UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C
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20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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U.S. GEOTHERMAL INC.
(Name
of Registrant as Specified In Its Charter)
_____________________________________________________
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate
box):
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[X]
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction
applies:
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Aggregate number of securities to which transaction
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0- 11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
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Proposed maximum aggregate value of
transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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August 19, 2016
Dear Shareholders:
You are cordially invited to join us for our 2016 annual
meeting of shareholders, which will be held on Friday, September 30, 2016, at
10:00 a.m., MDT, at the U.S. Geothermal Inc. Corporate Office located at 390 E
Parkcenter Blvd, Suite 250 in Boise, Idaho. Holders of record of our common
stock as of August 1, 2016, are entitled to notice of and to vote at the
meeting.
The Notice of Annual Meeting of Shareholders and the proxy
statement describe the business to be conducted at the meeting. We also will
report at the meeting on matters of current interest to our shareholders.
We hope you will be able to attend the meeting. However,
whether you plan to attend in person or not, please vote your shares in advance
to simplify our tally of the voting so as to not create a delay during our
shareholder meeting. You may submit your proxy vote by telephone or internet as
described in the following materials or by completing and signing the enclosed
proxy card and returning it in the envelope provided. If you decide to attend
the meeting and wish to change your proxy vote, you may do so automatically by
voting in person at the meeting.
If your shares are held in the name of a broker, trust, bank or
other nominee, you will need proof of ownership to be admitted to the meeting,
as described under “How can I attend the meeting?” in the proxy statement.
We look forward to seeing you at the annual meeting.
Sincerely,
/s/ Dennis J. Gilles
Dennis J. Gilles
Chief Executive Officer
-2-
August 19, 2016
Dear Fellow Stockholders,
We value your participation as a stockholder of U.S. Geothermal
Inc., and we appreciate your continued support and interest in our company. I
would like to take this opportunity to help prepare you for our upcoming Annual
General Meeting, and address some of the questions we have received regarding
our stock and related proposals.
We recently announced that our Annual General Meeting will be
held on September 30, 2016. At that meeting, we are recommending that our
stockholders approve an important resolution authorizing an amendment to our
certificate of incorporation to effect a share consolidation of US Geothermal’s
common stock, otherwise known as a reverse stock split.
As many of you are aware, the continued listing of US
Geothermal on the NYSE MKT stock exchange is not simply determined by our stocks
trading price. Management of the NYSE MKT has told us, that, given our
profitability, strong asset base, and our long term fixed price power sales
contracts, we are
not
at risk of any potential listing downgrade. We
currently meet all of their listing requirements, and our stock trading price
alone does not impact continued trading on the NYSE MKT.
However, while our share price does not jeopardize our listing
on the NYSE MKT, our price level of under $1.00 does keep many brokerage groups
and institutional investors from trading our stock. These institutions have
internal restrictions that prohibit them, or their clients, from investing in
stocks below certain trading price thresholds.
For those unfamiliar with a share consolidation, I’ve put
together a list of common questions and answers that help explain the mechanics
of a share consolidation and why our board of directors believes it would
benefit US Geothermal and its stock holders.
What is a share consolidation?
A share consolidation involves the company dividing its
currently outstanding common shares by a certain number, such as 3 or 6, which
would be called a “1-for-3” or “1-for-6” share consolidation. At the effective
time of a share consolidation, the number of shares outstanding decreases and
the trading market price per share increases due to the lower number of
outstanding shares. The number of authorized common shares (250,000,000 in the
case of US Geothermal) need not be reduced. Proportionate voting rights and
other rights of holders of common stock are not affected by a share
consolidation.
What is the specific share consolidation proposal to be
voted on at the Annual General Meeting?
We are asking stockholders to approve a resolution that would
allow our board of directors to effect a share consolidation of US Geothermal’s
common stock at a ratio of up to “1-for-6”, with the exact ratio to be set by
the board. We believe that the availability of a range of ratios up to
“1-for-6”, will provide us with the flexibility to implement the share
consolidation in a manner designed to maximize the anticipated benefits for the
company and our stockholders. A consolidation of 1-for-6 would reduce our
outstanding shares of common stock from ~113 million to ~18.9 million shares.
-3-
Why is US Geothermal proposing to implement a share
consolidation of its common stock?
While a share consolidation would not have a direct effect on
the market value of US Geothermal, we believe a share consolidation could help
improve the trading and valuation of the company’s stock in a number of
important ways:
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Meet Stock Price requirements:
Many brokerage
firms and institutional investors (including pension funds, mutual funds
and endowments) have internal policies and practices that either prohibit
them from investing in low-priced stocks, or discourage brokers from
recommending them to their customers. Such policies may also restrict or
limit an investor’s ability to purchase such stocks on margin. A share
consolidation will increase the price of our common stock and make it no
longer subject to such policies and practices, thereby making it available
for purchase by a much larger investor base.
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Reduce stock price volatility:
We have been
advised by certain institutional investors and financial advisors that a
higher stock price might increase the participation of investors who
currently find our shares unattractive, solely due to the trading
volatility typically associated with very low-priced stocks. A share
consolidation could increase the price of our common stock and make it
more acceptable in this regard.
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Reduce transaction costs for trading:
The NYSE MKT
stock exchange charges brokers a cost per share fee for every share that
is traded. Given our low price, and high number of shares, this results in
a substantial fee as a percentage of stock price. Additionally, many
brokerages charge their client fees based on the number of shares traded.
A share consolidation would also result in lower overall transactional
costs for most shareholders when they buy or sell our shares.
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Improve relevance of earnings per share:
A share
consolidation will decrease the total number of shares issued and
outstanding. When earnings are divided by the number of shares issued and
outstanding, this will result in a higher earnings per share value. Given
our current high number of outstanding shares, this results in the need to
fractionally round our earnings up or down, giving less transparency into
earnings per share comparisons.
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I hope these points help explain our rationale and the
importance of the share consolidation resolution. For additional information
about the share consolidation, please see Proposal 4 in the attached proxy
statement. Given these benefits, we believe the resolution is in the best
interest of US Geothermal stockholders and we encourage you to vote
“FOR”
the resolution at the upcoming Annual General Meeting.
Please do not hesitate to contact me with any questions or
concerns regarding the resolution and your very important voting rights. I look
forward to seeing many of you at our Annual General Meeting in September.
Sincerely,
/s/ Dennis J. Gilles
Dennis J. Gilles
Chief Executive Officer
-4-
August 19, 2016
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NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
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Date and Time:
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Friday, September 30, 2016, at 10:00
a.m. MDT
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U.S. Geothermal Corporate Office
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Place:
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390 E Parkcenter Blvd, Suite 250
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Boise, Idaho 83706
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Items of Business:
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1.
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The election of the seven directors named in this proxy
statement, each for a one- year term.
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The ratification of the selection of Moss Adams LLP as
our independent auditor for the fiscal year ending December 31, 2016.
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The approval of the 2009 Stock Incentive Plan.
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4.
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The approval of a shareholders resolution to authorize
the Board of Directors, in its sole and absolute discretion, without
further action of the shareholders, to amend our Certificate of
Incorporation to implement a consolidation of our common stock at a
consolidation ratio of up to 1 for 6 within one year from the date of the
Annual Meeting, with the exact ratio to be determined by the Board of
Directors.
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5.
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Any other business that may properly be considered at the
meeting or any adjournment of the meeting.
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Record Date:
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You may vote at the meeting if you were a shareholder of
record at the close of business on August 1, 2016.
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Voting by Proxy:
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If you cannot attend the annual meeting in person, you
may vote your shares by telephone or internet by no later than 1:00 a.m.
Central time on September 29, 2016 (as directed on the enclosed proxy
card), or by completing, signing and promptly returning the enclosed proxy
card by mail. We encourage you to vote by telephone or internet in order
to reduce our mailing and handling expenses. If you choose to submit your
proxy by mail, we have enclosed an envelope for your use, which is prepaid
if mailed in the United States.
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Important Notice Regarding the Availability of Proxy
Materials for the Shareholder Meeting to be held on September 30, 2016. The
Proxy Statement and Annual Report to Security holders are available at
http://www.usgeothermal.com
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By Order of the Board of Directors
/s/ Kerry D. Hawkley
Kerry D. Hawkley
Chief Financial Officer and Corporate
Secretary
-5-
PROXY STATEMENT
TABLE OF CONTENTS
-6-
PROXY STATEMENT
2016 ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON SEPTEMBER 30, 2016
The Board of Directors of U.S. Geothermal Inc. is soliciting
proxies for use at the annual meeting of shareholders to be held on September
30, 2016, and at any adjournment of the meeting. This proxy statement and the
enclosed proxy card are first being made available to shareholders on or about
August 19, 2016.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is the purpose of the meeting?
At our annual meeting, shareholders will act upon the matters
outlined in the Notice of Annual Meeting of Shareholders. These matters include
the election of directors, the ratification of the selection of our independent
auditor, the approval of the 2009 Stock Incentive Plan and the approval of a
resolution authorizing a share consolidation. Management will report on our
performance during the fiscal year ended December 31, 2015 after the annual
meeting is concluded, responding to questions from shareholders.
Who is entitled to vote at the meeting?
The Board has set August 1, 2016 as the record date for the
annual meeting. If you were a shareholder of record at the close of business on
August 1, 2016, you are entitled to vote at the meeting.
As of the record date, 113,323,500 shares of our common stock
were issued and outstanding and, therefore, eligible to vote at the meeting.
What are my voting rights?
Holders of our common stock are entitled to one vote per share.
Therefore, a total of 113,323,500 votes are entitled to be cast at the meeting.
There is no cumulative voting.
How many shares must be present to hold the
meeting?
In accordance with our Bylaws, shares equal to at least
one-third of the voting power of our outstanding shares of common stock as of
the record date must be present at the meeting in order to hold the meeting and
conduct business. This is called a quorum. Your shares are counted as present at
the meeting if:
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you are present and vote in person at the
meeting; or
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you have properly submitted a proxy by mail,
telephone or internet.
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How do I vote my shares?
If you are a shareholder of record as of the record date, you
can give a proxy to be voted at the meeting in any of the following ways:
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over the telephone by calling a toll-free
number;
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electronically, using the internet; or
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by completing, signing and mailing the enclosed
proxy card.
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-7-
The telephone and internet voting procedures have been set up
for your convenience. We encourage you to save corporate expense by submitting
your vote by telephone or internet. The procedures have been designed to
authenticate your identity, to allow you to give voting instructions, and to
confirm that those instructions have been recorded properly. If you are a
shareholder of record and you would like to submit your proxy by telephone or
internet, please refer to the specific instructions provided on the enclosed
proxy card. If you wish to submit your proxy by mail, please return your signed
proxy card to us before the annual meeting.
If you hold your shares in “street name,” you must vote your
shares in the manner prescribed by your broker or other nominee. Your broker or
other nominee has enclosed or otherwise provided a voting instruction card for
you to use in directing the broker or nominee how to vote your shares, and
telephone and internet voting is also encouraged for shareholders who hold their
shares in street name.
What is a proxy?
It is your designation of another person to vote stock you own.
That other person is called a proxy. If you designate someone as your proxy in a
written document, that document also is called a proxy or a proxy card. When you
designate a proxy, you also may direct the proxy how to vote your shares. We
refer to this as your “proxy vote.” Two executive officers, Douglas J. Glaspey
and Kerry D. Hawkley, have been designated as the proxies for our 2016 annual
meeting of shareholders.
What is a proxy statement?
It is a document that we are required to give you, in
accordance with regulations of the Securities and Exchange Commission, when we
ask you to designate proxies to vote your shares of our common stock at a
meeting of our shareholders. The proxy statement includes information regarding
the matters to be acted upon at the meeting and certain other information
required by regulations of the Securities and Exchange Commission and rules of
the NYSE MKT LLC (“NYSE MKT”).
What is the difference between a shareholder of record
and a “street name” holder?
If your shares are registered directly in your name, you are
considered the shareholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a
bank, trust or other nominee, then the broker, bank, trust or other nominee is
considered to be the shareholder of record with respect to those shares.
However, you still are considered the beneficial owner of those shares, and your
shares are said to be held in “street name.” Street name holders generally
cannot vote their shares directly and must instead instruct the broker, bank,
trust or other nominee how to vote their shares using the voting instruction
card provided by it.
What does it mean if I receive more than one proxy
card?
If you receive more than one proxy card, it means that you hold
shares registered in more than one account. To ensure that all of your shares
are voted, sign and return each proxy card or, if you submit your proxy vote by
telephone or internet, vote once for each proxy card you receive.
Can I vote my shares in person at the
meeting?
If you are a shareholder of record, you may vote your shares in
person at the meeting by completing a ballot at the meeting. Even if you
currently plan to attend the meeting, we recommend that you also submit your
proxy as described above so that your vote will be counted in advance to avoid
delays at the meeting in case you later decide not to attend the meeting.
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If you are a street name holder, you may vote your shares in
person at the meeting only if you obtain a signed letter or other document from
your broker, bank, trust or other nominee giving you the right to vote the
shares at the meeting.
What vote is required for the election of directors or
for the proposals to be approved?
Directors must be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. This means that those nominees receiving the
seven highest number of votes at the meeting will be elected, even if the votes
cast for each nominee do not constitute a majority of the votes of shares
present and entitled to vote. The affirmative vote of a majority of the voting
power of our common stock present, entitled to vote and cast on the matter is
required for the ratification of the selection of our independent auditor and
re-approval of the 2009 Stock Incentive Plan. The affirmative vote of a majority
of the outstanding common stock is required for the approval of the resolution
authorizing the share consolidation.
How are votes counted?
