically, the Compensation Committee does not believehas adopted an annual incentive plan for each year in February of that personal benefits oryear, as well as granted long-term equity compensation in February of each year. Due to the proposed merger and merger agreement restrictions, the Compensation Committee adopted the annual incentive plan for 2020 and made long-term equity compensation grants in July 2020 following termination of the merger agreement on June 29, 2020.
perquisites are appropriateDue to the Compensation Committee’s substantial concern regarding the potential difficulties in employee retention as a significant elementresult of compensation, the valueproposed merger, the Compensation Committee approved retention bonuses for certain Qumu non-executive officer employees in February 2020. On March 3, 2020, the Compensation Committee approved a retention agreement between Qumu and Mr. Ristow in order to ensure continuity in the key role of perksChief Financial Officer during the pendency of the proposed merger. Under the retention agreement, Mr. Ristow would be
paid a stay bonus of $54,000 if he remained employed through July 31, 2020 or if he were terminated without cause prior to July 31, 2020, subject to Mr. Ristow’s delivery of a release of claims against us. If Mr. Ristow resigned or was terminated for cause before July 31, 2020, we would not be obligated to pay the $54,000 stay bonus to Mr. Ristow. Mr. Hanzlik, the other executive officer serving at the time we entered into the merger agreement, was not party to any named executive officer was less than $10,000 in 2018.retention agreement or stay bonus arrangement. Because Mr. Ristow remained employed by us through July 31, 2020, he received the stay bonus.
In addition to selecting the components of compensation, the Compensation Committee also determined the relative weight of each component for each of the named executive officers. Performance-based, variable compensation is intended to be a meaningful portion of overall compensation. For 2018,2020, the Compensation Committee continued its practice of weighting this type of compensation more heavily than fixed compensation, such as base salary. For 2018, the Compensation Committee emphasizedemphasizing performance-based, variable compensation both through the 2018 Incentive Plan and through the multi-year performance stock unit awards granted in 2018 which will be earned based upon achievement of financial performance goals determined by the Compensation Committee.2020 Company Bonus Plan.
Annually, our Governance Committee establishes and oversees a process for the evaluation of the performance of the Chief Executive Officer by the whole Board, including a self-assessment by the Chief Executive Officer. The Compensation Committee then considers the results of that performance review in determining compensation of the Chief Executive Officer. Given the proposed merger that was pending from February 2020 to June 2020 and the transition of the Chief Executive Officer role in July 2020, the Governance Committee did not find it necessary to conduct a review of the Chief Executive Officer in 2020.
In determining 2018 compensation forOn July 14, 2020, we entered into an offer letter with Mr. Kennedy pursuant to which he agreed to accept our offer of employment to serve as Qumu’s President and Chief Executive Officer and to be appointed to our Board of Directors. Neil E. Cox, the named executive officers,Chair of the Board and a member of the Compensation Committee, also considered the May 2016 executivenegotiated with Mr. Kennedy on all elements of his compensation, assessment prepared by the Compensation Committee’s consultant, Radford. The assessment included an updated peer group, benchmarking of compensation (baseincluding annual base salary, target bonus opportunitypercentage and annual long-term incentive delivery) againstinitial stock option award, as well as the updated peer group,specific terms applicable to Mr. Kennedy under our form of letter agreement relating to severance and development of long-term incentive alternatives, including various equity vehicle mixes.change in control benefits. The Compensation Committee also reviewed updatedrecommended, and the Board of Directors approved, the compensation and surveys, reports and other market data against which it measuredto Mr. Kennedy under the July 14, 2020 offer letter.
On July 23, 2020, the Compensation Committee determined to engage Radford as its compensation consultant to assist the Compensation Committee in ensuring the competitiveness of our compensation programs and in particular, long-term incentive compensation to our executive officers for 2018.2020 and beyond. Under the charter of the Compensation Committee, any compensation consultant is retained directly by, and reports to, the Compensation Committee. Consistent with the charter, Radford was engaged by and reported to the Compensation Committee and the Compensation Committee reviewed Radford’s independence prior to engagement and determined that it was independent.
The Compensation Committee commissioned an executive compensation study from Radford that was delivered in September 2020. The scope of the engagement included development of executive compensation data comparing base salaries, target short-term incentives, target total cash, equity percentages and values, and total target direct pay for various executive and other senior leadership positions to comparable positions at companies in Radford’s global technology survey group, which included software companies with revenue ranges between $50 million and $325 million.
While the Compensation Committee viewed the 50th percentile of the peersurvey group as a key data point for the various elements of compensation it reviewed in 2018,September 2020, the Compensation Committee also considered experience, scope of position, individual performance, competitiveness and retention, our financial performance and position, our share price and market capitalization, and other factors when positioning elements of compensation to executive officers within the peersurvey group. In general,For our 2020 compensation program, each element of our compensation programspay to the executive officers as compared to benchmark peersurvey group companies iswas between the 25th and 50th percentile.
Historically, the Compensation Committee has typically considered the following factors in addition to the information set forth above to determining the value of long-term equity incentive compensation: (i) previously made grants to the executive officer; (ii) progress toward meeting our stock ownership guidelines; (iii) the type of equity award and the standard terms of that type of award; (iv) our historical grant practices; (v) the potential cash compensation to the executive officer; and (vi) the position of the executive officer to ensure that those in positions of increased responsibility have an opportunity to receive a correspondingly larger portion of the overall value of their compensation in the form of long-term equity compensation for the year. The Compensation Committee
During 2020, the named executive officers were also incorporated intoeligible to participate in the 2018 performance stock unit awards multiple financial performance goals, a two-year performance period of 2018 and 2019 and an additional one-year service period requirement for any shares earned, in ordersame benefit programs as were available to further extend the long-term incentives provided by these awards and further align pay with performance.
2018 Base Salaries
In March 2018,our other employees. Because the Compensation Committee determineddoes not believe that personal benefits or perquisites are appropriate as a significant element of compensation, the value of perks to change the annual base salary of Mr. Hanzlik or Mr. Ristow. Accordingly, any named executive officer was less than $10,000 in 2020.
2020 Base Salaries
Mr. Hanzlik’s annual base salary for 2018 continued to be the same amounts as were in effect for 2015 to 20172020 was $350,000 and Mr. Ristow’s annual base salary for 2018 continued to be the same amount as when he2020 was hired as our Chief Financial Officer on December 15, 2017.$300,000, both of which were set in 2019 and were unchanged into 2020. Mr. Hanzlik’sKennedy’s annual base salary for 2018 was $390,800 while he resides in Californiaapproved by the Compensation Committee and his unadjusted base salarythe Board at $375,000 as part of $308,800 was used for the purposes of calculating Mr. Hanzlik’s incentive pay opportunity under the 2018 Incentive Plan. Mr. Ristow’s annual base salary for 2018 was $275,000.Kennedy’s July 14, 2020 offer letter.
2018 Incentive2020 Company Bonus Plan
On March 20, 2018,July 23, 2020, the Compensation Committee adopted the 2018 Incentive2020 Company Bonus Plan and set the cash incentive pay opportunities under the 2018 Incentive2020 Company Bonus Plan for our eligible employees including our executive officers, Messrs. HanzlikKennedy and Ristow.
Under the 2018 Incentive2020 Company Bonus Plan, our achievement quarterly positivethe Compensation Committee determined target amounts of three performance goals for 2020: revenue, adjusted EBITDA as a percent of revenue will determine a pool available for payment of cash incentive payand customer retention, which were weighted 40%, 40% and 20%, respectively. Revenue was to all eligible employees, including the
executive officers.be determined in conformity with U.S. generally accepted accounting principles. Adjusted EBITDA iswas defined consistently with the Compensation Committee’s historic definition of adjusted EBITDA in order to provide comparability to 2019. Adjusted EBITDA under the 2020 Company Bonus Plan was defined as Qumu’s net income (loss) excluding items related to interest income and expense, the impact of income-based taxes, depreciation and amortization, stock-based compensation, change in fair value of warrant liability,liabilities, foreign currency gains and losses, the 2018 Incentive2020 Company Bonus Plan amounts, and other non-operating income and expenses, and transaction-related expenses. The failure to achieve the minimum adjusted EBITDA forCustomer retention was measured as a particular quarter results in no incentive pay under the 2018 Incentive Plan for that quarter. Additionally, the failure to achieve the minimum adjusted EBITDA for the full year 2018, even if quarterly adjusted EBITDA targets are achieved, will result in no incentive pay under the 2018 Incentive Plan.gross renewal rate percentage. The Compensation Committee retainsretained the discretion to include or exclude items from adjusted EBITDAeach of the performance goals and to determine the amountsachievement of adjusted EBITDA to be used inthe performance goals for the purposes of calculating incentive pay under the 2018 Incentive2020 Company Bonus Plan.
