Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant☒Registrant ☒
Filed by a Party other than the Registrant☐Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| Definitive |
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| Soliciting Material Pursuant to Rule 14a-11(c) or rule 14a-12 |
ENSERVCO CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: |
(4) | Proposed maximum aggregate value of transaction: |
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☐ | Fee paid previously with preliminary materials: |
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. |
(1) | Amount previously paid: |
(2) | Form, Schedule or Registration Statement no.: |
(3) | Filing Party: |
(4) | Date Filed: |
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Enservco CorporationNSERVCO CORPORATION
501 South Cherry999 18th Street, Suite 10001925N
Denver, CO 8024680202
NOTICE OF ADJOURNED ANNUAL MEETING OF STOCKHOLDERS
AND IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING
TO BE HELD ON SEPTEMBER 29, 2016
August 19, 2016JUNE 26, 2020
To Our
May 11, 2020
Fellow Stockholders:
Notice is given that the Adjourned Annual Meeting of Stockholders of Enservco Corporation (“Enservco” or the "Company") will be held September 29, 2016,June 26, 2020, at 1:2:00 p.m., local time, Mountain Time. Due to the evolving COVID-19 situation, we plan to conduct the meeting primarily via conference call format in order to safeguard the health of Enservco stockholders and employees. Accordingly, we encourage stockholders to vote either online or by mailing their proxy card as described below. The physical Annual Meeting will be held at 999 18th Street, Suite 100, 501 S. Cherry St.,1925N, Denver, CO 80246 (the “Annual Meeting”).At80202, on the same date and time listed above, but the only Enservco personnel present will be one vote inspector who will be responsible for accepting ballots in person, if any. Again, however, for the health and safety of all concerned, we strongly recommend stockholders cast their votes online or via mailed proxy card and participate in the meeting via conference call.
Stockholders participating via conference call may listen to the meeting in real time by calling 844-369-8770 or, for international callers, 862-298-0840. In addition, stockholders may submit questions they would like to have answered at the Annual Meeting by emailing those questions to mhargrave@enservco.com.
At the Meeting, Enservco will submit the following fivethree proposals to its stockholders for approval:
1. To elect six directors for the ensuing year; 2. To ratify and approve the appointment of Plante & Moran, PLLC, as Enservco's independent registered accounting firm for the year ended December 31, 2020. 3. To approve and adopt an amendment to our second amended and restated certificate of incorporation to effect, at the discretion of our Board of Directors (with the effectiveness or abandonment of such amendment to be determined by the Board of Directors as permitted under Section 242(c) of the Delaware General Corporation Law) a reverse stock split of our shares of common stock issued and outstanding or reserved for issuance, at an exchange ratio of not less than 1-for-10 and not greater than 1-for-25, such exchange ratio to be determined by our Board of Directors at its sole discretion; and 4. To consider and act upon such other matters as may properly come before the Annual Meeting and any adjournments thereof. |
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The foregoing items of business are described more fully in the accompanying Proxy Statement. Any other business that may properly come before the meetingMeeting will also be conducted. The Board of Directors is not aware of any other business to come before the Meeting.
On June 22, 2016, Enservco held and adjourned its annual meetingThe Board of stockholders. No formal action was taken byDirectors set May 5, 2020 as the stockholders at that meeting other than adjournment. The original record date for the Annual Meeting scheduled to be held in June 2016 was April 27, 2016. Following the adjournment of that meeting, the Board of Directors, pursuant to Enservco’s Bylaws, established a new record date of August 12, 2016 and a meeting date of September 29, 2016.Meeting. Only holders of record of our common stockCommon Stock as of close of business on August 12, 2016May 5, 2020 will be entitled to notice of and to vote at the Annual Meeting, and any postponements or adjournments thereof.
The Company recommends the approval of all the above-listed proposals. Please vote promptly by signing, dating and returning the enclosed proxy card, or voting by telephone, or voting on the Internet by following the instructions on your Notice of Internet Availability of Proxy Materials. In the event that a stockholder decides to attend the meeting,Meeting, it, he, or she may, if so desired, revoke the proxy by voting the shares in person at the meeting.Meeting. If you plan to attend the meeting,Meeting, please ensure that you have an admission ticket or other authorization from the record holder of your shares.
EACH STOCKHOLDER, WHETHER OR NOT THE STOCKHOLDER PLANS TO ATTEND THE MEETING, IS REQUESTED TO VOTE BY COMPLETING, SIGNING, DATING AND PROMPTLY RETURNING THE ENCLOSED PROXY CARD OR VOTING BY TELEPHONE OR INTERNET. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING MAY REVOKE THE PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT BEFORE THE MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE IN PERSON AT THE MEETING.
Sincerely,
| Sincerely, | |
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| Ian E. Dickinson | |
| Chief Executive Officer |
/s/ Rick D. Kasch
Chief Executive Officer
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF ENSERVCO’S
PROXY STATEMENT
We will be using the Securities and Exchange Commission’s Notice and Access modelrules, which allowsallow us to make the proxy materials available on the Internet, as the primary means of furnishing proxy materialsProxy Materials to stockholders. On or before August 19, 2016,about May 11, 2020, we will mail to all stockholders a Notice of Internet Availability of Proxy Materials, which contains instructions for accessing our proxy materialsProxy Materials on the Internet and voting by telephone or on the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions for requesting a printed set of proxy materials.Proxy Materials. The Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and Notice of Adjournment of Annual Meeting2019 are available at:www.edocumentview.com/ENSV. ENSV.
20162020 PROXY STATEMENT
TABLE OF CONTENTS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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PROPOSAL NO. 1 ELECTION OF DIRECTORS |
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PROPOSAL NO. 2 |
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| PROPOSAL 3 – APPROVE AND ADOPT AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF COMMON STOCK | 16 |
| BACKGROUND | 16 |
| REASONS FOR THE REVERSE STOCK SPLIT | 17 |
| BOARD DISCRETION TO IMPLEMENT THE REVERSE STOCK SPLIT | 18 |
| EFFECTS OF THE REVERSE STOCK SPLIT | 18 |
| CERTAIN RISKS AND POTENTIAL DISADVANTAGES ASSOCIATED WITH THE REVERSE STOCK SPLIT | 20 |
| EFFECTIVE DATE | 20 |
| EXCHANGE OF STOCK CERTIFICATES | 21 |
| TREATMENT OF FRACTIONAL SHARES | 21 |
| DISCRETIONARY AUTHORITY OF THE BOARD TO ABANDON THE REVERSE STOCK SPLIT | 21 |
| NO APPRAISAL RIGHTS | 22 |
| CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT | 22 |
| APPROVAL OF STOCKHOLDERS OF THE PROPOSAL | 24 |
CORPORATE GOVERNANCE | 25 |
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EXECUTIVE COMPENSATION |
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EQUITY COMPENSATION PLAN INFORMATION | 44 |
ANNUAL REPORT ON FORM 10-K AND ADDITIONAL INFORMATION |
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OTHER MATTERS |
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DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS |
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STOCKHOLDER PROPOSALS - 2021 Annual Meeting of Stockholders |
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| Appendix A -- Form of | 47 |
Form of Proxy Card | 50 |
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Enservco CorporationNSERVCO CORPORATION
501 South Cherry999 18th Street, Suite 10001925N
Denver, CO 8024680202
PROXY STATEMENT
FOR THEANNUAL MEETING OF STOCKHOLDERS
To Be Held on September 29, 2016June 26, 2020 at 1:2:00 PMp.m. Mountain Time
August 19, 2016May 11, 2020
To OurFellow Stockholders:
This proxy statement (the “Proxy Statement”) is furnished in connection with the solicitation by the Board of Directors of Enservco Corporation (“Enservco” or the “Company”) of proxies to be used at the Annual Meeting of Stockholders (the “Meeting”) to be held at 999 18th Street, Suite 100, 501 S. Cherry St.,1925N, Denver, CO 8024680202 on Thursday, September 29, 2016,June 26, 2020, at 1:2:00 p.m., local time, and at any adjournments or postponements thereof. Due to the evolving COVID-19 situation, we plan to conduct the meeting primarily via conference call format in order to safeguard the health of Enservco stockholders and employees. Stockholders participating via conference call may listen to the meeting in real time by calling 844-369-8770 or, for international callers, 862-298-0840. The Meeting is being held for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement (including the Notice of Annual Meeting of Stockholders) is first being made available to stockholders beginning on or before August 19, 2016.May 11, 2020. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, including financial statements2019 (“Annual Report”), was filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2016. (This20, 2020. This Proxy Statement and the Annual Report are collectively referred to herein as the “Meeting Materials.”)
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Notice and Access Model
We are making the Meeting Materials available to stockholders on the Internet under the SEC’s Notice and Access model. On or before August 19, 2016,May 15, 2020, we will mail to all stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) in lieu of mailing a full printed set of the Meeting Materials. Accordingly, our Meeting Materials are first being made available to our stockholders on the Internet atwww.edocumentview.com/ENSV,, on or before August 19, 2016.May 15, 2020. The Notice includes instructions for accessing the Meeting Materials and voting by mail, telephone or on the Internet. You will also find instructions for requesting a full printed set of the Meeting Materials in the Notice.
We believe the electronic method of delivery under the Notice and Access model will decrease postage and printing expenses, expedite delivery of proxy materials to you and reduce our environmental impact. We encourage you to take advantage of the availability of the proxy materials on the Internet. If you received the Notice but would like to receive a full printed set of the proxy materials in the mail, you may follow the instructions in the Notice for requesting such materials.
Solicitation/Cost of the Meeting
The enclosed proxy is being solicited by the Company’s Board of Directors.Directors (the "Board"). The costs of the solicitation will be borne by the Company. Proxies may be solicited personally or by mail, telephone, facsimile or email by directors, officers and employees of the Company, none of whom will receive any additional compensation for such solicitations. The Company will reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable out-of-pocket expenses incurred in sending the proxy materials to beneficial owners of the Company’s shares.
Record Date, Voting Rights, and Votes Required
Holders of shares of Enservco common stockCommon Stock (the “Common Stock”) at the close of business on August 12, 2016May 5, 2020 (the “Record Date”), are entitled to notice of, and to vote at, the Meeting. As of the Record Date, 38,130,16055,612,829 shares of Company’s Common Stock were outstanding.
For all Proposals, holders of Common Stock are entitled to one vote per share. Cumulative voting shallis not be allowedpermitted in the election of directors or any of the proposals being submitted to the stockholders at the meeting.Meeting.
For all Proposals, the presence in person or by proxy of the holders of one-third of the votes entitled to be cast as of the Record Date constitute a quorum for the transaction of business at the Meeting. The presence in person or by proxy of the holders of votes entitled to be cast of at least12,710,054votesleast 18,537,610 votes at the Meeting is required for a quorum.
In the event there are not sufficient votes for a quorum or to approve any proposals at the time of the Meeting, the Meeting may be adjourned in order to permit further solicitation of proxies. Abstentions will count towards quorum requirements.
As to the election of directors under Proposal No. 1, the proxy card being provided by the Board enables a stockholder to vote for the election of each of the nominees proposed by the Board, or to withhold authority to vote for one or more of the nominees being proposed. If a quorum is present, Directorsdirectors are elected by a plurality of votes cast, without respect to either (i) broker non-votes, or (ii) proxies as to which authority to vote for one or more of the other nominees being proposed is withheld.
If a quorum is present, the affirmative vote of a majority of the votes cast on the matter is required to approve ProposalsProposal No. 2, 3, & 4.2. As to these Proposals,this Proposal, a stockholder may: (i) vote “FOR” the proposal, (ii) vote “AGAINST” the proposal, or (iii) “ABSTAIN” with respect to the proposal. Abstentions and broker non-votes will not have an effect on these proposals.
With respect to Proposal No. 5 (the frequency of the advisory vote on executive compensation), the frequency receiving the greatest number of votes will be considered the frequency recommended by stockholders. Votes to abstain and broker non-votes will not have an effect on this proposal.
ProposalsProposal No. 3, 4, and 5 are2 is advisory in nature and non-binding on the Company. However,Company; however, our Board of Directors values the opinions of all of our stockholders and will consider the outcome of eachthis vote when making future decisions on the Company’s independent auditor selection, executive compensation, and frequency of executive compensation advisory votes.selection.
Proposal No. 3, approval of the proposal to approve and adopt the Amendment to our Second Amended and Restated Certificate of Incorporation requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Common Stock on such proposal. As to this Proposal, a stockholder may: (i) vote “FOR” the proposal, (ii) vote “AGAINST” the proposal, or (iii) “ABSTAIN” with respect to the proposal. Abstentions and broker non-votes will effectively be considered as votes against this proposal.
Voting
Whether you plan to attend the Meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive by the meetingMeeting through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via Internet or telephone. Unless contrary instructions are indicated on the proxy, the shares of Common Stock represented by such proxy will be voted “FOR” the slate of directors described herein, “FOR” each of the Proposals 2, 3, & 4, and “FOR” the selection “Every Three Years” under Proposal 5.Proposals Nos. 2 and 3. Voting by proxy will not affect your right to attend the Meeting. A proxy may be revoked at any time prior to its exercise by (i) providing notice in writing to the Company’s corporate secretary that the proxy is revoked; (ii) presenting to the Company a later-dated proxy; or (iii) by attending the Meeting and voting in person. If you plan to attend the meeting,Meeting, please ensure that you have an admission ticket or other authorization from the record holder of your shares. Due to the possible effects of the COVID-19 virus emanating from social gatherings, we strongly encourage stockholders refrain from attending the Meeting in person.
Registered Holder.Holder
If your shares are registered directly in your name through our stock transfer agent, Computershare, Inc. (“Computershare”), or you have stock certificates registered in your name, you may vote:
• | By Internet or by telephone. |
• | By mail. If you received a proxy card by mail, you can vote by mail by completing, signing, dating and returning the proxy card as instructed on the card. If you sign the proxy card but do not specify how you want your shares voted, they will be voted in accordance with the recommendation of our Board |
• | In person at the |
Beneficial Holder.Holder
If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. If your shares are not registered in your own name and you plan to vote your shares in person at the meeting,Meeting, you should contact the broker or agent to obtain a legal proxy or broker’s proxy card and bring it with you to the Meeting in order to vote. You will not be able to vote at the Meeting unless you have a proxy card from your broker.
No Dissenters Rights
The proposed corporate actions on which the stockholders are being asked to vote are not corporate actions for which stockholders of a Delaware corporation have the right to dissent under the Delaware General Corporation Law (the “DGCL”).
Proposals by Security Holders and Other Matters
No stockholder has requested that we include any additional proposals in this Proxy Statement or otherwise requested that any proposals be submitted to the stockholders at the Annual Meeting. Management and the Board of Directors of the Company know of no other matters to be brought before the Meeting other than as described herein. If any other matters are properly are presented to the stockholders for action at the Meeting and any adjournments or postponements thereof, the proxy holder named in the enclosed proxy intends to vote in his discretion on all matters on which the shares of Common Stock represented by such proxy are entitled to vote.
Forward-Looking Statements
This Proxy Statement may contain certain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements.
Such forward-looking statements include statements about our expectations, beliefs or intentions regarding actions contemplated by this Proxy Statement, our potential business, financial condition, results of operations, strategies, or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made and are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” or “will,” and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors” included in our other filings with the Securities and Exchange Commission (“SEC”), including the disclosures set forth in Item 1A of our Form 10-K for the year ended December 31, 2015.2019 and our Current Report on Form 8-K dated April 28, 2020. Furthermore, such forward-looking statements speak only as of the date of this Proxy Statement. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Management
As of the Record DatetheMay 5, 2020the Company had38,130,160shareswill have 55,612,829 shares of its common stockCommon Stock issued and outstanding. The following table sets forth the beneficial ownership of the Company’s common stockCommon Stock as of the Record Date by each person who serves asis a directornominee of the Board and/or an executive officer of the Company on that date, and the number of shares beneficially owned by all of the Company’s directorsnominees and named executive officers as a group. To the extent any of the named stockholders own derivative securities that are vested or otherwise exercisable into shares of our Common Stock these securities are included in the column regarding that stockholders’stockholder's Common Stock beneficial ownership (as required by Rule 13d-3(a)) promulgated under the Exchange Act and the material terms of such derivative securities are explained in the notes to the table.
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Name of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership (2) | Percent of Common Stock |
Named Executive Officers and Nominees | ||
Richard A. Murphy | 11,312,319 (3) | 20.3% |
| Ian E. Dickinson | 2,030,000 (4) | 3.7% |
| Keith J Behrens | - | * |
Marjorie Hargrave | 330,000 (5) | * |
William A. Jolly | 130,000 (6) | * |
Robert S. Herlin | 125,000 (7) | * |
Christopher D. Haymons | 100,000 (8) | * |
All current executive officers and nominees as a group (7 persons) | 14,027,319 | 25.2% |
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Notes toSecurity Ownership of Management and Board Nominees table shown above:
* The percentage of common stockCommon Stock beneficially owned is less than 1%.
(1) | The address of the beneficial owners in each case is c/o Enservco Corporation, |
(2) | Calculated in accordance with Rule 13d-3 under the |
(3) | Consists of (i) |
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(5) | Consists of (i) 55,000 shares | |
(6) | Consists of (i) 30,000 shares of Common Stock owned by Mr. |
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(7) | Consists of (i) 25,000 shares of Common Stock owned by Mr. Herlin and (ii) options to acquire | |
(8) | Consists of |
Security Ownership of Certain Beneficial Owners
As of the Record Date,May 5, 2020, the Company is not aware of any persons that beneficially own more than 5% of its outstanding common stockCommon Stock who doesdo not serve as an executive officer or directornominee of the Company, except as follows:
Name Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Common Stock | ||
Beneficial owners of more than 5% of outstanding Common Stock | ||||
Cross River Partners, L.P.
Ridgefield, CT 06877 |
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Colorado Springs, CO 80903 |
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(1) | Calculated in accordance with |
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(3) | Based on information in a Schedule 13D report dated February 28, 2017 by Leroy Landhuis. | |
(4) | Based solely on information in a Form 4 filed November 23, 2015. The following persons share voting and dispositive power with respect to the foregoing shares beneficially owned: Michael Herman |
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Changes in Control
There are no arrangements known to the Company which may result in a change in control of the Company. There has been no change of control of Enservco since the beginning of Enservco’s last fiscal year. At January 1, 2015, Michael D. and Debra Herman together owned approximately 35.4% of the outstanding shares of Enservco common stock. As of the Record Date, Mrs. Herman owns 3,033,660 shares (less than 8% of the outstanding shares) and Mr. Herman owns no shares of Enservco common stock. During that same period of time, Cross River Partners and its affiliates have increased their ownership from approximately 14% to approximately 23.6%. Enservco does not consider this to be a change of control since Mr. Herman did not assert control over Enservco following his departure from the Board of Directors in December 2014. Furthermore, as set forth in Item 4 (Purpose of the Transaction) in Cross River’s Schedule 13D filed on November 19, 2015, it was stated that Cross River intended to provide its “input and provide the board of directors and management of [Enservco] with advice on (i) merger and acquisition opportunities, (ii) additions to the Issuer's board of directors, (iii) the hiring of senior management, (iv) executive compensation, and (v) other proposals to maximize shareholder value on a per Share basis.” The Schedule 13D went on to state that “[e]xcept as otherwise set forth herein, the Reporting Persons do not have any present plans or proposals which would relate to, or result in, the matters set forth in subparagraphs (a) – (j) of Item 4 of Schedule 13D.” Subsequently, in January 2016, Enservco appointed Mr. Murphy, the managing member of Cross River Capital Management, LLC the general partner of Cross River Partners, L.P., to the Enservco board of directors as described below in “Proposal No. 1 – Election of Directors – Board of Directors; Corporate Governance.”
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The following persons, all whom are currently members of the Board, of Directors, have been nominated by the Board of Directors for election to the Company’s Board of Directors:
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If elected, each director will serve for a one-year term and until his successor is elected and qualified.
Vote Required and RecommendationBoard:
Each share will count as one vote cast for the election of directors, and abstentions and broker non-votes will not be counted. To be elected each director must receive a plurality of the votes cast at the Meeting—the six individuals with the most votes will be elected to the Board of Directors. Unless otherwise specified, the enclosed proxy will be voted “FOR” the election of the Board of Directors’ slate of nominees. Neither Management nor the Board of Directors of the Company is aware of any reason which would cause any nominee to be unavailable to serve as a Director.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” THE ELECTION OF MESSRS. BEHRENS, HERLIN, JOLLY, KASCH, MURPHY, AND OPPENHEIM.
BOARD OF DIRECTORS; CORPORATE GOVERNANCE
As of the Record Date, the names, titles, and ages of the members of the Company’s Board of Directors and its executive officers are as set forth in the following table.
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Keith J. Behrens, Age 54 Mr. Behrens |
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Rick D. Kasch. Mr. Kasch was appointed to the Company’s Board of Directors on July 25, 2012 and has served as Chairman of the Board of Directors since December 2, 2014. Mr. Kasch was appointed as the Company’s Chief Executive Officer on April 16, 2014 and has served as President since April 2013. Between July 2012 and April 2013, Mr. Kasch served as Chief Financial Officer of the Company. Mr. Kasch served as the principal financial officer of Enservco Corporation’s predecessor (Enservco LLC) since its inception in May 2007. Mr. Kasch served as the principal financial officer, Secretary and Treasurer of Dillco Fluid Services, Inc. from December 2007 until June 2014, and currently serves as the President and Chief Executive Officer. Further, he has served as a manager anddirector for the principal financial officer for Heat Waves Hot Oil Service LLCCompany since March 2006, and currently serves as the President. Additionally, Mr. Kasch has served as President or Chief Financial Officer for various other companies, including software development, hospitality, and internet-based companies. Mr. Kasch served on the board of directors of Pyramid Oil Company, a publicly held corporation traded on the NYSE MKT, until his resignation on September 10, 2014 in connection with its merger and name change to Yuma Energy, Inc. Mr. Kasch is not on the board of directors of any other company with its securities registered under the Securities Exchange Act of 1934. Mr. Kasch received a BBA - Accounting degree from the University of South Dakota. Mr. Kasch is a certified public accountant, but does not hold an active license.
Steven P. Oppenheim. Mr. Oppenheim was appointed to the Company’s Board of Directors on April 29, 2013. Mr. Oppenheim has been serving as the chairman of the Audit Committee of the Company’s Board of Directors since its formation in May 2013. He has over forty years of experience in accounting, securities, tax and finance. He served as an independent member of the Board of Directors of Sunair Services Corporation (AMEX: SNR) from January 2004 to mid-December 2009 at which time SNR’s business was sold to a private competitor and SNR’s entire Board ceased to serve. He served on SNR’s Audit Committee during his term as a director and interacted with SEC counsel and outside accountants relating to 1933 Act and Exchange Act filings and compliance, acquisitions and divestitures. Mr. Oppenheim also served as Chairs of SNR’s Compensation Committee and Nominating Committee from 2006 to mid-December 2009, handling stock option grants, employee plans and executive compensation, and with nominating process of new directors and director independence review. Mr. Oppenheim obtained both his Juris Doctor and Bachelor of Business Administration (Accounting) Degrees from the University of Miami, emphasizing accounting, finance, tax, and securities law. Mr. Oppenheim currently works as a corporate officer of, and is a founding equity partner in, IMS Internet Media Services, Inc., a USA company having the largest market share for placing client media, online and offline advertising, digital, mobile, and social media marketing and advertising in Latin America, and has done so for approximately the past 12 years. IMS became a controlled subsidiary of Sony Corporation in 2015 (NYSE: SNE). Mr. Oppenheim also serves as a corporate officer of Ted Baker Limited, a USA company, and Ted Baker Canada Inc., a Canadian company, both selling and distributing high-end retail fashions in the USA and Canada and both are subsidiaries of Ted Baker PLC, a European fashion conglomerate trading on the London Stock Exchange (LSE: TED.L), and he has done so for approximately the past 15 years. His above work includes involvement with appropriate accounting and financial statements, employee compensation and benefits, and international and pan-regional business transactions, financing and operations, requiring his interaction with outside counsel and accountants in various jurisdictions. Mr. Oppenheim previously served as Tax Supervisor at Coopers & Lybrand CPA firm, with audit and tax staff for accounting systems, audit work papers, financial statements and tax matters. Also, more than 25 years ago, he represented a private oil refinery and independent oil dealer, reviewed oil and gas private placement ventures, and served as personal advisor to a former President of Texaco Inc. Mr. Oppenheim is not on the board of directors of any other company with its securities registered under the Securities Exchange Act of 1934.
Keith J. Behrens. Mr. Behrens was appointed to the Company’s Board of Directors on June 20, 2014. Mr. Behrens joined Stephens, Inc. in May 2009 as a Managing Director. Prior to joining Stephens, Inc. Mr. Behrens was a Co-Founder and a Managing Partner of Energy Capital Solutions. Mr. Behrens has over 2425 years of investment banking experience with major investment banking firms including Bear Stearns and Wasserstein Perella. He has focused most of his career in covering primarily exploration and production companies as well as other energy-related companies. Mr. Behrens has generated and led the execution of various M&A, public & private equity and senior & mezzanine debt transactions representing 150in excess of 170 transactions and approximately $30$35 billion in transaction volume. In addition to his extensive transaction experience, Mr. Behrens served as Chairman of the IPAA’s 2013 Private Capital Conference and is active in several energy industry organizations. He was formerly on the Advisory Council for the Energy Management and Innovation Center at the University of Texas at Austin McCombs School of Business. Mr. Behrens received his BBA and MBA from the University of Texas at Austin.
