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Qumu Corporation
7725 Washington Avenue South
Edina, Minnesota 55439
(952) 683-7900
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 2015
____________________
TO THE SHAREHOLDERS OF
QUMU CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Qumu Corporation, a Minnesota corporation, will be held on Tuesday, May 20, 2014,12, 2015, at 2:00 p.m. (Minneapolis, Minnesota time), at 4200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402, for the following purposes:
| 1. | ||
| To elect |
| 2. | ||
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| Advisory vote to approve named executive officer compensation; and |
| 3. | ||
| To ratify and approve the appointment of KPMG LLP as the independent registered public accounting firm for Qumu Corporation for the year ending December 31, |
Only holders of record of Qumu Corporation’s common stock at the close of business on April 1, 20142015 are entitled to notice of and to vote at the Annual Meeting or any adjournments thereof.
You are invited to attend the Annual Meeting in person. Whether or not you plan to attend in person, please vote by proxy over the Internet, by telephone or by mailing the enclosed proxy card as soon as possible.
By Order of the Board of Directors, | |
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April 15, 201410, 2015
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IMPORTANT NOTICE REGARDING AVAILABILITY
OF PROXY MATERIALS FOR THE20142015 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 20, 201412, 2015
We are making our proxy materials available electronically via the Internet. You may access the following proxy materials atwww.qumu.com by following the link for “Investors” and then “Annual Meeting Materials”:
| — | ||
| Notice of |
| — | ||
| Proxy Statement for |
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| Annual Report on Form 10-K for the year ended December 31, |
These proxy materials are available free of charge and will remain available through the conclusion of the Annual Meeting. Additionally, we will not collect information, such as “cookies,” that would allow us to identify visitors to the site.
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Qumu Corporation
7725 Washington Avenue South
Edina, Minnesota 55439
(952) 683-7900
____________________
____________________ | ||
The accompanying Proxy is solicited on behalf of the Board of Directors of Qumu Corporation (“we” or “Qumu”) for use at the Annual Meeting of Shareholders to be held on May 20, 2014,12, 2015, at 2:00 p.m. (Minneapolis, Minnesota time) at 4200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402, and at any postponements or adjournments thereof (the “Annual Meeting”). The mailing of this proxy statement to our shareholders commenced on or about April 15, 2014.10, 2015.
Cost and Method of Solicitation
This solicitation of proxies to be voted at the Annual Meeting is being made by our Board of Directors. The cost of this solicitation of proxies will be borne by us. In addition to solicitation by mail, our officers, directors and employees may solicit proxies by telephone or in person. We may also request banks and brokers to solicit their customers who have a beneficial interest in our common stock registered in the names of nominees and will reimburse such banks and brokers for their reasonable out-of-pocket expenses.
The total number of shares outstanding and entitled to vote at the Annual Meeting as of April 1, 20142015 consisted of 8,684,0429,138,125 shares of common stock, $0.01 par value. Each share of common stock is entitled to one vote. Only shareholders of record at the close of business on April 1, 20142015 will be entitled to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, please complete, date, sign and return the enclosed proxy as promptly as possible (or follow instructions to grant a proxy to vote by means of telephone or internet) in order to ensure your representation at the Annual Meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for that purpose. Even if you have given your proxy, you may still vote in person if you attend the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must bring to the Annual Meeting a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares. Additionally, in order to vote at the Annual Meeting, you must obtain from the record holder a proxy issued in your name.
Differences Between Shareholder of Record and Beneficial Owners
You are a shareholder of record if at the close of business on the record date your shares were registered directly in your name with Wells Fargo Shareowner Services, our transfer agent.
You are a beneficial owner if at the close of business on the record date your shares were held by a bank, brokerage firm or other nominee and not in your name. Being a beneficial owner means that, like many of our shareholders, your shares are held in “street name.” As the beneficial owner, you have the right to direct your broker or nominee how to vote your shares by following the voting instructions your broker or other nominee provides. If you do not provide your broker or nominee with instructions on how to vote your shares, your broker or nominee will be able to vote your shares with respect to only one of the proposals being presented to shareholders at the Annual Meeting.
| 1 |
Record holders should review the additional information below under “Casting Your Vote as a Record Holder.”
Street name holders should review the additional information below under “Casting Your Vote as a Street Name Holder.”
Quorum and Voting Requirements
A quorum, consisting of a majority of the shares of common stock entitled to vote at the Annual Meeting, must be present, in person or by proxy, before action may be taken at the Annual Meeting.
Proposal 1 relates to the election of directors. Directors are elected by a plurality of the votes cast at the Annual Meeting by holders of common stock voting for the election of directors. This means that since shareholders will be electing ninesix directors, the ninesix nominees receiving the highest number of votes will be elected. You may either vote “FOR” or “WITHHOLD” authority to vote for each nominee for the Board of Directors. If you withhold authority to vote for the election of one of the directors, it has the same effect as a vote against that director.
The affirmative vote of the holders of the majority of the shares present, in person or by proxy, and entitled to vote is required for approval of:
| Proposal 2: |
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| Proposal |
You may vote “FOR,” “AGAINST” or “ABSTAIN” on Proposals 2 3 and 4.3.
Abstentions will be counted for purposes of calculating whether a quorum is present at the Annual Meeting, but are not counted for the purposes of determining whether shareholders have approved that matter. Therefore, if you abstain from voting on Proposals 2 3 or 4,3, it has the same effect as a vote against that proposal. A “broker non-vote” occurs when a broker or other nominee does not receive voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares. Broker non-votes will be counted for purposes of calculating whether a quorum is present at the Annual Meeting, but will not be counted for purposes of determining the number of votes present in person or represented by proxy and entitled to vote with respect to a particular proposal. Thus, a broker non-vote will not affect the outcome of the vote on a proposal that requires a plurality of votes cast (Proposal 1) or the approval of a majority of the votes present in person or represented by proxy and entitled to vote (Proposals 2 3 and 4)3).
Pursuant to an agreement dated March 18, 2013 as amended by an amendment dated October 23, 20132015 (the “Dolphin Agreement”) between us andDolphin Limited Partnership III, L.P., Dolphin Associates III, LLC, and Dolphin Holdings Corp. III (collectively, “Dolphin”),Dolphin will vote all of the shares of our common stock that it beneficially owns in favor of the election of each nominee named in Proposal 1 and in accordance with the recommendations of our Board of Directors with respect to all other proposals presented to shareholders at the Annual Meeting. See “Corporate Governance – Agreement with Dolphin” below for a summary of the Dolphin Agreement.
So far as our management is aware, no matters other than those described in this proxy statement will be acted upon at the Annual Meeting. In the event that any other matters properly come before the Annual Meeting calling for a vote of shareholders, the persons named as proxies in the enclosed form of proxy will vote in accordance with their best judgment and in accordance with the Dolphin Agreement on such other matters.judgment.
Casting Your Vote as a Record Holder
If you are the shareholder of record of your shares and you do not vote by proxy card, by telephone, via the Internet or in person at the Annual Meeting, your shares will not be voted at the Annual Meeting. If you are a record holder and you vote your shares, the individuals named on the proxy card will vote your shares as you have directed. If you just sign and submit your proxy without voting instructions, your shares will be voted “FOR” each director nominee identified in Proposal 1 and “FOR” each of Proposals 2 3 and 4.3.
| 2 |
Casting Your Vote as a Street Name Holder
If you are a street name holder and you do not vote by proxy card, by telephone, via the Internet or in person at the Annual Meeting, your broker or nominee may vote your shares only on those proposals on which it has discretion to vote. Your broker is entitled to vote in its discretion on Proposal 4,3, the ratification of KPMG LLP as our independent registered public accounting firm for 2014.2015.
If you hold your shares in street name and do not vote or do not provide voting instructions to your broker or nominee, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. This is sometimes called a “broker non-vote.” Brokers and nominees do not have discretionary authority to vote on:
| Proposal 1: Election of Directors, or |
| Proposal 2: |
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As a result, if you hold your shares in street name and do not vote or do not provide voting instructions to your broker or nominee, no votes will be cast on your behalf on Proposals 1 2 or 3.2. Because of these broker voting rules, all street name holders are urged to provide instructions to their brokers or nominees on how to vote their shares at the Annual Meeting.
Make your vote count! Instruct your broker how to cast your vote!
If you hold your shares in street name, your broker will continue to have discretion to vote any uninstructed shares on Proposal 4:3: Ratification of Independent Registered Public Accounting Firm.