For each participant inUnder the 2018 Incentive2020 Company Bonus Plan, the quarterlytarget level of achievement was also the minimum level of achievement such that achievement of a performance goal at less than target level would result in no incentive pay opportunity will be determined by the participant’s base salary multiplied bywith respect to that participant’sperformance goal. Achievement of a performance goal at greater than target level would result in proportionately increasing incentive pay percentage. For Messrs. Hanzlik and Ristow,relating to that performance goal. However, under the 2020 Company Bonus Plan, the maximum incentive pay that may be earned by an executive officer would not exceed 150% of his incentive pay at the target level, even if actual performance exceeds the maximum level for any or all of the performance goals.
On July 23, 2020, the Compensation Committee also approved the cash incentive pay percentages are 65% and 40%, respectively. The annual incentive pay opportunity of each participant, includingthat the executive officers willmay earn at the target level of achievement as a percentage of their respective salaries as follows: Messrs. Kennedy and Ristow, 100% and 50%, respectively. As agreed in Mr. Kennedy’s offer letter, Mr. Kennedy’s cash incentive pay would be pro-rated on a weighted average with all 2018 Incentivefor the 2020 calendar year.
All incentive pay earned under the 2020 Company Bonus Plan participantswould be determined in the first quarter of 2021 based upon the aggregate pool such that the aggregate amount of incentive pay under the 2018 Incentive Plan will not exceed the aggregate pool as determined by the Compensation Committee.
our audited financial results for 2020. A participant in the 2018 Incentive2020 Company Bonus Plan, including an executive officer, must be employed by usQumu as of December 31, 20182020 and as of the payment date in order to receive any incentive pay under the 2018 Incentive2020 Company Bonus Plan unless otherwise provided in the our letter agreement with the executive officerMessrs. Kennedy and Ristow relating to severance and change in control benefits. Additionally, all incentive payments are subject to “clawback” to the extent required by federal law and theQumu’s Second Amended and Restated 2007 Plan.Stock Incentive Plan, as amended (the “2007 Plan”).
Effective March 5, 2019,On February 18, 2021, the Compensation Committee determined that $525,000 wasachievement of the pool availablethree performance goals for 2020. Our 2020 gross customer retention rate achieved the target amount set by the Compensation Committee, resulting in achievement of 20% of the target bonus amounts under the 2018 Incentive Plan for payment of cash incentive pay2020 Company Bonus Plan. Our 2020 revenue and adjusted EBITDA loss failed to all eligible employees, includingmeet the executive officers. Whiletarget amount set by the Compensation Committee.
In reviewing our adjusted EBITDA loss performance for 2020, the full year 2018Compensation Committee considered that the adjusted EBITDA loss target amount set on July 23, 2020 did not exclude expenses associated with the
merger with Synacor, Inc. that was slightly less thanterminated on June 29, 2020 or the minimumChief Executive Officer transition on July 17, 2020 in recognition that the 2020 Company Bonus Plan expressly reserved to the Compensation Committee the authority to exclude unusual items of expense. Additionally, our adjusted EBITDA loss performance for 2020 reflected significant expense and investment associated with implementation of our long-term strategic roadmap beginning in October 2020, which was not anticipated by the Compensation Committee at $(2.94) million,the time the adjusted EBITDA loss target amount was set. After consideration of these factors, the Compensation Committee determined that it was appropriate to pay outexercise its discretion to increase the bonus pool created bypayout under the 2018 Incentive2020 Company Bonus Plan to all participants60% of the target bonus amounts. In exercising this discretion, the Compensation Committee also considered whether adjusted EBITDA would have been met without these costs and investments. The Compensation Committee also considered employee retention and Qumu’s financial and non-financial achievements that were not reflected in the 2018 Incentive Plan.
After applying2020 performance goals of the proration for base salary and target bonus percentages applicable to the 2018 Incentive Plan, Messrs. Hanzlik and Ristow earned $78,555 and $43,052, respectively, under the 2018 Incentive2020 Company Bonus Plan. The Compensation Committee did not exercise any discretion relating to the 2020 revenue performance goal, which was set aggressively in order to incentivize Qumu to capitalize on the opportunities presented by the rise of video in the enterprise following the onset of the COVID-19 pandemic. The Compensation Committee also determined that Mr. Hanzlik’s bonus would be paid in shares of our common stockdid not adjust the performance period, performance goals or performance targets for the 2020 Company Bonus Plan to account for any potential adverse impacts arising from the COVID-19 pandemic. Accordingly, the payouts under the 20072020 Company Bonus Plan with the number of shares to be issued to Mr. Hanzlik on March 5, 2019 equal to the bonus amount divided by the fair market value (as defined under the 2007 Plan) on the date that was two full trading days after Qumu has issued its earnings release for the year ended December 31, 2018. After tax withholding, we issuedKennedy and Mr. Hanzlik 20,891 shares of our common stock as bonus under the 2018 Incentive Plan.Ristow were $101,096 and $90,000, respectively.
20182020 Equity Awards
Pursuant to the offer letter with Mr. Ristow,Kennedy, we granted Mr. RistowKennedy a seven-year non-qualified stock option to purchase 150,000457,692 shares of our common stock and an award of 30,000 shares of restricted stock. The option has an exercise price equal to the fair market value of our common stock as of the grant date and vests with respect to 25%one-third of the shares underlying the option on the first fourthree anniversaries of the hire date. The restrictions on the restricted stock award will lapse with respect to 25% of the shares underlying the award on the first four anniversaries of the hiregrant date. The stock option award and restricted stock award wereto Mr. Kennedy was granted outside of the our shareholder-approved 2007 Plan pursuant to the exception for an inducement grant contained in Nasdaq Listing Rules. However, the option has terms that will mirror in all respects the options granted under the 2007 Plan.Plan and our standard form of non-qualified option agreement. In accordance with our policy regarding the granting of equity-based compensation awards, the grant date for the equity awards to Mr. Ristow were granted May 15, 2018,Kennedy was July 22, 2020, the first day of the next open window period.period following Mr. Kennedy’s appointment as our President and Chief Executive Officer on July 20, 2020.
Under our policy regarding the granting of equity-based compensation awards, annual equity awards to executive officer and non-executive officer employees will be approved by the Compensation Committee at a regularly scheduled meeting at which the Compensation Committee determines incentive compensation for the immediately completed year and the compensation program for executive officers for the current year, typically scheduled in February of each year. In accordance
Due to the then-proposed merger with this aspect of our policy, the Compensation Committee approved the award of an aggregate of 168,500 performance stock unitsSynacor, no equity awards were made to our executive officers and members of senior management underin February 2020.
On September 30, 2020, the 2007 Plan on March 23, 2018. The Compensation Committee approved an award to Messrs. Hanzlik andMr. Ristow of 50,000 performance108,527 restricted stock units and 30,274 performance stock units, respectively. In accordance with our policy regarding the granting of equity-based compensation awards, the grant date for the performance stock unit awards was May 15, 2018, the first day of the next open window period. The performance stock units represent a contractual right to receive shares of our common stock upon the achievement of performance goals. Two-thirds of each award of performance stock units willthat vest based upon achievement of
performance goals relating to 2018 revenue and renewal retention percentage, weighted equally. One-third of each award of performance stock units will vest based upon achievement of a performance goal relating to 2019 free cash flow from operations. In settlement of the performance stock units, we will issue a number of shares as is equal to the number of performance stock units for that performance period multiplied by the total percentage achievement of the performance goals for that performance period. The Compensation Committee will determine achievement of the performance goals following the end of the performance period and retains the discretion to include or exclude items from any of the performance goals. The shares issued will be restricted from transfer for a period of 364 days following issuance. The performance stock unit award and the restricted shares are subject to forfeiture for termination of employment for any reason. Upon a change of control, the performance stock units and the restricted shares will vest in full and any restrictions will lapse. Additionally, the awards are subject to “clawback” to the extent required by federal law and the 2007 Plan.