The following chart describes the proposals to be considered at
the meeting, the voting options, the votes required to elect directors and to
adopt each other proposal, and the manner in which votes will be counted:
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Proposal
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Voting Options
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Vote Required to
Adopt
the
Proposal
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Effect of
Abstentions
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Effect of “Broker
Non-Votes”
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Election of directors
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For or withhold
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Elected by plurality
of votes- nominees
receiving the seven
highest number of
votes at the meeting
will be elected.
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No effect.
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No broker
discretion to vote.
No
effect.
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Ratification of
selection of Moss
Adams LLP
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For, against or
abstain
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The affirmative
vote of a majority
of
the shares of
common stock cast.
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No effect.
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Brokers have
discretion to vote.
No
effect.
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Approval of 2009
Stock Incentive
Plan
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For, against or
abstain
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The affirmative
vote of a majority
of
the shares of
common stock cast.
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No effect.
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No broker
discretion to vote.
No
effect.
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Approval of Share
Consolidation
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For, against or
abstain
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The affirmative
vote of a majority
of
the outstanding
shares of common stock.
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Counted as vote.
Same effect as votes
against.
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No broker
discretion to vote.
Same
effect as votes against.
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If you submit your proxy but abstain from voting on one or more
matters, your shares will be counted as present at the meeting for the purpose
of determining a quorum. Shares not present at the meeting and shares voting
“WITHHOLD” or “ABSTAIN” have no effect on the election of director, the
ratification of the selection of our independent auditor, or the approval of the
2009 Stock Incentive Plan. Shares voting “ABSTAIN” will count as a vote against the share consolidation because an absolute
majority of affirmative votes are required to approve the proposal. Regardless
of how many votes are cast, an “ABSTAIN” is not an affirmative vote.
-9-
If you hold your shares in street name and do not provide
voting instructions to your broker or other nominee, your shares will be treated
as “broker non-votes” and will not be voted on any proposal on which your broker
or other nominee does not have discretionary authority to vote under applicable
rules. If you hold your shares in street name, it is critical that you cast your
vote if you want it to count in the election of directors, approval of the 2009
Stock Incentive Plan, and the share consolidation. In the past, if you held your
shares in street name and you did not indicate how you wanted your shares voted
in the election of directors, your broker or other nominee was allowed to vote
those shares on your behalf in the election of directors as they felt
appropriate. Recent changes in regulation were made to take away the ability of
your broker or other nominee to vote your uninstructed shares on a discretionary
basis for anything other than the ratification of the appointment of auditors.
Thus, if you hold your shares in street name and you do not instruct your broker
or other nominee how to vote, no votes on such matters will be cast on your
behalf except with respect to the ratification of the auditor appointment.
Shares that constitute broker non-votes will be counted as present at the
meeting for the purpose of determining a quorum, but will not be considered
entitled to vote at the meeting. “Broker non-votes” will have no effect on the
outcome for the election of directors, ratification of the auditor or approval
of the 2009 Stock Incentive Plan. However, broker non-votes will count as a vote
against the share consolidation because the approval requires an absolute
majority of affirmative votes.
Who will count the votes?
Representatives of Computershare Investor Services, our
tabulation agent, will tabulate the votes.
How does the Board recommend that I vote?
You will vote on the following management proposals:
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Election of seven directors: Dennis J. Gilles, Douglas J.
Glaspey, Randolph J. Hill, Paul A. Larkin, Leland L. Mink, James C.
Pappas, and John H. Walker.
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Ratification of the selection of Moss Adams LLP as our
independent auditor for the fiscal year ending December 31, 2016.
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Approval of the 2009 Stock Incentive Plan.
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Approval of the shareholder resolution authorizing the
share consolidation as described in this proxy statement.
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The Board of Directors recommends that you vote
FOR
the
election of each of the nominees to the Board of Directors,
FOR
the
ratification of Moss Adams LLP as our independent auditor for the fiscal year
ending December 31, 2016,
FOR
the re-approval of the 2009 Stock Incentive
Plan, and
FOR
the approval of the share consolidation resolution as
described in this proxy statement.
What if I do not specify how I want my shares
voted?
If you submit a signed proxy card or submit your proxy by
telephone or internet and do not specify how you want to vote your shares, we
will vote your shares:
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FOR
the election of all of the director nominees
named above; and
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FOR
the ratification of the selection of Moss
Adams LLP as our independent auditor for the fiscal year ending December
31, 2016.
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FOR
the approval of the 2009 Stock Incentive Plan
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FOR
the approval of the share consolidation as
described in this proxy statement
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Can I change my vote after submitting my
proxy?
Yes. You may revoke your proxy and change your vote at any time
before your proxy is voted at the annual meeting. If you are a shareholder of
record, you may revoke your proxy and change your vote by submitting a
later-dated proxy by telephone, internet or mail, or by voting in person at the
meeting. Attending the meeting will not revoke your proxy unless you
specifically request to revoke it. To request an additional proxy card, or if
you have any questions about the annual meeting or how to vote or revoke your
proxy, you should write to Corporate Secretary, U.S. Geothermal Inc., 390 E
Parkcenter Blvd, Suite 250, Boise, ID 83706 or call (208) 424-1027.
Will my vote be kept confidential?
Yes. We have procedures to ensure that, regardless of whether
shareholders vote by mail, telephone, internet or in person, all proxies,
ballots and voting tabulations that identify shareholders are kept permanently
confidential, except as disclosure may be required by federal or state law or as
expressly permitted by a shareholder. We also have the voting tabulations
performed by an independent third party.
How can I attend the meeting?
You may be asked to present valid picture identification, such
as a driver’s license or passport, before being admitted to the meeting. If you
hold your shares in street name, you also will need proof of ownership to be
admitted to the meeting. A recent brokerage statement or letter from your broker
or other nominee are examples of proof of ownership.
Please let us know whether you plan to attend the meeting by
marking the attendance box on the proxy card or responding affirmatively when
prompted during telephone or internet voting.
Who pays for the cost of proxy preparation and
solicitation?
We pay for the cost of proxy preparation and solicitation,
including the reasonable charges and expenses of brokerage firms, banks or other
nominees for forwarding proxy materials to street name holders.
We are soliciting proxies primarily by mail. In addition, our
directors, officers and regular employees may solicit proxies by telephone,
facsimile or personally. These individuals will receive no additional
compensation for their services other than their regular salaries.
What are the deadlines for submitting shareholder
proposals for the 2017 annual meeting?
In order for a shareholder proposal to be considered for
inclusion in our proxy statement and form of proxy for the 2017 annual meeting,
the written proposal must be received at our principal executive offices at 390
E Parkcenter Blvd, Suite 250, Boise, ID 83706, Attention: Corporate Secretary,
on or before April 21, 2017. If the date of our 2017 annual meeting is changed
by more than 30 calendar days from the anniversary of this year’s annual
meeting, then the deadline is a reasonable time before we begin to print and
mail proxy materials. All shareholder proposals must comply with Securities and
Exchange Commission regulations regarding the inclusion of shareholder proposals
in company-sponsored proxy materials.
-11-
Our Certificate of Incorporation provides that a shareholder(s)
holding, in aggregate, not less than 10% of our shares with voting rights, may
nominate a director for election at the annual meeting or may present from the
floor a proposal that is not included in the proxy statement if proper written
notice is received by our Corporate Secretary at our principal executive offices
in Boise, Idaho, not less than 40 days nor more than 60 days in advance of the
meeting. The notice must contain the specific information required by our
Certificate of Incorporation. You may request a copy of our Certificate of
Incorporation by contacting our Corporate Secretary at U.S. Geothermal Inc., 390
E Parkcenter Blvd, Suite 250, Boise, ID 83706, or by telephone at (208)
424-1027. We will not entertain any proposals or nominations at the annual
meeting that do not meet the requirements set forth in our Certificate of
Incorporation. If the stockholder does not also comply with the requirements of
Rule 14a-4(c)(2) under the Securities Exchange Act of 1934, as amended, we may
exercise discretionary voting authority under proxies that we solicit to vote in
accordance with our best judgment on any such stockholder proposal or
nomination.
How can I communicate with U.S. Geothermal’s Board of
Directors?
You or any other interested party may communicate with our
Board of Directors by sending a letter addressed to our Board of Directors,
non-management directors, Chairman of the Board or specified individual
directors to:
U.S. Geothermal Inc.
390 E
Parkcenter Blvd, Suite 250
Boise, ID 83706
Any such letters will be delivered to an independent director
or a specified director if so addressed. Letters relating to accounting matters
will also be delivered to our Chief Financial Officer for handling in accordance
with the Audit Committee’s policy on investigation of complaints relating to
accounting matters.
How can I elect to access proxy statements and annual
reports electronically instead of receiving paper copies through the
mail?
You can request electronic delivery if you are a shareholder of
record. In fact, we encourage you to request electronic delivery of these
documents if you are comfortable with the electronic format because it saves us
the expense of printing and mailing the materials to you and helps preserve
environmental resources. You can choose this option by:
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following the instructions provided on your
proxy card or voter instruction form;
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following the instructions provided when you
vote over the internet; or
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going to
http://www.envisionreports.com/HTM
and following the
instructions provided.
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If you choose to view future proxy statements and annual
reports over the internet, you will receive an e-mail message next year
containing a link to the internet website where you can access our proxy
statement and annual report. The e-mail also will include instructions for
voting over the internet. You may revoke this request at any time by following
the instructions at
http://www.envisionreports.com/HTM
. Your
election to view proxy materials online is permanent unless you revoke it later.
-12-
IMPORTANT INFORMATION REGARDING DELIVERY OF PROXY
MATERIALS
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What is “Notice and Access?”
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In 2007, the SEC adopted amendments to the proxy rules
that changed how companies must provide proxy materials. Under the proxy
delivery rules, a company may select either of the following two options
for making proxy materials available to shareholders:
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full set delivery option; or
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notice only option.
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A company may use a single method for all its shareholders, or
use full set delivery for some while adopting the notice only option for
others.
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What is the “full set” delivery option?
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Under the full set delivery option, a company delivers
all proxy materials to its shareholders. This can be by mail or, if a
stockholder has previously agreed, electronically. In addition to
delivering proxy materials to shareholders, the company must post all
proxy materials on a publicly-accessible website (other than the SEC’s
website) and provide information to shareholders about how to access that
website.
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What is the “notice only” option?
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Under the notice only option, a company must post all of
its proxy materials on a publicly-accessible website. However, instead of
delivering its proxy materials to shareholders, the company instead
delivers a “Notice of Internet Availability of Proxy Materials” which
outlines: (i) information regarding the date and time of the meeting of
shareholders as well as the items to be considered at the meeting; (ii)
information regarding the website where the proxy materials are posted;
and (iii) various means by which a stockholder can request paper or e-mail
copies of the proxy materials. The stockholder may request that the
company deliver paper copies of the proxy materials.
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In connection with our 2016 Annual Meeting of Shareholders,
U.S. Geothermal has elected to use the full set delivery option for registered
holders and the “notice only” option for “street name” shareholders.
Additionally, U.S. Geothermal has posted its proxy materials at
www.usgeothermal.com.
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Will U.S. Geothermal use the notice
only
option in the future?
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Although U.S. Geothermal elected to use the full set
delivery option for registered shareholders and “notice only” option for
“street name” holders in connection with the 2016 Annual Meeting of
Shareholders, it may choose to use the notice only option for registered
shareholders in the future. We plan to evaluate the future possible cost
savings as well as the possible impact on stockholder participation as we
consider the future use of the notice only option.
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-13-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Principal Shareholders
The following table sets forth certain information regarding
beneficial ownership of the Company’s common stock, as of August 1, 2016 by each
person known by us to be the beneficial owner of more than 5% of the Company’s
outstanding common stock. The percentage of beneficial ownership is based on
113,323,500 shares of the Company’s common stock outstanding as of August 1,
2016.
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Amount and Nature
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Name and Address of Beneficial Owner
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of Beneficial
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Percent of
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Ownership
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Class
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JCP Investment Management, LLC
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1177 West Loop South, Suite 1650
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17,129,690
(1)
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15.12%
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Houston, TX 77027
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Private Management Group, Inc.
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15635 Alton Parkway, Suite 400
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9,604,473
(2)
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8.48%
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Irvine, CA 92618
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Bradley Louis Radoff
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1177 West Loop South, Suite 1625
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5,696,900
(3)
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5.03%
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Houston, TX 77027
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(1)
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As of July 14, 2016, based on information set forth in a
Schedule 13D filed with the SEC on July 18, 2016 by JCP Investment
Management, LLC. Each of the persons listed may be deemed to be a member
of a Section 13(d) group that collectively beneficially owns more than 10%
of the Issuer’s outstanding shares of Common Stock, and each such person
disclaims beneficial ownership of the shares of Common Stock reported
herein except to the extent of his or its pecuniary interest therein.
Includes 5,630,160 shares of Common Stock owned directly by JCP Investment
Partnership, LP (“JCP Partnership”). Also includes 11,499,530 shares of
Common Stock owned directly by JCP Drawdown Partnership III, LP (“JCP
Drawdown III”). JCP Partners, as the general partner of each of JCP
Partnership and JCP Drawdown III, may be deemed the beneficial owner of
the (i) 5,630,160 shares owned by JCP Partnership and (ii) 11,499,530
shares owned by JCP Drawdown III. JCP Investment Holdings, LLC (“JCP
Holdings”), as the general partner of each of JCP Partners, may be deemed
the beneficial owner of the (i) 5,630,160 shares owned by JCP Partnership
and (ii) 11,499,530 shares owned by JCP Drawdown III. JCP Investment
Holdings, LLC (“JCP Holdings”), as the general partner of JCP Partners,
may be deemed the beneficial owner of the (i) 5,630,160 shares owned by
JCP Partnership and (ii) 11,499,530 shares owned by JCP Drawdown III. JCP
Investment Management, LLC (“JCP Management”), as the investment manager
of each of JCP Partnership and JCP Drawdown III, may be deemed the
beneficial owner of the (i) 5,630,160 shares owned by JCP Partnership and
(ii) 11,499,530 shares owned by JCP Drawdown III. James C. Pappas, as the
managing member of JCP Management and sole member of JCP Holdings, may be
deemed the beneficial owner of the (i) 5,630,160 shares owned by JCP
Partnership and (ii) 11,499,530 shares owned by JCP Drawdown
III.
