(410) 762-0800
March 25, 2024
Dear Shareholder,
Stockholder,
You are cordially invited to attend the 20182024 Annual Meeting of ShareholdersStockholders (the “Annual Meeting”) of Novume Solutions,Rekor Systems, Inc. to be held at 10:0030 a.m. EDT(Eastern time) on August 9, 2018,April 18, 2024, at 14420 Albemarle Point Place, Suite 200, Chantilly, VA 20151.NASDAQ Marketsite® - 4 Times Square, 2nd Floor, New York, NY 10036 and virtually via a live video webcast at https://central.virtualshareholdermeeting.com/vsm/web?pvskey=REKR24. The attached notice of Annual Meeting and proxy statement describe the matters to be presented at the Annual Meeting and provide information about us that you should consider when you vote your shares.
The principal business of the meeting will be (i) to elect as directors the nominees named in this proxy statement to serve until the 20192025 Annual Meeting of ShareholdersStockholders and until their successors are duly elected and qualified, or until the earlier of their resignation or removal, (ii) to ratify the appointment of BD & Company, Inc.Marcum LLP as our independent public accountant for the fiscal year ending December 31, 2018,2024, (iii) to adopt an amendment to our Amended and Restated Certificate of Incorporation, as amended, to increase the authorized number of shares of our common stock, $0.0001 par value per share, from 100,000,000 to 300,000,000 (iv) to adopt an amendment and restatement of the Company’s 2017 Equity Award Plan to increase the number of authorized shares of common stock reserved for issuance to 10,000,000, (v) to advise us as to whether you approve the compensation of our named executive officers (Say-on-Pay), (iv) to advise us as to whether you prefer a vote to advise us on the compensation of our named executive officers every year, every two years or every three years (Say-on-Pay Frequency), and (v)(vi) to transact such other business as may be properly brought before the Annual Meeting and any adjournments thereof.
We hope you will be able to attend the Annual Meeting. Whether you plan to attend the Annual Meeting or not, it is important that your shares are represented. Therefore, when you have finished reading the proxy statement, you are urged to complete, sign, date and return the enclosed proxy card or respond via Internet or telephone, promptly in accordance with the instructions set forth on the card. This will ensure your proper representation at the Annual Meeting, whether or not you can attend.
| | Sincerely, | |||
| | |  | ||
| | /s/ Robert A. Berman | |||
| | | Robert A. Berman | ||
| | | Executive Chairman of the Board |
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
(410) 762-0800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
To be Held August 9, 2018
April 18, 2024
To the ShareholdersStockholders of Novume Solutions,Rekor Systems, Inc.:
NOTICE IS HEREBY GIVEN that the 20182024 Annual Meeting of ShareholdersStockholders (the “Annual Meeting”) of Novume Solutions,Rekor Systems, Inc., a Delaware corporation (the “Company”), will be held at 10:0030 a.m. EDT(Eastern Time) on August 9, 2018,April 18, 2024, or such later date or dates as such Annual Meeting date may be adjourned, at 14420 Albemarle Point Place, Suite 200, Chantilly, VA 20151,NASDAQ Marketsite® - 4 Times Square, 2nd Floor, New York, NY 10036 and virtually via a live video webcast at https://central.virtualshareholdermeeting.com/vsm/web?pvskey=REKR24 , for the purpose of considering and taking action on the following proposals:
| 1. |
| 2. | To ratify the appointment of 2024. |
| 3. |
| 4. | To adopt an amendment and restatement to our 2017 Equity Award Plan to increase the number of authorized shares of common stock reserved for issuance to 10,000,000 shares (the “Equity Award Plan Amendment”); |
| 5. | To advise us as to whether you approve the compensation of our named executive officers (Say-on-Pay); | |
| To transact such other business as may be properly brought before the Annual Meeting and any adjournments thereof. |
The foregoing business items are more fully described in the following pages, which are made part of this notice.
The Board recommends that you vote as follows:
“FOR” for the election of each of the Board nominees as directors;
“FOR | ||
“FOR” the adoption of the Charter Amendment to increase the number of authorized shares of common stock from 100,000,000 to 300,000,000;
“FOR” the adoption of the Equity Award Plan Amendment to increase the number of authorized shares of common stock reserved for issuance under our 2017 Equity Award Plan to 10,000,000 shares; and
“FOR” the compensation of our named executive officers as set forth in this proxy statement.
You may vote if you were the record owner of the Company’s common stock at the close of business on June 25, 2018.February 21, 2024. The Board of Directors of the Company has fixed the close of business on June 25, 2018February 21, 2024, as the record date (the “Record Date”) for the determination of shareholdersstockholders entitled to notice of and to vote at the Annual Meeting and at any adjournments thereof.
As of the Record Date there were 14,535,69584,404,798 shares of common stock outstanding and entitled to vote at the Annual Meeting and 240,861 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) outstanding, of which 481,722 shares of underlying common stock are entitled to vote at the Annual Meeting.Meeting. Holders of the shares of common stock are entitled to one vote for each share of common stock held. Each holder of Series B Preferred Stock is entitled to a number of votes equal to the number of shares of common stock issuable upon conversion of such holder’s Series B Preferred Stock, but only for the election of members of the Board of Directors.A list of shareholdersstockholders of record will be available at the Annual Meetingmeeting and, during the 10 days prior to the Annual Meeting,meeting, at the office of the Secretary of the Company at 14420 Albemarle Point Place,6721 Columbia Gateway Drive, Suite 200, Chantilly, VA 20151.
400, Columbia, Maryland.
All shareholdersstockholders are cordially invited to attend the Annual Meeting. Whether you plan to attend the Annual Meeting in person or via live videocast or not, we recommend that you are requestedalso submit your proxy or voting instructions or vote by Internet, telephone or mail prior to complete, sign, date and return the enclosed proxy card, or respond via Internet or telephone, as soon as possiblemeeting, in accordance with the instructions on the proxy card. A pre-addressed, postage prepaid return envelope is enclosed forcard, so that your convenience.vote will be counted if you later decide not to attend or vote at the Annual Meeting.
By Order of the Board of Directors of Rekor Systems, Inc.,
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| | By: | | | /s/ Robert A. Berman | ||
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Executive Chairman of the Board | ||||||
YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT
Your vote is important. Please vote as promptly as possible even if you plan to attend the Annual Meeting.
Meeting in person or via live videocast.
For information on how to vote your shares, please see the instruction from your broker or other fiduciary, as applicable, as well as “General Information About the Annual Meeting” in the proxy statement accompanying this notice.
We encourage you to vote by completing, signing, and dating the proxy card, and returning it in the enclosed envelope.
envelope, or by following the electronic voting instructions below.
If you have questions about voting your shares, please contact our Corporate Secretary at Novume Solutions,Rekor Systems, Inc., at 14420 Albemarle Point Place,6721 Columbia Gateway Drive, Suite 200, Chantilly, VA 20151,400, Columbia, MD 21046, telephone number 703-953-3838.
(410) 762-0800.
If you decide to change your vote, you may revoke your proxy in the manner described in the attached proxy statement at any time before it is voted.
We urge you to review the accompanying materials carefully and to vote as promptly as possible. Note that we have enclosed with this notice a proxy statement/prospectus.
THE PROXY STATEMENT IS AVAILABLE AT: https://east.proxyvote.com/pv/web
VOTING IS AVAILABLE AT: https://east.proxyvote.com/pv/web
By Order of the Board of Directors,
| | | Sincerely, | |
| | | ||
| | | /s/ Robert A. Berman | |
| | | Robert A. Berman | |
| | | Executive Chairman of the Board |
| | IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF The Notice of Annual Meeting of https:// | |
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement incorporates important business and financial information about Novume Solutions,Rekor Systems, Inc. that is not included in or delivered with this document. You may obtain this information without charge through the Securities and Exchange Commission (“SEC”) website (www.sec.gov) or upon your written or oral request by contacting the Chief Executive OfficerCorporate Secretary of Novume Solutions,Rekor Systems, Inc., 14420 Albemarle Point Place,6721 Columbia Gateway Drive, Suite 200, Chantilly, VA 20151,400, Columbia, MD 21046, telephone number 703-953-3838.
(410) 762-0800.
To ensure timely delivery of these documents, any request should be made and received by the Company no later than July 27, 2018April 4, 2024 to receive them before the Annual Meeting.annual meeting.
For additional details about where you can find information about Rekor Systems, Inc., please see the section entitled “Where You Can Find More Information” in this proxy statement.
Table of Contents
| GENERAL INFORMATION ABOUT THE ANNUAL MEETING | | | |
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6721 Columbia Gateway Drive, Suite 400, Columbia, MD 21046
APRIL 18, 2024
This proxy statement, along with the accompanying notice of the 20182024 Annual Meeting of Shareholders,Stockholders, contains information about the 20182024 Annual Meeting of ShareholdersStockholders of Novume Solutions,Rekor Systems, Inc., including any adjournments or postponements thereof (referred to herein as the “Annual Meeting”). We are holding the Annual Meeting at 10:0030 a.m. EDT on August 9, 2018,April 18, 2024, in person at 14420 Albemarle Point Place, Suite 200, Chantilly, VA 20151,NASDAQ Marketsite® - 4 Times Square, 2nd Floor, New York, NY 10036 and virtually via a live video webcast at https://central.virtualshareholdermeeting.com/vsm/web?pvskey=REKR24 or such later date or dates as such Annual Meeting date may be adjourned. For directions to the meeting, please call 703-953-3838.
(410) 762-0800.
In this proxy statement, we refer to Novume Solutions,Rekor Systems, Inc. as “Novume,“Rekor,” the “Company,” “we,” “us” or “our.”
Why Did You Send Me This Proxy Statement?
The Board of Directors of the Company (referred to herein as the “Board of Directors” or the “Board”) is soliciting proxies, in the accompanying form, to be used at the Annual Meeting on April 18, 2024 at 10:30 a.m. EDT and any adjournments thereof. This proxy statement along with the accompanying Notice of Annual Meeting of Shareholders,Stockholders summarizes the purposes of the Annual Meeting and the information you need to know to vote at the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the ShareholderStockholder Meeting to Bebe Held on August 9, 2018:April 18, 2024: The Notice of Annual Meeting of Shareholders, our Proxy Statementproxy statement and 2017 Annual Reportannual report to security holders are available athttps://east.proxyvote.com/pv/webwww.iproxydirect.com/nvmm.
The following documents are being made availablemailed on or about March 27, 2024, to all shareholdersstockholders entitled to notice of and to vote at the Annual Meeting:
| 1) | This proxy |
| 2) | The accompanying |
| 3) | Our |
The 20172023 Annual Report includes our financial statements for the fiscal year ended December 31, 2017,2023 but is not a part of this proxy statement. You can also find a copy of our 20172023 Annual Report on Form 10-K, and subsequent quarterly reports on Form 10-Q, on the Internet through the Securities and Exchange Commission’s electronic data system called EDGAR at www.sec.gov or through the “Investors”“Investor Relations” section of our website at www.novume.comwww.rekor.ai/investors.
Who Can Vote?
You do not need to attend the Annual Meeting to vote your shares. Shares represented by valid proxies, received in time for the Annual Meeting and not revoked prior to the Annual Meeting, will be voted at the Annual Meeting. A shareholderstockholder may revoke a proxy before the proxy is voted by electronically delivering to our Secretary a signed statement of revocation or a duly executed proxy card bearing a later date. Any shareholder who has executed a proxy card but attends the Annual Meetingdate or by voting in person may revoke the proxy and vote at the Annual Meeting.
1
How Many Votes Do I Have?
Each share of common stock that you own entitles you to one vote.Each holder of Series B Preferred Stock is entitled to the number of votes equal to the number of shares of common stock issuable upon conversion of such holder’s Series B Preferred Stock; provided, however, that a holder is only entitled to vote shares of common stock underlying the Series B Preferred Stock in the case of a vote to be taken for the election of members of the Board of Directors.
How Do I Vote?
Whether you plan to attend the Annual Meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via Internet or telephone. You may specify whether your shares should be voted for or withheld foragainst each nominee for director, and how your shares should be voted with respect to each of the other proposals. Except as set forth below, if you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board’s recommendations as noted below. Voting by proxy will not affect your right to attend the Annual Meeting. If your shares are registered directly in your name through our stock transfer agent, Issuer Direct Corporation, or you have stock certificates, you may vote:
By mail. If you have received this solicitation by mail, you may complete and mail the enclosed proxy card in the enclosed postage prepaid envelope. Your proxy will be voted in accordance with your instructions. If you sign the proxy card but do not specify how you want your shares voted, they will be voted as recommended by the Board.
In person at the meeting. If you attend the meeting, you may electronically deliver your completed proxy card to the Secretary during the meeting, or you may vote by completing a ballot electronically by following the instructions provided during the Annual Meeting. Via the Internet at: https://east.proxyvote.com/pv/web | ||
If your shares are held in “street name” (held in the name of a bank, broker or other nominee), you must provide the bank, broker or other nominee with instructions on how to vote your shares and can do so as follows:
By Internet or by telephone. Follow the instructions you receive from your broker to vote by Internet or telephone.
By mail. You will receive instructions from your broker or other nominee explaining how to vote your shares. | ||
How Does theThe Board Recommend That I Vote On theThe Proposals?
The Board recommends that you vote as follows:
“FOR” for the election of the Board nominees as directors;
“FOR | ||
“FOR” the adoption of an amendment to our Amended and Restated Certificate of Incorporation, as amended (the “Charter”), to increase the number of authorized shares of our common stock from 100,000,000 to 300,000,000 (the “Charter Amendment”);
“FOR” the adoption of an amendment and restatement of our 2017 Equity Award Plan to increase the number of authorized shares of common stock reserved for issuance to 10,000,000 shares (the “Equity Award Plan Amendment”); and
“FOR” the compensation of our named executive officers as set forth in this proxy statement.
If any other matter is presented, the proxy card provides that your shares will be voted by the proxy holder listed on the proxy card in accordance with his or her best judgment. As ofAt the date oftime this proxy statement was printed, we knew of no matters that needed to be acted on at the Annual Meeting, other than those discussed in this proxy statement.
2
May I Change or Revoke My Proxy?
If you give us your proxy, you may change or revoke it at any time before the Annual Meeting. You may change or revoke your proxy in any one of the following ways:
signing a new proxy card and submitting it as instructed above;
attending the Annual Meeting in person or virtually and voting during the meeting. Attending the Annual Meeting in person or virtually will not in and of itself revoke a previously submitted proxy unless you specifically request it. |
What If I Receive More Than One Proxy Card?