In order to motivate and retaining personnel, the Compensation Committee pulled forward the 2019 annual grants to December 10, 2018, and, on that date, granted stock options and restricted stock to executive and non-executive officer employees under the 2007 Plan. On December 10, 2018, the Compensation Committee granted Mr. Hanzlik 37,500 shares of restricted stock and a stock option to purchase 75,000 shares of our common stock and the Compensation Committee granted Mr. Ristow 25,000 shares of restricted stock and a stock option to purchase 50,000 shares of our common stock. Like the other awards granted under the 2007 Plan, each option has an exercise price equal to the fair market value of our common stock as of the grant date, each option vests with respect to 25% on each of the shares underlying the option on the first four anniversaries of the date of grant and will be settled within 90 days following the restrictions ondate the restricted stock units vest. The Compensation Committee determined the size of this award will lapse with respectin part in reference to 25%the Radford data, which indicated that the grant date fair value of a 2020 equity award at the 25th percentile for the position of Chief Financial Officer of the survey group companies would be approximately $680,000. The restricted stock unit award to Mr. Ristow on September 30, 2020 had a grant date fair value of approximately $500,000. Due to Qumu’s smaller size relative to the survey group companies, the Compensation Committee also reviewed the equity award as a percentage of Qumu’s shares underlying award on the first four anniversaries of date of grant.outstanding.
All stock options granted in 20182020 have an exercise price of the fair market value of our common stock on the date of grant. The date of grant is determined, both for awards under the 2007 Plan and for Mr. Kennedy’s inducement award outside of the 2007 Plan, by reference to the closing market price of our common stock on the date the Compensation Committee meets (or takes action in writing in lieu of meeting) and determines the award recipient, the number of shares underlying stock option awards and the other material terms of the stock option grant, or such future date specified as the grant date by the Compensation Committee when all material terms of the stock option grant are determined.
Our policy is to grant equity awards at a time that Qumu’s directors and executive officers are not in possession of material, non-public information and during the periods of time that trading would be permitted under our trading policy, which is referred to above as an “open window period.”
Consideration of 20182020 Say-on-Pay Vote
The say-on-pay proposal presented at the 20182020 Annual Meeting of Shareholders received approximately 78%94.5% approval by our shareholders. We continue to seek out and welcome feedback from shareholders relating to our compensation programs and practices. Based upon the 20182020 Annual Meeting say-on-pay vote and the feedback subsequent to the 20182020 Annual Meeting, we believe that shareholders support our efforts to strengthen the connection between executive pay and performance. The Compensation Committee looks forward to the say-on-pay vote at this 2019 Annual Meeting as a way to gain additional information as it considersoverall design of our executive compensation philosophy, policies and practices for the remainder of 2019 and beyond.compensation governance program.
Consideration of Risk in Compensation
The Compensation Committee believes that promoting the creation of long-term value discourages behavior that leads to excessive risk. The Compensation Committee believes that the following features of our compensation programs provide incentives for the creation of long-term shareholder value and encourage high achievement by our executive officers without encouraging inappropriate or unnecessary risks:risks.
•Our long-term equity incentives are at the discretion of the Compensation Committee and are granted pursuant to a disciplined process.
•Stock options become exercisable over a three-year or four-year period and remain exercisable for up to seven years from the date of grant, and restricted sharesstock units vest over periods up to four years, encouraging executives to look to long-term appreciation in equity values.
The performance stock units granted in 2018 have multi-year performance goals and after the shares are earned, they are issued as restricted stock with an additional one-year vesting. These features encourage executives to drive long-term performance.
•We balance short- and long-term decision-making with our annual cash incentive program, equity awards that vest over four years, and multi-year performance periods for our performance stock units.
•Because of our stock ownership guidelines, our executive officers could lose significant value if our stock price were exposed to inappropriate or unnecessary risks.
•The metrics used to determine the incentive pay to a named executive officer under the 2018 Incentive2020 Company Bonus Plan balanced quarterly and annual revenue, adjusted EBITDA performance measures.and customer retention percentage, which were weighted 40%, 40% and 20% respectively. In this way, we incentivize disciplined growth and prudent expense management on a quarter-by-quarter and annual basis.management.
•The incentive pay amounts under the 2018 Incentive2020 Company Bonus Plan cannot exceed 150% of the executive officer’s target amount, no matter how much performance exceeds the maximum levels of the performance goals. This feature was designed to limit windfalls.
•Through our 2007 Plan, the Compensation Committee has the right to “claw back” stock incentives or cash incentives from a participant or to seek repayment from a participant through a variety of means in certain circumstances such as certain restatements of our financial statements, certain terminations of employment, and breach of an agreement between us and the executive officer. These “claw back” features are applicable to the 2018 Incentive2020 Company Bonus Plan and to all equity awards granted in 2018.2020.
•Our corporate compliance systems and policies, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. For example, our insider trading policy prohibits executive officers from purchasing Qumu securities on margin, hedging Qumu securities, borrowing against any account in which Qumu securities are held, pledging Qumu securities as collateral for a loan, or engaging in monetization transactions.
Based on their consideration of these and other factors, the Compensation Committee concurred with our management’s determination that none of its compensation policies and practices is reasonably likely to have a material adverse effect on Qumu.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee has served as one of our officers or employees at any time. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of the Board. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Compensation Committee during the last fiscal year.
Summary Compensation Table
The following table shows, for Vern Hanzlik,TJ Kennedy, who served as ourPresident and Chief Executive Officer in 2018, and2020 effective July 20, 2020, David G. Ristow, who served as our Chief Financial Officer in 20182020 and Vern Hanzlik, who served as our Chief Executive Officer in 2020 until July 17, 2020 (together referred to as our “named executive officers”), information concerning compensation earned for services in all capacities during the years indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Position | Year | Salary | Bonus (1) | Stock Awards (2) | Option Awards (2) | Non-Equity Incentive Plan Compensation (3) | All Other Compensation (4) | Total |
TJ Kennedy President and Chief Executive Officer (5) | 2020 | $ | 156,250 | | $ | — | | $ | — | | $ | 1,309,791 | | $ | 101,096 | | $ | 9,133 | | $ | 1,576,270 | |
David G. Ristow Chief Financial Officer | 2020 | $ | 300,000 | | $ | 54,000 | | $ | 500,309 | | $ | — | | $ | 90,000 | | $ | 25,315 | | $ | 969,624 | |
2019 | $ | 300,000 | | $ | — | | $ | — | | $ | — | | $ | 58,710 | | $ | 23,510 | | $ | 382,220 | |
2018 | $ | 275,000 | | $ | — | | $ | 53,143 | | $ | 61,837 | | $ | 43,052 | | $ | 21,089 | | $ | 454,121 | |
Vern Hanzlik Former President and Chief Executive Officer (6) | 2020 | $ | 192,275 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 193,373 | | $ | 385,648 | |
2019 | $ | 350,000 | | $ | — | | $ | — | | $ | — | | $ | 136,990 | | $ | 14,565 | | $ | 501,555 | |
2018 | $ | 390,800 | | $ | — | | $ | 234,934 | | $ | 92,755 | | $ | — | | $ | 15,463 | | $ | 733,952 | |
(1)Amounts represent stay bonus pursuant to a retention agreement between Qumu and Mr. Ristow entered into on March 3, 2020.
(2)Valuation of awards based on the grant date fair value of those awards computed in accordance with FASB ASC Topic 718 utilizing assumptions discussed in Note 8 to our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020. For 2018, includes $78,555 in stock issued to Mr. Hanzlik in lieu of a cash payment under the short-term cash incentive compensation program for 2018.
(3)Represents the amounts paid in cash to the named executive officers under the short-term cash incentive compensation program for the year noted, except as noted in the footnote above. All amounts are reported for the year in which the related services were performed, although may be paid in the following year.