You may change your vote and revoke your proxy at any time before it is voted by:
| Sending a written statement to that effect to the Secretary of Qumu Corporation; |
| Submitting a properly signed proxy card with a later date; |
| If you voted by telephone or through the Internet, by voting again either by telephone or through the Internet prior to the close of the voting facility; or |
| Voting in person at the Annual Meeting. |
All shares represented by valid, unrevoked proxies will be voted at the Annual Meeting and any adjournment(s) or postponement(s) thereof. Our principal offices are located at 7725 Washington Avenue South, Edina, Minnesota 55439, and our telephone number is (952) 683-7900.
| 3 |
Annual Meeting and Special Meetings; Bylaw Amendments
This 20142015 Annual Meeting of Shareholders is a regular meeting of our shareholders and has been called by our Board of Directors in accordance with our bylaws. Under our bylaws, special meetings of our shareholders may be held at any time and for any purpose and may be called by our President, Treasurer, two or more directors or by a shareholder or shareholders holding 10% or more of the voting power of all shares entitled to vote on the matters to be presented to the meeting, except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or affect a business combination, including any action to change or otherwise affect the composition of the Board of Directors for that purpose, must be called by 25% or more of the voting power of all shares entitled to vote. The business transacted at a special meeting is limited to the purposes as stated in the notice of the meeting. For business to be properly brought before a regular meeting of shareholders, a written notice containing the required information must be timely submitted. For more information, please review our bylaws and the section of this proxy statement entitled “Shareholder Proposals for 20152016 Annual Meeting.”
Our bylaws may be amended or altered by a vote of the majority of the whole Board at any meeting. The authority of the Board is subject to the power of our shareholders, exercisable in the manner provided by Minnesota law, to adopt or amend, repeal bylaws adopted, amended, or repealed by the Board. Additionally, the Board may not make or alter any bylaws fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the Board of Directors, or fixing the number of directors or their classifications, qualifications, or terms of office, except that the Board may adopt or amend any bylaw to increase their number.
| 4 |
OWNERSHIP OF VOTING SECURITIES BY PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth certain information as of April 1, 20142015 with respect to our common stock beneficially owned by (i) each director and each nominee for director, (ii) each person known to us to beneficially own more than five percent of our common stock, (iii) each executive officer named in the Summary Compensation Table (the “named executive officers”), and (iv) all current executive officers and directors as a group.
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Name and Address of Beneficial Owner |
| Number of Shares |
| Percent of Outstanding | ||
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Invicta Capital Management, LLC (2) |
| 820,938 |
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| 9.5 | % |
60 East 42nd Street |
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New York, NY 10165 |
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Ariel Investments, LLC (3) |
| 793,814 |
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| 9.1 | % |
200 E. Randolph Dr., Suite 2900 |
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Chicago, IL 60601 |
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Dolphin Limited Partnership III, L.P. (4) |
| 560,500 |
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| 6.5 | % |
c/o 96 Cummings Point Road |
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Stamford, CT 06902 |
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Renaissance Technologies LLC (5) |
| 500,959 |
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| 5.8 | % |
800 Third Avenue |
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New York, NY 10022 |
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Thomson Horstmann & Bryant, Inc. (6) |
| 471,116 |
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| 5.4 | % |
501 Merritt 7 |
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Norwalk, CT 06851 |
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Sherman L. Black (7)(8)(9)(10) |
| 368,075 |
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| 4.1 | % |
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James L. Reissner (7)(8) |
| 117,229 |
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| 1.3 | % |
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Lawrence M. Benveniste (7)(8) |
| 87,000 |
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| * |
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Daniel R. Fishback (7)(8) |
| 0 |
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| * |
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Thomas F. Madison (7)(8) |
| 86,000 |
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| * |
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Kimberly K. Nelson (7)(8) |
| 13,500 |
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| * |
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Robert F. Olson (7)(8) |
| 13,500 |
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| * |
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Justin A. Orlando (7)(8) |
| 5,000 |
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| * |
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Steven M. Quist (7)(8)(11) |
| 72,587 |
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| * |
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James R. Stewart (9) |
| 84,306 |
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| * |
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All current executive officers and directors as a group (10 persons) |
| 847,197 |
|
| 9.1 | % |
| Delegation of Limited Authority under 2007 Plan. The Compensation Committee has delegated authority to the Chief Executive Officer to grant equity awards under the 2007 Plan to employees who are not executive officers of Qumu. The Chief Executive Officer’s delegation authority is limited to grants to any individual of no more than the lesser of (i) 1.5 times the recommended annual grant corresponding to that individual’s position with Qumu and (ii) 10,000 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 by 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 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 awards by the Chief Executive Officer must be those contained in our standard form of non-qualified stock option agreement or standard form of restricted stock agreement, with the lapse of restrictions on the restricted stock over a period of 1 to 4 years as determined by the Chief Executive Officer consistent with the terms of the 2007 Plan. |
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For awards by the Chief Executive Officer to newly-hired non-executive employees or non-executive employees being recognized for their achievement, the grant date will be the second Tuesday of the month following the employee’s start date or the date the employee is recognized for achievement, 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.
| Stock Ownership Guidelines. In May 2006, we established stock ownership guidelines for our executive officers and directors. These guidelines are reviewed annually. The ownership guidelines for executive officers are based upon the following multiples of base pay, with the multiple depending upon management level: Chief Executive Officer, five times; President, Chief Operating Officer, Chief Technical Officer and Chief Financial Officer, three times; and all other executive officers, two times. In the event an individual holds positions in more than one management level, the multiple applicable to the highest management level applies to that individual. The ownership guideline for directors |
On February 18, 2015, the Compensation Committee reviewed the progress of the named executive officers and directors toward the ownership guidelines. As of that date, the four directors that were required to meet the ownership guidelines met them. Two other directors are required to meet the guidelines in 2017 and two are required to meet the guidelines in 2018. Mr. Black was first required to meet the ownership guidelines in 2014. Mr. Stewart is not required to meet the ownership guidelines until August 2015. Mr. Hanzlik is not required to meet the ownership guidelines until 2018. As of February 18, 2015, Mr. Black’s stock ownership was approximately 91% of the guideline amount. The Compensation Committee believes Mr. Black has been and will be challenged to meet the stock ownership guidelines, despite the stock options and stock held by him, because no equity awards have been made to Mr. Black since November 1, 2011. Additionally, certain outstanding vested options held by Mr. Black were not in-the-money at February 18, 2015.
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| Post-Termination Compensation. Our practice has been to enter into a form of agreement relating to severance and change in control benefits with each person appointed by the Board as an executive officer. As of December 31, |
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. See “Executive Compensation – Employment Arrangements with Named Executive Officers and Post-Employment Compensation” in this proxy statement for a discussion of the terms of the agreements with the named executive officers and the value of benefits payable under these agreements.
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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. See “Executive Compensation – Employment Arrangements with Named Executive Officers and Post-Employment Compensation” in this proxy statement for a discussion of the terms of the agreement with the named executive officers and the value of benefits payable under that agreement.
| Engagement of Compensation Consultant. Under its charter, the Compensation Committee has the sole authority to retain or replace the compensation consultant and the compensation consultant reports directly to the Compensation Committee. |
Consideration of 20132014 Say-on-Pay Vote
Prior to and afterThe say-on-pay proposal presented at the 20122014 Annual Meeting of Shareholders received 95.0% approval by our shareholders. Beginning in 2012, we increased our shareholder engagement and outreach efforts to enable the Compensation Committee to understand the 2012 advisory vote on named executive officer compensation (the “say-on-pay” vote). During 2012, our management had over 115 e-mail, telephone and in-person conversations on various topics with over 78 different investors, including 33 in-person meetings. The general feedback we received from our shareholdersspecifically relating to executive compensation was that they continue to be particularly attentive to the strength of the connection between performance and pay and the role of performance-based compensation in overall compensation of named executive officers.
Following the 2012 say-on-pay vote, the Compensation Committee devoted significant efforts to developing a performance based long-term performance and retention program for executive officers and key employees. In connection with this effort, the Compensation Committee engaged Radford as its independent compensation consultant in early Fall 2012 to assist with the design of the programs. For executive officers, the Compensation Committee determined to incorporate stock price as a performance measure. The culmination of the Compensation Committee’s work on this program was a LTI Program adopted in February 2013. This program is designed to incentivize financial performance of our disc publishing and software businesses for the two twelve month periods ending December 31,compensation. During 2013 and 2014, to increase shareholder value, as well as retain talent through payouts delayed over a 30 month periodwe sought and conditioned upon continued employment with us.
The say-on-pay proposal presented at the 2013 Annual Meeting of Shareholders received 93.3% approval as compared to 61.7% approval of the say-on-pay vote at the 2012 Annual Meeting of Shareholders. Following the implementation of LTI Program in February 2013 and the say-on-pay vote cast at the 2013 Annual Meeting of Shareholders, we continued our shareholder engagement and outreach to understand shareholder reactionwelcomed feedback from shareholders relating to our efforts to align pay with performance and our response tothrough the 2012 Annual Meeting say-on-pay vote.LTI Program. Based upon the 20132014 Annual Meeting say-on-pay vote and the feedback subsequent to the 20132014 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 20142015 Annual Meeting as a way to gain additional information as it considers executive compensation philosophy, policies and practices for the remainder of 20142015 and beyond.
Report of the Compensation Committee
The following report of the Compensation 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.