You may receive more than one proxy card or voting instruction form if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described above under “How Do I Vote?” or under "Voting Instructions" on the proxy card for each account to ensure that all of your shares are voted.
Will My Shares Be Voted If I Do Not Return My Proxy Card?
If your shares are registered in your name or if you have stock certificates, they will not be voted if you do not return your proxy card by mail fax or vote at the Annual Meeting as described above under “How Do I Vote?” IfWhen your broker cannot vote your shares on a particular matter because it has not received instructions from you and does not have discretionary voting authority on that matter, or because your broker chooses not to vote on a matter for which it does have discretionary voting authority, this is referred to as a “broker non-vote.” The New York Stock Exchange (“NYSE”) has rules that govern brokers who have record ownership of listed company stock (including stock such as ours that is listed on The Nasdaq Capital Market) held in brokerage accounts for their clients who beneficially own the shares. Under these rules, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares on certain matters (“routine matters”), but do not have the discretion to vote uninstructed shares as to certain other matters (“non-routine matters”). Under NYSE interpretations, Proposal 1 (election of directors), Proposal 3 (Charter Amendment), Proposal 4 (Equity Award Plan Amendment) and Proposal 5 (advisory vote to approve executive compensation), and Proposal 4 (advisory vote on frequency to advise us on the compensation of our named executive officers every year, every two years or every three years), are considered non-routine matters, and Proposal 2 (the ratification(ratification of our independent public accountant) is considered a routine matter.matters. If your shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares as described above under “How Do I Vote?,” the bank, broker or other nominee has the authority, even if it does not receive instructions from you, to vote your unvoted shares for Proposal 2 (the ratification(ratification of our independent public accountant), but does not have authority to vote your unvoted shares for ProposalProposals 1, (election of directors), Proposal 3, (advisory vote to approve executive compensation),4 and Proposal 4 (advisory vote on frequency to advise us on the compensation of our named executive officers every year, every two years or every three years).5. We encourage you to provide voting instructions. This ensures your shares will be voted at the Annual Meeting in the manner you desire.
What Vote is Required to Approve Each Proposal and How are Votes Counted?
Proposal 1: Election of Directors | | | The nominees for director who receive the |
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Proposal 2: Ratification of the Appointment of | | | The affirmative vote of a majority of |
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Proposal 3: Adoption of Charter Amendment to increase authorized Common Stock | | | The affirmative vote of a majority of votes cast, present or represented by proxy and entitled to vote at the Annual Meeting, will be required to adopt the amendment to our Charter to increase the number of our authorized shares of common stock. Abstentions will be treated as votes against this proposal. Brokerage firms are not entitled to vote customers’ unvoted shares held by the firms in street name for this proposal. As a result, any shares not voted by such a beneficial owner will be treated as a broker non-vote and such broker non-votes will not be included in the number of votes present and entitled to vote. |
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Proposal 4: Approval of Equity Award Plan Amendment to increase authorized shares available for issuance | | | The affirmative vote of a majority of votes cast, present or represented by proxy and entitled to vote at the Annual Meeting, will be required to adopt the Equity Award Plan Amendment. Abstentions will be treated as votes against this proposal. Brokerage firms are not entitled to vote customers’ unvoted shares held by the firms in street name for this proposal. As a result, any shares not voted by such a beneficial owner will be treated as a broker non-vote and such broker non-votes will not be included in the number of votes present and entitled to vote. |
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Proposal 5: Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay) | | | The advisory vote to approve the compensation of our executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal (Say-on-Pay). Abstentions will be counted as votes against this proposal and |
What Constitutes a Quorum for the Annual Meeting?
The presence, in person or by proxy, of the holders of a majority of the shares entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Votes of shareholdersstockholders of record who are present at the Annual Meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.
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Householding of Annual Disclosure Documents
The Securities and Exchange Commission (the “SEC”) previously adopted a rule concerning the delivery of annual disclosure documents. The rule allows us or brokers holding our shares on your behalf to send a single set of our annual report and proxy statement to any household at which two or more of our shareholdersstockholders reside, if either we or the brokers believe that the shareholdersstockholders are members of the same family. This practice, referred to as “householding,” benefits both shareholdersstockholders and us. It reduces the volume of duplicate information received by you and helps to reduce our expenses. The rule applies to our annual reports, proxy statements and information statements. Once shareholdersstockholders receive notice from their brokers or from us that communications to their addresses will be “householded,” the practice will continue until shareholdersstockholders are otherwise notified or until they revoke their consent to the practice. Each shareholderstockholder will continue to receive a separate proxy card or voting instruction card.
Those shareholdersstockholders who either (i) do not wish to participate in “householding” and would like to receive their own sets of our annual disclosure documents in future years or (ii) who share an address with another one of our shareholdersstockholders and who would like to receive only a single set of our annual disclosure documents should follow the instructions described below:
stockholders whose shares are registered in their own name should contact Broadridge Investor Communication Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, NY 11717 or by calling 1-866-540-7095; or
Who is paying for this proxy solicitation?
In addition to mailed proxy materials, our directors, officers and employees may also solicit proxies in person, by telephone, or by other means of communication. We will not pay our directors, officers and employees any additional compensation for soliciting proxies. We may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
When are shareholderstockholder proposals due for next year’s annual meeting?
At our annual meeting each year, our Board of Directors submits to shareholdersstockholders its nominees for election as directors. In addition, the Board of Directors may submit other matters to the shareholdersstockholders for action at the annual meeting.
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, shareholdersstockholders may present proper proposals for inclusion in the Company’s proxy statement for consideration at the 20192025 annual meeting of shareholdersstockholders by submitting their proposals to the Company in a timely manner. These proposals must meet the shareholdersstockholders eligibility and other requirements of the SEC. To be considered for inclusion in next year’s proxy materials, you must submit your proposal in writing by February 28, 2019December 19, 2024 to our Corporate Secretary, 14420 Albemarle Point Place,6721 Columbia Gateway Drive, Suite 200, Chantilly, VA 20151.400, Columbia, MD 21046.
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The following table sets forth certain information, as of the Record Date, with respect to the beneficial ownership of the outstanding Common Stockcommon stock by (i) any holder of more than five (5%) percent; (ii) each of the Company’s named executive officers and directors; and (iii) the Company’s directors and executive officers as a group. Except as otherwise indicated, each of the shareholdersstockholders listed below has sole voting and investment power over the shares beneficially owned.
| | | Shares Beneficially Owned | ||||
Name and address of beneficial owner(1) | | | Number of Shares beneficially owned(2) | | | Percent of class |
Robert A. Berman | | | 3,300,323(3) | | | 3.9% |
Paul de Bary | | | 213,379(4) | | | * |
Glenn Goord | | | 261,529(5) | | | * |
David Hanlon | | | 155,879(6) | | | * |
Steven Croxton | | | 133,379(7) | | | * |
Tim Davenport | | | —(8) | | | * |
Sanjay Sarma | | | —(9) | | | * |
Andrew Meyers | | | —(10) | | | * |
Anne Townsend | | | —(11) | | | * |
Eyal Hen | | | 151,971(12) | | | * |
David Desharnais | | | 187,045(13) | | | * |
All directors and named executive officers as a group (11 persons) | | | 4,403,505 | | | 5.2% |
5% or Greater Shareholders | | | | | ||
Robert A. Berman | | | 3,300,323(3) | | | 3.9% |
Arctis Global, LLC | | | 9,647,491(14) | | | 11.4% |
| Name and Address of Beneficial Owner (1) | Number of Shares Beneficially Owned (2) | Percent of Class | ||
| Directors and Named Executive Officers | ||||
| Robert A. Berman | 4,440,104 | (3) | 30.5% | |
| James McCarthy | 5,451,671 | 37.5% | ||
| Richard Nathan | 3,207,045 | (4) | 22.0% | |
| Harry Rhulen | 564,842 | (5) | 3.8% | |
| Suzanne Loughlin | 564,842 | (5) | 3.8% | |
| Paul de Bary | 48,499 | (6) | * | |
| Glenn Goord | 48,499 | (6) | * | |
| Christine Harada | 48,499 | (6) | * | |
| Marta Tienda | 48,499 | (6) | * | |
| Riaz Latifullah (7) | 116,397 | (8) | * | |
| All current Directors and named executive officers as a group (10 persons) | 14,538,897 | 66.5% | ||
| 5% or Greater Shareholders | ||||
| C.B. Brechin | 743,333 | 5.1% | ||
| Scott Rutherford | 748,226 | 5.2% | ||
| Paul Milligan | 781,722 | (9) | 5.2% |
| * | Less than 1% |
| (1) |
| (2) | Based on |
| (3) | Mr. Berman may be deemed to be the beneficial owner of 3,300,323 shares of Rekor Systems, Inc. common stock, or 3.9% of the class of securities. Consists |
| (4) | Consists of options to purchase 108,499 shares of our common stock exercisable within 60 days of February 21, 2024, restricted stock units of 20,378 which will vest into shares of our common stock within 60 days of February 21, 2024 and 84,502 shares of our common stock. |
| (5) | Consists of options to purchase 70,999 shares of our common stock exercisable within 60 days of February 21, 2024, restricted stock units of 20,378 which will vest into shares of our common stock within 60 days of February 21, 2024 and 170,152 shares of our common stock. |
| (6) | Consists of options to purchase 70,999 shares of our common stock exercisable within 60 days of February 21, 2024, restricted stock units of 20,378 which will vest into shares of our common stock within 60 days of February 21, 2024 and 64,502 shares of our common stock. |
| (7) | Consists of options to purchase 48,499 shares of our common stock exercisable within 60 days of February 21, 2024, restricted stock units of 20,378 which will vest into shares of our common stock within 60 days of February 21, 2024 and 64,502 shares of our common stock. |
| (8) | Director joined in September 2023 and does not currently hold any shares of our common stock. |
| (9) | Director joined in September 2023 and does not currently hold any shares of our common stock. |
| (10) | Director joined in January 2024 and does not currently hold any shares of our common stock. |
| (11) | Director joined in March 2024 and does not currently hold any shares of our common stock. |
| (12) | Consists of options to purchase |
| Consists |
| (14) | Based on the |
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Our Board currently consists of sevennine members. The Corporate Governance and Nominations Committee and Board have unanimously approved the recommended slate of sevennine directors.
The following table shows the Company’s nominees for election to the Board. Each nominee, if elected, will serve until the next annual meetingAnnual Meeting of shareholdersStockholders and until a successor is named and qualified, or until his earlier resignation or removal. All nominees are members of the presentcurrent Board of Directors. We have no reason to believe that any of the nominees is unable or will decline to serve as a director if elected. Unless otherwise indicated by the shareholder,stockholder, the accompanying proxy will be voted for the election of the sevennine persons named under the heading “Nominees for Directors.” Although the Company knows of no reason why any nominee could not serve as a director, if any nominee shall be unable to serve, the accompanying proxy will be voted for a substitute nominee.
Nominees for Director
| Name of Nominee | Age | Principal Position | Director Since | |||
| James K. McCarthy | 66 | Chairman of the Board | 2016 | |||
| Robert Berman | 58 | Chief Executive Officer and Director | 2016 | |||
| Dr. Richard Nathan | 73 | Director | 2016 | |||
| Glenn Goord | 66 | Director | 2016 | |||
| Paul A. de Bary | 71 | Director | 2017 | |||
| Christine J. Harada | 45 | Director | 2017 | |||
| Marta Tienda | 67 | Director | 2017 |
Name of Nominee | | | Age | | | Position | | | Director Since |
Robert A. Berman | | | 64 | | | Chief Executive Officer, and Executive Chairman of the Board | | | 2016 |
Paul A. de Bary | | | 77 | | | Lead Director | | | 2017 |
Glenn Goord | | | 72 | | | Director | | | 2016 |
David Hanlon | | | 78 | | | Director | | | 2018 |
Steven D. Croxton | | | 62 | | | Director | | | 2019 |
Sanjay Emani Sarma | | | 56 | | | Director | | | 2023 |
Timothy Davenport | | | 48 | | | Director | | | 2023 |
Andrew Meyers | | | 55 | | | Director | | | 2024 |
Anne Townsend | | | 46 | | | Director | | | 2024 |
The GovernanceNominations Committee and the Board seek, and the Board is comprised of, individuals whose characteristics, skills, expertise, and experience complement those of other Board members. We have set out below biographical and professional information about each of the nominees, along with a brief discussion of the experience, qualifications, and skills that the Board considered important in concluding that the individual should serve as a current director and as a nominee for re-election as a member of our Board.
Nominees Biographies
Robert A. Berman, Chief Executive Officer and Director
Robert Berman ishas served as our Chief Executive Officer and is a member of our Board of Directors since March 2016 and was appointed Executive Chairman of the Board of Directors and has served in such capacities since March 16, 2016.connection with the retirement of Mr. James McCarthy from the Board on July 23, 2020. Since January 2000, Mr. Berman has served as the General Partner of Avon Road Partners, L.P., a limited partnership investing in real estate and the broadcast media industry. From 2006 through March 2015, Mr. Berman held the office of Chairman and Chief Executive Officer at Cinium Financial Services Corporation, a privately-held specialty finance company, and its predecessor, Upper Hudson Holdings, LLC. Prior to Cinium, Mr. Berman was Chief Executive Officer of Empire Resorts, Inc., a Nasdaq-listedNASDAQ-listed gaming company, from 2002-2005.
Director Qualifications
Mr. Berman has extensive experience in the private equity and public company markets. We believe his strong understanding of the financial markets and the M&A process, and his previous senior executive roles with public companies make him a qualified member of our Board of Directors and to serve as our Chief Executive Officer.
Chairman.
Glenn Goord, Director
Glenn Goord has served on our Board of Directors since March 2016. From 1996 until his retirement in 2006, Mr. Goord is a 32-year veteranserved as Commissioner of the New York State Department of Correctional Services and served as Commissioner from 1996 until 2006. As Commissioner,(“NYSDCS”), where he oversaw the nation’s fourth largest state prison system, administering an operating budget of $2.3 billion in state and federal funds, plus $245 million in capital expenditures.system. Mr. Goord’s outstanding contributions to furthering excellence in corrections earned himGoord received the Carl Robison Award, the
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highest honor bestowed by the Middle Atlantic States Correctional Association.Association, in 1997. In 1998 he earnedreceived the Charles Evans Hughes Award for public service from the Albany based Capital Area Chapter for the American Society for Public Administration (ASPA). In 2002, the ASPA awarded Mr. Goord its highest honor, the Governor Alfred E. Smith Award, for his direction of the Department’s immediate and expansiveNYSDCA’s efforts to aid New York City following the September 11, 2001 terrorist attack. Mr. Goord holds a BA in Psychology from Fairleigh Dickinson University.