(4)Represents the following amounts:
| | | | | | | | | | | | | | | | |
Name | Year | Matching Contributions to 401(k) Plan | Insurance Premiums | Office Technology Stipend | | |
TJ Kennedy | 2020 | $ | 4,220 | | $ | 4,838 | | $ | 75 | | | |
David G. Ristow | 2020 | $ | 8,550 | | $ | 16,690 | | $ | 75 | | | |
2019 | $ | 7,976 | | $ | 15,534 | | $ | — | | | |
2018 | $ | 6,197 | | $ | 14,892 | | $ | — | | | |
Vern Hanzlik | 2020 | $ | 5,768 | | $ | 3,574 | | $ | — | | | |
2019 | $ | 8,338 | | $ | 6,227 | | $ | — | | | |
2018 | $ | 8,908 | | $ | 6,555 | | $ | — | | | |
|
| | | | | | | | | | | | | | | | | | | |
Name and Position | Year | Salary | Stock Awards (1) | Option Awards (1) | Non-Equity Incentive Plan Compen-sation (2) | All Other Compen- sation (3) | Total |
Vern Hanzlik President and Chief Executive Officer | 2018 | $ | 390,800 |
| $ | 234,934 |
| $ | 92,755 |
| $ | — |
| $ | 15,463 |
| $ | 733,952 |
|
2017 | $ | 390,800 |
| $ | 109,618 |
| $ | 76,773 |
| $ | — |
| $ | 17,745 |
| $ | 594,936 |
|
David G. Ristow (4) Chief Financial Officer | 2018 | $ | 275,000 |
| $ | 53,143 |
| $ | 61,837 |
| $ | 43,052 |
| $ | 21,089 |
| $ | 454,121 |
|
2017 | $ | 12,516 |
| $ | 68,400 |
| $ | 194,611 |
| $ | — |
| $ | — |
| $ | 275,527 |
|
| |
(1) | Valuation of awards based on the grant date fair value of those awards computed in accordance with FASB ASC Topic 718 utilizing assumptions discussed in Note 7 to our consolidated financial statements for the year ended December 31, 2018 included in our Annual Report on Form 10-K for the year ended December 31, 2018. For 2018, includes $78,555 in stock issued to Mr. Hanzlik in lieu of a cash payment of under the 2018 Incentive Plan. |
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(2) | Represents the amounts paid in cash to the named executive officers under the short-term cash incentive compensation program for the year noted, except as noted in the footnote above. All amounts are reported for the year in which the related services were performed, although may be paid in the following year. |
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(3) | Represents the following amounts: |
Additionally, for Mr. Hanzlik, includes $184,031 in salary continuation and payment of other amounts required his letter agreement relating to severance and change in control benefits described below under “Employment Arrangements with Named Executive Officers and Post-Employment Compensation.” |
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Name | Year | Matching Contributions to 401(k) Plan | Insurance Premiums |
Vern Hanzlik | 2018 | $ | 8,908 |
| $ | 6,555 |
|
2017 | $ | 7,950 |
| $ | 9,795 |
|
David G. Ristow | 2018 | $ | 6,197 |
| $ | 14,892 |
|
2017 | $ | — |
| $ | — |
|
(5)Effective July 20, 2020, Mr. Kennedy was hired as our President and Chief Executive Officer. Accordingly, information for 2020 represents a partial year. | |
(4) | Effective December 15, 2017, Mr. Ristow was hired as our Chief Financial Officer after serving as our Interim Chief Financial Officer on a consulting basis beginning November 7, 2017. Accordingly, information for 2017 represents a partial year. Salary information does not include amounts paid to Salo, LLC for the provision of Mr. Ristow’s services as Interim Chief Financial Officer. We paid Salo, LLC $245 per hour for Mr. Ristow’s services or $109,117 in the aggregate for his consulting services prior to being hired. |
(6)Mr. Hanzlik ceased serving as our President and Chief Executive Officer July 17, 2020.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information concerning option and stock awards outstanding to the named executive officers at December 31, 2018.2020. Due to the termination of his employment on July 17, 2020, Mr. Hanzlik had no outstanding option and stock awards at December 31, 2020.
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| Option Awards | | Stock Awards |
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date (1) | | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (1) (2) |
TJ Kennedy | — | | 457,692 | | $4.90 | 7/22/2027 | | — | | — | |
David G. Ristow | — | | — | | — | — | | 108,527 | | 867,130 | |
25,000 | | 25,000 | | $2.28 | 5/15/2025 | | — | | — | |
112,500 | | 37,500 | | $2.1257 | 12/10/2025 | | — | | — | |
— | | — | | — | — | | 20,000 | | 159,800 | |
|
| | | | | | | | | | | | | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexer-cisable (1) | Option Exercise Price ($) | Option Expiration Date (1) | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (2) | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (3) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested (2) |
Vern Hanzlik | 100,000 |
| — |
| $ | 6.62 |
| 11/26/2019 |
| — |
| — |
| — |
| — |
|
50,000 |
| — |
| $ | 6.92 |
| 12/10/2019 |
| — |
| — |
| — |
| — |
|
45,000 |
| 15,000 |
| $ | 3.11 |
| 11/11/2022 |
| — |
| — |
| — |
| — |
|
18,750 |
| 56,250 |
| $ | 1.90 |
| 3/8/2024 |
| — |
| — |
| — |
| — |
|
— |
| 75,000 |
| $ | 2.1257 |
| 12/10/2025 |
| — |
| — |
| — |
| — |
|
— |
| — |
| — |
| — |
| 72,581 |
| $ | 137,904 |
| — |
| — |
|
— |
| — |
| — |
| — |
| — |
| — |
| 50,000 |
| $ | 95,000 |
|
David G. Ristow | 37,500 |
| 112,500 |
| $ | 2.28 |
| 12/15/2024 |
| — |
| — |
| — |
| — |
|
— |
| 50,000 |
| $ | 2.1257 |
| 12/10/2025 |
| — |
| — |
| — |
| — |
|
— |
| — |
| — |
| — |
| 47,500 |
| $ | 90,250 |
| — |
| — |
|
— |
| — |
| — |
| — |
| — |
| — |
| 30,274 |
| $ | 57,521 |
|
(1)Other than Mr. Kennedy’s option, options vest and become exercisable in equal installments on the first four anniversaries of the grant date. Mr. Kennedy’s option vests with respect to one-third of the shares underlying the option on the first three anniversaries of the grant date. The expiration date of each option is the seven-year anniversary of the date of grant of such option. Restricted stock units vest in equal installments on the first four anniversaries of the date of grant or hire date. | |
(1) | Options vest and become exercisable in equal installments on the first four anniversaries of the date of grant or hire date and the expiration date of each option is the seven-year anniversary of the date of grant of such option. |
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(2) | Value based on a share price of $1.90, which was the closing sales price for a share of our common stock on the Nasdaq Capital Market on December 31, 2018. |
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(3) | Represents performance stock units approved by the Compensation Committee on March 23, 2018. As of December 31, 2018, none of the performance stock units were earned or vested. The Compensation Committee made determinations effective March 5, 2019 in respect of these performance stock units and the performance criteria for the 2018 performance period. Of the 50,000 performance stock units issued to Mr. Hanzlik and of the 30,274 performance stock units issued to Mr. Ristow, we issued 33,333 shares and 20,182 shares, respectively, in settlement of their performance stock units on March 5, 2019. As provided in and subject to the terms of the award agreements, the shares issued will be restricted from transfer for a period of 364 days following issuance and are subject to forfeiture for termination of employment. |
(2)Value based on a share price of $7.99, which was the closing sales price for a share of our common stock on the Nasdaq Capital Market on December 31, 2020. Employment Arrangements with Named Executive Officers and Post-Employment Compensation
Our practice has been to enter into a separate standard form of letter agreement relating to severance and change in control benefits (the “letter agreement”) with each person appointed by the Board as an executive officer. As of December 31, 2018,2020, Messrs. HanzlikKennedy and Ristow are parties to thesuch a letter agreement, which is summarized below.
Mr. Hanzlik ceased serving as our President and Chief Executive Officer July 17, 2020 and for the purposes of the letter agreement to which he was a party, the termination was considered a termination without cause. See the Summary Compensation Table under “All Other Compensation” for amounts paid in 2020 to Mr. Hanzlik under the letter agreement.
The Compensation Committee believes that severance and change in control arrangements for the named executive officers are consistent with competitive pay practices, aid in the recruitment and retention of executive officers, and provide incentives for executive officers to grow our business and maintain focus on returning value to shareholders. The Compensation Committee believes that providing protection to executive officers whose employment is terminated in connection with a change in control strikes an appropriate balance among the interests of our executive officers and the interests of others in a change in control transaction. In particular, the Compensation Committee believes that these arrangements are appropriate in part because the benefits under the agreement are only payable upon termination without cause prior to a change in control or both the occurrence of a change in control and the termination of employment without cause or for good reason, and that the severance and change in control benefits are conditioned upon compliance with non-disclosure and non-competition agreements.