The Compensation Committee has reviewed and discussed the section of this proxy statement entitled Compensation Discussion and Analysis (the “CD&A”) for the year ended December 31, 2014 with management. In reliance on the reviews and discussions referred to above, the Compensation Committee recommended to the Board that the CD&A be included in the proxy statement for the 2015 Annual Meeting of Shareholders for filing with the Securities and Exchange Commission.
By the Compensation Committee of the Board of Directors:
Steven M. Quist (Chair)
Lawrence M. Benveniste
Daniel R. Fishback
Robert F. Olson
Justin A. Orlando
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:
| Our long-term incentives in the form of stock options or restricted stock are at the discretion of the Compensation Committee and are granted pursuant to a disciplined process. |
| Stock options become exercisable over a four year period and remain exercisable for up to seven years (ten years for options issued prior to 2008) from the date of grant, and restricted shares vest over periods up to four years, encouraging executives to look to long-term appreciation in equity values. |
| We balance |
| 27 |
| Beginning with 2011 awards, the Compensation Committee granted a greater proportion of the value of long-term equity incentives in the form of restricted stock. These awards more directly tie the interests of our |
| Because of our stock ownership guidelines, our |
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| The metrics used to determine the |
| For |
| · | Following the sale of the disc publishing business on July 1, 2014, the Compensation Committee determined that payouts under the 2014 Incentive Plan relating to disc publishing performance for the first half of the 2014 performance period from January 1, 2014 to June 30, 2014 would continue to be based upon the actual achievement of the disc publishing business as compared to the minimum, target and maximum performance goals previously set by the Compensation Committee in February 2014. In basing the payouts under the fiscal year 2014 Incentive Plan on actual achievement of the disc publishing business, the Compensation Committee sought to align these payouts with the purchase price we received from the sale of the disc publishing business and to limit windfalls in the 2014 Incentive Plan payouts attributable to the disc publishing business. |
| · | Following the sale of the disc publishing business on July 1, 2014, the Compensation Committee reallocated the incentive opportunity under the 2014 Incentive Plan exclusively to our remaining software business for the second half of 2014 and reallocated all of the incentive opportunity under the LTI Program for the twelve month performance period ending December 31, 2014 to the performance goals relating to our retained software business. The Compensation Committee believes this reallocation of incentives aligns with both our short-term and long-term software strategy, which these performance based incentive pay programs are designed to support. |
| · | While the Compensation Committee reallocated the incentive opportunities under the 2014 Incentive Plan and the LTI Program, it did not change the metrics or performance goals relating to the software business under either the 2014 Incentive Plan or the LTI Program. The Compensation Committee believed that the reallocation combined with maintaining the metrics and performance goals encouraged management focus on our software business and reinforced the expectation of continued high performance in our software business, including the need to actively manage the risks and challenges of separation of the two businesses. The Compensation Committee also believed that these actions would help us realize the full benefits of the sale transaction. |
| · | The incentive pay amounts under the LTI Program and our |
| 28 |
| The incentive pay under our LTI Program is payable over a period of 30 months and only if the executive is employed by us at the time of payment. The Compensation Committee believes that the duration of the LTI Program provides long-term incentives that are aligned with our long-term strategy for the company. |
| The metrics used to determine the amount of a named executive officer’s incentive pay for |
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| Through our 2007 Stock Incentive 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 LTI Program and the |
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| Our corporate compliance systems and policies, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. |
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.
| 29 |
Report of the Compensation Committee
The following report of the Compensation 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.
The Compensation Committee has reviewed and discussed the section of this proxy statement entitled Compensation Discussion and Analysis (the “CD&A”) for the year ended December 31, 2013 with management. In reliance on the reviews and discussions referred to above, the Compensation Committee recommended to the Board that the CD&A be included in the proxy statement for the 2014 Annual Meeting of Shareholders for filing with the Securities and Exchange Commission.
By the Compensation Committee of the Board of Directors:
Steven M. Quist (Chair)Lawrence M. BenvenisteDaniel R. FishbackRobert F. OlsonJustin A. Orlando
The following table shows, for our Chief Executive Officer, and our Chief Financial Officer and our President (together referred to as our “named executive officers”), information concerning compensation earned for services in all capacities during the years ended December 31, 2013, 2012 and 2011.indicated.
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Name and Position |
| Year |
| Salary ($) |
| Stock |
| Option |
| Non- |
| All |
| Total ($) |
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Sherman L. Black |
|
| 2013 |
| $ | 375,000 |
|
| — |
|
| — |
| $ | 1,041,424 |
| $ | 6,660 |
| $ | 1,423,084 |
|
Chief Executive Officer |
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| 2012 |
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| 379,288 |
|
| — |
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| — |
|
| 140,063 |
|
| 6,651 |
|
| 526,002 |
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| 2011 |
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| 375,418 |
| $ | 570,108 |
| $ | 166,257 |
|
| 369,309 |
|
| 5,980 |
|
| 1,487,072 |
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James R. Stewart |
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| 2013 |
| $ | 293,968 |
|
| — |
|
| — |
| $ | 408,702 |
| $ | 8,301 |
| $ | 710,971 |
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Chief Financial Officer |
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| 2012 |
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| 245,306 |
|
| — |
|
| — |
|
| 62,325 |
|
| 8,104 |
|
| 315,735 |
|
|
|
| 2011 |
|
| 230,363 |
| $ | 207,312 |
| $ | 60,457 |
|
| 152,155 |
|
| 7,359 |
|
| 657,646 |
|
| Name and Position | Year | Salary ($) | Stock Awards ($) (1) | Option Awards ($) (1) | Non- Equity Incentive Plan Compen- sation ($) (2) | All Other Compen- sation ($) (3) | Total ($) |
| Sherman L. Black Chief Executive Officer | 2014 | $375,000 | — | — | $662,021 | $7,144 | $1,044,165 |
| 2013 | 375,000 | — | — | 1,041,424 | 6,660 | 1,423,084 | |
| 2012 | 379,288 | — | — | 140,063 | 6,651 | 526,002 | |
| James R. Stewart Chief Financial Officer | 2014 | $295,000 | $305,000 | — | $285,664 | $8,444 | $894,108 |
| 2013 | 293,968 | — | — | 408,702 | 8,301 | 710,971 | |
| 2012 | 245,306 | — | — | 62,325 | 8,104 | 315,735 | |
| Vern Hanzlik President (4) | 2014 | $316,962 | $305,000 | — | $162,536 | $5,665 | $790,163 |
| (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 |
| (2) | ||
| Represents the following amounts paid to the named executive officers under specified cash incentive compensation program for the year noted. Mr. Hanzlik does not participate in the LTI Program. All amounts are reported for the year in which the related services were performed, although paid in a following year. |
|
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|
| |||
Name |
| Year |
| LTI Program Amounts |
| Annual Incentive Plan |
| Year | LTI Program | Annual Incentive Plan | |||
|
| 2013 |
| $ | 583,310 |
| $ | 458,114 |
| ||||
Sherman L. Black |
| 2012 |
| ― |
| $ | 140,063 |
| 2014 | $374,363 | td87,658 | ||
|
| 2011 |
| ― |
| $ | 369,309 |
| |||||
|
| 2013 |
| $ | 188,468 |
| $ | 220,234 |
| ||||
| Sherman L. Black | 2013 | $583,310 | $458,114 | ||||||||||
| 2012 | ― | td40,063 | |||||||||||
| 2012 |
| ― |
| $ | 62,325 |
| 2014 | td47,375 | td38,289 | |||
|
| 2011 |
| ― |
| $ | 152,155 |
| |||||
| James R. Stewart | 2013 | td88,468 | td20,234 | ||||||||||
| 2012 | ― | $62,325 | |||||||||||
| 2014 | ― | td62,536 | |||||||||||
| 30 |
| (3) | ||
| Represents the following amounts: |
|
|
|
|
|
|
|
|
|
|
| |||
Name |
| Year |
| Matching |
| Insurance Premiums |
| Year | Matching Contributions to 401(k) Plan | Insurance Premiums | |||
|
| 2013 |
| $ | 5,841 |
| $ | 819 |
| ||||
Sherman L. Black |
| 2012 |
| $ | 5,844 |
| $ | 807 |
| 2014 | $6,166 | $978 | |
|
| 2011 |
| $ | 5,520 |
| $ | 460 |
| ||||
|
| 2013 |
| $ | 7,500 |
| $ | 801 |
| ||||
| Sherman L. Black | 2013 | $5,841 | $819 | ||||||||||
| 2012 | $5,844 | $807 | |||||||||||
| 2012 |
| $ | 7,363 |
| $ | 741 |
| 2014 | $7,500 | $944 | ||
|
| 2011 |
| $ | 6,911 |
| $ | 448 |
| ||||
| James R. Stewart | 2013 | $7,500 | $801 | ||||||||||
| 2012 | $7,363 | $741 | |||||||||||
| 2014 | $4,688 | $977 | |||||||||||
| (4) | Mr. Hanzlik began serving as our Executive Vice President, an executive officer position, on March 13, 2014 and was promoted to President on December 12, 2014. Accordingly, information for years prior to 2014 is not presented. Amounts presented for 2014 include compensation to Mr. Hanzlik in all capacities for 2014. |
Grants of Plan-Based Awards in 20132014
The following table sets forth certain information concerning plan-based awards granted to the named executive officers during the year ending December 31, 2013.2014.