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(2)
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As of December 31, 2015, based on information set forth
in a Schedule 13G filed with the SEC on January 28, 2016 by Private
Management Group, Inc., which has sole voting and dispositive power over
9,604,473 shares of the Company’s common stock.
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(3)
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As of December 31, 2015, based on information set forth
in a Schedule 13G/A filed with the SEC on February 3, 2016 by Bradley
Louis Radoff, who has sole voting and dispositive power over 5,696,900
shares of the Company’s common stock.
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-14-
Security Ownership of Management
Our executive officers and directors are encouraged to own our
common stock to further align their interests with our shareholders’ interests.
The following table sets forth certain information regarding beneficial
ownership of the Company’s common stock, as of August 1, 2016, by each of our
directors, director nominees, Named Executive Officers and directors, director
nominees and executive officers as a group. The percentage of beneficial
ownership is based on 113,323,500 shares of the Company’s common stock
outstanding as of August 1, 2016.
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Amount and
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Nature
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Name of Beneficial Owner
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of Beneficial
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Percent of
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Ownership
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Class
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Dennis J. Gilles
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3,592,173
(1)
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3.17%
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Douglas J. Glaspey
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1,509,687
(2)
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1.33%
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Kerry D. Hawkley
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691,982
(3)
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*
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Randolph J. Hill
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0
(4)
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*
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Paul A. Larkin
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704,825
(5)
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*
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Leland L. Mink
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458,378
(6)
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*
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James C. Pappas
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17,129,690
(7)
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15.12%
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John H. Walker
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454,657
(8)
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*
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Jonathan Zurkoff
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642,027
(9)
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*
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All directors, director nominees and
executive officers as a group (9 persons)
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25,183,419
(10)
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22.22%
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*
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Less than 1% of the Company’s outstanding common
stock
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(1)
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Includes 2,262,492 options exercisable within 60 days of
August 1, 2016.
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(2)
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Includes 810,000 options exercisable within 60 days of
August 1, 2016.
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(3)
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Includes 480,000 options exercisable within 60 days of
August 1, 2016.
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(4)
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Includes 0 options exercisable within 60 days of August
1, 2016.
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(5)
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Includes 400,000 options exercisable within 60 days of
August 1, 2016.
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(6)
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Includes 280,000 options exercisable within 60 days of
August 1, 2016.
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(7)
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Includes 0 options exercisable within 60 days of August
1, 2016.
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(8)
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Includes 300,000 options exercisable within 60 days of
August 1, 2016.
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(9)
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Includes 465,000 options exercisable within 60 days of
August 1, 2016.
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(10)
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Includes 4,997,492 options exercisable within 60 days of
August 1, 2016.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
our executive officers and directors, and persons who own more than 10% of a
registered class of our equity securities, to file initial reports of ownership
and reports of changes in ownership of our securities with the Securities and
Exchange Commission. Executive officers, directors and greater than 10%
shareholders are required to furnish us with copies of these reports. Based
solely on our review of the Section 16(a) reports furnished to us with respect
to the fiscal year ended December 31, 2015 and written representations from the
executive officers and directors and greater than 10% shareholders, we believe that all Section 16(a) filing
requirements applicable to our executive officers, directors and greater than
10% shareholders were satisfied.
-15-
PROPOSAL 1—ELECTION OF DIRECTORS
The Board of Directors will be composed of seven directors:
Dennis J. Gilles, Douglas J. Glaspey, Randolph J. Hill, Paul A. Larkin, Leland
L. Mink, James C. Pappas and John H. Walker. The majority of the Board, made up
of Mr. Hill, Mr. Larkin, Dr. Mink, Mr. Pappas and Mr. Walker, satisfy the
applicable independence requirements of NYSE MKT, and National Instrument
58-101, Disclosure of Corporate Governance Practices and Multilateral Instrument
52-110, Audit Committees. Mr. Gilles and Mr. Glaspey do not satisfy such
independence requirements based on their employment as executive officers of the
Company. The Board has one class of members that is elected at each annual
shareholders meeting to hold office until the next annual shareholders meeting
or until their successors have been duly elected and qualified. The Board of
Directors proposes the following nominees for election as directors to hold
office until the annual meeting of shareholders to be held in 2017 or until
their successors, if any, have been duly elected and qualified. Each of the
nominees has agreed to serve as a director if elected.
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Dennis J. Gilles
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Douglas J. Glaspey
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Randolph J. Hill
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Paul A. Larkin
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Leland L. Mink
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James C. Pappas
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John H. Walker
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If, for any reason, any nominee becomes unable to serve before
the election, the persons named as proxies will vote your shares for a
substitute nominee selected by the Board of Directors.
Information Concerning Director Nominees and Executive
Officers
Dennis J. Gilles:
Age 58, has served as the Chief
Executive Officer since April 2013 and a director of the Company since September
2011. Mr. Gilles also currently serves as a Director and Executive Board Officer
of the Geothermal Resource Council. Mr. Gilles is a senior executive with 30
years of experience in the management, operations, maintenance, engineering,
construction and administration of power and petrochemical plants and their
related facilities. Mr. Gilles’ primary activities have included the
identification, evaluation and acquisition of existing renewable projects or
portfolios, as well as heading development of new green-field opportunities.
During his 23 year career with Calpine Corporation as Senior Vice President, Mr.
Gilles managed the Company’s geothermal portfolio of 750 megawatts at the
Geysers geothermal field where he was instrumental in consolidating the majority
of the ownership interests into a single entity. Mr. Gilles was part of the
expansion and growth of Calpine Corporation from the very first megawatt to what
is now the largest independent power producer in the United States. Mr. Gilles
holds a Masters of Business Administration and a Bachelor of Science in
Mechanical Engineering. Mr. Gilles’ qualifications to serve as a director of the
Company include his over 35 years of experience in the energy industry and his
many years of senior management and director experience.
Douglas J. Glaspey
:
Age 64, is the
co-founder, President and Chief Operating Officer and a director of the Company.
He has served as a director of the Company since March 2000, President of the
Company since September 2011, and Chief Operating Officer of the Company since
December 2003. Mr. Glaspey served from March 2000 until December 2004 as the
President and Chief Executive Officer for the TSX Venture Exchange (“TSX-V”) listed U.S. Cobalt Inc. until the acquisition of
Geo-Idaho in December 2003. He also served as a director and the Chief Executive
Officer of Geo-Idaho from February 2002 until the acquisition of Geo-Idaho in
December 2003. During his career in the mining industry, he has held operating
positions with ASARCO, Earth Resources Company, Asamera Minerals, Atlanta Gold
Corporation and Twin Gold Corporation. Mr. Glaspey has 38 years of operating and
management experience. He holds a Bachelor of Science in Mineral Processing
Engineering and an Associate of Science in Engineering Science. His experience
includes public company financing and administration, production management,
planning and directing resource exploration programs, preparing feasibility
studies and environmental permitting. He has formed and served as an executive
officer of several private resource development companies in the United States,
including Drumlummon Gold Mines Corporation and Black Diamond Corporation. He is
currently a director of TSX-V listed Thunder Mountain Gold, Inc., which is also
quoted on the OTC Bulletin Board. Mr. Glaspey’s qualifications to serve as a
director of the Company include his over 35 years of experience in the natural
resource industry and his many years of senior management and director
experience.
-16-
Randolph J. Hill:
Age 61, will serve as a
director of the Company effective September 30, 2016. Mr. Hill is a corporate
lawyer with Stoel Rives with significant experience in corporate governance,
mergers and acquisitions, energy and infrastructure development, project
financing, and EPC, design-build and management and operations contracting, and
also serves as Chair of the Idaho Energy Resources Authority and a member of the
Board of Governors of the Andrus Center for Public Policy at Boise State
University. He has previously worked as Chief Legal Officer for a major division
of AECOM (previously Washington Group International and then URS through
successive mergers), as General Counsel and then President and CEO for Ida-West
Energy, and as a corporate lawyer at a premier Wall Street law firm. He has
previously served as a director for the Boise Metro Chamber of Commerce (one
year as Chair), the Idaho Association of Commerce and Industry, and the Women’s
and Children’s Alliance (four years as President). Mr. Hill holds a law degree
from Georgetown University Law Center and a bachelor’s degree from George
Washington University. Mr. Hill’s qualifications to serve as a director of the
Company include his many years of senior management, legal and energy industry
experience.
Paul Larkin
:
Age 65
,
serves as a
director of the Company, a position he has held since March 2000. He served as
Secretary of the Company from March 2000 until December 2003, and has served as
Chairman of the Audit Committee from 2003 to present. He also served as a
director and the Secretary-Treasurer of Geo-Idaho from February 2002 until its
acquisition in December 2003. Since 1983, Mr. Larkin has also been the President
of the New Dawn Group, an investment and financial consulting firm located in
Vancouver, British Columbia, and a director and officer of various TSX-V listed
companies. New Dawn is primarily involved in corporate finance, merchant banking
and administrative management of public companies. Mr. Larkin held various
accounting and banking positions for over a decade before founding New Dawn in
1983, and currently serves on the boards of the following companies which are
listed on the TSX-V: Esrey Energy Ltd., Condor Resources Ltd., Tyner Resources
Ltd. Gstaad Capital Corp., Westbridge Energy Corp., Velocity Minerals Ltd and
Capstream Ventures Inc. Mr. Larkin’s qualifications to serve as a director of
the Company include his many years of senior leadership and management
experience in corporate finance, merchant banking and administrative management
of public companies.
Dr. Leland “Roy” Mink
:
Age 76
,
serves as a director of the Company, a position he has held since November
2006. Dr. Mink holds a PhD in Geology from the University of Idaho and is
currently self-employed as President of Mink GeoHydro Inc conducting consulting
activities in hydrogeology and geothermal resource evaluations. He served as
Program Director for the Geothermal Technologies Program at the U.S. Department
of Energy (DOE) from February 2003 to October 2006. Prior to working for the
DOE, Dr. Mink was the Vice President of Exploration for the Company from June
2002 to February 2003. He has also worked for Morrison-Knudsen Corporation,
Idaho Bureau of Mines and Geology and Idaho Water Resources Research Institute.
Dr. Mink serves on the Geothermal Resources Board of Directors and is a member
of the Geothermal Energy Association. His qualifications to serve as a director of the
Company include his many years of senior leadership and management experience in
the geothermal energy industry.
-17-
James C. Pappas
: Age 35, will serve as a director
of the Company effective September 30, 2016. Mr. Pappas founded JCP Investment
Management in Houston in June 2009 and is the Managing Member and owner of the
Firm. Since January 2015, Mr. Pappas has served as a director of Jamba, Inc., a
leading health and wellness brand and the leading retailer of freshly squeezed
juice, where he is also a member of each of the Nominating and Corporate
Governance Committee and the Audit Committee. Mr. Pappas also currently serves
as a director of Tandy Leather Factory, Inc., a specialty retailer and wholesale
distributor of leather and leather related products. Previously, Mr. Pappas
served on the Board of Directors of The Pantry, Inc., has also served as
Chairman of the Board of Directors of Morgan’s Foods, and has also served as a
director of Samex Mining Corp. From 2005 until 2007, Mr. Pappas worked for The
Goldman Sachs Group, Inc. in their Investment Banking / Leveraged Finance
Division. As part of the Goldman Sachs Leveraged Finance Group, Mr. Pappas
advised private equity groups and corporations on appropriate leveraged buyout,
recapitalization and refinancing alternatives. Prior to Goldman Sachs, Mr.
Pappas worked at Banc of America Securities, the investment banking arm of Bank
of America, where he focused on Consumer and Retail Investment Banking,
providing advice on a wide range of transactions including mergers and
acquisitions, financings, restructurings and buy-side engagements. Mr. Pappas
received a BBA in Information Technology, and a Masters in Finance from Texas
A&M University. His qualifications to serve as a director of the Company
includes his years of investment banking and director experience.
John H. Walker
:
Age 67, is a director and
the Chairman of the Board of Directors of the Company. He has held that position
since December 2003. He is also a Managing Director of Kensington Capital
Partners Ltd and a National Director of Trout Unlimited Canada. Mr. Walker has a
38 year history in urban planning, energy security and power plant development
in Ontario and internationally as well as experience on both public and private
sector boards. Mr. Walker was a founding director of the Greater Toronto
Airports Authority in 1992 and chaired the first Planning and Development
Committee of the Board which provided oversight in the construction of CDN$4.4
billion terminal complex at Toronto Pearson Airport completed in 2004. He was
instrumental in the development of a 117 megawatt cogeneration power plant at
Toronto Pearson Airport which commenced operations in 2005. Additionally, he was
a founding Director of the Borealis Infrastructure Fund which is now owned by
Ontario Municipal Employee Retirement System (OMERS). Mr. Walker has worked in
the financial services community as an investment banker with Loewen Ondaatje
McCutcheon and has served on the Board of Directors of Sheridan College
Institute of Technology and Advanced Learning. His background includes 10 years
at Ontario Hydro where he was responsible for site selection, alternative energy
and international market development. Mr. Walker has also acted as a senior
advisor to Falconbridge on the Koniambo project, a CDN$3 billion nickel smelter,
mine, power plant and port project in New Caledonia. Mr. Walker advises
corporations on matters related to infrastructure and energy development and
acts as a developer of power plants. Mr. Walker is a Registered Professional
Planner in the Province of Ontario and a member of the Canadian Institute of
Planners. Mr. Walker has a BSc. from Springfield College and a Masters of
Environmental Studies (Urban and Regional Planning) from York University. Mr.