The terms “cause,” “good reason,”reason” and “change in control,”control” used in the letter agreementagreements are defined as follows:
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Term | Definition |
Cause | •The failure by the executive officer to use his or her best efforts to perform the material duties and responsibilities of his or her position or to comply with any material policy or directive Qumu has in effect from time to time, provided the executive officer shall have received notice of such failure and have failed to cure the same within thirty days of such notice. •Any act on the part of the executive officer which is harmful to the reputation, financial condition, business or business relationships of Qumu, including, but not limited to, conduct which is inconsistent with federal or state law respecting harassment of, or discrimination against, any Qumu employee or harmful to the reputation or business relationships of the executive officer. •A material breach of the executive officer’s fiduciary responsibilities to Qumu, such as embezzlement or misappropriation of Qumu funds, business opportunities or properties, or to any of our customers, vendors, agents or employees. •Conviction of, or guilty plea or nolo contendere plea by the executive officer to a felony or any crime involving moral turpitude, fraud or misrepresentation. •A material breach of the executive officer’s Nondisclosure and Noncompetition Agreement with Qumu. |
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Good Reason | Good Reason for the twelve-month period following a Change in Control shall mean, without yourthe executive officer’s express written consent, any of the following: (i) a material diminution of yourthe executive officer’s authority, duties or responsibilities with respect to yourhis or her position immediately prior to the Change in Control, or (ii) a material reduction in yourthe executive officer’s base compensation as in effect immediately prior to the Change in Control; (iii) a material reduction in yourthe executive officer’s opportunity to earn a cash bonus under the annual short-term incentive compensation plan of Qumu in which you participatehe or she participates as in effect immediately prior to the Change in Control (for the avoidance of doubt, specifically excluding any reduction in yourthe executive officer’s opportunity to earn a cash bonus under any long-term incentive compensation plan of Qumu in which you participate)he or she participates); (iv) a material reduction in the authority of the person to whom you reportthe executive officer reports (or a change in yourthe executive officer’s reporting directly to the Board of Directors, if applicable); (v) a material change in the geographic location at which youthe executive officer must perform services for Qumu; and (vi) any other action or inaction that constitutes a material violation of this Agreementthe agreement by Qumu; provided that no such termination for Good Reason shall be effective unless: (A) you providethe executive officer provides written notice to the Chair of the Board of Directors of the existence of a condition specified in paragraphs (i) through (v)(vi) above within 90 days of the initial existence of the condition; (B) Qumu does not remedy such condition within 30 days of the date of such notice; and (C) you terminate yourthe executive officer terminates his or her employment within 90 days following the last day of the remedial period described above. |
Change in Control | Change in Control of Qumu shall mean a change in control which would be required to be reported in response to Item 5.01 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not Qumu is then subject to such reporting requirement, including without limitation, if: •any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of Qumu representing 20% or more of the combined voting power of Qumu’s then outstanding securities (other than an entity owned 50% or greater by Qumu or an employee pension plan for the benefit of the employees of Qumu); •there ceases to be a majority of the Board of Directors comprised of (A) individuals who, on the date of thisthe letter agreement, constituted the Board of Directors of Qumu; and (B) any new director who subsequently was elected or nominated for election by a majority of the directors who held such office prior to a Change in Control; or •Qumu disposes of at least 75% of its assets, other than (X) to an entity owned 50% or greater by Qumu or any of its subsidiaries, or to an entity in which at least 50% of the voting equity securities are owned by the shareholders of Qumu immediately prior to the disposition in substantially the same percentage or (Y) as a result of a bankruptcy proceeding, dissolution or liquidation of Qumu. |
The letter agreement providesagreements provide that if the executive officer’s employment is terminated without cause (other than during the twelve-month period following a change in control), the executive will be entitled to payments of the executive officer’s regular base salary for a period of twelve months. The executive officer will also be paid an amount equal to the average of the prior three calendar years’ short-term incentive bonus amount received by the executive. The short-term incentive bonus amount will be paid in twelve equal installments consistent with our
regular payroll practices. We also will pay a portion of the premiums for continued health, dental and group life insurance until the earlier of: (A) twelve months from the date COBRA coverage begins; or (B) the date COBRA coverage otherwise terminates.
Under the letter agreements, if a change in control occurs, but the named executive officer’s employment is not terminated within twelve months of the change in control, the executive is not entitled to any payment or benefit under the letter agreements.benefit.
The letter agreement providesagreements provide that if a change in control occurs and within twelve months of the change in control the named executive officer’s employment is terminated by us without cause or by the executive for good reason, we must pay the executive a cash severance payment. The severance payment is payable within sixty days of the date of termination and will be equal to 100% of the sum of the executive’s annual base salary and his “target bonus” in effect on such date (without giving effect to any reduction that results in the executive’s termination for good reason). The “target bonus” is the cash amount under all our short-term annual incentive compensation plans in which the executive participates, waiving any condition for payment to the executive and assuming that the performance goals for the period were achieved at the 100% level. We will pay a portion of the premiums for continued health, dental and group life insurance until the earlier of: (A) twelve months from the date COBRA coverage begins; or (B) the date COBRA coverage otherwise terminates.
These salary continuation and change in control benefits are conditioned upon the named executive officer’s execution of a general release and compliance with a nondisclosure and non-competition agreement. Further, in the event that the vesting of options upon a change in control, together with all other benefits provided by the letter agreement,agreements, would result in all or a portion of such amount being subject to excise tax then the executive will be entitled to either the full amount of the payments or value of benefits under the letter agreementagreements or such lesser amount as determined by us that would result in no portion of the payment being subject to excise tax, whichever results in the receipt by the named executive officer of the greatest amount on an after-tax basis.
Additionally, if the amounts payable under the letter agreementagreements would be subject to the requirements of Section 409A of the Internal Revenue Code, we may amend the letter agreementagreements as we may determine, including to delay the start of any payment as provided in the letter agreement,agreements, amend the definition of change in control, and amend the definition of disability. In the event any such payment is so delayed, the amount of the first payment to the executive officer will be increased for interest earned on the delayed payment based upon interest for the period of delay, compounded annually, equal to the prime rate (as published in the Wall Street Journal) in effect as of the date the payment should otherwise have been provided.
If the named executive officer resigns (other than for good reason during the twelve month period following a change in control), if we terminate the named executive officer’s employment for cause, or if the named executive officer’s employment terminates as a result of death or disability, the named executive officer is entitled to receive the named executive officer’s base salary accrued but unpaid as of the date of termination, but is not entitled to receive any salary continuation benefit thereafter.
Additionally, under the 2007 Plan, all stock options held by the named executive officers will immediately vest upon a change in control and if the agreements effectuating the change in control do not provide for the assumption or substitution of restricted stock awards, the restrictions will lapse on the restricted stock to the extent these restrictions have not already lapsed under the terms of the restricted stock award agreement.
PROPOSAL 2:
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
At the time of the 2017 Annual Meeting of Shareholders, our Board determined that an advisory vote on named executive officer compensation (commonly referred to as “say-on-pay”) will be held every year and our shareholders also supported annual say-on-pay votes at the 2017 Annual Meeting of Shareholders. Accordingly, and in accordance with Section 14A of the Exchange Act, we are asking our shareholders to cast an advisory vote on named executive officer compensation at this 2019the Annual Meeting.
Our compensation policies and determinations in 20182020 were influenced by a variety of factors, most notably from February to July 2020, the proposed merger with Synacor, Inc. and the Chief Executive Officer transition that delayed the implementation of our continued effortsexecutive compensation program in our typical timeframes. Following this delay, the Compensation Committee reestablished the key elements of our executive compensation program beginning in July 2020 to continue to provide incentives to high performance and align pay and performance and the development of pay programs for the named executive officers that reflect the performance of our business.with performance.
Shareholders are encouraged to read the Executive Compensation section of this proxy statement for a more detailed discussion of our executive compensation programs, including information about 20182020 compensation of our named executive officers. Shareholders are also encouraged to read “Executive Compensation – Explanation of Compensation – Consideration of 20182020 Say-on-Pay Vote” for an explanation of the impact of last year’s say-on-pay vote.
We are asking our shareholders to indicate their support for our named executive officer compensation as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask our shareholder to vote “FOR” the following resolution at the Annual Meeting:
RESOLVED, that the shareholders of Qumu Corporation approve, on an advisory basis, the compensation of the named executive officers as disclosed in Qumu’s proxy statement for the 20192021 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission.
Vote Required
The affirmative vote of the holders of athe majority of the shares of common stock representedpresent at the Annual Meeting and entitled to vote is required to approve Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation, provided that the total number of shares that vote on the proposal represent a majority of our shares outstanding on the record date. Pursuant to the amended standstill agreement, Harbert will vote all of the shares of our common stock that it beneficially owns in favor of this Proposal 2.Compensation. Proxies will be voted in favor of this proposal unless otherwise indicated.