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| |||||||||||
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|
| All Other |
| All Other |
| Exercise or |
| Grant Date |
| ||||||||||||||
|
|
|
| Estimated Future |
|
| |||||||||||||||||||||
|
|
|
| All Other | Exercise or | Grant Date | |||||||||||||||||||||
|
|
|
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards | All Other Stock Awards Number of Shares of Stock (#) | Grant Date Fair Value of Stock and Option Awards (#)(3) | |||||||||||||||||||||
Name |
| Grant |
| Target |
| Maximum |
| Grant Date | Target ($) | Maximum ($) | |||||||||||||||||
Sherman L. Black (1) |
| — |
| $ | 337,500 |
| $ | 675,000 |
| — |
| — |
| — |
| — | 2/20/2014 | $337,500 | $675,000 | — | |||||||
Sherman L. Black (2) |
| — |
| $ | 1,500,000 |
| $ | 7,500,000 |
| — |
| — |
| — |
| — | — | td,500,000 | $7,500,000 | — | — | ||||||
James R. Stewart (1) |
| — |
| $ | 162,250 |
| $ | 324,500 |
| — |
| — |
| — |
| — |
| 2/20/2014 | $162,250 | $324,500 | — | — | |||||
James R. Stewart (2) |
| — |
| $ | 590,000 |
| $ | 1,770,000 |
| — |
| — |
| — |
| — |
| — | $590,000 | $1,770,000 | — | — | |||||
| James R. Stewart | 5/20/2014 | — | 20,000 | $305,000 | |||||||||||||||||||||||
| Vern Hanzlik (1) | 2/20/2014 | $211,250 | $422,500 | — | — | ||||||||||||||||||||||
| Vern Hanzlik | 5/20/2014 | — | 20,000 | $305,000 | |||||||||||||||||||||||
| (1) | ||
| Represents incentive pay that may have been earned by the named executive officers under our |
| 31 |
| (2) | ||
| Represents pay that may be earned by |
| (3) | Valuation of awards based on the grant date fair value of those awards computed in accordance with FASB ASC Topic 718 utilizing assumptions discussed in Note 4 to our consolidated financial statements for the year ended December 31, 2014 included in our Annual Report on Form 10-K for the year ended December 31, 2014. |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information concerning option awards outstanding to the named executive officers at December 31, 2013.2014.
|
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|
|
|
|
|
|
|
|
|
|
| ||||
|
| Option Awards |
| Option Awards | |||||||||||||
Name |
| Number of |
| Number of |
| Option |
| Option Expiration Date (1) |
| Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date (1) | ||||
Sherman L. Black |
| 200,000 |
| — |
| $ | 14.10 |
| 04/01/2016 |
| 200,000 | ― | td4.10 | 04/01/2016 | |||
|
| 37,500 |
| 12,500 |
| $ | 17.34 |
| 01/01/2017 |
| 50,000 | ― | td7.34 | 01/01/2017 | |||
|
| 8,250 |
| 8,250 |
| $ | 14.68 |
| 05/11/2018 |
| 12,375 | 4,125 | td4.68 | 05/11/2018 | |||
|
| 16,500 |
| 16,500 |
| $ | 11.17 |
| 11/01/2018 |
| 24,750 | 8,250 | td1.17 | 11/01/2018 | |||
| |||||||||||||||||
James R. Stewart |
| 48,750 |
| 16,250 |
| $ | 16.77 |
| 08/02/2017 |
| 65,000 | ― | td6.77 | 08/02/2017 | |||
|
| 3,000 |
| 3,000 |
| $ | 14.68 |
| 05/11/2018 |
| 4,500 | 1,500 | td4.68 | 05/11/2018 | |||
|
| 6,000 |
| 6,000 |
| $ | 11.17 |
| 11/01/2018 |
| 9,000 | 3,000 | td1.17 | 11/01/2018 | |||
| Vern Hanzlik | 50,000 | $6.62 | 11/26/2019 | ||||||||||||||
| 25,000 | $6.92 | 12/10/2019 | |||||||||||||||
| (1) | ||
| Options vest and become exercisable in equal installments on the first four anniversaries of the date of grant and the expiration date of each option is the seven-year anniversary of the date of grant of such option. |
The following table sets forth certain information concerning stock awards outstanding to the named executive officers at December 31, 2013.2014.
|
|
|
|
|
| ||||
|
| Stock Awards |
| Stock Awards | |||||
Name |
| Number of Shares or Units of Stock |
| Market Value of Shares or Units of |
| Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | ||
Sherman L. Black |
| 23,100 |
| $ | 295,680 |
| 11,550 | $157,889 | |
James R. Stewart |
| 8,400 |
| $ | 107,520 |
| 24,200 | $330,814 | |
| Vern Hanzlik | 35,000 | $478,450 | |||||||
| (1) | ||
|
|
| 32 |
20132014 Options Exercised and Stock Vested
The following table sets forth certain information concerning options exercised and stock awards vested during 20132014 for the named executive officers.
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|
|
|
|
|
|
| ||||
|
| Option Awards |
| Stock Awards |
| Option Awards | Stock Awards | ||||||||||
Name |
| Number of Shares |
| Value Realized |
| Number of Shares |
| Value Realized |
| Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||
Sherman L. Black |
| — |
| — |
| 11,550 |
| $ | 143,759 |
| — | 11,550 | $166,513 | ||||
James R. Stewart |
| — |
| — |
| 4,200 |
| $ | 52,276 |
| — | 4,200 | $60,550 | ||||
| Vern Hanzlik | — | 5,000 | $67,000 | ||||||||||||||
| (1) | ||
| For option awards, represents the difference between the exercise price and the fair market value of our common stock on the respective dates of exercise and for stock awards, represents the number of shares vested multiplied by the fair market value of our stock on the vesting date. |
Employment Arrangements with Named Executive Officers and Post-Employment Compensation
Our practice has been to enter into a 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. Messrs. Black and Stewart were parties to the letter agreement during 2013, which was last amended2014 and, restated on February 21, 2013.
The amendments and changeswhen he became an executive officer in March 2014, Mr. Hanzlik also became a party to the letter agreement reflected in the amended and restated letter agreement of February 21, 2013 include (i) removing the provisions that terminate payment of severance amounts at such time as the executive has secured other employment, (ii) changes to the excise tax provisions such that the executive officer will receive either the full amount of the payments or value of benefits under the amended letter agreement 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 executive officer of the greatest amount on an after-tax basis, (iii) providing that a material reduction in short-term bonus opportunity constitutes “good reason”, and (iv) changes relating to Section 409A of the Internal Revenue Code of 1986, the Patient Protection and Affordable Care Act, and other updating and clarifying changes.agreement.
The terms “cause,” “good reason,” and “change in control,” used in the letter agreement in effect as of December 31, 2013 are defined as follows:
| Term | Definition | |
|
| |
|
| 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 ornolo 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. | |
Good Reason | Good Reason for the twelve month period following a Change in Control shall mean, without your express written consent, any of the following: | |
(i) | a material diminution of your authority, duties or responsibilities with respect to your position immediately prior to the Change in Control, or | |
(ii) | a material reduction in your base compensation as in effect immediately prior to the Change in Control; | |
(iii) | a material reduction in your opportunity to earn a cash bonus under the annual short-term incentive compensation plan of Qumu in which you participate as in effect immediately prior to the Change in Control (for the avoidance of doubt, specifically excluding any reduction in your opportunity to earn a cash bonus under any long-term incentive compensation plan of Qumu in which you participate); | |
(iv) | a material reduction in the authority of the person to whom you report (or a change in your reporting directly to the Board of Directors, if applicable); | |
(v) | a material change in the geographic location at which you must perform services for Qumu; and | |
(vi) | any other action or inaction that constitutes a material violation of this Agreement by Qumu; | |
provided that no such termination for Good Reason shall be effective unless: (A) you provide written notice to the Chair of the Board of Directors of the existence of a condition specified in paragraphs (i) through (v) 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 your employment within 90 days following the last day of the remedial period described above. | ||
| 33 |
| Term | Definition | |
|
| |
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 this 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 provides 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.
On February 21, 2013, we entered into LTI Agreements with Messrs. Black and Stewart under the LTI Program that are summarized above under “Executive Compensation – Compensation Discussion and Analysis – 2013 Compensation Elements and Determinations – LTI Program.” The LTI Agreements were adopted under the 2007 Plan and incorporate the definition of “Change in Control” from the 2007 Plan, which is the same as the definition used in the letter agreement described above. The LTI Agreements incorporate the definition of “Cause” from the letter agreement described above.