Walker’s qualifications to serve as a director of the Company include his many
years of senior leadership and management experience in international business
development.
Additional Executive Officers Who are Not Nominees to the
Board.
Kerry D. Hawkley:
Age 62, serves as the Chief
Financial Officer and Corporate Secretary of the Company. He has served as the
Company’s controller since July 2003, and became CFO as of January 1, 2005. From
July 2003 to December 2004, he also provided consulting services to Triumph Gold
Corp. From 1998 to June 2003, Mr. Hawkley served as controller, director and
treasurer of LB Industries. Mr. Hawkley has over 39 years of experience in all
areas of accounting, finance and administration. He holds Bachelor of Business
Administration degrees in Accounting and Finance. He started his career as an
internal auditor with Union Pacific Corporation and has held various accounting management
positions in the oil and gas, truck leasing, mining and energy industries.
-18-
Jonathan Zurkoff:
Age 60, serves as the Treasurer
and Executive Vice President of the Company, a position he has held since
September 2011. From January 2009 to May 2009, Mr. Zurkoff served as a financial
consultant to the Company. He then served as the Vice President Finance of the
Company from June 2009 until September 2011. Mr. Zurkoff served as CFO of
Tamarack Resorts from 2004 to 2008. Mr. Zurkoff has over 25 years of experience
in engineering, construction, and all phases of project development with an
emphasis on project and corporate finance. Mr. Zurkoff holds a Masters of
Business Administration, a Masters of Science in Groundwater Hydrology, and a
Bachelor of Science in Geology. Mr. Zurkoff has held positions in Tamarack
Resort (CFO), Process Technologies (CFO & COO), and Morrison Knudsen
Corporation (now URS).
The election of each director nominee requires such nominee
receiving one of the seven highest number of votes cast “FOR” a nominee’s
election.
The Board of Directors recommends a vote “FOR” the election
of the seven nominated directors. Proxies will be voted “FOR” the election of
the seven nominees unless otherwise specified.
CORPORATE GOVERNANCE
Our Board of Directors and management are dedicated to
exemplary corporate governance. Good corporate governance is vital to the
continued success of U.S. Geothermal Inc. Our Board of Directors has adopted the
U.S. Geothermal Inc. Code of Business Conduct and Ethics to provide a corporate
governance framework for our directors and management to effectively pursue U.S.
Geothermal Inc.’s objectives for the benefit of our shareholders. The Board
annually reviews and updates these guidelines and the charters of the Board
committees in response to evolving “best practices” and the results of annual
Board and committee evaluations. Our Code of Business Conduct and Ethics and
Board committee charters can be found at
http://
www.usgeothermal.com
by clicking on “About Us”.
Shareholders may request a free printed copy of our Code of Business Conduct and
Ethics and Board committee charters from our Corporate Secretary at 390 E
Parkcenter Blvd, Suite 250, Boise, Idaho 83706, or by contacting him at
info@usgeothermal.com
, or by calling (208) 424-1027. We will post any
amendments to the Code of Business Conduct and Ethics at that location on our
website. In the unlikely event that the Board of Directors approves any sort of
waiver to the Code of Business Conduct and Ethics for our executive officers or
directors, information concerning such waiver will also be posted at that
location on our website. No waivers were granted during the fiscal year ended
December 31, 2015. In addition to posting information regarding amendments and
waivers on our website, the same information will be included in a Current
Report on Form 8-K within four business days following the date of the amendment
or waiver, unless website posting of such amendment or waiver satisfies
applicable NYSE MKT listing rules.
Board Structure and Committee Composition
According to our Bylaws, the business and affairs of our
Company are to be managed by and under the direction of a Board of Directors.
The Board may exercise all powers not expressly given to our stockholders
through our Certificate of Incorporation, Bylaws, or as required by law. Our
guidelines provide that the Board will review the Company’s long-term strategic
plans and the major challenges faced by the Company in executing its strategy.
The Chairman of the Board is responsible for establishing the agenda for each
Board meeting. Each Board member is free to suggest the inclusion of items on
the agenda and to raise subjects at any Board meeting that are not on the agenda
for the meeting.
John H. Walker currently serves as the Chairman of the Board of
U.S. Geothermal, while Dennis J. Gilles currently serves as Chief Executive
Officer. The Board has no policy with respect to the separation of the offices of Chairman of the Board and Chief Executive Officer,
and if they are to be separate, whether the Chairman of the Board should be
selected from the non-employee directors or be an employee. If the Chairman of
the Board is also an employee of the Company, he or she is referred to as the
Executive Chairman. The Board believes that the issue of the separation of these
positions should be considered periodically as part of the succession planning
process. Based on these principles, the Board may determine that it is
appropriate in the future to combine the roles of Chairman of the Board and
Chief Executive Officer. The Board does believe, however, that if the roles of
Chief Executive Officer and the Chairman of the Board are combined, sound
governance practices require a strong countervailing governance structure that
includes, among other things, the appointment of a Lead Independent Director
with a broad set of duties.
-19-
When a Lead Independent Director is appointed, the Lead
Independent Director’s duties shall include, at a minimum (i) presiding at all
meetings of the Board at which the Chairman is not present, including executive
sessions of independent directors, (ii) serving as a liaison between the
Chairman and the independent directors, (iii) approving Board meeting schedules
to assure that there is sufficient time for discussion of all agenda items, (iv)
having authority to call meetings of the independent directors, and (v) if
requested by major shareholders, ensuring he or she is available for
consultation and direct communication.
We believe that our current Board leadership structure
efficiently addresses the present needs of our Company, and allows our Board to
fulfill its role in exercising effective, independent oversight of our
management on behalf of our stockholders. Our Board further believes that we
have in place effective structures, processes and arrangements to ensure that
the work of our Board is completed in a manner that maintains the highest
standards of corporate governance, independence and leadership, as well as
continued accountability of management.
As of the date of this proxy statement, our Board of Directors
is comprised of seven (7) directors and maintains the following three standing
committees: Audit Committee; Compensation and Benefits Committee; and Nominating
and Corporate Governance Committee. Each of these committees has a written
charter approved by the Board.
Director Independence
Our Board has adopted certain standards to assist it in
assessing the independence of each of our directors. Absent other material
relationships with U.S. Geothermal Inc., a director of U.S. Geothermal Inc. who
otherwise meets the independence qualifications of NYSE MKT listing standards
may be deemed “independent” by the Board of Directors after consideration of all
of the relationships between U.S. Geothermal Inc., or any of our subsidiaries,
and the director, or any of his or her immediate family members (as defined in
NYSE MKT listing standards), or any entity with which the director or any of his
or her immediate family members is affiliated by reason of being a partner,
officer or a significant shareholder thereof. Examples of the NYSE MKT standards
on independence include:
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A director is not independent if the director is, or has
been within the last three years, an employee of U.S. Geothermal, or an
immediate family member is, or has been within the last three years, an
executive officer of U.S. Geothermal;
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A director is not independent if the director has
received, or has an immediate family member who has received, during any
twelve-month period within the last three years, more than $120,000 in
direct compensation from U.S. Geothermal;
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A director is not independent if the director, or an
immediate family member, is a partner or an employee of the Company’s
internal or external audit firms;
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A director is not independent if the director, or an
immediate family member, is or has been within the last three years,
employed as an executive officer of another company where any of U.S.
Geothermal’s executive officers also served on the compensation committee
of the other company; or
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A director is not independent if the director is a
current employee, or an immediate family member is a current executive
officer, of a company that has made payments to or received payments from
U.S. Geothermal for property or services in an amount which, in any of the
past three years, exceeds the greater of $1 million or 2% of U.S.
Geothermal’s consolidated gross revenue.
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In assessing the independence of our directors, our full Board
carefully considered all of the business relationships between U.S. Geothermal
Inc. and our directors or their affiliated companies. This review was based
primarily on responses of the directors to questions in a questionnaire
regarding employment, business, familial, compensation and other relationships
with U.S. Geothermal Inc. and our management. Normal course business,
relationships arising solely from a director’s membership in the same
professional, social, fraternal or religious association or organization, or
ownership of less than 5% in equity or partnership interests would not affect a
director’s independence. The NYSE MKT also imposes additional standards for
independence for members of the Audit Committee and Compensation and Benefits
Committee.
Our Board of Directors has determined that each of our
directors other than Dennis J. Gilles and Douglas J. Glaspey has no material
relationship with U.S. Geothermal Inc. and is independent in accordance with the
criteria described above. Mr. Gilles is not independent because he is the Chief
Executive Officer of U.S. Geothermal Inc. Mr. Glaspey is not independent because
he is the President and Chief Operating Officer of U.S. Geothermal Inc.
Each of our Audit, Nominating and Corporate Governance and
Compensation and Benefits Committees is composed only of independent directors
as determined in accordance with the rules of the NYSE MKT.
Board Qualifications and Selection Process
Director Qualification Standards
. U.S. Geothermal Inc.
will only consider as candidates for director individuals who possess the
highest personal and professional ethics, integrity and values, and who are
committed to representing the long-term interests of our shareholders. The
Nominating and Corporate Governance Committee also considers issues of
diversity, such as diversity of gender, race and national origin, education,
professional experience and differences in viewpoints and skills. The Nominating
and Corporate Governance Committee does not have a formal policy on Board
diversity; however, the Nominating and Corporate Governance Committee believes
that it is important for Board members to represent diverse viewpoints. In
evaluating candidates for nomination as a director of U.S. Geothermal Inc., the
Nominating and Corporate Governance Committee considers a wide variety of
criteria, including current or recent experience as a chief executive officer of
a public company or as a leader of another major complex organization; business
and financial expertise; geography; experience as a director of a public
company; gender and ethnic diversity on the Board; independence; and general
criteria such as ethical standards, independent thought, practical wisdom and
mature judgment. In addition, directors must be willing to devote sufficient
time to carrying out their duties and responsibilities effectively, and should
be committed to serving on the Board for an extended period of time. One or more
of our directors must possess the education or experience required to qualify as
an “audit committee financial expert,” as defined by the applicable rules of the
SEC.
Director Nominee Selection Process
. The selection
process for director candidates includes the following steps: (1) identification
of director candidates by the Nominating and Corporate Governance Committee
based upon suggestions from current directors and executives and recommendations
received from shareholders; (2) possible engagement of a director search firm to
provide names and biographies of director candidates for the Nominating and
Corporate Governance Committee’s consideration; (3) interviews of candidates by
the Nominating and Corporate Governance Committee members; (4) reports to the
Board by the Nominating and Corporate Governance Committee on the selection process; (5)
recommendations by the Nominating and Corporate Governance Committee; and (6)
formal nomination by the Board for inclusion in the slate of directors at the
annual shareholders meeting. Director candidates recommended by shareholders are
given the same consideration as candidates suggested by directors and executive
officers. A shareholder seeking to recommend a prospective candidate for the
Nominating and Corporate Governance Committee’s consideration should submit the
candidate’s name and sufficient written information about the candidate to
permit a determination by the Nominating and Corporate Governance Committee
whether the candidate meets the director selection criteria set forth in our
Nominating and Corporate Governance Committee Charter to the Corporate Secretary
of U.S. Geothermal Inc. at the address listed in this proxy statement. The
Nominating and Corporate Governance Committee regularly reviews the director
nomination procedures to assess the effectiveness of its policies.
-21-
Board Meetings and Committees
The Board of Directors conducts its business through meetings
of the Board and the following standing committees: Audit, Nominating and
Corporate Governance, and Compensation and Benefits. The standing committees
regularly report on their deliberations and actions to the full Board. Each of
the standing committees has the authority to engage outside experts, advisors
and counsel to the extent it considers appropriate to assist the committee in
its work. Each of the standing committees has adopted and operates under a
written charter which can be found at
http:///www.usgeothermal.com
by
clicking on “About Us”. Shareholders may request a free printed copy of any of
these charters from our Corporate Secretary by contacting him at
info@usgeothermal.com
or by calling (208) 424-1027.
The Board of Directors held five meetings during the fiscal
year ended December 31, 2015. Each director attended at least 75% of the total
meetings of the Board and Board committees on which the director served during
the fiscal year. The following table shows the membership of each Board
committee.
Committee Membership
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Nominating and
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Corporate
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Compensation and
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Name
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Audit
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Governance
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Benefits
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Paul A. Larkin
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Chair &
Financial
Expert
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✓
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Leland L. Mink
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John H. Walker
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Chair
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Chair
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Audit Committee
The primary function of the Audit Committee is to assist the
Board in fulfilling its financial oversight responsibilities by reviewing the
financial reports and other financial information provided by the Company to
regulatory authorities and shareholders, the Company’s systems of internal
controls regarding finance and accounting and the Company’s auditing, accounting
and financial reporting processes. Consistent with this function, the Audit
Committee will encourage continuous improvement of, and should foster adherence
to, the Company’s policies, procedures and practices at all levels. The Audit
Committee’s primary duties and responsibilities are to:
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serve as an independent and objective party to monitor
the Company’s financial reporting and internal control system and review
the Company’s financial statements;
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review and appraise the performance of the Company’s
external auditors; and
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provide open avenues of communication among the
Company’s auditors, financial and senior management and the Board.
