UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrantþ [X]
Filed by a Party other than the Registranto [ ]
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| Preliminary Proxy Statement | |
| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| Definitive Proxy Statement | |
| Definitive Additional Materials | |
| Soliciting Material Pursuant to §240.14a-12 |
ACORN ENERGY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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ACORN ENERGY, INC.
3903 Centerville Road3844 Kennett Pike
Wilmington, Delaware 19807
NOTICE OF 20142016 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Acorn Energy, Inc. (“Acorn Energy” or the “Company”) will be held at The Westin Wilmington, 818 Shipyard Drive, Wilmington, DE 19801, on September 23, 2014 at 1:00 p.m. Eastern Daylight Time,pm, on July 21, 2016 at The Delaware Art Museum, 2301 Kentmere Parkway, Wilmington, Delaware 19806, for the following purposes, all as more fully described in the attached Proxy Statement:
| (1) |
| (2) | approval of an amendment to the Company’s restated certificate of incorporation to authorize up to 8 million shares of preferred stock, which is referred to as the Preferred Shares proposal (the full text of the proposed amendment is attached as Annex A to the proxy statement accompanying this notice); |
| (3) | approval of an amendment to the Company’s restated certificate of incorporation to authorize a reverse split of the Company’s common stock at any time prior to July 21, 2017, at a ratio between one-for-ten and one-for-twenty, if and as determined by the Company’s Board of Directors, which is referred to as the Reverse Split proposal (the full text of the proposed amendment is attached as Annex B to the proxy statement accompanying this notice); |
| (4) | approval of any motion to adjourn the Annual Meeting from time to time, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Annual Meeting to approve the Preferred Shares proposal and/or the Reverse Split proposal; |
| (5) | ratification of the selection by the Audit Committee of the Company’s Board of Directors of Friedman LLP as the independent registered public accounting firm for the Company for the year ending December 31, |
| (6) |
| (7) | such other business as may properly come before the Annual Meeting or any adjournment thereof. |
You are cordially invited to attend the meeting in person. You are also invited to be our guest for a buffet lunch to be held before the Annual Meeting beginning at 12:00 noon Eastern Daylight Time at The Westin Wilmington.
You are requested to vote by Internet or by mail whether or not you expect to attend the meeting in person. This year we are once again furnishing our proxy materials to our stockholders who hold their shares through brokers over the Internet, as permitted by rules adopted by the Securities and Exchange Commission. These stockholders should have received a notice containing instructions on how to access these materials and how to vote their shares online. The notice provides instructions on how you can request a paper copy of these materials by mail, by telephone or by e-mail. If you previously requested that you receive annual meeting materials via e-mail, the e-mail contains voting instructions and links to the materials on the Internet. All stockholders may read, print and download our 2013 Annual Report and our Proxy Statement athttps://materials.proxyvote.com/004848.
The proxy is revocable by you at any time prior to its exercise and will not affect your right to vote in person in the event you attend the meeting or any adjournment thereof. The prompt return of the proxy will be of assistance in preparing for the meeting and your cooperation in this respect will be appreciated.
A copy of the Company’s Annual Report for the year ended December 31, 20132015 is enclosed.
| By Order of the Board of Directors, | ||
| Wilmington, Delaware | CHRISTOPHER E. CLOUSER | |
ACORN ENERGY, INC.
3903 Centerville Road3844 Kennett Pike
Wilmington, Delaware 19807
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 23, 2014JULY 21, 2016
This proxy statement and the accompanying proxy are being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company for use in voting at the 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 1:00 p.m. Eastern Daylight Timepm on Tuesday, September 23, 2014,July 21, 2016, at The WestinDelaware Art Museum, 2301 Kentmere Parkway, Wilmington, 818 Shipyard Drive, Wilmington, DE 19801,Delaware19806, and any adjournments thereof. Distribution to stockholders of this proxy statement and a proxy form is scheduled to begin on or about August 14, 2014June [__], 2016 to each stockholder of record at the close of business on July 28, 2014June 7, 2016 (the “Record Date”).
Your vote is important. Whether or not you plan to attend the Annual Meeting, please take the time to vote your shares of common stock as soon as possible. You can ensure that your shares are voted at the meeting by submitting your proxy by Internet or by completing, signing, dating and returning the enclosed proxy in the envelope provided. Submitting your proxy will not affect your right to attend the meeting and vote. A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy or by notifying our corporate Secretary in writing of such revocation.
INFORMATION ABOUT THE 20142016 ANNUAL MEETING AND PROXY VOTING
What matters are to be voted on at the Annual Meeting?
Acorn Energy intends to present the following proposals for stockholder consideration and voting at the Annual Meeting:
| (1) |
| (2) | approval of an amendment to the Company’s restated certificate of incorporation to authorize up to 8 million shares of preferred stock, which is referred to as the Preferred Shares proposal (the full text of the proposed amendment is attached as Annex A to the proxy statement accompanying this notice); |
| (3) | approval of an amendment to the Company’s restated certificate of incorporation to authorize a reverse split of the Company’s common stock at any time prior to July 21, 2017, at a ratio between one-for-ten and one-for-twenty, if and as determined by the Company’s Board of Directors, which is referred to as the Reverse Split proposal (the full text of the proposed amendment is attached as Annex B to the proxy statement accompanying this notice); |
| (4) | approval of any motion to adjourn the Annual Meeting from time to time, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Annual Meeting to approve the Preferred Shares proposal and/or the Reverse Split proposal; |
| (5) | ratification of the selection by the Audit Committee of the Company’s Board of Directors of Friedman LLP as the independent registered public accounting firm for the Company for the year ending December 31, |
| (6) |
| and such other business as may properly come before the Annual Meeting or any adjournment thereof. |
What is the Board’s recommendation?
The Board of Directors recommends that you vote your shares “FOR”FOR each of the director nominees in Proposal 1 and "FOR"FOR each of Proposals 2, 3, 4, 5 and 3.6.
Will any other matters be presented for a vote at the Annual Meeting?
We do not expect that any other matters might be presented for a vote at the Annual Meeting. However, if another matter were to be properly presented, the proxies would use their own judgment in deciding whether to vote for or against the proposal.
Who is entitled to vote?
All Acorn Energy stockholders of record at the close of business on the Record Date are entitled to vote at the Annual Meeting. Each share outstanding on the Record Date will be entitled to one vote. There were 22,189,877[_____________] shares outstanding on the Record Date.
How do I vote my shares?
As permitted by the Securities and Exchange Commission, or SEC, Acorn Energy is sending a Notice of Internet Availability of Proxy Materials to stockholders who hold shares in “street name” through a bank, broker or other holder of record. All such stockholders will have the ability to access this Proxy Statement and the Company’s Annual Report athttps://materials.proxyvote.com/004848. The notice also includes information as to how these stockholders may vote their shares.
| ● | If you are a stockholder of record, you may grant a proxy with respect to your shares by mail using the proxy included with the proxy materials. Stockholders who own their shares through banks, brokers or other nominees may grant their proxy by mail, by telephone or over the Internet in accordance with the instructions provided on the enclosed voting instruction form. Internet and telephone voting by beneficial owners will be available through 11:59 p.m. Eastern Daylight Time on July 20, 2016. | |
| ● | If you are a stockholder of record or a duly appointed proxy of a stockholder of record, you may attend the Annual Meeting and vote in person. However, if your shares are held in the name of a bank, broker or other nominee, and you wish to attend the Annual Meeting to vote in person, you will have to contact your bank, broker or other nominee to obtain its proxy. Bring that document with you to the meeting. | |
| ● | All proxies submitted will be voted in the manner you indicate by the individuals named on the proxy. If you do not specify how your shares are to be voted, the proxies will vote your shares FOR all director nominees in Proposal 1 and FOR Proposals 2, 3, 4, 5 and 6. |
May I change or revoke my proxy after it is submitted?
Yes, you may change or revoke your proxy at any time before the Annual Meeting by:
| ● | returning a later-dated proxy card; | |
| ● | attending the Annual Meeting and voting in person; or | |
| ● | sending your written notice of revocation to Christopher E. Clouser, our Chairman. |
Your changed proxy or revocation must be received before the polls close for voting.
What is a “quorum?”
In order for business to be conducted at the Annual Meeting, a quorum must be present. A quorum will be present if stockholders of record holding a majority in voting power of the outstanding shares of our common stock entitled to vote at the Annual Meeting are present in person or are represented by proxies. For purposes of determining the presence or absence of a quorum, we intend to count as present shares present in person but not voting and shares for which we have received proxies but for which holders thereof have abstained. Furthermore, shares represented by proxies returned by a broker holding the shares in nominee or “street” name will be counted as present for purposes of determining whether a quorum is present, even if the broker is not entitled to vote the shares on matters where discretionary voting by the broker is not allowed (“broker non-votes”).
What vote is necessary to pass the items of business at the Annual Meeting?
Holders of our common stock will vote as a single class and will be entitled to one vote per share with respect to each matter to be presented at the Annual Meeting. With respect to Proposal 1, the sixfive nominees for director receiving a plurality of the votes cast by holders of common stock, at the Annual Meeting in person or by proxy, shallwill be elected to our Board. Approval of Proposals 2 and 3 requires the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting in person or by proxy. Because approval is based on the affirmative vote of a majority of the outstanding shares, abstentions from voting, as well as broker non-votes, if any, will have the effect of votes being cast against proposals 2 and 3. Approval of Proposals 4, 5 and 6 requires the votes cast in favor of each such proposal to exceed the votes cast against such proposal. Abstentions from voting, as well as broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on any of these proposals.Proposals 4, 5 and 6.
Who pays the costs of this proxy solicitation?
This solicitation of proxies is made by our Board of Directors, and all related costs will be borne by us. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners.
What is the deadline for submission of stockholder proposals for the 20152017 Annual Meeting?
Proposals that our stockholders may wish to include in our proxy statement and form of proxy for presentation at our 20152017 Annual Meeting of Stockholders must be received by or delivered to us at Acorn Energy, Inc. 3903 Centerville Road,, 3844 Kennett Pike, Wilmington, Delaware 19807, Attention: Heather K. Mallard, Secretary, no later than the close of business on April 16, 2015.
February [__], 2017.
Any stockholder proposal must be in accordance with the rules and regulations of the SEC. In addition, with respect to proposals submitted by a stockholder other than for inclusion in our 20152017 proxy statement, our By-Laws have established advance notice procedures that stockholders must follow. Pursuant to the By-laws of the Company, stockholders who wish to nominate any person for election to the Board of Directors or bring any other business before the 20152017 Annual Meeting must generally give notice thereof to the Company at its principal executive offices not less than 60 days nor more than 90 days before the date of the meeting. All nominations for director or other business sought to be transacted that are not timely delivered to the Company, or that fail to comply with the requirements set forth in the Company’s By-Laws, will be excluded from the Annual Meeting, as provided in the By-Laws. A copy of the By-Laws of the Company is available upon request from the Secretary of the Company, 3903 Centerville Road,3844 Kennett Pike, Wilmington, Delaware 19807.
Where can I find the voting results of the Annual Meeting?
The preliminary voting results will be announced at the Annual Meeting. The final results will be published in our current report on Form 8-K to be filed with the Securities and Exchange Commission within four business days after the date of the Annual Meeting, provided that the final results are available at such time. In the event the final results are not available within such time period, the preliminary voting results will be published in our current report on Form 8-K to be filed within such time period, and the final results will be published in an amended current report on Form 8-K/A to be filed within four business days after the final results are available. Any stockholder may also obtain the results from the Secretary of the Company, 3903 Centerville Road,3844 Kennett Pike, Wilmington, Delaware 19807.
INFORMATION ABOUT COMMUNICATING WITH OUR BOARD OF DIRECTORS
How may I communicate directly with the Board of Directors?
The Board provides a process for stockholders to send communications to the Board. You may communicate with the Board, individually or as a group, as follows:
| BY MAIL | BY PHONE | |
| The Board of Directors | 1-302-656-1707 | |
| Acorn Energy, Inc. | ||
| Attn: | BY EMAIL | |
| c/o Christopher E. Clouser | ||
| Wilmington, Delaware 19807 | cclouser@acornenergy.com |
You should identify your communication as being from an Acorn Energy stockholder. The Secretary may require reasonable evidence that your communication or other submission is made by an Acorn Energy stockholder before transmitting your communication to the Board.
| 5 |
OWNERSHIP OF THE COMPANY’S COMMON STOCK
The following table and the notes thereto set forth information, as of July 28, 2014June 7, 2016 (except as otherwise set forth herein), concerning beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of common stock by (i) each director of the Company, (ii) each executive officer of the Company named below in the Summary Compensation Table and certain other executive officers, (iii) all executive officers and directors as a group, and (iv) each holder of 5% or more of the Company’s outstanding shares of common stock.
| Name and Address of Beneficial Owner (1) (2) | Number of Shares of common stock Beneficially Owned (2) | Percentage of common stock Outstanding (2) | Number of Shares of common stock Beneficially Owned (2) | Percentage of common stock Outstanding (2) | ||||||||||||
| Jan H. Loeb | 980,343 | (3) | 4.3 | % | ||||||||||||
| John A. Moore | 1,217,896 | (3) | 5.4 | % | 935,377 | (4) | 3.3 | % | ||||||||
| Mannie L. Jackson | 231,876 | (4) | 1.0 | % | 832,620 | (5) | 3.0 | % | ||||||||
| Samuel M. Zentman | 140,142 | (5) | * | 196,869 | (6) | * | ||||||||||
| Christopher E. Clouser | 131,180 | (6) | * | 542,977 | (7) | 1.9 | % | |||||||||
| Robert E. McKee III | 44,896 | (7) | * | |||||||||||||
| Andy H. Sassine | 593,748 | (8) | 2.7 | % | ||||||||||||
| Edgar S. Woolard, Jr. | 728,520 | (8) | 2.6 | % | ||||||||||||
| Michael Barth | 105,508 | (9) | * | 97,175 | (9) | * | ||||||||||
| Heather K. Mallard | 41,000 | (10) | * | |||||||||||||
| Benny Sela | 10,000 | (11) | * | |||||||||||||
| Joe Musanti | 84,200 | (12) | * | 62,533 | (10) | * | ||||||||||
| Mark A. Bashforth | 0 | (13) | * | |||||||||||||
| All executive officers and directors of the Company as a group (11 people) | 2,600,446 | (14) | 11. 7 | % | ||||||||||||
| Walter Czarnecki | 35,000 | (11) | — | |||||||||||||
| All executive officers and directors of the Company as a group (9 people) | 4,411,415 | (12) | 15.0 | % | ||||||||||||
* Less than 1%
| (1) | Unless otherwise indicated, the address for each of the beneficial owners listed in the table is in care of the Company, |
| (2) | Unless otherwise indicated, each person has sole investment and voting power with respect to the shares indicated. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given date which such person has the right to acquire within 60 days after such date. Percentage information is based on the |
| (3) | Consists of |
| (4) | Consists of 125,118 shares and |
| (5) | Consists of 178,100 shares |
| (6) | Consists of 61,445 shares and 135,424 shares underlying currently exercisable options. |
| (7) | Consists of 293,500 shares (77,862 of which are held in a trust) and |
| (8) | Consists of |
| (9) | Consists of 48,842 shares and |
| Consists of 9,200 shares and |
| (11) | Consists solely of currently exercisable options. | |
| (12) | Consists of 2,981,792 shares, 1,709,279 shares underlying currently exercisable options and 17,500 shares underlying currently exercisable warrants. |
PROPOSAL 1
ELECTION OF DIRECTORS
TheOur Board of Directors of the Company is currently comprisedconsists of seven seats, including one vacancy. The Board of Directors has nominated Christopher E. Clouser, John A. Moore,Jan H. Loeb, Mannie L. Jackson, Edgar S. Woolard, Jr., and Samuel M. Zentman, Robert E. McKee, III, and Andrew H. Sassine, all current Directors, for election as directors at the Annual Meeting to serve until the 20152017 Annual Meeting and until their successors have been duly elected and qualified. The nominees were recommended for nominationselected by the Nominating Committee of the Company’sour Board of Directors, the members of which are independent directors as required byNasdaq.Directors. All nominees have consented to be named as such and to serve if elected. The Nominating Committee did not nominate a candidate to fillIf these five nominees are elected at the presently vacant seventh seat.Annual Meeting, our Board will have two vacancies.
With respect to the election of directors, stockholders may vote in favor of all nominees, withhold their votes as to all nominees or withhold their votes as to specific nominees. Stockholders cannot vote for more than the sixfive nominees. Stockholders should specify their choices on the accompanying proxy card. If no specific instructions are given, the shares represented by a signed proxy will be voted FOR the election of all sixfive of the Board’s nominees. If any nominee becomes unavailable for any reason to serve as a director at the time of the Annual Meeting (which event is not anticipated), proxies will be voted in the discretion of the persons acting pursuant to the proxy for any nominee who shall be designated by the current Board of Directors as a substitute nominee.