Ian E. Dickinson, Age 49Mr. BehrensDickinson has served as the Company’s President and Chief Executive Officer and as a director for the Company since 2017. Mr. Dickinson joined the Company from Caddis Capital Investments, LLC (“Caddis”), an actively managed private equity firm, where he had been a partner since July, 2016. Prior to joining Caddis, Mr. Dickinson served as President and Chief Executive Officer of Premier Oilfield Equipment Company (“Premier”) from its acquisition by Altira Group, LLC in February, 2012, until July, 2016. Prior to that, Mr. Dickinson served as Senior Vice President of Finance at Startek, Inc. (“SRT”), a global contact center outsource services provider, from March 2011 until February, 2012, and as Managing Director at Slalom Consulting, LLC, leading the CFO Advisory Services practice from October, 2009 until March, 2011. His previous experience includes CFO and corporate development roles at several private equity and venture capital backed companies. Mr. Dickinson began his career in various and expanding leadership roles in finance and M&A at Quest Communications (acquired by CenturyLink), Nextel (acquired by Sprint), and ADT Security Services. Mr. Dickinson is nota member of Young President Organization – Colorado Chapter, and currently serves on the board of directors of any other company with its securities registered under the Securities Exchange Act of 1934.
William A. Jolly. Mr. Jolly was appointed to the Company’s Board of Directors on January 15, 2015.of Fox Management, LLC and the ACE Scholarships Advisory Board. Mr. JollyDickinson is a principal with Scarsdale Equities,graduate of Fort Lewis College in Durango, Colorado.
Christopher D. Haymons, Age 49Mr. Haymons has served as a FINRA member broker/dealer in New York Citydirector for the Company since 2017. Mr. Haymons is co-founder and Partner of Industria Partners, LLC, a strategic advisory and merchant banking firm focused on providing capital, restructuring, and M&A services to energy and industrial companies. Prior to co-founding Industria, Mr. Haymons was a Partner at St. Charles Capital, LLC, where he focuses on providing innovative banking solutions for small cap companies. Mr. Jolly spent over 15 years with Procterplayed a senior leadership role as the founder and managing director of the Energy Services & Gamble managing brands and subsidiaries in the U.S. and throughout Asia. Mr. Jolly then became Vice President for the Consumer Division of Scott Paper in Asia PacificTechnology Group, until itSt. Charles Capital, LLC was acquired by Kimberly Clark.KPMG LLP in 2014. Previously, he was senior managing director, head of Investment Banking and head of the Industrials Group for Headwaters MB. He began his career with Dain Bosworth and Green Manning & Bunch. Mr. Jolly serves on the advisory boardHaymons brings to Enservco 25 years of ZetrOZ Systems, which develops non-invasive medical devices to accelerate tissue healingexperience in investment banking, corporate finance, M&A, and relieve pain. Mr. Jolly currentlymerchant banking transactions. He is not currently serving on the boarda graduate of any company with shares registered under the Securities Exchange Act of 1934. Mr. Jolly received his undergraduate degree from Duke University and his M.B.A. from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.The Colorado College.
Robert S. Herlin,. Age 65Mr. Herlin was appointed tohas served as a director for the Company’s Board of Directors on January 15,Company since 2015. Mr. Herlin is also Executive Chairman of Evolution Petroleum Corporation, Houston, Texas.Texas, a company with a class of securities registered pursuant to Section 12 of the Exchange Act. He has served as a director of Evolution Petroleum since its inception in 2003, was elected Chairman of its Board of Directors in 2009 and served as Chief Executive Officer from inception through 2015. Evolution Petroleum’s common stock is registered under the Securities Exchange Act of 1934. Mr. Herlin also serves on the Board of Directors of Well Lift Inc., a private company that was spun off from Evolution Petroleum and is the owner and marketer of the GARP artificial lift technology. Mr. Herlin is also President of AVL Resources, LLC, a private energy company.company, and is actively engaged in new venture funding and advising. Mr. Herlin has 30 years of experience in engineering, energy transactions, operations and finance with small independents, larger independents and major integrated oil companies. Since 2003 until early 2010, Mr. Herlin also served as a non-active Partner with Tatum CFO, a financial advisory firm that provides executive officers on a part-time or full-time basis to clients. From 2001 to 2003, Mr. Herlin served as Senior Vice President and Chief Financial Officer of Intercontinental Towers Corporation, an international wireless infrastructure venture. Mr. Herlin also served on the Board of Directors of Boots and Coots, Inc., an oil field services company, from 2003 until its sale to Halliburton Company in September 2010. Prior to 2001, Mr. Herlin served in various officer capacities for upstream and downstream oil and gas companies, both private and public. Mr. Herlin served on the Engineering Advisory Board for the Brown School of Engineering at Rice University from 2013 to 2016. Mr. Herlin graduated with honors from Rice University with B.S. and M.E. degrees in chemical engineering and earned an MBA from Harvard University.
William A. Jolly, Age 66 Mr. Jolly has served as a director for the Company since 2015. Mr. Jolly serves as an area chairman for the C12 group, which provides peer advisory services for middle market companies. Mr. Jolly served as a principal with Scarsdale Equities, a FINRA member broker/dealer in New York City where he focused on providing innovative banking solutions for small cap companies for 10 years. Mr. Jolly spent over 15 years with Procter & Gamble managing brands and subsidiaries in the U.S. and throughout Asia. Mr. Jolly then became Vice President for the Consumer Division of Scott Paper in Asia Pacific until it was acquired by Kimberly Clark. Mr. Jolly serves on the advisory board of ZetrOZ Systems, which develops non-invasive medical devices to accelerate tissue healing and relieve pain. Mr. Jolly received his undergraduate degree from Duke University and his M.B.A. from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.
Richard A. Murphy., Age 50 Mr. Murphy was appointed tohas served as a director for the Company’s Board of Directors on January 19,Company since 2016. Mr. Murphy currently serves as the managing member of Cross River Capital Management, LLC the general partner of Cross River Partners, L.P., currently the largest stockholder of the Company. Mr. Murphy founded Cross River Partners, L.P. in April of 2002. Cross River Partners, L.P. invests in micro-cap and small-cap companies with market capitalizations up to $1.5 billion at the time of initial investment. Mr. Murphy’s primary responsibility as managing member is investment research, analysis of investment opportunities, and coordinating final investment decisions for Cross River Partners, L.P. Prior to founding Cross River Partners, L.P., Mr. Murphy was an analyst and asset portfolio manager with SunAmerica Asset Management, LLC from 1998 to 2002. Mr. Murphy also worked as an associate investment banker at ING Barings in its food and agricultural division in 1998 and he worked at Chase Manhattan Bank from 1992 to 1996. He also sat on the Advisory Board of CMS Bankcorp, Inc. and currently sits on the Applied Investment Management Board for the University of Notre Dame. Mr. Murphy is Chairmanserves on the Board of the audit committeeDirectors for Williston Holding Company, Inc. a non-reporting restaurant company. Mr. Murphy also serves on the Board of Trustees of Brooklyn Jesuit Prep, a not-for-profit secondary school serving low income families. Mr. Murphy received his MBA from the University of Notre Dame-Mendoza College of Business in 1998 and his bachelor’s degree in political science from Gettysburg College in 1992. Mr. Murphy currently
If elected, each director will serve for a one-year term and until his successor is not serving on the board of directors of any other company with its securities registered under the Securities Exchange Act of 1934.elected and qualified.
Robert J. Devers. Mr. Devers has served as the Company’s Chief Financial Officer and Treasurer since appointed by the Board of Directors on April 29, 2013. Prior to joining the Company, Mr. Devers spent two years as an independent consultant providing finance and accounting services to public companies in the mining and beverage distribution sectors. From June 2007 to April 2011, Mr. Devers served as Chief Financial Officer of Silver Bull Resources, a mineral exploration company that was listed on both the NYSE MKT and TSX. Additionally, Mr. Devers served as Senior Director – Financial Analysis and Internal Audit of The Broe Companies Inc., a large privately held international company in the Denver area with investments in real estate, transportation, mining, and oil and gas exploration. He has also served as a corporate officer and financial executive for several other privately-held and publicly traded companies. Earlier in his career, Mr. Devers spent three years in public accounting with a regional firm that specialized in publicly held oil and gas exploration and production companies. Mr. Devers received a Bachelor of Arts degree in Accounting from Western State College.
Austin Peitz. Mr. Peitz serves as Senior Vice President of Field Operations of the Company and has been a significant employee of the Company for a substantial period of time. Mr. Peitz has worked for Heat Waves Hot Oil Service, LLC since October 1999 and has been involved in nearly all aspects of operations since that time. In his current position as Senior Vice President of Field Operations, Mr. Peitz is in charge of overseeing and coordinating field operations.
Board of Directors – Composition, Qualifications and AttributesMember Nominee Selection Criteria
The Company’sCompany believes that each of the persons nominated for reelection to the Board of Directors seeks to ensure that it is composed of members whose particularhave the requisite experience, qualifications, attributes and skills when taken together, will allowto enable the Board of Directors to effectively satisfy its oversight obligations effectively. As discussed herein,responsibilities. With regard to the nominees (each of whom is currently a member of our Board) the following factors were among those considered that led to the Board’s conclusion that each would make valuable contributions to the Board:
• | Keith J. Behrens: Mr. Behrens has served the Company’s Board of Directors since July 15, 2014. Mr. Behrens has over 23 years of investment banking experience with major investment banking firms including Bear Stearns and Wasserstein Perella. He has focused most of his career in covering primarily exploration and production companies as well as other energy-related companies. The Board believes Mr. Behrens’ extensive experience in M&A transactions in the energy-related field is valuable in the continued development and growth of the Company. |
• | Ian E. Dickinson: Mr. Dickinson was appointed to the Company’s Board of Directors on May 9, 2017. Mr. Dickinson brings a strong track record in the areas of private equity, oilfield service equipment, M&A, and finance. The Board believes Mr. Dickinson’s prior leadership experience in the oil field services and finance industries is valuable to the Board of Directors as a whole. |
• | Christopher D. Haymons: Mr. Haymons was appointed to the Company’s Board of Directors on January 27, 2017. The Board believes Mr. Haymons provides valuable transactional and analytical skills with respect to the oil field services industry within which the Company operates. |
• | Robert S. Herlin: Mr. Herlin was appointed to the Company’s Board of Directors on January 15, 2015. Mr. Herlin was appointed at the same time to the Audit Committee of the Company’s Board of Directors. Mr. Herlin has 30 years of experience in engineering, energy transactions, and operations and finance of companies in the oil and gas sector. The Board believes Mr. Herlin’s experience and knowledge in the oil and gas sector are valuable to the Board of Directors as a whole. |
• | William A. Jolly: Mr. Jolly was appointed to the Company’s Board of Directors and the Audit Committee on January 15, 2015. Mr. Jolly has previously served as a board member/advisor for several public companies. Mr. Jolly serves as an area chairman for the C12 group, which provides peer advisory services for middle market companies. In addition, Mr. Jolly served as a principal with Scarsdale Equities, a FINRA member broker/dealer in New York City where he focused on providing innovative banking solutions for small cap companies for over 10 years. The Board believes Mr. Jolly’s experience and knowledge advising public companies and experience in banking solutions for small cap companies are valuable to the Board of Directors as a whole. |
• | Richard A. Murphy: Mr. Murphy was appointed to the company’s Board of Directors on January 19, 2016. He is the managing member of the general partner of the Company’s largest stockholder, Cross River Partners L.P. and has experience analyzing and evaluating micro-cap companies. The Board believes Mr. Murphy’s years of experience advising emerging growth companies are valuable to the Board of Directors as a whole. |
Vote Required and Recommendation
Each share will count as one vote cast for the election of directors, and abstentions and broker non-votes will not be counted. To be elected each director must receive a plurality of the votes cast at the Meeting—the six individuals with the most votes will be elected to the Board. Unless otherwise specified, the enclosed proxy will be voted “FOR” the election of the Board’s slate of nominees. Neither Management nor the Board of the Company does not currently haveis aware of any reason which would cause any nominee to be unavailable to serve as a separate nominating (or similar) committee,Director.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” THE ELECTION OF MESSRS. BEHRENS, DICKINSON, HAYMONS, HERLIN, JOLLY, AND MURPHY.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and givendiscussed the audited financial statements contained in the Company’s small size,Annual Report on Form 10-K for the year ended December 31, 2019, with Enservco management. The Audit Committee has discussed with the Company’s independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board (the “PCAOB”) in Rule 3200T and has received written disclosures from the independent auditor required by the applicable requirements of the PCAOB regarding the independent auditor’s independence. The Audit Committee has discussed the independent auditor’s independence with representatives of the Company's independent auditor. Based on that review and discussions, the Audit Committee recommended to the Board that the audited financial statements be included with the Company’s Form 10-K for the year ended December 31, 2019.
| The Audit Committee | |
| Robert Herlin, Chair | |
| William A. Jolly |
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM
The Board has selected the accounting firm of Plante & Moran, PLLC (“PM”) to serve as our independent registered public accounting firm for the 2020 fiscal year. We are asking our stockholders to ratify the selection of PM as our independent registered public accounting firm. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of PM to our stockholders for ratification because we value our stockholders’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice.
To the Company’s knowledge, a representative from PM is expected to be present at the Meeting and will have the opportunity to make a statement if they desire to do so and will be available to respond to questions.
Fees Billed
The following is a summary and description of fees for services provided by PM and EKS&H LLLP (the auditing firm that was acquired by PM in 2018) for the years ended December 31, 2019 and 2018.
2019 | 2018 | |||
Audit fees (1) | $ 161,000 | $ 157,934 | ||
Audit-related fees (2) | — | — | ||
Tax fees | 14,471 | — | ||
All other fees (3) | 36,636 | — | ||
Total | $ 212,107 | $ 157,934 |
(1) | Audit Fees include professional services for the audit of our annual consolidated financial statements, reviews of the consolidated financial statements included in our Form 10-Q filings, audits of company provided employee benefit plans, and services that are normally provided in connection with statutory and regulatory filings or engagements. |
(2) | Audit-Related Fees comprise fees for professional services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements including review of the consolidated financial statements incurred in conjunction with registration statements. |
(3) | All other fees include amounts billed for consultation provided to the Company. |
Pre-Approval Policies and Procedures
The Audit Committee Charter provides that the Audit Committee is responsible for the appointment, compensation, retention and oversight of the independent public accountants, and pre-approves all audit services and permissible non-audit services to be provided to the Company doesby the independent public accountants. The Audit Committee may, in its discretion, delegate the authority to pre-approve all audit services and permissible non-audit services to the Chairman of the Audit Committee provided the Chairman reports any delegated pre-approvals to the Audit Committee at the next meeting thereof. The Audit Committee has not, yet believe such a committee is necessary. However, ashowever, adopted any specific policies and procedures for the Company grows, it may consider establishing a separate nominating committee.engagement of non-audit services.
UnderThe Audit Committee approved of PM performing our audit and all other consultation services provided for the NYSE MKT Rule 804(a), if there is no nominating committee, nominations must be made by2019 and 2018 fiscal years as set forth in the table above.
Vote Required and Recommendation of Board
Proposal No. 2 requires the affirmative vote of a majority of the independent directors. Enservco believes that this is appropriate in light ofvotes cast at the NYSE MKT rules on point and based onMeeting. If our stockholders fail to ratify the fact that Enservco remains a smaller reporting company and (as described below) nominating decisions are made by the independent directors. Currently the Board of Directorsselection, it will be considered as a whole is in charge of identifying and appointing appropriate persons to adddirection to the Board of Directors when necessary. In identifying Board candidates, it isto consider the Board’s goal to identify persons who it believes have appropriate expertise and experience to contribute to the oversightselection of a company like Enservco while also reviewing other appropriate factors.
Significant Employees
There are no significant employees of Enservco other than its executive officers named above.
Transactions with Related Persons
different firm. The following sets forth information regarding transactions betweenBoard considers PM to be well-qualified to serve as the Company (and its subsidiaries) and its officers, directors and significant stockholders since January 1, 2015 or otherwise outstanding as of the Record Date.
Employment Agreements
See the Executive Compensation section of this Proxy Statementindependent auditor for a discussion of the employment agreements between the Company and eachPM has experience since 2010 in doing so. However, even if the selection is ratified, the Board, 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 Messrs. Kasch, Peitz,the Company and Devers.our stockholders.
Investment Banking Agreement with Stephens, Inc.
In March 2015, the Company entered into an investment banking agreement with Stephens, Inc., in connection with investigating a potential business combination. The agreement was terminated in April of 2015 when the Company determined not to pursue the transaction that was under consideration. The Company paid $20,000 under the agreement to Stephens, Inc. Mr. Behrens is a managing director of Stephens, Inc. as well as being a director of Enservco. Mr. Behrens was not involved in the deliberations of Enservco’s board of directors when they determined to retain Stephens. In retaining Stephens, the disinterested directors (being all directors except Mr. Behrens) determined that the arrangement was fair to Enservco.THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF PM AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
PROPOSAL NO. 3
Academy Bank Guaranty by Enservco and Mr. HermanAPPROVE AND ADOPT AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF COMMON STOCK
In 2013, Heat Waves Hot Oil Service LLC, a subsidiary of the Company, entered into a real estate loan with Academy Bank, N.A. to replace an existing real estate loan in North Dakota in the amount of $720,000, under a note maturing on September 10, 2028. As a condition of making the loan, Academy Bank required Mr. Herman, the Company’s former Chairman and Chief Executive Officer, to guaranty $100,000 of the loan. As a result of this requirement, the Company continued to pay Mr. Herman a $12,500 per month guaranty fee. In February 2015, the Company made a principal payment of $100,000 and Academy Bank, N.A. released the guaranty in full and the Company was subsequently relieved of its obligation to continue to pay the guaranty fee to Mr. Herman.Background
Mr. Kasch’s Pledge of Company Shares
The Company’s Chief Executive Officer, Rick D. Kasch, carries a personal line of creditOn November 6, 2019 we received written notice (the “NYSE Notice”) from the NYSE American LLC (the “NYSE American”) that we are not in compliance with Northstar Bank, the terms of which require the pledge of Enservco common stock as collateral. As of July 20, 2016, Mr. Kasch has pledged 700,000 shares of Enservco common stock to Northstar Bank pursuant to his line of credit, which, as of the same date, has a balance of $190,000.
Director Independence
The Company utilizes the definition of “independent” as it iscontinued listing standards set forth in Section 803A(2)1003(a)(iii) of the NYSE MKT Rules. Further,American Company Guide. The NYSE American has determined that the continued listing of the Common Stock is predicated on us having a minimum price for the Common Stock. In order to become into compliance with the continued listing standards, we are seeking to effect a reverse stock split of the Common Stock. The NYSE American has informed us that we have until July, 2020 to demonstrate compliance.
Accordingly, our Board has approved proposed amendment (the “Amendment”) to our Certificate of Incorporation, that: would effect a share consolidation, or reverse stock split, of our outstanding Common Stock and Common Stock reserved for issuance, at an exchange ratio of not less than 1-for-10 (1:10) and not greater than 1-for-25 (1:25), as shall be determined in the sole discretion of the Board considers all relevant facts and circumstanceson the terms described in its determinationthis proxy statement.
The number of independenceauthorized shares of all membersCommon Stock, which is currently 100,000,000 shares, will not be affected by the reverse stock split. The number of authorized shares of our preferred stock, which is currently 10,000,000 shares, will not be affected by the reverse stock split.
The effectiveness of the board (including any relationships). Based onAmendment, and the foregoing criteria, Messrs. Oppenheim, Jolly, Herlin, and Behrens are considered independent directors and were confirmed as suchimplementation or abandonment of the reverse stock split, if approved, will be determined by our Board following the Annual Meeting. Our Board of Directors.has recommended that the Amendment be presented to our stockholders for approval.
InvolvementIf our stockholders approve Proposal 3 amending our Second Amended and Restated Certificate of Incorporation to enact the reverse stock split, our Board will have the sole discretion to elect, as it determines to be in Certain Legal Proceedings
During the past ten years none of the persons serving as executive officers and/or directorsbest interests of the Company has beenand its stockholders, whether to effect a reverse stock split and, if so, the subject matternumber of anyshares of Common Stock within the following legal proceedingsstockholder-approved range (between 10 and 25 shares) which will be combined into one share of Common Stock. Our Board believes that are requiredstockholder approval of this range of reverse stock split ratios (as opposed to be disclosed pursuant to Item 401(f)approval of Regulation S-K including: (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any criminal convictions; (c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; (d) any finding by a court, the SEC or the CFTC to have violated a federal or state securities or commodities law, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory organization or registered entity or equivalent exchange, association or entity. Further, no such legal proceedings are known to be contemplated by governmental authorities against any director or executive officer.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act requires Enservco’s directors and officers and any persons who own more than ten percent of Enservco’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the “SEC”). All directors, officers and greater-than-ten-percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports files. Based solely on our review of the copies of Forms 3, 4 and any amendments thereto furnished to us during the fiscal year completed December 31, 2015, we believe that during the Company’s 2015 fiscal year all filing requirements applicable to our officers, directors and greater-than-ten-percent stockholders were complied with.
Corporate Governance
In considering its corporate governance requirements and best practices, Enservco looks to the NYSE MKT Listed Company manual. The manual is available through the Internet at http://wallstreet.cch.com/MKT/CompanyGuide/.
Board Leadership Structure
The Board does not have an express policy regarding the separation of the roles of Chief Executive Officer and Board Chairman assingle reverse stock split ratio) provides the Board believes itwith maximum flexibility to achieve the purposes of a reverse stock split and, therefore, is in the best interests of the Company to makeand its stockholders.
If, following stockholder approval of this proposal, the Board determines that determination based onit is the position and directionbest interests of the Company and its stockholders to effect the membershipreverse stock split, the Board would determine the reverse stock split ratio (within the approved range) and authorize the filing of the Board.applicable amendment to our Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware reflecting the reverse stock split. The text of the form of amendment to the Second Amended and Restated Certificate of Incorporation is set forth in Appendix A to this proxy statement. However, such text is subject to amendment to include such changes as may be required by the office of the Secretary of State of the State of Delaware or as the Board deems necessary and advisable to effect the reverse stock split of the Common Stock.
If, following stockholder approval of this proposal, the Board elects to effect the proposed reverse stock split, then except for adjustments that may result from the treatment of fractional shares as described below, each stockholder will hold the same percentage of outstanding Common Stock immediately following the reverse stock split as such stockholder held immediately prior to the reverse stock split. The par value of the Common Stock would remain unchanged at $0.005 per share.
Our Board does not intend for the reverse stock split transaction to be the first step in a series of plans or proposals of a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Reasons for the Reverse Stock Split
NYSE American Requirement for Continued Listing
Background: As a direct result of the NYSE Notice, our Board’s primary objective in asking for authority to effect a reverse stock split is to increase the per-share trading price of the Common Stock on the NYSE American.
As a result of this NYSE Notice, the Board believes that it is no longer a mere option for our stockholders to approve a reverse stock split, but a financial necessity. The only way to help continue our listing on the NYSE American is to effect a stock split that would sufficiently raise the trading price for a sustained period to avoid NYSE American delisting.
Potential Adverse Effects of Delisting: The Board has not designatedconsidered the potential harm to us of a lead independent director. Rick D. Kasch servesdelisting from NYSE American and believes that delisting from the NYSE American would materially and adversely affect us, including as follows:
• we would be forced to seek to be traded on a less recognized or accepted exchange or market such as the Company’s Chief Executive Officer, President, and ChairmanOTC Bulletin Board or the “pink sheets;”
• the trading price of the Board. As Chief Executive OfficerCommon Stock would be adversely affected, including an increased spread between the “bid” and President, Mr. Kasch“asked” prices quoted by market makers;
• the liquidity and marketability of shares of the Common Stock would be adversely affected, thereby reducing the ability of holders of the Common Stock to purchase or sell our shares as quickly and as inexpensively as they have done historically (if our stock is involvedtraded as a “penny stock,” transactions in our Common Stock would be more difficult and cumbersome);
• our ability to access capital on terms favorable to us (or at all) would be adversely affected, as companies trading on the OTC Bulletin Board or “pink sheets” are viewed as less attractive investments with materially higher associated risks, such that existing or prospective institutional investors may be less interested in, or prohibited from, investing in the day-to-day operationsCommon Stock (which may also cause the market price of the CompanyCommon Stock to decline);
• our relationships with vendors and customers may be adversely affected, as wellthey may perceive our business less favorably, which would have a detrimental effect on our relationships with these parties.
Further, if we are required to move our Common Stock listing to the OTC Bulletin Board, or “pink sheets,” we will no longer be deemed a “covered security” under Section 18 of the Securities Act, and as providing strategic guidance ona result, we will lose our exemption from certain state securities regulations. Among other things, this means that granting equity incentives to our employees will be more difficult.
Board Discretion to Implement the Company’s operations on an as-needed basis. The Board believes Mr. Kasch’s experience, knowledge, and connections inReverse Stock Split
If the oil and gas industry are valuable in his operational role as President and Chief Executive Officer, as well as in his oversight role as Chairmanreverse stock split is approved by our stockholders at the Board level.