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Composition
The Audit Committee shall be comprised of three directors as
determined by the Board, each of whom shall be free from any relationship that,
in the opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Audit Committee and shall satisfy the
independence, financial literacy, expertise and experience requirements under
applicable securities laws and the rules of the NYSE MKT. At least one member of
the Audit Committee shall have accounting or related financial management
expertise. All members of the Audit Committee that are not financially literate
will work towards becoming financially literate to obtain a working familiarity
with basic finance and accounting practices. For the purposes of the Audit
Committee’s Charter, the definition of “financially literate” is the ability to
read and understand a set of financial statements that present a breadth and
level of complexity of accounting issues that are generally comparable to the
breadth and complexity of the issues that can presumably be expected to be
raised by the Company’s financial statements. The members of the Audit Committee
shall be elected by the Board at its first meeting following the annual
shareholders’ meeting. Unless a Chair is elected by the full Board, the members
of the Audit Committee may designate a Chair by a majority vote of the full
Audit Committee membership. All members of the Audit Committee meet the
applicable independence, financial literacy, expertise and experience
requirements under applicable securities laws and the rules of the NYSE MKT. Mr.
Larkin has been determined to be the “audit committee financial expert.”
Responsibilities and Duties
To fulfill its responsibilities and duties, the Committee
shall:
Documents/Reports Review
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Review and update the Audit Committee’s Charter
annually.
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(b)
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Review the Company’s financial statements, management’s
discussion and analysis (“MD&A”) and any annual and interim earnings,
press releases before the Company publicly discloses this information and
any reports or other financial information (including quarterly financial
statements), which are submitted to any governmental body, or to the
public, including any certification, report, opinion, or review rendered
by the external auditors.
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Meetings
The Audit Committee shall meet at least four times annually
,
or more frequently as circumstances dictate. As part of its job to foster
open communication, the Audit Committee will meet at least annually with the
Chief Financial Officer and the external auditors in separate sessions. The
Audit Committee held four meetings during the fiscal year ended December 31,
2015.
Nominating and Corporate Governance Committee
The primary objective of the Nominating & Corporate
Governance Committee of U.S. Geothermal Inc. is to assist the Board in
fulfilling its oversight responsibilities by (a) identifying individuals
qualified to become Board and Board Committee members and recommending that the
Board select director nominees for appointment or election to the Board; and (b)
developing and recommending to the Board corporate governance guidelines for the
Company and making recommendations to the Board with respect to corporate
governance practices.
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The Nominating & Corporate Governance Committee shall meet
as many times as the Committee deems necessary to carry out its duties
effectively, but not less frequently than three times per year. The chair of the
Committee shall ensure that the agenda for each upcoming meeting of the
Committee is circulated to each member of the Committee and to the other
directors in advance of such meeting.
The Nominating & Corporate Governance Committee reviews and
makes recommendations to the Board regarding our corporate governance principles
and processes, including policies related to director retention, resignation and
retirement. The Nominating & Corporate Governance Committee also manages the
performance review process for our current directors, recommends new directors,
recommends qualified members of the Board for membership on committees, conducts
a preliminary assessment of the independence of all Board members, reviews
charters of all Board committees, reviews and evaluates succession plans for
executive officers, oversees the evaluation of management, and makes
recommendations to the Board regarding any shareholder proposals. All of the
Nominating & Corporate Governance Committee members meet the applicable
independence requirements of NYSE MKT. The Nominating & Corporate Governance
Committee held four meetings during the fiscal year ended December 31, 2015.
Compensation and Benefits Committee
The Compensation and Benefits Committee is appointed annually
by the Board to discharge the Board's responsibilities relating to compensation
and benefits of the executive officers of the Company. The goals of the
committee are to attract, retain and motivate our executive officers by
providing appropriate levels of compensation and benefits while taking into
consideration, among such other factors as it may deem relevant, the Company's
performance, shareholder returns, the value of similar incentive awards to
executive officers at comparable companies and the awards given to the executive
officers in past years. The main categories of compensation available to the
committee are base salary, discretionary annual performance bonuses, stock
option grants, restricted stock awards, and insurance reimbursements.
The Company competes with a variety of companies for our
executive-level employees. The Compensation and Benefits Committee uses base
salary to compensate the executive officers for services rendered as well as for
motivation and retention purposes. Base salaries are intended to be competitive
for companies of similar size and purpose, also taking into consideration
individual factors such as experience, tenure, institutional knowledge and
qualifications. Base salaries are reviewed annually to determine whether they
are consistent with our overall compensation objectives. In considering
increases in base salary, the Compensation and Benefits Committee reviews
individual and corporate performance, market and industry conditions, and the
Company’s overall financial health.
The Compensation and Benefits Committee may grant annual
performance bonuses as a reward for achievement of individual and corporate
short-term goals. Any grant of an annual performance bonus is discretionary and
the amount is determined after a recommendation from the CEO with input from
other executive officers. Bonus amounts are dependent upon our financial and
operational performance as well as the completion of specific milestone events
by the individual executive officer.
Generally, the Compensation and Benefits Committee grants stock
options to all employees, including executive officers, annually after
completion of our annual financial reports. Stock options are granted with an
exercise price equal to the market value of our common stock on the date of the
grant, and typically with a term of five years. The timing of the stock option
grant is not coordinated with the release of material non-public information and
is typically in the first or second fiscal quarter. The options typically vest
25% on the date of grant, and another 25% each six months thereafter. During the
fiscal year ended December 31, 2015, stock option grants to executive officers
represented approximately 47% of the total stock option grants to all employees.
-24-
Our executive officers do not receive any material incremental
benefits that are not otherwise available to all of our employees. Our health
and dental insurance plans are the same for all employees.
The Compensation and Benefits Committee also reviews and makes
recommendations to the Board on an annual basis with respect to the adequacy and
form of compensation and benefits of independent directors, including directors’
equity incentive plan(s) and any other incentive compensation plans and
equity-based plans. Recommendations are made after a determination of time
commitments required of the independent directors. As of April 1, 2011,
independent directors are compensated $30,000 per year and reimbursed for all
Company-related expenses. Effective 1/1/2014, independent directors also receive
additional compensation for chairing a Board committee (Board and Audit $5,000,
all other $2,500), and are paid for in person meetings attended ($1,500) and for
Board and committee telephone calls attended ($400).
All of the Compensation and Benefits Committee members meet the
applicable independence requirements of the NYSE MKT. The Compensation and
Benefits Committee held four meetings during the fiscal year ended December 31,
2015.
Standard for Election of Directors
Our Bylaws provide that directors will be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. This means
that those nominees receiving the seven highest number of votes at the meeting
will be elected, even if the votes cast for each nominee do not constitute a
majority of the votes present and entitled to vote.
Executive Sessions of the Board
Our non-employee directors meet in executive session at each
regular meeting of the Board without the chief executive officer or any other
member of management present, and the independent directors meet alone on an
annual basis. The Chairman of the Board presides at all of these sessions.
Director Policies
Policy Regarding Service on Other Boards
. Our Board of
Directors does not have a policy that restricts our directors from serving on
the board of directors of other publicly traded companies unless the Board
determines that such service will impair their service on the U.S. Geothermal
Board or could represent a conflict of interest.
Policy Regarding Attendance
at Annual Meetings
. We encourage, but do not require, our Board members to
attend the annual meeting of shareholders. Last year, Messrs. Gilles, Glaspey,
Larkin, Mink, and Walker attended the annual shareholders meeting.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Our compensation philosophy is to structure compensation awards
to members of our executive management that directly align their personal
interests with those of our shareholders. Our executive compensation program is
intended to attract, motivate, reward and retain the management talent required
to achieve our corporate objectives and increase shareholder value, while at the
same time making the most efficient use of shareholder resources. This
compensation philosophy puts a strong emphasis on pay for performance, and uses
equity awards as a significant component in order to correlate the long-term
growth of shareholder value with management’s most significant compensation
opportunities.
The three primary components of total direct compensation for
our senior executives are:
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base salary;
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annual cash incentive bonus opportunity; and
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stock options and restricted stock.
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The relative weighting of the three components of compensation
is designed to strongly reward long-term performance, by heavily emphasizing the
proportion of long-term equity compensation.
The Compensation and Benefits Committee is appointed annually
by the Board of Directors to discharge the Board’s responsibilities relating to
compensation and benefits of the executive officers of our Company. The goals of
the committee are to attract, retain and motivate our executive officers by
providing appropriate levels of compensation and benefits while taking into
consideration, among such other factors as it may deem relevant, our Company’s
performance, shareholder returns, the value of similar incentive awards to
executive officers at comparable companies and the awards given to the executive
officers in past years. The main categories of compensation available to the
committee are base salary, discretionary annual performance bonuses, stock
option grants, restricted stock awards, and insurance reimbursements.
We compete with a variety of companies for our executive-level
employees. The Compensation and Benefits Committee uses base salary to
compensate the executive officers for services rendered. Base salaries are
intended to be competitive for companies of similar size and purpose, also
taking into consideration individual factors such as experience, tenure,
institutional knowledge and qualifications. An informal review of several public
junior resource development companies was completed to provide the committee
with comparative compensation information. The committee looked at Alterra,
Calpine, Ormat, Chesapeake, Algonquin Power, Boralex, Caribbean Utilities, Maxim
Power, Etrion, and Atlantic Power, who are involved in either geothermal
development, mineral exploration, electrical power generators or other similar
activities. Base salaries are reviewed annually to determine whether they are
consistent with our overall compensation objectives. In considering increases in
base salary, the Compensation and Benefits Committee reviews individual and
corporate performance, market and industry conditions, and our overall financial
health.
While the Company does not attach a weighting to the various
components of executive compensation, the Compensation and Benefits Committee
attempts to pay a competitive salary (retention) to its executives while
providing long-term incentive to the executives through equity awards
(ownership/reward) in order to align their interest with the long-term
progression of the Company as a whole. Our Chief Executive Officer and
Compensation and Benefits Committee perform an informal annual review of
compensation practices of similar sized companies to educate themselves of the
general parameters (levels and types of compensation) for executive
compensation. They do not, however, benchmark the various components of pay. The
review highlights areas of our executive pay package that may not be consistent
with compensation practices at similar sized companies and provides the
committee with knowledge of the compensation landscape for its executives.
The Compensation and Benefits Committee may grant annual
performance bonuses as a reward for achievement of individual and corporate
short-term goals. Any grant of an annual performance bonus is discretionary and
the amount is determined after a recommendation from the CEO with input from
other executive officers. Bonus amounts are dependent upon our financial and
operational performance as well as the completion of specific milestone events
by the individual executive officer.
Generally, the Compensation and Benefits Committee grants stock
options to all employees, including executive officers, for motivation and
retention purposes annually after completion of our annual financial reports.
Stock options are granted with an exercise price equal to the market value of
our common stock on the date of the grant, and typically with a term of five
years. The timing of the stock option grant is not coordinated with the release
of material non-public information and is typically occurs during the second
fiscal quarter. The options typically vest 25% on the date of grant, and another
25% each six months thereafter. During the fiscal year ended December 31, 2015,
stock option grants to executive officers represented approximately 47% of the
total stock option grants to all employees. During the year
ended December 31, 2014, stock option grants to executive officers represented
approximately 34% of the total stock option grants to all employees. We do not
have a formal procedure for determining factors to consider when making grants.
The committee uses an informal review of similar sized companies engaged in
natural resource development to assist in determining the appropriate levels of
stock option. In 2015, the percentage of votes cast “For” our advisory “say on
pay” resolution to approve our executive compensation was 88.4% . The Board and
the Compensation and Benefits Committee considered the results of the advisory
vote and no significant changes have been made to the executive compensation
programs based on the 2015 “say on pay” results.
-26-
Our executive officers do not normally receive any material
incremental benefits that are not otherwise available to all of our employees.
Our health, dental and vision insurance plans are the same for all employees.
Gilles Employment Agreement
Effective April 19, 2013, Dennis J. Gilles entered into an
employment agreement as the Company’s new Chief Executive Officer. The initial
term of employment will be from April 19, 2013 until the earlier of April 18,
2015 or termination of employment in accordance with the terms of the employment
agreement. The employment agreement will automatically renew at the end of the
initial term, and at the end of each subsequent term, for an additional one year
term unless either the Company or Mr. Gilles gives written notice of non-renewal
to the other party at least 90 days prior to expiration of the then-current
term.
The Company has agreed to pay to Mr. Gilles an annual base
salary of $375,000, which increased to $410,000 on April 19, 2014 and will
remain in place as a minimum annual base salary during all successive periods
under the employment agreement. In addition, Mr. Gilles received a signing bonus
of $100,000 payable in the Company’s common stock and cash to cover the tax
impact of the stock bonus. Mr. Gilles was also granted 300,000 restricted shares
of the Company’s common stock, and a non-qualified stock option to acquire a
total of 1,250,000 shares of the Company’s common stock at a price of $0.35 per
share with a term of 10 years. Until the earlier of expiration or termination of
the employment agreement, the Company has agreed to provide Mr. Gilles, at the
Company’s expense, a $1,000,000 life insurance policy that names the Gilles
Family Trust as the beneficiary in the event of the death of Mr. Gilles. Mr.
Gilles will be eligible to earn annual bonuses with the target amount being 100%
of his annual base salary payable in a combination of cash and restricted shares
of the Company’s common stock, provided that no more than one-half of the annual
bonus will be paid in the form of restricted shares. The actual bonus amount
will be subject to the discretion of the Company’s board of directors and its
Compensation and Benefits Committee. On April 18, 2014, Mr. Gilles was granted
400,000 stock options to acquire shares of the Company’s common stock at an
exercise price of $0.74, a cash bonus of $150,000 and 325,000 shares of
restricted stock with a one-year vesting period. On June 26, 2015, Mr. Gilles
was granted 450,000 stock options to acquire shares of the Company’s common
stock at an exercise price of $0.53, a cash bonus of $102,500 and 193,396 shares
of restricted stock with a one-year vesting period. On subsequent annual
anniversaries, Mr. Gilles will be eligible to receive stock option awards at a
similar level with the actual amount determined by the Company’s board of
directors. Mr. Gilles and his immediate family will be eligible to participate
in the Company’s employee health insurance, dental insurance, retirement plan
401(k) and any other employee benefit plans in accordance with the terms and
conditions of such plans. Mr. Gilles is entitled to five weeks of vacation
within each 12-month period under the employment agreement. Subject to certain
limitations and conditions, the Company will also reimburse Mr. Gilles for all
reasonable expenses incurred in connection with his employment and the cost of
travel between the Company’s office in Boise, Idaho and his home. In addition,
Mr. Gilles has received cost reimbursement for a single relocation for costs of
$35,000.