Persons nominated in accordance with the notice requirements of the Company’sour By-laws are eligible for election as directors of the Company. All nominations for director that are not timely delivered to the Companyus or that fail to comply with the requirements set forth in the Company’sour By-laws will be excluded from the Annual Meeting, as provided in the By-laws. A copy of the Company’sour By-laws can be obtained from theour Secretary, of the Company, 3903 Centerville Road,3844 Kennett Pike, Wilmington, Delaware 19807. Directors will be elected at the Annual Meeting by a plurality of the votes cast (i.e., the sixfive nominees receiving the greatest number of votes will be elected as directors).
Nominees for Election
Christopher E. Clouserwas electedappointed to the Board in November 2011 and became Chairman in November 2012. He is also chairs our Compensation Committee, is a member of our Audit and Nominating CommitteesCommittee and serves on each of our subsidiary boards of directors or managers.Mr.managers. Mr. Clouser has held senior level positions including: President of Burger King Brands; President and CEO of Preview Travel/Travelocity;Travel; CEO of the Minnesota Twins Major League Baseball Club; Senior Vice President & Chief Communications Officer of Northwest Airlines; Corporate Vice President of Public Affairs and Communications of Hallmark Cards; and Senior Vice President and Chief Administrative Officer of Sprint. In addition, he has served on the corporate Boards of Directors of Piper Jaffray Inc., Gibson Guitar/Baldwin Corp., Mall of America, Pepsi Americas, Marquette Bancshares, Delta Beverage and Mesaba Aviation. He presently serves as Chairmanis the immediate past chair of the Board and executive committee of the International Tennis Hall of Fame and Museum in Newport, Rhode Islandand as a member ofFame. He serves on the Advisory BoardBoards Fila, Northstar, Mall of privately held Northstar.America and VML corporations. Prior to his current positions, he was President of the Association of Tennis Professions (ATP), where he also served as Chairman of ATP Properties and Chair of the ATP Foundation.
Key Attributes, Experience and Skills.Mr. Clouser brings to Acorn a wealth of operational and managerial experience culled from decades of service in key roles at major corporations. He has particular skills in marketing and business development, which will enable the Board to better position our companies for customer growth.
John A. MooreJan H. Loeb has been a director andserved as our President and Chief Executive OfficerCEO since January 28, 2016. He was appointed to our Board in August 2015 pursuant to the terms of our Company since March 2006. Mr. MooreLoan and Security Agreement with Leap Tide Capital Partners III, LLC (the “Leap Tide Loan Agreement”). He was elected Chairmanalso appointed to the Board of our DSIT subsidiary in August 2015 pursuant to the terms of the Board on March 25, 2009 andLeap Tide Loan Agreement. Mr. Loeb serves as the President of Leap Tide Capital Management, Inc. He has been the Managing Member of Leap Tide Capital Management LLC since 2007. From 2005 to 2007, he served in that role until November 13, 2012. Mr. Moore alsoas the President of Leap Tide’s predecessor, Leap Tide Capital Management Inc., which was formerly known as AmTrust Capital Management Inc. He served as a directorPortfolio Manager of Comverge from March 2006 through January 2008. Mr. Moore was the President and founder of Edson Moore Healthcare Ventures, which he founded to acquire $150 million of drug delivery assets from Elan Pharmaceuticals in 2002. Mr. Moore was Chairman and EVP of ImaRx Therapeutics, a drug and medical therapy development company,Chesapeake Partners from February 2004 to February 2006 and Chairman of Elite Pharmaceuticals from February 2003January 2005. From January 2002 to October 2004.December 2004, he served as Managing Director at Jefferies & Company, Inc. From 1994 to 2001, he served as Managing Director at Dresdner Kleinwort Wasserstein, Inc. (formerly Wasserstein Perella & Co., Inc.). He was CEOResearch Analyst at Dresdner Kleinwort, Research Division. He has been a Director of Optimer,Gyrotron Technology, Inc. (a research based polymer development company) from inception in 1994 until 2002 and Chairman from inception until its sale in February 2008since July 2014. He has been a Director of Sterling Capital.TAT Technologies, Ltd. since August 2009. He previously served as a memberLead Director of the BoardAmerican Pacific Corporation from July 8, 2013 to February 27, 2014, and also served as its Director from January 1997 to February 27, 2014. He served as an Independent Director of DirectorsPernix Therapeutics Holdings Inc. (formerly, Golf Trust of Voltaix,America, Inc. prior) from 2006 to its sale to Air Liquid. Mr. Moore is currently a member of the Board of Caesar Rodney Institute, a nonprofit public policy organization in Delaware, and USEED LLC, an organization providing fundraising solutions for entrepreneurial projects originating at colleges and universities. He also serves as a director on the Board of Directors or Managers for each of our subsidiaries.August 31, 2011.
Key Attributes, Experience and Skills.Mr. MooreLoeb brings his strategic vision for our Company to the Acorn Board significant financial expertise, cultivated over more than 30 years of money management and investment banking experience, together with his leadership and business, deal making and investor relations skills. Mr. Moore has an immense knowledge of our Company and the energy technology industry which is beneficial to the Board. Mr. Moore’s service as a Director and CEO of the Company bridges a critical gap between the Company’sbackground in public company management and the Board, enabling the Board to benefit from management’s perspective on the Company’s business while the Board performs its oversight function.audit committee experience.
Mannie L. Jacksonwas elected to the Board in September 2012 and serves as a member of our Compensation Committee.2012. Mr. Jackson played professional basketball for a brief time before starting his business career at General Motors, Inc. He later served as President and General Manager of Honeywell’s Telecommunications Business and then as Corporate Executive VP of worldwide Sales and Marketing before retiring as a Corporate Officer and Senior Vice President in 1993. Mr. Jackson helped found and chaired the Executive Leadership Council which represents the most senior African American corporate executives in Fortune 500 companies and previously served on the Board of Directors of several Fortune 500 companies, including Ashland Inc., Reebok International, Stanley Works, Jostens and True North. Mr. Jackson is currently Chairman of privately held Boxcar Holdings, LLC, and a former owner and Chairman of the Board of the Harlem Globetrotters. He is also former Chairman of the Board of Trustees of the Naismith Basketball Hall of Fame and is a member of the University of Illinois Foundation Board of Directors.
Key Attributes, Experience and Skills.Mr. Jackson brings to the Board deep operational, strategic planning and senior managerial experience; as well as access to a network of domestic and international business relationships.
Robert E. McKee IIIEdgar S. Woolard Jr.was elected to joined the Board in May 2013November 2014 and is Chairman of our Nominating committee.Mr. McKee had a 37-year career at ConocoPhillips and Conoco, Inc., including over ten yearsserves as Executive Vice President, Exploration and Production (1992-2003). He was the senior oil advisor to the Coalition Provisional Authority and the Iraqi Oil Ministry in Iraq to manage the rebuilding of its oil industry from September 2003 to March 2004. He is also a Director of QEP Resources, an unconventional oil driller with a $6 billion market capitalization, Post Oak Bank and a board member of the Colorado School of Mines Foundation.
Key Attributes, Experience and Skills.Rob McKee is a widely recognized and experienced energy industry expert both domestically and internationally. He brings a tremendous background and a broad understanding of energy technologies and customer needs to our Board.
Andrew H. Sassinewas elected to the Board in September 2013 and is a member of our Audit Committee. Mr. Sassine workedWoolard served as chairman and chief executive officer of DuPont from 1989 to 1995 and as chairman until 1997. He remained a portfolio manager for Fidelity Investmentsdirector until his retirement from 1999 to 2012 holding numerous roles during his tenure. Prior to joining Fidelity, Mr. Sassine was a Vice Presidentthe board effective January 1, 2000. He also served as non-executive chairman of DuPont’s Conoco Inc. subsidiary where he oversaw that company’s IPO in the Acquisition Finance Group at Fleet National Bank1998 and prior to joining Fleet, he managed a portfolio of highly leveraged middle market companies at Continental Bank and Heller Financial in Chicago. Mr. Sassine anticipates rejoining next month the Henry B. Tippie College of Business, University of Iowa, Board of Advisors (on which he previously served) and also servesinitiated its merger with Phillips Petroleum. He has served on the Clarke Schools for Hearingboards of the New York Stock Exchange, Inc., Telex Communications Inc., Apple Computer Inc., Citigroup, Inc., IBM, and Speech, BoardBell Atlantic, Delaware. He is also a former Chairman of Trustees.the Business Council. He is a member of the BoardNational Academy of Directors of CNS Response, Inc. (CNSO), a clinical decision support company providing reference dataEngineering and analytical tools for clinicians and researchers in psychiatry, and is a member of both its Audit and Governance and Nominations Committee. He was recently elected for a term commencing April 1, 2014 to the Board of Directors of FluoroPharma Medical, Inc. (FPMI), a company specializing in the development of novel diagnostic imaging products that utilize positron emission tomography (PET) technology for the detection and assessment of disease before clinical manifestation. In addition, he is a member of the Board of Directors of two privately-held San Diego based companies, Freedom Meditech, Inc. and MD Revolution Inc. Mr. Sassine earned a Bachelor of Arts degree at the University of Iowa in 1987 and an MBA from the Wharton School at the University of Pennsylvania in 1993.American Philosophical Society.
Key Attributes, Experience and Skills.Mr. SassineWoolard brings to Acorn a distinguished background of operational and managerial experience at the Board his extensive investment management experience and understandinghighest levels of the capital markets.energy industry, in addition to his outstanding and extensive service record of corporate management and oversight as a member of the boards of several major corporations.
Samuel M. Zentman has been one of our directors since November 2004 and currently serves as Chairman of our Audit Committee. From 1980 until 2006, Dr. Zentman was the president and chief executive officer of a privately-held textile firm, where he also served as vice president of finance and administration from 1978 to 1980. From 1973 to 1978, Dr. Zentman served in various capacities at American Motors Corporation. He holds a Ph.D. in Complex Analysis. Dr. Zentman presently serves on the board of Hinson & Hale Medical Technologies, Inc., as well as several national charitable organizations devoted to advancing the quality of education.
Key Attributes, Experience and Skills. Dr. Zentman’s long-time experience as a businessman together with his experience with computer systems and software enables him to bring valuable insights to the Board. Dr. Zentman has a broad, fundamental understanding of the business drivers affecting our Company and also brings leadership and oversight experience to the Board.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTEFOR EACH OF THE NOMINEES FOR ELECTION. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
Certain Information Regarding Directors and Officers
In addition to the information set forth above about the Company’s directors who have been nominated for election at the Annual Meeting, set forth below is certainadditional information concerning thesuch directors and certain officers of the Company:
| Name | Age | Position | ||
| Christopher E. Clouser | Director, Chairman of the Board | |||
| Mannie L. Jackson | ||||
| Director and member of our Audit Committee | ||||
| Edgar S. Woolard Jr. | 82 | Director | ||
| Samuel M. Zentman | Director and Chairman of our Audit Committee | |||
| Joseph Musanti | Chief Operating Officer of the Company, Chief Executive Officer | |||
| Michael Barth | Chief Financial Officer of the Company | |||
Mark A. Bashforth serves as CEO and President of USSI, positions to which he was elected in July 2014. Previously, Mr. Bashforth served as the General Manager of CGG Company’s GeoSoftware Group (formerly Fugro Jason, acquired by CGG Veritas in March 2013), a leading reservoir characterization software and services provider to the oil and gas industry. In such position, he lead a team of over 220 geoscience, sales and marketing professionals, including nine direct reports on a global basis in 17 countries and 2014 P&L responsibility of $65MM. Prior to joining GeoSoftware, he operated a privately held building maintenance franchise from 2009 to 2012. He was also previously the Managing Director and later President for the Americas for Roxar Inc., a leading solution provider for reservoir management prior to its sale to Emerson.
Joe Musanti was elected Chief Operating Officer of the Company in January 2014 and also serves as President and CEO of GridSense and OmniMetrix and is the Chief Financial Officer of USSI under an arrangement between USSI and GridSense. He previously served as GridSense’s President, Chief Operating Officer and Chief Financial Officer, OmniMetrix’s President and as President of OmniMetrix. He is a Director or ManagerCEO, and USSI’s Chief Financial Officer. Mr. Musanti currently serves on the BoardsBoard of OmniMetrix,Directors of GridSense and USSI, and is Vice Chairmanwas previously chairman of the USSI board. Prior to these management roles, he served on the Company’s Board from September 2007 until December 2012. Mr. Musanti had also been the General Manager/CFO of Main Tape, a leading manufacturer of surface protection film and paper products, based in Cranbury, New Jersey. Prior to the acquisition of Film Tech Inc. and their merger into Main Tape in 2010 Mr. Musanti served as President of Main Tape Inc. From 2003 to 2006, prior to becoming its President, Mr. Musanti served as Vice President of Finance of Main Tape. Prior to that, Mr. Musanti was Vice President of Finance of Rheometric Scientific, Inc., a manufacturer of thermal analytical instrumentation products where he held significant domestic and foreign, operational, managerial,financial and accounting positions.
Benny Sela serves as the CEO and President of DSIT, a position he has held since July 2007. Previously, he held the position of Executive Vice President and head of the company’s Real Time Division since 1996. Mr. Sela joined DSIT in February 1989. Prior to that, Mr. Sela served in the Israeli Air Force reaching the position of Lt. Colonel (Ret.). During his service in the Israeli Air Force, Mr. Sela was head of the Electronic Warfare branch, working on both the F-16 and Lavi projects. He holds a B.Sc. in Electrical Engineering, a Master’s Degree in Operations Research, and an MBA.
Michael Barth has been our Chief Financial Officer and the Chief Financial Officer of DSIT since December 2005. For the six years prior, he served as Deputy Chief Financial Officer and Controller of DSIT. Mr. Barth holds an MBA in Accounting from Bernard M. Baruch College of the City University of New York. He is a Certified Public Accountant in both the U.S. and Israel and has over twenty-five years of experience in public and private accounting. He serves on the Boards of GridSense, OmniMetrix and USSI.
Heather K. MallardWalter Czarnecki joined Acornserves as President and CEO of OmniMetrix. Mr. Czarnecki has over a decade of management, strategy and P&L leadership experience building high-growth companies in technology and energy across global markets. Prior to his appointment at OmniMetrix, Walter served as Vice President General Counselof Business Development at Acorn, and Secretarypreviously as Director of Corporate Strategy at Ener1, Inc., a maker of lithium-ion energy storage solutions for electric vehicles, grid storage and military applications. There he negotiated and managed Ener1’s joint venture with China’s largest Tier I auto parts supplier, Wanxiang, a $26 billion global conglomerate. Prior to Ener1, Walter spent four years in February 2012. ForBeijing, where he led the twenty-three years prior, Ms. Mallard practicedEnergy Technology team for China Renaissance Partners, a Chinese investment bank with over $26 billion in transactions. Prior to China Renaissance, Walter established the law firm Womble Carlyle Sandridge & Rice, LLP. She isUniversity of Maryland’s China strategy and increased revenue by $3.6 million. He began his career at Lehman Brothers Investment Banking in New York. Walter holds an experienced corporate and business lawyer, with a practice that has spanned a variety of industries.MBA in Finance from the Wharton School. In 2015, Walter was named in Wharton’s 40 Under 40 list.
Biographical information about the Company’s directors who have been nominated for election at the Annual Meeting is set forth above under “Nominees for Election.”
CORPORATE GOVERNANCE MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. These persons are also required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Further, we have implemented measures to assure timely filing of Section 16(a) reports by our executive officers and directors. Based solely on our review of such forms or written representations from certain reporting persons, we believe that during 20132015 our executive officers and directors complied with the filing requirements of Section 16(a).
Board Composition and Director Independence
Our Board of Directors is composed of one class, with seven Board seats, one of which is vacant, and six directors serving until their reelection or replacement at the 20142016 Annual Meeting of Stockholders. One current Director, John A. Moore, is not standing for re-election as a Director at the Annual Meeting and will resign from the Board effective as of the date of the Annual Meeting. If the five nominees for Director are elected at the Annual Meeting, our Board will have two vacancies. Jan H. Loeb serves as both President and Chief Executive Officer andas well as serving as a Member of our Board of Directors. Christopher E. Clouser serves as the Non-Executive Chairman of our Board. Applying the definition of independence provided under the NASDAQ rules, the Board has determined that with the exceptionexceptions of John A. Moore (who is not standing for re-election at the Annual Meeting) and Jan H. Loeb, all of the members of the Board of Directors are independent.
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Board Leadership Structure and Role in Risk Oversight
Christopher E. Clouser currently serves as the Non-Executive Chairman of our Board of Directors. The appointment of Mr. Clouser to this position demonstrates the Board’s commitment to sound corporate governance by adopting the developing best practice among public companies toward retaining non-executive, independent Board leadership. The Board believes that having an independent director in the senior most Board leadership position best ensures that the Board’s agenda will reflect the concerns of our stockholders. Furthermore, the Board believes that Mr. Clouser’s extensive business experience and network will enable him to help position the Company for growth.