Board’s Role andAnnual Meeting, the Role of the Audit Committee in Risk Oversight
While management is charged with the day-to-day management of risks that Enservco faces,actual reverse stock split will be effected, if at all, only upon a subsequent determination by the Board of Directors and audit committee have been responsible for oversight of risk management. The full Board andthat the audit committee have responsibility for general oversight of risks facingreverse stock split (with the Company. Specifically, the audit committee will review and assess the adequacy of Enservco’s risk management policies and procedures with regardactual reverse stock split exchange ratio to identification of Enservco’s principal risks, both financial and non-financial, and review updates on these risks from the Chief Financial Officer and the Chief Executive Officer. The audit committee will also review and assess the adequacy of the implementation of appropriate systems to mitigate and manage the principal risks.
Review and Approval of Transactions with Related Parties
On May 29, 2013,be determined by the Board adopted a policy requiring that disinterested directors approve transactions with related parties which are not market-based transactions. The Board of Directors had been following this policy on an informal basis before. Generally,within the Board of Directors will approve a transaction only to the extent the disinterested directors believe that the transactionstockholder-approved range, as described above) is in the best interests of Enservcothe Company and its terms are fairstockholders at the time. Such determination will be based upon many factors, including existing and reasonable (in the judgmentexpected marketability and liquidity of the disinterested directors)Common Stock, prevailing market conditions and the likely effect of the reverse stock split on the market price of the Common Stock. Notwithstanding approval of the proposed reverse stock split by the stockholders, the Board may, in its sole discretion, abandon the Amendment and determine prior to Enservco.the effectiveness of any filing with the Delaware Secretary of State not to effect the reverse stock split. If the Board fails to implement the reverse stock split after stockholder approval, further stockholder approval would thereafter be required prior to implement any reverse stock split.
Audit CommitteeEffects of the Reverse Stock Split
Maintenance of Ownership Percentage: If the reverse stock split is approved and effected, each stockholder will own a reduced number of shares of Common Stock. This will affect all of our stockholders uniformly and would not affect any stockholder’s percentage ownership in the Company, except to the extent that the reverse stock split results in a stockholder owning a fractional share, as described below. The number of stockholders of record would not be affected by the reverse stock split.
Voting Rights: Proportionate voting rights and other rights of the holders of the Common Stock would not be affected by the reverse stock split, other than as a result of rounding up each fractional share amount to the next whole share amount, as described below. For example, a holder of 1% of the voting power of the outstanding shares of the Common Stock immediately prior to the reverse stock split would continue to hold 1% of the voting power of the outstanding shares of Common Stock after the reverse stock split, regardless of the exchange ratio chosen by the Board.
Equity Incentive Plans: All shares of the Common Stock subject to outstanding equity awards (including stock options and stock appreciation rights) under our 2016 Plan and our 2010 Plan (collectively, with the 2016 Plan, the “Plans”) and the number of shares of Common Stock which have been authorized for issuance under the Plans but as to which no equity awards have yet been granted or which have been returned to respective Plan pools upon cancellation or expiration of such equity awards, will be converted on the effective date of the reverse stock split in proportion to the reverse split ratio of the reverse stock split (subject to adjustment for fractional interests). In addition, the exercise price of outstanding stock awards will be proportionately increased such that approximately the same aggregate price will be required to be paid after the reverse stock split as immediately preceding the reverse stock split. No fractional shares with respect to the shares subject to the outstanding equity awards (including stock options and stock appreciation rights) under our Plans will be issued following the reverse stock split. Therefore, if the number of shares subject to any outstanding equity awards under our Plans immediately before the reverse stock split is not evenly divisible (in other words, it would result in a fractional interest following the reverse stock split), the number of shares of Common Stock subject to such equity award (including upon exercise of stock options and stock appreciation rights) will be rounded up to the nearest whole number. This will result in an increase to the proportion of shares reserved for issuance under our Plans to the number of authorized shares of Common Stock following the reverse stock split.
As of May 5, 2020, there were options to purchase 1,460,667 shares outstanding, 926,666 options had been exercised pursuant to the 2016 Plan, and 1,395,833 Restricted Stock Award shares outstanding under the 2016 Plan. As of May 5, 2020, there were options to purchase 274,666 shares which remain outstanding under the 2010 Plan.
Summary Table Regarding the Effects of the Reverse Stock Split
The following table contains approximate information relating to the Common Stock based upon certain reverse stock split ratios within the range that has been submitted for stockholder approval, and based on share information as of May 5, 2020.
Pre-Reverse Split | Post-Split (1:10) | Post-Split (1:25) | |
Total Authorized Shares of Common Stock | 100,000,000 | 100,000,000 | 100,000,000 |
Outstanding Shares of Common Stock | 55,612,829 | 5,561,283 | 2,224,513 |
Treasury Stock | 103,600 | 10,360 | 4,144 |
Outstanding Stock Options and Warrants | 2,390,333 | 239,033 | 95,613 |
No fractional shares of the Common Stock will be issued in connection with the proposed reverse stock split. Holders of Common Stock who would otherwise receive a fractional share of Common stock pursuant to the reverse stock split will have their fractional shares rounded up to the nearest whole share amount, as explained more fully below.
The Common Stock is currently registered under Section 12(b) of the Exchange Act, and the Company is subject to the periodic reporting and other requirements of the Exchange Act. The reverse stock split would not affect the registration of the Common Stock under the Exchange Act. After the reverse stock split, the Common Stock would continue to be reported on the NYSE American under the symbol “ENSV.”
Certain Risks and Potential Disadvantages Associated with the Reverse Stock Split
If the reverse stock split is implemented, some stockholders may consequently own less than one hundred shares of the Common Stock. A purchase or sale of less than one hundred shares (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own less than one hundred shares following the reverse stock split may be required to pay modestly higher transaction costs should they then determine to sell their shares in the Company.
The effect of the reverse stock split upon the market prices for the Common Stock cannot be accurately predicted. However, there is a risk of decreases in stock price performance in the near-term trading period after effectiveness of the reverse stock split. In particular, there is no assurance that the price per share of the Common Stock after the reverse stock split will increase in a manner directly proportionate to our reverse stock split ratio so as to cause our market capitalization (and the value of our stockholders’ respective Common Stock holdings) to remain the same. Further, there can be no assurance that the market price of the Common Stock immediately after the proposed reverse stock split will be maintained for any period of time. Even if an increased share price can be maintained, the reverse stock split may not achieve the other desired results which have been outlined above. Moreover, because some investors may view a reverse stock split negatively, there can be no assurance that approval of the reverse stock split will not adversely impact the market price of the Common Stock.
In addition, if the reverse stock split is implemented, we cannot assume nor conclude that the Common Stock will be more attractive to investors or that the liquidity of the Common Stock will increase since there would be a reduced number of shares outstanding after the reverse stock split.
Effective Date
If the proposed reverse stock split is approved at our Annual Meeting and the Board elects to proceed with a reverse stock split within the stockholder-approved range, the reverse stock split would become effective as of the filing (the “Effective Time”) of the applicable certificate of amendment to our Certificate of Incorporation with the office of the Secretary of State of the State of Delaware. Except as explained below with respect to fractional shares, at the Effective Time, all shares of the Common Stock issued and outstanding immediately prior thereto will be, automatically and without any action on the part of the stockholders, combined and converted into new shares of Common Stock in accordance with the reverse stock split ratio determined by the Board (within the approved range).
If the Board elects to effect a reverse stock split, before we file the amendment to our Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, we intend to issue a press release announcing the terms, including the reverse stock split ratio, as well as the effective date of the reverse stock split.
Exchange of Stock Certificates
As soon as practicable after the effective date of the reverse stock split, stockholders will be notified that the reverse stock split has been effected. Computershare will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of pre-split shares will be asked to surrender to the exchange agent certificates representing pre-split shares in exchange for certificates representing post-split shares in accordance with the procedures to be set forth in a letter of transmittal that will be delivered to our stockholders. No new certificates will be issued to a stockholder until the stockholder has surrendered to the exchange agent his, her or its outstanding certificate(s) together with the properly completed and executed letter of transmittal. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM FROM OUR EXCHANGE AGENT. STOCKHOLDERS ARE ENCOURAGED TO PROMPTLY SURRENDER CERTIFICATES TO THE EXCHANGE AGENT FOLLOWING RECEIPT OF TRANSMITTAL FORMS IN ORDER TO AVOID HAVING SHARES POSSIBLY BECOMING SUBJECT TO ESCHEAT LAWS.
Stockholders whose shares are held by their stockbroker do not need to submit old share certificates for exchange. These shares will automatically reflect the new quantity of shares based on the selected reverse stock split ratio. Beginning on the effective date of the reverse stock split, each certificate representing pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares.
Treatment of Fractional Shares
In lieu of any fractional shares to which a holder of the Common Stock would otherwise be entitled as a result of the reverse stock split, we shall round up each such fractional shares to the nearest whole share amount. We expect that this will result in a slight increase in the overall number of shares outstanding after the split than if we were to elect payment of cash for fractional shares, but the effect on stockholders’ respective ownership percentages will be negligible.
Discretionary Authority of the Board to Abandon the Reverse Stock Split
The Board reserves the right to abandon the reverse stock split without further action by our stockholders at any time before the effectiveness of Directorsthe Amendment, even if the reverse stock split has been authorized by our stockholders. By voting in favor of the reverse stock split, you are expressly also authorizing our Board to determine not to proceed with, and abandon, the reverse stock split, if it should so decide.
No Appraisal Rights
Under the Delaware General Corporation Law, our stockholders do not have a right to dissent and are not entitled to appraisal rights with respect to the proposed Amendment to effect the reverse stock split, and we will not independently provide our stockholders with any such rights.
Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following discussion is a general summary of certain U.S. federal income tax consequences of the reverse stock split that may be relevant to U.S. Holders (as defined below) of the Common Stock, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws, are not discussed. This discussion is based on the Code, Treasury regulations promulgated thereunder (the “Treasury Regulations”), judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a U.S. Holder of the Common Stock. We have not sought and will not seek an opinion of counsel or any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the reverse stock split.
This discussion is limited to U.S. Holders that hold the Common Stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a U.S. Holder’s particular circumstances, including the impact of the alternative minimum tax and the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to U.S. Holders subject to special rules, including, without limitation:
• U.S. expatriates and former citizens or long-term residents of the United States;
• U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
• persons holding the Common Stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;
• banks, insurance companies, and other financial institutions;
• real estate investment trusts or regulated investment companies;
• brokers, dealers or traders in securities;
• corporations that accumulate earnings to avoid U.S. federal income tax;
• partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
• tax-exempt organizations or governmental organizations;
• persons deemed to sell the Common Stock under the constructive sale provisions of the Code;
• persons holding the Common Stock as “qualified small business stock” within the meaning of Section 1202 of the Code;
• persons subject to special tax accounting rules as a result of any item of gross income with respect to the Common Stock being taken into account in an “applicable financial statement” (as defined in the Code);
• persons who hold or receive the Common Stock pursuant to the exercise of any employee stock option or otherwise as compensation; and
• tax-qualified retirement plans.
If an entity treated as a partnership for U.S. federal income tax purposes holds the Common Stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding the Common Stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. U.S. HOLDERS OF THE COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
For purposes of this discussion, a “U.S. Holder” is any beneficial owner of the Common Stock that, for U.S. federal income tax purposes, is or is treated as any of the following:
• an individual who is a citizen or resident of the United States;
• a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;
• an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
• a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.
The reverse stock split should constitute a tax-free “recapitalization” for U.S. federal income tax purposes pursuant to Section 368(a)(1)(E) of the Code. As a result, a U.S. Holder generally should not recognize gain or loss upon the reverse stock split. A U.S. Holder’s aggregate tax basis in the shares of the Common Stock received pursuant to the reverse stock split should equal the aggregate tax basis of the shares of the Common Stock surrendered, and such U.S. Holder’s holding period in the shares of the Common Stock received should include the holding period in the shares of the Common Stock surrendered. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the shares of the Common Stock surrendered to the shares of the Common Stock received pursuant to the reverse stock split. U.S. Holders of shares of the Common Stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
Approval by the Stockholders of the Proposal
Approval of the proposal to approve and adopt the Amendment requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Common Stock on such proposal.
OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE AMENDMENT TO THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF THE COMMON STOCK.
CORPORATE GOVERNANCE
The Board is committed to sound and effective governance practices, which help us compete more effectively, sustain our success, and build long-term stockholder value. The Board reviews the Company's governance policies and business strategies, and advises and counsels the executive officers who manage the Company.
Meetings of the Board and Committees; Attendance at the Annual Meeting
The Board held four formal in-person or telephonic meetings during the fiscal year ended December 31, 2019 and acted by unanimous consent four times during 2019. The incumbent directors each attended 100% of the board meetings held during 2019. In addition, regular communications were maintained throughout the year among all of the officers and directors of the Company.
Board members are not required to attend the annual stockholder meeting. The Company last held an annual meeting of stockholders on June 3, 2019, and six Board members were in attendance, either in person or telephonically.
Committees of the Board
Audit Committee
The Board established the Audit Committee on May 29, 2013, in accordance with Section 3(a)(58)(A) of the Exchange Act and then NYSE MKT Rule 803(B) as modified for smaller reporting companies by then NYSE MKT Rule 801(h). The Audit Committee was established to oversee the Company’s corporate accounting and financial reporting processes and audits of its financial statements.
The members of our Audit Committee are Messrs. Oppenheim, Jolly,Herlin and Herlin.Jolly. Mr. OppenheimHerlin is chairman of the Audit Committee. On June 20, 2015,May 1, 2017, and each subsequent Audit Committee meeting thereafter, the Board of Directors determined that Mr. Oppenheim,Herlin and Mr. Jolly and Mr. Herlin were independent under SEC Rule 10A-3(b)(1) and NYSE MKTAmerican Rule 802(a). The Board has determined that all current members of the Audit Committee are “financially literate” as interpreted by the Board in its business judgment. No members of the audit committeeAudit Committee have been qualified as an audit committee financial expert, as defined in the applicable rules of the SEC, because the Board believes that the Company’s status as a smaller reporting company does not require expertise beyond financial literacy. The Audit Committee held fivefour meetings during the year ended December 31, 2015.2019.
The Audit Committee meets quarterly with our independent accountants and management to review the scope and results of the annual audit and to review our financial statements and related reporting matters prior to the submission of the financial statements to the Board. In addition, the committeeAudit Committee meets with the independent auditors at least on a quarterly basis to review and discuss the annual audit or quarterly review of our financial statements.
The Audit Committee has reviewed and discussed the audited financial statements appearing in the Company’s annual report on Form 10-K for the year ended December 31, 2015, with Enservco management. The Audit Committee has discussed with the Company’s independent auditors (EKS&H LLLP, “EKSH”) the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T and has received written disclosures from EKSH required by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) regarding EKSH’s independence. The Audit Committee has discussed EKSH’s independence with representatives of EKSH. Based on that review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included with the Company’s Form 10-K for the fiscal year ended December 31, 2015.
We have establishedadopted an Audit Committee Charter that deals with the establishment of the Audit Committee and sets out its duties and responsibilities. The Audit Committee reviews and reassesses the adequacy of the Audit Committee Charter on an annual basis. The Audit Committee Charter is available on our Company website at http://www.enservco.com.
No Nominating Committee
Enservco has not established a nominating committee. Under the NYSE MKTAmerican Rule 804(a), if there is no nominating committee, nominations must be made by a majority of the independent directors. In accordance with this rule, the independent members of the Board are responsible for identifying and nominating appropriate persons to become members of the Board, as necessary. In identifying Board candidates, it is the Company's goal to identify persons who it believes have appropriate expertise and experience to contribute to the oversight of the Company, while also reviewing other appropriate factors. Enservco believes that this method of identifying, evaluating, and nominating members to join the Board is appropriate in light of the NYSE MKT rules on point and based on the fact that Enservco remainsgiven Enservco's status as a smaller reporting company and (as described below) nominating decisions are made by the independent directors. for SEC purposes.
In order to comply with the NYSE MKTAmerican rules, however, Enservco has adopted a nomination procedure in its Bylaws by which eligible stockholders may nominate a person to the Board of Directors.Board. Such procedure was amended by the Board of Directors on March 16, 2015. That procedure is as follows:
Enservco will consider all recommendations from any person (or group) who holds and has (or collectively if a group have) held more than 5% of Enservco’s voting securities for longer than one year. Any stockholder who desires to submit a nomination of a person to stand for election of directors at the next annual or special meeting of the stockholders at which directors are to be elected must submit a notification of the stockholder’s intention to make a nomination (“Notification”) to Enservco’s corporate secretary by the date mentioned in the most recent proxy statement or information statement under the heading “Proposal From Stockholders” as such date may be amended in cases where the annual meeting has been changed as contemplated in SEC Rule 14a-8(e), Question 5, and in that notification must provide the following additional information to Enservco:
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Name, address, telephone number and other methods by which Enservco can contact the stockholder submitting the Notification and the total number of shares beneficially owned by the stockholder (as the term “beneficial ownership” is defined in SEC Rule 13d-3);
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If the stockholder owns shares of Enservco’s Common Stock other than on the records of Enservco, the stockholder must provide evidence that he or she owns such shares (which evidence may include a current statement from a brokerage house or other appropriate documentation);
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Information from the stockholder regarding any intentions that he or she may have to attempt to make a change of control or to influence the direction of Enservco, and other information regarding the stockholder any other persons associated with the stockholder that would be required under Items 4 and 5 of SEC Schedule 14A were the stockholder or other persons associated with the stockholder making a solicitation subject to SEC Rule 14a-12(c); and
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All information required by Item 7 of SEC Schedule 14A with respect to the proposed nominee, which shall be in a form reasonably acceptable to Enservco.
No Compensation Committee
EnservcoThe Board established the Compensation Committee in November, 2017. The Board has not established aappointed Messrs. Jolly, Herlin, and Murphy to the Compensation Committee, each of whom the Board has determined is independent pursuant to the independence tests under the NYSE American Company Guide. The Compensation Committee is charged with reviewing and approving the terms and structure of the compensation committee. Enservcoof the Company’s executive officers. The Compensation Committee held three meetings during the year ended December 31, 2019.
Pursuant to the NYSE American rules, the independent members of Enservco's Board determine the compensation of our Chief Executive Officer. The Board believes that this is appropriate in light of the NYSE MKT rules on point and based on the factgiven that Enservco remainsis a smaller reporting company and (as described below)these compensation decisions are made by the independent directors. The process and procedures for establishing executive compensation are discussed in the "Executive Compensation" and "Compensation of Directors" sections located elsewhere in this proxy statement.
We have adopted a Compensation Committee Charter that provides for the establishment of the Compensation Committee and sets out its duties and responsibilities. The Compensation Committee reviews and reassesses the adequacy of the Compensation Committee Charter on an annual basis. The Compensation Committee Charter is available on our Company website at http://www.enservco.com.
Board Leadership Structure
The Board does not have an express policy regarding the separation of the roles of Chief Executive Officer and Board Chairman as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board has not designated a lead independent director. The roles of Chief Executive Officer and Chairman are presently separated, and Richard A. Murphy serves as the Chairman of the Board.
Board’s Role and the Role of the Audit Committee in Risk Oversight
While management is charged with the day-to-day management of risks that Enservco faces, the Board and Audit Committee are responsible for oversight of risk management. The Board and the Audit Committee have responsibility for general oversight of risks facing the Company. Specifically, the Audit Committee reviews and assesses the adequacy of Enservco’s risk management policies and procedures with regard to identification of Enservco’s principal risks, both financial and non-financial, and review updates on these risks from our Chief Financial Officer and Chief Executive Officer. The Audit Committee also reviews and assess the adequacy of the implementation of appropriate systems to mitigate and manage the principal risks.
Director Independence
The Company utilizes the definition of “independent director” as it is set forth in Section 803A(2) of the NYSE American LLC Company Guide. Further, the Board considers all relevant facts and circumstances in its determination of independence of all members of the Board (including any relationships). Based on the foregoing criteria, Messrs. Behrens, Haymons, Herlin, Jolly, and Murphy are considered independent directors and have been confirmed as such by the Board.
Further information regarding enhanced independence standards applicable to directors who serve on the Company's Audit Committee, and directors who participate in the determination of the compensation of our Chief Executive Officer, can be found in the Corporate Governance section elsewhere in this proxy statement, under the headings "Audit Committee" and "No Compensation Committee".
Board of Directors – Composition, Qualifications and Attributes; Board Diversity
The Company’s Board seeks to ensure that it is composed of members whose particular experience, qualifications, attributes, and skills, when taken together, will allow the Board to satisfy its oversight obligations effectively. The Company does not currently have a separate nominating (or similar) committee and, as further discussed above, given the Company’s small size, the Company does not yet believe such a committee is necessary. However, as the Company grows, it may consider establishing a separate nominating committee.
Under the NYSE MKT Rule 805(a)American LLC Company Guide 804(a), if there is no compensationnominating committee, compensation of the CEO (being Mr. Kasch)nominations must be determined, or recommended to the Board for determination,made by a majority of independent directors on its Board of Directors. The CEO may not be present during voting or deliberations of his compensation.
NYSE MKT Rule 805(c)(1) enhances the independence requirements for directors in connection with compensation decisions by requiring that the directors “consider all factors specifically relevant to determining whether a director has a relationship to the listed company which is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member.” The Board of Directors determined that Messrs. Oppenheim, Jolly and Herlin are independent under this requirement. Their independence is considered at each audit committee meeting.
Compensation Consultant
Although NYSE MKT Rule 805(c)(3)(i) provides that a compensation committee may (in its discretion, not the discretion of the Board) retain compensation consultants, independent legal counsel, and other advisors, the independent directors did not retain an independent compensation consultant during the fiscal year 2015. Rather than retaining an independent consultant, on January 15, 2015, the Board of Directors directed Burns, Figa & Will, P.C. (the Company’s outside legal counsel at the time), with the guidance of the independent directors, to create a compensation study to aid the independent directors in reviewing and analyzing the structure and terms of the compensation payable to the Company’s directors and executive officers based on public data of peer group companies.
On February 5, 2016, the independent directors (acting in lieu of a compensation committee) determined to retain an independent compensation consultant. The independent directors subsequently retained Mr. Arlen Brammer as a compensation consultant. As part of Mr. Brammer’s engagement, the independent directors requested that Mr. Brammer develop a peer group of companies, perform analyses of competitive performance and compensation levels for the peer group for the three highest compensated executives and independent directors, and employment contract terms. Mr. Brammer, who reports directly to the independent directors and not to our management, is independent from us, has not provided any services to us other than to the independent directors, and receives compensation from us only for services provided to the independent directors. Mr. Brammer’s retention as a compensation consultant has not raised any conflict of interest under NYSE MKT Rule 805(c)(4).
Mr. Brammer’s report stated that, compared toIn accordance with this rule, the peer group, our top three executives were provided direct compensation that falls in the lowest quartile of the peer group. Based on industry conditions and trends, the report recommended no immediate increase in pay. The report also recommended utilization of equity or stock appreciation rights for current bonuses. Finally, with respect to long-term incentives (“LTI”), the report recommended the grant of restricted equity tied in part or in whole to the attainment of performance goals. The report recommended that the long term incentive awards should be similar to those in the peer companies. The report also recommended minor adjustments to the terms of the employment contracts with the named executive officers.
The Board and independent members of the Board of Directors conferred with regardsare responsible for identifying and appointing appropriate persons to Mr. Brammer’s report and on May 5, 2016 granted options to the Company’s NEO’s as reported in the Company’s Current Report on Form 8-K dated May 5, 2016 and filed with the SEC on May 11, 2016. Subsequently, a special committeebecome members of the Board, as necessary. In identifying Board candidates, it is the Company's goal to identify persons who it believes have appropriate expertise and experience to contribute to the oversight of Directors was appointedthe Company, while also reviewing other appropriate factors. Enservco believes that this method of identifying, evaluating, and nominating members to join the Board is appropriate given Enservco's status as a smaller reporting company.
The Board does not have a formal diversity policy. The Board considers candidates that will make the Board as a whole reflective of a range of talents, skills, diversity, and experience.
Related Party Transactions Policy and Procedures
The Board has adopted a written policy that establishes a framework for the review and approval or ratification of transactions between the 2010 Stock Incentive PlanCompany and awards grantedits related parties and/or their respective affiliated entities. We refer to this policy as our "Related Party Transactions Policy". The Related Party Transactions Policy is available on our website at www.enservco.com.
Pursuant to this policy, "Related Parties" includes our executive officers and directors, any nominee for director, beneficial owners of 5% or greater of the Company's voting securities, and the immediate family members any of the foregoing persons. An "Immediate Family Member" of a Related Party means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, or any person sharing a household with the Related Party, other than a tenant or employee.
A "Related Party Transaction" includes:
any transaction or relationship directly or indirectly involving a Related Party that would need to be disclosed under Item 404(a) of SEC Regulation S-K;
any material amendment or modification to an existing Related Party Transaction; and
any transaction deemed by the 2010 Stock Incentive Plan in responsedirectors or the Company's legal counsel to certain claims inbe a letter dated June 14, 2016 from attorney purporting to represent a stockholderRelated Party Transaction.
Under the Related Party Transactions Policy, Related Party Transactions are prohibited, unless approved or ratified by the disinterested directors of the Company. On July 7, 2016, the special committee approved the rescission (and forfeiture by the holders)A Related Party Transaction entered into without pre-approval is not invalid, unenforceable, or in violation of the certain option awardspolicy, provided that such transaction is brought to granted in excessthe disinterested directors as promptly as reasonably practical after it is entered into, and such transaction is ratified.