Director Qualifications
Mr. Goord has a strong background in government operations and procurement. His insights into how government operates is a key skill for board decision making on NovumeRekor strategy in certain industry segments. We believe his management and operational experience makes him a qualified member of our Board of Directors and the committees on which he participates.
Paul A. de Bary, Lead Director
Paul A. de Bary has had a varied careerserved on our Board of Directors since January 2017 and as Lead Director since November 2017. As an attorney, investment banker, financial advisor and corporate executiveinvestment banker, Mr. de Bary has had extensive experience with financial markets, governmental operations and director. Heprivate businesses. From 1996 to 2015, he was a managing director at Marquette de Bary Co., Inc., a New York based broker-dealer, from 1996 to 2015, where he served as a financial advisor for state and local government agencies, public and private corporations and non-profit organizations, as well as general counsel. He previously served as a director of Empire Resorts, Inc. (Nasdaq: NYNY) from 1996 to 2010, where he served as chairmanchair of its audit committee as well as, at various times throughout his tenure as a director, a member of the governance and compensation committees and various special committees. Since 2008, Mr. de Bary has also served as ChairChairman of the Board of Ethics forof the Town of Greenwich, Connecticut. Previously, Mr. de Bary was a managing director in the Public Finance Department of Prudential Securities from 1994 to 1997 and a partner in the law firm of Hawkins, Delafield & Wood in New York from 1975 to 1994.Connecticut since 2008. Mr. de Bary is a member of the American Bar Association, the New York State Bar Association and the Association of the Bar of the City of New York. Mr. de Bary holds a Juris Doctor degree,JD, an MBA and an ABA.B. from Columbia University.
Director Qualifications
Mr. de Bary has a diverse background that includes vast experience as a lawyer, investment banker, corporate officer and member of several boards of directors, including those of public companies. We believe these experiences, combined with his skills and knowledge related to public market decision-making and audit committee roles and responsibilities, makes him qualified member of our Board of Directors and the committees on which he participates.
David P. Hanlon,
Advanced Management Program at the Harvard Business School.
Director Qualifications
Mr. Croxton is Managing Director of Rice, Voelker, LLC and has more than 30 years’ experience in investment and commercial banking. During his career, Mr. Croxton has been involved in financing and advisory transactions totaling more than $35 billion for a variety of public and private corporations. He has previously
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served as the Maurice P. During ’22 Professor in demographic studies at Princeton University since 1999. She has also been a Professor of Sociology and Public Affairs, and Research Associate in the Office of Population Research at Princeton since 1997. Previously she held permanent positions at the universities of Chicago, where she served as chair of the sociology department, and Wisconsin-Madison, and visiting appointments at NYU, Stanford and Brown. She is a member of the National Academy of Education, the American Academy of Political and Social Science, and the American Academy of Arts and Sciences. She is past president of the Population Association of America, and from 2004 to 2006 chaired the National Research Council’s Panel on Hispanics. She serves on the board of the Population Reference Bureau, Robin Hood, and the Jacobs Foundation of Switzerland. In addition to chairing the Board of TrusteesDirectors of the Alfred P. Sloan Foundation, she serves as an independent trustee of the Board of Trustees of Teachers Insurance Annuity Association (TIAA). She is emeritus trustee of Brown University, the Federal Reserve Bank of New York, the W.T. Grant Foundation, The Carnegie Corporation of New York, the Kaiser Family Foundation,Peninsula Gaming, LLC, and the Russell Sage Foundation. Dr. Tienda received honorary doctorateshas held leadership roles with responsibilities related to investment, corporate, and international banking. Mr. Croxton earned a B.S. in Finance from Ohio State University, Lehman College and Bank Street College. She has published over 200 scientific papers and several monographs and edited books. She has a BA in Spanish (education) from MichiganLouisiana State University, and MA and PhD degrees in sociologya Master of International Management from the UniversityAmerican Graduate School of Texas at Austin.
International Management (now Thunderbird School of Global Management), and holds FINRA Series 7, 24, 63, and 79 licenses.
Director Qualifications
Sanjay Sarma, Prof., Director
Director Qualifications
Professor Sarma has a strong background within the area of global logistics, transportation, and data networks and he is well known with the industry as thought leader within the IoT community. We believe his skills and experiences make him a qualified member of our Board of Directors and the committees on which he participates.
Timothy Davenport, Director
Mr. Davenport currently serves as Chief Operating Officer for Arctis Global, LLC, a hedge fund manager. As a seasoned professional with over 20 years of experience in the hedge fund industry, Mr. Davenport brings a vast wealth of financial and operational expertise to the Board. His keen financial insight will be invaluable in shaping Rekor's financial strategies and acquisition initiatives. Mr. Davenport is a Fellow Chartered Accountant of the Institute of Chartered Accountants in England and Wales. He also holds a degree in mechanical engineering from the University of Birmingham. Before joining Arctis, Mr. Davenport has served as Head of Fund Accounting for Marshall Wace, as COO for MW Eaglewood, and as CFO for Winton, a research-based investment management company with a special focus on statistical inference in financial markets.
Director Qualifications
Mr. Davenport has significant experience within the finance industry and finance strategies. We believe his skills and experiences make him a qualified member of our Board of Directors and the committees on which he participates.
Andrew Meyers, Director
Since 2018, Mr. Meyers has been a partner in Seaport Capital, LLC, a firm that invests in communication infrastructure and services, business and information services and media companies. He has an active role in sourcing, analyzing and structuring new investment opportunities, and also assists in managing the operating activities of Seaport. He focuses primarily on business and information services, communication infrastructure, software and tech-enabled services investments. Mr. Meyers brings an extensive background in corporate governance, having served on various committees, including audit committees, compensation committees, and special committees for both public and private companies.
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Director Qualifications
As Partner at Seaport Capital, Mr. Meyers brings in-depth experience with M&A and financial strategies, as well as extensive experience working with technology companies to enhance their growth. With his business background and prior experience in corporate governance, we believe his skills and experiences make him a qualified member of our Board of Directors.
Anne Townsend, Director
Anne Townsend has served on our Board of Directors since March 2024. She currently serves as Sr. Principal Engineer – Cyber Architecture & Resiliency for the nominees named above is withheld,MITRE Corporation, where she was Departmental Manger – Cybersecurity from 2004-2022. Previous to that, she worked in software and systems engineering for Raytheon and Honeywell Information Systems. Ms. Townsend holds a bachelor’s degree in business administration with a concentration in computer and information sciences from the shares represented by the enclosed proxy will be voted FOR the electionUniversity of such nominees as directors. In the event that any of the nominees shall become unable or unwillingFlorida and a master’s degree in computer science with a concentration in information security from Boston University.
Director Qualifications
Ms. Townsend has extensive experience in information technology and network security for large mission critical data systems, particularly with respect to serve, the shares represented by the enclosed proxy will be voted for the election of such other person as the Board may recommend in such nominee’s place. The Board has no reason toIoT systems and urban mobility issues. We believe that anyher extensive experience in these area, as well as her skills as a project manager, make her a qualified member of the nominees will be unable or unwilling to serve.our Board of Directors.
Family Relationships
In the event that any of the nominees shall become unable or unwilling to serve, the shares represented by the enclosed proxy will be voted for the election of such other person as the Board may recommend in such nominee’s place. The Board has no reason to believe that any of the nominees will be unable or unwilling to serve.
Involvement in Certain Legal Proceedings
During the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has been:
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
Vote Required
The nominees for director who receive the greatest numberaffirmative vote of a majority of votes FOR election (also known as a plurality)cast, present or represented by proxy and entitled to vote at the Annual Meeting, will be elected as directors. You may vote either FOR all ofALL the nominees, WITHHOLD your vote from all ofALL the nominees or WITHHOLD your vote fromFOR ALL EXCEPT any one or more of the nominees. Votes that are withheld will not be included as affirmative votes in the vote tally for the election of directors. Brokerage firms doare not have authorityentitled to vote customers’ unvoted shares held by the firms in street name for the election of directors. As a result, any shares not voted by such a beneficial owner will be treated as a broker non-vote. Suchnon-vote and such broker non-votes will have no effect onnot be included in the resultsnumber of thisvotes present and entitled to vote.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF “FOR ALL” THE NOMINEES NAMED ABOVE FOR ELECTION AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE ON THE PROXY.DIRECTORS.
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Information about the Board of Directors and Committees
Corporate Governance
Independence of Directors
Our Board is currently comprised of sevennine members, foureight of whom are independent directors. Messrs. McCarthy, Nathan andMr. Berman areis not independent directors.
director.
The Board, upon recommendation of the Governance and Nominations Committee, unanimously determined that each of our foureight non-employee directors is “independent,” as such term is defined in the Nasdaq Stock Market Rules (“Stock Market Rules”).
The definition of “independent director” included in the Stock Market Rules includes a series of objective tests, such as that the director is not an employee of the Company, has not engaged in various types of specified business dealings with the Company, and does not have an affiliation with an organization that has had specified business dealings with the Company. Consistent with the Company’s corporate governance principles,Corporate Governance Principles, the Board’s determination of independence is made in accordance with the Stock Market Rules, as the Board has not adopted supplemental independence standards. As required by the Stock Market Rules, the Board also has made a subjective determination with respect to each director that such director has no material relationship with the Company (either directly or as a partner, shareholderstockholder or officer of an organization that has a relationship with the Company), even if the director otherwise satisfies the objective independence tests included in the definition of an “independent director” included in the Stock Market Rules.
In determining that each individual who served as a member of the Board is independent, the Board considered that, in the ordinary course of business, transactions may occur between the Company and entities with which some of our directors are affiliated. The Board unanimously determined that the relationships discussed below in the section entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” were not material.material to determination with respect to the independence of our independent directors. No unusual discounts or terms were extended.
Board Leadership Structure
Our Board of Directors is currently led by itsExecutive Chairman, James McCarthy.Robert Berman. Our Board of Directors recognizes that it is important to determine an optimal Board leadership structure to ensure the independent oversight of management as the Company continues to grow. We separatehave previously separated the roles of Chief Executive Officer and Chairman of the Board, but in recognition ofconnection with the differences between the two roles. The Chief Executive Officer is responsible for setting thecurrent strategic direction forof the Company and its focus, we believe at the day-to-day leadership and performance ofpresent time that Mr. Berman is in the Company, while thebest position to serve as both Executive Chairman of the Board of Directors provides guidance to theand Chief Executive Officer, and presides over meetingsthat combining these two roles at this time is in the best interests of the full Board of Directors. We believe thatCompany and its stockholders. The Company may revisit this separation of responsibilities provides a balanced approach to managingdecision in the Board of Directors and overseeing the Company.
future as circumstances warrant.
Our organizational guidelines provide for a Lead Director to be elected whenever the Chair of the Board of Directors is not an independent director. The responsibilities of the Lead Director are to: 1) preside at meetings of our stockholders and Board of Directors if the Chair is absent; 2) call meetings and executive sessions of the independent directors of the Board; 3) establish the agenda and preside at all executive sessions and other meetings of the independent directors of the Board and communicate the results of meetings of the independent directors to the Chair and other members of management, as appropriate; 4) communicate with the independent directors of the Board between meetings as necessary or appropriate, serve as a liaison between the Chair and the independent directors and communicate independent director consensus on important issues to the Chair; 5) approve Board meeting agendas and schedules for regular meetings of the Board of Directors to assure there is sufficient time for discussion of all agenda items and approve meeting materials and other information to be sent to the Board in advance of regular meetings; 6) evaluate the quality and timeliness of information sent to the Board by the Chief Executive Officer and other members of management; 7) oversee the evaluation of the Chief Executive Officer and assist the Board Chair on matters of Board succession planning and crisis management; 8) assist the Chair of the GovernanceNominations Committee with individual director evaluations; and 9) be available for consultation and direct communication at the request of major stockholders. Mr. de Bary currently serves as Lead Director.
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Director Attendance at Board, Committee, and Other Meetings
Directors are expected to attend Board meetings and meetings of the committees on which they serve, with the understanding that on occasion a director may be unable to attend a meeting. The Board does not have a policy on director attendance at the Company’s annual meeting.
The non-management directors (who also constitute all of the independent directors) meet in executive sessions in connection with regularly scheduled Board meetings and at such other times as the non-management directors deem appropriate. These sessions are led by the Lead Director.
In 2017,2023, the Board held threefour regular and six special meetings, the non-management directors held no regular and specialone meeting in executive sessions,session. In addition, in 2023, the Audit Committee held onefour regular and six special meeting,meetings, the Compensation Committee held onetwo regular meetings, the Nominations Committee held three regular meetings and one special meeting, and the Governance Committee held twofour regular and three special meetings. Each director attended 100% or more of the regular and special meetings of the Board and of the committees on which he or she served that were held during his or her term of office.
Each of the non-management (and independent) directors attended 100% of the regular and special executive sessions that were held during his term of office.
Board Role in Risk Oversight
Our Board of Directors has responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from Board committees and members of senior management to enable our Board to understand the Company’s risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk.
The Audit Committee reviews information regarding liquidity and operations and oversees our management of financial risks. Periodically, the Audit Committee reviews our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the Audit Committee includes direct communication with our external auditors, and discussions with management regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures. The Compensation Committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive risk-taking. The Governance Committee manages risks associated with the independence of the board, corporate disclosure practices, and potential conflicts of interest. The Nominations Committee has responsibility for the recruitment, evaluation training and assignment of Directors and developing performance criteria and succession planning for the chief executive officer. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered by our Board as a whole.
Committees of the Board
Our Board has three standing committees: Audit, Compensation, Governance and Governance.Nominations. Each of the committees is solely comprised of and chaired by independent directors, each of whom the Board has affirmatively determined is independent pursuant to the Stock Market Rules. Each of the committees operates pursuant to its charter. The committee chartersCharters are reviewed annually by the Governance Committee. If appropriate, and in consultation with the chairs of the other committees, the Corporate Governance Committee proposes revisions to the charters. The responsibilities of each committee are described in more detail below. The charters for the threefour committees are available on the Company’s website at www.novume.comwww.rekor.ai by following the link to “Investors” and then to “Corporate Governance.”
