What will constitute a quorum at the Annual Meeting?
A quorum is the minimum number of shares required to be virtually present or represented by proxy at the Annual Meeting to properly hold a meeting of stockholders and conduct business under our Bylaws and Delaware law. The presence at the meeting, either in the virtual meetingvirtually or by proxy, of the holders of a majorityone-third of our Common Stockthe voting power of the stock issued, outstanding and entitled to vote at the Annual Meeting on the Record Date (April 20, 2020) will constitute a quorum, permitting our stockholders to conduct business at the Annual Meeting. Shares that are automatically redeemed in the Initial Redemption will not be counted towards the presence of a quorum or as part of the issued and outstanding shares of capital stock of the Company entitled to vote at our Annual Meeting for purposes of determining the presence of a quorum. We will include abstentions and broker non-votes in the calculation of the number of shares considered to be present at the meeting for purposes of determining the presence of a quorum at the meeting. As of the Record Date, there were 93,952,87415,993,137 shares of our Common Stock outstanding, consisting of 10,347,026 shares of Class A Common Stock 5,814,630 shares of Class B Common Stock and 77,791,218 shares of Class C Common Stock.outstanding.
If a quorum is not present to transact business at the Annual Meeting or if we do not receive sufficient votes in favor of the proposals by the date of the Annual Meeting, the persons named as proxies may propose one or more adjournments of the Annual Meeting to permit the solicitation of additional proxies. The chairperson of the Annual Meeting shall have the power to adjourn the Annual Meeting.
What are broker non-votes?
Broker non-votes occur when nominees, such as banks and brokers holding shares on behalf of beneficial owners, do not receive voting instructions from the beneficial owners at least ten days before the Annual Meeting. If you do not give your broker or other nominee voting instructions with respect to Proposal 1 (Election of Directors), Proposal 3 (Approval of Reverse Split), Proposal 4 (Approval of Adjournment Proposal) or Proposal 5 (Approval of the Third Amendment and Restatement), your broker or other nominee will not be able to vote on that proposal, and broker non-votes may exist with respect to the election of directors.
Proposal 2 (Ratification of Deloitte)Marcum) is the only proposal in which brokers or other nominees are permitted to submit a discretionary vote. If you are a beneficial owner and your shares are held in the name of a broker or other nominee, the broker or other nominee is permitted to vote your shares on the ratification of the appointment of DeloitteMarcum as our independent registered public accounting firm for our fiscal year ending December 31, 2020,2023, even if the broker or other nominee does not receive voting instructions from you.
How many votes are needed for the proposals to pass?
The proposals to be voted on at the Annual Meeting have the following voting requirements:
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Proposal 1 (Election of Directors): Directors are elected by the affirmative vote of the majority of votes cast once a quorum has been established. If any director nominee is not elected by such standard, the director must submit an irrevocable resignation, contingent on the acceptance of that resignation by the Board. There is no cumulative voting in the election of directors. For purposes of the election of directors, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.
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Proposal 2 (Ratification of Deloitte & Touche LLP)Marcum): The affirmative vote of a majority of the votes cast once a quorum has been established is required to ratify the appointment of DeloitteMarcum as our independent registered public accounting firm for our fiscal year ending December 31, 2020.2023. For purposes of the vote on the ratification of DeloitteMarcum as our independent registered public accounting firm, abstentions will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.
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Proposal 3 (Approval of Reverse Split Proposal): The affirmative vote of holders of a majority of the outstanding shares of Common Stock and Series A Preferred Stock entitled to vote on this proposal, voting together as a single class, is required to approve the adoption of an amendment to the Charter to effect the Reverse Split. For purposes of the vote on the approval of this proposal,
PROPOSAL 1: ELECTION OF DIRECTORS
The Board is currently comprised of five directors, all of whom have terms expiring at the Annual Meeting. The nominees, all of whom are currently serving as directors of the Company, have been recommended by the Board for re-election to serve as directors for one-year terms until the 2021 Annual Meeting and until their successors are duly elected and qualify. Based on its review of the relationships between the director nominees and the Company, the Board has affirmatively determined that the following directors are “independent” directors under the listing requirements of the Nasdaq Stock Market, LLC (“Nasdaq”) and under applicable rules of the Securities and Exchange Commission (the “SEC”): Mr. Neil Closner, Mr. Richard Taney and Mr. Jeff Uttz.
The Board knows of no reason why any nominee would be unable to serve as a director. If any nominee is unavailable for election or service, the Board may designate a substitute nominee and the persons designated as proxy holders on the proxy card will vote for the substitute nominee recommended by the Board. Under these circumstances, the Board may also, as permitted by our bylaws, decrease the size of the Board.