The Company's executive officers, directors, and nominees for director are required to promptly notify the Board and the Company's legal counsel of any proposed Related Party Transaction. The Company's disinterested directors will review such transaction, considering all relevant facts and circumstances, including the commercial reasonableness of the 2010 Stock Incentive Plan limits.terms, the benefit and perceived benefit (or lack thereof) to the Company, opportunity costs of alternate transactions, the materiality and character of the Related Party's direct or indirect interest, and the actual or apparent conflict of interest of the Related Party. The special committee also approveddisinterested directors may not approve or ratify a Related Party Transaction unless they have determined that upon consideration of all relevant information, the grantproposed Related Party Transaction is in, or not inconsistent with, the best interests of optionsthe Company and its stockholders.
The following sets forth information regarding transactions between the Company (and its subsidiaries) and its officers, directors, nominees, and significant stockholders since January 1, 2018 or otherwise outstanding as of the Record Date.
Subordinated Loan Agreement entered into with Cross River Partners, L.P.
On June 28, 2017, the Company entered into a subordinated loan agreement (the “Subordinated Loan Agreement”) with Cross River Partners, L.P., ("Cross River"), which documents the Company’s obligations to Cross River with respect to the financial accommodations made to the Company by Cross River in connection with the Tenth Amendment to the Company Amended and Restated Revolving Credit and Security Agreement with PNC Bank. In connection with the Subordinated Loan Agreement, on June 28, 2017, the Company delivered two subordinated promissory notes to Cross River in the amounts of $1 million and $1.5 million, respectively (each a “Note”, collectively, the “Notes” and, together with the Subordinated Loan Agreement, the “Subordinated Loan Documents”). The Notes each have a maturity date of June 28, 2022 (the “Maturity Date”) and bear interest at a fixed per annum rate of 10.0%.
On August 10, 2017, the Company entered into the Loan and Security Agreement with East West Bank (the "2017 Credit Agreement"), which replaced the 2014 Credit Agreement. In relation to the 2017 Credit Agreement, on August 7, 2017, Cross River entered into a subordination agreement with East West Bank. The Company began making quarterly payments of accrued interest under each Note on July 1, 2017 and will continue making such interest only payments until all of the Company’s obligations under the 2017 Credit Agreement have been satisfied. Once all of the Company’s obligations under the 2017 Credit Agreement have been satisfied, the Company will begin making quarterly payments of principal (based on an amortization schedule of 10 years) plus interest until the Maturity Date. On the Maturity Date, all amounts still outstanding under the Notes will become due and payable. The Company has the right to prepay the outstanding balance of all principal and interest of either or both Notes, in whole, subject to a prepayment penalty equal to the stockholders approval of a new stock incentive plan, seetotal interest that would have been due and payable on the description below under the heading “Narrative Disclosure to Summary Compensation Table – Forfeiture and Grant of Stock Options.”next two quarterly payments following such prepayment.
In connection with the Subordinated Loan Agreement, on June 28, 2017, the Company issued Cross River two five-year warrants (the “Warrants”) to buy an aggregate total of 1,612,902 shares of the Common Stock at an exercise price of $0.31 per share, the average closing price of the Common Stock for the 20 day period ended May 11, 2017. These warrants were exercised on June 29, 2018. Proceeds from the exercise of the warrants in the amount of $500,000 were used to reduce the subordinated debt balance.
On November 11, 2019 Enservco and Cross River Partners, L.P. entered into an Amended and Restated Subordinated Loan Agreement that increased the principal of the subordinated debt by $500,000 from $2.0 million to $2.5 million and provided Cross River Partners with an additional five-year warrant, fully vested, to purchase 625,000 shares of the common stock at an exercise price of $0.20 per share.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Enservco’s directors and officers and any persons who own more than ten percent of Enservco’s equity securities, to file reports of ownership and changes in ownership with the SEC. All directors, officers and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports filed. Based solely on our review of the copies of Forms 3, 4 and any amendments thereto furnished to us during the fiscal year completed December 31, 2019, we believe that during the Company’s 2019 fiscal year all of our named executive officers, directors, and greater than ten percent stockholders filed the required reports on a timely basis under Section 16(a) of the Exchange Act.
Code of Business Conduct and Whistleblower Policy
On July 27, 2010, our Board of Directors adopted a Code of Business Conduct and Whistleblower Policy (the “Code of Conduct”) which the Board updated on May 29, 2013. The Code of Conduct applies to all of our officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Our Code of Conduct establishes standards and guidelines to assist our directors, officers, and employees in complying with both the Company’s corporate policies and with the law and is posted at our website: www.enservco.com. Additionally, a copy of our Code of Conduct was filed as an exhibit to our Current Report on Form 8-K dated July 27, 2010 and the amended Code of Conduct was filed as an exhibit to a Current Report on Form 8-K dated May 29, 2013.
Insider Trading Policy
On June 22, 2016, our Board of Directors approved a new Insider Trading Policy. The Insider Trading Policy applies to all of our officers, directors, and employees. Our Insider Trading Policy is posted at our website: www.enservco.com. Additionally, a copy of our Insider Trading Policy was filed as an exhibit to our Current Report on Form 8-K dated June 22, 2016.
Policy on Trading Blackout Period
On August 16, 2013, our Board of Directors adopted athe Company's Policy on Trading Blackout Periods; Benefits Plans; and Section 16 Reporting (the “Blackout Policy”), which the boardBoard amended on June 25, 2015. The Blackout Policy applies to all of our officers, directors, and employees. Our Blackout Policy is posted at our website www.enservco.com. In addition, a copy of Blackout Policy was filed as an exhibit to our Current Report on Form 8-K, dated June 25, 2015.
Stockholder Communications to the Boardwith Directors
Stockholders whoand other interested parties may communicate with any of our independent directors, including committee chairs, by using the following address:
Enservco Corporation
Board of Directors
c/o Corporate Secretary
999 18th Street, Suite 1925N
Denver, CO 80202
The Corporate Secretary of the Company reviews communications to the independent directors and forwards the communications to the independent directors as appropriate. All such communications should identify the author as a stockholder and clearly state whether the intended recipients are interested in communicating directly withall members of the Board or the Board as a group, may do so by writing directly to thejust certain specified individual Board member c/o Secretary, 501 South Cherry Street, Suite 1000, Denver, CO 80246. The Company’sdirectors. Our Corporate Secretary will forwardmake copies of all such communications directly to the appropriate Board member. If the correspondence is not addressed to the particular member, the communication will be forwarded to a Board member to bring to the attention of the Board. The Company’s Secretary will review all communications before forwardingand circulate them to the appropriate Board member.
Meetingsdirector or directors. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee. Communications that pertain to non-financial matters will be forwarded promptly to the appropriate committee. Certain items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product related inquiries; junk mail or mass mailings; resumes or other job related inquiries; spam and Committees; Attendance at the Annual Meetingoverly hostile, threatening, potentially illegal, or similarly unsuitable communications.
EXECUTIVE OFFICERS
The Boardage, business experience, and current position of Directorseach person who currently serves as an executive officer of Enservco are as follows.
Ian E. Dickinson, Age 49 - Biographical information for Mr. Dickinson is provided in the section “Proposal No. 1 – Election of Directors” elsewhere in this proxy statement.
Marjorie Hargrave, age 56 - Ms. Hargrave previously provided consulting services to various companies in the areas of finance, administration, accounting, risk mitigation, human resources, and investor relations from 2016 until joining the Company in 2019. Prior to her consulting work, Ms. Hargrave served as Chief Financial Officer and Senior Vice President of Strategic Planning for CTAP, LLC, a privately held seven formal in-person or telephonic meetings during the fiscal year ended December 31, 2015distributor of tubing and acted by unanimous consent seven times during 2015. The incumbent directors each attended 100% of the board meetings held during fiscal 2015. In addition, regular communications were maintainedcasing throughout the year among allUnited States, from 2010 to 2016. Ms. Hargrave also served as Chief Financial Officer of the officersHigh Sierra Energy, LP, a start-up energy company that focused on midstream acquisitions, from 2005 to 2009. Ms. Hargrave’s previous experience also includes management and directors of the Company.associate roles with Black Hills Corporation, Xcel Energy, and Merrill Lynch & Co. Ms. Hargrave earned a bachelor’s degree in economics from Boston University, and a master’s degree in economics from New York University.
Board members are not required to attend the annual stockholder meeting. The Company last held an annual meeting of stockholders in June 2015 and all Board members were in attendance, either in person or telephonically.Significant Employees
Board Member Nominee Selection Criteria There are no significant employees of Enservco other than its executive officers named above.
EXECUTIVE COMPENSATION
The Company believes that each of the persons nominated for reelection to the Board have the experience, qualifications, attributes and skills when taken as a whole will enable the Board of Directors to satisfy its oversight responsibilities effectively. With regard to the nominees (each of whom is currently a member of our Board) the following factors were among those considered that led to the Board’s conclusion that each would make valuable contributions to the Board:
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EXECUTIVE COMPENSATION
The following table sets out the compensation received for the fiscal years ended December 31, 20142019 and 20152018 in respect to each of the individuals who served as the Company’s chief executive officerofficers at any time during the last fiscal year, as well as the Company’s two most highly compensated executive officers (collectively referred to herein as the “NEOs”). The table does not include transactions subsequent to December 31, 2015. For a discussion of transactions subsequent to December 31, 2015, please see the discussion under the heading “Narrative Disclosure to Summary Compensation Table – Forfeiture and Grant of Stock Options”.2019.
Name and Principal Position | Fiscal Year | Salary | Bonus and Other | Stock Awards (1) | Option Awards (2) | Non-Equity Incentive Plan Compensation (12) | Non-Qualified Deferred Plan Compensation | All Other Compensation (3) | Total | ||||||||||||||
Ian E. Dickinson | 2019 | $ | 285,000 | $ | 142,500 | $ | 138,732 | (5) | $ | 71,679 | (4) | $ | - | $ | - | $ | 23,985 | $ | 661,896 | ||||
CEO and President | 2018 | $ | 274,904 | $ | 75,000 | $ | 189,406 | $ | 71,679 | $ | 142,500 | $ | - | $ | 22,900 | $ | 776,388 | ||||||
| Marjorie Hargrave(8) | 2019 | $ | 92,462 | $ | - | $ | 155,100 | (9) | $ | - | $ | - | $ | - | $ | 4,643 | $ | 252,205 | |||||
| Chief Financial Officer | 2018 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
Dustin Bradford (10) | 2019 | $ | 124,103 | $ | 61,250 | $ | - | $ | 3,551 | (11) | $ | - | $ | - | $ | 5,271 | $ | 194,175 | |||||
Former CFO and Treasurer | 2018 | $ | 170,385 | $ | 20,250 | $ | 187,680 | $ | 3,551 | $ | 61,250 | $ | - | $ | 19,874 | $ | 462,900 | ||||||
| Kevin Kersting (6) | 2019 | $ | 225,910 | $ | 78,750 | $ | 82,266 | $ | - | $ | - | $ | - | $ | 477 | $ | 387,403 | ||||||
| Former Chief Operating Officer | 2018 | $ | 129,808 | $ | - | $ | 306,360 | (7) | $ | - | $ | 78,750 | $ | - | $ | 146 | $ | 515,064 | |||||
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SUMMARY COMPENSATION TABLE(1) Stock awards reflect the grant date fair of the awards determined in accordance with ASC Topic 718. The assumptions and methodologies used in the calculations of these amounts are set forth in Note 10 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019. Under generally accepted accounting principles, compensation expense with respect to stock awards granted to our executive officers is generally recognized over the vesting periods applicable to the awards. The SEC disclosure rules require that we present stock award amounts in the applicable row of the table above using the grant date fair value of the awards granted during the corresponding year (regardless of the period over which the awards are scheduled to vest).
| (1) | Non-Equity | Non-Qualified | (2) | |||||||||||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||||||||||||
Name and | Fiscal | Bonus | Stock | Option | Plan | Plan | All Other | |||||||||||||||||||||||||||
Principal Position | Year | Salary | and Other | Awards | Awards | Compensation | Compensation | Compensation | Total | |||||||||||||||||||||||||
Rick D. Kasch | 2015 | $ | 260,466 | 85,000 | (3) | $ | - | $ | 249,423 | (4) | $ | - | $ | - | $ | 38,173 | $ | 633,062 | ||||||||||||||||
Chairman, CEO and President | 2014 | $ | 253,978 | - | $ | - | $ | - | $ | - | $ | - | $ | 41,838 | $ | 295,816 | ||||||||||||||||||
Austin Peitz | 2015 | $ | 165,193 | 165,000 | (5) | $ | - | $ | 190,036 | (6) | $ | - | $ | - | $ | 15,338 | $ | 535,567 | ||||||||||||||||
Senior Vice President of Field Operations | 2014 | $ | 188,132 | - | $ | - | $ | - | $ | - | $ | - | $ | 12,379 | $ | 200,511 | ||||||||||||||||||
Robert Devers | 2015 | $ | 175,000 | 50,000 | (7) | $ | - | $ | 166,282 | (8) | $ | - | $ | - | $ | 18,865 | $ | 410,147 | ||||||||||||||||
CFO and Treasurer | 2014 | $ | 161,923 | - | $ | - | $ | 85,110 | (9) | $ | - | $ | - | $ | 26,066 | $ | 273,099 | |||||||||||||||||
(1)(2) Amounts represent the calculated fair value of stock options granted to the named executive officers which vested during the year based on provisions of ASC 718-10,Stock Compensation.Compensation. See Note 92 to the consolidated financial statements set forth in theour Annual Report on Form 10-K for the fiscal year endingended December 31, 20152019 for a discussion regarding assumptions used to calculate fair value under the Black-Scholes–Merton valuation model.
(2)(3) Represents: (i) automobile expenses; (ii) health, life, dental and vision insurance premiums; and (iii)(ii) matching contributions to the Company’s 401(k) plan incurred on behalf of Mr. Kasch,Dickinson, Ms. Hargrave, Mr. PeitzKersting, and Mr. Devers by the Company.Bradford.
(3) Amount includes a discretionary cash bonus to Mr. Kasch in the amount of $85,000 granted in April 2015 after reviewing a compensation study prepared by Burns Figa & Will. The board of directors did not grant a discretionary bonuses in fiscal 2014 as it was awaiting conclusion of the above mentioned compensation study.
(4) Amount represents the calculated grant date fair value of stock options to purchase an aggregate of 210,000400,000 shares of common stock in April 2015 which vest one third on each anniversary through April 2018. As discussed under “Narrative Disclosure to Summary Compensation Table – Forfeiture and Grant ofCommon Stock Options”, Mr. Kasch entered into a letter agreement in July 2016 to forfeit options to purchase 110,000 shares of common stock.that vested during 2019.
(5) Amount includes (i) a discretionary cash bonusThis award is subject to Mr. Peitz inperformance conditions. If the amounthighest level of $75,000 granted in April 2015 after reviewing a compensation study prepared by Burns Figa & Will, and (ii) $90,000 of discretionary quarterly bonuses paid to Mr. Peitz pursuant to revised employment agreement effective April 1, 2015. The board of directors did not grant a discretionary bonuses in fiscal 2014 as it was awaiting conclusionall conditions are met, the value of the above mentioned compensation study. As partaward would be $227,430.
(6) Mr. Kersting was appointed our Chief Operating Officer on May 21, 2018.
(7) This award is subject to performance conditions. If the highest level of all conditions are met, the value of the revised employment agreement, Mr. Peitz agreed to reduce his base salary from $192,938 to $150,000.award would be $414,000.
(6)(8) Ms. Hargrave was appointed our Chief Financial Officer on July 24, 2019.
(9) This award is subject to performance conditions. If the highest level of all conditions are met, the value of the award would be $65,835.
(10) Mr. Bradford resigned as Chief Financial Officer on July 24, 2019.
(11) Amount represents the calculated grant date fair value of stock options to purchase an aggregate of 160,00016,667 shares of common stockCommon Stock which vested during 2019.
(12) There were no executive bonuses paid relating to 2019. The 2018 bonus represents 2018 short-term incentive bonuses earned in April 20152018 and paid subsequent to 2018. Sixty percent of the incentive was based on achieving an EBITDA target, which vest one thirdwas not met, 20% of the bonus was based on each anniversary through April 2018. As discussed under “Narrative Disclosure to Summary Compensation Table –Forfeiturea safety target which achieved 50% of the target, and Grant20% of Stock Options”, Mr. Peitz entered into a letter agreement in July 2016 to forfeit options to purchase 60,000 shares of common stock.the bonus was discretionary which was paid out at twice the allocated percentage amount.
(7) Amount includes a discretionary cash bonus to Mr. Devers in the amount of $50,000 granted in April 2015 after reviewing a compensation study prepared by Burns Figa & Will. The board of directors did not grant a discretionary bonuses in fiscal 2014 as it was awaiting conclusion of the above mentioned compensation study.
(8) Amount represents calculated fair value of stock options to purchase an aggregate of 140,000 shares of common stock in April 2015 which vest one third on each anniversary through April 2018. As discussed under “Narrative Disclosure to Summary Compensation Table – Forfeiture and Grant of Stock Options,” Mr. Devers entered into a letter agreement in July 2016 to forfeit options to purchase 40,000 shares of common stock.
(9) Amount represents calculated fair valueCompensation Committee. The Board established the Compensation Committee in November, 2017. The Board has appointed Messrs. Jolly, Herlin, and Murphy to the Compensation Committee, each of stock options to purchase an aggregate of 50,000 shares of common stock in January 2014 that vest one third on each anniversary through January 2017
Narrative Disclosure to Summary Compensation Table
The independent members ofwhom the Board of Directors acting in lieu of a compensation committee, are charged with reviewinghas determined is independent pursuant to the independence tests under the NYSE American Company Guide. The Compensation Committee reviews and approvingapproves the terms and structure of the compensation of the Company’s executive officers. During the fiscal year 2015, the Board of Directors directed its outside counsel to prepare a compensation report to aid the independent directors in reviewing and analyzing the structure and terms of the compensation payable to the Company’s directors and executive officers based on public data of peer group companies. During 2015, however, there were no compensation decisions to be made by the Board of Directors since the contracts for the named executive officers extended through June 30, 2016, as described below.
As discussed above, in February 2016, the Board of Directors engaged Mr. Arlen Brammer as an independent compensation consultant to prepare a compensation report for the independent members of the Board of Directors to consider in connection with reconsideration of the existing employment agreements with the named executive officers which extend through June 30, 2016 as described below.
The Company considers various factors when evaluating and determining the compensation terms and structure of its executive officers, including the following:
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1. The executive's leadership and operational performance and potential to enhance long-term value to the Company's stockholders; 2. The Company's financial resources, results of operations, and financial projections; 3. Performance compared to the financial, operational, and strategic goals established for the Company; 4. The nature, scope, and level of the executive's responsibilities; 5. Competitive market compensation paid by other companies for similar positions, experience, and performance levels; and 6. The executive's current salary, the appropriate balance between incentives for long-term and short-term performance. |
Company management is responsible for reviewing the base salary, annual bonus and long-term compensation levels for other Company employees, and the Company expects this practice to continue going forward. The entire Board of Directors remains responsible for significant changes to, or adoption, of new employee benefit plans.
The Company believes that the compensation environment for qualified professionals in the industry in which we operate is highly competitive. In order to compete in this environment, the compensation of our executive officers is primarily comprised of the following four components:
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■ Base salary;
■ Annual short-term incentive plan compensation (cash bonus awards);
■ Long-term incentive compensation (equity awards); and
■ Other employment benefits.
Base Salary.Salary
Base salary, paid in cash, is the first element of compensation to our officers.Inofficers.In determining base salaries for our key executive officers, the Company aims to set base salaries at a level we believe enables us to hire and retain individuals in a competitive environment and to reward individual performance and contribution to our overall business goals. The Board of Directors believes that base salary should be relatively stable over time, providing the executive a dependable, minimum level of compensation, which is approximately equivalent to compensation that may be paid by competitors for persons of similar abilities. The Board of Directors believes that base salaries for our executive officers are appropriate for persons serving as executive officers of public companies similar in size and complexity similar to the Company.
The Company’s named executive officers (being Messrs. Kasch, DeversDickinson and Peitz)Hargrave) receive base salaries in accordance with the terms of their respective employment agreements (which are described below). On July 1, 2015, the Company’s named executive officers agreed to forego annual increases in each of their base salaries as provided for in their previous employment agreements in an effort to reduce costs due to deteriorating industry conditions.
Discretionary Annual Bonus.Cash BonusesDiscretionary
Historically, discretionary cash bonuses arewere another prongelement of our compensation plan. The Board of Directors believes that it is appropriate thatThese discretionary cash bonuses provided executive officers and other employees havewith the potential to receive a portion of their annual cash compensation as a cash bonus in order to encourage performance to achieve key corporate objectives and to be competitive from a total remuneration standpoint.
We have nodid not establish a set formula for determining or awarding discretionary cash bonuses to our other executives or employees. In determining whether to award bonuses and the amount of any bonuses, we have taken and expect to continue to take into consideration discretionary factors such as the individual’s current and expected future performance, level of responsibilities, retention considerations, and the total compensation package, as well as the Company’s overall performance including cash flow and other operational factors.
The employment agreementsIn 2018, we have entered into with certain ofadopted the 2018 Short Term Incentive Plan (“2018 STIP”) in order to motivate and reward our named executive officers providefor meeting or exceeding corporate performance goals. Under the 2018 STIP, the Compensation Committee set target opportunities of 100% of base salary for our CEO, and 70% of base salary for our CFO and COO. The Compensation Committee also determined that each is eligible to receive a discretionary cash bonus. Such bonuses are to be considered and determined by the Board of Directors, and paid during the ninety-day period beginning February 160% of the year following that yeartotal cash incentive bonus for whicheach named executive officer should be based on the bonus was earned.Company’s attainment of a threshold ratio of EBITDA to debt, 20% should be based on the Company’s achievement of certain safety goals, and 20% should be discretionary at the discretion of the Compensation Committee, in each case subject to the Compensation Committee’s further adjustment in order to realign with corporate goals.
In reviewing the performance of the Company for 2019, the Compensation Committee determined that cash bonus awards would not be paid out for 2019. This determination was based on the Compensation Committee’s evaluation of corporate objectives during 2019.
Stock Option Plan Benefits.Equity-Based Compensation
Each of the Company’s executive officers isare eligible to be granted awards under the Company’s equity compensation plans. The Company believes that equity-based compensation helps align management and executives’ interests with the interests of our stockholders. Our equity incentives are also intended to reward the attainment of long-term corporate objectives by our executives. We also believe that grants of equity-based compensation are necessary to enable us to be competitive from a total remuneration standpoint. At the present time, we have one active equity incentive plan for our management and employees, the 20102016 Stock Incentive Plan. We are asking our stockholders at this meeting to approve a newPlan (the "2016 Plan"), and one dormant equity incentive plan that will replacefor our management and employees, the 2010 Stock Incentive Plan as described below under the heading “Proposal No. 2 Approval of the 2016 Stock Incentive Plan.”(the "2010 Plan"), pursuant to which there are still outstanding awards.
We have no set formula for granting awards to our executives or employees. InHistorically, in determining whether to grant awards and the amount of any awards, we takethe Company took into consideration discretionary factors such as the individual’s current and expected future performance, level of responsibilities, retention considerations, and the total compensation package. In 2018, the Company adopted the Long-Term Incentive Plan (“2018 LTIP), which is intended to balance the short-term orientation of other compensation elements, further align management and shareholder interests, focus named executive officers on achievement of long-term results, and retain executive talent. The Company’s named executive officers and senior managers are eligible to receive awards under the 2018 LTIP. All awards granted under the 2018 LTIP are made pursuant to the 2016 Plan. Awards granted during 2019 under the 2018 LTIP contain the following terms: (i) 60% shall vest upon the Common Stock achieving a 90-day moving average price of at least $1.85 per share and (ii) 40% shall vest upon the Company achieving a ratio of trailing twelve-month debt to EBITDA ratio of 1.50 to 1.0. Awards granted in 2018 under the 2018 LTIP contain the following terms: (i) 60% shall vest upon the Common Stock achieving a 90-day moving average price of at least $2.25 per share and (ii) 40% shall vest upon the Company achieving a ratio of trailing twelve-month debt to EBITDA ratio of 1.50 to 1.0.
The Company has granted restricted stock and stock options to each of its executive officers as described above in the table entitled “Security Ownership of Management”Management, Directors, and Certain Beneficial Owners” and below in the table entitled “Stock Options, Stock Awards, and Equity Incentive Plans.”
Forfeiture and Grant of Stock Options.Options
The Board of DirectorsCompensation Committee granted restricted stock optionsawards to Messrs. Kasch, Peitz,Mr. Dickinson, Ms. Hargrave, and DeversMr. Kersting for fiscal years 2014 and 2015. Subsequently,on June 17,year 2019 under the 2016 the Board of Directors appointed a special committee of disinterested directors (the “Special Committee”) to address certain claims in a letter datedPlan. On June 14, 2016 from an attorney purporting to represent a stockholder2018 the Compensation Committee approved granting Mr. Dickinson 570,000 shares of the Company regarding the Company’s 2010 Stock Incentive Plan (the “2010 Plan”)restricted stock, and equity awardsMr. Kersting 330,000 shares of restricted stock, however, Mr Kersting forfeited his unvested restricted shares in connection with his resignation. In conjunction with her employment agreement, on July 23, 2019 Ms. Hargrave was granted thereunder. After investigation and consultation with its counsel, the Special Committee verified that certain stock options granted under the 2010 Plan had exceeded applicable limitations on grants in the 2010 Plan.330,000 shares of restricted stock.