The Company may terminate Mr. Gilles’ employment at any time
for “cause” upon at least 15 days’ notice. In such event, Mr. Gilles will only
be entitled to compensation through the date of termination.
-27-
Mr. Gilles may terminate his employment at any time without
“good reason” (which is defined in the employment agreement) upon 60 days’
notice. Mr. Gilles will be paid his salary through the date designated in the
notice, plus payment for unused vacation days granted or accrued and
reimbursement for expenses incurred through the date of termination.
In the event Mr. Gilles’ employment is terminated by the
Company without “cause” or by Mr. Gilles for “good reason”, Mr. Gilles will be
entitled to receive a lump sum payment equal to one and one-half (1.5) times the
sum of his second year base salary ($410,000) plus annual target bonus. In
addition, any unvested stock options to acquire shares of the Company’s common
stock and any unvested restricted shares of the Company’s common stock held by
Mr. Gilles as of the termination date that would have vested within18 months
following such termination date had Mr. Gilles’ employment continued will become
fully vested. Mr. Gilles also will receive a lump sum cash payment equal to 24
times the Company’s contribution to the monthly cost of the medical and dental
benefits provided to Mr. Gilles under the employment agreement.
In the event Mr. Gilles’ employment is terminated by the
Company without “cause” or by Mr. Gilles for “good reason” within 12 months
following a “change of control” (which is defined in the employment agreement)
or a “change of control” occurs within 12 months following such termination, Mr.
Gilles will receive total severance payments equal to three (3) times the sum of
his second year base salary ($410,000) plus annual target bonus. In addition,
any unvested stock options to acquire shares of the Company’s common stock and
any unvested restricted shares of the Company’s common stock held by Mr. Gilles
as of the termination date that would have vested within 18 months following
such termination date had Mr. Gilles’ employment continued will become fully
vested. Any vested stock options held by Mr. Gilles will remain exercisable
until the expiration of the original term of such option. If such termination
occurs within 12 months following a “change of control”, Mr. Gilles will receive
a lump sum cash payment equal to 36 times the Company’s contribution to the
monthly cost of the medical and dental benefits provided to Mr. Gilles under the
employment agreement.
The Company has agreed to defend and indemnify Mr. Gilles in
connection with legal claims, lawsuits, cause of action or liabilities asserted
against him arising out of or related to his employment with the Company and to
provide Mr. Gilles with an advance for any expenses in connection with such
defense and/or indemnification. The employment agreement also includes covenants
by Mr. Gilles with respect to the treatment of confidential information,
non-competition and non-solicitation, and provides for equitable relief in the
event of breach,
Glaspey Employment Agreement
The Company has entered into an employment agreement with
Douglas J. Glaspey as the Company’s President and Chief Operating Officer. The
initial term of employment will be from July 1, 2013 until the earlier of June
30, 2015 or termination of employment in accordance with the terms of the
employment agreement. The employment agreement will automatically renew at the
end of the initial term, and at the end of each subsequent term, for an
additional one year term unless either the Company or Mr. Glaspey gives written
notice of non-renewal to the other party at least 60 days prior to expiration of
the then-current term.
The Company has agreed to pay to Mr. Glaspey compensation of
$220,000 per annum, to grant to Mr. Glaspey cash or stock bonus and/or stock
options in such amount and under such conditions as may be determined by the
Company’s board of directors, to provide to Mr. Glaspey (and his immediate
family) such medical, dental and related benefits as are available to other
employees of the Company, to provide to Mr. Glaspey reasonable life insurance
and accidental death coverage (with the proceeds payable to Mr. Glaspey’s estate
or specified family member), and to provide to Mr. Glaspey such 401(k)
retirement benefit as is available to other employees of the Company. In
addition, the Company will reimburse Mr. Glaspey for reasonable expenses
incurred in connection with the performance of his duties under the employment
agreement. Mr. Glaspey is entitled to a paid vacation of five weeks within each
12 month period under the terms of the employment agreement.
-28-
The employment agreement may be terminated by the Company
without notice, payment in lieu of notice, severance payments, benefits, damages
or other sums for causes which include failure to perform his duties in a
competent and professional manner, appropriation of corporate opportunities or
failure to disclose a material conflict of interest, a plea of guilty to, or
conviction of, an indictable offense which may not be further appealed, fraud,
dishonesty, illegality or gross incompetence, failure to disclose material facts
concerning business interests or other employment that are relevant to his
employment with the Company, refusal to follow reasonable and lawful directions
of the Company, breach of fiduciary duty, and material breach under, or gross
negligence in connection with his employment under, the employment agreement.
Otherwise, the Company may terminate the employment agreement upon one month’s
written notice and Mr. Glaspey may terminate the employment agreement upon 60
days’ written notice.
In the event that Mr. Glaspey’s employment is terminated
without “cause” by the Company or for “good reason” by Mr. Glaspey, and in the
event that a “change of control” has occurred within the 12 months prior to the
termination, Mr. Glaspey is entitled to receive compensation equal to 24 monthly
installments of his normal compensation on the 30
th
day after the
date of termination (which sum would be currently $440,000). The terms “cause”,
“good reason” and “change of control” are defined in the employment agreement.
The Company has agreed to defend and indemnify Mr. Glaspey in
connection with legal claims, lawsuits, cause of action or liabilities asserted
against him arising out of or related to his employment with the Company and to
provide Mr. Glaspey with an advance for any expenses in connection with such
defense and/or indemnification. The employment agreement also includes covenants
by Mr. Glaspey with respect to the treatment of confidential information,
non-competition and non-solicitation, and provides for equitable relief in the
event of breach.
Hawkley Employment Agreement
The Company has entered into an employment agreement with Kerry
D. Hawkley as the Company’s Chief Financial Officer. The initial term of
employment will be from July 1, 2013 until the earlier of June 30, 2015 or
termination of employment in accordance with the terms of the employment
agreement. The employment agreement will automatically renew at the end of the
initial term, and at the end of each subsequent term, for an additional one year
term unless either the Company or Mr. Hawkley gives written notice of
non-renewal to the other party at least 60 days prior to expiration of the
then-current term.
The Company has agreed to pay to Mr. Hawkley compensation of
$175,000 per annum, to grant to Mr. Hawkley cash or stock bonus and/or stock
options in such amount and under such conditions as may be determined by the
Company’s board of directors, to provide to Mr. Hawkley (and his immediate
family) such medical, dental and related benefits as are available to other
employees of the Company, and to provide to Mr. Hawkley such 401(k) retirement
benefit as is available to other employees of the Company. This salary may be
adjusted annually on the anniversary date of the employment agreement and is
currently $179,375 per annum. In addition, the Company will reimburse Mr.
Hawkley for reasonable expenses incurred in connection with the performance of
his duties under the employment agreement. Mr. Hawkley is entitled to a paid
vacation of five weeks within each 12 month period under the terms of the
employment agreement.
The employment agreement may be terminated by the Company
without notice, payment in lieu of notice, severance payments, benefits, damages
or other sums for causes which include failure to perform his duties in a
competent and professional manner, appropriation of corporate opportunities or
failure to disclose a material conflict of interest, a plea of guilty to, or
conviction of, an indictable offense which may not be further appealed, fraud,
dishonesty, illegality or gross incompetence, failure to disclose material facts
concerning business interests or other employment that are relevant to his
employment with the Company, refusal to follow reasonable and lawful directions
of the Company, breach of fiduciary duty, and material breach under, or gross
negligence in connection with his employment under, the employment agreement.
Otherwise, the Company may terminate the employment agreement upon one month’s written
notice and Mr. Hawkley may terminate the employment agreement upon 60 days’
written notice.
-29-
In the event that Mr. Hawkley’s employment is terminated
without “cause” by the Company or for “good reason” by Mr. Hawkley, and in the
event that a “change of control” has occurred within the 12 months prior to the
termination, Mr. Hawkley is entitled to receive compensation equal to 18 monthly
installments of his normal compensation on the 30
th
day after the
date of termination (which sum would be currently $269,063). The terms “cause”,
“good reason” and “change of control” are defined in the employment agreement.
The Company has agreed to defend and indemnify Mr. Hawkley in
connection with legal claims, lawsuits, cause of action or liabilities asserted
against him arising out of or related to his employment with the Company and to
provide Mr. Hawkley with an advance for any expenses in connection with such
defense and/or indemnification. The employment agreement also includes covenants
by Mr. Hawkley with respect to the treatment of confidential information,
non-competition and non-solicitation, and provides for equitable relief in the
event of breach.
Zurkoff Employment Agreement
The Company has entered into an amendment to the employment
agreement with Jonathan Zurkoff as the Company’s Executive Vice President,
Finance. The employment agreement, as amended four times, is effective December
31, 2010, and will remain in effect until March 31, 2017 unless earlier
terminated in accordance with its terms.
The Company has agreed to pay to Mr. Zurkoff compensation of
$160,000 per annum pursuant to the employment agreement. This salary may be
adjusted annually on the anniversary date of the employment agreement and is
currently $192,000 per annum. The Company has also agreed to provide to Mr.
Zurkoff such 401(k) retirement benefit as is available to other employees of the
Company, and to provide to Mr. Zurkoff (and his immediate family) such medical,
dental and related benefits as are available to other employees of the Company.
In addition, the Company will reimburse Mr. Zurkoff for reasonable expenses
incurred in connection with the performance of his duties under the employment
agreement. Mr. Zurkoff is entitled to a paid vacation of 20 days within each 12
month period under the terms of the employment agreement.
The employment agreement may be terminated by the Company
without notice, payment in lieu of notice, severance payments, benefits, damages
or other sums for causes which include failure to perform his duties in a
competent and professional manner, appropriation of corporate opportunities or
failure to disclose a material conflict of interest, a plea of guilty to, or
conviction of, an indictable offense which may not be further appealed, fraud,
dishonesty, illegality or gross incompetence, failure to disclose material facts
concerning business interests or other employment that are relevant to his
employment with the Company, refusal to follow reasonable and lawful directions
of the Company, breach of fiduciary duty, and material breach under, or gross
negligence in connection with his employment under, the employment agreement.
Otherwise, either party may terminate the employment agreement upon one month’s
written notice.
In the event that Mr. Zurkoff’s employment is terminated
without “cause” by the Company or for “good reason” by Mr. Zurkoff, and in the
event that a “change of control” has occurred within the 12 months prior to the
termination, Mr. Zurkoff is entitled to receive compensation equal to 18 monthly
installments of his normal compensation on the 30
th
day after the
date of termination (which sum would be currently $288,000). The terms “cause”,
“good reason” and “change of control” are defined in the employment agreement.
The employment agreement also includes covenants by Mr. Zurkoff
with respect to the treatment of confidential information and non-competition,
and provides for equitable relief in the event of breach.
-30-
Summary Compensation Table
The following table shows the compensation for the last two
years awarded to or earned by our Chief Executive Officer and each of our three
other most highly compensated executive officers (collectively, our “Named
Executive Officers”).
Name and
principal
position(s)
|
Year
Ended
|
Salary
(1)
($)
|
Bonus
(2)
($)
|
Option
Awards
(3)
($)
|
Stock
Awards
(4)
($)
|
All other
compensation
(5)
($)
|
Total
($)
|
|
|
Dennis J. Gilles,
Chief
Executive
Officer (effective
4/19/13)
|
12/31/14
|
399,500
|
150,000
|
167,378
|
105,000
|
3,406
|
825,284
|
|
12/31/15
|
410,000
|
102,500
|
114,524
|
156,000
|
2,750
|
785,774
|
|
|
Douglas J.
Glaspey,
President and
Chief
Operating Officer
|
12/31/14
|
220,000
|
22,000
|
92,058
|
0
|
1,035
|
335,093
|
|
12/31/15
|
220,000
|
0
|
85,113
|
14,000
|
1,035
|
320,148
|
|
|
Kerry D.
Hawkley,
Chief
Financial
Officer
|
12/31/14
|
178,282
|
17,500
|
73,228
|
0
|
0
|
269,010
|
|
12/31/15
|
179,375
|
8,969
|
40,317
|
11,351
|
0
|
240,012
|
|
|
Jonathan Zurkoff,
Treasurer and
Executive
Vice President
|
12/31/14
|
192,000
|
20,000
|
69,729
|
0
|
0
|
281,729
|
|
12/31/15
|
192,000
|
9,600
|
32,754
|
12,973
|
0
|
247,327
|
|
(1)
|
Dollar value of base salary (cash and non-cash) earned by
the Named Executive Officer during the fiscal year.
|
|
(2)
|
Dollar value of bonus (cash and non-cash) earned by the
Named Executive Officer during the fiscal year. Bonuses are eligible to
all employees and submitted and approved by the Board annually.
|
|
(3)
|
Stock options are valued at the grant date in accordance
with FASB ASC Topic 718.
|
|
(4)
|
Stock awards (restricted shares) are valued at grant
date.
|
|
(5)
|
Other compensation consists of all other compensation not
disclosed in another category.
|
Outstanding Equity Awards at Fiscal Year-End
The following table shows the unexercised stock options,
unvested restricted stock, and other equity incentive plan awards held at the
year ended December 31, 2015 by our Named Executive Officers.