Nominees for Election for a One-Year Term Expiring at the 2021 Annual Meeting
The following table sets forth the name and age of each nominee for director, indicating all positions and offices with us currently held by the director.
| | | | | | | | | | | | | | | | | | | | |
Name | | Age(1) | | Title | | Director Since |
Aaron LoCascio | | 34 | | Chief Executive Officer and Chairman of the Board of Directors | | 2018 |
Adam Schoenfeld | | 35 | | Chief Strategy Officer and Director | | 2018 |
Neil Closner | | 46 | | Independent Director | | 2019 |
Richard Taney | | 64 | | Independent Director | | 2019 |
Jeff Uttz | | 51 | | Independent Director | | 2019 |
(1) Age as of April 24, 2020.
Set forth below are descriptions of the backgrounds and principal occupations of each of our directors, and the period during which he has served as a director.
Aaron LoCascio, our co-founder, has served as our Chief Executive Officer and Chairman of the Board of Directors since May 2018 and has served as the Chief Executive Officer of Greenlane Holdings, LLC since its inception in 2007. He received his Associate’s degree in Accounting from Valencia Community College. Mr. LoCascio brings to the board extensive executive leadership experience, industry relationships and knowledge, and, through his position as our co-founder and Chief Executive Officer, he will use his full range of skills and perspective to further our success.
Adam Schoenfeld, our co-founder, has served as our Chief Strategy Officer and Director since May 2018 and has served as Managing Member of Greenlane Holdings, LLC since its inception in 2007. Mr. Schoenfeld received his Bachelor’s degree in International Business from Evergreen State College. He brings to the board valuable operational and leadership experience in the industry, extensive industry relationships and experience in customer service, import and export logistics, electronic transaction systems and order fulfillment.
Neil Closner was elected to our Board in April 2019 in connection with our initial public offering. Mr. Closner has over two decades of start-up, technology and health care experience. Mr. Closner currently serves as Chief Executive Officer and a director of LAVVAN Inc., a company that manufactures pure cannabinoid isolates through a yeast-based cellular agriculture platform. Immediately prior, from February 2013 to July 2018, he was the founder, Chief Executive Officer and a director of Canada-based MedReleaf Corp., one of the largest and most profitable
providers of medical cannabis in Canada which was acquired in July 2018. Prior to establishing MedReleaf Corp., Mr. Closner served as Vice President of Business Development at Toronto’s Mount Sinai Hospital, where he launched and managed a number of entrepreneurial enterprises within the hospital. Mr. Closner began his career as a health care-focused investment banker with Salomon Smith Barney (now Citigroup) and has also served as the founder, Chief Executive Officer and/or director of more than half a dozen technology and health care-related start-up companies. He served two terms as the Chairman of the Board of the Cannabis Canada Council, the national industry association that represents the majority of Canada’s licensed cannabis producers. Mr. Closner studied economics at the London School of Economics and Political Science and received his Bachelor of Arts degree from McGill University and a Master of Business Administration degree from the Wharton School at the University of Pennsylvania. He brings to the board extensive leadership experience in the medical cannabis industry as well as experience in mergers and acquisitions.
Richard Taney was elected to our Board in April 2019 in connection with our initial public offering. From June 2017 until May of 2019, Mr. Taney served as a Managing Director of Tuatara Capital, LP (“Tuatara”), a cannabis industry focused private equity fund. Mr. Taney continues to serve as an advisor to Tuatara. From April 2016 to July 2017, Mr. Taney served as the founding member of T2 Capital Management, LLC, an investment and advisory company focused on the cannabis industry. From October 2010 to April 2016, Mr. Taney served as President, Chief Executive Officer and director of Curaleaf, Inc. (formerly PalliaTech, Inc.), a cannabis cultivation and distribution company. Prior to co-founding Curaleaf, Inc., Mr. Taney was President and Chief Executive Officer of Delcath Systems, Inc. (NASDAQ: DCTH), a medical technology company. Mr. Taney also served as Chairman of the Board of Directors of MGT Capital Investments, Inc., another medical technology company. Prior to assuming his public company management positions, Mr. Taney spent 20 years advising institutional and high net worth clients at Salomon Brothers, Goldman Sachs, Merrill Lynch and Banc of America Securities. Mr. Taney received his Bachelor of Arts degree from Tufts University and a Juris Doctor degree from Temple University School of Law. He brings to the board broad management and finance experience as well as extensive experience in the cannabis industry.
Jeff Uttz was elected to our Board in April 2019 in connection with our initial public offering. From September 2013 to March 2017, Mr. Uttz served as the Chief Financial Officer of Shake Shack Inc. (NYSE: SHAK), an international burger restaurant chain. From September 2001 to June 2013, Mr. Uttz served as the Chief Financial Officer of Yard House USA, Inc., a full-service restaurant chain. Prior to that, Mr. Uttz held a number of positions at CKE Restaurants, Inc., working his way up from Manager of Corporate Banking to Vice President of Finance. Mr. Uttz began his career at KPMG where he obtained his C.P.A. From July 2017 to July 2018, he also served as a non-executive director of Pret a Manger, an international sandwich shop chain. Mr. Uttz received his Bachelor of Arts degree in Business Administration from California State University, Fullerton. He brings to the board extensive financial expertise and significant experience in public company financial leadership.