Under the LTI Agreements with Messrs. Black and Stewart, if the executive’s employment is terminated by us without cause (other than in connection with a change in control), we will pay the executivesexecutive the LTI incentive pay amounts as follows (subject to the execution and delivery of a general release and continued compliance with the nondisclosure and noncompetition agreement) in a lump sum no later than the first regular payroll date following the date of termination:
| For Mr. Black, an amount equal to the LTI incentive pay based upon the achievement of the performance measures, as determined by the Compensation Committee, for each year of the performance periods completed prior to the termination or if any year of the performance periods is not completed, assuming the matrix performance factors were 1.0 for that year. |
| For Mr. Stewart, an amount equal to the full amount of the time portion and the amount of the performance portion based upon the achievement of performance measures, as determined by the Compensation Committee, for each year of the performance periods completed prior to the termination or if any year of the performance periods is not completed, assuming the matrix performance factors were 1.0 for that year. |
| 34 |
If the employment of Messrs. Black, Stewart or StewartHanzlik was terminated without cause as of December 31, 2013,2014, we estimate that the value of the benefits under thehis respective agreements would have been as followsset forth below based upon his salary for 2013,2014, an amount equal to the average of the short-term incentive amounts for the prior three completed calendar years prior to December 31, 2013 (2012, 20112014 (2013, 2012 and 2010),2011) for Messrs. Black and assumingStewart and two completed calendar years prior to December 31, 2014 for Mr. Hanzlik, which are the years during which he was employed by us. For Messrs. Black and Stewart, the LTI Incentive Pay amounts are those amounts that would otherwise be payable in March 2015 and July 2015 based upon the LTI matrix performance factor for 2014 of 0.9983x (actual) and LTI matrix performance factor for 2013 wasof 1.5555x (actual) and the matrix performance factor for 2014 was 1.0x..
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Termination Without Cause |
| Termination Without Cause | |||||||||||||
Executive Officer |
| Base Salary |
| Annual Incentive |
| LTI Incentive |
| Insurance |
| Base Salary Payments | Annual Incentive Payments | LTI Incentive Pay | Insurance Premiums | ||||
Sherman L. Black |
| $ | 375,000 |
| $ | 268,641 |
| $ | 1,916,626 |
| $ | 15,794 |
| $375,000 | $322,495 | $1,331,944 | $17,399 |
James R. Stewart |
| $ | 295,000 |
| $ | 95,193 |
| $ | 671,936 |
| $ | 15,791 |
| $295,000 | $144,905 | $483,199 | $10,809 |
| Vern Hanzlik | $325,000 | $199,375 | ― | $18,414 | |||||||||||||
Under the LTI Agreements, if a change in control occurs, we will pay Messrs. Black and Stewart the executives thefollowing LTI Program incentive pay amounts as follows in a lump sum no later than the first regular payroll date following the date of the change in control:
| For Mr. Black, an amount equal to the LTI Program incentive pay based upon the achievement of performance measures during the performance periods, whether or not completed, as determined by the Compensation Committee. |
| For Mr. Stewart, an amount equal to the full amount of the time portion and the amount of the performance portion based upon the achievement of performance measures during the performance periods, whether or not completed, as determined by the Compensation Committee. |
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.
Under the letter agreements, if a change in control occurs, but the executive’snamed 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.
If a change in control occurred as of December 31, 2013,2014, we estimate that the value of the benefits to Messrs. Black, Stewart and Hanzlik under the 2007 Plan and the LTI Agreements would have been as follows assuming that the matrix performance factor for 2013 was 1.5555x (actual) and that the matrix performance factor for 2014 was 1.0x andset forth below based upon his respective stock option and restricted stock holdings at December 31, 2013.2014. For Messrs. Black and Stewart, the LTI Incentive Pay amounts are those amounts that would otherwise be payable in March 2015 and July 2015 based upon the LTI matrix performance factor for 2014 of 0.9983x (actual) and LTI matrix performance factor for 2013 of 1.5555x (actual).
|
|
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|
|
|
|
|
|
| |||
|
| Change in Control (Without Termination of Employment) |
| Change in Control (Without Termination of Employment) | |||||||||
Executive Officer |
| LTI Incentive Pay |
| Value of Accelerated Vesting |
| Value of Accelerated Lapse |
| LTI Incentive Pay | Value of Accelerated Vesting of Stock Options (1) | Value of Accelerated Lapse of Restrictions on Restricted Stock (1) | |||
Sherman L. Black |
| $ | 1,916,626 |
| $ | 53,790 |
| $ | 295,680 |
| $1,331,944 | $20,625 | $157,889 |
James R. Stewart |
| $ | 671,936 |
| $ | 19,560 |
| $ | 107,520 |
| $483,199 | $7,500 | $330,814 |
| Vern Hanzlik | ― | $521,250 | $478,450 | ||||||||||
| 35 |
| (1) | ||
| Value based on a share price of |
The letter agreement provides that if a change in control occurs and within twelve months of the change in control the executive’snamed 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.
As stated above, the LTI Agreements with Messrs. Black and Stewart require us to pay the LTI incentive pay amounts upon a change in control, including if the executive’shis employment is terminated by us. Also as stated above, under the 2007 Plan all stock options held by the executive 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.
If, within twelve months of a change in control, the employment of Messrs. Black, Stewart and StewartHanzlik was terminated without cause or for good reason as of December 31, 2013,2014, we estimate that the value of the benefits under the letter agreements, and LTI Agreements and the 2007 Plan to a named executive officer would have been as followsset forth below based upon (i) his salary for 2013,2014, (ii) target incentive pay for 2013,2014, (iii) for the LTI Program assumingfor Messrs. Black and Stewart, the LTI Incentive Pay amounts are those amounts that would otherwise be payable in March 2015 and July 2015 based upon the LTI matrix performance factor for 2014 of 0.9983x (actual) and LTI matrix performance factor for 2013 wasof 1.5555x (actual) and that the matrix performance factor for 2014 was 1.0x,, and (iv) his respective stock option and restricted stock holdings at December 31, 2013.2014.
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| |||||
|
| Termination Without Cause or For Good Reason |
| Termination Without Cause or For Good Reason Within 12 Months of a Change in Control | |||||||||||||||||
Executive Officer |
| Severance |
| Insurance |
| LTI |
| Value of |
| Value of |
| Severance Payments | Insurance Premiums | LTI Incentive Pay | Value of Accelerated Vesting of Stock Options (1) | Value of Accelerated Lapse of Restrictions on Restricted Stock (1) | |||||
Sherman L. Black |
| $ | 712,500 |
| $ | 15,794 |
| $ | 1,916,626 |
| $ | 53,790 |
| $ | 295,680 |
| $712,500 | $17,399 | $1,331,944 | $20,625 | $157,889 |
James R. Stewart |
| $ | 457,250 |
| $ | 15,791 |
| $ | 671,936 |
| $ | 19,560 |
| $ | 107,520 |
| $457,250 | $10,809 | $483,199 | $7,500 | $330,814 |
| Vern Hanzlik | $536,250 | $18,414 | ― | $521,250 | $478,450 | ||||||||||||||||
| (1) | ||
| Value based on a share price of |
| 36 |
These salary continuation and change in control benefits are conditioned upon the executive’snamed 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 or the LTI Agreement, 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 agreement and the LTI Agreement 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. In calculating the amounts described above, we assumed that the full amount of the payments or value of benefits under the letter agreement and the LTI Agreement would provide the greatest after-tax benefit to the named executive officers.
Additionally, if the amounts payable under the letter agreement would be subject to the requirements of Section 409A of the Internal Revenue Code, we may amend the letter agreement as we may determine, including to delay the start of any payment as provided in the letter agreement, 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. We may also amend any provision of the LTI Agreements pertaining to a payment of non-qualified deferred compensation to comply with Section 409A of the Internal Revenue Code in the least restrictive manner necessary without any diminution in the value of payments to the executive. In calculating the amounts described above, we assumed that no amount payable to the named executive officers under the letter agreement or LTI Agreement is subject to the requirements of Section 409A of the Internal Revenue Code.
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 executive’snamed executive officer’s employment for cause, or if the executive’snamed executive officer’s employment terminates as a result of death or disability, the named executive officer is entitled to receive the executive’snamed 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.
| 37 |
PROPOSAL2:APPROVAL OF AN AMENDMENT TO THESECOND AMENDED AND RESTATED 2007 STOCK INCENTIVE PLAN
Amendment and Reasons for Amendment
On February 19, 2014, our Compensation Committee recommended and on March 10, 2014 our Board of Directors approved, subject to shareholder approval, an amendment to our Second Amended and Restated 2007 Stock Incentive Plan (the “2007 Plan”) to increase in the number of shares authorized for issuance by 500,000 shares to a total of 2,230,320 shares.
Since May 15, 2007, the only shareholder approved equity compensation plan available to Qumu has been the 2007 Plan. At April 1, 2014, there were only 205,484 shares remaining available for grant under the 2007 Plan. Equity-based compensation, such as stock options, has historically been a key component in the compensation packages for both executive and technical personnel. The Compensation Committee believes 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 its industry and the importance of equity compensation in the structure of overall compensation. Without the ability to grant additional awards under the 2007 Plan, the Compensation Committee does not believe that it would have the appropriate tools to attract and retain these personnel. The Compensation Committee believes 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 two years.