Audit Committee
We have an Audit Committee comprised of directors who are “independent” within the meaning of Nasdaq Rule 5605(b)(1). The Audit Committee assists our Board in overseeing the financial reporting process and maintaining the integrity of our financial statements, and of our financial reporting processes
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and systems of internal audit controls, and our compliance with legal and regulatory requirements. The Audit Committee is responsible for reviewing the qualifications, independence and performance of our independent registered public accounting firm and reviewreviews our internal controls, financial management practices and investment functions and compliance with financial legal and regulatory requirements. The Audit Committee is also responsible for performing risk and risk management assessments as well as preparing any report of the Audit Committee that may be required by the proxy rules of the SEC to be included in the Corporation’s annual proxy statement. Our Board has identified and appointed Paul de Bary as its “audit committee financial expert,” as defined by the SEC in Item 407 of Regulation S-K. Mr. de Bary serves as the Chair of the Audit Committee, and is joined on the committee by Ms. HaradaMr. Croxton, Mr. Davenport and Mr. Goord.Hanlon.
Compensation Committee
We have a Compensation Committee comprised of members who are “Non-Employee Directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “outside directors” within the meaning of Section 162(m) of the Code.Internal Revenue Code of 1986, as amended (the “Code”). They are also “independent” directors within the meaning of NasdaqNASDAQ Rule 5605(b)(1). The Compensation Committee is responsible for overseeing the establishment and maintenance of our overall compensation and incentive programs to discharge the Board’s responsibilities relating to compensation of our executive officers and directors, including establishing criteria for evaluating performance and setting appropriate levels of compensation, and to produce an annual report on executive compensation for inclusion in the Corporation’s proxy statement in accordance with the rules and regulations of the SEC. The Compensation Committee advises and makes recommendations to our Board on all matters concerning director compensation. Mr. GoordCroxton currently serves as Chair of the Compensation Committee and is joined by Ms. HaradaMr. Hanlon and Dr. Tienda.Mr. Goord.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee has been during 2016 or 2017, an officer or employee of NovumeRekor or any of its subsidiaries or predecessor companies, or was formerly an officer of NovumeRekor or any of its subsidiaries or predecessor companies or had any relationship requiring disclosure by us under Item 404 of Regulation S-K. No interlocking relationship as described in Itemitem 407(e)(4) of Regulation S-K exists between any of our executive officers or Compensation Committee members, on the one hand, and the executive officers or Compensation Committee members of any other entity, on the other hand, nor has any such interlocking relationship existed in the past.
Governance and Nominations Committee
Our Board has a Governance and Nominations Committee that that (1) reviews and recommends improvements to our governance guidelines and corporate policies; (2) monitors compliance with our Code of Conduct; (3) trains new members of the Board of Directors; (4) reviews the performance of the Board of Directors and its various committees and makes recommendations intended to improve that performance; (5) evaluates and makes recommendations concerning changes in the charters of the various Committees of the Board of Directors;Directors, (4) recommends and trains new members of the Board; (5) reviews the performance of the Board and its various committees and making recommendations for candidates and otherwise intended to improve that performance, (6) evaluatesrecommending criteria for evaluating the performance of the Chief Executive Officer, of the Corporation; (7) oversees the development and implementation of succession planning for Corporation senior management positions; and (8) identifies and recommends candidatesis responsible for nomination as members of the Board of Directors and its committees; and (9) such other matters as may be required to ensure compliance with applicable federal and state laws or the requirements of any exchange on which the Company maintains a listing for its securities. The committee is required to be comprised of entirely “independent” directors within the meaning of NasdaqNASDAQ Rule 5605(b)(1). Ms. Harada currentlyOn November 10th, 2023, the Governance Committee was renamed and assumed the former responsibilities of the Nominations Committee, which was subsequently disbanded. Mr. Hanlon serves as the Chair of the Governance and Nominations Committee and is joined on the committee by Dr. TiendaMr. de Bary and Mr. de Bary.Goord.
Technology and Social Responsibility Committee
The Board has established a Technology and Social Responsibility Committee to make periodic assessments of (1) technological developments and trends affecting the Company’s operations and business opportunities, (2) competitive advantages and vulnerabilities in its use and development of
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technology, and (3) the security of its physical and intellectual assets. Prof. Sarma serves as Chair of the Technology and membersSocial Responsibility Committee and is joined on the Committee by Mr. de Bary and Ms. Townsend.
The following chart describes the current membership and leadership of each committee are summarized in the table below:Board’s Committees:
Name | | Audit Committee | | Compensation Committee | | | Governance Committee | | | Technology Committee | ||
Paul A. de Bary - (Independent) | | Chair | | — | | | Member | | | Member | ||
Glenn Goord- (Independent) | | — | | Member | | | Member | | | — | ||
David Hanlon - (Independent) | | Member | | Member | | | Chair | | | — | ||
Steven D. Croxton - (Independent) | | Member | | Chair | | | — | | | — | ||
Sanjay Sarma - (Independent) | | | — | | | — | | | — | | | Chair |
Timothy Davenport - (Independent) | | | Member | | | — | | | — | | | — |
Anne Townsend - (Independent) | | | — | | | — | | | — | | | Member |
We seek directors with the highest standards of ethics and integrity, sound business judgment, and the willingness to make a strong commitment to the Company and its success. The Governance and Nominations Committee works with the Board on an annual basis to determine the appropriate and desirable mix of characteristics, skills, expertise, and experience for the full Board and each committee, taking into account both existing directors and all nominees for election as directors, as well as any diversity considerations and the membership criteria applied by the Governance and Nominations Committee. The Governance and Nominations Committee and the Board, which dodoes not have a formal diversity policy considerseparate from the Company’s Code of Conduct, considers diversity in a broad sense when evaluating board composition and nominations; and they seekseeks to include directors with a diversity of experience, professions, viewpoints, skills, and backgrounds that will enable them to make significant contributions to the Board and the Company, both as individuals and as part of a group of directors. The Board evaluates each individual in the context of the full Board, with the objective of recommending a group that can best contribute to the success of the business and represent shareholderstockholder interests through the exercise of sound judgment. In determining whether to recommend a director for re-election, the Governance and Nominations Committee also considers the director’s attendance at meetings and participation in and contributions to the activities of the Board and its committees.
The Governance and Nominations Committee will consider director candidates recommended by shareholders,stockholders, and its process for considering such recommendations is no different than its process for screening and evaluating candidates suggested by directors, management of the Company, or third parties.
Corporate Governance Matters
We are committed to maintaining strong corporate governance practices that benefit the long-term interests of our shareholdersstockholders by providing for effective oversight and management of the Company. Our governance policies, including our Code of Conduct and Committee Charters can be found on our website at www.novume.comwww.rekor.ai by following the link to “Investors” and then to “Corporate Governance.”
The Governance and Nominations Committee regularly reviews our Code of Conduct and Committee Charters to ensure that they take into account developments at the Company, changes in regulations and listing requirements, and the continuing evolution of best practices in the area of corporate governance.
The Board conducts an annual self-evaluation in order to assess whether the directors, the committees, and the Board are functioning effectively.
Code of Conduct
We have adopted a Code of Conduct, which serves as our Code of Ethics, which applies to all of our employees, including our Chief Executive Officer and our Chief Financial Officer and our Principal Financial and Accounting Officer. Our Code of Conduct is available on our website atwww.rekor.aiwww.novume.comby following the link to "Investors" and then to "Corporate Governance." The Code of Conduct is presented under "Corporate Policies.". If we amend or grant a waiver of one or more of the provisions
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of our Code of Conduct, we intend to satisfy the requirements under Item 5.05 of Item 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Conduct that apply to our Principal Executive and Principal Financial and Accounting Officer by posting the required information on our website at the above address. Our website is not part of this proxy statement.Proxy Statement.
Clawback Policy
Our Compensation Committee oversees our policy for compensation recovery with respect to any annual incentive payment or long-term incentive payment that may be received by an executive officer (the “Clawback Policy”), where such payment would be predicated upon achieving certain financial results that were subsequently the subject of a restatement of our financial statements, and a lower payment would have been made to the executive based upon the restated financial results. In such case, the Board has the authority to seek to recover from the executive officer the amount by which such officer’s incentive payments for the relevant period exceeded the lower payment that would have been made based on the restated financial results.
Communications with the Board of Directors
c/o Corporate Secretary
6721 Columbia Gateway Drive, Suite 400, Columbia, MD 21046
All shareholderstockholder correspondence will be compiled by our corporate secretary. Communications will be distributed to the Board of Directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications. Items that are unrelated to the duties and responsibilities of the Board of Directors may be excluded, such as:
junk mail and mass mailings;
| resumes and other forms of job inquiries; surveys; and solicitations and advertisements. |
In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is filtered out will be made available to any independent director upon request.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive officers, and shareholdersstockholders who own more than 10% of the Company’s stock to file forms with the SEC to report their ownership of the Company’s stock and any changes in ownership. The Company assists its directors and executives by identifying reportable transactions of which it is aware and preparing and filing the forms on their behalf. All persons required to file forms with the SEC must also send copies of the forms to the Company. We have reviewed all forms provided to us. Based on that review and on written information given to us by our executive officers and directors, we believe that all Section 16(a) filings during the past fiscal year were filed on a timely basis, and that all directors, executive officers and 10% beneficial owners have otherwise fully complied with such requirements during the past fiscal year.
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The following persons are our executive officers and hold the offices set forth opposite their names.
| Name | Age | Principal Occupation | Officer Since | |||
| James K. McCarthy | 66 | Chairman of the Board | 2017 | |||
| Robert A. Berman | 58 | Chief Executive Officer and Member of the Board | 2017 | |||
| Harry Rhulen | 54 | President | 2017 | |||
| Suzanne Loughlin | 56 | General Counsel and Chief Administrative Officer | 2017 | |||
| Riaz Latifullah | 61 | Executive Vice President, Corporate Development and Principal Financial and Accounting Officer | 2017 |
Name | | | Age | | | Position |
Executive Officer | | | | | ||
Robert A. Berman | | | 64 | | | Chief Executive Officer and Executive Chairman of the Board |
David Desharnais | | | 52 | | | President and Chief Operations Officer |
Eyal Hen | | | 51 | | | Chief Financial Officer |
Robert A. Berman, Chief Executive Officer and MemberExecutive Chairman of the Board
The biography for Robert A. Berman is containedset forth above in the information disclosures relatingsection entitled “Nominees Biographies - Robert A. Berman, Chief Executive Officer and Director.”
David Desharnais, President and Chief Operations Officer
On January 3, 2022, David Desharnais was appointed President. Mr. Desharnais has over two decades of experience leading growth strategies for technology driven businesses from start-ups to the Company’s nominees for director.
multinational corporations and across multiple industries. Mr. Rhulen is our President. He also is a founder, andDesharnais most recently served as CEO, of Firestorm, since its inception in 2005 until our acquisition of Firestorm in January of 2017. Mr. Rhulen previously served as an executive and CEO of a public insurance holding company with U.S. and European operations, commencing 1989 through 2005. Mr. Rhulen has extensive diligence experience having participated in over thirty M&A transactions. He has led several public offerings raising in excess of $350 million. Mr. Rhulen worked as a consultant in many industries, using his risk management, crisis management, and business management skills, as well as his public company, legal, bankruptcy, and due diligence experience to help his clients. Mr. Rhulen holds both a Juris Doctor and Masters of Business Degree from Syracuse University and graduated Cum Laude from the College of Insurance, New York, New York.
Eyal Hen, Chief Financial Officer
Mr. Latifullah previouslyHen has served as our Chief Financial Officer since May of 2019. He has more than 18 years’ experience as a global finance and now servesbusiness management executive in corporate environments, most recently with VAYA Pharma Inc. and Ormat Technologies, Inc. (NYSE: ORA). His expertise working as Executive Vice President, Corporate Development. On May 1, 2018,a finance executive in the public markets, where he oversaw financial reporting, compliance initiatives, investor communications, and financing, is instrumental as the Company continues its growth. Mr. Latifullah was appointed as our Principal FinancialHen holds a BA in Economics and Accounting Officer, a role he assumed on an interim basis upon the resignation of our former Chief Financial Officer. Prior to joining Novume, Mr. Latifullah served as the Chief Financial Officer of the American Grandparents Association / Grandparents.com. Mr. Latifullah spent 13 years with AARP, a non-profit organization that advocates on behalf of people over age 50. With AARP he served as Vice President, Financial Management, Senior Director Strategic Markets and Director Brand Operations. As an in-house entrepreneur with AARP he created and launched five start-up operations bringing significant changes to the organization. In other positions before AARP Mr. Latifullah served as General Manager for TV on the WEB, an internet video production company, a Government Relations Representative for the U.S. Merchant Marine Academy Alumni Foundationfrom Ben Gurion University (Israel) and an Investment Banking Associate for Ryan, Lee and Company. Mr. Latifullah holds an MBA from Stanford University, an MSE in Naval Architecture and Marine Engineering from the University of Michigan and a BS in Marine Engineering from the U.S. Merchant Marine Academy.Phoenix.
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The following table sets forth information about the annual paid compensation of our: Principal Executive Officer, Mr. Berman; two most highly compensated executive officers other than the Principal Executive Officer, Messrs. James McCarthyHen and Latifullah,Desharnais, who were serving as executive officers as of December 31, 2017; and two additional individuals, Messrs. Greg McCarthy and Berrigan, for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer as of December 31, 2017. While all named executive officers were eligible for bonuses in 2016 and 2017, due to our startup nature and because the first closing of the Regulation A Offering did not occur until December 23, 2016, management elected to only issue bonuses to Messrs. Gregory McCarthy and Berrigan for AOC Key Solutions and individual sales performance.2023; The information in this table for the Company’s most recently completed fiscal year is based on the information available to the Company as of the date of the Company’s Annual Report on Form 10-K for the year ended 2017.2023.