Vote Required and Recommendation
In connection with uncontested elections in which the number of directors nominees equals the number of directors to be elected, directors are elected by the affirmative vote of the majority of votes cast once a quorum has been established, which means that the director nominee much receive more “for” votes than “against” votes for his or her election. The election of directors at the 2020 Annual Meeting is uncontested. If any director nominee is not elected by such majority voting standard, the director must submit an irrevocable resignation, contingent on the acceptance of that resignation by the Board. There is no cumulative voting in the election of directors. For purposes of the election of directors, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.
THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES SET FORTH ABOVE.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board, which is composed entirely of independent directors, has appointed Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2020. After careful consideration of the matter and in recognition of the importance of this matter to our stockholders, the Board has determined that it is in the best interests of the Company and our stockholders to seek the ratification by our stockholders of our Audit Committee’s selection of our independent registered public accounting firm. A representative of Deloitte will be present at the virtual Annual Meeting, will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Change of Independent Public Accountants
As previously reported on the Company's Current Report on Form 8-K dated September 23, 2019, on September 23, 2019, the Company dismissed BDO USA, LLP (“BDO”) as its independent registered public accounting firm. The Audit Committee participated in and approved the decision to change the Company's independent registered public accounting firm. The Company notified BDO of its decision on September 19, 2019.
The audit reports of BDO on the consolidated financial statements of Greenlane Holdings, LLC, the Company’s predecessor, for each of the two fiscal years ending December 31, 2018 and December 31, 2017 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. In addition, during the fiscal years ended December 31, 2018 and December 31, 2017, as well as during the subsequent interim period preceding September 23, 2019, there were no (i) “disagreements” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) between the Company or Greenlane Holdings, LLC and BDO with respect to any matter relating to accounting principles or practices, financial statement disclosure or auditing scope or procedures which disagreements, if not resolved to the satisfaction of BDO, would have caused BDO to make reference to the subject matter of the disagreement in its reports on the Company’s or Greenlane Holdings, LLC’s financial statements with respect to such periods; or (ii) “reportable events” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions).
On September 23, 2019, the Company engaged Deloitte as its new independent registered public accounting firm upon the approval of the Audit Committee. During the years ended December 31, 2018 and December 31, 2017, and the subsequent interim period through September 23, 2019, the effective date of the Company’s engagement of Deloitte, the Company did not consult with Deloitte regarding any of the matters or events set forth in Items 304(a)(2)(i) or (ii) of Regulation S-K.
Vote Required and Recommendation
The affirmative vote of the holders of a majority of all the votes cast at the Annual Meeting with respect to the matter is necessary for the approval of the ratification of the appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2020. For purposes of the vote on this proposal, abstentions will not be counted as votes cast and will have no effect on the result of the vote. Even if the appointment of Deloitte as our independent registered public accounting firm is ratified, the Audit Committee may, in its discretion, change that appointment at any time during the year should it determine such a change would be in our and our stockholders’ best interests. In the event that the appointment of Deloitte is not ratified, the Audit Committee will consider the appointment of another independent registered public accounting firm, but will not be required to appoint a different firm.
THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
Audit and Non-Audit Fees for 2019
Our consolidated financial statements for the fiscal year ended December 31, 2019 have been audited by Deloitte, which served as our independent registered public accounting firm as of the end of that year. In addition, as described above, BDO served as our independent registered public accounting firm until September 23, 2019. BDO fees are not included in the audit and non-audit fee summary below.
The following table summarizes the aggregate fees billed by Deloitte for services performed for the Company for the fiscal year ended December 31, 2019:
| | | | | |
| Year Ended
December 31, 2019 |
Audit Fees(1)
| $ | 995,000 | |
Audit-Related Fees(2)
| 243,423 | |
Tax Fees | — | |
All Other Fees | — | |
Total | $ | 1,238,423 | |
(1) Audit Fees for 2019 include actual fees for the 2019 audit and reviews of our Quarterly Reports on Form 10-Q.