The Board believes Mr. Moore’sLoeb’s service as President and Chief Executive Officer and as a Member of our Board is appropriate because it bridges a critical gap between the Company’s management and the Board, enabling the Board to benefit from management’s perspective on the Company’s business while the Board performs its oversight function. Further, the Board believes Mr. Moore’sLoeb’s significant ownership of Acorn Energy stock aligns his interests with those of Acorn Energy’s stockholders.
Management is responsible for Acorn Energy’s day-to-day risk management, and the Board’s role is to engage in informed oversight. The entire Board performs the risk oversight role. Acorn Energy’s Chief Executive Officer is a member of the Board of Directors, and Acorn Energy’s Chief Operating Officer, Chief Financial Officer and its General Counsel regularly attend Board meetings, which helps facilitate discussions regarding risk between the Board and Acorn Energy’s senior management, as well as the exchange of risk-related information or concerns between the Board and the senior management. Further, the independent directors periodically meet in executive session following regularly scheduled Board meetings to voice their observations or concerns and to shape the agendas for future Board meetings.
The Board of Directors believes that, with these practices, each director has an equal stake in the Board’s actions and oversight role and equal accountability to Acorn Energy and its stockholders.
Meetings and Meeting Attendance
During the fiscal year ended December 31, 2013,2015, there were sixteen[__] meetings of the Board of Directors. Our independent directors periodically meet in executive session as part of each regularly scheduled Board meeting. All incumbent directors attended 75% or more of the Board meetings and meetings of the committees on which they served during the last fiscal year. Directors are encouraged to attend the annual meeting of stockholders. Only one director was unable to attendAll of the directors then serving attended our most recent annual meeting in 2013 as the date fell on a religious holiday.2014.
Committees of the Board
Our Board of Directors has established three standing committees: the Audit Committee, the Compensation Committee and the Nominating Committee, all of which have been established and are administered in accordance with applicable SEC and NASDAQ rules.
Audit Committee; Audit Committee Financial Expert.Expert
The Company has a separate designated standing Audit Committee oversees our accountingestablished and financial reporting processes and audits of our financial statements by our independent auditors.administered in accordance with SEC rules. The three members of the Audit Committee are Samuel M. Zentman, Christopher E. Clouser and Andy H. Sassine. Dr. Zentman serves as Chairman of the Audit Committee. Prior to October 2013, the Audit Committee members were Sam Zentman, Mannie L. Jackson and Richard J. Giacco.Edgar S. Woolard. The Board of Directors has determined that each member of the Audit Committee meets the independence criteria prescribed by NASDAQ governing the qualifications offor audit committee members and each Audit Committee member meets NASDAQ’s financial knowledge requirements. Our Board has determined that SamDr. Zentman qualifies as an “audit committee financial expert,” as defined in the rules and regulations of the SEC. During 2013,2015, the Audit Committee met six (6)[__] times. The charter of the Audit Committee is available on our websitewww.acornenergy.comunder the "Investor Relations"“Investor Relations” tab.
Audit Committee Report.The Audit Committee has (1) reviewed and discussed the audited financial statements with management; (2) discussed with the independent auditors the matters required to be discussed by the statement of Auditing Standard No. 16 as amended; and (3) received the written disclosures and the letter from the independent accountants required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013,2015, which was filed with the Securities and Exchange Commission on March 17, 2014.
Nominating Committee and Procedures.The Nominating Committee has overall responsibility for identifying, evaluating, recruiting and selecting qualified candidates for election, re-election or appointment to the Board. The Members of the Nominating Committee are Robert E. McKee and Christopher Clouser as of October 2013. Mr. Clouser served as Chairman of the Nominating Committee until October 2013, when Mr. McKee became Chairman of the Committee. Dr. Zentman served on the Nominating Committee until Mr. McKee’s election thereto. The Board of Directors has determined that each member of the Nominating Committee meets the independence criteria prescribed by NASDAQ governing the qualifications of nominating committee members. The charter of the Nominating Committee is available on our website http://www.acornenergy.com under the "Investor Relations" tab.30, 2016.
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF ACORN ENERGY, INC.
Samuel M. Zentman
Christopher E. Clouser
Edgar S. Woolard Jr.
Nominating Procedures
Our Board does not have a standing nominating committee. We believe that not using a committee of the Board in the director nomination process fosters fuller active participation of all our directors in the process. Nominations to the Board must either be selected or recommended for the Board’s selection by a majority of the Board’s independent directors. The Nominating CommitteeBoard uses established policies and procedures for director nominations. The Board identifies potential director candidates from a variety of sources, including recommendations from current directors or management, recommendations of security holders, or any other source that the Board has deemed appropriate. During 2013, the Nominating Committee met twice.
In considering candidates for the Board of Directors, the Nominating CommitteeBoard evaluates the entirety of each candidate’s credentials, such as (i) business or other relevant experience; (ii) expertise, skills and knowledge; (iii) integrity and reputation; (iv) the extent to which the candidate will enhance the objective of having directors with diverse viewpoints and backgrounds; (v) willingness and ability to commit sufficient time to Board responsibilities; and (vi) qualification to serve on specialized board committees.
Our stockholders may recommend potential director candidates by contacting theour corporate Secretary of the Company to receive a copy of the procedure to recommend a potential director candidate for consideration by the Nominating Committee,independent directors, who will evaluate recommendations from stockholders in the same manner that they evaluate recommendations from other sources.
Compensation Matters
Compensation Committee and Matters.
Our executiveBoard does not have a standing compensation is administered by the Compensation Committeecommittee. We believe that not using a committee of the Board in setting compensation policies and making compensation decisions fosters fuller active participation of Directors.all our directors in the process. The membersentire Board of Directors establishes the Compensation Committee are Christopher E. Clouser (Chairman) and Mannie L. Jackson, bothgeneral compensation policies of whom are independent in accordance with NASDAQ's requirementour company, the specific compensation levels for independent director oversight ofeach executive officer, compensation. Mr. Clouser was elected to theand administers our equity compensation committee in December 2012plans and became Chairman in October 2013 following the retirement of Richard J. Giacco from the Board on September 20, 2013. Mr. Jackson was elected in October 2013 to fill the vacancy created by Mr. Giacco’s retirement. In fulfilling its role, the Compensation Committee (1) reviews periodically and approves the Company's general philosophy concerning executive compensation and the components of the Company's executive compensation program to align thempractices.
All action with the Company's compensation philosophy; (2) reviews and approves goals and objectives that it considers relevantrespect to the compensation of the Company's chief executive officer, evaluates his performance and sets the terms of his compensation; and (3) establishes the compensation of each of the Company's otherour executive officers as well approves employment agreements, severance agreements and change in control agreementsis also approved or recommended for the Company's chief executive officer and other executive officers. In addition, the Compensation Committee periodically evaluates the Company's long-term and short-term incentive plans and employee benefit plans, together with the Company's methodology for awarding equity-based and other incentive compensation to all non-executive employees (including new hires) and other service providers and the levelsapproval by a majority of such compensation. The Compensation Committee met three times in 2013. The charter of the Compensation Committee is available on our websitehttp://www.acornenergy.com under the "Investor Relations" tab.independent directors.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all our directors, officers and employees. This Code of Ethics is designed to comply with theNasdaq marketplace rules related to codes of conduct. A copyOur code of this Code of Ethicsethics may be obtainedaccessed on the Internet athttp://www.acornenergy.com/rsc/docs/55.pdf. We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our code of ethics by posting such information on our website, athttp://www.acornenergy.com under the “Investor Relations” tab. We intend to post on our website any amendments to, or waiver from, our Code of Business Conduct and Ethics.Internet address specified above.
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements of our named executive officers for the year ended December 31, 20132015 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion.
Compensation determinations. Our executive compensation iswas previously administered by the Compensation Committee of the Board of Directors (the “Committee”). The members of the Committee in 20132015 were Christopher E. Clouser (Chairman since October 3, 2013), Richard J. Giacco (through September 20, 2013)(Chairman) and Mannie L. Jackson, (since October 3, 2013), allboth of whom were independent in accordance with NASDAQ'sNASDAQ’s requirement for independent Director oversight of executive officer compensation. The Committee was dissolved in October 2015. We believe that not using a committee of the Board in setting compensation policies and making compensation decisions fosters fuller active participation of all our directors in the process. In fulfilling its role, the CommitteeBoard (1) reviews periodically and approves the Company'sCompany’s general philosophy concerning executive compensation and the components of the Company'sCompany’s executive compensation program to align them with the Company'sCompany’s compensation philosophy; (2) reviews and approves goals and objectives that it considers relevant to the compensation of the Company'sCompany’s chief executive officer, evaluates his performance and sets the terms of his compensation; and (3) establishes the compensation of each of the Company'sCompany’s other executive officers, as well approves employment agreements, severance agreements and change in control agreements for the Company'sCompany’s chief executive officer and other executive officers. In addition, the CommitteeBoard administers and periodically evaluates the Company'sCompany’s long-term and short-term incentive plans and employee benefit plans, together with the Company'sCompany’s methodology for awarding equity-based and other incentive compensation to all non-executive employees (including new hires) and other service providers and the levels of such compensation. All action with respect to the compensation of our executive officers is also approved or recommended for approval by a majority of our independent directors.
Compensation objectives and philosophy.philosophy. Our executive compensation programs are designed to motivate and reward sustainable long-term performance, and a key component of our executive compensation is long-term incentives. This ensures that executive compensation aligns appropriately with long-term stockholder interests and the Company'sCompany’s performance. We periodically evaluate our executive compensation programs and make changes when necessary to ensure alignment with stockholder interests. The Board believes that the objectives of our executive compensation program are appropriate for a company of our size and stage of development and that our compensation policies and practices help meet those objectives.
Compensation program.The elements of our compensation program include base salary and performance-based cash bonuses, as well as long-term compensation in the form of stock options. The Board believes that our executive compensation program achieves an appropriate balance between fixed compensation and variable incentive compensation and pays for performance. The Board also believes that the Company'sCompany’s executive compensation program effectively aligns the interests of our executive officers with those of our stockholders by tying a significant portion of their compensation to the Company'sCompany’s performance and by providing a competitive level of compensation needed to recruit, retain and motivate talented executives critical to the Company'sCompany’s long-term success. The costs of our compensation programs are a significant determinant of our competitiveness. Accordingly, we are focused on ensuring that the balance of the various components of our compensation program is optimized to motivate employees to achieve our corporate objectives on a cost-effective basis.
In March 2012, the Compensation Committee engaged an independent compensation consultant (“Consultant”) to assist it in reviewing our current executive compensation practices and recommend an overall compensation strategy for the executive officers of the Company, including assistance in reviewing the compensation to be included in a new employment agreement for Mr. Moore for 2013.
Executive compensation for 2013.2015.Changes in each named executive officer'sofficer’s base compensation for 2013,2015, together with the methodology for determining their respective bonuses, if any, are described below. The Boards of Directors of our subsidiary companies (DSIT, GridSense and OmniMetrix and USSI) determinedetermined the compensation of their own executive officers and other employees; provided that we made a separate bonus award to Mr. Barth in 2012 as described below.employees.
John A. Moore.Moore. Effective January 1, 2013, Mr. Moore and the Company entered into a new five-year Employment Agreement (the “2013 Agreement”). The Compensation Committee contracted in late 2011 with a compensation consultant previously utilized by the Board to assist in developing compensation under the extension of Mr. Moore'sMoore’s previous employment agreement, but ultimately decided as a part of a more comprehensive review of executive and Board compensation to interview and ultimately hire a different party. The original consultant'sconsultant’s report was reviewed but not relied upon in developing Mr. Moore'sMoore’s compensation under the 2013 Agreement. As of March 1, 2012, the term of Mr. Moore'sMoore’s existing employment agreement had been amended to continue on a month-to-month basis in anticipation of negotiating and finalizing a new employment agreement. Mr. Moore offered a proposal for the terms of a new employment agreement and the end result was the product of arms'arms’ length negotiations between Mr. Moore and the Compensation Committee. The Compensation Committee retained outside legal counsel in connection with the negotiations with Mr. Moore, in addition to conferring with our then General Counsel concerning the agreement. Because Mr. Musanti (at the time, a member of the Compensation Committee) had been retained by the Company for services to be performed in 2013 (initially as(as CFO and COO of GridSense and CFO of USSI) shortly before the date at which the 2013 Agreement was scheduled for approval by the Compensation Committee, Mr. Musanti recused himself from final deliberations regarding the 2013 Agreement. Since his recusal left the Committee with a single member, the 2013 Agreement was also considered and ratified by the Corporation'sCorporation’s independent directors. The Consultant and our Compensation Committee used peer group benchmarking to assist in setting Mr. Moore'sMoore’s compensation. In so doing, they focused exclusively on market capitalization as the most representative statistic in developing the peer group comparison within the Energy Services Company sector for benchmarking Mr. Moore'sMoore’s position. As noted above, the Committee found the peer groups in the Consultant’s report to be more relevant to the Company’s business model. The Consultant relied on a regression analysis technique which adjusted the sample so that it was able to provide the Committee with more direct and relevant comparisons of data. Benchmarked items include salary, total cash compensation and total direct compensation. The data was used to ensure that Mr. Moore iswas paid at approximately the 50th percentile of benchmarked companies. Benchmarked companies included the following:
USEC Inc. (USU)
EnerNOC, Inc. (ENOC)
Echelon Corporation (ELON)
Warren Resources, Inc. (WRES)
Panhandle Oil and Gas Inc. (PHX)
Callon Petroleum Company (CPE)
Dawson Geophysical Company (DWSN)
Safeguard Scientifics, Inc. (SFE)
Endeavour International Corporation (END)
Goodrich Petroleum Corporation (GDP)
Oyo Geospace (GEOS)
Bill Barrett Corp. (BBG)
Itron Inc. (ITRI)
Ultra Petroleum Corp. (UPL)
Harris & Harris Group (TINY)
Hercules Technology Growth Capital (HTGC)
Energy Partners Ltd. (EPL)
The 2013 Agreement providesprovided that Mr. Moore shallwas to receive an annual cash bonus with respect to each year of up to one hundred percent (100%) of his aggregate base salary in such year, based upon the attainment of agreed upon personal and Company performance goals and milestones for the preceding fiscal year, as mutually determined by the Board (or any committee of the Board delegated authority over employee compensation matters)Compensation Committee and Mr. Moore.Moore. The actual amount of any bonus payable by the Company to Mr. Moore iswas to be determined on a sliding scale based upon his attainment of such targets for the applicable fiscal year, such that the amount of any bonus payable by the Company willwould be directly proportional to the percentage of such target attained by Mr. Moore during the applicable year as reasonably determined by the Board in its good faith judgment. Mr. Moore did not receive a bonus for 2013 and agreed to reduce his salary to $318,750 per annum effective October 16, 2013.
Michael Barth. Effective October 1, 2015, Mr. Barth's base compensation for 2013 increased by approximately $8,000 due to currency exchange rates and contractual cost of living adjustments. For 2014, Mr. BarthMoore agreed to a $10,000 reduction in the portiondefer payment of 30% of his salary payable by Acorn and a voluntary reductionuntil the completion of NIS 12,000 ($3,457 at December 31, 2013 exchange rates)the sale of DSIT to Rafael. In 2015, $23,906 of Mr. Moore’s salary was deferred under this arrangement (all of which was paid to Mr. Moore upon the closing of the DSIT transaction in the amount payable by DSIT effective January 1, 2014 andApril 2016). Mr. Moore did not receive a bonus from either company for 2013. On June2014 or 2015.
Benny Sela. Mr. Sela’s employment agreement provides for a base salary which is denominated in NIS and linked to Israeli Consumer Price Index (“CPI”) which at December 31, 2011 was equivalent to approximately $199,000 per annum. In September 2012, the board of directors of DSIT awarded Mr. Sela a 10% increase in annual compensation effective September 1, 2012. Effective January 1, 2014, Mr. Barth’s employment agreement was amended to restore the above mentioned reduction with the effect of increasingSela voluntarily reduced his annual base salary as in effect on May 31, 2014, by $10,000.
Benny Selaapproximately $24,600 (10%). Mr. Sela'sSela’s base compensation for 2013 increased bysalary is currently equivalent to approximately $30,000 due$197,000 per annum. In addition to currency exchange rates and contractual cost of living adjustments. Hehis base salary, Mr. Sela is also received a cash bonus of $78,838 for 2013 in accordance with the terms of his contract whereby he is entitled to receive a bonus payment equal to 1.75% of DSIT'sDSIT’s gross profit. In JulyJune 2013, DSIT and Mr. Sela agreed that future bonus payments would be further conditioned upon DSIT achieving certain further EBITDA growth targets.Effective January 1, 2014, Mr. Sela agreeddid not receive a bonus for 2014 or 2015. Mr. Sela’s base compensation for 2015 decreased by approximately $17,000 due to take a voluntary reductionthe net effect of NIS 85,484 ($24,628 at December 31, 2013currency exchange rates).rates and contractual cost of living adjustments.