Name/Capacities in which compensation was received | | | Year | | | Base Salary | | | Bonus | | | Equity incentive awards | | | All other compensation(2) | | | Total |
Robert Berman | | | 2023 | | | $394,279(1) | | | $— | | | $— | | | $11,550 | | | $405,829 |
Chief Executive Officer | | | 2022 | | | 695,000(1) | | | — | | | — | | | 15,086 | | | 710,086 |
Eyal Hen | | | 2023 | | | 406,091(3) | | | — | | | 67,500(4) | | | 11,550 | | | 485,141 |
Chief Financial Officer | | | 2022 | | | 445,000(3) | | | — | | | 142,800(6) | | | 7,197 | | | 594,997 |
David Desharnais | | | 2023 | | | 724,673(6) | | | — | | | 67,500(8) | | | 11,550 | | | 803,723 |
President and Chief Operations Officer | | | 2022 | | | 728,750(6) | | | 200,000(7) | | | 2,118,750(9) | | | 10,675 | | | 3,058,175 |
| Name/Capacities in Which Compensation Was Received | Year | Salary ($) | Bonus ($) | Options ($) | All Other Compensation ($) | Total ($) | ||||||
| Robert Berman | 2017 | 395,000 | - | - | - | 395,000 | ||||||
| Chief Executive Officer (1) | 2016 | 300,000 | - | - | - | 300,000 | ||||||
| James K. McCarthy | 2017 | 293,231 | - | - | 8,931 | (2) | 302,162 | |||||
| Chief Strategy Officer (3) | 2016 | 298,989 | - | - | 10,600 | (2) | 406,840 | |||||
| Riaz Latifullah (4) | 2017 | 258,333 | - | 97,251 | (5) | - | 355,584 | |||||
| EVP, Corporate Development, Chief Financial Officer (6) | 2016 | 200,000 | - | - | - | 200,000 | ||||||
| Greg McCarthy | 2017 | 272,380 | 5,381 | (7) | - | 10,800 | (2) | 288,561 | ||||
| Chief Executive Officer of AOC Key Solutions | 2016 | 229,800 | 42,762 | (8) | - | 9,497 | (2) | 282,059 | ||||
| Kevin Berrigan | 2017 | 232,792 | 18,500 | (7) | - | - | 251,292 | |||||
| SVP and Chief Financial Officer of AOC Key Solutions | 2016 | 209,724 | 11,641 | (7) | - | 4,461 | (2) | 225,826 |
| (1) | In March of 2023, Mr. Berman |
| (2) | Amount represents 401(k) |
| (3) | From March to August of 2023, Mr. $405,000 to $445,000. |
| (4) | |
| Amount represents the fair value of the issuance of |
| Amount represents |
| From March to August of 2023, Mr. Desharnais voluntarily reduced his salary from $795,000 to $636,000. Mr. Desharnais has severed as the Company's President since January 17, 2022 and Chief Operating Officer since September 30, 2022. |
| (7) | Amount represents |
| (8) | Amount represents the fair value of the issuance of 50,000 restricted stock units to Mr. Desharnais on |
| (9) | Amount represents the fair value of the issuance of 375,000 restricted stock units to Mr. Desharnais on January 17, 2022. |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information with respect to unexercised stock options, stock that has not vested, and equity incentive plan awards held by our named executive officers at December 31, 2017.2023.
| | | | | Option Awards(3) | | | Restricted Stock Awards(3) | ||||||||||||||
Name | | | Grant Date | | | Number of Securities Underlying Unexercised Option - Exercisable | | | Number of Securities Underlying Unexercised Options - Unexercisable | | | Option Exercise Price | | | Option Expiration Date | | | Number of Shares that Have Not Vested | | | Market Value of Shares of Stock that Have not Vested(2) |
Robert Berman | | | 5/8/19 | | | 50,000 | | | —(1) | | | 1 | | | 5/8/29 | | | — | | | — |
Chief Executive Officer | | | 5/8/19 | | | 50,000 | | | — (1) | | | 1.5 | | | 5/8/29 | | | — | | | — |
Eyal Hen | | | 3/15/23 | | | | | | | | | | | 50,000 (1) | | | 166,500 | ||||
Chief Financial Officer | | | 3/15/22 | | | | | | | | | | | 26,666 (1) | | | 88,798 | ||||
| | | 3/17/21 | | | | | | | | | | | 3,333 (1) | | | 11,099 | |||||
| | | 5/15/19 | | | 50,000 | | | — (1) | | | 0.78 | | | 5/15/29 | | | — | | | — | |
David Desharnais | | | 3/15/23 | | | | | | | | | | | 50,000 (1) | | | 166,500 | ||||
President and Chief Operations Officer | | | 1/17/22 | | | | | | | | | | | 125,000 (1) | | | 416,250 | ||||
Option Awards | Stock Awards | |||||
Name and Principal Position | Number of Securities Underlying Unexercised Options - Exercisable | Number of Securities Underlying Unexercised Options - Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock that Have not Vested | Market Value of Shares of Stock that Have not Vested ($) |
| Robert Berman (1) | - | - | - | - | - | - |
| James McCarthy | - | - | - | - | - | - |
| Riaz Latifullah (2) | 72,748 | 101,847 | 1.42 | 12/23/26 | - | - |
| Greg McCarthy | - | - | - | - | - | - |
| Kevin Berrigan | - | - | - | - | - | - |
| (1) |
| (2) | Represents the market value of the restricted stock award or restricted stock unit based on the closing price of our common stock of $3.33 per share on December 29, 2023. |
| (3) | All of the options and restricted stock unit awards listed in the |
18
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee is a current or former officer or employee of NovumeRekor or its subsidiaries. No executive officer of NovumeRekor served as a director or member of the Compensation Committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
Employment Agreements
We have entered into employment agreementagreements with our executives in connection with his or herthe commencement of their employment with us.
Berman Employment Agreement
The Employment Agreement entered into May 15, 2019, with Robert Berman (the “Berman(“Berman Employment Agreement”) provides that Mr. Berman will serveserves as our Chief Executive Officer. The agreement has an initiala term which was effective as of December 23, 2016, of five years with automatically renewing one-year terms thereafter. This agreement supersedes Mr. Berman’s previous employment agreement which otherwise would have expired by its terms on March 31, 2022. Mr. Berman’s minimum base salary is $395,000$695,000 per annum, and he is eligible for a bonus as determined by our Compensation Committee. Mr. Berman is also eligible to receive all such other benefits as are provided to other management employees.
In the event of a “Change of Control”, as defined in the Berman Employment Agreement, whether during the initial term or thereafter, we shall have the right to terminate the Berman Employment Agreement. In the event we exercise the option to terminate Mr. Berman’s agreement, we will be required to pay Mr. Berman an amount equalis eligible to Mr. Berman’sreceive two times his base salary per annum multiplied by the number of years and portions thereof remaining under the Berman Employment Agreement. Mr. Berman may be terminated bythen in effect if his employment with the Company for “Cause”, asis terminated within 120 days of a change in control (as such is defined in the Berman Employment Agreement.Agreement).
In March 2023, Mr. Berman’s base salary was voluntary reduced by 50%. This reduction is still in effect.
The employment agreement Employment Agreement with Harry RhulenEyal Hen (the “Rhulen“Hen Employment Agreement”) provides that Mr. Rhulen will serveHen serves as our President forChief Financial Officer. Mr. Hen's Employment Agreement had an initial five-yearthree year term that beganbeginning on January 25, 2017.May 15, 2019, and has been subject to automatic annual extension since the initial term ended. His minimum base salary is $275,000$445,000 per annum and he will beis eligible for a bonus as determined by our Compensation Committee.the Board of Directors of the Company (the “Board”) in its sole discretion. Mr. RhulenHen is also eligible to receive all such other benefits as are provided to other management employees.
Mr. Hen is eligible to receive two times his base salary then in effect if his employment with the Company is terminated within 120 days of a change of control (as such term is defined in the Hen Employment Agreement).
In March 2023, Mr. RhulenHen’s base salary was previously granted optionsvoluntary reduced by 20% for 6 months.
Desharnais Employment Agreement
The Desharnais Employment Agreement provides for an initial three-year term beginning in January 2022, subject to purchase 80,000 sharesautomatic extension. Mr. Desharnais is eligible to receive annual performance bonuses as determined by the Company’s Chief Executive Officer and Board of Directors based on performance metrics mutually determined by the Company and the Mr. Desharnais, subject to the following terms: (i) for calendar year 2022, an amount up to $700,000, of which $200,000 was guaranteed, and (ii) for calendar year 2023 and thereafter, the Company and Mr. Desharnais will mutually agree, on or before January 30th of the commonparticular bonus measurement year, to metrics and goals that will apply to that bonus measurement year, and Mr. Desharnais is eligible for performance bonuses of up to $700,000.00 per year. In addition to performance bonuses, Mr. Desharnais was paid a one-time signing bonus of $139,468.
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Mr. Desharnais is eligible to receive two times his base salary then in effect if his employment with the Company is terminated within 120 days of a change of control (as such term is defined in the Desharnais Employment Agreement). Mr. Desharnais is eligible for benefits available to management employees generally, as outlined in the Company’s annual proxy statement filed with the Securities Exchange Commission (“SEC”) on August 3, 2021.
In connection with his employment, on January 17, 2022, Mr. Desharnais was granted 375,000 restricted stock par value $0.001 per share, of KeyStone at a strike price of $3.00 per share. These options were converted into optionsunits pursuant to purchase 155,195 shares of our common stock at a strike price of $1.5464 per share. The conversion did not affect theirthe Company’s 2017 Equity Award Plan, vesting schedule; the options were to begin vestingin three equal annual installments on the first anniversary of Mr. Rhulen’s initial employment as President(January 17, 2023), second (January 17, 2024), and continue vesting monthly over the following two years.
In March 2023, Mr. Rhulen’s health insurance premiums.
6 months.
Bonus Eligibility
Bonuses for our executive officers may be conditioned on the achievement of objective goals, which may not be waived after being set, based on one or more of the following performance measures: earnings; operating profits (including measures of earnings before interest, taxes, depreciation and amortization); free cash flow or adjusted free cash flow; cash from operating activities; revenues; net income (before or after tax); financial return ratios; market performance; stockholder return and/or value; net profits; earnings per share; profit returns and margins; stock price; working capital; capital investments; returns on assets; returns on equity; returns on capital investments; selling, general and administrative expenses; discounted cash flows; productivity; expense targets; market share; cost control measures; strategic initiatives; changes between years or periods that are determined with respect to any of the above-listed performance criteria; net present value; sales volume; cash conversion costs; leverage ratios; maintenance of liquidity; integration of acquired businesses; operational efficiencies, including Lean Six Sigma initiatives;efficiencies; regulatory compliance, including the Sarbanes-Oxley Act of 2002; and economic profit.
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PAY VERSUS PERFORMANCE
Pay vs. Performance
The following table sets forth compensation information for our chief executive officer, referred to below as our CEO, and our other named executive officers, or NEOs, for purposes of comparing their compensation to the value of our shareholders’ investments and our net income, calculated in accordance with SEC regulations, for fiscal years 2023, 2022 and 2021.
Year | | | Summary Compensation Table Total for CEO(1) | | | Compensation Actually Paid to CEO(2) | | | Average Summary Compensation Table Total for Non-CEO NEOs(3) | | | Average Compensation Actually Paid to Non-CEO NEOs(4) | | | Value of Initial Fixed $100 Investment Based on: Total Shareholder Return(5) | | | Net Loss |
2023 | | | $405,829 | | | $405,829 | | | $644,432 | | | $1,257,108 | | | $50.84 | | | $(44,925,000) |
2022 | | | $710,086 | | | $495,986 | | | $1,826,586 | | | $826,753 | | | $18.32 | | | $(83,115,000) |
2021 | | | $1,669,881 | | | $1,255,880 | | | $477,813 | | | $529,831 | | | $81.16 | | | $(26,782,000) |
| (1) | The dollar amounts reported are the amounts of total compensation reported for our CEO, Robert Berman, in the Summary Compensation Table for fiscal years 2023 and 2022, and in the Summary Compensation Table in our 2023 Annual Meeting Proxy Statement for fiscal year 2021. |
| (2) | The dollar amounts reported represent the amount of “compensation actually paid”, as computed in accordance with SEC rules. The dollar amounts reported are the amounts of total compensation reported for Mr. Berman during the applicable year, but also include (i) the year-end value of equity awards granted during the reported year, (ii) the change in the value of equity awards that were unvested at the end of the prior year, measured through the date the awards vested, or through the end of the reported fiscal year, and (iii) value of equity awards issued and vested during the reported fiscal year. See Table below for further information. |
| (3) | The dollar amounts reported are the average of the total compensation reported for our NEOs, other than our CEO, namely Mr. Hen and Mr. Desharnais for fiscal years 2023, 2022 and 2021. |
| (4) | The dollar amounts reported represent the average amount of “compensation actually paid”, as computed in accordance with SEC rules, for our NEOs, other than our CEO. The dollar amounts reported are the average of the total compensation reported for our NEOs, other than our CEO in the Summary Compensation Table for fiscal years 2023, 2022 and 2021, but also include (i) the year-end value of equity awards granted during the reported year, (ii) the change in the value of equity awards that were unvested at the end of the prior year, measured through the date the awards vested, or through the end of the reported fiscal year, and (iii) value of equity awards issued and vested during the reported fiscal year. |
| (5) | Assumes an investment of $100 on December 31, 2020. The closing prices of Rekor's common stock as reported on NASDAQ, as applicable, on the following trading days were: (i) $8.07 on December 31, 2020; (ii) $6.55 on December 31, 2021; (iii) $1.20 on December 30, 2022; and (iv) $3.33 on December 29, 2023. |
To calculate the amounts in the “Compensation Actually Paid to CEO” column in the table above, the following amounts were deducted from and added to (as applicable) our CEO’s “Total” compensation as reported in the Summary Compensation Table:
Year | | | Summary Compensation Table Total for CEO | | | Reported Value of Equity Awards for CEO(1) | | | Fair Value as of Year End for Unvested Awards Granted During the Year | | | Fair Value Year over Year Increase or Decrease in Unvested Awards Granted in Prior Years | | | Fair Value of Awards Granted and Vested During the Year | | | Fair Value Increase or Decrease from Prior Year end for Awards that Vested during the Year | | | Compensation Actually Paid to CEO |
2023 | | | $405,829 | | | $— | | | $— | | | $— | | | $— | | | $— | | | $405,829 |
2022 | | | $710,086 | | | $— | | | $— | | | $— | | | $— | | | $ (214,100) | | | $495,986 |
2021 | | | $1,669,881 | | | $ (1,000,004) | | | $ 174,296 | | | $ (53,118) | | | $ 279,405 | | | $185,420 | | | $ 1,255,880 |
| (1) | Represents the grant date fair value of the equity awards to our CEO, as reported in the Summary Compensation Table |
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To calculate the amounts in the “Compensation Actually Paid to Non-CEO NEOs” column in the table above, the following amounts were deducted from and added to (as applicable) the average “Total” compensation of our Non-CEO NEOs as reported in the Summary Compensation Table:
Year | | | Summary Compensation Table Total for Non-CEO NEOs | | | Reported Value of Equity Awards for Non-CEO NEOs(1) | | | Fair Value as of Year End for Unvested Awards Granted During the Year | | | Fair Value Year over Year Increase or Decrease in Unvested Awards Granted in Prior Years | | | Fair Value for Awards Granted and Vested During the Year | | | Fair Value Increase or Decrease from Prior Year end for Awards that Vested during the Year | | | Compensation Actually Paid to Non-CEO NEOs |
2023 | | | $644,432 | | | $(67,500) | | | $ 166,500 | | | $ 464,201 | | | $— | | | $49,475 | | | $ 1,257,108 |
2022 | | | $1,826,586 | | | $ (1,130,775) | | | $ 249,000 | | | $(62,416) | | | $— | | | $(55,642) | | | $826,753 |
2021 | | | $477,813 | | | $(93,950) | | | $32,750 | | | $(63,676) | | | $— | | | $ 176,893 | | | $529,831 |
| (1) | Represents the grant date fair value of the equity awards to our Non-CEO NEOs, as reported in the Summary Compensation Table |
Relationship between Pay and Performance
With respect to Rekor’s current ownership interests, those ownership interests, including the parent company, which primarily consist of technology driven businesses, have a history of operating losses and/or limited operating history. These ownership interests have incurred substantial costs to develop and market their products, have incurred net losses and cannot fund their cash needs from operations. Other ownership interests consist of service businesses that have a history of profitable operations. However, the profits from these operations have not equaled or exceeded the losses incurred by the other ownership interests. As provided in Rekor’s Annual Report on Form 10-K, such circumstances, taken together with the principles of accounting for such ownership interests, can result in Rekor’s net income varying considerably from year to year.