On July 7, 2016,June 14, 2018 the SpecialCompensation Committee unanimously approved: (a) the rescission (and forfeiture by the holders) of certain stock option awards to purchase 2,560,000approved granting Mr. Dickinson 225,000 shares of the Company’s commonrestricted stock, that had been granted to named executive officers Rick Kasch, Robert Devers, and Austin Peitz, and to directors Keith Behrens and Steve Oppenheim in excess of the 2010 Plan’s limitations (“Excess Options”), and (b) as disclosed in the table under“Proposal No. 2 – Adoption of Enservco Corporation’s 2016 Stock Incentive Plan – New Plan Benefits,” the grant of new options to purchase 1,960,000Mr. Kersting 300,000 shares of the Company’s commonrestricted stock, (the “New Options”), pursuant to a new stock incentive plan to be approved by the Boardand Mr. Bradford 175,000 shares of Directors (the “2016 Plan”). The New Options were also subject to: (i) each of the subject optionees entering into the letter agreements (disclosed below) with the Company and (ii) stockholder approval of the 2016 Plan.restricted stock.
In connection with its approval of the grant of the New Options as described above, the Special Committee considered, among other things: (1) the fact that, because all of the New Options were replacing previously outstanding options, these transactions will not have a significant impact on dilution for the Company’s stockholders, (2) the fact that any compensation granted instead of granting the New Options would likely have involved expenditure of a significant amount of cash, which would not be in the best interests of the Company, (3) the fact that any compensation granted instead of granting the New Options might not have provided the same level of incentives to the recipients as the Excess Options and (4) the fact that the New Options were granted subject to stockholder approval of the 2016 Plan.Other Compensation/Benefits
Subsequently, on July 18, 2016, the Board of Directors unanimously approved the adoption of the 2016 Plan, which after stockholder approval thereof (if accomplished pursuant to Proposal No. 2 of this Proxy Statement), will replace the 2010 Plan.
Also on July 18, 2016, the Company entered into letter agreements with Messrs. Kasch, Devers, Peitz, Behrens and Oppenheim. Pursuant to the letter agreements, each such officer/director agreed to forfeit his Excess Options. The Company agreed to grant the New Options pursuant to new stock option agreements that provide for vesting on substantially the same schedule as the Excess Options would have vested but cannot be exercised prior to stockholder approval of the 2016 Plan. The exercise price of the New Options is the greater of the original exercise price of the Excess Options or the closing market price on July 7, 2016, the date the Special Committee approved the grant of the New Options. Under the letter agreements, the termination date of each New Option is the termination date of the rescinded option, except that if the termination date of the rescinded option is prior to the two-year anniversary of the date of the letter agreement, then the termination date of the New Option is extended six months past the termination date of the rescinded option. Further, the Company agreed to submit the 2016 Plan to the stockholders of the Company for approval as soon as reasonably possible.
Pursuant to the letter agreements, the option holders agreed to the rescission of Excess Options, and the Company granted new options, as follows:
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Other Compensation/Benefits.Another element of the overall compensation is through providing our executive officers various employment benefits, such as the payment of health and life insurance premiums on behalf of the executive officers. Additionally, the Company provides Messrs. Peitz and Kasch with an automobile (Peitz) or an automobile allowance (Kasch). Our executive officers are also eligible to participate in our 401(k) plan on the same basis as other employees and the Company historically has made matching contributions to the 401(k) plan, including for the benefit of our executive officers.
Declared Discretionary Bonuses
Based on a compensation report prepared byAs indicated above, during 2019, the Company’s outside counsel, and after analyzing the structure and terms of compensation payable to similar executive officers within the peer group of companies, the Board of Directors (upon recommendation of the independent directors) declared discretionary bonuses related to fiscal year 2014 to the NEOs in the first quarter of 2015 in the total amount of $210,000. At the recommendation of Mr. Kasch, the Board of Directors did not award any discretionary bonuses forto the 2015 fiscal yearexecutive officers. During 2018, the Board awarded discretionary bonuses to Messrs. KaschDickinson, Kersting, and Devers. Effective April 1, 2015, Mr. Peitz’s base salary was reduced by $42,938 and replaced by a quarterly, formulaic bonus program under which he has received $90,000 through December, 2015. As of June 22, 2016, Mr. Peitz entered into a new employment agreement withBradford as shown in the Company (described below) that terminated the formulaic bonus program.Summary Compensation Table above.
Employment Agreements
We have entered into employment agreements with certain Company officers, beingMr. Dickinson and Ms. Hargrave. We previously entered into employment agreements with Messrs. Kasch, Peitz,Bradford and Devers.Kersting.
Rick KaschIan E. Dickinson – – Mr. KaschDickinson is chief executive officerChief Executive Officer and presidentPresident of the Company. HeMr. Dickinson entered into an employment agreement witheffective May 9, 2017 (the “Dickinson Employment Agreement”). Pursuant to the Company on June 22, 2016 to replace his prior employment agreement with the Company dated July 27, 2010, as amended.Dickinson Employment Agreement, Mr. Kasch’s new employment agreement has a term of July 1, 2016 through June 30, 2017, and is automatically renewed thereafter on a year-to-year basis unless Enservco or Mr. Kasch provides the other with 60 days’ notice of non-renewal or the agreement is otherwise terminated. The agreement provides forDickinson receives an annual base salary equalof $285,000 and is eligible each year to the base salary received by Mr. Kasch under his prior employment agreement - $260,466. Under Mr. Kasch’s prior agreement, he was entitledreceive a discretionary bonus in addition to car allowance of $1,400 per month. This allowance will be provided for the first year of the new agreement after which his base salary, which will be increasedawarded in such amounts as the Board may determine. Mr. Dickinson was also granted stock options to purchase 1,200,000 shares of Common Stock. The exercise price of the stock options is $0.30 per share. The stock options vest in one third installments, the first of which vested on May 9, 2017, the second of which vests on May 9, 2018 and the third of which vested on May 9, 2019, provided that Mr. Dickinson continues to be employed by $1,400 per month.the Company on those dates. The employment agreement alsoDickinson Employment Agreement provides for standard employment benefits andseverance compensation if Mr. Dickinson is terminated without cause or upon a change of control. The Dickinson Employment Agreement also contains other standard provisions contained in agreements of this nature, including confidentiality and non-competition provisions as well as eligibility for discretionary bonuses and longer termlong-term incentive awards.
Mr. Kasch’sMarjorie Hargrave - Ms. Hargrave is the Chief Financial Officer of the Company. Ms. Hargrave entered into an employment agreement effective July 24, 2019 (the "Hargrave Employment Agreement" Pursuant to the Hargrave Employment Agreement, Ms. Hargrave receives an annual base salary of $230,000. In addition, Ms. Hargrave is eligible each year to receive a discretionary bonus in addition to her base salary, which will be awarded in such amounts as the Board will determine. Ms. Hargrave was also granted 330,000 restricted shares of common stock (the “Restricted Shares”), half of which are time-vested, and half of which are performance-vested. The time-vested Restricted Shares will vest in one-third installments on each of January 23, 2020, January 23, 2021, and January 23, 2022, provided that Ms. Hargrave continues to be employed by the Company on those dates. The performance-vested Restricted Shares are subject to two performance metrics: (i) 99,000 Restricted Shares will vest upon the Company achieving a 90-day moving average stock price of at least $1.85 per common share, adjusted for stock splits, and (ii) 66,000 Restricted Shares will vest upon the Company achieving a ratio of Trailing Twelve Month EBITDA to Consolidated Debt of 1.0 to 1.5, in each case subject to Ms. Hargrave’s continued employment with the Company. The Hargrave Employment Agreement provides for severance compensation if his employmentMs. Hargrave is terminated for the following reasons:
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Austin Peitz – Mr. Peitz is Senior Vice President of Field Operations of the Company. He entered into an employment agreement with the Company on June 22, 2016 to replace his prior employment agreement with the Company dated July 27, 2010, as amended. Mr. Peitz’s new employment agreement has a term of July 1, 2016 through June 30, 2017, and is automatically renewed thereafter on a year-to-year basis unless Enservco or Mr. Peitz provides the other with 60 days’ notice of non-renewal or the agreement is otherwise terminated. The agreement provides for an annual base salary equal to the base salary received by Mr. Peitz under his prior employment agreement - $192,938. Additionally, the Company provides Mr. Peitz with an automobile. The employment agreement also provides for standard employment benefits and contains other standard provisions contained in agreements of this nature, including confidentiality and non-competition provisions as well as eligibility for discretionary bonuses and longer termlong-term incentive awards.
Kevin Kersting –Mr. Peitz’s employment agreement also provides for severance compensation if his employment is terminated for the following reasons:
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Robert Devers – Mr. Devers becameKersting was the Chief FinancialOperating Officer of the Company on April 29, 2013. HeCompany. Mr. Kersting entered into an employment agreement witheffective May 21, 2018 (the "Kersting Employment Agreement). Pursuant to the Company on June 22, 2016 to replace his prior employment agreement with the Company dated April 29, 2013, as amended. The new employment agreement has a term of July 1, 2016 through June 30, 2017, and is automatically renewed thereafter on a year-to-year basis unless Enservco orKersting Employment Agreement, Mr. Devers provides the other with 60 days’ notice of non-renewal or the agreement is otherwise terminated. The agreement provides forKersting received an annual base salary equalof $225,000 and was eligible each year to receive a discretionary bonus. Mr. Kersting resigned from the Company, effective February 14, 2020.
Dustin Bradford – The Company and Dustin Bradford entered into an Employment Agreement on April 23, 2018, effective January 31, 2018 (the “Bradford Employment Agreement”). Pursuant to the Bradford Employment Agreement, Mr. Bradford received an annual base salary receivedof $175,000.
Effective July 24, 2019, Dustin Bradford resigned as Chief Financial Officer and all other positions he held with the Company and its subsidiaries.
In connection with Mr. Bradford’s resignation, the Company entered into an Executive Severance and Consulting Agreement with Mr. Bradford (the “Severance Agreement”) under which he continued to be employed by the Company in an advisory role, and his employment terminated on August 16, 2019. In addition, until September 30, 2019, Mr. Devers under his prior employment agreement - $175,000. Bradford provided financial consulting services for the Company and was paid $43,750.
The employment agreement also provides for standard employment benefits andSeverance Agreement contains other standard provisions contained in agreements of this nature including restrictive covenants concerning confidentiality, non-competition, non-solicitation and non-competition provisions as well as eligibility for discretionary bonusesnon-disparagement, and longer term incentive awards.a general release of any and all claims Mr. Bradford may have against the Company, its directors, officers and associated persons.
Mr. Devers’ employment agreement also provides for severance compensation if his employment is terminated for the following reasons:
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Stock Options, Stock Awards, and Equity Incentive Plans
In accordance with the Company’s 2010 Stock Incentive Planstock incentive plans the Company granted certain of its executive officers stock optionsrestricted share awards during the Company’s 2015Company's 2019 and 2018 fiscal year. No other equity based awards were granted to executive officers during the fiscal year. After the end of the fiscal year, a special committee of the Board of Directorsyears. The 2016 Plan was appointed to review the 2010 Stock Incentive Plan and awards granted under the 2010 Stock Incentive Plan in response to certain claims in a letter dated June 14, 2016 from an attorney purporting to represent a stockholder of the Company. On July 7, 2016, the special committee approved the rescission (and forfeiture by the holders) of certain option awards granted in excess of the 2010 Stock Incentive Plan limits. The special committee also approved the grant of options subject to the stockholders approval of a new stock incentive plan, see the description above under the heading“Narrative Disclosure to Summary Compensation Table – Forfeiture and Grant of Stock Options.”on September 29, 2016.
The following table sets forth the outstanding equity awards for each named executive officer at December 31, 2015,2019 and does not include transactions subsequent to December 31, 20152019 as set forth in the footnotes to the table.
Number of Securities | |||||||||||||
Underlying Unexercised | |||||||||||||
Options(1) | Option | Option | |||||||||||
Exercise | Expiration | ||||||||||||
Name | Exercisable | Unexercisable | Price | Date | |||||||||
Rick Kasch (2) | 600,000 | - | $ | 1.10 | 07/19/2016 | ||||||||
| 425,000 | - | $ | 0.46 | 06/05/2017 | |||||||||
| - | 210,000 | $ | 1.74 | 04/08/2020 | |||||||||
| 1,025,000 | 210,000 | ||||||||||||
Austin Peitz (2) | 300,000 | - | $ | 0.46 | 06/05/2017 | ||||||||
| 33,333 | 16,667 | $ | 0.70 | 01/23/2018 | |||||||||
| - | 160,000 | $ | 1.74 | 04/08/2020 | |||||||||
| 333,333 | 176,667 | ||||||||||||
Robert J. Devers (2) | 100,000 | 50,000 | $ | 1.27 | 04/29/2018 | ||||||||
| 50,000 | - | $ | 1.00 | 07/25/2018 | |||||||||
| 16,667 | 33,333 | $ | 2.25 | 01/30/2019 | |||||||||
| - | 140,000 | $ | 1.74 | 04/08/2020 | |||||||||
| 166,667 | 223,333 | ||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||
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| Option | or Units | Shares or Units | Unearned Shares, Units or | Value of Unearned Shares | ||||||||||||||
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| Expiration | of Stock That | of Stock That | Other Rights That | Units or Other Rights | |||||||||
Name | Exercisable |
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| Date | Have Not Vested | Have Not Vested | Have Not Vested | That Have Not Vested | |||||||||||
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Ian E. Dickinson | 1,200,000 | - | (2) | $ | 0.30 | 06/02/2022 | - | $ | - | - | $ | - | ||||||||||||
| $ | 225,000 | (7) | $ | 189,405 | (4) | |||||||||||||||||||
| 570,000 | (7) | 138,732 | (6) | |||||||||||||||||||||
| 795,000 | 328,137 | |||||||||||||||||||||||
| Marjorie Hargrave | 165,000 | (3) | 77,550 | 165,000 | (7) | 77,550 | (9) | |||||||||||||||||
| Kevin Kersting | $ | 66,667 | (5) | 24,667 | 200,000 | (7) | 74,000 | (8) | ||||||||||||||||
| 338,000 | (7) | 82,266 | (10) | |||||||||||||||||||||
| 538,000 | 156,266 | |||||||||||||||||||||||
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(1) | Consists of options granted under 2010 |
(2) |
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| (3) | Represents restricted stock awards issued effective July 24, 2019 vest ratably over a three-year term on January 23, 2020, 2021, and | |
| (4) | Represents restricted stock awards with a market value of | |
| (5) | Represents unvested restricted stock awards. | |
| (6) | Represents restricted stock awards with a market value of $102,600 based on the | |
| (7) | Represents performance-based restricted stock awards that have not yet been earned. | |
| (8) | These are performance-based restricted stock awards with a market value of $36,000 based on the | |
| (9) | Represents restricted stock awards with a market value of $29,700 based on the closing common stock price on December 31, 2019 of $0.18 per share. | |
| (10) | Represents restricted stock awards with a market value of $60,840 based on the closing common stock price on December 31, 2019 of $0.18 per share. |
Risks of Compensation Programs
The Company’s equity-based compensation is performance-based in that the issued stock options become valuable as the stockholders’ returns (measured by stock price) increase. Furthermore, in all cases, options granted to the Company’s employees include time-based vesting. The Company believes that this vesting, coupled with the internal controls and oversight of the risk elements of its business, have minimized the possibility that the compensation programs and practices will have a material adverse effect on the Company and its financial, and operational, performance.
COMPENSATION OF DIRECTORS
After evaluating the compensation structureEach member of independent directors included in the compensation study prepared and presented by Burns, Figa, and Will, P.C. on March 16, 2015, the Board of Directors voted to raise thereceives a quarterly director fee from $6,000 to $7,000 per quarter, effective April 1, 2015. The Board of $7,000. Directors also approved on March 16, 2015, the payment of an additional $1,000 per quarter towho are members of the audit committee, withBoard's Audit Committee receive an additional $3,000fee of $1,500 per quarter to thequarter. As chair of the auditAudit Committee, Mr. Herlin receives an additional fee of $3,000 per quarter. As chair of the compensation committee, Mr. Oppenheim, both effective April 1, 2015.Jolly receives an additional $2,500 per quarter. Mr. KaschDickinson is an employee of the only “non-employee director”Company and he is not paid for his service as a member of the Board of Directors.Board.
As such, theThe table below reflects compensation paid to the non-employee members of the boardBoard during the year ended December 31, 2015:2019:
Fees | Fees | |||||||||||||||||||||||||||||||
Earned or | Options | All Other | Earned or | Options | All Other | |||||||||||||||||||||||||||
Paid in | Awards | Compensation | Paid in | Awards | Compensation | |||||||||||||||||||||||||||
Director | Cash | (1) | Awards | Total | Cash | (1) | Awards | Total | ||||||||||||||||||||||||
Steven P. Oppenheim (2) | $ | 41,000 | $ | -- | $ | -- | $ | 41,000 | ||||||||||||||||||||||||
Christopher D. Haymons (2) | $ | 32,000 | $ | - | $ | - | $ | 32,000 | ||||||||||||||||||||||||
Keith J. Behrens (3) | $ | 27,000 | $ | -- | $ | -- | $ | 27,000 | $ | 28,000 | $ | - | $ | - | $ | 28,000 | ||||||||||||||||
Gerald Laheney (4) | $ | - | $ | -- | $ | 5,000 | $ | 5,000 | ||||||||||||||||||||||||
Richard A. Murphy (5) | $ | 43,000 | $ | - | $ | - | $ | 43,000 | ||||||||||||||||||||||||
William A. Jolly | $ | 29,833 | $ | 121,186 | $ | -- | $ | 151,019 | $ | 42,500 | $ | - | $ | - | $ | 42,500 | ||||||||||||||||
Robert S. Herlin | $ | 29,833 | $ | 121,186 | $ | -- | $ | 151,019 | $ | 44,000 | $ | - | $ | - | $ | 44,000 | ||||||||||||||||
(1) | Amounts represent the |
(2) | Mr. |
(3) | Mr. Behrens received fees in the amount of $28,000 in 2019 for serving as a director. |
(5) | Mr. Murphy received fees in the amount of $43,000 in 2019 for serving as a director and |
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(6) | Mr. |
(7) | Mr. Herlin |
PROPOSAL NO. 2APPROVAL OF THE 2016 STOCK INCENTIVE
EQUITY COMPENSATION PLAN INFORMATION
On July 18,The following table provides information with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance as of December 31, 2019:
Plan Category And Description | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
Equity Compensation Plans Approved by Security Holders | 1,945,333 | (1) | $ | 0.55 | 6,914,711 | (3) | ||||||
Equity Compensation Plans Not Approved by Security Holders | 655,000 | (2) | $ | 0.22 | — | |||||||
Total / Weighted Average | 2,600,333 | $ | 0.474 | 6,914,711 | ||||||||
(1) Represents (i) 1,470,667 unexercised options outstanding under the 2016 Plan, and (ii) 474,666 unexercised options under the Company’s Board of Directors adopted the Enservco Corporation 2016frozen 2010 Stock Incentive Plan (the “2016 Plan”), subjectPlan.
(2) Consists of: (i) 30,000 warrants issued in June 2016 to stockholder approval at this Meeting. The following is a summarythe principals of the material provisionsCompany’s existing investor relations firm to acquire 30,000 shares of Common Stock exercisable at $0.70 per share and (ii) 625,000 warrants issued to Cross River Partners, L.P. in connection with an Amended and Restated Subordinated Loan Agreement discussed in more detail in Note 10 to the consolidated financial statements set forth in the Form 10-K for the fiscal year ending December 31, 2019.
(3) Calculated as 10,391,711 shares of Common Stock reserved for the 2016 Plan less 2,637,165 options outstanding or exercised under the 2016 Plan and 836,667 of Restricted Stock Award shares outstanding under the 2016 Plan. A copy of the 2016 Plan is attached to this Proxy Statement as Appendix A and the summary below is qualified in its entirety by the full text of the 2016 Plan.
We are asking our stockholders to approve the 2016 Plan which is a newNo additional stock incentive plan that is separate from the Company’s 2010 Stock Incentive Plan, (the “2010 Plan”). The purpose of the 2016 Plan is to increase stockholder value and to advance the interests of the Company by furnishing a variety of economic incentives designed to attract, retain and motivate employees, certain key consultants and directors of the Company.
If this proposal is approved by our stockholders, the 2016 Plan will be effective as of July 18, 2016 (the “Effective Date”), and no additional awardsoption grants will be granted under the 2010 Plan (although all outstanding awards granted under the 2010 Plan will continue to be subject to the terms and conditions as set forth in the agreements, as amended, evidencing such awards and the terms of the 2010 Plan). If our stockholders do not approve this proposal, the 2016 Plan will not become effective and the 2010 Plan will continue in its current form.
As described under “Narrative Disclosure to Summary Compensation Table –Forfeiture and Grant of Stock Options” under Proposal No. 1, on July 7, 2016, the special committee of the Board approved the rescission (and forfeiture by the holders) of certain stock option awards to purchase 2,560,000 shares of the Company’s common stock that had been granted to named executive officers Rick Kasch, Robert Devers, and Austin Peitz, and to directors Keith Behrens and Steve Oppenheim in excess of the 2010 Plan’s limitations. These excess stock options are referred to as the “Excess Options.” The special committee also approved the grant of new options to purchase 1,960,000 shares of the Company’s common stock (the “New Options”) under the 2016 Plan, subject to stockholder approval of the 2016 Plan. On July 18, 2016, such individuals signed letter agreements with the Company providing for rescission of the Excess Options and the grant of the New Options. If this proposal is approved by our stockholders, the New Options will become exercisable as set forth in the table under “New Plan Benefits” below.
The approval of the 2016 Plan will allow us to continue to grant stock options and other awards at levels determined appropriate by our Board of Directors. The 2016 Plan will also allow us to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of our employees, directors, and consultants, and to provide long term incentives that align the interests of our employees, directors and consultants with the interests of our stockholders.
Approval of the 2016 Plan by our stockholders will also constitute approval of terms and conditions set forth therein that will permit us to grant stock options and performance awards under the 2016 Plan that may qualify as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code. Section 162(m) of the Code denies a deduction to any publicly held corporation and its affiliates for certain compensation paid to “covered employees” in a taxable year to the extent that compensation to a covered employee exceeds $1 million. However, some kinds of compensation, including qualified “performance-based compensation,” are not subject to this deduction limitation, and we believe it is in our best interests and the best interests of our stockholders to preserve the ability to grant “performance-based compensation” under Section 162(m) of the Code. For the grant of awards under a plan to qualify as “performance-based compensation” under Section 162(m) of the Code, the plan must, among other things, (i) describe the employees eligible to receive such awards, (ii) provide a per-person limit on the number of shares subject to stock options and performance stock awards, and the amount of cash that may be subject to performance cash awards, granted to any employee under the plan in any year and (iii) include one or more pre-established business criteria upon which the performance goals for performance awards may be granted (or become vested or exercisable). These terms must be approved by the stockholders and, accordingly, our stockholders are requested to approve the 2016 Plan, which includes terms regarding eligibility for awards, per-person limits on awards and the business criteria for performance awards granted under the 2016 Plan (as described in the summary below).
Description of the 2016 Plan
The material features of the 2016 Plan are outlined below. This summary is qualified in its entirety by reference to the complete text of the 2016 Plan, which is appended to this proxy statement as Appendix A. Stockholders are urged to read the actual text of the 2016 Plan in its entirety.
Eligibility. Our employees, directors and consultants are eligible to participate in the 2016 Plan.
Administration. The 2016 Plan is administered by our Board of Directors, which may in turn delegate authority to administer the 2016 Plan to a committee. Our Board of Directors has not formed a compensation committee, but should one be formed the Board may delegate the authority to administer the 2016 Plan to the compensation committee. The Board of Directors and the compensation committee are each considered to be a plan administrator for purposes of this proposal. Our plan administrator may make grants of cash and equity awards under the 2016 Plan to facilitate compliance with Section 162(m) of the Code. Subject to the terms of the 2016 Plan, the plan administrator may determine the recipients, numbers and types of awards to be granted, and the terms and conditions of the awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, the plan administrator also determines the fair market value applicable to a stock award and the exercise price of stock options and stock appreciation rights granted under the 2016 Plan.
The plan administrator may also delegate to one or more of our directors or officers the authority to designate employees who are not officers to be recipients of certain stock awards and the number of shares subject to such stock awards, provided that the Board of Directors must specify the total number of shares of our common stock that may be subject to the stock awards granted by such officer, and such officer may not grant a stock award to himself or herself.
Shares Available for Awards. If this proposal is approved, the aggregate number of shares of our common stock reserved for issuance under the 2016 Plan will not exceed 8,000,000 shares over the next ten years (the stated life of the plan). In addition, any shares that were set aside under the 2010 Plan on the Effective Date and not subject to outstanding incentives were added to the share reserve under the 2016 Plan. As of the Effective Date, there were 2,391,711 shares set aside under the 2010 Plan that were not subject to outstanding incentives. Therefore, the total reserve under the 2016 Plan as of the Effective Date was 10,391,711 shares. Of this amount, 1,960,000 shares are reserved for issuance under the New Options. In addition, shares may be issued under the 2016 Plan in connection with a merger or acquisition under certain circumstances as permitted by NYSE MKT Rules Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the 2016 Plan. If this proposal is approved, no additional incentives will be granted under the 2010 Plan.