Joseph E. Musanti.Musanti. Effective January 1, 2013, Mr. Musanti and GridSense entered into an Employment Agreement pursuant to which Mr. Musanti initially served as GridSense’s CFO and COO and later became its President and CEO effective May 10, 2013, became its CEO and President. He retained the CEO role upon the election of GridSense’s new President in March 2014.2013. Pursuant to a letter agreement between GridSense and USSI, Mr. Musanti also servesserved as USSI’s CFO and USSI reimbursesreimbursed GridSense for an agreed upon portion of Mr. Musanti’s employee costs. A similar informal arrangement iswas in place between GridSense and OmniMetrix pursuant to which Mr. Musanti servesserved as OmniMetrix’s CEO (and from July 2013 through March 2014, as its President).April 22, 2015. Mr. Musanti was also named the COO of the Company effective January 7, 2014 and received a $25,000 annual raise in his base compensation in connection with such election, which amount (together with associated employee costs) is funded entirely by Acorn. Mr. Musanti’s employment is on an “at-will” basis and the Employment Agreement has no fixed term. It provides that GridSense’s Board of Directors will set Mr. Musanti’s base salary (which was $250,000 for 2013, increased to $275,000 for 2014) and contains an opportunity for him to earn an annual bonus which would be payable in arrears based on a targeted increase in gross profits for the combined (i.e., US and Australian affiliate) GridSense business over prior year (or a base year) results (which formula is subject to change by the Board in the future). He iswas also eligible under a letter agreement with USSI to a bonus based on the percentage, if any, by which USSI exceedsexceeded its projected gross revenues and operating income targets as set in its annual budget. HeMr. Musanti did not receive a bonus from GridSenseany company for 2014 or USSI for 2013.2015.
Richard Rimer. Mr. Rimer served as the Vice Chairman of our Board of Directors until July 31, 2013 and from August 1 until December 31, 2013, he served as our Executive Vice President. He also served as a member of our Board of Directors and as Chairman of the Boards of our GridSense and OmniMetrix subsidiaries until November 11, 2013. Mr. Rimer and the Company were parties to a Consulting Agreement dated December 12, 2011 that was extended through July 31, 2013 and initially provided for annualized compensation of $250,000 (or $20,833 per month). Effective August 1, 2013, Mr. Rimer and the Company entered into a new Consulting Agreement that acknowledged that his 2013 compensation under the prior and such new agreement would be $30,720 per month. The term of the new Consulting Agreement was scheduled to end on March 31, 2014, but by an amendment effective November 11, 2013, Mr. Rimer and the Company agreed to end the consultancy as of December 31, 2013. The amendment provided for an early termination payment of $73,728, which we made to Mr. Rimer on December 31, 2013 (which amount represents a 20% reduction in the amounts he would have received under the Consulting Agreement for the remaining term prior to the amendment). Mr. Rimer also agreed to reduce his compensation for the remaining term by 20% to $24,576 per month effective November 1, 2013.
Executive Bonus Program for 2014.
In May 2014, the Compensation Committee approved a bonus program for 2014 (the “2014 Bonus Program”) for the purposes of providing Company management with guidelines for meeting the Compensation Committee’s criteria for bonus eligibility with respect to calendar year 2014. The plan was designed in such a fashion as to neither guarantee an award, nor make such achievement impossible. As a preliminary process matter, the Compensation Committee asked Mr. Moore, our President and CEO, to propose a bonus structure for the management team, including underlying objectives. The Compensation Committee then met without management in attendance, discussed and considered management’s recommendations and adjusted the weighting given to each of the three criterion listed below, and adopted the 2014 Bonus Program.
The determination of whether bonuses will be payable in each case remains in the discretion of the Compensation Committee, to be exercised consistent with its goal to administer a compensation program that drives satisfaction of corporate objectives as described above. Recognizing the relative immaturity of the Company’s subsidiaries, the Compensation Committee acknowledged that financial performance should not be the only, but rather one of many, measures by which management’s performance should be assessed given the mid to long-term nature of the Company’s investment horizons. The Compensation Committee thus established the following performance objectives and base-line weightings for CY 14:
40% overall corporate performance
30% portfolio company performance
30% personal objectives and general performance
The weight given to each performance criterion may be adjusted in the case of any individual member of management based on duties assigned to or performed by such person during CY 14 in order to better reflect the Compensation Committee’s consideration of the role played by such person in achieving (i) specific Company goals and (ii) fulfillment of agreed-upon career objectives that are intended to benefit the Company’s interests. Furthermore, “partial credit” may be given by the Compensation Committee based upon the degree to which the Compensation Committee believes a goal has been reached.
Specific corporate goals have been established relative to the overall operation of the Company with regard to the corporate performance benchmark. Other factors that may be considered include, without limitation, the degree to which management is perceived to have executed on the Company’s overall strategy and vision, management of the Company for stock appreciation and enhanced market capitalization, the accuracy and transparency of public and internal reporting, optimization of corporate and portfolio staffing and risk identification and mitigation. With regard to portfolio performance, the Compensation Committee considered that the Company develops investor value both by monetizing portfolio investments and by improving financial performance which meets or exceeds analysts’ expectations. Because the Company’s subsidiaries are in various stages of maturity, the Compensation Committee did not wish to place undue emphasis on any particular financial or other benchmark. It thus developed a matrix of goals for each subsidiary with the intention that achievement of at least 75% of these benchmarks will generally be required for the portfolio performance criterion to be deemed satisfied for partial or full bonus consideration. The Compensation Committee worked with Mr. Moore to refine his personal objectives for the year and approved the goals for the other management team members that Mr. Moore had developed in consultation with each individual.
Stockholder input on executive compensation. Stockholders can provide the Company with their views on executive compensation matters at each year'syear’s annual meeting through the stockholder advisory vote on executive compensation and during the interval between stockholder advisory votes. The Company welcomes stockholder input on our executive compensation matters, and stockholders are able to reach out directly to our independent directors by emailing tocclouser@acornenergy.comto express their views on executive compensation matters.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||
| John A. Moore | 2015 | 318,750 | — | 250,000 | (2) | 12,000 | (3) | 580,750 | ||||||||||||||||||||||||||||||||||||
| President and CEO | 2013 | 402,864 | — | — | 12,000 | (1) | 414,864 | 2014 | 318,750 | — | 250,000 | (4) | 12,000 | (3) | 580,750 | |||||||||||||||||||||||||||||
| 2012 | 375,000 | — | 213,189 | (2) | 27,000 | (3) | 615,189 | |||||||||||||||||||||||||||||||||||||
| 2011 | 325,962 | 596,890 | 124,232 | (4) | 12,000 | (1) | 1,059,084 | |||||||||||||||||||||||||||||||||||||
| Michael Barth | ||||||||||||||||||||||||||||||||||||||||||||
| CFO and CFO of DSIT | 2013 | 191,195 | — | — | 30,114 | (5) | 221,309 | |||||||||||||||||||||||||||||||||||||
| 2012 | 183,192 | 13,305 | 88,308 | (6) | 26,756 | (5) | 311,561 | |||||||||||||||||||||||||||||||||||||
| 2011 | 188,529 | 90,000 | — | 33,637 | (5) | 312,166 | ||||||||||||||||||||||||||||||||||||||
| Richard Rimer | ||||||||||||||||||||||||||||||||||||||||||||
| Former Vice-Chairman and Executive Vice-President | 2013 | 430,080 | (7) | — | — | 15,000 | (8) | 445,080 | ||||||||||||||||||||||||||||||||||||
| Joseph Musanti | 2015 | 275,000 | — | — | — | 275,000 | ||||||||||||||||||||||||||||||||||||||
| COO of Acorn, CEO and | 2014 | 275,000 | — | 36,750 | (6) | — | 311,750 | |||||||||||||||||||||||||||||||||||||
| President of GridSense, CEO of OmniMetrix (5) | ||||||||||||||||||||||||||||||||||||||||||||
| Benny Sela | 2015 | 197,921 | — | — | 37,168 | (7) | 235,089 | |||||||||||||||||||||||||||||||||||||
| CEO and President of DSIT | 2013 | 235,685 | 78,838 | — | 39,288 | (5) | 353,811 | 2014 | 214,582 | — | — | 40,276 | (7) | 254,858 | ||||||||||||||||||||||||||||||
| 2012 | 205,549 | 90,125 | — | 35,326 | (5) | 331,000 | ||||||||||||||||||||||||||||||||||||||
| 2011 | 210,509 | 67,168 | — | 39,863 | (5) | 317,540 | ||||||||||||||||||||||||||||||||||||||
| Joseph Musanti | ||||||||||||||||||||||||||||||||||||||||||||
| COO of Acorn, CEO of GridSense and OmniMetrix, Vice Chairman and CFO of USSI | 2013 | 250,000 | 10,000 | (9) | 49,315 | (10) | 3,000 | (11) | 312,315 | |||||||||||||||||||||||||||||||||||
| (1) |
| (2) | Represents the grant date fair value calculated in accordance with applicable accounting principles with respect to |
| (3) | Consists of automobile expense allowance. | |
| (4) | Represents the grant date fair value calculated in accordance with applicable accounting principles with respect to 86,128 stock options granted on January 1, 2014 with an exercise price of $4.07.The fair value of the options was determined using the Black-Scholes option pricing model using the following assumptions: (i) a risk-free interest rate of 2.99% (ii) an expected term of 9.5 years (iii) an assumed volatility of 63% and (iv) no |
| (5) | Mr. Musanti served as CEO of OmniMetrix through April 22, 2015. | |
| (6) | Represents | |
| (7) | Consists of automobile fringe benefits and the gross-up value of income taxes on such benefits. |
Grants of Plan Based Awards
| Name | Grant Date | Number of Shares of Common Stock Underlying Options | Exercise Price of Options Awards (Per Share) | Grant Date Fair Value of Options Awards | ||||||||||
| John A. Moore | — | — | — | — | ||||||||||
| Michael Barth | — | — | — | — | ||||||||||
| Richard Rimer | — | — | — | — | ||||||||||
| Benny Sela | — | — | — | — | ||||||||||
| Joseph Musanti | January 1, 2013 | 50,000 | (1) | — | $ | 49,315 | ||||||||
| Name | Grant Date | Number of Shares of Common Stock Underlying Options | Exercise Price of Options Awards (Per Share) | Grant Date Fair Value of Options Awards | ||||||||||
| John A. Moore | January 1, 2014 | 469,131 | (1) | $ | 0.77 | $ | 250,000 | |||||||
| (1) | The options |
| 17 |
Employment Arrangements
The employment arrangements of each named executive officer and certain other officers are described below. From time to time, the Company has made discretionary awards of management options as reflected in the table above.
John A. Moorebecame our President and Chief Executive Officer in March 2006. In March, 2008, we entered into a three-year Employment Agreement with Mr. Moore (the “Prior Agreement”), providing for an initial base salary of $325,000 per annum, retroactive to January 1, 2008, increasing to $350,000 per annum on the first anniversary of the Prior Agreement and increasing to $375,000 per annum on the second anniversary. Effective November 1, 2010, Mr. Moore voluntarily reduced his annual salary to $300,000 per annum. In March 2011, we entered into a one-year extension of the Prior Agreement with Mr. Moore at the reduced salary of $300,000 per annum. In November 2011, we entered into a second amendment to the Prior Agreement restoring his salary to $375,000 per annum effective November 1, 2011. In March 2012, we further amended the Prior Agreement such that Mr. Moore's employment would continue on a month-to-month basis unless otherwise terminated according to the provisions of the Agreement. Mr. Moore was eligible to receive an annual cash bonus of up to $200,000 under the Prior Agreement, based upon the attainment of agreed upon personal and company performance goals and milestones for the preceding fiscal year, as determined by the Compensation Committee. Under the Prior Agreement, Mr. Moore was also entitled to (i) the employee benefits generally made available to the registrant's executive officers, (ii) short-term and long-term disability insurance for the benefit of Mr. Moore, and (iii) a monthly automobile expense allowance of $1,000.
Under the terms of the 2013 Agreement, Mr. Moore'sMoore’s initial base salary was initially set at $425,000 per annum, which wasand had been scheduled to increase to $450,000 per annum on January 1, 2014, $475,000 per annum on January 1, 2015, $500,000 on January 1, 2016 and remainingwas to remain at that amount through the end of the term. Effective for the pay period commencing October 16, 2013, Mr. Moore agreedand the Company amended the 2013 Agreement to reduceprovide for a fixed annual salary of $318,750 (which amount represented a 25% reduction from his salary to $318,750 per annum effective October 16, 2013.original 2013 base salary). The 2013 Agreement providesprovided that commencing on January 1, 2014, and for each subsequent anniversary date of the term through the fourth anniversary (January 1, 2017), stock option awards having a value of $250,000, based on a Black-Scholes model, willwere to be awarded to Mr. Moore. The 2013 Agreement also providesprovided that in addition to annual stock option awards, the registrant and Mr. Moore and the Company willwere to discuss the terms of a mutually agreeable grant by usthe registrant to Mr. Moore of “Challenge Options” or “Challenge Shares” under the Corporation'sCorporation’s 2006 Stock Incentive Plan based upon the future increase in the market capitalization of the Corporation'sCorporation’s Common Stock. Assuming agreement by the parties, theAny such grant willwas to be reflected in a separate contract executed between Mr. Moore and us. At this time, the Compensation Committee does not anticipate making such an award. Under the 2013 Agreement, Mr. Moore iswas also entitled to (i) the employee benefits generally made available to the registrant'sregistrant’s executive officers, (ii) short-term and long-term disability insurance for the benefit of Mr. Moore, and (iii) a monthly automobile expense allowance of $1,000. In addition, we arewere required to contribute for each calendar year an amount equal to three percent (3%) of Mr. Moore'sMoore’s aggregate base salary to his 401(k) Plan, subject to applicable statutory limits. The Company reimbursed Mr. Moore $15,000 for his legal expenses in connection with executing the 2013 Agreement.
In March 2011, in lieu of a bonus for 2010,The 2013 Agreement provided that Mr. Moore was awarded 66,666 stock options exercisable until March 14, 2016 at an exercise price of $3.70 per share, exercisable immediately as to one-fourth of the options, with the remainder vesting in equal installments on June 30, September 30 and December 31, 2011. We also made a payment to Mr. Moore of a discretionary cash bonus of $421,890 as determined by the independent members of our Board of Directors. This bonus was based on Mr. Moore's efforts in leading the successful sale of CoaLogix, his voluntary reduction of his salary during the prior twelve month period and in lieu of an award of additional options which the Board of Directors had intended to make to Mr. Moore in connection with the one- year extension of his employment agreement in early 2011.The Compensation Committee had agreed with Mr. Moore following its appointment that his annual bonus would be based on three factors for 2011: (1) success in acquisitions/dispositions (up to 30%), (2) performance of our stock versus peer companies as determined by the Compensation Committee (up to 30%), and (3) revenue and EBTIDA performance of the subsidiaries versus budget and parent company expenses versus budget (up to 40%). Mr. Moore was also advised that, absent some major change prior to the end of 2011, the Committee would recognize that he had fully earned the 30% related to success in acquisitions/dispositions because of the extraordinary return from the sale of CoaLogix. Mr. Moore agreed to that process. Following the finalization of the Corporation's 2011financial results, the Committee reviewed the performance of Acorn's stock versus a peer group comprised of COMV (Comverge), ELON (Echeleon), ENOC (EnerNOC), ITRI (Itron), SFE (Safeguard Scientifics), TINY (Harris & Harris) and USU (USEC Inc.) and the revenue and EBTIDA performance of the subsidiaries versus budget and parent company expenses versus budget. The bonus determined as appropriate by the Committee was $150,000. Mr. Moore also received an additional cash bonus of $25,000 in September, 2012 representing the remainder of a 2011 bonus award based on Acorn receiving the balance of our portion of the escrowed sales proceeds from the sale of CoaLogix, which were in fact paid in full to us in September 2012. Under the 2013 Agreement, Mr. Moore is eligible to receive an annual cash bonus with respect to each year of up to 100%one hundred percent (100%) of his aggregate base salary for each fiscalin such year, based upon the attainment of agreed upon personal and companyCompany performance goals and milestones for the preceding fiscal year, as mutually determined by the Compensation Committee. In addition,Committee and Mr. Moore. The actual amount of any bonus payable by the Company to Mr. Moore maywas to be awarded an additionaldetermined on a sliding scale based upon his attainment of such targets for the applicable fiscal year, such that the amount of any bonus payable by the Company was to be directly proportional to the percentage of such target attained by Mr. Moore during the applicable year as reasonably determined by the Board in cash or sharesits good faith judgment. Mr. Moore agreed to reduce his salary to $318,750 per annum effective October 16, 2013. Mr. Moore further agreed to defer 30% of our common stock (athis salary effective October 1, 2015 until the optionconsummation of the Company) after each fiscal year, subjectsale of DSIT to Rafael (all of which was paid to Mr. Moore upon the sole discretionclosing of the Compensation Committee, based upon Mr. Moore's performance during such year and/or other criteria as the Compensation Committee may deem appropriate.DSIT transaction in April 2016). Mr. Moore did not receive a bonus from Acorn for 20122014 or 2013.