(2) Audit-Related fees for 2019 consist of due diligence related to acquisitions.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is to review and pre-approve, either pursuant to the Company’s Audit and Non-Audit Services Pre-Approval Policy (the “Pre-Approval Policy”) or through a separate pre-approval by the Audit Committee, any engagement of the Company’s independent auditor to provide any audit-related and non-audit services to the Company. Pursuant to the Pre-Approval Policy, which the Audit Committee reviews and reassesses periodically, a list of specific services within certain categories of services, including audit, audit-related and tax services, are specifically pre-approved for the upcoming or current fiscal year, subject to an aggregate maximum annual fee payable by us for each category of pre-approved services. Any service that is not included in the approved list of services must be separately pre-approved by the Audit Committee. In addition, the Audit Committee may delegate authority to its chairperson to pre-approve engagements for the performance of audit-related and non-audit services. Additionally, all audit-related and non-audit services in excess of the pre-approved fee level, whether or not included on the pre-approved list of services, must be separately pre-approved by the Audit Committee. The Audit Committee has delegated authority to its chairperson to pre-approve engagements for the performance of audit and non-audit services, for which the estimated cost for such services shall not exceed $100,000 in the aggregate for any calendar year. The chairperson must report all pre-approval decisions to the Audit Committee at its next scheduled meeting and provide a description of the terms of the engagement. During the year ended December 31, 2019, 100% of the services provided by Deloitte and BDO after the completion of our initial public offering were pre-approved under the Pre-Approval Policy.
CORPORATE GOVERNANCE AND BOARD MATTERS
We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Messrs. LoCascio and Schoenfeld, together with their affiliates, control a majority of the combined voting power of our outstanding capital stock. As a result, we are a “controlled company” under the Nasdaq rules. As a controlled company, we are permitted to opt out of certain corporate governance requirements. However, we have made the decision to comply fully with the requirements of the SEC and Nasdaq as if we were not a controlled company. Other notableNotable features of our corporate governance structure include the following:
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the Board is not classified, with each of our directors subject to re-election annually;
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three of our five directors are “independent” within the meaning of the listing standards of Nasdaq;the Nasdaq Stock Market LLC (“Nasdaq”);
•all of
our standing Board committees are comprised solely of independent directors;
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separate Chairman of the Board and Chief Executive Officer roles;
we have •
majority voting in the election of directors;
•we have adopted
adoption of a proxy access bylaw provision; and
•we do not have a
no stockholder rights plan.
Our directors stay informed about our business by attending meetings of the Board and its committees and through supplemental reports and communications. Our independent directors meet regularly in executive sessions without the presence of our corporate officers or non-independent directors.
Board Composition and Structure; Director Independence
Our business and affairs are managed under the direction of our Board. Our second amended and restated bylawsBylaws provide that our Board shall be comprised of at least five directors and that the size of our Board shall otherwise be determined from time to time by our Board. Our Board currently consists of five members, one of whom is our Chief Executive Officer and one of whom is our Chief Strategy Officer. Subject to any rights applicable to any preferred stock we may issue from time to time, any additional directorships resulting from an increase in the number of directors may only be filled by the directors then in office unless otherwise required by law or by a resolution passed by our Board as provided in our second amended and restated bylaws.Bylaws. The term of office for each director will be until his or her successor is elected at our annual meeting or his or her death, resignation or removal, whichever is earliest to occur.
While we do not have a stand-alone diversity policy, in considering whether to recommend any director nominee, including candidates recommended by stockholders, we believe that the backgrounds and qualifications of the directors, considered as a group, should provide a significant mix of experience, knowledge and abilities that will allow our Board to fulfill its responsibilities. As set forth in our corporate governance guidelines,Corporate Governance Guidelines, when considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individualdirector’s biographies set forth above.in this Proxy Statement. We believe that our directors will provide an appropriate mix of experience and skills relevant to the size and nature of our business.
Messrs. LoCascio and Schoenfeld, together with their affiliates, control a majority of the combined voting power of our outstanding capital stock. As a result, Messrs. LoCascio and Schoenfeld are able to control any action requiring the general approval of our stockholders, including the election of our Board.
Our Board has determined that Aaron LoCascio and Adam Schoenfeld,Craig Snyder, by virtue of theirhis employment by our company,Company as Chief Executive Officer, and Aaron LoCascio, by virtue of his previous employment by our Company, most recently as our President, and his status as a co-founder of the Company, are not considered “independent” for purposes of applicable securities laws or under the rules of Nasdaq Marketplace Rules.
Our Board expects a culture of ethical business conduct. Our Board encourages each member to conduct a self-review to determine if he or she is providing effective service with respect to both our companyCompany and our stockholders. Should it be determined that a member of our Board is unable to effectively act in the best interests of our stockholders, such member would be encouraged to resign.
Board Leadership Structure
Our second amended and restated bylawsBylaws and our corporate governance guidelinesCorporate Governance Guidelines provide our Board with flexibility to combine or separate the positions of Chairman of the Board and Chief Executive Officer in accordance with its determination that utilizing one or the other structure is in the best interests of our company. Aaron LoCascioCraig Snyder currently serves as our Chief Executive Officer and Donald Hunter currently serves as the Chairman of the