While this vote is advisory, and not binding on the Compensation Committee or the Board, it will provide valuable information to us that the Compensation Committee will be able to consider when determining executive compensation philosophy, policies and practices for the remainder of 20192021 and beyond. The next advisory vote on named executive officer compensation will take place at our 2022 Annual Meeting of Shareholders.
The Board Recommends
Shareholders Vote FOR
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation
_______________________
PROPOSAL 3:
APPROVAL OF AMENDMENT TO SECOND AMENDED AND RESTATED 2007 STOCK INCENTIVE PLAN
Amendment and Reasons for Amendment
On February 18, 2021, our Board of Directors approved, subject to shareholder approval, an amendment to our Second Amended and Restated 2007 Stock Incentive Plan, as amended (the “2007 Plan”) to increase the number of shares authorized for issuance by 500,000 shares. This increase was approved by our Compensation Committee for the reasons set forth below.
Since May 15, 2007, the only shareholder approved equity compensation plan available to Qumu has been the 2007 Plan. At March 23, 2021, there were only 377,716 shares remaining available for grant under the 2007 Plan.
As part of the execution of our long-term strategic roadmap, we intend to make significant investments in the executive, sales, marketing, technical and other personnel that we believe will be critical to accelerate the evolution of our SaaS-based business model and allow us to capture the opportunities presented by the dramatic growth of video in organizations of all sizes. Equity-based compensation, such as stock options, restricted stock, restricted stock units and performance stock units, has historically been a key component in the compensation packages for both executive and technical personnel. We believe equity-based compensation under the 2007 Plan is, and will continue to be, an important tool in attracting and retaining key personnel, especially given the highly competitive nature of our industry and the importance of equity compensation in the structure of overall compensation. Without the ability to grant additional awards under the 2007 Plan, we do not believe that we would have the appropriate tools to attract and retain these personnel. We believe an increase of 500,000 shares in the number of shares authorized for issuance will provide enough authorization to cover anticipated stock incentive awards for the next year.
Our three-year average “burn rate” was 4.03% for fiscal years 2018 through 2020. We define burn rate as the total number of shares subject to awards granted to participants in a single year expressed, net of grants forfeited, canceled or expired, as a percent of our basic weighted average common shares outstanding for that year.
Summary of the 2007 Plan
Below is a summary of the 2007 Plan, which includes the amendment described above that is the subject of this Proposal 3. This summary is qualified in its entirety by reference to the full text of the 2007 Plan, as proposed to be amended, which is attached to this Proxy Statement as Appendix A.
Purpose and Key Features of the 2007 Plan
The purpose of the 2007 Plan is to attract and retain talented and experienced people, closely link employee compensation with performance realized by shareholders, and reward long-term results with long-term compensation. The 2007 Plan permits us to grant stock incentive awards to current and new employees, including officers, service providers and members of the Board of Directors.
The following is a brief summary of the key features and provisions of the 2007 Plan.
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Features | Description |
Plan Term | •stock incentives may not be granted after the term of the 2007 Plan, which ends on May 10, 2028 |
Eligible Participants | •employees, including executive officers, of Qumu and any subsidiary as determined by the Compensation Committee •members of the Board of Directors •service providers to us or any of our subsidiaries |
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Features | Description |
Shares Available for Future Grant | •After the Annual Meeting and assuming this Proposal 3 is approved, the sum of (a) 500,000, (b) the number of shares remaining available under the 2007 Plan immediately prior to the date of the Annual Meeting (as of March 23, 2021, 377,716 shares were available for the grant of awards under the 2007 Plan), and (c) any shares subject to awards outstanding under the 2007 Plan on the date of the Annual Meeting that are forfeited, terminated or cancelled (as of March 23, 2021, awards covering a total of 4,500 shares were outstanding under the 2007 Plan). |
Individual Share Limits | •up to 25,000 shares for all stock incentive awards to any non-employee director elected or re-elected at a meeting •up to 300,000 shares per employee or service provider per year under all stock incentives |
No Liberal Share “Recycling” | •any shares surrendered to pay the exercise price of an option or shares withheld by us or tendered to us to satisfy tax withholding obligations of a participant with respect to any award will not be added back (“recycled”) to the shares authorized under the 2007 Plan |
Types of Awards | •incentive and non-qualified stock options with an exercise period no longer than ten years, •restricted stock and restricted stock units, •stock appreciation rights, •performance stock and performance units, •other stock-based awards or cash. |
Vesting and Exercise | •determined by Compensation Committee based on service (time vesting) or upon achievement of performance targets (performance vesting) or both •minimum one year vesting and minimum one year period of restriction, and all non-performance awards vest upon a change in control |
Permissible Features | •forfeiture and recoupment of prior award values for financial mismanagement or other breaches of policies or agreements with us, such as a non-compete or non-disclosure agreement •we will hold restricted stock and restricted stock units until restrictions lapse •dividend and dividend equivalents on awards may be paid currently or deferred, except that for performance based awards, dividends and dividend equivalents may only paid at such time as the performance standard has been met •options may be exercised with previously acquired shares |
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Features | Description |
Repricing Prohibited | •2007 Plan explicitly prohibits repricing of any stock option or stock appreciation right |
Features Not Permitted without Shareholder Approval | •increase the number of shares reserved for awards in the 2007 Plan •extend the maximum life of the 2007 Plan or the maximum exercise period •decrease the minimum exercise price of an award •change the designation of participants eligible to participate in the 2007 Plan |
Eligibility for Stock Incentive Awards
Our employees, including executive officers, members of the Board of Directors and service providers to us and our subsidiaries are eligible to receive awards under the 2007 Plan. The Compensation Committee will determine which employees and other eligible persons will be awarded stock incentives under the 2007 Plan. As of March 23, 2021, we have six non-employee Board members, three executive officers and approximately 132 other employees eligible to receive awards.
Types of Stock Incentives to be Awarded
Subject to the limits of the 2007 Plan, the Compensation Committee has the discretionary authority to determine the size of the award, the type of award, and if the award will be tied to meeting performance-based requirements or will vest over time.
For directors who are not employees, the 2007 Plan provides for a grant of a discretionary number of restricted stock units, shares of restricted stock or non-qualified stock options or a combination of any of these three on each director’s election and re-election at the annual shareholder meeting. Under this provision of the 2007 Plan, the stock incentive awards granted to the non-employee directors on each director’s election and re-election at the annual shareholder meeting may not exceed 25,000 shares. For each following year, the Board will determine the type(s) of award and the number of shares underlying each award to be granted to non-employee directors upon election or re-election at an annual meeting of shareholders. The Compensation Committee will determine term, vesting and other provisions relating to the restricted stock units, shares of restricted stock or non-qualified stock options. In addition, the Board may from time to time grant additional awards to some or all of the Board of Directors as it deems appropriate.
The types of awards that may be made under the 2007 Plan are as follows:
•Incentive stock options and non-qualified stock options – the right to purchase shares where value is based on the appreciation in the underlying shares in excess of an exercise price, which right may be exercised by the holder during the term of the option, unless earlier terminated upon certain events, such as termination of employment. The exercise price may be paid in cash or in previously owned shares or by other means permitted by the Compensation Committee.
•Stock appreciation rights – a contractual right to the increase in the value of the underlying shares subject to the award that does not require payment by the recipient to exercise the right, but which pays the appreciation in stock value when elected by the holder in the form of whole shares or cash, or a combination of both.
•Restricted stock and restricted stock units – awards of stock that do not require purchase by the recipient, but which are subject to significant restrictions on transfer until certain restrictions lapse, either based on time or upon achievement of performance related criteria. Restricted units may vest earlier than the date the shares are actually paid in exchange for the units, which may result in a deferral of income. The holder of restricted stock is entitled to vote those shares. The Compensation Committee may determine whether, with respect to restricted stock, to pay dividends on those shares to the holder or to defer dividends. Restricted stock units are not outstanding shares and therefore do not have voting or dividend rights.
•Performance shares and performance units – awards of restricted or unrestricted stock that are delivered to the recipient only upon satisfaction of performance-based criteria.
•Other awards – additional opportunities to reward participants through payment of cash or stock as a bonus, or as deferred compensation, or for other purposes for which stock will provide a meaningful incentive.