Michael Barth has served as Chief Financial Officer of the Company and Chief Financial Officer of DSIT beginning December 1, 2005. In August 2009, the Board approved new employment terms for Mr. Barth. According to the new employment terms, Mr. Barth was entitled to a salary of $175,000 per annum effective August 1, 2009. One half of Mr. Barth’s salary is fixed in NIS at the November 1, 2007 exchange rate and linked to the Israel CPI and adjusted semi-annually. Mr. Barth’s current annual salary following such linkage adjustments is approximately $196,000 (at December 31, 2013). The cost of Mr. Barth's total compensation (excluding bonuses) is shared by an arrangement between Acorn (75%) and DSIT (25%). Effective January 1, 2014, Mr. Barth agreed to a $10,000 reduction in his salary of the annual portion payable by Acorn and a monthly reduction of NIS 1,000 in the amount payable by DSIT effective January 1, 2014. On June 1, 2014, Mr. Barth’s employment agreement was amended to restore the above mentioned Acorn portion of the reductions with the effect of increasing his annual salary, as in effect on May 31, 2014, by $10,000. Each of Acorn and DSIT separately determine the bonus (if any) to be paid to Mr. Barth. In April 2012, the Compensation Committee of the Board of Directors awarded Mr. Barth a discretionary bonus for 2011 of $90,000. In September 2012, DSIT’s board of directors made Mr. Barth eligible to receive an annual bonus equal to 1.5% of DSIT’s annual consolidated net income before tax, to be calculated and paid as soon as practicable following the end of DSIT’s fiscal year beginning with 2012. Such bonus will be paid only if Mr. Barth is employed by DSIT on the last day of the fiscal year to which such payment relates. For 2012, such bonus was calculated to be $13,305. Mr. Barth did not receive any bonus from Acorn for 2012. For 2013, Mr. Barth did not receive any bonus from Acorn or DSIT. He is eligible to participate in the Acorn 2014 Bonus Program as described above with a target bonus of 30% of the Acorn share of his annual salary, or approximately $44,000.
Richard Rimerwas elected Executive Vice President ("EVP") of Acorn on July 25, 2013 in connection with his execution of a new Consulting Agreement with Acorn effective as of August 1, 2013 (the “Rimer CA”). At that time, he ceased to be Vice Chairman of our Board. Under the Rimer CA, Mr. Rimer received a payment of $215,040 for services rendered by him during 2013 prior to the effective date of that agreement. He was also reimbursed for business travel and other expenses he incurred on the Company's behalf during that time. The Rimer CA provided that Mr. Rimer would serve as EVP for an annualized fee of $368,640, payable in equal monthly installments of $30,720, and would continue to receive business-related expense reimbursements in accordance with company policies. The term of the Rimer CA was to expire on March 31, 2014 unless earlier terminated. On November 11, 2013, Mr. Rimer agreed to reduce his consulting fees by 20% from $30,720 per month to $24,576, effective retroactively as of November 1, 2013, and to end the Rimer CA effective December 31, 2013 in exchange for a lump sum payment of $73,728, which represents 80% of the amounts that otherwise would be payable upon termination of the agreement.
Mr. Rimer was eligible to earn a bonus up to $272,000 for the accomplishment of agreed-upon goals by December 31, 2013 as set by the Compensation Committee. Mr. Rimer did not receive any bonus from Acorn for 2013.
Heather K. Mallard became Vice President, General Counsel and Secretary of the Company commencing February 1, 2012. Under her employment agreement, Ms. Mallard's initial base salary is $225,000 per annum. The agreement has no fixed term, and the employment is on an “at-will” basis. She is eligible to receive an annual bonus of up to 30% of her base salary, based upon the attainment of personal, corporate and discretionary goals as established by the Board in consultation with2015. Mr. Moore and Ms. Mallard. We reimbursed Ms. Mallard approximately $9,500 in 2012 for expenses incurred in connection with her relocation to Wilmington, Delaware.Ms. Mallard did not receive a bonus from Acorn for 2012 or 2013.
Under the employment agreement, Ms. Mallard was awarded 50,000 options to purchase Acorn common stock at an exercise price of $6.49 per share, vesting equally over a three year period following the first anniversary of the date of grant, exercisable through February 1, 2019. The employment agreement provides for an additional award of 10,000 options to purchase Acorn common stock on each anniversary of her employment.
Benny Sela has servedresigned as President and Chief Executive Officer of DSIT since July 1, 2007. Mr. Sela’s employment agreement provides for a base salary which is denominated in Israeli Consumer Price Index (“CPI”) linked NIS which at December 31, 2011 was equivalent to approximately $199,000 per annum. In September 2012, the board of directors of DSIT awarded Mr. Sela a 10% increase in annual compensation effective September 1, 2012. After giving effect to such increase, Mr. Sela’s new base salary, which is still denominated in NIS and linked to the Israeli CPI, is currently equivalent to approximately $226,000 per annum. In addition to his base salary, Mr. Sela is also entitled to receive a bonus payment equal to 1.75% of DSIT’s gross profit. Mr. Sela’s bonus under this arrangement was, $67,168, $90,125 and $78,838 for the year's ended December 31, 2011, 2012 and 2013, respectively. In July 2013, DSIT and Mr. Sela agreed that future bonus payments would be further conditioned upon DSIT achieving certain EBITDA growth targets. Effectiveon January 1, 2014, Mr. Sela voluntarily reduced his annual base salary by approximately $24,600 (10%).28, 2016.
Mark BashforthJoseph Musantiwas elected has served as CEO and President of USSI in July 2014. His employment terms are based on an offer letter and we anticipate that he and USSI will enter into an employment agreement on similar terms. His employment is on an “at-will” basis and his annual salary is $275,000. He will be eligible to receive an annual bonus in an amount up to 40% of his base pay based on financial and operating metrics to be mutually agreed upon.
Joseph Musantihas served as CEO of GridSense since May 10, 2013 and as CEO of OmniMetrix sincefrom July 25, 2013.2013 to April 2015. From January 1, 2013 until May 10, 2013, he served as the Chief Operating Officer and Chief Financial Officer of GridSense andGridSense. From July 2013 until April 2014, he held the additional positionalso served as President of President from May 2013 through March 2014.OmniMetrix. He has also servesserved as the Chief Financial Officer of USSI (sincefrom January 1, 2013) and is presently2013 until the suspension of its Vice Chairman (having previously been Chairman fromoperations in March until June 2014).2015. Effective January 7, 2014, he was elected Acorn’s Chief Operating Officer. Mr. Musanti is party to an At-Will Employment, Confidential Information, Non-Solicitation and Invention Assignment Agreement effective as of January 1, 2013 with GridSense pursuant to which he initially was paid an annual salary of $250,000 and received a one-time $10,000 signing bonus that was paid in January 2013. For 2014, Mr. Musanti received a $25,000 annual raise in his base compensation in connection with his election as the Company’s COO, which amount (together with associated employee costs) is funded entirely by Acorn. USSI and OmniMetrix areis also each obligated to reimburse GridSense on a monthly basis a variable percentage of the total costs of employing Mr. Musanti based on the portion of his time devoted to their respective businesses. Pursuant to a side lettersletter with GridSense, and USSI, Mr. Musanti may earn an annual bonus. He is not entitled to a bonus from OmniMetrix. With respect to GridSense, unless otherwise determined by the Board, he is eligible for a bonus equal to 2% of the amount, if any, by which the actual gross profit of GridSense Inc. and its Australian affiliates (collectively, the “GridSense Business”), as determined for financial reporting purposes, for the 2013applicable calendar year exceeds 105% of the GridSense Business’s gross profit earned in 2011 (the “Base Year”). Unless otherwise determined by the Board, the financial measurement for each future period will equal 2% of the amount, if any, by which the GridSense Business’s actual gross profit, as determined for financial reporting purposes, exceeds 105% of the greater of GridSense Business’s gross profit earned in the year immediately prior to the applicable period or the Base Year.GridSense Business’s gross profit earned in 2011. Mr. Musanti was not paid a bonus by GridSense for 2013.2014 or 2015. His bonus eligibility at USSI iswas based on the percentage, if any, by which USSI exceedsexceeded its projected gross revenues and operating income targets as set in its annual budget. Mr. Musanti was not paid a bonus by USSI for 2013. He2014 or 2015.
Benny Sela has served as President and Chief Executive Officer of DSIT since July 1, 2007. Mr. Sela’s employment agreement provided for a base salary which is eligibledenominated in NIS and is linked to participatethe Israeli CPI which at December 31, 2011 was equivalent to approximately $199,000 per annum. In September 2012, the board of directors of DSIT awarded Mr. Sela a 10% increase in the Acornannual compensation effective September 1, 2012. Effective January 1, 2014, Bonus Program as described above with a target bonus of 100% of the Acorn share ofMr. Sela voluntarily reduced his annual base salary by approximately $24,600 (10%). Mr. Sela’s base salary in 2015 was equivalent to approximately $197,000 per annum. In addition to his base salary, Mr. Sela is also entitled to receive a bonus payment equal to 1.75% of DSIT’s gross profit. In June 2013, DSIT and Mr. Sela agreed that future bonus payments would be further conditioned upon DSIT achieving certain EBITDA growth targets. Mr. Sela did not receive a bonus for 2014 or $25,000.2015.
Outstanding Equity Awards at 20132015 Fiscal Year End
The following tables set forth all outstanding equity awards made to each of the Named Executive Officers that arewere outstanding at December 31, 2013.2015.
| OPTIONS TO PURCHASE ACORN ENERGY, INC. STOCK | ||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||
| John A. Moore | 200,000 | — | 5.11 | March 4, 2018 | ||||||||||
| 75,000 | — | 2.51 | February 20, 2014 | |||||||||||
| 66,666 | — | 3.70 | March 14, 2016 | |||||||||||
| 10,000 | 40,000 | (1) | 7.57 | December 13, 2022 | ||||||||||
| Michael Barth | 30,000 | — | 3.90 | September 19, 2014 | ||||||||||
| 35,000 | — | 2.51 | February 20, 2014 | |||||||||||
| 10,000 | — | 4.09 | December 28, 2017 | |||||||||||
| 8,333 | 16,667 | (2) | 7.57 | December 13, 2019 | ||||||||||
| Richard Rimer | 10,000 | — | 4.20 | December 5, 2014 | ||||||||||
| 10,000 | — | 2.24 | November 3, 2015 | |||||||||||
| 10,000 | — | 4.75 | August 4, 2016 | |||||||||||
| 10,000 | — | 5.00 | June 10, 2017 | |||||||||||
| 10,000 | — | 5.37 | October 17, 2018 | |||||||||||
| 10,000 | — | 8.83 | September 11, 2019 | |||||||||||
| 11,666 | — | 7.57 | December 13, 2019 | |||||||||||
| Benny Sela | 10,000 | — | 4.09 | December 28, 2017 | ||||||||||
| Joseph Musanti | 10,000 | — | 2.24 | November 3, 2015 | ||||||||||
| 10,000 | — | 4.75 | August 4, 2016 | |||||||||||
| 10,000 | — | 5.00 | June 10, 2017 | |||||||||||
| 10,000 | — | 5.37 | October 17, 2018 | |||||||||||
| 10,000 | — | 8.83 | September 11, 2019 | |||||||||||
OPTIONS TO PURCHASE ACORN ENERGY, INC. STOCK
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||
| John A. Moore | 200,000 | — | 5.11 | March 4, 2018 | ||||||||||
| 66,666 | — | 3.70 | March 14, 2016 | |||||||||||
| 30,000 | 20,000 | (1) | 7.57 | December 13, 2022 | ||||||||||
| 30,144 | 55,984 | (2) | 4.07 | January 1, 2024 | ||||||||||
| 70,369 | 398,762 | (3) | 0.77 | January 1, 2025 | ||||||||||
| Joseph Musanti | 10,000 | — | 4.75 | August 4, 2016 | ||||||||||
| 10,000 | — | 5.00 | June 10, 2017 | |||||||||||
| 10,000 | — | 5.37 | October 17, 2018 | |||||||||||
| 10,000 | — | 8.83 | September 11, 2019 | |||||||||||
| 13,333 | 26,667 | (4) | 1.68 | October 2, 2021 | ||||||||||
| Benny Sela | 10,000 | — | 4.09 | December 28, 2017 | ||||||||||
| (1) | The options were to vest 2,500 each on March 13, June 13, September 13 and December 13 of each year |
| (2) | The options were to vest | |
| (3) | The options were to vest approximately 23,457 each on | |
| (4) | The options vest 13,333 and 13,334 on October 2, 2016 and 2017, respectively. |
| OPTIONS TO PURCHASE DSIT SOLUTIONS LTD. STOCK | ||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||||
| John A. Moore | — | — | — | — | ||||||||||||
| Michael Barth | — | 16,734 | 1.05 | August 10, 2018 | ||||||||||||
| Richard Rimer | — | — | — | — | ||||||||||||
| Benny Sela | 47,600 | — | 1.26 | August 10, 2018 | ||||||||||||
| 19,336 | — | 2.70 | August 10, 2018 | |||||||||||||
| Joseph Musanti | — | — | — | — | ||||||||||||
All options to purchaseOPTIONS TO PURCHASE DSIT Solutions Ltd. common stock vest only upon an exit transaction by Acorn or upon reaching twenty-five years of service at DSIT.SOLUTIONS LTD. STOCK
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||
| John A. Moore | — | — | — | — | ||||||||||
| Benny Sela | 47,600 | — | 1.26 | August 10, 2018 | ||||||||||
| 19,336 | — | 2.40 | (1) | August 10, 2018 | ||||||||||
| Joseph Musanti | — | — | — | — | ||||||||||
| OPTIONS TO PURCHASE US SEISMIC SYSTEMS, INC. STOCK | ||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||||
| John A. Moore | — | — | — | — | ||||||||||||
| Michael Barth | — | — | — | — | ||||||||||||
| Richard Rimer | — | — | — | — | ||||||||||||
| Benny Sela | — | — | — | — | ||||||||||||
| Joseph Musanti | — | 50,000 | 1.72 | January 1, 2020 | ||||||||||||
| (1) | Exercise price is NIS 9.38 converted at the December 31, 2015 exchange rate of 3.902 |
| 20 |
The options in USSI vest 25% on the first anniversary of the vesting commencement date (January 1, 2014) and thereafter in equal quarterly installments of 6.25% on each March 31, June 30, September 30, and December 31 thereafter until vested in full.
Option and Warrant Exercises
None of Messrs. Moore, Barth, Sela or Musanti exercised any options held by them in Acorn, DSIT or USSI during 2013. Mr. Rimer exercised on a cashless basis a total of 75,000 options. On October 3, 2013, he surrendered 15,830 option shares having a fair market value of $5.18 per share to satisfy the $3.28 exercise price under non-plan options to purchase 25,000 shares expiring on such date and was issued a net of 9,170 shares of Acorn common stock as of October 4, 2013. On November 30, 2013, he surrendered 43,849 option shares having a fair market value of $3.82 per share to satisfy the $3.35 exercise price under non-plan options to purchase 50,000 shares expiring on such date and was issued a net of 6,151 shares of Acorn common stock as of December 1, 2013.2015.
Non-qualified Deferred Compensation
The following table provides information on the executive non-qualified deferred compensation activity for each of our named executive officers for the year ended December 31, 2013.2015.
| Named Executive Officer | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings (Losses) in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings (Losses) in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | ||||||||||||||||||||||||||||||
| John A. Moore | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
| Michael Barth | — | 39,952 | (1) | 25,617 | (2) | — | 380,070 | (3) | ||||||||||||||||||||||||||||||||
| Richard Rimer | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Benny Sela | — | 39,289 | (1) | 64,574 | (2) | — | 1,002,678 | (3) | 8,228 | 40,563 | (1) | 29,878 | (2) | — | 1,039,342 | (3) | ||||||||||||||||||||||||
| Joseph Musanti | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| (1) | Represents a contribution to a |
| (2) | Represents the dollar value by which the aggregate balance of the |
| (3) | Represents the aggregate balance of the |
Estimated Payments and Benefits Upon Termination or Change in Control
The amount of compensation and benefits payable to each named executive officer and certain other officers in various termination situations is described in the tables below.
John A. Moore
Under the terms of the 2013 Agreement with Mr. Moore, our President and Chief Executive Officer, upon termination by the Company for cause (as defined in the agreement) and upon termination by Mr. Moore without good reason (as defined in the agreement), all compensation due to Mr. Moore under his agreement wouldwas to cease, except that Mr. Moore wouldwas to receive all accrued but unpaid base salary up to the date of termination, and reimbursement of all previously unreimbursed expenses. All vested and unexercised options granted by the Company as of the date of termination wouldwere to be exercisable in accordance with the terms of the applicable stock option plan and agreements, provided that Mr. Moore would have only three months to exercise such previously vested options. All options that had not vested as of the date of termination wouldwere to expire.