Given the stage of Rekor’s lifecycle and the nature of Rekor’s net income, Rekor does not include total shareholder return or net income in its compensation policies. Instead, with respect to the CEO and other Non-CEO NEO’s, compensation primarily includes: (i) base salary and (ii) restricted stock awards that vest and are paid subject to the CEO’s and Non-CEO NEOs continued employment. Since 2019, the Company has principally oriented its compensation policies toward the Company’s success at developing and deploying roadway intelligence products and services, and the development and expansion of its presence in related markets.
22
The following table provides the total compensation for each person who served as a non-employee member of our Board of Directors during fiscal year 2017,2023, including all compensation awarded to, earned by or paid to each person who served as a non-employee director for some portion or all of fiscal year 2017:2023:
Name | | | Fees earned or paid in cash ($) | | | Stock Awards(1) ($) | | | Total ($) |
Paul de Bary | | | $99,500 | | | 33,827 | | | $133,327 |
Glenn Goord | | | 65,000 | | | 33,827 | | | 98,827 |
Richard Nathan, Ph. D.(2) | | | 52,250 | | | 33,827 | | | 86,077 |
David Hanlon | | | 65,750 | | | 33,827 | | | 99,577 |
Steven D. Croxton | | | 59,500 | | | 33,827 | | | 93,327 |
Tim Davenport | | | 28,000 | | | 168,500 | | | 196,500 |
Sanjay E. Sarma | | | 27,500 | | | 168,500 | | | 196,000 |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
| Paul de Bary (2) | 54,000 | - | 24,874 | - | - | - | 78,874 |
| Glenn Goord (3) | 40,000 | - | 26,484 | - | - | - | 66,484 |
| Christine Harada (4) | 16,000 | - | 47,523 | - | - | - | 63,523 |
| Marta Tienda (5) | - | - | 108,900 | - | - | - | 108,900 |
| (1) | The |
| (2) | Dr. Nathan retired from the Board of |
Position | | | Annual Fee ($)(1) | | | Board Meeting Fee | | | Committee Meeting Fee | ||||||
| | In Person ($) | | | Telephonic ($) | | | In Person ($) | | | Telephonic ($) | |||||
Board Member | | | 50,000 | | | 1,000 | | | 500 | | | 500 | | | 250 |
Audit Committee Chair | | | 30,000 | | | 1,500 | | | 500 | | | 500 | | | 250 |
Compensation Committee Chair | | | 10,000 | | | 1,500 | | | 500 | | | 500 | | | 250 |
Governance Committee Chair | | | 15,000 | | | 1,500 | | | 500 | | | 500 | | | 250 |
Technology Committee Chair | | | 10,000 | | | 1,500 | | | 500 | | | 500 | | | 250 |
Special Committee | | | — | | | 500 | | | 250 | | | 500 | | | 250 |
Lead Director | | | 10,000 | | | — | | | — | | | — | | | — |
Board Meeting Fee | Committee Meeting Fee | ||||
| Position | Annual Fee ($) (1) | In Person ($) | Telephonic ($) | In Person ($) | Telephonic ($) |
| Board Member | 25,000 | 1,000 | 500 | 500 | 250 |
| Audit Committee Chair | 20,000 | 1,500 | 500 | 500 | 250 |
| Compensation Committee Chair | 10,000 | 1,500 | 500 | 500 | 250 |
| Governance Committee Chair | 10,000 | 1,500 | 500 | 500 | 250 |
| (1) | Payments are made on a quarterly basis. |
Directors who are officers or employees of NovumeRekor or its subsidiaries do not receive any compensation for service on our Board,, but employee directors will be reimbursed for expenses incurred in attending meetings of our Board or any committees thereof.
Director Stock Ownership Policy
To align the interests of directors with stockholders, in July 2021, the Board of Directors adopted a requirement that each of our directors will be required to own our stock in an amount equal to three (3) times his or her annual cash retainer (excluding any cash retainer for service on any committee). This stock ownership policy took effect on January 1, 2022. For purposes of our policy, a director’s holdings shall include shares held directly or indirectly and individually or jointly. Our directors are expected to meet this ownership requirement within five years of the later of (a) January 1, 2022 or (b) the date he or she first becomes a director. Except of directors who have been serving less than six months, all current directors currently meet this ownership requirement.
23
The AuditGovernance Committee has responsibility for reviewing and, if appropriate, for approving any related party transactions that would be required to be disclosed pursuant to applicable SEC rules.
As previously disclosed in our Current Report on Form 8-K filed with the SEC on January 1, 2023, we entered into a securities purchase agreement (“SPA”) with certain accredited investors, pursuant to which we agreed to issue and sell to the investors in a private placement transaction (i) up to $15,000,000 in aggregate principal amount of senior secured promissory notes (the “Senior Secured Notes”), and (ii) warrants (the “Related Warrants”) to purchase up to an aggregate of 7,500,000 shares of our common stock. In connection with the initial closing on January 18, 2023, the Company issued $12,500,000 in aggregate principal amount of Senior Secured Notes and Related Warrants to purchase 6,250,000 shares of common stock, resulting in proceeds to the Company of $12,500,000 before reimbursement of expenses. We have a material relationship with two of the investors, (i) Robert A. Berman, our Chief Executive Officer and Executive Chairman, and (ii) Arctis Global Master Fund Limited (“Arctis”), an affiliate of Arctis Global, LLC, a 11.4% holder of our common stock based on its Schedule 13G/A filed with the SEC on February 14, 2024. Mr. Berman and Arctis invested $2,000,000 and $6,500,000, respectively, in connection with the $12,500,000 initial closing of the private placement. Mr. Davenport serves as Chief Operating Officer for Arctis Global, LLC, the manager of Arctis. On March 4, 2024, the Company early redeemed all $12,500,000 of its outstanding Senior Secured Notes and no longer has any obligations thereunder.
| The amounts involved exceeded or will exceed | ||
5% of the outstanding capital stock of the Company, or any member of such person’s immediate family had or will have a direct or indirect material interest.
Review and Approval, or Ratification of Transactions with Related Parties
Under our Code of Conduct, all Company personnel are required to seek review of and obtain approval or ratification of any Company transaction which involves them or certain family members or businesses they have economic interests in. The Charter of our Governance Committee also requires that any transaction with a related person that must be reported under applicable rules of the SEC must be reviewed and either approved, disapproved or ratified by our Governance Committee.
such transactions to be obtained by a subcommittee of the Governance and Nominations Committee that consists entirely of directors without any personal, business or family interest in the transaction.
Director Independence
Steven D. Croxton, Tim Davenport, Paul de Bary, David P. Hanlon, Glen Goord, Christina HaradaAndrew Meyers, Sanjay Sarma and Marta TiendaAnne Townsend, are each “independent” within the meaning of Nasdaq Rule 5605(b)(1).
24
RATIFICATION OF THE APPOINTMENT OF BD & COMPANY, INC.MARCUM LLP AS INDEPENDENT PUBLIC ACCOUNTANT FOR THE FISCAL YEAR ENDING DECEMBER 31, 20182024
The Audit Committee retained BD & CompanyMarcum LLP as the Company’s independent registered public accounting firm to perform the audit of the Company’s consolidated financial statements for the fiscal year ending December 31, 2018, and the audit of the Company’s internal control over financial reporting as of December 31, 2018.
2024.
Aggregate fees billed or incurred related to the following years for professional services rendered by BD & CompanyMarcum and Friedman for 20172023 and 20162022 are set forth below.
| | | Year ended December 31, | ||||
| | | 2023 | | | 2022 | |
| | | (Dollars in thousands) | ||||
Audit fees | | | 447 | | | 295 |
Total | | | 447 | | | 295 |
2017 | 2016 | |
| Audit fees | $241,661 | $- |
| Audit-related fees | - | - |
| Tax fees | 24,875 | - |
| All other fees | - | - |
| Total | $266,536 | $- |
2017 | 2016 | |
| Audit fees | $35,850 | $14,150 |
| Audit-related fees | - | - |
| Tax fees | - | - |
| All other fees | - | - |
| Total | $35,850 | $14,150 |
2017 | 2016 | |
| Audit fees | $- | $28,500 |
| Audit-related fees | - | - |
| Tax fees | - | 2,705 |
| All other fees | 25,128 | - |
| Total | $25,128 | $31,205 |
Audit Fees for 20172023 and 20162022 include fees associated with the audits of the annual financial statements and the quarterly reviews of the unaudited interim financial statements included in the Company’s Annual and Quarterly Reports on Form 10-K and 10-Q, and services related to other reports filed with the SEC. Tax Fees for 2017 and 2016 include fees associated with the preparation and reviews of tax returns, advising on the impact of local tax laws, and tax planning.
respectively.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Consistent with SEC policies and guidelines regarding audit independence, the Audit Committee is responsible for the pre-approval of all audit and permissible non-audit services provided by our principal accountants on a case-by-case basis. Our Audit Committee has established a policy regarding approval of all audit and permissible non-audit services provided by our principal accountants. Our Audit Committee pre-approves these services by category and service. Our Audit Committee has pre-approved all of the services provided by our principal accountants.
No Appraisal Rights
Under Delaware law, our shareholdersstockholders are not entitled to appraisal rights with respect to our proposed ratification of the appointment of BD & CompanyMarcum LLP as our independent public accountant and we will not independently provide our shareholdersstockholders with any such rights.
Vote Required
The affirmative vote of a majority of the votes cast, for this proposal ispresent or represented by proxy and entitled to vote at the Annual Meeting, will be required to ratify the appointment of the Company’sour independent public accountant. Abstentions will be counted towards the tabulation ofas votes cast onagainst this proposal and will have the same effect as a negative vote. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect onnot be included in the resultsnumber of thisvotes present and entitled to vote. We are not required to obtain the approval of our shareholdersstockholders to appoint the Company’s independent accountant. However, if our shareholdersstockholders do not ratify the appointment of BD & CompanyMarcum LLP as the Company’s independent public accountant for the fiscal year ending December 31, 2018,2024, the Audit Committee may reconsider its appointment.
THE BOARD RECOMMENDS A VOTE "FOR"“FOR” THE RATIFICATION OF THE APPOINTMENT OF BD & COMPANY, INC.MARCUM LLP AS INDEPENDENT PUBLIC ACCOUNTANT, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A SHAREHOLDERSTOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
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CHARTER AMENDMENT TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted and approved and recommended that our stockholders adopt an amendment to our Amended and Restated Certificate of Incorporation, as amended (the “Charter”), to increase the number of authorized shares of our common stock from 100,000,000 shares to 300,000,000 shares, an increase of 200,000,000 shares. The authorized capital stock of the Company currently consists of 100,000,000 shares of common stock, $0.0001 par value per share, and 2,000,000 shares of preferred stock, $0.0001 par value per share. If the proposed amendment is approved, the authorized capital stock of the Company will consist of 300,000,000 shares of common stock and 2,000,000 shares of preferred stock. The form of the Third Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company to increase the number of authorized shares of common stock is attached as Annex A to this proxy statement (the “Charter Amendment”).
The Board of Directors is recommending the proposed increase in the number of authorized shares of common stock to provide additional authorized shares of common stock for use in connection with potential future financings, strategic opportunities, acquisitions, employee benefit plans or for other corporate purposes. The Board determined that the Charter Amendment is advisable and in the best interests of the Company and directed that the Charter Amendment be submitted for adoption and approval by stockholders at the Annual Meeting. The Charter Amendment would not affect the number of authorized shares of preferred stock nor affect the par value of the common stock or the preferred stock. Currently, there are no shares of preferred stock issued and outstanding. Except for shares of common stock that are reserved for issuance, the Company has no commitments at this time for the issuance of additional shares of common stock, but desires to position itself to do so when needs arise and market conditions warrant.
As of February 21, 2024, the Company has 84,404,798 shares of common stock issued and outstanding and an aggregate of 9,581,100 shares of common stock reserved for issuance upon exercise of warrants to purchase shares of common stock issued in previous financings, and for issuance under our 2017 Plan (inclusive of shares to be issued pursuant to outstanding options and restricted stock units). This leaves a balance of 322,866 shares of authorized and unissued common stock available for issuance, and as a result, our ability to raise additional equity capital is constrained. The Board of Directors believes it is critically important for the Company to maintain its flexibility in accessing the equity capital markets.