If a stock option or Stock Appreciation Right (SAR) granted under the 2016 Plan expires or is terminated or canceled unexercised as to any shares of common stock, such shares shall be added back to the 2016 Plan share reserve and shall be available again for issuance under the 2016 Plan. If the full number of shares subject to a performance based-stock award (other than a stock option or SAR) is not issued by reason of failure to achieve maximum performance goals, the number of shares not issued shall be added back to the 2016 Plan share reserve and shall be available again for issuance under the 2016 Plan. If shares of common stock are issued as performance shares, restricted stock or pursuant to another stock award and thereafter are forfeited or reacquired by the Company because of the failure to meet a contingency or condition required to vest such shares in the participant, then the shares that are forfeited or repurchased shall be added back to the 2016 Plan share reserve and shall be available again for issuance under the 2016 Plan. Shares withheld or deducted from an Incentive in satisfaction of tax withholding obligations on an incentive or as consideration for the exercise or purchase price of an Incentive will not be added back to the 2016 Plan share reserve and will not again become available for issuance under the 2016 Plan.
Types of Awards. Incentives under the 2016 Plan may be granted in any one or a combination of the following forms: incentive stock options and non-statutory stock options, stock appreciation rights, or SARs; stock awards, restricted stock awards and restricted stock unit awards, performance share awards, performance cash awards, and other forms of incentives valued in whole or in part by reference to, or otherwise based on, our common stock, including the appreciation in value thereof.
Stock Options. Non-qualified and incentive stock options may be granted to eligible participants to purchase shares of common stock from the Company. The 2016 Plan confers on the Board of Directors the discretion, with respect to any such stock option, to determine the term of each option, the time or times during its term when the option becomes exercisable and the number and purchase price of the shares subject to the option, provided that the purchase price shall be not less than the fair market value of the common stock subject to the option on the date of grant. The fair market value may be based on the closing price of the common stock as quoted on its principal exchange or market, or on such other method of determining the fair market value of a share of Common Stock that complies with the requirements of Section 409A of the Internal Revenue Code. For future stock option grants, the Board intends to use a ten day volume weighted average price to determine the exercise price until it determines that another method better reflects fair market value.
Stock Appreciation Rights. A stock appreciation right, or SAR, is a right to receive, without payment to the Company, a number of shares, cash or any combination thereof, the amount of which is equal to the aggregate amount of the appreciation in the shares of common stock as to which the SAR is exercised. For this purpose, the “appreciation” in the shares consists of the amount by which the fair market value of the shares of common stock on the exercise date exceeds (a) in the case of an SAR related to a stock option, the purchase price of the shares under the option or (b) in the case of an SAR granted alone, without reference to a related stock option, an amount determined by the plan administrator at the time of grant. The Board of Directors has the discretion to determine the number of shares as to which a SAR will relate as well as the duration and exercisability of an SAR.
Stock Awards. Stock awards consist of the transfer by the Company to an eligible participant of shares of common stock, without payment, as additional compensation for services to the Company. The number of shares transferred pursuant to any stock award is determined by the Board of Directors.
Restricted Stock and Restricted Stock Units. Restricted stock consists of the sale or transfer by the Company to an eligible participant of one or more shares of common stock that are subject to restrictions on their sale or other transfer by the participant. The price at which restricted stock will be sold will be determined by the Board of Directors, and it may vary from time to time and among participants and may be less than the fair market value of the shares at the date of sale. Subject to these restrictions and the other requirements of the 2016 Plan, a participant receiving restricted stock shall have all of the rights of a stockholder as to those shares. The 2016 Plan also permit grants of restricted stock units, which are units that evidence the right to receive shares of common stock at a future date, subject to restrictions that may be imposed by the Board of Directors.
Performance Awards. The 2016 Plan allows us to grant cash and stock-based performance awards that may qualify as performance-based compensation that is not subject to the $1 million limitation on the income tax deductibility of compensation paid per covered employee imposed by Section 162(m) of the Code. Performance awards may be granted, vest or be exercised based upon the attainment during a specified period of time of specified performance goals. The length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained will be determined by the Board of Directors, and/or, to the extent consistent with Section 162(m) of the Code, the compensation committee or the Board of Directors; provided, however, that any performance period must be at least one year in length.
In granting a performance award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Board of Directors will set a period of time, or a performance period, over which the attainment of one or more goals, or performance goals, will be measured. Within the time period prescribed by Section 162(m) of the Code, at a time when the achievement of the performance goals remains substantially uncertain (typically no later than the earlier of the 90th day of a performance period and the date on which 25% of the performance period has elapsed), the Board of Directors will establish the performance goals, based upon one or more criteria, which we refer to as performance criteria, enumerated in the 2016 Plan and described below.
Performance goals under the 2016 Plan will be based on any one or more of the following performance criteria: (i) earnings (including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity or average stockholder’s equity; (vi) return on assets, investment, or capital employed; (vii) stock price; (viii) margin (including gross margin); (ix) income (before or after taxes); (x) operating income; (xi) operating income after taxes; (xii) pre-tax profit; (xiii) operating cash flow; (xiv) sales or revenue targets; (xv) increases in revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement in or attainment of working capital levels; (xiii) economic value added (or an equivalent metric); (xix) market share; (xx) cash flow; (xxi) cash flow per share; (xxii) share price performance; (xxiii) debt reduction; (xxiv) implementation or completion of projects or processes; (xxv) customer satisfaction; (xxvi) stockholders’ equity; (xxvii) capital expenditures; (xxiii) debt levels; (xxix) operating profit or net operating profit; (xxx) workforce diversity; (xxxi) growth of net income or operating income; (xxxii) billings; and (xxxiii) to the extent that an incentive is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board of Directors. Performance goals may be based on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices.
Section 162(m) Limits. Under the 2016 Plan, a maximum of 1,200,000 shares of our common stock may be granted to any one participant during any one calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of our common stock on the date of grant. In addition, the maximum amount covered by performance awards that may be granted to any one participant in any one calendar year (whether the grant, vesting or exercise is contingent upon the attainment during a performance period of the performance goals described below) is 500,000 shares of our common stock in the case of performance share awards and $500,000 in the case of performance cash awards. Such limits are designed to allow us to grant awards that are exempt from the $1,000,000 limitation on the income tax deductibility of compensation paid per covered employee imposed by Section 162(m) of the Code. If a performance share award is in the form of an option, it will count only against the performance stock award limit. If a performance share award could be paid out in cash, it will count only against the performance stock award limit.
Limitation of Director Awards. Under the 2016 Plan, no director who is not also an employee of the Company or its affiliates may be granted incentives denominated in shares that exceed in the aggregate $500,000 in value in any calendar year, except to the extent that the incentive is awarded pursuant to an election by the directors to receive such incentive in lieu of all or a portion of annual and committee retainers and meeting fees.
No Repricing of Stock Options or Cancellation and Re-Grant of Incentives. Except in connection with certain capitalization adjustments, neither the Board of Directors nor any committee will have the authority to reduce the exercise, purchase or strike price of any outstanding options or SAR under the 2016 Plan, or cancel any outstanding options or SARs that have an exercise price or strike price greater than the current fair market value of our common stock in exchange for cash or other incentives under the 2016 Plan, unless the stockholders of the Company have approved such an action within twelve months prior to such an event.
Changes to Capital Structure. In the event of certain capitalization adjustments, the Board of Directors will appropriately adjust: (i) the class(es) and maximum number of securities subject to the 2016 Plan; (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of incentive stock options; (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 162(m) limits; and (iv) the class(es) and number of securities and price per share of stock subject to outstanding stock awards.
Corporate Transactions. In the event of a corporate transaction (as defined in the 2016 Plan and described below), the Board of Directors may have the discretion to take one or more of the following actions with respect to outstanding stock awards (contingent upon the closing or consummation of such transaction), unless otherwise provided in the stock award agreement or other written agreement with the participant or unless otherwise provided by the Board of Directors at the time of grant:
arrange for the surviving or acquiring corporation (or its parent company) to assume or continue the award or to substitute a similar stock award for the award (including an award to acquire the same consideration paid to our stockholders pursuant to the corporate transaction);
arrange for the assignment of any reacquisition or repurchase rights held by us with respect to the stock award to the surviving or acquiring corporation (or its parent company);
accelerate the vesting, in whole or in part, (and, if applicable, the exercisability) of the stock award and provide for its termination prior to the effective time of the corporate transaction;
arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by us with respect to the award;
cancel or arrange for the cancellation of the stock award, to the extent not vested or exercised prior to the effective time of the corporate transaction, in exchange for such cash consideration, if any, as the Board of Directors may consider appropriate; and
cancel or arrange for the cancellation of the stock award, to the extent not vested or not exercised prior to the effective time of the corporate transaction, in exchange for a payment, in such form as may be determined by the Board of Directors, equal to the excess, if any, of (i) the value of the property the participant would have received upon the exercise of the stock award immediately prior to the effective time of the corporate transaction, over (ii) any exercise price payable in connection with such exercise.
The Board of Directors is not obligated to treat all stock awards or portions of stock awards in the same manner. The Board of Directors may take different actions with respect to the vested and unvested portions of a stock award.
For purposes of the 2016 Plan, a corporate transaction will be deemed to occur in the event of the consummation of (i) a sale or other disposition of all or substantially all of our consolidated assets, (ii) a sale or other disposition of more than 90% of our outstanding securities, (iii) a merger, consolidation or similar transaction following which we are not the surviving corporation, or (iv) a merger, consolidation or similar transaction following which we are the surviving corporation but the shares of our common stock outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction.
Change in Control. In the event of a change in control (as defined in the 2016 Plan), the Board of Directors or a comparable committee of any corporation assuming the obligations of the Company under the 2016 Plan may, but shall not be obligated to, elect in its discretion to declare that the restriction period of all restricted stock and restricted stock units has been eliminated, that all outstanding stock options and SARs shall accelerate and become exercisable in full but that all outstanding stock options and SARs, whether or not exercisable prior to such acceleration, must be exercised within the period of time set forth in a notice to participant or they will terminate, and that all performance shares granted to participants are deemed earned at 100% of target levels and shall be paid. In connection with any such declaration by the Board or committee, the Board may, but shall not be obligated to, cause certain cash payments to be made to each Plan participant who holds a stock option or SAR.
The employment agreements of our named executive officers provide that, in the event of a change in control, among other things, all outstanding stock options that they hold shall accelerate and become exercisable.
Plan Amendments and Termination. Our Board of Directors may amend, modify, suspend, discontinue or terminate the 2016 Plan at any time as it deems necessary or advisable; provided, however, any amendment or modification that (a) increases the total number of shares available for issuance pursuant to incentives granted under the 2016 Plan, (b) deletes or limits the prohibition of re-pricing incentives, or (c) requires the approval of the Company’s stockholders pursuant to any applicable law, regulation or securities exchange rule or listing requirement, shall be subject to approval by the Company’s stockholders. In general, however, no amendment, modification, suspension, discontinuance or termination of the 2016 Plan shall impair a participant’s rights under an outstanding incentive without his or her written consent.
Transferability of Incentives. Incentives granted under the 2016 Plan may not be transferred, pledged or assigned by the holder thereof (except, in the event of the holder’s death, by will or the laws of descent and distribution to the limited extent provided in the 2016 Plan or the incentive, or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder). However, stock options may be transferred by the holder thereof to such holder’s spouse, children, grandchildren or parents (collectively, the “Family Members”), to trusts for the benefit of Family Members, to partnerships or limited liability companies in which Family Members are the only partners or stockholders, or to entities exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. During a participant’s lifetime, a stock option may be exercised only by him or her, by his or her guardian or legal representative or by the transferees permitted by the preceding sentence.
Clawback Policy. Awards granted under the 2016 Plan will be subject to recoupment in accordance with any clawback policy that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, or other applicable law. In addition, the Board of Directors may impose other clawback, recovery or recoupment provisions in an award agreement as the Board of Directors determines necessary or appropriate, including a reacquisition right in respect of previously acquired shares of our common stock or other cash or property upon the occurrence of cause.
U.S. Federal Income Tax Consequences
The information set forth below is a summary only and does not purport to be complete. The information is based upon current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any recipient may depend on his or her particular situation, each recipient should consult the recipient’s tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result of an award. The 2016 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of our tax reporting obligations.
Nonstatutory Stock Options. Generally, there is no taxation upon the grant of a nonstatutory stock option if the stock option is granted with an exercise price equal to the fair market value of the underlying stock on the grant date. On exercise, an optionholder will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the stock over the exercise price. If the optionholder is employed by us or one of our affiliates, that income will be subject to withholding taxes. The optionholder’s tax basis in those shares will be equal to their fair market value on the date of exercise of the stock option, and the optionholder’s capital gain holding period for those shares will begin on that date.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the optionholder.
Incentive Stock Options. The 2016 Plan provides for the grant of stock options that qualify as “incentive stock options,” as defined in Section 422 of the Code, or an incentive stock option. Under the Code, an optionholder generally is not subject to ordinary income tax upon the grant or exercise of an incentive stock option. If the optionholder holds a share received on exercise of an incentive stock options for more than two years from the date the stock option was granted and more than one year from the date the stock option was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder’s tax basis in that share will be long-term capital gain or loss.
If, however, an optionholder disposes of a share acquired on exercise of an incentive stock options before the end of the required holding period, which is referred to as a disqualifying disposition, the optionholder generally will recognize ordinary income in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the incentive stock options was exercised over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of exercise of the stock option, the amount of ordinary income recognized by the optionholder will not exceed the gain, if any, realized on the sale. If the amount realized on a disqualifying disposition exceeds the fair market value of the share on the date of exercise of the stock option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired on exercise of an incentive stock option exceeds the exercise price of that stock option generally will be an adjustment included in the optionholder’s alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifying disposition of the share in the year in which the stock option is exercised, there will be no adjustment for alternative minimum tax purposes with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired on exercise of an incentive stock option is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the stock option is exercised.
We are not allowed an income tax deduction with respect to the grant or exercise of an incentive stock options or the disposition of a share acquired on exercise of an incentive stock options after the required holding period. If there is a disqualifying disposition of a share, however, we are allowed a deduction in an amount equal to the ordinary income includible in income by the optionholder, subject to Section 162(m) of the Code and provided that amount constitutes an ordinary and necessary business expense for us and is reasonable in amount, and either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.
Restricted Stock Awards. Generally, the recipient of a restricted stock award will recognize ordinary income at the time the stock is received equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the stock. If, however, the stock is not vested when it is received (for example, if the employee is required to work for a period of time in order to have the right to sell the stock), the recipient generally will not recognize income until the stock becomes vested, at which time the recipient will recognize ordinary income equal to the excess, if any, of the fair market value of the stock on the date it becomes vested over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election with the Internal Revenue Service, within 30 days following his or her receipt of the stock award, to recognize ordinary income, as of the date the recipient receives the award, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient for the stock.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock awards will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the stock becomes vested.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock award.
Restricted Stock Unit Awards. Generally, the recipient of a restricted stock unit structured to conform to the requirements of Section 409A of the Code or an exception to Section 409A of the Code will recognize ordinary income at the time the stock is delivered equal to the excess, if any, of the fair market value of the shares of our common stock received over any amount paid by the recipient in exchange for the shares of our common stock. To conform to the requirements of Section 409A of the Code, the shares of our common stock subject to a restricted stock unit award may generally only be delivered upon one of the following events: a fixed calendar date (or dates), separation from service, death, disability or a change in control. If delivery occurs on another date, unless the restricted stock units otherwise comply with or qualify for an exception to the requirements of Section 409A of the Code, in addition to the tax treatment described above, the recipient will owe an additional 20% federal tax and interest on any taxes owed.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from restricted stock units will be the amount paid for such shares plus any ordinary income recognized when the stock is delivered.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the restricted stock unit award.
Stock Appreciation Rights. We may grant under the 2016 Plan stock appreciation rights separate from any other award or in tandem with other awards under the 2016 Plan. Where the stock appreciation rights are granted with a strike price equal to the fair market value of the underlying stock on the grant date, the recipient will recognize ordinary income equal to the fair market value of the stock or cash received upon such exercise. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock appreciation right.
New Plan Benefits
As described above, on July 7, 2016, a special committee of the Board approved the rescission (and forfeiture by the holders) of the Excess Options to purchase 2,560,000 shares and approved the grant of the New Options to purchase 1,960,000 shares. The New Options, which were granted subject to stockholder approval of the 2016 Plan, are set forth below. Other than the New Options set forth in the table below, equity-based or cash compensation awards to be granted in the future to eligible individuals, including current and future employees, officers and directors, under the 2016 Plan cannot be determined at this time, as actual awards will be made at the discretion of the Board of Directors or the compensation committee.
| New Plan Benefits | ||||||
Name and Position |
| Number of Shares(1) |
|
| ||
|
|
|
|
|
| |
Rick Kasch, Chief Executive Officer, President, Chairman of the Board |
| 1,185,000 |
| (2) | ||
|
|
|
|
|
| |
Robert Devers, Chief Financial Officer, Treasurer |
|
| 165,000 |
| (3) | |
|
|
|
|
|
| |
Austin Peitz, Senior Vice President of Operations |
| 360,000 |
| (4) | ||
Executive Officers as a Group |
|
| 1,710,000 |
| ||
|
|
|
|
|
| |
Keith Behrens, Director |
|
| 100,000 |
| (5) | |
|
|
|
|
|
| |
Steve Oppenheim, Director |
| 150,000 |
| (6) | ||
Non-employee Directors as a Group |
|
| 250,000 |
| ||
|
|
|
|
|
| |
Total |
| 1,960,000 |
|
| ||
(1) Represents the number of shares of common stock that may be purchased pursuant to the New Options. The New Options are not exercisable unless and until the 2016 Plan is approved by stockholders.
(2) Includes the following New Options: (i) 325,000 shares with an exercise price of $0.65 per share, vesting on the date of stockholder approval of the 2016 Plan and expiring on 12/5/2017; (ii) 110,000 shares with an exercise price of $1.74 per share, vesting as to 40,000 shares on 1/1/2017, with the remaining 70,000 shares vesting on 1/1/2018, subject to certain conditions to vesting on each date, and expiring on 4/8/2020; (iii) 400,000 shares with an exercise price of $0.65 per share, vesting as to 150,000 shares on 12/31/2016, with the remaining 250,000 shares vesting on 12/31/2017, subject to certain conditions to vesting on each date, and expiring on 5/5/2021; and (iv) 350,000 shares with an exercise price of $0.65 per share, vesting as to 116,667 shares on each of 12/31/2016 and 12/31/2017, with the remaining 116,666 shares vesting on 12/31/2018, subject to certain conditions to vesting on each date, and expiring on 5/5/2021. As described above Mr. Kasch forfeited Excess Options to purchase 1,785,000 shares of common stock.
(3) Includes the following New Options: (i) 50,000 shares with an exercise price of $1.27 per share, vesting on the date of stockholder approval of the 2016 Plan and expiring on 10/29/2018; (ii) 50,000 shares with an exercise price of $1.00 per share, vesting on the date of stockholder approval of the 2016 Plan, and expiring on 7/25/2018; (iii) 40,000 shares with an exercise price of $1.74 per share, vesting on 1/1/2018, and expiring on 4/8/2020; and (iv) 25,000 shares with an exercise price of $0.65 per share, vesting on 12/31/2018, and expiring on 5/5/2021. As described above Mr. Devers forfeited Excess Options to purchase 165,000 shares of common stock.
(4) Includes the following New Options: (i) 200,000 shares with an exercise price of $0.65 per share, vesting on the date of stockholder approval of the 2016 Plan and expiring on 12/30/2017; (ii) 60,000 shares with an exercise price of $1.74 per share, vesting as to 6,666 shares on 1/1/2017, with the remaining 53,334 shares vesting on 1/1/2018, subject to certain conditions to vesting on each date, and expiring on 4/8/2020; and (iii) 100,000 shares with an exercise price of $0.65 per share, vesting as to 33,334 shares on 12/31/2017, with the remaining 66,666 shares vesting on 12/31/2018, subject to certain conditions to vesting on each date, and expiring on 5/5/2021. As described above Mr. Peitz forfeited Excess Options to purchase 360,000 shares of common stock.
(5) Option for 100,000 shares with an exercise price of $2.49 per share, vesting on the date of stockholder approval of the 2016 Plan and expiring on 7/10/2019. As described above Mr. Behrens forfeited Excess Options to purchase 100,000 shares of common stock.
(6) Includes the following New Options: (i) 100,000 shares with an exercise price of $1.27 per share, vesting on the date of stockholder approval of the 2016 Plan and expiring on 10/29/2018; and (ii) 50,000 shares with an exercise price of $1.00 per share, vesting on the date of stockholder approval of the 2016 Plan, and expiring on 7/25/2018. As described above Mr. Oppenheim forfeited Excess Options to purchase 150,000 shares of common stock.
Vote Required and Recommendation of Board
The Board recommends that the stockholders approve the 2016 Plan. The affirmative vote of a majority of the shares represented at the Annual Meeting and entitled to vote is required for approval of the 2016 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE 2016 EQUITY STOCK INCENTIVE PLAN.
PROPOSAL NO. 3RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors has selected the accounting firm of EKS&H LLLP (“EKSH”) to serve as our independent registered public accounting firm for the 2016 fiscal year. We are asking our stockholders to ratify the selection of EKSH as our independent registered public accounting firm. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of EKSH to our stockholders for ratification because we value our stockholders’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice.
To the Company’s knowledge, a representative from EKSH is expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and will be available to respond to questions.
Fees Billed
The aggregate fees billed to the Company by EKSH for each of the last two fiscal years for professional fees are as follows:
Financial Year Ending | Audit Fees | Audit Related Fees | Tax Fees | All Other Fees | Total | |||||||||||||||
December 31, 2015 | $ | 124,500 | $ | - | $ | - | $ | 925 | $ | 125,425 | ||||||||||
December 31, 2014 | $ | 122,500 | $ | 18,571 | $ | - | $ | 11,162 | $ | 152,233 | ||||||||||
Audit Fees and audit related fees are amounts billed for professional services that EKSH provided for the audit of our annual financial statements, review of the financial statements included in our reports on Form 10-Q and other services typically provided by an accountant in connection with statutory and regulatory filings or engagements for those fiscal years. All other fees include amounts billed for consultation provided to the company.
Pre-Approval Policies and Procedures
The Audit Committee Charter provides that the Audit Committee is responsible for the appointment, compensation, retention and oversight of the independent public accountants, and pre-approves all audit services and permissible non-audit services to be provided to the Company by the independent public accountants. The Audit Committee may, in its discretion, delegate the authority to pre-approve all audit services and permissible non-audit services to the Chairman of the Audit Committee provided the Chairman reports any delegated pre-approvals to the Audit Committee at the next meeting thereof. The Audit Committee has not, however, adopted any specific policies and procedures for the engagement of non-audit services.
The Audit Committee approved of EKSH performing our audit and all other consultation services provided for the 2014 and 2015 fiscal years as set forth in table above.
Vote Required and Recommendation of Board
Proposal Three requires the affirmative vote of a majority of the votes cast at the Meeting. If our stockholders fail to ratify the selection, it will be considered as a direction to the Board to consider the selection of a different firm. The Board considers EKSH to be well-qualified to serve as the independent auditor for the Company and EKSH has experience since 2010 in doing so. However, even if the selection is ratified, the Board of Directors, 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 our stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF EKSH AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
PROPOSAL NO. 4ADVISORY VOTE ON EXECUTIVE COMPENSATION
Starting in 2011, Section 14A of the Securities Exchange Act of 1934, as amended, and Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), require that at stockholder meetings at which directors are to be elected, certain public companies submit to their stockholders what is commonly known as a “Say on Pay” proposal. A Say on Pay proposal gives stockholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of the companies Named Executive Officers (“NEOs”)—being those executive officers whose total compensation is described in the Executive Compensation disclosure included in the company’s annual report as well as in the materials prepared and distributed in connection with stockholder meetings.
This Say On Pay vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s NEOs and our compensation philosophy, policies and practices, as disclosed under the “Executive Compensation” section of this Proxy Statement.
The Company recognizes that a framework that accounts for the Company’s financial resources and its business objectives is essential to an effective executive compensation program. The Company’s compensation framework and philosophy are established and overseen primarily by the Board of Directors. Our executive compensation program is designed to provide a competitive level of compensation necessary to attract and retain talented and experienced executives and to motivate them to achieve short-term and long-term corporate goals that enhance stockholder value. To that end we strive to ensure that the compensation of our executives is in-line with those of similarly situated oil and gas field services companies. The Board of Directors attempts to balance the compensation of our NEOs between near term compensation (being the payment of competitive salaries) with providing compensation intended to reward executives for the Company’s long term success (being equity based compensation). Moreover, the equity based compensation element is intended to further align the longer term interests of our executive officers with that of our stockholders.To further implement our objectives in attracting and retaining qualified executive officers our NEOs are also eligible to receive an annual bonus and receive various employment benefits.