Granting History
The following table summarizes the history of stock and option grants over the past three years by the Compensation Committee. The table shows the number of shares utilized under the 2007 Plan during the past three years, and the aggregate shares authorized for outstanding grants plus those available under the 2007 Plan, as a percentage of our outstanding shares (assuming for this calculation that all shares under the 2007 Plan were also outstanding).
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Year |
| Beginning |
| Beginning |
| Plan Shares (B) |
| New Share |
| New Share |
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2013 |
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| 8,653,932 |
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| 143,189 |
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| 1.6 | % |
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| 394,498 |
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| 4.5 | % |
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2012 |
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| 10,203,734 |
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| 395,003 |
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| 3.7 | % |
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| 494,664 |
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| 4.7 | % |
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2011 |
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| 9,479,272 |
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| 456,083 |
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| 4.6 | % |
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| 594,569 |
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| 6.0 | % |
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Below is a summary of the 2007 Plan, which includes the amendment proposed by this Proposal 2 to increase the number of shares authorized for issuance by 500,000. This summary is qualified in its entirety by reference to the full text of the Second Amended and Restated 2007 Stock Incentive Plan, as amended on March 10, 2014, which attached to this Proxy Statement asAppendix 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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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. The 2007 Plan also provides for an annual grant of restricted stock units, shares of restricted stock or non-qualified stock options, or any combination of these three stock incentives, to each non-employee Board member upon election or re-election. The type of award and number of shares, up to 25,000 shares in the aggregate, will be determined by the Compensation Committee its sole discretion prior to such annual meeting of shareholders. The 2007 Plan also permits stock incentives be made to non-employee directors by the Board in its discretion in addition to the annual automatic grants. As of April 1, 2014, we have eight non-employee Board members, three executive officers and approximately 256 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 executive officers, the performance-based requirements for vesting in an award may be designed to comply with Section 162(m) of the Internal Revenue Code to permit us to deduct the value of the award for income tax purposes.
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 the same as those under the 2007 Plan and are as follows:
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Adjustments to StockIncentives 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, that 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 Code.
Exercise Price for Stock Options
The exercise price of stock options granted under the 2007 Plan that are intended to qualify for favorable tax treatment as incentive stock options under Code Section 422 may not be less than the fair market value of our common stock on the date of grant. No option shall have a term longer than ten years. No option may be repurchased or exchanged for a lower priced option.
Effect on Termination of Employment on Stock Incentives
Subject to certain exceptions requiring earlier termination, stock options will expire and cannot be exercised 90 days after the termination of a participant’s employment, including upon death, disability or retirement. Prior to that time, 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
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, except that 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. The Compensation Committee may require options or stock appreciation rights be exercised prior to the change in control, may pay cash or other securities to cancel awards in connection with the change in control, or may provide for the successor to substitute its stock for outstanding awards.
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:
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Under the 2007 Plan, the amendment to the 2007 Plan to increase the number of authorized shares by 500,000 that was approved by our Board of Directors on March 10, 2014 requires approval of our shareholders. Accordingly, we are submitting this amendment to our shareholders at the Meeting as this Proposal 2.
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 governed by Internal Revenue Code Section 422 or as non-qualified stock options, which are governed by Internal Revenue Code Section 83. 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 the recipient 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 recipient recognizes taxable income on the restricted or performance stock or units.
It is not possible to determine the benefits that will be received by eligible participants in the 2007 Plan, other than non-employee directors elected or re-elected at the Meeting. On February 19, 2014, the Compensation Committee and the Board of Directors determined that each non-employee director elected or re-elected at the Meeting would receive 5,000 restricted stock units under the 2007 Plan. The restricted stock units will vest in full on the first business day prior to the 2014 Annual Meeting of Shareholders provided the director continues to provide service to us on that date, subject to individual deferral elections that may be made by each non-employee director. See the section of this Proxy Statement entitled “Director Compensation.”
The following table sets forth the information with respect to restricted stock unit awards that will be granted under the 2007 Plan to nominees upon their election or re-election to the Board of Directors:
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Registration with Securities and Exchange Commission
Upon approval of the 2007 Plan 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 issuable under the 2007 Plan.
The affirmative vote of the holders of a majority of the shares of common stock represented at the Annual Meeting and entitled to vote is required to approve Proposal 2: Approval of an Amendment to the Second Amended and Restated 2007 Stock Incentive Plan, 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 Dolphin Agreement, Dolphin will vote all of the shares of our common stock that it beneficially owns in favor of this Proposal 2. Proxies will be voted in favor of this proposal unless otherwise indicated.
The Board of Directors RecommendsShareholders Vote FORProposal 2: Approval of an Amendment to the Second Amended and Restated 2007 Stock Incentive Plan
OTHER INFORMATION REGARDING EQUITY COMPENSATION PLANS
The following table sets forth information regarding our equity compensation plans in effect as of December 31, 2013. Each of our equity compensation plans is an “employee benefit plan” as defined by Rule 405 of Regulation C of the Securities Act of 1933.
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| Securities Authorized for Issuance Under Equity Compensation Plans |
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Equity compensation plans approved by shareholders: |
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| 1,398,357 |
| $ | 13.46 |
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| 204,109(2) |
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| 350,000 |
| $ | 10.91 |
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Total |
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| 1,748,357 |
| $ | 12.95 |
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| 204,109(2) |
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Under our shareholder approved equity compensation plans, there is no mandatory holding period for stock acquired upon exercise of options. However, the federal income tax consequences to an employee for immediate disposition of stock acquired upon exercise of incentive stock options may make it more advantageous to the employee to hold such shares for at least one year from the date of exercise and two years from the date of grant. In addition, our executive officers and directors are subject to stock ownership guidelines that may encourage our executive officers and directors to hold shares acquired upon exercise of options. See the section of this proxy statement entitled “Executive Compensation – Compensation Discussion and Analysis – Stock Ownership Guidelines” for more information.
PROPOSAL 3:
ADVISORY VOTE ON NAMEDNamed EXECUTIVE OFFICEROfficer COMPENSATION
Our Board of Directors has determined that an advisory vote on named executive officer compensation (commonly referred to as “say-on-pay”) will be held annually until the next time shareholders are required to cast an advisory vote on the frequency of the say-on-pay vote. Accordingly, we are asking our shareholders to cast an advisory vote on named executive officer compensation at this 20142015 Annual Meeting.
As described in detail inDuring 2014, we continued the section entitled “Executive Compensation – Compensation Discussion and Analysis,” our executive compensation program has been designed to implement core compensation principles, which includeprocess of transforming Qumu into a focus on pay for performance. This focus was enhanced for 2013high growth software company, with the adoptionsale of our disc publishing business on July 1, 2014 representing a significant milestone in this process. The Compensation Committee believes that this transformation was supported by performance based compensation programs in effect for 2014, including the 2014 Incentive Plan and the LTI Program, and aby the changes made to those programs in 2014. Prior to the sale of the disc publishing business, the 2014 Incentive Plan and the 2014 performance goals under the LTI Program weighted the performance of our software business at 75%, placing appropriately greater weightingemphasis the business what would most impact our future growth. Following the sale, the Compensation Committee reallocated the disc publishing incentive opportunity under the 2014 Incentive Plan for the second half of 2013 executive pay2014 and reallocated all of the potential incentive opportunity under the LTI Program for 2014 exclusively to variable,our software business, but without changing any of the metrics or performance based compensation.goals relating to the retained software business. This reallocation was designed to encourage management focus on capitalizing on the significant market opportunity for our software business and reinforce the expectation of continued high performance in our software business. Performance based compensation accounted for 73.2%63.4% of the total compensation in 20132014 to our Chief Executive Officer.
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 20132014 compensation of our named executive officers. Shareholders are also encouraged to read “Executive Compensation – Compensation Discussion and Analysis – Consideration of 20132014 Say-on-Pay Vote” for an explanation of the impact of last year’s say-on-pay vote on executive compensation.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 2015 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis section, the compensation tables and any related material disclosed in this proxy statement. | |
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Approval of this Proposal 32 requires the affirmative vote of the holders of the majority of the shares present, in person or by proxy, and entitled to vote on this Proposal 3.2. Pursuant to the Dolphin Agreement, Dolphin will vote all of the shares of our common stock that it beneficially owns in favor of this Proposal 3.2. 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 of Directors, 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 20142015 and beyond.