If the Charter Amendment is adopted by the stockholders, 300,000,000 shares of common stock will be authorized for issuance and the 200,000,0000 additional authorized shares of common stock may be issued by us without any further action by the stockholders, except to the extent required by law or regulation or stock exchange requirement. Any additional authorized shares of common stock, if and when issued, would be part of our existing class of common stock, and would have the same rights and privileges as the currently outstanding shares of common stock. The issuance of additional authorized shares of common stock may, among other things, have a dilutive effect on earnings per share and on the equity and voting power of existing holders of common stock. Although the Board of Directors has no present intention of issuing additional shares for such purposes, the proposed increase in the number of authorized shares of common stock could also enable the Board of Directors to render more difficult or discourage an attempt by another person or entity to obtain control of the Company. The Board of Directors is not aware of any attempt, or contemplated attempt, to acquire control of the Company, and this proposal is not being presented with the intent that it be utilized as a type of anti-takeover device. The Charter Amendment has been prompted by business and financial considerations. The Charter Amendment will not by itself change the number of issued shares of common stock nor will it change the rights of current holders of our common stock.
If our stockholders adopt this Proposal, the Charter Amendment will become effective upon its filing with the Secretary of State of the State of Delaware, or such later time as specified in such filing. If the Charter Amendment is adopted by the stockholders, the Company currently anticipates filing the Charter Amendment with the Secretary of State of the State of Delaware on or around April 19, 2024.
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Vote Required
The affirmative vote of a majority of votes cast, present or represented by proxy and entitled to vote at the Annual Meeting, will be required to adopt the Charter Amendment to increase the number of our authorized shares of common stock. Abstentions will be treated as votes against this proposal. Brokerage firms are not entitled to vote customers’ unvoted shares held by the firms in street name for this proposal. As a result, any shares not voted by such a beneficial owner will be treated as a broker non-vote and such broker non-votes will not be included in the number of votes present and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ADOPTION OF THE CHARTER AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
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2017 EQUITY AWARD PLAN AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN
We are asking our stockholders adopt an amendment and restatement of the Rekor Systems, Inc. 2017 Equity Award Plan (the “Plan”) to increase the number of authorized shares of common stock reserved for issuance under the Plan by 7,495,063 shares, resulting in a total of 10,000,000 shares available for issuance upon effectiveness of the proposed amendment (the “Equity Award Plan Amendment”). Our Board believes that the Plan is a vital component of our employee compensation program because it allows us the ability to compensate our employees, consultants, and non-employee directors whose contributions are important to our success by offering them the opportunity to participate in our future performance while at the same time providing an incentive to build long-term stockholder value. We operate in a competitive market and new hire grants are essential in helping us attract talented individuals. Likewise, annual grants are essential in helping us retain and motivate our most valuable employees. Both new hire grants and annual grants help keep employees’ interests aligned with the interests of our stockholders. Our Board and management recommend that our stockholders adopt the Equity Award Plan Amendment. If our stockholders do not adopt the Equity Award Plan Amendment, the Plan will remain in effect with its current terms and conditions and the number of shares reserved for issuance will not increase.
Other than an increase in the number of shares reserved for issuance under our Plan, our Plan has not been amended in any material way since the Plan was originally approved and adopted in August 2017.
Share Reserve
As of February 21, 2024, an aggregate of 2,504,937 shares of our common stock remained available for future grants under our Plan. Equity Award Plan Amendment is not adopted by our stockholders, we may not have enough shares available to reliably sustain our equity grant programs in the future. We anticipate that if Equity Award Plan Amendment is adopted by the stockholders, we will have sufficient shares to grant equity awards for the remaining life of the Plan. The shares requested may, however, last for a shorter or longer period of time depending on various factors, such as the number of grant recipients, future grant practices, our stock price, and forfeiture rates.
As a high-growth business, we utilize a value-based equity strategy across all levels of our organization as we anticipate continued revenue and headcount growth in the future. We strive to maintain an effective incentive compensation program for the Company in light of this anticipated growth to remain competitive for talent in our market and support inorganic growth via strategic acquisitions, when appropriate. We will continue to manage dilution, as discussed below, and expense as we consider both our current equity strategy and whether it is reasonable and appropriate to make changes.
We are committed to effectively managing our equity compensation program in light of potential stockholder dilution. For this reason, in administering our Plan, we consider both our “burn rate” and our “overhang” in evaluating the impact of the program on our stockholders. We define “burn rate” as the number of equity awards granted during the year, divided by the weighted average number of shares of our common stock outstanding during the period. The burn rate measures the potential dilutive effect of our equity grants. We define “overhang” as the number of full value awards granted (but not yet vested or issued) and stock options granted (but not yet exercised) divided by the number of shares of common stock outstanding at the end of the period. We endeavor to ensure that our burn rate and overhang approximate the average rates of our peer group, and that they are within the limits recommended by certain independent stockholder advisory groups.
Accordingly, the Board believes that Equity Award Plan Amendment is reasonable and prudent to allow us to replenish our share usage from previous fiscal years, to continue our current granting practices in the future, and to be able to respond to growth (both organic and inorganic), market competition, and potential stock price fluctuations.
Vote Required
Stockholders are requested to adopt the Equity Award Plan Amendment to increase the number of authorized shares of common stock reserved for issuance under the Plan. A summary of the Plan is
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included below in the section captioned “Summary of the Plan”, and the Plan, as amended and restated to give effect to Equity Award Plan Amendment described in this proposal, is attached to this proxy statement as Annex B.
The affirmative vote of a majority of votes cast, present or represented by proxy and entitled to vote at the Annual Meeting, will be required to will be required to adopt the Equity Award Plan Amendment. Abstentions will be treated as votes against this proposal. Brokerage firms are not entitled to vote customers’ unvoted shares held by the firms in street name for this proposal. As a result, any shares not voted by such a beneficial owner will be treated as a broker non-vote and such broker non-votes will not be included in the number of votes present and entitled to vote. Our executive officers and members of the Board have a financial interest in this proposal because they are eligible to receive awards under the Plan.
THE BOARD RECOMMENDS A VOTE “FOR” THE ADOPTION OF THE EQUITY AWARD PLAN AMENDMENT.
Summary of the Rekor Systems, Inc. 2017 Equity Award Plan
The following paragraphs provide a summary of the principal features of the Plan, as amended to give effect to this proposal 4. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Plan a copy of which will be filed with the SEC with this proxy statement as Annex B.
Overview
The purpose of the 2017 Equity Award Plan is to promote the interests of the Company (including its subsidiaries and affiliates, if any) and its stockholders by using equity interests in the Company to attract, retain and motivate its management, nonemployee directors and other eligible persons and to encourage and reward their contributions to our performance and profitability.
As of February 21, 2024, the total shares of our common stock remaining available for issuance under the Plan is 2,504,937.
The Plan permits us to take a flexible approach to our equity awards by permitting the grant of restricted stock, restricted stock units, restricted stock purchase rights, stock options, stock appreciation rights, performance awards and other stock awards. We have also designed the Plan to include a number of provisions that our management believes promote best practices by reinforcing the alignment of equity compensation arrangements for nonemployee directors, officers, employees, consultants and stockholders’ interests. These provisions include, but are not limited to, the following:
No Discounted Awards. Awards that have an exercise price cannot be granted with an exercise price less than the fair market value on the grant date.
No Repricing Without Stockholder Approval. We cannot, without stockholder approval, reduce the exercise price of an award (except for adjustments in connection with a recapitalization), and, at any time when the exercise price of an award is above the market value of our common stock, we cannot, without stockholder approval, cancel and re-grant or exchange such award for cash, other awards or a new award at a lower (or no) exercise price.
No Evergreen Provision. There is no evergreen feature under which the shares of common stock authorized for issuance under the Equity Award Plan can be automatically replenished.
No Automatic Grants. The Plan does not provide for “reload” or other automatic grants to recipients.
No Transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, unless approved by the Administrator.
No Tax Gross-Ups. The Plan does not provide for any tax gross-ups.
No liberal change-in-control definition. The change-in-control definition contained in the Plan is not a “liberal” definition that would be activated on mere stockholder approval of a transaction.
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“Double-trigger” change in control vesting. If awards granted under the Plan are assumed by a successor in connection with a change in control of the Company, such awards will not automatically vest and pay out solely as a result of the change in control, unless otherwise expressly set forth in an award agreement.
No dividends on unearned performance awards. The Plan prohibits the current payment of dividends or dividend equivalent rights on unearned performance-based awards.
Limitation on amendments. No amendments to the Plan may be made without stockholder approval if any such amendment would materially increase the number of shares reserved or the per-participant award limitations under the Plan, diminish the prohibitions on repricing stock options or stock appreciation rights, or otherwise constitute a material change requiring stockholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of the principal exchange on which our shares are traded.
Administered by the Administrator. The Plan is administered by our Board of Directors (in such capacity, the “Administrator”).
Clawbacks. Awards based on the satisfaction of financial metrics that are subsequently reversed, due to a financial statement restatement or reclassification, are subject to forfeiture.
Equity Award Plan Principal Features
The principal features of the Plan are summarized below. This summary is not complete, however, and is qualified by the terms of the Plan.
Shares Available Under the Plan
The maximum aggregate number of shares of our common stock available for issuance under the Plan is 10,000,000. Shares subject to an award may be authorized but unissued, or reacquired shares of our common stock or treasury shares. If an award under the Plan expires or becomes unexercisable without having been exercised in full, or an award is settled for cash, the unissued shares that were subject to the award will become available for future grant under the Plan, as will any shares that are withheld by us when an option is exercised or tax withholdings are satisfied by the tendering of shares. However, shares that have been issued under the Plan will not be returned to the Plan and will not be available for future distribution under the Plan.
Plan Administration
The Plan is administered by the Administrator. The Administrator has the exclusive authority, subject to the terms and conditions set forth in the Plan, to determine all matters relating to awards under the Plan, including the selection of individuals to be granted an award, the type of award, the number of shares of our common stock subject to an award, and all terms, conditions, restrictions and limitations, if any, including, without limitation, vesting, acceleration of vesting, exercisability, termination, substitution, cancellation, forfeiture, or repurchase of an award and the terms of any instrument that evidences the award.
Term
The Plan provides that it will continue in effect for a term of ten (10) years, unless sooner terminated pursuant to its provisions.
Eligibility
Awards under the Plan may be granted to employees (including officers), consultants and directors of the Company, its subsidiaries and affiliates. In addition, an award under the Plan may be granted to a person who is offered employment by us or a subsidiary or affiliate, provided that such award shall be immediately forfeited if such person does not accept such offer of employment within an established time period. If otherwise eligible, an employee, consultant or director who has been granted an award under
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the Plan may be granted other awards. Although all employees of the Company, its subsidiaries and affiliates are eligible to receive awards under the Plan, it is not possible to estimate the number of additional individuals who may become eligible to receive awards under the Plan from time to time.
Awards
The Plan is broad-based and flexible, providing for awards to be made in the form of (a) restricted stock and restricted stock units, (b) restricted stock purchase rights, (c) incentive stock options, which are intended to qualify under Section 422 of the Code, (d) non-qualified stock options, which are not intended to qualify under Section 422 of the Code, (e) stock appreciation rights, (f) performance awards, (g) performance shares, (h) performance units or (i) other stock-based awards that relate to or serve a similar function to the awards described above. Awards may be made on a standalone, combination or tandem basis. Additional information about some of the awards is set forth below.
Awards of Restricted Common Stock, Restricted Stock Purchase Rights and Restricted Stock Units
Awards of restricted common stock and grants of restricted stock purchase rights of shares of our common stock awarded or granted to the recipient, all or a portion of which are subject to a restriction period set by the Administrator during which restriction period the recipient or purchaser shall not be permitted to sell, transfer or pledge the restricted common stock. Restricted stock units are notional accounts that are valued solely by reference to shares of our common stock, subject to a restriction period set by the Administrator and payable in our common stock, cash or a combination thereof. The restriction period for both restricted stock and restricted stock units may be based on period of service, which shall not be less than one (1) year, performance of the recipient or the Company, its subsidiaries, divisions or departments for which the recipient is employed or such other factors as the Administrator may determine.
Rights as a Stockholder
Subject to any restrictions set forth in the award agreement, a recipient or purchaser of our restricted common stock will possess all of the rights of a holder of our common stock, including the right to vote and receive dividends. Cash dividends on the shares of our common stock that are the subject of an award agreement shall be paid in cash to the recipient or purchaser and may be subject to forfeiture as set forth in the award agreement. The recipient of restricted stock units shall not have any of the rights of a stockholder of the Company; the Administrator shall be entitled to specify with respect to any restricted stock unit award that upon the payment of a dividend by the Company, the Company will hold in escrow an amount in cash equal to the dividend that would have been paid on the restricted stock units had they been converted into the same number of shares of our common stock and held by the recipient on that date. Upon adjustment and vesting of the restricted stock unit, any cash payment due with respect to such dividends shall be made to the recipient.
Termination of Employment, Consultancy or Director Relationship
Generally, upon termination of employment, consultancy or a director relationship for any reason during the restricted period, the recipient or purchaser will forfeit the right to the shares of restricted our common stock to the extent that the applicable restrictions have not lapsed at the time of such termination.
Common Stock Options
Types
Stock options to purchase shares of our commons stock may be granted under the Plan to directors and consultants in the form of nonqualified stock options and to employees in the form of incentive stock options or nonqualified stock options.
Exercise Price
The per share exercise price for shares underlying common stock options will be determined by the Administrator, provided that the exercise price must be at least equal to 100% of the fair market value per share of common stock on the date of grant. In the case of an incentive stock option granted to an employee who, at the time of grant, owns more than 10% of the total combined voting power of all classes of our stock, the per share exercise price must be at least equal to 110% of the fair market value per share of common stock on the date of grant.
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Term of Option; Vesting
The term during which a common stock option may be exercised will be determined by the Administrator, provided that no common stock option will be exercisable more than ten (10) years from the date of grant. In the case of an incentive stock option granted to an employee who, at the time of grant, owns more than 10% of the total combined voting power of all classes of stock of the Company or its subsidiaries or affiliates, the term of such common stock option may not be more than five (5) years. The Administrator has full authority, subject to the terms of the Plan, to determine the vesting period or limitation or waiting period with respect to any common stock option granted to a participant or the shares purchased upon exercise of such option; provided, however, that such vesting restriction or limitation or waiting period shall not be less than one (1) year. In addition, the Administrator may, for any reason, accelerate the exercisability of any common stock option.
Other Awards
Stock Appreciation Rights
The Administrator may grant to an employee, consultant or a director a right to receive the excess of the fair market value of shares of our common stock on the date the stock appreciation right is exercised over the fair market value of such shares on the date the stock appreciation right was granted. Such spread may, in the sole discretion of the Administrator, be paid in cash or common stock or a combination of both.