Additionally, as part of our philosophy of aiming to attract and retain qualified executive level personnel the Company has entered into an employment agreement with each of its NEOs that is intended to provide each executive with a reasonable level of security with respect to his on-going employment.
We believe our executive compensation program implements our primary objectives of attracting and retaining qualified executive level personnel, providing the executives with reasonable contractual terms that offer some level of security, and motivating executive level personnel with a balance between short-term incentives with longer term incentives aimed to help further align the interests of our executive officers with our stockholders. Stockholders are encouraged to read the Executive Compensation section of this Proxy Statement for a more detailed discussion of the compensation structure and programs implemented by the Company during its 2015 fiscal year and which we expect to continue going forward.
At the 2013 Annual Meeting of Stockholders, held on July 25, 2013, an advisory vote was held on executive compensation for Enservco’s NEOs. At the 2013 Annual Meeting of Stockholders the stockholders approved a frequency of three years for voting on executive compensation. Pursuant to the foregoing, the Company is holding an advisory stockholder vote regarding NEO compensation at this Meeting. At the Annual Meeting, we will ask our stockholders to indicate their support for our NEO compensation as described in this Proxy Statement by voting “FOR” the following resolution:
RESOLVED, that the stockholders of Enservco approve, on an advisory basis, the compensation of the Company’s named executive officers, as such compensation is disclosed pursuant to Item 402 of Regulation S-K, including the “Compensation Discussion and Analysis” section, the tabular disclosure regarding such compensation, and the accompanying narrative executive compensation disclosures set forth in the Company’s 2016 Annual Meeting Proxy Statement.
While we intend to carefully consider the voting results of this proposal, the final vote is advisory in nature and therefore not binding on the Company. However, our Board of Directors values the opinions of all of our stockholders and will consider the outcome of this vote when making future compensation decisions for our NEOs.
Vote Required and Recommendation of Board
The advisory (non-binding) vote on the Company’s executive compensation structure and program as described in this Proxy Statement (including under the heading “Executive Compensation”) is non-binding, meaning that our Board will not be obligated to take any compensation actions, or to adjust our executive compensation programs or policies, as a result of the vote. Notwithstanding the advisory nature of the vote, the resolution will be considered passed with the affirmative vote of a majority of the votes cast at the Meeting. Although the vote is non-binding, our Board will review the voting results. The Board intends to consider the feedback obtained through this process in making future decisions about executive compensation programs.
The Board believes the Company’s executive compensation program is appropriately structured and effective in achieving the Company’s core compensation objectives.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.
PROPOSAL NO. 5FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION
Starting in 2011 Section 14A of the Securities Exchange Act of 1934, as amended, and Section 951 of the Dodd-Frank Act, require that public companies give their stockholders the opportunity to vote, at stockholder meetings at which directors are to be elected and on an advisory basis, on the frequency with which companies include in their meeting materials an advisory vote to approve or not approve the compensation of their NEOs.
At the 2013 Annual Meeting of Stockholders, held on July 25, 2013, an advisory vote was held on the frequency of the advisory vote on the compensation program for Enservco’s named executive officers. More than a majority of the votes cast at the annual meeting approved holding an advisory vote on the compensation program for named executive officers on a triennial basis (that is, each three years).
Our Board of Directors believes that an advisory vote on executive compensation that occurs every three years is the most appropriate choice for the Company, as a triennial vote complements the Company’s goal to create a compensation program that enhances long-term stockholder value. As described in the section titled “Executive Compensation,” our executive compensation program is designed to motivate executives to achieve both short-term and longer-term corporate goals that enhance stockholder value. To facilitate the creation of long-term, sustainable stockholder value, certain of our compensation awards are contingent upon successful completion of multi-year performance and service periods. A triennial vote will provide stockholders the ability to evaluate our compensation program over a time period similar to the periods associated with our compensation awards, allowing them to compare the Company’s compensation program to the long-term performance of the Company.
The Company and the Board of Directors would similarly benefit from this longer time period between advisory votes. Three years will give the Company sufficient time to fully analyze the Company’s compensation program (as compared to the Company’s performance over that same period) and to implement necessary changes. In addition, this period will provide the time necessary for implemented changes to take effect and the effectiveness of such changes to be properly assessed. The greater time period between votes will also allow the Company to consider various factors that impact the Company’s financial performance, stockholder sentiments and executive pay on a longer-term basis. The Board of Directors believes anything less than a triennial vote may yield a short-term mindset and detract from the long-term interests and goals of the Company.
While we intend to carefully consider the voting results of this proposal, the final vote is advisory in nature and therefore not binding on the Company or the Board of Directors. Our Board of Directors values the opinions of all of our stockholders and will consider the outcome of this vote when making future decisions on the frequency with which we will hold an advisory vote on executive compensation.
Unless the timing of the advisory votes is changed, the next required advisory vote regarding the frequency of an advisory vote on named executive officer compensation will be held at the Annual Meeting of Stockholders to be held in 2022.
Vote Required and Recommendation of Board
With respect to Proposal No. 5, stockholders will have the opportunity to cast their vote on the preferred voting frequency by selecting the option of holding an advisory vote on executive compensation: 1) “EVERY THREE YEARS,” 2) “EVERY TWO YEARS”, 3) “EVERY ONE YEAR,” or stockholders may “ABSTAIN.” The frequency receiving the greatest number of votes will be considered the frequency recommended by stockholders. Although the advisory vote is non-binding, our Board will review the results of the vote and take them into account in making a determination concerning the frequency of advisory votes on executive compensation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU SELECT “THREE YEARS” FOR VOTING ON THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION.
ANNUAL REPORT ON FORM 10-K AND ADDITIONAL INFORMATION
Annual Report
Available with this Proxy Statement (and available on the Internet as stated above) is the Company’s 20152019 Annual Report to Stockholders on Form 10-K.10-K for the year ended December 31, 2019.
Information Available
The Company is subject to the information and reporting requirements of the Exchange Act and in accordance with the Exchange Act, the Company files periodic reports, documents and other information with the SEC relating to its business, financial statements and other matters, including the Company’s annual report on Form 10-K for the year ended December 31, 2015,2019, and any reports prior to or subsequent to that date.
These reports and other information filed with the SEC by the Company may be inspected and are available for copying at the public reference facilities maintained at the Securities and Exchange Commission at 100 F Street NW, Washington, D.C. 20549.
The Company’s filings with the Securities and Exchange CommissionSEC are also available to the public from the SEC’s website, http://www.sec.gov and at the Company’s website, http://www.enservco.com. Our Annual Report on Form 10-K for the year ended December 31, 2015,2019, and other reports filed under the Securities Exchange Act of 1934, are also available to any stockholder at no cost upon request to: Corporate Secretary, Enservco Corporation, 501 South Cherry999 18th Street, Suite 1000,1925N, Denver, Colorado 80246;80202; Phone: (866) 998-8731.
OTHER MATTERS
Management and the Board of Directors of the Company know of no matters to be brought before the Meeting other than as set forth herein. However, if any such other matters properly are presented to the stockholders for action at the Meeting and any adjournments or postponements thereof, it is the intention of the proxy holder named in the enclosed proxy to vote in his discretion on all matters on which the shares represented by such proxy are entitled to vote.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
If hard copies of the materials are requested, we will send only one Proxy Statement and other corporate mailings to stockholders who share a single address unless we received contrary instructions from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, the Company will deliver promptly upon written or oral request a separate copy of the Proxy Statement to a stockholder at a shared address to which a single copy of the Proxy Statement was delivered. You may make such a written or oral request by sending a written notification stating (i) your name, (ii) your shared address and (iii) the address to which the Company should direct the additional copy of the Proxy Statement, to the Company at Corporate Secretary, Enservco Corporation, 501 South Cherry999 18th Street, Suite 1000,1925N, Denver, CO 80246;80202; Phone: (866) 998-8731.
If multiple stockholders sharing an address have received one copy of this Proxy Statement or any other corporate mailing and would prefer the Company to mail each stockholder a separate copy of future mailings, you may send notification to or call the Company’s Corporate Secretary in the same manner as described above. Additionally, if current stockholders with a shared address received multiple copies of this Proxy Statement or other corporate mailings and would prefer the Company to mail one copy of future mailings to stockholders at the shared address, notification of such request may also be made by mail or telephone to the Company’s Corporate Secretary in the same manner.
STOCKHOLDER PROPOSALS
2021 Annual Meeting of Stockholders
Enservco Corporation expects to resume holding its annual meeting of stockholders in accordance with previous practices and anticipates its next annual meetingAnnual Meeting of stockholdersStockholders will be held in June of 2017. Proposals from stockholders intended2021. Under Rule 14a-8, if a stockholder wants us to be presentinclude a proposal in our proxy statement for presentation at the nextour 2021 Annual Meeting of Stockholders, the proposal must be received by us by December 31, 2020. If the date of our 2021 Annual Meeting of Stockholders is more than 30 days from the anniversary date of our 2020 Annual Meeting of Stockholders, stockholders who wish to submit proposals for the 2021 Annual Meeting of Stockholders must submit such proposals a reasonable amount of time before we print and mail our proxy materials for the 2021 Annual Meeting of Stockholders. All proposals should be addressed to Enservco Corporation, Attention: Corporate Secretary,501 South Cherry 999 18th Street, Suite 1000,1925N, Denver, CO 80246,and we must receive the proposals by February 14, 2017.80202. Upon receipt of any such proposal, we shall determine whether or not to include any such proposal in the meeting materials in accordance with applicable law. It is suggested that stockholders forwardsubmit such proposals by Certified Mail-Return Receipt Requested. After February 14, 2017,certified mail, return receipt requested.
As discussed under the heading “Committees of the Board – No Nominating Committee” elsewhere in this proxy statement, the Company’s Bylaws set forth specific information that must be included with any stockholder proposal submittednomination of a person to stand for election of directors at the next Annual Meeting or special meeting of the stockholders at which directors are to be elected.
The SEC also sets forth procedures under which stockholders may make proposals outside of the process described above in order for a stockholder to nominate persons for election as directors or to introduce an item of Rule 14a-8business at an annual meeting of stockholders. These procedures require that stockholders must submit nominations or items of business in writing to our Corporate Secretary at our offices in Denver, Colorado. We must receive the notice of your intention to introduce a nomination or to propose an item of business at our 2021 Annual Meeting no later than 45 days before the date on which the Company first sent proxy materials for the prior year’s annual meeting if it is being held within 30 days preceding the anniversary date of this year’s annual meeting (June 26, 2020), which is a reasonable time before the Company will be consideredmake its proxy materials available to be untimely.stockholders.
Assuming that our 2021 Annual Meeting is held on schedule, we must receive notice of your intention to introduce a nomination or other item of business at that meeting by March 3, 2021, which is a reasonable time before the Company will make its proxy materials available to stockholders. In order to curtail controversy as to the date on which a proposal was received by us, it is suggested that proponents submit their proposals by certified mail, return receipt requested. Such proposals must also meet the other requirements established by the SEC for stockholder proposals.
BY ORDER OF THE BOARD OF DIRECTORS:
ENSERVCO CORPORATIONEnservco Corporation
Rick D. Kasch, Chief Executive Officer and PresidentRichard A. Murphy, Chairman of the Board of Directors
Appendix A
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Appendix B
FORM OF
CERTIFICATE OF AMENDMENT TO THE
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ENSERVCO CORPORATION
2016 STOCK INCENTIVE PLAN
Effective July 18, 2016
1.
Adopted in accordance with the provisions
of Section 242 of the General. Corporation
Law of the State of Delaware
1.1Purpose. The purpose
Enservco Corporation, a corporation organized and existing under the laws of the 2016 Stock Incentive PlanState of Delaware (the “Plan”“Corporation”), by its duly authorized officer, does hereby certify:
The Second Amended and Restated Certificate of Enservco Corporation (the “Company”) is to increase stockholder value and to advance the interestsIncorporation of the Company by furnishing a variety of economic incentives (“Incentives”) designed to attract, retain and motivate Employees, certain key consultants and directorsCorporation is hereby amended as follows:
Article IV of the Company. Incentives maySecond Amended and Restated Certificate of Incorporation is hereby amended and restated as follows:
“The authorized capital stock of the Corporation shall consist of opportunities to purchase110,000,000 shares, which shall be divided into two classes, consisting of 100,000,000 shares of common stock (“Common Stock”) and 10,000,000 shares of preferred stock (“Preferred Stock”), each with $0.005 par value per share. The designations, preferences, privileges, rights and voting powers and any limitations, restrictions or receivequalifications thereof, of the shares of each class are as follows:
A. The holders of outstanding shares of Common Stock $0.005 par value pershall have the right to vote on all questions to the exclusion of all other stockholders, each holder of record of Common Stock being entitled to one vote for each share of the Company (“Common Stock”) standing in the name of the stockholder on terms determined underthe books of the Corporation, except as may be provided in this Plan.Certificate of Incorporation, in a Preferred Stock Designation (as hereinafter defined), or as required by law.
1.2Eligible Participants. Employees, Directors and Consultants are eligible to receive Incentives. ParticipantsB. The Preferred Stock may be designated individuallyissued from time to time in one or by groupsmore series. The Board of Directors (or any committee to which it may duly delegate the authority granted in this Section B of Article IV) is hereby empowered to authorize the issuance from time to time of shares of Preferred Stock in one or categories (for example, by pay grade)more series, for such consideration and for such corporate purposes as the Committee deems appropriate. ParticipationBoard of Directors may from time to time determine, and by officersfiling a certificate pursuant to applicable law of the CompanyState of Delaware (hereinafter referred to as a “Preferred Stock Designation”) as it presently exists or its subsidiariesmay hereafter be amended to establish from time to time for each such series the number of shares to be included in each such series and any performance objectives relating to fix the designations, powers, rights and preferences of the shares of each such officers mustseries, and the qualifications, limitations and restrictions thereof to the fullest extent now or hereafter permitted by this Certificate of Incorporation and the laws of the State of Delaware, including, without limitation, voting rights (if any), dividend rights, dissolution rights, conversion rights, exchange rights and redemption rights thereof, as shall be approvedstated and expressed in a resolution or resolutions adopted by the Committee. Participation by others and any performance objectives relatingBoard of Directors (or such committee thereof) providing for the issuance of such series of Preferred Stock. Each series of Preferred Stock shall be distinctly designated. The authority of the Board of Directors with respect to otherseach series of Preferred Stock shall include, but not be limited to, determination of the following:
(i) The designation of the series, which may be approved by groupsdistinguishing number, letter or categories (for example, by pay grade) and authority to designate participants who are not officers and to set or modify such targets may be delegated.title.
1.3Types (ii) The number of Incentives. Incentives under the Plan may be granted in any one or a combinationshares of the following forms: (a) Incentive Stock Options and non-statutory stock options (Section 4); (b) stock appreciation rights (“SARs”) (Section 5); (c) stock awards, restricted stock awards and restricted stock unit awards (Section 6); (d) performance awards (Section 7), and (e) other forms of Incentives valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (withseries, which number the Board having sole and complete authority to determineof Directors may thereafter (except where otherwise provided in the persons to whomPreferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding).
(iii) The amounts payable on, and the timepreferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or timesnoncumulative.
(iv) Dates at which dividends, if any, shall be payable.
(v) The redemption rights and price or prices, if any, for shares of the series.
(vi) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series.
(vii) The amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
(viii) Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other formsterms and conditions upon which such conversion or exchange may be made.
(ix) Restrictions on the issuance of Incentives willshares of the same series or of any other class or series.
(x) The voting rights, if any, of the holders of shares of the series.
C. Reservation of Right. The Board of Directors of the Corporation reserves the right by subsequent amendment of (i) this Certificate of Incorporation or (ii) the resolutions of the Board of Directors providing for the creation of a series of Preferred Stock (the “Adopting Resolutions”), to increase or decrease the number of shares constituting Preferred Stock or any series thereof (but not below the number of shares then outstanding) and in any other respects to amend this Certificate of Incorporation or the Adopting Resolutions, in each case, within the limits provided by law, this Certificate of Incorporation and any applicable contract or instrument binding on the Corporation.
D. Other Provisions Applicable To Preferred Stock And Common Stock
1. Cumulative voting shall not be granted,allowed in elections of directors or for any other purpose.
2. No holders of shares of Preferred Stock or Common Stock of the Corporation shall be entitled, as such, to any preemptive or preferential right to subscribe to any unissued stock or any other securities which the Corporation may now or hereafter be authorized to issue. The Board of Directors of the Corporation, however, in its discretion by resolution, may determine that any unissued securities of the Corporation shall be offered for subscription solely to the holders of Preferred Stock or Common Stock of the Corporation, or solely to the holders of any class or classes of such stock, which the Corporation may now or hereafter be authorized to issue, in such proportions based on stock ownership as said board in its discretion may determine.
3. The Board of Directors may restrict the transfer of any of the Corporation’s stock issued by giving the Corporation or any stockholder “first right of refusal to purchase” the stock, by making the stock redeemable, or by restricting the transfer of the stock under such terms and in such manner as the directors may deem necessary and as are not inconsistent with the laws of the State of Delaware. Any stock so restricted must carry a conspicuous legend noting the restriction and the place where such restriction may be found in the records of the Corporation.
Upon the filing and effectiveness (the “Effective Time”), pursuant to the General Corporation Law of the State of Delaware, of this Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Corporation, each ________ (_______) shares of Common Stock either issued and outstanding or held by the Corporation in its treasury immediately prior to the Effective Time shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Common Stock (the “Reverse Stock Split”). No fractional shares shall be issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to receive fractional shares shall be entitled to the rounding up of the fractional share to the nearest whole number. Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old Certificates”), shall thereafter represent that number of shares of Common Stock (or the cash equivalent thereof) to be granted and all other terms and conditions of such other Incentives. Subject to the specific limitations provided in this Plan, payment of Incentives may also be in the form of cash, Common Stock or combinations thereof as the Board shall determine, and with such other restrictions as it may impose.
1.4Status of Prior Plan. The Plan is intended as a new equity incentive plan that is separate from the Company’s 2010 Stock Incentive Plan (the “Prior Plan”). Following the Effective Date, no additional Incentives may be granted under the Prior Plan. Any shares of Common Stock that are set aside under the Prior Plan’s share reserve butinto which are not subject to any outstanding Incentives under the Prior Plan as of 11:59 p.m. Mountain Standard Time on the Effective Date (the “Prior Plan’s Available Reserve”) will cease to be available for use under the Prior Plan at such time and will be added to this Plan’s Share Reserve (as further described in Section 3.1) and be then immediately available for issuance pursuant to Incentives. In addition, from and after 11:59 p.m. Mountain Standard Time on the Effective Date, all outstanding Incentives granted under the Prior Plan will remain subject to the terms of the Prior Plan. All Incentives granted on or after 11:59 p.m. Mountain Standard Time on the Effective Date of this Plan will be subject to the terms of this Plan.
2. Administration.
2.1Administration by the Board. The Plan shall be administered by the board of directors of the Company (the “Board”). The Board may delegate administration of the Plan to a stock option or compensation committee of the Board to whom authority has been delegated by the Board, in accordance with Section 2.3 (a “Committee”).
2.2Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(a) To determine: (i) who will be granted Incentives; (ii) when and how each Incentive will be granted; (iii) what type of Incentive will be granted; (iv) the provisions of each Incentive (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Incentive; (v) the number of shares of Common Stock subject to, or the cash value of, an Incentive; and (vi) the Fair Market Value applicable to an Incentive.
(b) To construe and interpret the Plan and Incentives granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Incentives. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any written agreement (an “Incentive Agreement”) between the Company and a person to whom an Incentive is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Incentive (a “Participant”), in a manner and to the extent it will deem necessary or expedient to make the Plan or Incentive fully effective.
(c) To settle all controversies regarding the Plan and Incentives granted under it.
(d) To accelerate, in whole or in part, the time at which an Incentive may be exercised or vest (or at which cash or shares of Common Stock may be issued).
(e) To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an Incentive Agreement, suspension or termination of the Plan will not materially impair a Participant’s rights under his or her then-outstanding Incentive without his or her written consent except as provided in subsection (viii) below.
(f) To submit the Plan and any amendment to the Plan for shareholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Internal Revenue Code of 1986, as amended (including the regulations promulgated thereunder, the “Code”) regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to “covered employees” (within the meaning of Section 162(m)(3) under the Code), (B) Section 422 of the Code regarding incentive stock options, or (C) Rule 16b-3 of the Securities Exchange Act of 1934 (including the regulations promulgated thereunder, the “Exchange Act”) (“Rule 16b-3”).
(g) To approve forms of Incentive Agreements for use under the Plan and to amend the terms of any one or more Incentives, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Incentive Agreement, subject to any specified limits in the Plan that are not subject to Board discretion;provided,however, that a Participant’s rights under any Incentive will not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing. Notwithstanding the foregoing, (A) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (B) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Incentives without the affected Participant’s consent: (1) to maintain the qualified status of the Incentive as an Incentive Stock Option under Section 422 of the Code; (2) to change the terms of an Incentive Stock Option, if such change results in impairment of the Incentive solely because it impairs the qualified status of the Incentive as an Incentive Stock Option under Section 422 of the Code; (3) to clarify the manner of exemption from, or to bring the Incentive into compliance with, Section 409A; or (4) to comply with other applicable laws or securities exchange rule or listing requirements.
(h) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Incentives.
(i) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Incentive Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).
2.3Delegation to Committee.
(a) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Committee may, at any time, abolish the subcommittee and/or re-vest in the Committee any powers delegated to the subcommittee. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(b) Section 162(m) and Rule 16b-3 Compliance. The Committee shall consist of not less than two Directors. During any time period in which the Company has a class of equity securities registered under Section 12 of the Exchange Act, each such Committee member or, if applicable, each member of a subcommittee to which power to administer the Company’s equity incentive plans and compensation under Section 162(m) under the Code, has been delegated, shall be an “outside director” within the meaning of Section 162(m) under the Code and a “non-employee director” within the meaning of Rule 16b-3.
2.4Delegation to an Officer. The Board may delegate to one or more Directors or officers of the Company (within the meaning of Section 16 of the Exchange Act, “Officers”), subject to such terms, conditions and limitation as the Board may establish in its discretion, the authority to grant Incentives;provided,however, that the Board shall not delegate such authority (i) with respect to grants of Incentives to be made to Officers or (ii) in such a manner as would cause the Plan not to comply with the requirements of Section 162(m) under the Code, applicable exchange rules or applicable corporate law.
2.5Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
2.6Cancellation and Re-Grant of Incentives. Except in connection with a Capitalization Adjustment, neither the Board nor any Committee will have the authority to: (a) reduce the exercise, purchase or strike price of any outstanding Options or SAR under the Plan; or (b) cancel any outstanding Options or SARs that have an exercise price or strike price greater than the current Fair Market Value of the Common Stock in exchange for cash or other Incentives (other than Options with an exercise price greater than or equal to the exercise price of the Options being exchanged) under the Plan, unless the shareholders of the Company have approved such an action within 12 months prior to such an event.
3. Shares Subject to the Plan.
3.1.Number of Shares.Subject to adjustment in connection with a Capitalization Adjustment and subject to Section 1.4, the number of shares of Common Stock which may be issued under the Plan shall not exceed 8,000,000shares of Common Stock. Shares of Common Stock that are issued under the Plan or are subject to outstanding Incentives will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. For purposes of clarification, the award of any Incentives payable only in cash will not reduce the number of shares of Common Stock remaining and available to be issued under the Plan. Shares may be issued in connection with a merger or acquisition as permitted by NYSE MKT Rules Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.
3.2.Share Counting.
(a) To the extent that cash in lieu of shares of Common Stock is delivered upon the exercise of a SAR pursuant to Section 5.4, the Company shall be deemed, for purposes of applying the limitation on the number of shares, to have issued the greater of the number of shares of Common Stock which it was entitled to issue upon such exercise or on the exercise of any related option.
(b) In the event that a stock option or SAR granted hereunder expires or is terminated or canceled unexercised as to any shares of Common Stock, such shares shall be added back to the Plan share reserve and shall be available again for issuance pursuant to Incentives granted under the Plan.
(c) To the extent that the full number of shares subject to a performance share award other performance based-stock award (other than a stock option or SAR) is not issued by reason of failure to achieve maximum performance goals, the number of shares not issued shall be added back to the Plan share reserve and shall be available again for issuance pursuant to Incentives granted under the Plan.
(d) In the event that shares of Common Stock are issued as performance shares, restricted stock or pursuant to another stock award and thereafter are forfeited or reacquired by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased shall be added back to the Plan share reserve and shall be available again for issuance pursuant to Incentives granted under the Plan.
(e) Shares withheld or deducted from an Incentive in satisfaction of tax withholding obligations on an Incentive or as consideration for the exercise or purchase price of an Incentive shall not be added back to the Plan share reserve and shall not again become available for issuance under the Plan.
3.3Section 162(m) Limitations. Subject to Section 9.1 relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, the following limitations shall apply:
(a) A maximum of 1,200,000 shares of Common Stock subject to stock options, SARs and Other Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the Fair Market Value on the date any such Incentive is granted may be granted to any Participant during any calendar year. Notwithstanding the foregoing, if any additional Options, SARs or Other Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the Fair Market Value on the date the Stock Award are granted to any Participant during any calendar year, compensation attributable to the exercise of such additional Incentive will not satisfy the requirements to be considered “qualified performance-based compensation” under Section 162(m) of the Code unless such additional Incentive is approved by the Company’s shareholders.