The Board of Directors Recommends
Shareholders Vote FOR
Proposal 3:2: Advisory Vote on Executive Compensation
_______________________
| 38 |
Our non-employee directors received the following amounts for Board and committee service during 2014:
| · |
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| an annual retainer of $38,000; |
| an additional retainer of $16,000 for our non-executive Chairman of the Board, currently |
| 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. |
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 20132014 Annual Meeting, Messrs. Benveniste, Fishback, Madison, Olson, Orlando, Quist, and Reissner, and Ms. Nelson, received 5,000 restricted stock units. Each restricted stock unit represents a contingent right to receive one share of our common stock. 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, subject to certain exceptions. Directors may elect to defer receipt of the shares to the earlier of January 1 of the 3rd to 10th 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 19, 2014,18, 2015 the Compensation Committee recommended and on February 20, 2014, the Board determined thatapproved an award of restricted stock units under the 2007 Plan to each non-employee director elected or re-elected at the Annual Meeting.The grant date will be the date of the Annual Meeting will receive 5,000and the number of shares underlying the restricted stock units underunit award will be equal to $80,000 divided by the 2007 Plan.fair market value of our common stock on the grant date, rounded down to the nearest whole share, up to a maximum of 25,000 shares. These restricted stock units will be subject to the same vesting terms and deferral option as the restricted stock units granted in connection with the 20132014 Annual Meeting.
In connection with the election of Daniel R. Fishback to the Board on December 10, 2013, the Compensation Committee recommended and the Board of Directors approved an award to Mr. Fishback of 7,500 shares of restricted stock under the 2007 Plan, which was granted on May 2, 2014, the first day trades were permitted under our Policy Regarding Buying and Selling Securities – Insider Trading. The restrictions on the restricted stock will lapselapsed on the one year anniversary of Mr. Fishback’s election to the Board.
The following table shows the cash and other compensation paid by us to each of our directors for 2013.2014. Sherman L. Black, who is a director and an executive officer, received no compensation as a director during 2013.2014. Justin A. Orlando was elected tooriginally joined the Board in March 2013 pursuant to a March 2013 agreement with Dolphin. The March 2013 agreement terminated by its terms and Mr. Orlando was nominated for election at the Dolphin Agreement. TheAnnual Meeting without regard to any agreement with any person. For a portion of 2014, the retainers for Mr. Orlando’s service were paid to Dolphin at Mr. Orlando’s direction butand are reflected below.
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| Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Total ($) | |||
Lawrence M. Benveniste |
| $ | 56,000 |
| $ | 39,250 |
| $ | 95,250 |
| $50,500 | $76,250 | $126,750 |
Daniel R. Fishback (3) |
| ― |
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| Daniel R. Fishback | $48,000 | $175,475 | $223,475 | ||||||||||
Thomas F. Madison |
| $ | 50,000 |
| $ | 39,250 |
| $ | 89,250 |
| $50,000 | $76,250 | $126,250 |
Kimberly K. Nelson |
| $ | 47,000 |
| $ | 39,250 |
| $ | 86,250 |
| $51,000 | $76,250 | $127,250 |
Robert F. Olson |
| $ | 48,000 |
| $ | 39,250 |
| $ | 87,250 |
| $56,000 | $76,250 | $132,250 |
Justin A. Orlando (3) |
| $ | 33,750 |
| $ | 39,250 |
| $ | 39,250 |
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| Justin A. Orlando | $33,750 | $76,250 | $110,000 | ||||||||||
Steven M. Quist |
| $ | 53,000 |
| $ | 39,250 |
| $ | 92,250 |
| $53,000 | $76,250 | $129,250 |
James L. Reissner |
| $ | 63,000 |
| $ | 39,250 |
| $ | 102,250 |
| $55,000 | $76,250 | $131,250 |
| 39 |
(1) | Represents cash retainer and meeting fees for |
(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 |
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The aggregate number of shares underlying stock options outstanding at December 31, 20132014 held by directors was: Mr. Benveniste, 57,00049,500 shares; Mr. Black, 299,500 shares; Mr. Fishback, no shares; Mr. Madison 57,00049,500 shares; Ms. Nelson, no shares; Mr. Olson, no shares; Mr. Orlando, no shares; Mr. Quist, 57,00049,500 shares; and Mr. Reissner, 57,00049,500 shares. Each of these directors, with the exception of Mr. Black, and Mr. Fishback, also held 5,000 unvested restricted stock units as of December 31, 20132014 that will vest on May 19, 2014,11, 2015, the first business day prior to this Annual Meeting, subject to deferral elections described above.
| 40 |
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Since the beginning of 2013,2014, we have not entered into any transaction and there are no currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest.
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 have adopted a related person transaction approval policy, which sets forth our policies and procedures for the review, approval or ratification 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. Through the policy, the Audit Committee has also identified and pre-approved certain transactions with related persons, including:
| employment of executive officers, director compensation to be reported in our proxy statement; |
| payment of ordinary expenses and business reimbursements; |
| transactions with related companies in which the dollar amount does not exceed $120,000 if the related party’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that other company’s shares; |
| charitable contributions in which the dollar amount does not exceed $10,000 or 2% of the charitable organization’s receipts where a related party’s only relationship to the charity is as an employee (other than an executive officer) or a director; |
| payments made under our articles of incorporation, bylaws, insurance policies or other agreements relating to indemnification; |
| transactions in which our shareholders receive proportional benefits; and |
| transactions that involve competitive bid, banking transactions and transactions where the terms of which are regulated by law or governmental authority. |
The Audit Committee must approve any related person transaction subject to this policy before commencement of the related party transaction. If pre-approval is not feasible, the Audit Committee may ratify, amend or terminate the related person transaction. The Audit Committee will analyze the following factors, in addition to any other factors the Committee deems appropriate, in determining whether to approve a related party transaction:
| whether the terms are fair to us; |
| whether the terms of the related party transaction are no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances; |
| whether the related party transaction is material to us; |
| the role the related party has played in arranging the transaction; |
| the structure of the related party transaction; |
| the interests of all related parties in the transaction; |
| the extent of the related party’s interest in the transaction; and |
| whether the transaction would require a waiver of our Code of Ethics and Business Conduct. |
The Audit Committee may, in its sole discretion, approve or deny any related person transaction. Approval of a related person transaction may be conditioned upon our company and the related person taking such precautionary actions, as the Audit Committees deems appropriate.
| 41 |
SECTION 16(a)16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, our directors and officers, and any beneficial owner of more than 10% of a class of our equity securities, are required to report their ownership of our equity securities and any changes in such ownership to the Securities and Exchange Commission. Specific due dates for these reports have been established by the Securities and Exchange Commission, and we are required to disclose in this proxy statement any delinquent filing of such reports and any failure to file such reports during the year ending December 31, 2013.2014.
Based upon information provided by our officers and directors, we believe that all officers, directors and 10% shareholders filed all reports on a timely basis in year 2013, except that reports were not filed on a timely basis in 2013 for certain gifts of shares by Mr. Black to a trust, of which Mr. Black’s spouse is the beneficiary and Mr. Black and his spouse are trustees.2014.
PROPOSAL 4:3:RATIFICATIONRatification OF INDEPENDENT REGISTEREDregistered PUBLIC ACCOUNTING FIRM
The Audit Committee has selected KPMG LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 20142015 and the effectiveness of internal control over financial reporting as of December 31, 20142015 and to perform other appropriate audit-related and tax services. While the Audit Committee retains the sole authority to retain, compensate, oversee and terminate the independent registered public accounting firm, the Audit Committee is submitting the reappointment of KPMG LLP as our independent registered public accounting firm for ratification. In the event the shareholders do not ratify the reappointment of KPMG LLP, the Audit Committee will reconsider the selection.
The affirmative vote of the holders of a majority of the shares of common stock represented at the Annual Meeting and entitled to vote is required to approve the ratification of the appointment of the independent public accounting firm, 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 Dolphin Agreement, Dolphin will vote all of the shares of our common stock that it beneficially owns in favor of this Proposal 4.3. Proxies will be voted in favor of this proposal unless otherwise indicated.
The Board of Directors Recommends
Shareholders Vote FOR
Proposal 4:3: Ratification of the Appointment of KPMG LLP
_______________________
RELATIONSHIP WITH INDEPENDENT REGISTEREDregistered PUBLIC ACCOUNTING FIRM
The Audit Committee has selected KPMG LLP as its independent registered public accounting firm for Qumu’s year ending December 31, 20142015 and has asked the shareholders to ratify such appointment. Representatives of KPMG LLP, which has served as our independent auditors since 1989, are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders.
The following is an explanation of the fees billed to us by KPMG LLP for professional services rendered for the years ended December 31, 20132014 and December 31, 2012,2013, which totaled approximately $896,288$1,135,200 and $785,983,$896,288, respectively.
Audit Fees. The aggregate fees billed or estimated to be billed to us for professional services related to the audit of our annual financial statements, review of financial statements included in our Forms 10-Q, work relating to our internal controls over financial reporting and the attestations required by Section 404 of the Sarbanes-Oxley Act of 2002, or other services normally provided by KPMG LLP in connection with statutory and regulatory filings or engagements for the years ended December 31, 20132014 and December 31, 20122013 totaled approximately $891,500 and $755,175, and $607,733, respectively.