-31-
|
|
Option Awards
|
Stock Awards
|
|
|
Number of
|
Number of
|
|
|
|
|
|
|
Securities
|
Securities
|
|
|
Number of
|
Market Value of
|
|
|
Underlying
|
Underlying
|
|
|
Shares or Units
|
Shares or Units of
|
|
|
Unexercised
|
Unexercised
|
Option
|
Option
|
of Stock That
|
Stock That
Have
|
|
|
Options
|
Options
(1)
|
Exercise Price
|
Expiration
|
Have Not Vested
|
Not Vested
|
|
Name
|
(#) Exercisable
|
(#) Unexercisable
|
($)
|
Date
|
(#)
|
($)
|
|
Dennis J. Gilles
|
100,000
|
0
|
0.60
|
9/12/16
|
0
|
0
|
|
Douglas J. Glaspey
|
165,000
|
0
|
0.83
|
6/13/16
|
0
|
0
|
|
Kerry D. Hawkley
|
95,000
|
0
|
0.83
|
6/13/16
|
0
|
0
|
|
Jonathan Zurkoff
|
146,000
|
0
|
0.83
|
6/13/16
|
0
|
0
|
|
Dennis J. Gilles
|
100,000
|
0
|
0.31
|
8/24/17
|
0
|
0
|
|
Douglas J. Glaspey
|
190,000
|
0
|
0.31
|
8/24/17
|
0
|
0
|
|
Kerry D. Hawkley
|
150,000
|
0
|
0.31
|
8/24/17
|
0
|
0
|
|
Jonathan Zurkoff
|
150,000
|
0
|
0.31
|
8/24/17
|
0
|
0
|
|
Dennis J. Gilles
|
1,250,000
|
0
|
0.35
|
4/19/23
|
0
|
0
|
|
Douglas J. Glaspey
|
150,000
|
0
|
0.46
|
7/22/18
|
0
|
0
|
|
Kerry D. Hawkley
|
125,000
|
0
|
0.46
|
7/22/18
|
0
|
0
|
|
Jonathan Zurkoff
|
125,000
|
0
|
0.46
|
7/22/18
|
0
|
0
|
|
Dennis J. Gilles
|
400,000
|
0
|
0.74
|
4/2/19
|
0
|
0
|
|
Douglas J. Glaspey
|
220,000
|
0
|
0.74
|
4/2/19
|
0
|
0
|
|
Kerry D. Hawkley
|
175,000
|
0
|
0.74
|
4/2/19
|
0
|
0
|
|
Jonathan Zurkoff
|
175,000
|
0
|
0.74
|
4/2/19
|
0
|
0
|
|
Douglas J. Glaspey
|
190,000
|
190,000
|
0.48
|
5/15/20
|
0
|
0
|
|
Kerry D. Hawkley
|
90,000
|
90,000
|
0.48
|
5/15/20
|
40,000
|
19,200
|
|
Jonathan Zurkoff
|
80,000
|
80,000
|
0.48
|
5/15/20
|
35,000
|
16,800
|
|
Dennis J. Gilles
|
225,000
|
225,000
|
0.53
|
6/26/20
|
193,396
|
102,500
|
(1)The $0.48 options unexercisable at December 31, 2015 will
fully vest on November 15, 2016.
The $0.53 options
unexercisable at December 31, 2015 will fully vest on December 26, 2016.
Potential Payments upon Termination or
Change-in-Control
Payments Made Upon Termination Absent a
Change-in-Control
. Except as discussed below under “Potential Payments upon
Change-in-Control,” if the employment of any of our Named Executive Officers is
voluntarily or involuntarily terminated, no additional payments or benefits will
accrue or be paid to him, other than what the officer has accrued and is vested
in under the benefit plans. A voluntary or involuntary termination will not
trigger an acceleration of the vesting of any outstanding stock options or
shares of restricted stock.
Potential Payments upon Change-in-Control
. We have
entered into employment agreements with Messrs. Gilles, Glaspey, Hawkley and
Zurkoff which provide for change-in-control payments.
Mr. Gilles employment agreement provided that in the event Mr.
Gilles’ employment is terminated by the Company without “cause” or by Mr. Gilles
for “good reason” within 12 months following a “change of control” (which is
defined in the employment agreement) or a “change of control” occurs within 12
months following such termination, Mr. Gilles will receive total severance
payments equal to three (3) times the sum of his second year base salary
($410,000) plus annual target bonus. In addition, any unvested stock options to
acquire shares of the Company’s common stock and any unvested restricted shares
of the Company’s common stock held by Mr. Gilles as of the termination date that
would have vested within 18 months following such termination date had Mr.
Gilles’ employment continued will become fully vested. Any vested stock options
held by Mr. Gilles will remain exercisable until the expiration of the original
term of such option. If such termination occurs within 12 months following a
“change of control”, Mr. Gilles will receive a lump sum cash payment equal to 36
times the Company’s contribution to the monthly cost of the medical and dental
benefits provided to Mr. Gilles under the employment agreement.
-32-
Mr. Glaspey’s employment agreement provides that if within
twelve months following a “change of control” Mr. Glaspey’s employment is
terminated either by the Company without “cause”, or by Mr. Glaspey for “good
reason”, then Mr. Glaspey will be entitled to a lump-sum payment consisting of
(a) his prorated base salary through the date of termination, (b) a payment
equal to 24 times his monthly base salary at termination, and (c) employee
medical and dental coverage for 24 months or until Mr. Glaspey commences
alternate employment, whichever comes first, subject to certain limitations and
conditions. The terms “cause,” “good reason” and “change-in-control” are defined
in the agreements.
Mr. Hawkley’s employment agreement provides that if within
twelve months following a “change of control” Mr. Hawkley’s employment is
terminated either by the Company without “cause”, or by Mr. Hawkley for “good
reason”, then Mr. Hawkley will be entitled to a lump-sum payment consisting of
(a) his prorated base salary through the date of termination, (b) a payment
equal to 18 times his monthly base salary at termination, and (c) employee
medical and dental coverage for 18 months or until Mr. Hawkley commences
alternate employment, whichever comes first, subject to certain limitations and
conditions. The terms “cause,” “good reason” and “change-in-control” are defined
in the agreements.
Mr. Zurkoff’s employment agreement provides that if within
twelve months following a “change of control” Mr. Zurkoff’s employment is
terminated either by the Company without “cause”, or by Mr. Zurkoff for “good
reason”, then Mr. Zurkoff will be entitled to a lump-sum payment consisting of
(a) his prorated base salary through the date of termination, (b) a payment
equal to 18 times his monthly base salary at termination, and (c) employee
medical and dental coverage for 18 months or until Mr. Zurkoff commences
alternate employment, whichever comes first, subject to certain limitations and
conditions. The terms “cause,” “good reason” and “change-in-control” are defined
in the agreements.
The following table summarizes the change of control amounts
payable to our executives during the year ended December 31, 2015.
|
Name
|
Change of Control
Salary ($)
|
Change of Control
Benefits ($)
|
Change of Control
Total ($)
|
|
Dennis J. Gilles
|
2,460,000
|
28,199
|
2,488,199
|
|
Douglas J. Glaspey
|
440,000
|
22,569
|
462,569
|
|
Kerry D. Hawkley
|
269,063
|
16,493
|
285,556
|
|
Jonathan Zurkoff
|
288,000
|
15,011
|
303,011
|
DIRECTOR COMPENSATION
The following table summarizes the compensation paid to our
directors during the year ended December 31, 2015.
-33-
|
Name
|
Fees
earned or
paid in
cash
($)
|
Stock
awards
($)
|
Option
awards
(1)
($)
|
Non-equity
incentive
plan
compens-
ation
($)
|
Nonqualified
deferred
compensa-
tion
earnings
($)
|
All other
compensa-
tion
($)
|
Total
($)
|
|
Paul A. Larkin
|
41,200
|
0
|
22,398
|
0
|
0
|
0
|
63,598
|
|
Leland L. Mink
|
36,600
|
0
|
17,918
|
0
|
0
|
0
|
54,518
|
|
John H. Walker
|
40,100
|
0
|
22,398
|
0
|
0
|
0
|
62,498
|
|
(1)
|
Stock options are valued at the grant date in accordance
with FASB ASC Topic 718.
|
Directors who are not otherwise remunerated per an employment
agreement are paid $7,500 per quarter, $1,500 per face-to-face meetings, $400
per telephone meetings, $2,500-$5,000 per annum as committee heads, and are
eligible to receive awards under our equity compensation plans. Directors who
are also officers do not receive any compensation for serving in the capacity of
director. However, all directors are reimbursed for their out-of-pocket expenses
in attending meetings.
Securities Authorized for Issuance under Equity Compensation
Plans
The following table sets forth the number of securities
authorized for issuance under the Company’s equity compensation plans as of
December 31, 2015.
|
Equity
Compensation Plan Information
|
|
Plan category
|
Number of securities
to
be issued upon exercise
of outstanding
options,
warrants and rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of
securities
remaining available for
future issuance
under
equity compensation plans
(excluding
securities
reflected in column (a))
(c)
|
Equity compensation plans
approved by
security holders
|
12,613,500
|
$0.62
|
3,526,713
|
Equity compensation plans
not approved by security
holders
|
Nil
|
Nil
|
Nil
|
|
Total
|
12,613,500
|
$0.62
|
3,526,713
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Person Transactions
U.S. Geothermal Inc. has written procedures for reviewing
transactions between U.S. Geothermal Inc. and its directors and executive
officers, their immediate family members and entities with which they have a
position or relationship. These procedures are intended to determine whether any
such related person transaction impairs the independence of a director or
presents a conflict of interest on the part of a director or executive officer.
-34-
Since January 1, 2012, there have been no financial
transactions, arrangements or relationships (including any indebtedness or
guarantee of indebtedness) in which the Company or any of its subsidiaries, was
or is to be a participant, and the amount involved exceeds the lesser of
$120,000 or 1% of the average of the Company’s total assets at year end for the
last two completed fiscal years, and in which a director, an executive officer,
any immediate family member of a director or executive officer, a beneficial
owner of more than 5% of the Company’s outstanding common stock or any immediate
family member of the beneficial owner, had or will have a direct or indirect
material interest.
AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO
AUDITORS
Audit Committee Report
The Audit Committee of the Board of Directors is responsible
for assisting the Board in monitoring the integrity of the financial statements
of U.S. Geothermal Inc., compliance by U.S. Geothermal Inc. with legal and
regulatory requirements, and the independence and performance of U.S. Geothermal
Inc. internal and external auditors.
The consolidated financial statements of U.S. Geothermal Inc.
for the fiscal year ended December 31, 2015, were audited by Moss Adams LLP,
independent auditor for U.S. Geothermal Inc.
As part of its activities, the Audit Committee has:
|
|
1.
|
Reviewed and discussed with management the audited
financial statements of U.S. Geothermal Inc.;
|
|
|
|
|
|
|
2.
|
Discussed with the independent auditor the matters
required to be discussed under Statement on Auditing Standards No. 61, as
amended (Communications with Audit Committees);
|
|
|
|
|
|
|
3.
|
Received the written disclosures and letter from the
independent auditor required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent auditor’s
communications with the audit committee concerning independence;
|
|
|
|
|
|
|
4.
|
Discussed with the independent auditor the independent
auditor’s independence; and
|
|
|
|
|
|
|
5.
|
Verified that the Company has maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2015, based on criteria established in
Internal Control -
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission
(COSO-1992).
|
Based on the review and discussions
referred to above, the Audit Committee recommended to the Board of Directors
that the audited consolidated financial statements of U.S. Geothermal Inc. for
the fiscal year ended December 31, 2015, be included in U.S. Geothermal Inc.’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Audit Committee of the Board of Directors of U.S. Geothermal
Inc.
Paul A. Larkin
Leland L. Mink
John H. Walker
-35-
Audit Fees
During the current year, the Company changed independent
auditing firms from MarinelliMick PLLC to Moss Adams LLP. The aggregate fees
billed to the Company by Moss Adams LLP for the year ended December 31, 2015 for
annual financial statements and reviews of financial statements included in the
Company’s Quarterly Report on Forms 10-Q totaled $179,818. The aggregate fees
billed to the Company by Fruci and Associates formerly MartinelliMick PLLC for
the years ended December 31, 2015, and 2014 for the audit of the Company’s
annual financial statements and reviews of the financial statements included in
the Company’s Quarterly Reports on Form 10-Q, were $134,756 and $200,000;
respectively.
Audit-Related Fees
The fees billed to the Company by Moss Adams LLP for the
financial statement audits of the Company’s three subsidiaries USG Oregon LLC,
USG Nevada LLC and Raft River Energy I LLC for the year ended December 31, 2015
were $51,000. Fees billed to the Company by Moss Adams LLP for a Department of
Energy compliance audit as of and for the period ended December 31, 2014 totaled
$17,000.
All Other Fees
The Company was not billed by Fruci and Associates formerly
MartinelliMick PLLC or Moss Adams LLP for any other services during years ended
December 31, 2015 and 2014.
Administration of Engagement of Independent
Auditor
The Audit Committee is responsible for appointing, setting
compensation for and overseeing the work of our independent auditor. The Audit
Committee has established a policy for pre-approving the services provided by
our independent auditor in accordance with the auditor independence rules of the
Securities and Exchange Commission. This policy requires the review and
pre-approval by the Audit Committee of all audit and permissible non-audit
services provided by our independent auditor and an annual review of the
financial plan for audit fees.
All of the services provided by our independent auditor for the
years ended December 31, 2015 and 2014, including services related to the
Audit-Related Fees described above, were approved by the Audit Committee under
its pre-approval policies.