In the event that within three months prior to or one year following a change of control (as defined in the 2013 Agreement), either (i) the Company terminateswere to terminate the employment of Mr. Moore, other than for cause, or (ii) Mr. Moore terminateswere to terminate for good reason (as defined in the 2013 Agreement), Mr. Moore wouldwas to receive the following additional amounts (except to the extent that any payment would constitute an “excess parachute payment” under the IRS Code): (i) an amount equal to (A) $850,000 (which represents two times his 2013 original base salary prior to his agreeing to a voluntary reduction of such amount) and (B) two times the amount of his target bonus for the year in which the termination occurred, which target equalsequaled 100% of his then-current annual salary; (ii) reimbursement of all previously unreimbursed expenses; (iii) the full vesting of any and all stock options granted to Mr. Moore by the Company prior to such termination, and extended exercisability thereof until their respective expiration dates; and (iv) the continuation of all medical and dental benefits at the Company'sCompany’s sole expense for a period of one year after termination.
In the event that (i) the Company terminateswere to terminate the employment of Mr. Moore (including a non-renewal of his agreement at the end of the five-year term provided therein, as extended, but not including non-renewal following any subsequent renewal of the term), other than upon a change of control, death, disability or for cause, or (ii) Mr. Moore terminateswere to terminate for good reason, other than in connection with a change of control, Mr. Moore wouldwas to receive the following additional amounts (except to the extent that any payment would constitute an “excess parachute payment” under the IRS Code): (i) an amount equal to (A) $425,000 (which represents the amount of his 2013 original base salary prior to his agreeing to a voluntary reduction of such amount)and (B) his most recent annual bonus target, which target equalsequaled 100% of his then-current annual salary; (ii) reimbursement of all previously unreimbursed expenses; (iii) accelerated vesting of all unvested options that otherwise would vest within 24 months of the date of termination, with such accelerated options and all other vested and unexercised options granted by the Company as of the date of termination to be exercisable for a period of one year from the date of termination of employment in accordance with the terms of the applicable stock option plan and agreements; and (iv) the continuation of all medical and dental benefits at the Company'sCompany’s sole expense for a period of one year after termination.
In the event of any change of control, all stock options granted to Mr. Moore prior to such change of control wouldwere to vest and remain exercisable until their respective expiration dates.
The term of the 2013 Agreement endswas to end immediately upon Mr. Moore'sMoore’s death, or upon termination by the Company for cause or disability (as defined in the agreement) or by Mr. Moore for good reason. Upon termination due to Mr. Moore'sMoore’s death, all compensation due Mr. Moore under his agreement wouldwas to cease.
The following table describes the potentialSee Executive Compensation Developments in 2016, below, for payments and benefits upon termination of employment for Mr. Moore, as if his employment terminated as of December 31, 2013, the last day of our last fiscal year assuming that there is no earned, but unpaid base salary at the time of termination.
| Circumstances of Termination | ||||||||||||||||
| Payments and benefits | Voluntary resignation | Termination not for cause | Change of control | Death or disability | ||||||||||||
| Compensation: | ||||||||||||||||
| Base salary | $ | — | $ | 425,000 | (1) | $ | 850,000 | (4) | $ | — | ||||||
| Bonus | — | 318,750 | (2) | 637,500 | (2) | — | ||||||||||
| Benefits and perquisites: | ||||||||||||||||
| Perquisites and other personal benefits | — | 9,192 | (3) | 9,192 | (3) | — | ||||||||||
| Total | $ | — | $ | 752,942 | $ | 1,496,692 | $ | — | ||||||||
Michael Barth
Under the terms of the employment arrangement with Mr. Barth, our Chief Financial Officer, we are obligated to make certain payments to fund in part our severance obligations to him. We would be required to pay Mr. Barth an amount equal to 120% of his last month’s salary multiplied by the number of years (including partial years) that Mr. Barth worked for us. This severance obligation, which is customary for executives of Israeli companies, would be reduced by the amount contributed by us to certain Israeli pension and severance funds pursuantmade to Mr. Barth’s employment arrangement. As of December 31, 2013, the unfunded portion of these payments was $96,318. In addition, the arrangement with Mr. Barth provides for an additional payment equal to six times his last month’s total compensation, payable at the end of his employment with us.
The following table describes the potential payments and benefits upon termination of employment for Mr. Barth, as if his employment terminated as of December 31, 2013, the last day of our last fiscal year assuming that there is no earned, but unpaid base salary at the time of termination.
| Circumstances of Termination | ||||||||||||||||
| Payments and benefits | Voluntary resignation | Termination not for cause | Change of control | Death or disability | ||||||||||||
| Compensation: | ||||||||||||||||
| Base salary | $ | 32,642 | (1) | $ | 97,926 | (2) | — | $ | 97,926 | (2) | ||||||
| Benefits and perquisites: | ||||||||||||||||
| Perquisites and other personal benefits | 174,885 | (3) | 289,324 | (4) | — | 289,324 | (4) | |||||||||
| Total | $ | 207,527 | $ | 344,501 | — | $ | 387,250 | |||||||||
Richard Rimer
Mr. Rimer received an early termination payment on December 31, 2013 under the Rimer CA of $73,728Moore in connection with the termination effective as of such date.his resignation on January 28, 2016.
Benny Sela
Under the terms of the employment agreement with Mr. Sela, the President and Chief Executive Officer of our DSIT subsidiary, we are obligated to make certain payments to fund in part our severance obligations to him. We are required to pay Mr. Sela an amount equal to 150% of his last month’s salary multiplied by the number of years (including partial years) that Mr. Sela has worked for us. This severance obligation would be reduced by the amount contributed by us to certain Israeli pension and severance funds pursuant to Mr. Sela’s employment agreement. As of December 31, 2013,2015, the unfunded portion of these payments was $311,334.$294,353. Mr. Sela would also receive a lump sum payment equal to six months base salary in the event of a voluntary resignation, and a lump sum payment equal to nine months'months’ salary in the event of termination not for cause.
The following table describes the potential payments and benefits upon terminationCompensation of employment for Mr. Sela, as if his employment terminated as of December 31, 2012, the last day of our last fiscal year assuming that there is no earned, but unpaid base salary at the time of termination.
| Circumstances of Termination | ||||||||||||||||
| Payments and benefits | Voluntary resignation | Termination not for cause | Change of control | Death or disability | ||||||||||||
| Compensation: | ||||||||||||||||
| Base salary | $ | 123,138 | (1) | $ | 184,707 | (2) | $ | — | $ | 184,707 | (2) | |||||
| Benefits and perquisites: | ||||||||||||||||
| Perquisites and other personal benefits | 778,125 | (3) | 793,408 | (4) | — | 793,408 | (4) | |||||||||
| Total | $ | 901,263 | $ | 978,115 | $ | — | $ | 978,115 | ||||||||
Mark BashforthDirectors
Mr. Bashforth’s offer letter provides that once he has been employedDirectors Annual Stock Option Grants for six months, he will receive three months’ of base pay as severance if he is terminated without cause or if he leaves for good reason, as such terms will be defined in his employment agreement. After one year of service, his severance in such cases will be increased to six months of base salary. California employees are also entitled to be paid any accrued but unused vacation upon any termination. His predecessor was not entitled to any severance payment from USSI, but would have received the value of any accrued but unused vacation if he had been terminated on December 31, 2013.2015
Joseph MusantiAs no annual meeting of stockholders was held in 2015, there were no annual stock option grants to non-employee Directors in 2015 and, as the Company did not have sufficient authorized shares of Common Stock available for reservation, the non-executive Chairman received $60,000 in cash in lieu of his annual grant of stock options in 2015.
Compensation of Directors in 2016 and Future Years
Under
In January 2016, the termsBoard of Directors of the employment agreement with Mr. Musanti, our COOCompany adopted a revised compensation policy for its non-employee Directors for 2016 and the Chief Executive Officer of our GridSensefuture years, which provides for drastically reduced cash and OmniMetrix subsidiaries and the CFO and Vice Chairman of our USSI subsidiary, we are obligatedequity compensation. The Board intends to make certain payments to him upon the termination of his employment.review non-employee director compensation on an annual basis.
The following table describes the potential payments and benefits upon termination of employment for Mr. Musanti, as if his employment terminated as of December 31, 2013, the last day of our last fiscal year assuming that there is no earned, but unpaid base salary at the time of termination.
| Circumstances of Termination | ||||||||||||||||
| Payments and benefits | Voluntary resignation | Termination not for cause | Change of control | Death or disability | ||||||||||||
| Compensation: | ||||||||||||||||
| Base salary | $ | — | $ | 125,000 | (1) | $ | — | $ | — | |||||||
| Benefits and perquisites: | ||||||||||||||||
| Perquisites and other personal benefits | 17,317 | (2) | 17,317 | (2) | 17,317 | (2) | 17,317 | (2) | ||||||||
| Total | $ | 17,317 | $ | 142,317 | $ | 17,317 | $ | 17,317 | ||||||||
Heather K. Mallard
Under the terms of the employment agreement with Ms. Mallard, our Vice President, General Counsel and Secretary, we are obligated to make certain payments to her upon the termination of her employment.
The following table describes the potential payments and benefits upon termination of employment for Ms. Mallard, as if her employment terminated as of December 31, 2013, the last day of our last fiscal year assuming that there is no earned, but unpaid base salary at the time of termination.
| Circumstances of Termination | ||||||||||||||||
| Payments and benefits | Voluntary resignation | Termination not for cause | Change of control | Death or disability | ||||||||||||
| Compensation: | ||||||||||||||||
| Base salary | $ | — | $ | 112,500 | (1) | $ | — | $ | — | |||||||
| Benefits and perquisites: | ||||||||||||||||
| Perquisites and other personal benefits | — | 12,168 | (2) | — | — | |||||||||||
| Total | $ | — | $ | 123,694 | $ | — | $ | — | ||||||||
Compensation of Directors
In October 2007, we agreed that each of our non-employee directors would be paidnon-executive Chairman will receive an annual cash retainer of $40,000 payable quarterly in advance (“Retainer”), as well as meeting fees for Board and Committee meetings of $1,000 per meeting. Effective December 13, 2012, the $1,000 per meeting fee was canceled. In 2009, we agreed that the Chairman of the Audit Committee would receive an additional annual cash retainer of $10,000. In 2012, we agreed that members of the Audit Committee would receive an additional annual cash retainer of $2,000, the Chairman of the Compensation Committee would receive an additional annual cash retainer of $5,000 and the Chairman of the Nominating Committee would receive an additional annual cash retainer of $3,000.
In connection with the election in November 2012 of a non-executive Board Chairman, in addition to fees and options awarded to Directors, the Board determined that any non-executive Chairman would receive for such service: (1)$35,000, plus an annual grant of optionsan option to purchase 25,000 shares of Company Common Stock. The non-executive Chairman will also receive an annual payment in the Corporation'samount of $22,200 per annum to be utilized to pay for an administrative assistant in connection with his duties.
Each non-employee Director (other than the non-executive Chairman) will receive an annual retainer of $15,000, plus an annual grant of an option to purchase 10,000 shares (vestingof Company Common Stock to be made on January 1.
Upon a non-employee Director’s first election or appointment to the Board, such newly elected/appointed Director will be granted an option to purchase 25,000 shares of Company Common Stock. Each option so granted to a newly elected/appointed Director shall vest for the purchase of one-third of the shares purchasable under such option on each of the three anniversaries following the date of first election or appointment.
All options granted to non-employee Directors and to the non-executive Chairman shall have an exercise price equal to closing price of the Company’s Common Stock on its then-current trading platform or exchange on the last trading day immediately preceding the date of grant, and shall, except as described in the preceding paragraph, vest in four installments quarterly in advance) having a value (determined asadvance. Once vested, such options shall be exercisable in whole or in part at all times until the earliest of (i) seven years from the date of hisgrant or her election(ii) 18 months from the date such Director ceases to such position and any anniversary thereof so long as he/she continues in such role in accordance with the methodology then used by the Corporation to determine stock compensation for purposesbe a Director, officer, employee of, its audited financial statements) of $60,000, and for the first year with an exercise price equalor consultant to, the closing priceCompany.
The chair of the Corporation's shares onAudit Committee will receive an additional annual retainer of $10,000; each Audit Committee member other than the NASDAQ Global Market on the date immediately prior to election and having a termchair will receive an additional annual retainer of seven years, as documented by a non-qualified option award agreement under the Corporation's 2006 Stock Incentive Plan, as amended; (2) a cash fee of $60,000, (3) payments to an administrative consultant for his/her use in the amount of $15,000 plus (4) $10,000 for each subsidiary board on which he/she serves at the designation of the Corporation (which amount may be charged back to such subsidiary as determined by the Board).$2,000.
In December 2012, we agreed that each
Each Director may, in his or her discretion, elect by written notice delivered on or before the first day of each calendar year (the “Election”) whether to receive, in lieu of some or all of his or her Retainerretainer and Boardboard fees, options to purchase that number of shares of ourCompany Common Stock as shall have a value (determined as of the first day of the calendar year for which such Election is made (the “Election Year”) in accordance with the methodology then used by the Corporation to determine stock compensation for purposes of its audited financial statements) as is equal to the applicable Retainerretainer and Board Fees and with an exerciseboard fees, based on the closing price equal to the fair market value of the Company’s Common Stock at the close of businesson its then-current trading platform or exchange on the last trading day immediately preceding the first day of the applicable Election Year.year. Once made, the Electionelection shall be irrevocable for such Election Yearelection year and the optionsshares subject to the Electionelection shall vest and be issued one-fourth upon the first day of the Election Yearelection year and one-fourth as of the first day of each of the second through fourth calendar quarters thereafter during the remainder of the Election Year.
As an employee, Mr. Moore is not entitled to separate compensationelection year. A newly-elected or appointed Director may, in his capacity as a director. Mr. Rimer’s consulting terms also provided thator her discretion, make such an election for the balance of the year in which he not receive Board fees for 2013.
Our 2006 Stock Option Plan for Non-Employee Directors, whichor she was adopted in February 2007 and amended and restated in November 2008 and further amended effective September 2012, provides for formula grants to non-employee directors equal to an option to purchase (i) 25,000 shares of our common stock upon a member's initial appointmentelected/appointed by written notice delivered on or electionbefore the tenth day after his or her election/appointment to the Board, of Directors and (ii) 10,000 shares of our common stock to each director, other than newly appointed or elected directors, immediately following each annual meeting of stockholders. The initial grant to purchase 25,000 shares of our common stock vests one-third per year for each ofwith the three years following the date of appointment or election and the annual grant to purchase 10,000 shares vests one year from the date of grant. Both options shall be granted at an exercise price equal to their fair market value and shall be exercisable until the earlier of (a) seven years from the date of grant or (b) 18 months from the date that the director ceases to be a director, officer, employee, or consultant. The plan also provides for non-formula grants at the Board's discretion. The maximum number of shares of our common stockCompany Common Stock subject to such newly elected/appointed Director’s election to be issued under the plan is 600,000. The Plan is administered by the Compensation Committee.
Beginning in 2013, if the value (the “Award Value”)based on closing price of the shares granted (determined as provided above as of the date of grant) to each Director (other than a Director then having been first-elected to the Board) after each annual meeting of stockholders pursuant to the formula grant under the Corporation's 2006Company’s Common Stock Option Plan for Non-Employee Directors is less than $60,000, then an additional award of options having a value (determined in the same manner as above) as is equal to the difference between $60,000 and the Award Value shall be made to each such Director pursuant to the Corporation's 2006 Stock Incentive Plan.
Consulting Agreement with Mr. Morgenstern
George Morgenstern, our Chairman Emeritus, has been retained as a consultant by Acorn since March 2006 primarily to provide oversight of our Israeli activities. On July 25, 2012, we extended the existing consulting agreement with Mr. Morgenstern through September 30, 2014, subject to any earlier termination as therein provided (the “Termination Date”). Previously Mr. Morgenstern's expense allowance was $56,250 per year and was paid one-third by the Company and two-thirds by the Company's DSIT subsidiary. Mr. Morgenstern continues to receive a fee of $1 per year, but his annualized, non-accountable expense allowance has been increased to $75,000. A pro rata portion thereof (i.e., a total of $6,250) is paid each month, one-half by the Corporation and one-half by DSIT. The Corporation has also agreed to caston its votes of DSIT stock for Mr. Morgenstern's election to the DSIT Board of Directors at all elections held between September 11, 2012 and the Termination Date (the “Participation Period”), unless he has resigned therefromthen-current trading platform or been removed for cause. Mr. Morgenstern is also invited (but not required) to observe any regular meetings of the Board of Directors of the Corporation (excluding executive sessions and committee meetings) held during the Participation Period and will be paid $1,000 by us for each such meeting he attends.