Adjustments to Stock Incentives for Corporate Transactions
In the event of a stock dividend, stock split, spin-off, rights offering, recapitalization through a large, nonrecurring cash dividend, or a similar equity restructuring, the Compensation Committee will adjust the number and kind of shares granted under the 2007 Plan, including the number and exercise price of shares subject to outstanding options or stock appreciation rights. For certain other corporate transactions, such as certain mergers, consolidations, acquisitions of property or stock, separations, reorganizations or liquidations, which provide for the substitution or assumption of awards, the Compensation Committee will adjust awards of restricted stock, restricted stock units, performance stock and performance share units, and other awards to comply with certain requirements of the Internal Revenue Code.
Exercise Price and Term of Stock Options
The exercise price of stock options granted under the 2007 Plan may not be less than the fair market value of our common stock on the date of grant. With respect to each grant of options that are intended to qualify as incentive stock options under Code Section 422 to a participant who is a 10% or greater shareholder, the exercise price may not be less than 110% of the fair market value of our common stock on the date of grant.
No option shall have a term longer than ten years, and incentive stock options granted to a 10% or greater shareholder may not have a term longer than five years.
Repricing Prohibited
Under the 2007 Plan, the Compensation Committee does not have the right to (i) lower the exercise price of an existing option or stock appreciation right, (ii) take any action which would be treated as a “repricing” under generally accepted accounting principles, or (iii) cancel an existing option or stock appreciation right at a time when its exercise price exceeds the fair market value of our common stock in exchange for cash, another stock incentive, or other equity in Qumu.
Effect on Termination of Employment on Stock Incentives
Except as provided in the option agreement or a separate agreement with the participant that governs options granted under the 2007 Plan, any option held by such participant may thereafter be exercised to the extent it was exercisable at the time of termination of employment (other than by reason of death, disability or retirement), but may not be exercised after 90 days after such termination, or the expiration of the stated term of the options, whichever period is the shorter. For termination of employment by reason of death, disability or retirement, any options held by a participant may thereafter be exercised to the extent it was exercisable at the time of such event, but may not be exercised after one year after such event, or the expiration of the stated term of the option, whichever period is the shorter.
Prior to termination of employment, only options that have become exercisable under their terms, based on either service-based or performance-based vesting, may be exercised. The Compensation Committee may at any time after an award vest part or all of the unvested options as it deems appropriate.
Restricted stock and restricted stock units will be forfeited if not vested when the participant terminates employment, including upon death, disability or retirement. The Compensation Committee may also accelerate vesting at any time after the restricted stock incentive is awarded.
For options and restricted stock, restricted stock units, performance stock and performance units, the Compensation Committee may elect not to accelerate options that would otherwise vest only upon achievement of performance criteria if those targets have not been achieved, or the performance period has not expired.
Effect of a Change in Control on Stock Incentives
If the agreements effectuating the change in control (as defined in the 2007 Plan) do not provide for the assumption or substitution of all stock incentives granted under the 2007 Plan, stock options become fully exercisable and restricted stock and restricted stock units automatically become fully vested upon the occurrence of a change in control as defined in the 2007 Plan. Awards based on performance criteria where the performance period has not yet concluded at the time of a change in control will not automatically accelerate unless the Compensation Committee so determines at or prior to the change in control.
As to any stock incentives that are not assumed or substituted in the change of control, the Compensation Committee may require options or stock appreciation rights be exercised prior to the change in control or may pay cash or other securities to cancel awards in connection with the change in control.
Transferability of Stock Incentives
Stock options, restricted stock, restricted stock units, performance stock, and performance units, as well as other awards under the 2007 Plan that are vested at the time of the death of the participant, are transferable only by the participant’s last will and testament or applicable state laws on descent and distribution. Restricted stock, restricted stock units, performance stock and performance units may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of until the applicable restrictions lapse or the performance targets have been achieved.
Administration
The Compensation Committee will administer the 2007 Plan. The Compensation Committee will select employees to receive awards, determine the number of shares covered by each award, and establish the other terms and conditions consistent with the limitations contained in the 2007 Plan. The Compensation Committee may also interpret the 2007 Plan, may establish and amend terms of existing stock incentive awards, except that if the award recipient is adversely affected by the amendment, the recipient must also consent.
To the extent required by law or desired for tax purposes, awards to executive officers and non-employee directors will be made only by persons who qualify as “outside directors” under securities and tax laws. The Compensation Committee may delegate to an executive officer all or part of its responsibilities to make awards, other than the authority to make awards to other executive officers and non-employee directors.
Amendments to the 2007 Plan
The Compensation Committee may amend or suspend the 2007 Plan at any time except that any amendment in one or more of the following categories will not be permitted without the approval of our shareholders:
•increase the number of shares reserved under the 2007 Plan;
•extend the maximum life of the 2007 Plan or the maximum exercise period;
•decrease the minimum exercise price of an award; or
•changes the designation of participants eligible for stock incentives.
The proposed amendment to the 2007 Plan to increase the number of shares authorized for issuance by 500,000, which amendment was approved by the Board of Directors on February 18, 2021, requires approval by the shareholders. Accordingly, we are submitting this amendment to our shareholders at the 2021 Annual Meeting of Shareholders as this Proposal 3.
Tax Consequences of Stock Incentives to Participants and to Us
Options. Stock options grant under the 2007 Plan may either be granted as incentive stock options, which are intended to comply with the requirements of Internal Revenue Code Section 422 or as non-qualified stock options. Generally, no federal income tax is payable by the recipient upon the grant of an incentive stock option and no deduction is taken by us. If certain holding periods are met, the exercise of an incentive stock option does not result in taxation to the recipient; rather, the recipient is taxed only at the time of sale. If the shares have been held
for at least one year after the date of exercise and at least two years from the date of grant of the option, the recipient will be taxed on any appreciation in excess of the exercise price as long-term capital gains. In that event, we are not entitled to a deduction for the amount of the capital gains. Under current tax laws, if a recipient exercises a non-qualified stock option, the recipient will be taxed on the difference between the fair market value of the stock on the exercise date and the exercise price and, thereafter, the recipient would receive capital gains on any appreciation in stock value after the exercise date, depending upon the length of time the recipient held the stock after exercise. When the option is exercised, we will be entitled to corresponding tax deduction.
Restricted and Performance Stock and Units. Awards of restricted stock and restricted stock units, performance stock and performance units under the 2007 Plan generally are not subject to federal income tax when awarded, unless, solely in the case of restricted stock, the participant properly elects to accelerate the tax recognition. Restricted stock is generally subject to ordinary income tax at the time the restrictions lapse, and performance stock is taxed at the time the performance targets are met. Restricted stock units and performance units are generally subject to ordinary tax at the time of payment, even if vested earlier. We are entitled to a corresponding deduction at the time the participant recognizes taxable income on the restricted or performance stock or units.
New Plan Benefits
Because the number or size of the awards that a participant may receive under the 2007 Plan is at the discretion of the Compensation Committee, it is not possible to determine the benefits that will be received by participants under the 2007 Plan if Proposal 3 is approved by our shareholders. Please see the above description regarding the 2007 Plan’s limitations on the size of awards that may be granted to individual participants.
On February 18, 2021, the Compensation Committee recommended and the Board approved an award of restricted stock units under the 2007 Plan to each non-employee director elected or re-elected at the Annual Meeting. The number of restricted stock units will be equal to $80,000 divided by the fair market value of our common stock on the grant date, rounded down to the nearest whole share, up to a maximum of 25,000 shares. Accordingly, the number of restricted stock units to be granted to each non-employee director elected or re-elected at the Annual Meeting is not able to be calculated at this time. See the section of this proxy statement entitled “Director Compensation.”
Registration with Securities and Exchange Commission
Upon approval of this Proposal 3 by our shareholders, we intend to file a registration statement with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1933, as amended, covering the 500,000 additional shares authorized for issuance under the 2007 Plan.
Vote Required
The affirmative vote of the holders of the majority of the shares present at the Annual Meeting and entitled to vote is required to approve Proposal 3: Approval of Amendment to the Second Amended and Restated 2007 Stock Incentive Plan. Proxies will be voted in favor of this proposal unless otherwise indicated.
The Board of Directors Recommends
Shareholders Vote FOR
Proposal 3: Approval of Amendment to the
Second Amended and Restated 2007 Stock Incentive Plan
DIRECTOR COMPENSATION
Our non-employee directors received the following amounts for Board and committee service during 2018:2020:
•an annual retainer of $38,000;
•an additional retainer of $16,000 for our non-executive Chairman of the Board, which was Robert F. Olson;Olson until April 6, 2020 and Neil E. Cox for the remainder of 2020;
•an annual retainer of $6,000, $4,000 and $3,000 for members of the Audit, Compensation and Governance Committees, respectively; and
•an additional annual retainer of $8,000, $8,000 and $3,000 for the chairs of the Audit, Compensation and Governance Committees, respectively.