Performance Awards
The Administrator may grant performance awards to employees based on the performance of a recipient over a specified period. Such performance awards may be awarded contingent upon future performance of the Company or its affiliates or subsidiaries during that period. A performance award may be in the form of common stock (or cash in an amount equal to the fair market value thereof) or the right to receive an amount equal to the appreciation, if any, in the fair market value of common stock over a specified period. Performance awards may be paid, in the Administrator’s discretion, in cash or stock or some combination thereof. Each performance award will have a maximum value established by the Administrator at the time the award is made. Unless otherwise provided in an award agreement or by the Administrator, performance awards terminate if the recipient does not remain an employee of the Company, or its affiliates or subsidiaries, at all times during the applicable performance period.
Other Stock-Based Awards
The Administrator may, in its discretion, grant other stock-based awards that are related to or serve a similar function to the awards described above.
Material Terms of Performance Goals for Qualified Performance-Based Compensation
Under section 162(m) of the Code, in order for us to deduct compensation in excess of $1,000,000 that is paid in any year to any “covered employee,” such compensation must be treated as “qualified performance-based,” within the meaning of section 162(m) of the Code. A “covered employee” is defined under section 162(m) of the Code as a company’s principal executive officer or any of such company’s three other most highly compensated executive officers named in the proxy statement (other than the principal executive officer or principal financial officer). Section 7 of the Plan sets forth the procedures the Administrator should follow to avoid the deductibility limitations of section 162(m) of the Code when making long-term incentive performance awards under the Plan to current covered employees and employees whom the Administrator anticipates may become covered employees between the time of grant and payment of the award. However, there can be no guarantee that amounts payable under the Plan will be treated as “qualified performance-based” compensation and we reserve the flexibility to pay nondeductible compensation when necessary to achieve our compensation objectives.
Among other things, in order for an award under Section 7 of the Plan to be treated as “qualified performance-based” compensation that is not subject to the $1,000,000 cap, stockholder approval of the material terms of the performance goals is required at least every five (5) years. The material terms
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include the employees eligible to receive the compensation, a description of the performance criteria and the maximum amount of compensation that may be paid to any one employee. A description of the material terms for qualified performance-based compensation in the Plan follows:
Employees Eligible to Receive Compensation. A performance-based award under the Plan may be granted to employees (including officers) of the Company, its subsidiaries and affiliates. In addition, a performance-based award may be granted to a person who is offered employment by the Company or a subsidiary or affiliate, provided that such award shall be immediately forfeited if such person does not accept such offer of employment within an established time period.
Performance Criteria. When making an award under the Plan, the Administrator may designate the award as “qualified performance-based compensation,” which means that performance criteria must be satisfied in order for an employee to be paid the award. Qualified performance-based compensation may be made in the form of restricted common stock, restricted stock units, common stock options, performance shares, performance units or other stock equivalents. Section 7 of the Plan includes the performance criteria the Administrator has adopted, subject to stockholder approval, for a “qualified performance-based compensation” award, which shall consist of objective tests based on one or more of the following:
earnings;
operating profits (including measures of earnings before interest, taxes, depreciation and amortization;
free cash flow or adjusted free cash flow;
cash from operating activities;
revenues;
net income (before or after tax);
financial return ratios;
market performance;
stockholder return and/or value;
net profits;
earnings per share;
profit returns and margins;
stock price;
working capital;
capital investments;
returns on assets;
returns on equity;
returns on capital investments;
selling, general and administrative expenses;
discounted cash flows;
productivity;
expense targets;
market share;
cost control measures;
strategic initiatives;
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changes between years or periods that are determined with respect to any of the above-listed performance criteria;
net present value;
sales volume;
cash conversion costs;
leverage ratios;
maintenance of liquidity;
integration of acquired businesses;
operational efficiencies, including Lean Six Sigma initiatives;
regulatory compliance, including the Sarbanes-Oxley Act of 2002; and
economic profit.
Performance criteria may be measured solely on the Company, a subsidiary or business unit basis, on specific capital projects or groups of projects or a combination thereof. Further, performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of one or more peer groups of entities or other external measure of the selected performance criteria. The measure for any such award may include or exclude items to retain the intents and purposes of specific objectives, such as losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts, acceleration of payments, costs of capital invested, discount factors, and any unusual or nonrecurring gain or loss. In order to qualify as performance-based under section 162(m) of the Code, the performance criteria will be established before 25% of the performance period has elapsed and will not be subject to change (although future awards may be based on different performance criteria). The performance periods may extend over one to five calendar years, and may overlap one another.
Other Provisions
Termination, Amendment and Employee Retirement Income Security Act of 1974 (“ERISA”) Status
The Plan provides that the Administrator may generally amend, alter, suspend or terminate the Plan and the Administrator may prospectively or retroactively amend any or all of the terms of awards granted under the Plan, so long as any such amendment does not impair the rights of any recipient without the recipient’s consent. Stockholder approval is required for any material Plan amendment or any amendment necessary to comply with the tax code or any other applicable laws or stock exchange requirements. The Plan is not subject to the provisions of ERISA.
Anti-dilution Provisions
Subject to any required action by our stockholders, the number of shares of common stock covered by each outstanding award (and the purchase or exercise price thereof), and the number of shares of common stock that have been authorized for issuance under the Plan, but as to which no awards have yet been granted (or which have been returned to the Plan upon cancellation or expiration of an award or the withholding of shares by the Company) will be proportionately adjusted to prevent dilution or enlargement of rights in the event of any stock split, stock dividend, combination or reclassification of the common stock or other relevant capitalization change.
Prohibition on Loans to Participants
We may not lend money to any participant under the Plan for the purpose of paying the exercise or base price associated with any award or for the purpose of paying any taxes associated with the exercise or vesting of an award.
Withholding Obligations
We may take such steps as are considered necessary or appropriate for the withholding of any federal, state, local or foreign taxes of any kind that we are required by any law or regulation of any governmental
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authority to withhold in connection with any award under the Plan, including, without limiting the generality of the foregoing, the withholding of all or any portion of any payment or the withholding of the issue of common stock to be issued under the Plan, until such time as the recipient has paid us for any amount we are required to withhold with respect to taxes. Unless otherwise determined by the Administrator, withholding obligations may be settled with vested common stock, including vested common stock that is part of the award that gives rise to the withholding requirement. The Administrator may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settlement of withholding obligations with vested common stock.
Potential Dilutive Impact of the Plan
We are committed to effectively managing its employee equity compensation programs while minimizing stockholder dilution. For this reason, in administering our equity compensation program, we consider both our “burn rate” and “overhang” in evaluating the impact of the program on our stockholders. We define “burn rate” as the number of equity awards granted during the year, divided by the weighted average number of shares of our common stock outstanding during the period. The burn rate measures the potential dilutive effect of our equity grants. We define “overhang” as the number of full value awards granted (but not yet vested or issued) and stock options granted (but not yet exercised) divided by the number of shares of common stock outstanding at the end of the period.
Certain Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax consequences of the receipt of restricted common stock and restricted stock units, the grant and exercise of common stock options awarded under the Plan and the subsequent disposition of shares acquired upon such exercise and the receipt of certain other awards under the Plan. This summary is based upon the provisions of the Code as in effect on the date of this offering circular, current regulations adopted and proposed thereunder and existing judicial decisions, as well as administrative rulings and pronouncements of the Internal Revenue Service (all of which are subject to change, possibly with retroactive effect). This summary is not intended to be exhaustive and does not describe all federal, state or local tax laws. Furthermore, the general rules discussed below may vary, depending upon the personal circumstances of the individual holder. Accordingly, participants should consult a tax advisor to determine the income tax consequences of any particular transaction.
Taxation of Restricted Common Stock
In general, except in the case of an election under section 83(b) of the Code, a participant will not incur any tax upon the grant of shares of stock which are subject to a substantial risk of forfeiture. However, when the restrictions lapse or the shares become freely transferable, the participant will recognize ordinary income equal to the fair market value of the applicable shares at such time, less the amount, if any, paid for such shares, unless the participant has made a section 83(b) election with respect to such shares or has elected to defer receipt of such shares, as discussed below.
If a participant makes a section 83(b) election within 30 days of a grant of restricted common stock, the participant will recognize ordinary income at the time of grant in an amount equal to the difference between the fair market value of the restricted shares on the grant date and the amount, if any, paid for such restricted shares. If the participant makes such an election, he or she will not recognize any further income with respect to such shares solely as a result of a later lapse of the restrictions.
If a participant holds the restricted common stock as a capital asset after the earlier of either (1) the vesting of such restricted common stock or (2) the making of a timely section 83(b) election with respect to such restricted common stock, any subsequent gain or loss will be taxable as long-term or short-term capital gain or loss, depending upon the holding period. For this purpose, the basis in the restricted common stock generally will be equal to the sum of the amount (if any) paid for the restricted common stock and the amount included in ordinary income as a result of the vesting event or section 83(b) election, as applicable; provided, however, that, if a participant forfeits restricted common stock with respect to which a section 83(b) election was made prior to vesting, the participant’s capital loss is limited to the amount (if any) paid for such restricted common stock.
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In general, at the time a participant recognizes ordinary income with respect to the restricted common stock, will be entitled to a deduction in an amount equal to the ordinary income recognized by the participant, which deduction may be limited by section 162(m) of the Code.
Taxation of Restricted Stock Units; Stock Appreciation Rights; Performance Shares and Performance Units
In general, a participant will not incur any tax upon the grant of restricted stock units, stock appreciation rights, performance shares or performance units. However, when the restrictions lapse, the participant will recognize ordinary income in an amount equal to the sum of the cash and the fair market value of any property received.
Taxation of Non-Qualified Stock Options
In general, a participant will not recognize any income upon the grant of a non-qualified stock option. Upon the exercise of a non-qualified stock option, however, a participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the non-qualified option stock on the date of exercise over the exercise price (i.e., the “spread”) and the Company will be entitled to a deduction in an equal amount, which may be limited by section 162(m) of the Code.
Upon subsequent sales of shares obtained through the exercise of non-qualified stock options, the participant may realize short-term or long-term capital gain or loss, depending upon the holding period of the shares, if such shares constitute capital assets in the participant’s hands. The gain or loss will be measured by the difference between the sales price and the tax basis of the shares sold. The tax basis for this purpose generally will be fair market value of the shares on the date of exercise.
Taxation of Incentive Stock Options
A participant who is granted an incentive stock option does not recognize taxable income at the time the option is granted or upon its exercise, although the exercise is an adjustment item for alternative minimum tax purposes and may subject the participant to alternative minimum tax. If the shares acquired upon exercise are sold after the expiration of two years from the grant of the option and one year after exercise of the option, any gain or loss is treated as long-term capital gain or loss. If these holding periods are not satisfied, the participant recognizes ordinary income at the time of disposition equal to the difference between the exercise price and the lower of (1) the fair market value of the shares at the date of the option exercise or (2) the sale price of the shares. Any gain or loss recognized on such a premature disposition of the shares in excess of the amount treated as ordinary income is treated as long-term or short-term capital gain or loss, depending on the holding period. Unless limited by section 162(m) of the Tax Code, we are generally entitled to a deduction in the same amount as the ordinary income recognized by the participant.
Taxation of Other Stock Based Awards
Other awards may be granted under Plan. Since the amount, character and timing of income recognized in connection with such awards will vary depending upon the specific terms and conditions of such awards, no information regarding the tax consequences of the receipt of such awards may be provided at this time.
Tax Withholding
Our obligations under the Plan are conditioned upon proper arrangements being in place with participants in the Plan for the payment of withholding tax obligations. Unless otherwise determined by the Administrator, withholding tax obligations may be settled with shares of our common stock, including shares that are part of the award that gives rise to the withholding obligation.
In light of the factors described above, the Administrator believes that the ability to grant equity compensation is vital to our ability to continue to attract, motivate, reward, and retain individuals.
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ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the Company’s shareholdersstockholders to have the opportunity to cast a non-binding advisory vote regarding the approval of the compensation disclosed in this Proxy Statement of the Company’s executive officers who are named in the Executive Compensation Table (the “Named Executive Officers”). The Company has disclosed the compensation of the Named Executive Officers pursuant to rules adopted by the SEC.
We believe that our compensation policies for the Named Executive Officers are designed to attract, motivate and retain talented executive officers and are aligned with the long-term interests of the Company’s shareholders.stockholders. This advisory shareholders vote, commonly referred to as a “say-on-pay“say-on-pay” vote,” gives you as a shareholderstockholder the opportunity to approve or not approve the compensation of the Named Executive Officers that is disclosed in this Proxy Statement by voting for or against the following resolution (or by abstaining with respect to the resolution):
RESOLVED, that the shareholdersstockholders of the Company approve all of the compensation of the Company’s executive officers who are named in the Executive Compensation Table of the Company’s 20182023 Proxy Statement, as such compensation is disclosed in the Company’s 20182023 Proxy Statement pursuant to Item 402 of Regulation S-K, which disclosure includes the Proxy Statement’s Summary Compensation Table and other executive compensation tables and related narrative disclosures.
Because your vote is advisory, it will not be binding on either the Board of Directors or the Company. However, the Company’s Compensation Committee will take into account the outcome of the shareholderstockholder vote on this proposal at the Annual Meeting when considering future executive compensation arrangements. In addition, your non-binding advisory votes described in this Proposal 3 will not be construed: (1) as overruling any decision by the Board of Directors, any board committee or the Company relating to the compensation of the Named Executive Officers, or (2) as creating or changing any fiduciary duties or other duties on the part of the Board of Directors, any board committee or the Company.
Vote Required
The advisory vote to approve the compensation of our executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions will be counted as votes against this proposal and brokerwill have the same effect as a negative vote. Broker non-votes will not be counted as either votes cast for or against this proposal. While the results of this advisory vote are non-binding, the Compensation Committee of the Board and the Board values the opinions of our shareholdersstockholders and will consider the outcome of the vote, along with other relevant factors, in deciding whether any actions are necessary to address the concerns raised by the vote and when making future compensation decisions for executive officers
officers.
THE BOARD RECOMMENDS THAT SHAREHOLDERSSTOCKHOLDERS VOTE "FOR"“FOR” THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTED OFFICERS, AS STATED IN THE ABOVE NON-BINDING RESOLUTION, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A SHAREHOLDERSTOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
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TABLE OF HOLDING FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
As of the date of this proxy statement,Proxy Statement, the Board knows of no other business that will be presented at the Annual Meeting.Meeting. If any other business is properly brought before the Annual Meeting, it is intended that proxies in the enclosed form will be voted in respect thereof in accordance with the best judgment and in the discretion of the persons voting the proxies.
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