Agreements with Mr. Rimer
On July 25, 2013, Richard Rimer was elected as our Executive Vice President pursuant to a Consulting Agreement effective as of August 1, 2013 (the “Rimer CA”). Although our Compensation Committee had considered a proposal by Mr. Rimer for a longer term employment agreement, it determined that in view of the Corporation’s revenue level and overhead expenses, it was unwilling to obligate us to a longer term contractual obligation with a second senior executive. In addition to his work developing international investor and customer interest, Mr. Rimer also served as Chairman of our GridSense and OmniMetrix subsidiaries and wasexchange on the Board of Directors or Managers of DSIT and USSI as well.
Under the Rimer CA, Mr. Rimer received a payment of $ 215,040 for services rendered by him during 2013 prior to execution of the agreement. He also was reimbursed in the ordinary course of business for travel and other expenses he incurred on our behalf during that time. The Rimer CA provided that Mr. Rimer would serve as our Executive Vice President for an annualized fee of $368,640, payable in equal monthly installments of $30,720, and would continue to receive business-related expense reimbursements in accordance with our policies. The term of the new Consulting Agreement was scheduled to end on March 31, 2014, but by an amendment effective November 11, 2013, Mr. Rimer and the Company agreed to end the consultancy as of December 31, 2013. The amendment provided for an early termination payment of $73,728, which we made to Mr. Rimer on December 31, 2013 (which amount represents a 20% reduction in the amounts he would have received under the Consulting Agreement for the remaining term prior to the amendment). Mr. Rimer also agreed to reduce his compensation for the remaining term by 20% to $24,576 per month effective November 1, 2013.
Mr. Rimer was eligible to earn a bonus up to $272,000 for the accomplishment of agreed-upon goals by December 31, 2013 as set by our Compensation Committee. Mr. Rimer did not earn a bonus for 2013. If the engagement had still been in effect at January 1, 2014, we would have been obligated to award Mr. Rimer options to purchase shares of our common stock with a Black-Scholes valuation of $200,000 and at an exercise price equal to the closing price on the NASDAQ Global Market as of the last trading day immediately preceding the day of 2013. Such options would have had a term of seven years, and vested in equal quarterly installments over five years, subject to acceleration as provided in our usual executive award agreements. No options were granted as the Rimer CA had been terminated prior to the scheduled award date. In connection with such termination, the provisions of the Rimer CA related to both shortened and accelerated vesting of any option awards were agreed to be of no effect and the terms of the option awards themselves control such that vesting ceased as of the termination date and Mr. Rimer generally has 18 months past termination to exercise any then-vested options.
As part of the Rimer CA, Mr. Rimer agreed for a period of one year not to solicit anyone to leave our or our portfolio companies’ employment. He is also responsible for funding all benefit and other taxes associated with his engagement by us, except that we will have to pay taxes on an allocated portion of our income in Switzerland for 2013.
newly elected/appointed Director’s election/appointment.
The following table sets forth information concerning the compensation earned for service on our Board of Directors during the fiscal year ended December 31, 20132015 by each individual (other than Mr. Moore and Mr. Rimer who werewas not separately compensated for theirhis Board service) who served as a director at any time during the fiscal year.
DIRECTOR COMPENSATION IN 20132015
| Name | Fees Earned or Paid in Cash ($) | Option Awards ($) (1) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Option Awards ($) (1) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
| Christopher E. Clouser | 144,000 | (2) | 120,000 | — | 264,000 | 179,500 | (2) | — | — | 179,500 | ||||||||||||||||||||||
| Richard J. Giacco (3) | 35,250 | (4) | — | — | 35,250 | |||||||||||||||||||||||||||
| Mannie L. Jackson | — | (5) | 102,033 | — | 102,033 | — | 30,000 | (3) | — | 30,000 | ||||||||||||||||||||||
| Robert E. McKee III (6) | 25,934 | (7) | 213,421 | 239,355 | ||||||||||||||||||||||||||||
| Andy H. Sassine (8) | 10,500 | (9) | 90,877 | 101,377 | ||||||||||||||||||||||||||||
| Robert E. McKee III (4) | — | 33,000 | (5) | — | 33,000 | |||||||||||||||||||||||||||
| Jan H. Loeb (6) | 11,507 | (7) | 3,318 | — | 14,825 | |||||||||||||||||||||||||||
| Edgar S. Woolard Jr. | 3,699 | (8) | 32,000 | (9) | — | 35,699 | ||||||||||||||||||||||||||
| Samuel M. Zentman | 50,000 | (10) | 60,000 | — | 110,000 | 40,000 | — | — | 40,000 | |||||||||||||||||||||||
| (1) | On |
| (2) | Includes $30,000 of annual director fees, | |
| (3) | Mr. Jackson elected to receive in options in lieu of his Board fees for 2015. | |
| (4) | Mr. McKee retired from the Board effective October 12, 2015. According to their terms, his options will expire on April 12, 2017 (eighteen months after the date of his resignation). | |
| (5) | Mr. McKee elected to receive in options in lieu of his Board fees for 2015. Includes $3,000 received for services rendered as Chairman of the Nominating Committee. | |
| (6) | Mr. Loeb joined the Board on August 13, 2015. | |
| (7) | Represents pro-rata annual director fees from the time Mr. Loeb joined the Board. | |
| (8) | Represents pro-rata annual director fees for 2014 the time Mr. Woolard joined the Board to December 31, 2014. | |
| (9) | Mr. Woolard elected to receive in options in lieu of his Board fees for 2015. Includes $2,000 received for services rendered as a member of the Audit Committee. |
Executive Compensation Committee Interlocks and Insider ParticipationDevelopments in 2016
All membersJan H. Loeb
On January 28, 2016, Jan H. Loeb was appointed President and CEO of the Compensation CommitteeCompany, replacing outgoing President and CEO, John A. Moore, who resigned from those positions as of that date. Concurrent with the appointment of Mr. Loeb as President and CEO, the Company entered into a consulting arrangement with Leap Tide Capital Management LLC pursuant to which Leap Tide Capital Management LLC will receive a monthly fee of $17,000 and will provide the services of Mr. Loeb to the Company as President and CEO and such other services as shall be mutually agreed upon with the Company. Mr. Loeb will not be an employee of the Company and will not receive any cash compensation from the Company in connection with his service as President and CEO. Mr. Loeb is the sole owner and manager of Leap Tide Capital Management LLC. Pursuant to the consulting arrangement, on March 16, 2016, the Company issued to Leap Tide Capital Management LLC, for nominal consideration, warrants exercisable for 35,000 shares of the Company’s common stock. The exercise price of the warrants is $0.13 per share. One-fourth of the warrants are immediately exercisable; the remainder become exercisable in equal increments on each of June 16, 2016, September 16, 2016 and December 16, 2016. The warrants expire on the earlier of (a) March 16, 2023 and (b) 18 months from the date Mr. Loeb ceases to be a director, officer, employee or consultant of the Company.
John A. Moore
In connection with his resignation as the Company’s President and CEO on January 28, 2016, Mr. Moore entered into a letter agreement, dated as of such date, with the Company pursuant to which it was agreed that (i) the Company would pay Mr. Moore an aggregate of $425,000 in severance payments between July 2016 and July 2017 in accordance with the Company’s regular payroll practices; (ii) for the twelve-month period commencing on the date of the letter agreement, the Company will reimburse Mr. Moore up to $1,400 per month for costs associated with obtaining medical insurance; (iii) Mr. Moore will continue to serve on the Company’s Board of Directors duringuntil the fiscalnext annual stockholders’ meeting and shall receive compensation for such service in accordance with the Company’s compensation policy for non-employee directors; (iv) consistent with the terms of his employment agreement, Mr. Moore received accelerated vesting of all unvested options that otherwise would have vested within 24 months of the date of his resignation, with such accelerated options and all other vested and unexercised options granted by the Company as of the date of his resignation becoming exercisable for a period of one year ended December 31, 2013, Messrs. Clouser, Giacco (through September 20, 2013)from the date of his resignation; and Jackson (beginning October 3, 2013), were independent directors(v) other than the payments and nonebenefits set forth in the letter agreement and notwithstanding any provisions of them were our employeeshis employment agreement, Mr. Moore would not be entitled to any further compensation or our former employees. During the fiscal year ended December 31, 2013, none of our executive officers served on the Compensation Committee (or equivalent), or the board of directors, of another entity whose executive officers served on the Compensation Committee of our Board of Directors.benefits.
Compensation Committee Report
The Compensation CommitteeBoard of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors concluded that the Compensation Discussion and Analysis be included in this proxy statement on Schedule 14A.
Christopher E. Clouser, John A. Moore, Mannie L. Jackson,
Jan H. Loeb, Edgar S. Woolard, Jr., and Samuel M. Zentman
PROPOSAL 2
AMENDMENT OF THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE UP TO 8 MILLION SHARES OF PREFERRED STOCK
Our Certificate of Incorporation does not currently authorize any shares of preferred stock. The primary purpose of the proposed authorization of up to 8 million shares of blank-check preferred stock is for general corporate purposes, including, without limitation, capital raising, merger and acquisition opportunities, the issuance of stock dividends or stock splits, and other general corporate purposes.
The effect of the adoption of this proposal would be to grant the Board the authority to issue shares of preferred stock in one or more series, with such rights, preferences and designations, as it deems necessary or advisable without any additional action by our stockholders, unless otherwise required by law or by the rules and policies of the OTCQB or any other quotation system or exchange upon which the shares of our common stock are listed and trade. With regard to such proposed blank-check preferred stock, the Board’s authority to determine the terms of any such shares of preferred stock would include, but not be limited to (i) the designation of each class or series and the number of shares that will constitute each such class or series; (ii) the dividend rate for each class or series; (iii) the price at which, and the terms and conditions on which, the shares of each class or series may be redeemed, if such shares are redeemable; (iv) the terms and conditions, if any, upon which shares of each class or series may be converted into shares of other classes or series of shares of our company, or other securities; and (v) the voting rights for each class or series. Shares of preferred stock that are issued by us and subsequently redeemed or converted into another security of our company would be available to be reissued by us, and the Board may set the terms of the reissued shares as they deem appropriate, in the same manner, and subject to the same limitations, as the authorized preferred shares permit.
The Board has made no decisions or commitments with respect to the use of the requested shares of blank-check preferred stock, and it has no plans to commence an offering of any of our shares related thereto at this time.
The Board of Directors has approved, subject to stockholder approval, an amendment to Article FOURTH of the Certificate of Incorporation to increase the total authorized number of shares of our stock from 42 million to 50 million shares, with 8 million of those shares designated as blank-check preferred shares, which is referred to as the Preferred Shares proposal (the full text of the proposed amendment is attached as Annex A to this proxy statement).
If the amendment is approved by the requisite vote of the stockholders, we will file an amendment to our Certificate of Incorporation with the Delaware Secretary of State as soon as reasonably practicable after the Annual Meeting. The amendment shall become effective upon filing with the Delaware Secretary of State.
Reason for the Authorization
The Board believes that approval of the Preferred Shares proposal will provide flexibility to take advantage of financing opportunities as they arise where the ability to issue equity other than common stock may be advantageous. For example, it might be to our benefit to issue non-convertible preferred shares instead of issuing additional shares of common stock in circumstances where doing the latter would negatively impact our ability to retain net operating losses that could reduce our tax liability.
Certain Disadvantages of the Authorization
If the Preferred Shares proposal is approved, the availability of undesignated blank-check preferred stock may have certain negative effects on the rights of holders of the common stock. The actual effect of the issuance of any shares of preferred stock upon the rights of holders of common stock cannot be stated until the Board determines the specific rights of the holders of such preferred stock. The proposed amendment will permit the Board, without future stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights, which are superior to and could adversely affect the voting power or other rights of the holders of our common stock. Specifically, we will be in a position to issue securities which would grant to the holders thereof, preferences or priorities over the holders of common stock with respect to, among other things, liquidation, dividends and voting. This could result in holders of common stock receiving less in the event of a liquidation, dissolution or other winding up of our company, reduce the amount of funds, if any, available for dividends on common stock, and dilute the voting power of the holders of our common stock.
Anti-Takeover Effects
The blank-check preferred stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. For example, the Board could designate and issue a series of preferred stock in an amount that sufficiently increases the number of outstanding shares to overcome a vote by the holders of our common stock or with rights and preferences that include special voting rights to veto a change in control. The effect of such provisions could delay or frustrate a merger, tender offer or proxy contest, the removal of incumbent directors, or the assumption of control by stockholders. Please note, however, that the proposed increase in authorized shares and in authorized shares of preferred stock is not in response to any effort by any person or group to accumulate our common stock or to obtain control of us by any means. In addition, the proposal is not part of any plan by our Board of Directors to recommend or implement a series of anti-takeover measures.
Vote Required for Approval and Board Recommendation
The affirmative vote of the majority of the outstanding shares of common stock entitled to vote on the Preferred Shares proposal is required to amend the Certificate of Incorporation to authorize up to 8 million shares of preferred stock.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTEFOR APPROVAL OF THE PREFERRED SHARES PROPOSAL TO AUTHORIZE UP TO 8 MILLION SHARES OF PREFERRED STOCK.
PROPOSAL 3
AMENDMENT OF THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE A REVERSE SPLIT OF THE COMPANY’S COMMON STOCK AT ANY TIME PRIOR TO JULY 21, 2017, AT A RATIO BETWEEN ONE-FOR-TEN AND ONE-FOR-TWENTY, IF AND AS DETERMINED BY THE COMPANY’S BOARD OF DIRECTORS
Article FOURTH of our Certificate of Incorporation currently authorizes the issuance of up to 42 million shares of our common stock, par value $0.01 per share (no shares of preferred stock are authorized). As of June 7, 2016, a total of [____________] shares of common stock were issued and outstanding.
The Board of Directors has approved, subject to stockholder approval, an amendment to Article FOURTH of the Certificate of Incorporation to effect a reverse stock split of our common stock any time prior to the first anniversary of its approval by the stockholders at a ratio to be selected by our Board of Directors between one-for-ten and one-for-twenty, which is referred to as the Reverse Split proposal (the full text of the proposed amendment is attached as Annex B to this proxy statement).
If the Reverse Split proposal is approved by a majority of our stockholders, the Board will have the discretion to determine, as it deems to be in the best interest of our stockholders, the specific ratio to be used within the range described above and the timing of the reverse stock split, which must occur at any time prior to the first anniversary of its approval by the stockholders. The Board may also, in its discretion, determine not to effect the reverse stock split if it concludes, subsequent to obtaining stockholder approval, that such action is not in the best interests of the Company. Our Board of Directors believes that the availability of a range of reverse stock split ratios will provide it with the flexibility to implement the reverse stock split in a manner designed to maximize the anticipated benefits for us and our stockholders. In determining whether to implement the reverse split following the receipt of stockholder approval, our Board of Directors may consider, among other things, factors such as:
| the historical trading price and trading volume of our common stock; | ||
| ● | the then-prevailing trading price and trading volume of our common stock and the anticipated impact of the reverse split on the trading market for our common stock; | |
| ● | the anticipated impact of the reverse split on our ability to raise additional financing; and | |
| ● | prevailing general market and economic conditions. |
PROPOSAL 2
If our Board determines that effecting the reverse stock split is in our best interest, the reverse stock split will become effective upon filing of an amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware. The amendment will set forth the number of shares to be combined into one share of our common stock within the limits set forth in this proposal. Except for adjustments that may result from the treatment of fractional shares as described below, each stockholder will hold the same percentage of our outstanding common stock immediately following the reverse stock split as such stockholder holds immediately prior to the reverse split.
Effective Date
If the proposed amendment to the Certificate of Incorporation to give effect to the reverse stock split is approved at the Annual Meeting and the Board of Directors determines to effect the reverse stock split, the reverse stock split will become effective on the effective date of the certificate of amendment to our Certificate of Incorporation with the office of the Secretary of State of the State of Delaware, which we would expect to be the date of filing. We refer to this time and date as the “Effective Date.” As set forth below with respect to fractional shares, each issued share of common stock immediately prior to the Effective Date will automatically be changed, as of the Effective Date, into a fraction of a share of common stock based on the exchange ratio within the approved range determined by the Board of Directors.
Reasons for the Reverse Stock Split
The Board of Directors believes that a reverse stock split is advisable because the increased market price of our common stock expected as a result of implementing the reverse stock split will improve the marketability and liquidity of our common stock and will encourage interest and trading in our common stock. A reverse stock split could allow a broader range of institutions to invest in our stock (namely, funds that are prohibited from buying stocks whose price is below a certain threshold), potentially increasing the liquidity of our common stock. A reverse stock split could help increase analyst and broker interest in our stock as their policies can discourage them from following or recommending companies with low stock prices. Because of the trading volatility often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our common stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher.