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Audit-Related Fees.Fees billed to us for assurance and related professional services by KPMG LLP that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees” totaled $7,013 and $2,750 for the yearsyear ended December 31, 2013 and December 31, 2012, respectively. These2013. The “Audit-Related Fees” for 2013 were for advisory services associated with our response to SEC comment letters. No Audit-Related Fees were billed to us for services provided for the year ended December 31, 2014.
Tax Fees. The aggregate fees billed to us by KPMG LLP for professional services related to tax compliance, tax advice, and tax planning, including preparation of federal and state tax returns for the years ended December 31, 20132014 and December 31, 20122013 totaled approximately $243,700 and $134,100, and $125,500, respectively.
All Other Fees. Other than those described above, fees billed to us by KPMG LLP for consulting and tax related services totaled $50,000 for the year ended December 31, 2012. Therethere were no such other fees billed to us by KPMG LLP for the yearyears ended December 31, 2014 or December 31, 2013. Fees billed in 2012 were for a Section 382 study associated with our acquisition of Qumu, Inc. in 2011.
Audit Committee Pre-Approval Procedures
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 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 Companyour 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.
All of the services described above for 20132014 were pre-approved by the Audit Committee or a member of the Committee before KPMG LLP was engaged to render the services.
SHAREHOLDER PROPOSALS FOR 20152016 ANNUAL MEETING
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 20152016 Annual Meeting of Shareholders, the proposal must be received by the Secretary of Qumu Corporation in writing at our corporate offices, 7725 Washington Avenue South, Edina, Minnesota 55439, no later than December 16, 2014.12, 2015.
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 16, 2014.12, 2015. 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 16, 2014,12, 2015, such proposal also will be considered untimely pursuant to Rules 14a-4 and 14a-5(e) and the persons named in proxies solicited by the Board of Directors for our 20142015 Annual Meeting of Shareholders may exercise discretionary voting power with respect to such proposal.
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At the date of this proxy statement, management knows of no other business that may properly come before the Annual Meeting. However, if any other matters properly come before the Annual Meeting, the persons named in the enclosed form of proxy will vote the proxies received in response to this solicitation in accordance with their best judgment on such matters.
By Order of | |
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QUMU CORPORATION
SECOND AMENDED AND RESTATED
2007 STOCK INCENTIVE PLAN
(As amended by the Board of Directors
Sherman L. Black
Chief Executive Officer
Edina, Minnesota
April 10, 2015
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7725 WASHINGTON AVE. SOUTH
MINNEAPOLIS, MN 55439
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of Qumu Corporation on March 10, 2014)
QUMU CORPORATIONinformation up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
SECOND AMENDED AND RESTATEDELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS2007 STOCK INCENTIVE PLANIf you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
SECTION 1VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.PURPOSE
The purpose ofVOTE BY MAIL
Mark, sign and date your proxy card and return it in the Second Amended and Restated 2007 Stock Incentive Plan (the “Plan”) ispostage-paid envelope we have provided or return it to enable Qumu Corporation (f/k/a Rimage Corporation, the “Company”) and its Subsidiaries to attract and retain employees, directors and service providers of the Company by aligning financial interests of these individuals with the other stockholders of the Company.Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
The Plan provides for the grant of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Restricted Stock Units, Stock Appreciation Rights, Performance Stock, Performance Units, and Other Awards to aid the Company in obtaining these goals, subject to the approval by the shareholders on May 11, 2011.
SECTION 2DEFINITIONS
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SECTION 4EFFECTIVE DATE
The effective date of this Plan as restated shall be May 11, 2011, subject to shareholder approval on that date; provided that the amended provisions of the restated Plan shall not adversely affect the rights of Participants with respect to Stock Incentives granted pursuant to the terms of the Plan in effect prior to the effective date of the restated Plan. The Plan was originally effective on May 15, 2007, which is the date on which the shareholders of the Company originally approved the Plan and the Plan was restated effective May 13, 2009, the date the shareholders of the Company approved the Plan as amended and restated.
SECTION 5ADMINISTRATION
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SECTION 6ELIGIBILITY
Participants selected by the Committee shall be eligible for the grant of Stock Incentives under this Plan, but no Participant shall have the right to be granted a Stock Incentive under this Plan merely as a result of his or her status as an eligible Participant.
SECTION 7TERMS OF STOCK INCENTIVES
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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SECTION 9LIFE OF PLAN
No Stock Incentive shall be granted under this Plan on or after the earlier of:
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This Plan shall continue in effect until all outstanding Stock Incentives have been exercised in full or are no longer exercisable and all Restricted Stock Awards or Restricted Stock Units have vested or been forfeited.
SECTION 10ADJUSTMENT
Notwithstanding anything in Section 12 to the contrary, 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 of the Company, the Committee will adjust: (a) the number of Shares reserved under Section 3 of this Plan, (b) the limit on the number of Shares that may be granted subject to Stock Incentives during a calendar year to any individual under Section 3 of this Plan, (c) the number of Shares subject to certain Stock Incentives granted subject to Section 3 of the Plan, and (d) the Exercise Price of any Options and the specified price of any Stock Appreciation Rights, or any combination thereof, in an equitable manner that will equalize the fair value of the previously granted Stock Incentives before and after the equity restructuring. Furthermore, in the event of any corporate transaction described in Code Section 424(a) that provides for the substitution or assumption of Stock Incentives, the Committee will adjust such Stock Incentives in a manner that satisfies the requirements of Code Section 424(a) as to: (i) the number of Shares reserved under Section 3, (ii) the limit on the number of Shares that may be granted subject to Stock Incentives during a calendar year to any individual under Section 3 of this Plan; (iii) the number of Shares subject to such Stock Incentives, and (iii) the Exercise Price of any Options and the specified price of any Stock Appreciation Rights. If any adjustment under this Section creates a fractional Share or a right to acquire a fractional Share, such fractional Share shall be disregarded, and the number of Shares reserved under this Plan and the number subject to any Stock Incentives granted under this Plan shall be the next lower number of Shares, rounding all fractions downward. An adjustment made under this Section by the Committee shall be conclusive and binding on all affected persons and, further, shall not constitute an increase in the number of Shares reserved under Section 3 or an increase in any limitation imposed by the Plan.
SECTION 11CHANGE IN CONTROL OF THE COMPANY
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Approved by Board of Directors on March 23, 2007Approved by shareholders on May 15, 2007.Amended by the Board of Directors on May 15, 2007, April 22, 2008 and March 11, 2009.Amendments approved by the shareholders on May 13, 2009.Amended by the Board of Directors on March 25, 2011.Amendments approved by the shareholders on May 11, 2011.Amendments approved by the Board of Directors on March 10, 2014 (subject to shareholder approval).
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Vote by Internet, Telephone or Mail
24 Hours a Day, 7 Days a Week
Your phone or Internet vote authorizes the named
proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card.
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TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW,
SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
Please detach here
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QUMU CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 20, 20142:00 p.m. Minneapolis, Minnesota Time
4200 IDS Center80 South Eighth StreetMinneapolis, Minnesota
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| The Board of Directors recommends you vote | o | o | o | |||||||||||||||||||||||||||||||||||
1. Election of Directors | |||||||||||||||||||||||||||||||||||||||
Nominees: | |||||||||||||||||||||||||||||||||||||||
01 Sherman L. Black | 02 Daniel R. Fishback | 03 Thomas F. Madison | 04 Kimberly K. Nelson | 05 Robert F. Olson | |||||||||||||||||||||||||||||||||||
06 Justin A. Orlando | |||||||||||||||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||
2. Advisory vote to approve executive officer compensation. | o | o | o | ||||||||||||||||||||||||||||||||||||
3. To ratify and approve the appointment of KPMG LLP as the independent registered public accounting firm for Qumu Corporation for the fiscal year ending December 31, 2015. | o | o | o | ||||||||||||||||||||||||||||||||||||
NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | |||||||||||||||||||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. | |||||||||||||||||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | ||||||||||||||||||||||||||||||||||||
0000239719_1 R1.0.0.51160
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Form 10-K, Notice & Proxy Statement is/are available atwww.proxyvote.com . |
QUMU | ||||
The undersigned hereby appoints Sherman Black and James Stewart, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all of the shares of Qumu Corporation Common Stock that the undersigned is entitled to vote and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Shareholders of the Company to be held at 4200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402, at 2:00 p.m. Central Daylight Time, on May 12, 2015 or any adjournment thereof, with all powers that the undersigned would possess if present at the Meeting. | ||||
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. | ||||
Continued and to be signed on reverse side | ||||
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sherman L. Black and James R. Stewart, or any of them, with power of substitution to each, as proxies, and hereby authorizes them to represent the undersigned at the Annual Meeting of Shareholders of Qumu Corporation to be held at 4200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota, on Tuesday, May 20, 2014 at 2:00 p.m. Minneapolis, Minnesota Time, and at any adjournment(s) or postponement(s) thereof, and to vote, as designated below, all shares of Common Stock of Qumu Corporation held of record by the undersigned on April 1, 2014 and which the undersigned would be entitled to vote at such Annual Meeting, hereby revoking all former proxies.0000239719_2 R1.0.0.51160
See reverse for voting instructions.