(b) A maximum of 500,000 performance shares may be granted to any one Participant during any one calendar year (whether the grant, vesting or exercise is contingent upon the attainment during the Performance Period of the Performance Goals).
(c) A maximum of $500,000 may be granted as a performance cash awards to any one Participant during any one calendar year.
3.4Limitation on Awards Granted to Non-Employee Directors. No Director who is not also an Employee may be granted any Incentive or Incentives denominated in shares that exceed in the aggregate $500,000 in value (such value computed as of the date of grant in accordance with applicable financial accounting rules) in any calendar year. The foregoing limit shall not apply to any Incentive made pursuant to any election by the Directors to receive an Incentive in lieu of all or a portion of annual and committee retainers and meeting fees.
3.5Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued Common Stock.
4. Stock Options. A stock option is a right to purchase shares of Common Stock from the Company. Each stock option granted under this Plan shall be subject to the following terms and conditions:
4.1Price. The option price per share shall be determined by the Board, subject to adjustment under Section 9.1; provided that option price shall be not less than the Fair Market Value of the Common Stock subject to the option on the date of grant.
4.2.Number. The number of shares of Common Stock subject to the option shall be determined by the Board, subject to adjustment in connection with a Capitalization Adjustment. The number of shares of Common Stock subject to a stock option shall be reduced in the same proportion that the holder thereof exercises a SAR if any SAR is granted in conjunction with or related to the stock option.
4.3.Duration and Time for Exercise. Subject to earlier termination as provided in Section 10.2, the term of each stock option shall be determined by the Committee but shall not exceed ten years and one day from the date of grant. Each stock option shall become exercisable at such time or times during its term as shall be determined by the Board at the time of grant.
4.4.Manner of Exercise. A stock option may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of shares of Common Stock to be purchased and accompanied by the full purchase price for such shares. The option price shall be payable (a) in United States dollars upon exercise of the option and may be paid by cash, uncertified or certified check or bank draft; (b) at the discretion of the Board, by delivery of shares of Common Stock in payment of all or any part of the option price, which shares shall be valued for this purpose at the Fair Market Value on the date such option is exercised; (c) at the discretion of the Committee, by instructing the Company to withhold from the shares of Common Stock issuable upon exercise of the stock option shares of Common Stock in payment of all or any part of the exercise price and/or any related withholding tax obligations, which shares shall be valued for this purpose at the Fair Market Value or in such other manner as may be authorized from time to time by the Board, or (d) in any other form of legal consideration that may be acceptable to the Board or is specified in the applicable Incentive Agreement. The shares of Common Stock delivered by the participant pursuant to Section 4.4(b) must have been held by the participant for a period of not less than six months prior to the exercise of the option, unless otherwise determined by the Board. Prior to the issuance of shares of Common Stock upon the exercise of a stock option, a participant shall have no rights as a shareholder.
4.5 Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant Incentive Stock Options:
(a) To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000) (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as non-statutory stock options, notwithstanding any contrary provision of the applicable Incentive Agreement(s).
(b) Any Incentive Stock Option authorized under the Plan shall contain such other provisions as the Board shall deem advisable, but shall in all events be consistent with and contain all provisions required in order to qualify the options as Incentive Stock Options.
(c) All Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan was adopted by Board of Directors or the date this Plan was approved by the shareholders.
(d) Unless sooner exercised, all Incentive Stock Options shall expire no later than 10 years after the date of grant.
(e) The option price for Incentive Stock Options shall be not less than the Fair Market Value of the Common Stock subject to the option on the date of grant.
(f) If Incentive Stock Options are granted to any participant who, at the time such option is granted, would own (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation, (i) the option price for such Incentive Stock Options shall be not less than 110% of the Fair Market Value of the Common Stock subject to the option on the date of grant and (ii) such Incentive Stock Options shall expire no later than five years after the date of grant.
5. Stock Appreciation Rights. A SAR is a right to receive, without payment to the Company, a number of shares of Common Stock, cash or any combination thereof, the amount of which is determined pursuant to the formula set forth in Section 5.4. A SAR may be granted (a) with respect to any stock option granted under this Plan, either concurrently with the grant of such stock option or at such later time as determined by the Board (as to all or any portion of the shares of Common Stock subject to the stock option), or (b) alone, without reference to any related stock option. Each SAR under this Plan shall be subject to the following terms and conditions:
5.1.Number. Each SAR granted to any participant shall relate to such number of shares of Common Stock as shall be determined by the Board, subject to adjustment in connection with a Capitalization Adjustment. In the case of a SAR granted with respect to a stock option, the number of shares of Common Stock to which the SAR pertains shall be reduced in the same proportion that the holder of the option exercises the related stock option.
5.2.Duration. Subject to earlier termination as provided in Section 10.2, the term of each SAR shall be determined by the Board but shall not exceed ten years and one day from the date of grant. Unless otherwise provided by the Board, each SAR shall become exercisable at such time or times, to such extent and upon such conditions as the stock option, if any, to which it relates is exercisable.
5.3.Exercise. A SAR may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of SARs which the holder wishes to exercise. Upon receipt of such written notice, the Company shall, within 90 days thereafter, deliver to the exercising holder certificates for the shares of Common Stock or cash or both, as determined by the Committee, to which the holder is entitled pursuant to Section 5.4.
5.4.Payment. Subject to the right of the Board to deliver cash in lieu of shares of Common Stock (which, as it pertains to Officers and Directors, shall comply with all requirements of the Exchange Act), the number of shares of Common Stock which shall be issuable upon the exercise of a SAR shall be determined by dividing:
(a) the number of shares of Common Stock as to which the SAR is exercised multiplied by the amount of the appreciation in such shares (for this purpose, the “appreciation” shall be the amount by which the Fair Market Value of the shares of Common Stock subject to the SAR on the exercise date exceeds (1) in the case of a SAR related to a stock option, the purchase price of the shares of Common Stock under the stock option or (2) in the case of a SAR granted alone, without reference to a related stock option, an amount which shall be determined by the Board at the time of grant, subject to adjustment under Section 10.6); by
(b) the Fair Market Value of a share of Common Stock on the exercise date.
In lieu of issuing shares of Common Stock upon the exercise of a SAR, the Board may elect to pay the holder of the SAR cash equal to the Fair Market Value on the exercise date of any or all of the shares which would otherwise be issuable. No fractional shares of Common Stock shall be issued upon the exercise of a SAR; instead, the holder of the SAR shall be entitled to receive a cash adjustment equal to the same fraction of the Fair Market Value of a share of Common Stock on the exercise date or to purchase the portion necessary to make a whole share at its Fair Market Value on the date of exercise.
6. Stock Awards, Restricted Stock and Restricted Stock Units. A stock award consists of the transfer by the Company to a participant of shares of Common Stock, without other payment therefor, as additional compensation for services to the Company. Restricted stock consists of shares of Common Stock which are sold or transferred by the Company to a participant at a price determined by the Committee (which price shall be at least equal to the minimum price required by applicable law for the issuance of a share of Common Stock) and subject to restrictions on their sale or other transfer by the participant. Restricted stock units evidence the right to receive shares of Common Stock at a future date. The transfer of Common Stock pursuant to stock awards and the transfer and sale of restricted stock shall be subject to the following terms and conditions:
6.1.Number of Shares. The number of shares to be transferred or sold by the Company to a participant pursuant to a stock award or as restricted stock, or the number of shares that may be issued pursuant to a restricted stock unit, shall be determined by the Board.
6.2.Sale Price. The Board shall determine the price, if any, at which shares of restricted stock shall be sold to a participant, which may vary from time to time and among Participants and which may be below the Fair Market Value of such shares of Common Stock at the date of sale.
6.3.Restrictions. All shares of restricted stock transferred or sold hereunder, and all restricted stock units granted hereunder, shall be subject to such restrictions as the Board may determine, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Board may deem appropriate, including, without limitation any or all of the following:
(a) a prohibition against either the sale, transfer, pledge or other encumbrance of the shares of restricted stock, or the delivery of shares pursuant to restricted stock units, such prohibition to lapse at such time or times as the Committee shall determine (whether in annual or more frequent installments, at the time of the death, disability or retirement of the holder of such shares, or otherwise);
(b) a requirement that the holder of shares of restricted stock or restricted stock units forfeit, or (in the case of shares sold to a participant) resell back to the Company at his or her cost, any right to all or a part of such shares or units in the event of termination of his or her employment or consulting engagement during any period in which such shares or units are subject to restrictions; and
(c) such other conditions or restrictions as the Board may deem advisable.
6.4.Escrow. In order to enforce the restrictions imposed by the Board pursuant to Section 6.3, the Participant receiving restricted stock or restricted stock units, as applicable, shall enter into an Incentive Agreement with the Company setting forth the conditions of the grant. Shares of restricted stock shall be registered in the name of the Participant and deposited, together with a stock power endorsed in blank, with the Company. Each such certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of Common Stock represented by it arethe Old Certificate shall have been combined, subject to the terms and conditions (including conditionselimination of forfeiture) contained in the 2016 Stock Incentive Plan of Enservco Corporation (the “Company”), and an agreement entered into between the registered owner and the Company. A copy of the Plan and the agreement is on file in the office of the Company.
6.5.Issuance and Delivery of Shares. Subject to Section 10.6, at the end of any time period during which the shares of restricted stock are subject to forfeiture and restrictions on transfer, such shares will be delivered free of all restrictions to the participant or to the participant’s legal representative, beneficiary or heir. In the case of restricted stock units, no shares shall be issued at the time such restricted stock units are granted. Subject to Section 10.6, upon the lapse or waiver of restrictions applicable to restricted stock units, or at a later time specified in the agreement governing the grant of restricted stock units, any shares derived from the restricted stock units shall be issued and delivered to the holder of the restricted stock units.
6.6.Shareholder. Subject to the terms and conditions of the Plan, each Participant receiving restricted stock shall have all the rights of a shareholder with respect to shares of stock during any period in which such shares are subject to forfeiture and restrictions on transfer, including without limitation, the right to vote such shares. Dividends paid in cash or property other than Common Stock with respect to shares of restricted stock shall be paid to the participant currently. Any holder of restricted stock units shall not be, and shall not have rights and privileges of, a shareholder with respect to any shares that may be derived from the restricted stock units unless and until such shares have been issued.
7.Performance Awards.
7.1Performance Shares. A performancefractional share is an Incentive (covering a number of shares not in excess of that set forth in Section 3.4(b) above) that is payable contingent upon the attainment during a Performance Period of certain Performance Goals. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion, within the time prescribed by Section 162(m), and shall otherwise comply with the requirements of Section 162(m). The grant of performance shares to a Participant shall not create any rights in such Participantinterests as a shareholder of the Company, until the payment of shares of Common Stock with respect to an Incentive. No adjustment shall be made in performance shares granted on account of cash dividends which may be paid or other rights which may be issued to the holders of Common Stock prior to the end of any period for which performance objectives were established. In addition, to the extent permitted by applicable law and the applicable Incentive Agreement, the Board may determine that cash may be used in payment of performance shares.
7.2Performance Cash Awards. A performance cash award is a cash award (for a dollar value not in excess of that set forth in Section 3.4(c) above) that is payable contingent upon the attainment during a Performance Period of certain Performance Goals. At the time of grant of a performance cash award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion; provided, however, that any Performance Period shall be at least one year in length. The Board may specify the form of payment of performance cash awards, which may be cash or other property, or may provide for a Participant to have the option for his or her performance cash award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property.described above.”
7.3Board Discretion. The Board retains the discretion to at any time reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period.
7.4Section 162(m) Compliance. Unless otherwise permitted in compliance with the requirements of Section 162(m) of the Code with respect to an Incentive intended to qualify as “performance-based compensation” thereunder, the Committee will establish the Performance Goals applicable to, and the formula for calculating the amount payable under, the Incentive no later than the earlier of (A) the date 90 days after the commencement of the applicable Performance Period, and (B) the date on which 25% of the Performance Period has elapsed, and in any event at a time when the achievement of the applicable Performance Goals remains substantially uncertain. PriorThis amendment to the paymentCorporation’s Second Amended and Restated Certificate of any compensation under an Incentive intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee will certify the extent to which any Performance Goals and any other material terms under such Award have been satisfied (other than in cases where such relate solely to the increase in the value of the Common Stock). Notwithstanding satisfaction of any completion of any Performance Goals, options, cash or other benefits granted, issued, retainable and/or vested under an Incentive on account of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as the Committee, in its sole discretion, will determine.
8.Covenants of the Company.
8.1Availability of Shares. The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Incentives.
8.2.Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Incentives and to issue and sell shares of Common Stock upon exercise of the Incentives;provided,however, that this undertaking will not require the Company to register under the Securities Act of 1933 (including the regulations promulgated thereunder, the “Securities Act”) the Plan, any Incentive or any Common Stock issued or issuable pursuant to any such Incentive. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Incentives unless and until such authority is obtained. A Participant will not be eligible for the grant of an Incentive or the subsequent issuance of cash or Common Stock pursuant to the Incentive if such grant or issuance would be in violation of any applicable securities law.
8.3No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising any Incentive. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Incentive or a possible period in which the Incentive may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Incentive to the holder of such Incentive.
9.Adjustments upon Changes in Common Stock; Other Corporate Events.
9.1Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a) and theshares of Common Stock issuable pursuant to any Incentive, the exercise price of any stock option or SAR, the performance goals for any Incentive, and other provisions of this Plan and outstanding Incentives, in order to reflect the change in the Common Stock and to provide Plan participants with the same relative rights before and after such adjustment. The Board will make such adjustments, and its determination will be final, binding and conclusive.
9.2Dissolution or Liquidation. Except as otherwise provided in the Incentive Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Incentives (other than Incentives consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company;provided,however, that the Board may, in its sole discretion, cause some or all Incentives to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Incentives have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
9.3Corporate Transaction. The following provisions will apply to Incentives in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Incentive or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of an Incentive. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board may take one or more of the following actions with respect to Incentives, contingent upon the closing or consummation of the Corporate Transaction:
(a) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Incentive or to substitute a similar stock award for the Incentive (including, but not limited to, an award to acquire the same consideration paid to the shareholders of the Company pursuant to the Corporate Transaction);
(b) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Incentives to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(c) accelerate the vesting, in whole or in part, of the Incentive (and, if applicable, the time at which the Incentive may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with such Incentive terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;provided,however, that the Board may require Participants to complete and deliver to the Company a notice of exercise before the effective date of a Corporate Transaction, which exercise is contingent upon the effectiveness of such Corporate Transaction;
(d) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Incentive;
(e) cancel or arrange for the cancellation of the Incentive, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
(f) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Incentive immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise. For clarity, this payment may be zero ($0) if the value of the property is equal to or less than the exercise price. Payments under this provision may be delayed to the same extent that payment of consideration to the holders of the Company’s Common Stock in connection with the Corporate Transaction is delayed as a result of escrows, earn outs, holdbacks or any other contingencies.
The Board need not take the same action or actions with respect to all Incentives or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of an Incentive prior to the earlier of (i) the effective time of the Corporate Transaction and (ii) the effectiveness of such action(s) with respect to the Incentives.
9.4.Change in Control. In the event of a Change in Control (as defined in Section 11.3), the Board or a comparable committee of any corporation assuming the obligations of the Company hereunder may, but shall not be obligated to, elect in its discretion to declare that the restriction period of all restricted stock and restricted stock units has been eliminated, that all outstanding stock options and SARs shall accelerate and become exercisable in full but that all outstanding Stock Options and SARs, whether or not exercisable prior to such acceleration, must be exercised within the period of time set forth in a notice to Participant or they will terminate, and that all performance shares granted to Participants are deemed earned at 100% of target levels andIncorporation shall be paid. In connection with any declaration pursuant to this Section 9.4, the Board may, but shall not be obligated to, cause a cash payment to be made to each Plan participant who holds a stock option or SAR that is terminated in an amount equal to the product obtained by multiplying (x) the amount (if any) by which the Transaction Proceeds Per Share (as defined in Section 11.14) exceeds the exercise price per share covered by such stock option times (y) the number of shares of Common Stock covered by such stock option or SAR.
The Board may restrict the rights of Plan participants or the applicability of this Section 9.4 to the extent necessary to comply with Section 16(b) of the Exchange Act, the Code or any other applicable law or regulation. The grant of an Incentive pursuant to the Plan shall not limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, exchange or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.
10. General.
10.1.Effective Date. The Plan will become effective on the Effective Date.
10.2.Duration.
(a) The Board may suspend or terminate the Plan at any time. No Incentive Stock Option will be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the shareholders of the Company. No Incentives may be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Suspension or termination of the Plan will not impair rights and obligations under any Incentive granted while the Plan is in effect except with the written consent of the affected Participant or as otherwise permitted in the Plan.
10.3Corporate Action Constituting Grant of Incentives. Corporate action constituting a grant by the Company of an Incentive to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined byfiling of this Certificate of Amendment with the Board, regardlessSecretary of when the Incentive Agreement, instrument, certificate, or letter evidencing the Incentive is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Incentive Agreement as a result of a clerical error in the paperingState of the Incentive Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Incentive Agreement.
10.4.Non-transferabilityState of Incentives. No stock option, SAR, restricted stock, restricted stock unit or performance award may be transferred, pledged or assigned by the holder thereof (except, in the event of the holder’s death, by will or the laws of descent and distribution to the limited extent provided in the Plan or the Incentive, or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder), and the Company shall not be required to recognize any attempted assignment of such rights by any participant. Notwithstanding the preceding sentence, stock options may be transferred by the holder thereof to Employee’s spouse, children, grandchildren or parents (collectively, the “Family Members”), to trusts for the benefit of Family Members, to partnerships or limited liability companies in which Family Members are the only partners or shareholders, or to entities exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. During a participant’s lifetime, a stock option may be exercised only by him or her, by his or her guardian or legal representative or by the transferees permitted by the preceding sentence.Delaware.
10.5.Effect of Termination or Death. In the event that a Participant ceases to be an Employee Director, or Consultant for any reason, including death or disability, any Incentives may be exercised (or payments or shares may be delivered thereunder) or shall expire at such times as may be determined by the Board and, if applicable, set forth in the Incentive Agreement.
10.6.Investment Assurances; Additional Condition. Notwithstanding anything in this Plan to the contrary, the Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Incentive, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Incentive; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Incentive for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Incentiveforgoing amendment has been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. If at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of any Incentive or the shares of Common Stock issuable pursuant thereto is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the award of any Incentive, the issuance of shares of Common Stock pursuant thereto, or the removal of any restrictions imposed on such shares, such Incentive shall not be awarded or such shares of Common Stock shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company.
10.7.Incentive Plans and Agreements. Except in the case of stock awards, the terms of each Incentive shall be stated in a plan or agreement approved by the Board. The Board may also determine to enter into agreements with holders of options to reclassify or convert certain outstanding options, within the terms of the Plan, as Incentive Stock Options or as non-statutory stock options and in order to eliminate SARs with respect to all or part of such options and any other previously issued options.
10.8.Withholding. Unless prohibited by the terms of an Incentive Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Incentive by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Incentive;provided,however, that no shares of Common Stock are withheld with a value exceeding the maximum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Incentive as a liability for financial accounting purposes); (iii) withholding cash from an Incentive settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Incentive Agreement. If a Participant desires and the Board permits, the Participant may satisfy its obligation to pay to the Company the amount required to be withheld by electing (the “Election”) to have the Company withhold from the distribution shares of Common Stock having a value up to the maximum amount of withholding taxes required to be collected on the transaction. The value of the shares to be withheld shall be based on the Fair Market Value of the Common Stock on the date that the amount of tax to be withheld shall be determined (“Tax Date”). Each Election must be made prior to the Tax Date. The Board may disapprove of any Election, may suspend or terminate the right to make Elections, or may provide with respect to any Incentive that the right to make Elections shall not apply to such Incentive. An Election is irrevocable.
10.9.No Continued Employment, Engagement or Right to Corporate Assets. Nothing in the Plan, any Incentive Agreement or any other instrument executed thereunder or in connection with any Incentive granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Incentive was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. Nothing contained in the Plan shall be construed as giving an Employee, a consultant, such persons’ beneficiaries or any other person any equity or interests of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person.
10.10.Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee) after the date of grant of any Incentive to the Participant, the Board has the right in its sole discretion to (i) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Incentive that is scheduled to vest or become payable after the date of such change in time commitment, and (ii) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Incentive that is so reduced or extended.
10.11Electronic Delivery. Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
10.12.Deferral Permitted. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Incentive may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be madeduly adopted in accordance with Section 409A.
10.13.Amendment of the Plan. The Board may amend, modify, suspend, discontinue or terminate the Plan or any portion of the Plan at any time as it deems necessary or advisable;provided,however, any amendment or modification that (a) increases the total number of shares available for issuance pursuant to Incentives granted under the Plan (except as contemplated by the provisions of Section 9.1 relating to Capitalization Adjustments), (b) deletes or limits the provisions of Section 2.6 (Cancellation and Re-Grant of Incentives), or (c) requires the approval242 of the Company’s shareholders pursuant to any applicable law, regulation or securities exchange rule or listing requirement, shall be subject to approvalGeneral Corporation Law of the State of Delaware by the Company’s shareholders. Except as provided in the Plan (including Section 2.2(g)) or an Incentive Agreement, no amendment, modification, suspension, discontinuance or terminationvote of a majority of each class of outstanding stock of the Plan shall impair a Participant’s rights under an outstanding Incentive without his or her written consent, provided that such consent shall not be required with respect to any Plan amendment, modification or other such action if the Board determines in its sole discretion that such amendment, modification or other such action is not reasonably likely to significantly reduce or diminish the benefits provided to the Participant under such Incentive.
10.14.Code Section 409A Provisions. Unless otherwise expressly provided for in an Incentive Agreement, the Plan and Incentive Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Incentives granted hereunder exempt from Section 409A of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code. If the Board determines that any Incentive granted hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Incentive Agreement evidencing such Incentive will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code and to the extent an Incentive Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Incentive Agreement. Notwithstanding anything to the contrary in this Plan (and unless the Incentive Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Incentive that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses, with the balance paid thereafter on the original schedule.
10.15.Clawback/Recovery. All Incentives granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Incentive Agreement as the Board determines necessary or appropriate. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company.
11.Additional Definitions.
11.1Affiliate. “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405. The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
11.2Capitalization Adjustment. A “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Incentive after the Effective Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, stock split, reverse stock split, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
11.3.Change in Control.A “Change in Control” means any of the following:
(a) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (A) the then-outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the CompanyCorporation entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);provided,however, that, for purposes of this Section 11.3, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (iv) any acquisition pursuant to a transaction that complies with Sections 11.3(b)(1), 11.3(b)(2) and 11.3(b)(3);
(b) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board (defined below) at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(c) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
(d) Individuals who, as of the effective date of this Plan, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the effective date of this Plan whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.
Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Incentives subject to such agreement;provided,however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply;provided,further, that no Change in Control shall be deemed to occur upon announcement or commencement of a tender offer or upon a potential takeover or upon shareholder approval of a merger or other transaction, in each case without a requirement that the Change in Control actually occur. If required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.
11.4.Corporate Transaction. “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(a) a sale or other disposition of all or substantially all, as determined by the Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(b) a sale or other disposition of at least 90% of the outstanding securities of the Company;
(c) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(d) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
To the extent required for compliance with Section 409A of the Code, in no event will an event be deemed a Corporate Transaction if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder).
11.5Employee. “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
11.6Consultant. “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act of 1933 is available to register either the offer or the sale of the Company’s securities to such person.
11.7Director. “Director” means a member of the Board.
11.8Effective Date. “Effective Date” means the effective date of this Plan document, which is the date on which this Plan is approved by the Company’s Board.
11.9Fair Market Value. “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
(a) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be (i) the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable, or (ii) such other method of determining the fair market value of a share of Common Stock that complies with the requirements of Section 409A of the Code.
(b) Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(c) In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
11.10Incentive Stock Option. “Incentive Stock Option” means a stock option that is intended to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.
11.11Performance Criteria. “Performance Criteria” means the one or more criteria that the Board will select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Board: (i) earnings (including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity or average stockholder’s equity; (vi) return on assets, investment, or capital employed; (vii) stock price; (viii) margin (including gross margin); (ix) income (before or after taxes); (x) operating income; (xi) operating income after taxes; (xii) pre-tax profit; (xiii) operating cash flow; (xiv) sales or revenue targets; (xv) increases in revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement in or attainment of working capital levels; (xiii) economic value added (or an equivalent metric); (xix) market share; (xx) cash flow; (xxi) cash flow per share; (xxii) share price performance; (xxiii) debt reduction; (xxiv) implementation or completion of projects or processes; (xxv) customer satisfaction; (xxvi) stockholders’ equity; (xxvii) capital expenditures; (xxiii) debt levels; (xxix) operating profit or net operating profit; (xxx) workforce diversity; (xxxi) growth of net income or operating income; (xxxii) billings; and (xxxiii) to the extent that an Incentive is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board.
11.12Performance Goals. “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices.
11.13Performance Period. “Performance Period” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of an Incentive. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.
11.14Transaction Proceeds Per Share.“Transaction Proceeds Per Share” in connection with a Change in Control shall mean the cash plus the Fair Market Value of the non-cash consideration to be received per share by the shareholders of the Company upon the occurrence of the transaction.thereon.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its duly authorized officer this day of , 2020.
Name:
Title:
Proxy Card from Computershare.