On February 10, 2020, the Compensation Committee granted 25,000 restricted stock units from the 2007 Plan to each of Ms. Chowning and Mr. Horowitz, who were elected as directors on October 31, 2019 but did not receive any equity awards at that time. These restricted stock units vested and were settled on the first business day prior to the 2020 Annual Meeting of Shareholders held on September 30, 2020.
For directors who are not employees, the 2007 Plan provides for a grant of a discretionary number of shares of restricted stock, restricted stock units, or non-qualified stock options or a combination of any on each director’s election and re-election at the annual shareholder meeting, not to exceed 25,000 shares. Under this provision of the 2007 Plan, each non-employee director elected or re-elected at the 20182020 Annual Meeting Messrs. Fishback, Madison, Olson, Cox and Lucas and Ms. Nelson, received 25,000of Shareholders was granted restricted stock units. Each restricted stock unit represents a contingent rightunits, with the number of underlying shares equal to receive one share$80,000 divided by the fair market value of our common stock.stock on the grant date, rounded down to the nearest whole share, up to a maximum of 25,000 shares. The restricted stock units vest in full on the first business day prior to the Annual Meeting of Shareholders next following the date of grant provided the director continues to provide services to us on that date, except that such restricted stock units will fully vest in the event of death, disability, or a change in control. The restricted stock units granted at the 2020 Annual Meeting will be settled and the shares delivered will be deferred until the first January 1 following the date of separation of service from Qumu. On September 30, 2020, the date of the 2020 Annual Meeting of Shareholders, Messrs. Olson, Cox, Fishback, Horowitz, Lucas and Ms. Chowning were each granted an award of 17,353 restricted stock units with the terms described above.
Also on September 30, 2020, in recognition of his service and leadership of the Board in connection with the Synacor merger and Chief Executive Officer transition, among other matters, the Compensation Committee granted Mr. Cox 50,000 restricted stock units from the 2007 Plan that will vest on the first business day before the Annual Meeting, with delivery deferred to the first January 1 following the date of separation from service with Qumu, subject to certain exceptions.acceleration upon a change in control.
On February 18, 2021, the Compensation Committee determined that each non-employee director elected or re-elected at the Annual Meeting will be granted restricted stock units, with the number of underlying shares equal to $80,000 divided by the fair market value of our common stock on the grant date, rounded down to the nearest whole share, up to a maximum of 25,000 shares. The restricted stock units vest in full on the first business day prior to the Annual Meeting of Shareholders next following the date of grant provided the director continues to provide services to us on that date, except that such restricted stock units will fully vest in the event of death, disability, or a change in control. Directors may elect to defer receipt of the shares to the earlier of January 1 of the 3rd3rd to 10th10th year following the date of grant or the first January 1 following the date of separation of service from Qumu. Any restricted stock units the director does not elect to defer will be paid within 90 days following the date the restricted stock units first vest.
On February 27, 2019, upon the recommendation of the Compensation Committee, the Board approved an award of restricted stock units under the 2007 Plan to each non-employee director re-elected at the Annual Meeting. The grant date will be the date of the Annual Meeting and the number of shares underlying the restricted stock unit award will be equal to $80,000 divided by the fair market value of our common stock on the grant date, rounded down to the nearest whole share, up to a maximum of 25,000 shares. These restricted stock units will be subject to the same vesting terms and deferral option as those granted on the date of the 2018 Annual Meeting.
The following table shows the cash and other compensation paid by us to each of our directors for 2018. Vern2020. Messrs. Hanzlik and Kennedy, who served as a directordirectors and executive officer in 2018,for a portion of 2020, did not receive compensation as a director during 2018. For 2018, the retainers for Mr. Netter’s service were paid to Dolphin at Mr. Netter’s direction and are reflected below.2020.
| | Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Total | Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Total |
Neil E. Cox | | Neil E. Cox | $ | 59,419 | | $ | 310,497 | | $ | 369,916 | |
Mary E. Chowning | | Mary E. Chowning | $ | 49,472 | | $ | 142,997 | | $ | 192,469 | |
Daniel R. Fishback | | Daniel R. Fishback | $ | 50,000 | | $ | 79,997 | | $ | 129,997 | |
Edward D. Horowitz | | Edward D. Horowitz | $ | 47,167 | | $ | 142,997 | | $ | 190,164 | |
Kenan Lucas | | Kenan Lucas | $ | 46,472 | | $ | 79,997 | | $ | 126,469 | |
Robert F. Olson |
| $44,575 |
|
| $54,250 |
|
| $98,825 |
| Robert F. Olson | $ | 49,117 | | $ | 79,997 | | $ | 129,114 | |
Neil E. Cox |
| $35,250 |
|
| $54,250 |
|
| $89,500 |
| |
Daniel R. Fishback |
| $37,500 |
|
| $54,250 |
|
| $91,750 |
| |
Kenan Lucas |
| $36,817 |
|
| $54,250 |
|
| $91,067 |
| |
Thomas F. Madison |
| $37,500 |
|
| $54,250 |
|
| $91,750 |
| |
Kimberly K. Nelson |
| $41,250 |
|
| $54,250 |
|
| $95,500 |
| |
Donald T. Netter (3) |
| $16,125 |
| $— |
|
| $16,125 |
| |
Justin A. Orlando (3) |
| $17,200 |
| $— |
|
| $17,200 |
| |
The charter of our Audit Committee provides that the Audit Committee is responsible for reviewing and approving the terms and conditions of all transactions we enter into in which an officer, director or 5% or greater shareholder or any affiliate of these persons has a direct or indirect material interest. Our Code of Ethics and Business Conduct, which is applicable to all of our employees and directors, also prohibits our employees, including our executive officers, and our directors from engaging in conflict of interest transactions. Requests for waivers by our executive officers and directors from the provisions of, or requests for consents by our executive officers and directors under, our Code of Ethics and Business Conduct must be made to the Audit Committee.
We also have adopted a related person transaction approval policy, which sets forth our policies and procedures for the review, approval or ratification by the Audit Committee of any transaction required to be reported in our filings with the Securities and Exchange Commission. Our policy applies to any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships in which our company is a participant and in which a related person has a direct or indirect interest.
We have adopted pre-approval policies and procedures for the Audit Committee that require the Audit Committee to pre-approve all audit and all permitted non-audit engagements and services (including the fees and terms thereof) by the independent auditors, except that the Audit Committee may delegate the authority to pre-approve any engagement or service less than $25,000$10,000 to one of its members, but requires that the member report such pre-approval at the next full Audit Committee meeting. The Audit Committee may not delegate its pre-approval authority for any services rendered by our independent auditors relating to internal controls. These pre-approval policies and procedures prohibit delegation of the Audit Committee’s responsibilities to our management. Under the policies and procedures, the Audit Committee may pre-approve specifically described categories of
services which are expected to be conducted over the subsequent twelve months on its own volition, or upon application by management or the independent auditor.
The proxy rules of the Securities and Exchange Commission permit our shareholders, after timely notice to us, to present proposals for shareholder action in our proxy statement where such proposals are consistent with applicable law, pertain to matters appropriate for shareholder action and are not properly omitted by our action in accordance with the proxy rules. In order for a shareholder proposal to be considered for inclusion in the proxy statement for the 20202022 Annual Meeting of Shareholders, the proposal must be received by the Secretary of Qumu Corporation in writing at our corporate offices, 510 1st Avenue North,400 South 4th Street, Suite 305,401-412, Minneapolis, Minnesota 55403,55415, no later than December 11, 2019.7, 2021.
Pursuant to our bylaws, in order for any other proposal to be properly brought before the next annual meeting by a shareholder, including a nominee for director to be considered at such annual meeting, the shareholder must give written notice of such shareholder’s intent to bring a matter before the annual meeting, or nominate the director, no later than December 11, 2019.7, 2021. Each such notice must set forth certain information with respect to the shareholder who intends to bring such matter before the meeting and the business desired to be conducted, as set forth in greater detail in the section of this proxy statement entitled “Corporate Governance — Director Nominations” and in our bylaws. If we receive notice of a shareholder proposal after December 11, 2019,7, 2021, such proposal also will be considered untimely pursuant to Rules 14a-4 and 14a-5(e) and the persons named in proxies