Risks of the Reverse Stock Split
We cannot assure you that the proposed reverse stock split will increase our stock price.The Board of Directors expects that a reverse stock split of our common stock will increase the market price of our common stock. However, we cannot predict the effect of a reverse stock split upon the market price of our common stock with any certainty, and the history of similar reverse stock splits for companies in like circumstances is varied.
It is possible that the per share price of our common stock after the reverse stock split will not rise in proportion to the reduction in the number of shares of our common stock outstanding resulting from the reverse stock split, and the reverse stock split may not result in a per share price that would attract brokers and investors who do not trade in lower priced stocks. Even if we effect a reverse stock split, the market price of our common stock may decrease due to factors unrelated to the stock split. Further, the market price of our common stock may also be based on other factors which may be unrelated to the number of shares outstanding, including our future performance. If the reverse stock split is consummated and the trading price of the common stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the reverse stock split.
The proposed reverse stock split may decrease the liquidity of our stock.The liquidity of our common stock may be harmed by the proposed reverse stock split given the reduced number of shares that would be outstanding after the reverse stock split, particularly if the stock price does not increase as a result of the reverse stock split. Additionally, investors might consider the increased proportion of unissued authorized shares to issued shares to have an anti-takeover effect under certain circumstances, because the proportion allows for dilutive issuances that could prevent certain stockholders from changing the composition of the Board of Directors or render tender offers for a combination with another entity more difficult to successfully complete. The Board of Directors does not intend for the reverse stock split to have any anti-takeover effects.
Impact of the Reverse Stock Split if Implemented
If approved and effected, the reverse stock split will automatically apply to all shares of our common stock and all outstanding rights to acquire shares of our common stock. Except for adjustments that may result from the treatment of fractional shares as described below, the reverse stock split will not affect any stockholder’s percentage ownership or proportionate voting power.
If this Reverse Split proposal is approved, the number of authorized shares of our common stock will not be reduced proportionately upon implementation of the reverse stock split, meaning the reverse stock split will increase the Board’s ability to issue authorized and unissued shares of common stock without further stockholder action. There are no existing plans, arrangements or understandings relating to the issuance of any of the additional authorized but unissued shares of common stock that would be available as a result of the approval of this Reverse Split proposal.
Based on the number of shares, options and warrants outstanding as of the Record Date, the principal effect of a reverse stock split (at a ratio between one-for-ten and one-for-twenty) would be that:
| ● | the number of shares of our common stock issued and outstanding would be reduced from [_____________] shares to between approximately [___________] shares and [____________] shares; | |
| ● | the number of shares of the Company’s common stock issuable upon the exercise of outstanding stock options would be reduced from [_____________] to between approximately [_____________] shares and [_____________] shares (and the respective exercise prices of the options would increase by a factor equal to the inverse of the split ratio); | |
| ● | the number of shares of the Company’s common stock issuable upon the exercise of outstanding warrants would be reduced from 2,654,423 to between approximately 132,721 shares and 265,442 shares (and the respective exercise prices of the warrants would increase by a factor equal to the inverse of the split ratio); and | |
| ● | the number of shares of the Company’s common stock that are authorized, but unissued, and can be used for future issuances of common stock as described above would increase from [_____________] to between approximately [_____________] shares and [_____________] shares. |
In addition, the reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares). Stockholders who hold odd lots typically may experience an increase in the cost of selling their shares and may have greater difficulty in effecting sales.
Fractional Shares
To avoid the existence of fractional shares of common stock after the reverse stock split, fractional shares that would be created as a result of the reverse stock split will be rounded up to the next whole share, including fractional shares that are less than one half of one share.
Effect on Registered and Beneficial Stockholders
Upon a reverse stock split, we intend to treat stockholders holding common stock in “street name”, through a bank, broker or other nominee, in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding common stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split. If you hold your shares with a bank, broker or other nominee and if you have any questions in this regard, we encourage you to contact your bank, broker or nominee.
Effect on Registered Certificated Shares
Some of our registered stockholders hold all their shares in certificate form. If any of your shares are held in certificate form, you will receive a transmittal letter from our transfer agent, American Stock Transfer and Trust Company, as soon as practicable after the effective date of the reverse stock split. The letter of transmittal will contain instructions on how to surrender your certificate(s) representing your pre-reverse stock split shares to the transfer agent.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Accounting Matters
The reverse stock split will not affect the par value of the common stock. As a result, as of the Effective Date, the stated capital attributable to common stock on our balance sheet will be reduced proportionately based on the reverse stock split ratio described above, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. The per-share net income or loss and net book value of the Company’s common stock will be restated because there will be fewer shares of common stock outstanding.
Certain Federal Income Tax Considerations
The following discussion describes certain material federal income tax considerations relating to the reverse stock split. This discussion is based upon the Internal Revenue Code, existing and proposed regulations thereunder, legislative history, judicial decisions and current administrative rulings and practices, all as amended and in effect on the date hereof. Any of these authorities could be repealed, overruled or modified at any time. Any such change could be retroactive and, accordingly, could cause the tax consequences to vary substantially from the consequences described herein. No ruling from the Internal Revenue Service (the “IRS”) with respect to the matters discussed herein has been requested, and there is no assurance that the IRS would agree with the conclusions set forth in this discussion.
This discussion may not address certain federal income tax consequences that may be relevant to particular stockholders in light of their personal circumstances or to stockholders who may be subject to special treatment under the federal income tax laws. This discussion also does not address any tax consequences under state, local or foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT FOR THEM, INCLUDING THE APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION.
The reverse stock split is intended to be a tax-free recapitalization to the Company and its stockholders, except for those stockholders who receive a whole share of Common Stock in lieu of a fractional share. Stockholders will not recognize any gain or loss for federal income tax purposes as a result of the reverse stock split, except for those stockholders receiving a whole share of Common Stock in lieu of a fractional share (as described below). The holding period for shares of Common Stock after the reverse stock split will include the holding period of shares of Common Stock before the reverse stock split, provided that such shares of Common Stock are held as a capital asset at the effective time of the reverse stock split. The adjusted basis of the shares of Common Stock after the reverse stock split will be the same as the adjusted basis of the shares of Common Stock before the reverse stock split, excluding the basis of any fractional share.
A stockholder who receives a whole share of Common Stock in lieu of a fractional share generally may recognize gain in an amount not to exceed the excess of the fair market value of such whole share over the fair market value of the fractional share to which the stockholder was otherwise entitled.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTEFOR APPROVAL OF THE REVERSE SPLIT PROPOSAL TO AUTHORIZE A REVERSE SPLIT OF THE COMPANY’S COMMON STOCK AT ANY TIME PRIOR TO JULY 21, 2017, AT A RATIO BETWEEN ONE-FOR-TEN AND ONE-FOR-TWENTY, IF AND AS DETERMINED BY THE COMPANY’S BOARD OF DIRECTORS.
PROPOSAL 4
ADJOURNMENT OF THE ANNUAL MEETING
The Annual Meeting may be adjourned to another time or place from time to time, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the Annual Meeting to approve the Preferred Shares proposal and/or the Reverse Split proposal.
With respect to each of the Preferred Shares proposal and the Reverse Split proposal, approval requires the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting in person or by proxy. If, at the time of the Annual Meeting, the number of shares of our common stock present or represented and voting in favor of the Preferred Shares proposal and/or the Reverse Split proposal is insufficient to approve, as the case may be, the Preferred Shares proposal and/or the Reverse Split proposal, we intend to adjourn the Annual Meeting from time to time in order to enable our Board to solicit additional proxies.
In this adjournment proposal, we are asking our stockholders to authorize the holder of any proxy solicited by our Board to vote in favor of granting authority to the proxy holders, and each of them individually, to adjourn the Annual Meeting to another time and place from time to time for the purpose of soliciting additional proxies. If our stockholders approve this adjournment proposal, we could adjourn the Annual Meeting, and any adjourned session of the Annual Meeting, and use the additional time to solicit additional proxies, including the solicitation of proxies from our stockholders who have previously voted.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTEFOR APPROVAL OF ANY MOTION TO ADJOURN THE ANNUAL MEETING.
PROPOSAL 5
RATIFICATION OF THE SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Friedman LLP as the independent registered public accounting firm to perform the audit of our consolidated financial statements for the year ending December 31, 2014.2016. Friedman LLP representatives are expected to attend the 20142016 Annual Meeting. They will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions. Friedman LLP is a registered public accounting firm with the Public Company Accounting Oversight Board (the “PCAOB”), as required by the Sarbanes-Oxley Act of 2002 and the Rules of the PCAOB.
The Board is asking our stockholders to ratify the selection of Friedman LLP as our independent registered public accounting firm. Although current law, rules, and regulations, as well as the charter of the Audit Committee, require the Audit Committee to engage, retain, and supervise our independent registered public accounting firm, the Board considers the selection of the independent registered public accounting firm to be an important matter of stockholder concern and is submitting the selection of Friedman LLP for ratification by stockholders as a matter of good corporate practice. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
Accounting Fees
The following table summarizes the fees billed to Acorn for professional services rendered by Friedman LLP for the years ended December 31, 20122014 and 2013.2015:
| 2012 | 2013 | 2014 | 2015 | |||||||||||||
| Audit Fees | $ | 175,000 | $ | 210,000 | $ | 205,000 | $ | 190,000 | ||||||||
| Audit- Related Fees | 39,000 | 18,000 | 11,000 | 13,000 | ||||||||||||
| Tax Fees | — | — | — | — | ||||||||||||
| All Other Fees | 5,000 | 50,000 | 7,500 | — | ||||||||||||
| Total | $ | 219,000 | $ | 278,000 | $ | 223,500 | $ | 203,000 | ||||||||
Audit Fees were for professional services rendered for the audits of the consolidated financial statements of the Company, assistance with review of documents filed with the SEC, consents, and other assistance required to be performed by our independent accountants.
Audit-Related Fees were for travel costs and administrative fees associated with our audit.
All Other Fees in 20132014 were for services related to our capital raise. All Other Fees in 2012 were for due diligence services related to our OmniMetrix acquisition.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee’s current policy is to pre-approve all audit and non-audit services that are to be performed and fees to be charged by our independent auditor to assure that the provision of these services does not impair the independence of the auditor. The Audit Committee pre-approved all audit and non-audit services rendered by our principal accountant in 20132015 and 2012.2014.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFORTHE
RATIFICATION OF THE SELECTION OF FRIEDMAN LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR
ENDING DECEMBER 31, 2014.2016.
| 33 |
PROPOSAL 6
PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are asking stockholders to cast an advisory vote on the compensation of our Named Executive Officers disclosed in the Executive Compensation section of this Proxy Statement. While this vote is non-binding, the Company values the opinions of stockholders and will consider the outcome of the vote when making future compensation decisions.
The Board believes that the objectives of our executive compensation program are appropriate for a company of our size and stage of development and that our compensation policies and practices help meet those objectives. In addition the Board believes that our executive compensation program achieves an appropriate balance between fixed compensation and variable incentive compensation and pays for performance. The Board also believes that the Company’s executive compensation programs effectively align the interests of our executive officers with those of our stockholders by tying a significant portion of their compensation to the Company’s performance and by providing a competitive level of compensation needed to recruit, retain and motivate talented executives critical to the Company’s long-term success. Accordingly, we are asking our stockholders to approve the compensation of our named executive officers. This advisory vote is not intended to be limited or specific to any particular element of compensation, but rather cover the overall compensation of our named executive officers and the compensation policies and practices described in this proxy statement.
We are asking our stockholders to vote FOR, in a non-binding vote, the compensation of the Company’s Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K on pages 14 to 36 in thethis Proxy Statement forunder the 2014 Annual Meeting of Stockholders.heading “Executive and Director Compensation”.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters to be presented for action at the Annual Meeting other than those listed in the accompanying Notice of Annual Meeting and described herein. If any other matters not described herein should properly come before the meeting for stockholder action, it is the intention of the persons named in the accompanying proxy to vote, or otherwise act, in respect thereof in accordance with the Board of Directors’ recommendations.
ANNUAL REPORT ON FORM 10-K
A copy of the Company’s Annual Report covering the fiscal year ended December 31, 2013,2015, including audited financial statements, is enclosed with this Proxy Statement. Such report is not incorporated in this Proxy Statement and is not a part of the proxy soliciting material.
SOLICITATION OF PROXIES
The cost of soliciting proxies for the Annual Meeting will be borne by the Company. In addition to the use of the mails, proxies may be solicited by in person interview, Internet, telephone, e-mail or facsimile. The Company will, upon request and in accordance with applicable regulation, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of stock.
| By Order of the Board of Directors, | |
August 14, 2014June [___], 2016
Wilmington, Delaware
ANNEX A
The Restated Certificate of Incorporation of the Corporation be amended by changing Article FOURTH so that, as amended, said Article shall be and read as follows:
“FOURTH: The total number of shares of capital stock which the Corporation has authority to issue is 50 million shares, par value $.01 per share, 8 million of which shall be undesignated preferred stock (the “Undesignated Preferred Stock”), and 42 million of which shall be Common Stock. Shares of capital stock of the Corporation may be issued by the Corporation from time to time for such legally sufficient consideration as may be fixed from time to time by the Board of Directors. The Board of Directors or any authorized committee thereof is authorized from time to time to establish and designate one or more series of Undesignated Preferred Stock, to fix and determine the relative rights, preferences and powers of any such series of Undesignated Preferred Stock, and to fix or alter the number of shares comprising any such series and the designation thereof to the fullest extent permitted by law.”
ANNEX B
| A. | If the Preferred Shares proposal is approved: |
The Restated Certificate of Incorporation of the Corporation be amended by changing Article FOURTH so that, as amended, said Article shall be and read as follows:
“FOURTH: The total number of shares of capital stock which the Corporation has authority to issue is 50 million shares, par value $.01 per share, 8 million of which shall be undesignated preferred stock (the “Undesignated Preferred Stock”), and 42 million of which shall be Common Stock. Shares of capital stock of the Corporation may be issued by the Corporation from time to time for such legally sufficient consideration as may be fixed from time to time by the Board of Directors. The Board of Directors or any authorized committee thereof is authorized from time to time to establish and designate one or more series of Undesignated Preferred Stock, to fix and determine the relative rights, preferences and powers of any such series of Undesignated Preferred Stock, and to fix or alter the number of shares comprising any such series and the designation thereof to the fullest extent permitted by law.
Upon this Certificate of Amendment of Certificate of Incorporation of the Corporation becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), each share of the Corporation’s Common Stock, issued and outstanding immediately prior to the Effective Time (the “Old Common Stock”), will be automatically reclassified as and converted into [one tenth (1/10)/one twentieth (1/20)] of a share of Common Stock, par value $.01 per share, of the Corporation (the “New Common Stock”). Any stock certificate that, immediately prior to the Effective Time, represented shares of the Old Common Stock will, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent the number of shares of the New Common Stock as equals the product obtained by multiplying the number of shares of Old Common Stock represented by such certificate immediately prior to the Effective Time by [one tenth (1/10)/one twentieth (1/20)].”
| B. | If the Preferred Shares proposal is not approved: |
The Restated Certificate of Incorporation of the Corporation be amended by changing Article FOURTH so that, as amended, said Article shall be and read as follows:
“FOURTH: The total number of shares of capital stock which the Corporation has authority to issue is 42 million shares, par value $.01 per share, all of which shall be Common Stock. Shares of capital stock of the Corporation may be issued by the Corporation from time to time for such legally sufficient consideration as may be fixed from time to time by the Board of Directors.
Upon this Certificate of Amendment of Certificate of Incorporation of the Corporation becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), each share of the Corporation’s Common Stock, issued and outstanding immediately prior to the Effective Time (the “Old Common Stock”), will be automatically reclassified as and converted into [one tenth (1/10)/one twentieth (1/20)] of a share of Common Stock, par value $.01 per share, of the Corporation (the “New Common Stock”). Any stock certificate that, immediately prior to the Effective Time, represented shares of the Old Common Stock will, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent the number of shares of the New Common Stock as equals the product obtained by multiplying the number of shares of Old Common Stock represented by such certificate immediately prior to the Effective Time by [one tenth (1/10)/one twentieth (1/20)].”
the digital energy company
ANNUAL REPORT 2013
Cautionary Note:
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements expressing expectations regarding our future and projections relating to prospects, sales, revenues and earnings are typical of such statements and are made under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions and are not historical facts and typically are identified by use of terms such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar words, although some forward-looking statements are expressed differently.
All forward-looking statements are subject to the risks and uncertainties inherent in predicting the future. You should be aware that although the forward-looking statements included herein represent management’s current judgment and expectations, our actual results may differ materially from those projected, stated or implied in these forward-looking statements as a result of many factors, including, but not limited to the recent downturn in the worldwide economy and its ongoing impact on our business and the business of our customers and suppliers. These and other risks and uncertainties, many of which are addressed in more detail in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, could cause our actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements. We undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur except as required by the federal securities laws, and you are urged to review and consider disclosures that we make in the reports that we file with the Securities and Exchange Commission that discuss other factors relevant to our business.
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