PROPOSAL 2—RATIFICATION OF SELECTION OF AUDITOR
As discussed above, the Company engaged Moss Adams LLP,
certified public accountants, as the principal accountant to audit the Company’s
financial statements effective March 31, 2015. Moss Adams LLP replaced
MartinelliMick PPLC, which resigned as the Company’s principal accountant
effective March 31, 2015. While we are not required to do so, U.S. Geothermal
Inc. is submitting the selection of Moss Adams LLP to serve as our independent
auditor for the fiscal year ending December 31, 2016, for ratification in order
to ascertain the views of our shareholders on this appointment. If the selection
is not ratified, the Audit Committee will reconsider its selection.
Representatives of Moss Adams LLP are not expected to be present at the annual
meeting.
Recommendation of the Board
The Board of Directors recommends a vote “FOR” the
ratification of the selection of Moss Adams LLP as the independent auditor of
U.S. Geothermal Inc. and its subsidiaries for the fiscal year ending December
31, 2016.
-36-
PROPOSAL 3- APPROVAL OF THE 2009 STOCK INCENTIVE PLAN
The 2009 Stock Incentive Plan was approved by the Company’s
board of directors on October 29, 2009 and the Company’s shareholders on
December 17, 2009. Under the 2009 Stock Incentive Plan, options and restricted
stock units may be granted to our directors, officers, employees and consultants
on authorized but unissued common stock up to but not in excess of 15% of our
issued and outstanding common stock at the time of the grant. Stock options are
determined by the Compensation and Benefits Committee and are granted only in
compliance with applicable laws and regulatory policy. As of June 30, 2016, the
Company had outstanding options to purchase 11,182,242 common shares at prices
from $0.31 to $0.74.
The purpose of the 2009 Stock Incentive Plan is to promote the
interests of the Company and its shareholders by aiding the Company in
attracting and retaining employees, officers, consultants, independent
contractors, advisors and non-employee directors capable of assuring the future
success of the Company and motivating such persons to put forth maximum efforts
for the success of the Company’s business. The 2009 Stock Incentive Plan will
allow the Company to compensate such persons through various stock-based
arrangements and provide them with opportunities for stock ownership in the
Company, thereby aligning the interests of such persons with the Company’s
shareholders.
The Board believes that a stock-based compensation program is
essential in attracting, retaining and motivating highly qualified officers,
employees and non-employee directors to enhance the Company’s success. The 2009
Stock Incentive Plan will allow for the continued use of stock-based
compensation. The flexibility of the 2009 Stock Incentive Plan will allow future
awards to be based on then-current objectives for aligning compensation with
shareholder value.
During the fiscal year ended March 31, 2015, stock option
grants to executive officers represented approximately 47% of the total stock
option grants to all employees.
Summary of the 2009 Stock Incentive
Plan
The following summary of the material terms of the 2009 Stock
Incentive Plan is qualified in its entirety by reference to the full text of the
2009 Stock Incentive Plan, a copy of which is included as Appendix A to this
proxy statement.
Administration
The Compensation and Benefits Committee (the “Committee”) will
administer the 2009 Stock Incentive Plan and will have full power and authority
to determine when and to whom awards will be granted, and the type, amount, form
of payment and other terms and conditions of each award, consistent with the
provisions of the 2009 Stock Incentive Plan. In addition, the Committee can
specify whether, and under what circumstances, awards to be received under the
2009 Stock Incentive Plan or amounts payable under such awards may be deferred
automatically or at the election of either the holder of the award or the
Committee. Subject to the provisions of the 2009 Stock Incentive Plan, the
Committee may amend or waive the terms and conditions, or accelerate the
exercisability, of an outstanding award. The Committee has authority to
interpret the 2009 Stock Incentive Plan and establish rules and regulations for
the administration of the 2009 Stock Incentive Plan. The Committee may delegate
its powers and duties under the 2009 Stock Incentive Plan to one or more
directors (including a director who is also an officer of the Company), except
that the Committee may not delegate its powers to grant awards to executive
officers or directors who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or in a way that would violate
Section 162(m) of the Internal Revenue Code. In addition, the Committee may authorize
one or more non-director officers of the Company to grant stock options under
the 2009 Stock Incentive Plan, provided that stock option awards made by these
officers may not be made to executive officers or directors who are subject to
Section 16 of the Exchange Act. The Board may also exercise the powers of the
Committee at any time, so long as its actions would not violate Rule 16b-3 of
the Exchange Act or Section 162(m) of the Internal Revenue Code.
-37-
Eligible Participants
Any employee, officer, service provider or non-employee
director providing services to the Company, or any of its affiliates, who is
selected by the Committee, is eligible to receive an award under the 2009 Stock
Incentive Plan.
Shares Available for Awards
The aggregate number of shares of our common stock that may be
issued under all stock-based awards made under the 2009 Stock Incentive Plan
will be equal to 15% of the Company’s issued and outstanding shares of common
stock (calculated as of the first day of each fiscal year while the 2009 Stock
Incentive Plan is in effect). This aggregate amount is subject to further
limitations as follows:
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•
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A maximum of 2,500,000 shares will be available for
granting incentive stock options under the 2009 Stock Incentive Plan,
subject to the provisions of Section 422 or 424 of the Internal Revenue
Code or any successor provision;
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•
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The maximum number of shares that may be awarded under
the 2009 Stock Incentive Plan pursuant to grants of restricted stock,
restricted stock units and stock awards is 2,500,000;
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•
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The number of shares that will be issued to “insiders”
within any one year period under the Plan and all of the Company’s other
security-based compensation arrangements may not exceed 5% of the
Company’s outstanding and issued common stock;
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•
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The number of shares that may be issued to any one
“insider” under the Plan within any one year period shall not exceed 5% of
the Company’s outstanding and issued common stock; and
|
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|
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|
|
•
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The maximum number of shares that may be issued to any
one eligible person under the Plan may not exceed 5% of the Company’s
outstanding and issued common stock.
|
The Committee may adjust the number of shares and share limits
described above in the case of a stock dividend or other distribution, including
a stock split, merger or other similar corporate transaction or event, in order
to prevent dilution or enlargement of the benefits or potential benefits
intended under the 2009 Stock Incentive Plan.
If an award is terminated, forfeited or cancelled without the
issuance of any shares or if shares covered by an award are not issued for any
other reason, then the shares previously set aside for such award will be
available for future awards under the 2009 Stock Incentive Plan. If shares of
restricted stock awarded under the 2009 Stock Incentive Plan are forfeited or
otherwise reacquired by the Company prior to vesting, these shares will again be
available for awards under the 2009 Stock Incentive Plan.
Types of Awards and Terms and Conditions
-38-
The 2009 Stock Incentive Plan permits the granting of: stock
options (including both incentive and non-qualified stock options); stock
appreciation rights (“SARs”); restricted stock and restricted stock units;
performance awards of cash, stock or property; dividend equivalents; stock
awards; and other stock-based awards.
Awards may be granted alone, in addition to, in combination
with or in substitution for, any other award granted under the 2009 Stock
Incentive Plan or any other compensation plan. Awards can be granted for no cash
consideration or for any cash or other consideration as may be determined by the
Committee or as required by applicable law. Awards may provide that upon the
grant or exercise thereof, the holder will receive cash, shares of our common
stock, other securities or property, or any combination of these in a single
payment, installments or on a deferred basis. The exercise price per share under
any stock option and the grant price of any SAR may not be less than the fair
market value of our common stock on the date of grant of such option or SAR
except to satisfy legal requirements of foreign jurisdictions or if the award is
in substitution for an award previously granted by an entity acquired by the
Company.
Determinations of fair market value under the 2009 Stock
Incentive Plan will be made in accordance with methods and procedures
established by the Committee. Notwithstanding the foregoing, unless otherwise
determined by the Committee, the fair market value of common stock will be the
closing sale price of our common stock on the principal stock exchange on which
our common stock is listed. The term of each award shall be determined by the
Committee.
Stock Options
. The holder of an option will be entitled
to purchase a number of shares of our common stock at a specified exercise price
during a specified time period, all as determined by the Committee. The option
exercise price may be payable either in cash or, at the discretion of the
Committee, in promissory notes, other securities or other property having a fair
market value on the exercise date equal to the exercise price.
Stock Appreciation Rights
. The holder of a SAR is
entitled to receive upon exercise, the excess of the fair market value
(calculated as of the exercise date or, at the Committee’s discretion, as of any
time during a specified period before or after the exercise date) of a specified
number of shares of our common stock over the grant price of the SAR. SARs vest
and become exercisable in accordance with a vesting schedule established by the
Committee. The Committee may impose additional conditions or restrictions on the
exercise of any SAR as it deems appropriate.
Restricted Stock and Restricted Stock Units
. The holder
of restricted stock will own shares of our common stock subject to restrictions
imposed by the Committee (including, for example, restrictions on the right to
vote the restricted shares or to receive any dividends with respect to the
shares) for a specified time period determined by the Committee. The holder of
restricted stock units will have the right, subject to any restrictions imposed
by the Committee, to receive shares of our common stock, or a cash payment equal
to the fair market value of those shares, at some future date determined by the
Committee.
Performance Awards
. The Committee may grant awards under
the 2009 Stock Incentive Plan that are intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Internal Revenue Code.
A performance award may be payable in cash or stock and will be conditioned
solely upon the achievement of one or more objective performance goals
established by the Committee in compliance with Section 162(m) of the Internal
Revenue Code. Subject to the terms of the 2009 Stock Incentive Plan, the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any performance award granted, the amount
of any payment or transfer to be made pursuant to any performance award and any
other terms or conditions of any performance award shall be determined by the
Committee in accordance with the Plan.
-39-
Dividend Equivalents
. The Committee may grant dividend
equivalents, the holder of dividend equivalents will be entitled to receive
payments, with respect to the number of shares of common stock as determined by
the Committee, (in cash, common stock, other securities, or other awards at the
discretion of the Committee) equivalent to the amount of cash dividends paid by
us to the holders of our common stock. Such grant is subject to such terms and
conditions as the Committee may determine.
Stock Awards
. The Committee may grant unrestricted
shares of our common stock, subject to terms and conditions determined by the
Committee and the limitations of the 2009 Stock Incentive Plan.
Other Stock-Based Awards
. The Committee is also
authorized to grant other types of awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to
our common stock, subject to terms and conditions determined by the Committee
and the limitations in the 2009 Stock Incentive Plan.
Duration, Termination and Amendment
. Unless discontinued
or terminated by the Board, the 2009 Stock Incentive Plan will expire on
December 17, 2019. No awards may be made after that date. With respect to
performance awards intended to qualify as “performance-based compensation”, no
performance award may be granted after the fifth year following the year in
which the shareholders approved the performance goals. However, unless otherwise
expressly provided in an applicable award agreement, any award granted under the
2009 Stock Incentive Plan prior to expiration may extend beyond the expiration
of the 2009 Stock Incentive Plan through the award’s normal expiration date.
The Board may amend, alter, suspend, discontinue or terminate
the 2009 Stock Incentive Plan at any time, although shareholder approval must be
obtained for any action that would increase the number of shares of our common
stock available under the 2009 Stock Incentive Plan, increase the award limits
under the 2009 Stock Incentive Plan or cause Section 162(m) to become
unavailable under the Plan. Shareholder approval is also required for any action
that requires shareholder approval under the rules and regulations of the
Securities and Exchange Commission, the NYSE MKT or any other securities
exchange that are applicable to the Company.
Prohibition on Repricing Awards
Without the approval of the Company’s shareholders, the
Committee will not reprice, adjust or amend the exercise price of any options or
the grant price of any SAR previously awarded, whether through amendment,
cancellation and replacement grant or any other means, except in connection with
a stock dividend or other distribution, including a stock split, merger or other
similar corporate transaction or event, in order to prevent dilution or
enlargement of the benefit, or potential benefit intended to be provided under
the 2009 Stock Incentive Plan.
Transferability of Awards
Unless otherwise provided by the Committee, awards under the
2009 Stock Incentive Plan may only be transferred by will or by the laws of
descent and distribution.
Federal Income Tax Consequences
The following is a summary of the principal U.S. federal income
tax consequences generally applicable to awards under the 2009 Stock Incentive
Plan:
Options and SARs
. The grant of an option or SAR should
not result in any taxable income for the recipient. The holder of an incentive
stock option generally will have no taxable income upon exercising the incentive
stock option (except that an alternative minimum tax liability may result), and
the Company will not be entitled to a tax deduction when an incentive stock option is exercised. Upon
exercising a non-qualified stock option, the option holder must recognize
ordinary income equal to the excess of the fair market value of the shares of
our common stock acquired on the date of exercise over the exercise price, and
the Company will be entitled at that time to a tax deduction for the same
amount. Upon the exercise of a SAR, the amount of any cash received and the fair
market value on the exercise date of any shares of our common stock received are
taxable to the recipient as ordinary income, and are deductible by the Company.
-40-
The tax consequences to an option holder upon the disposition
of shares of our common stock acquired through the exercise of an option will
depend on how long the shares have been held and whether the shares were
acquired by exercising an incentive stock option or by exercising a
non-qualified stock option or SAR. Generally, there will be no tax consequences
to the Company in connection with the disposition of shares acquired pursuant to
an option. However, the Company may be entitled to a tax deduction in the case
of a disposition of shares acquired pursuant to an incentive stock option before
the applicable incentive stock option holding periods set forth in the Code have
been satisfied.
Other Awards
. For other Awards granted under the 2009
Stock Incentive Plan that are payable in cash or shares of our common stock and
that are either transferable or not subject to substantial risk of forfeiture,
the holder of such an Award must recognize ordinary income equal to the excess
of (a) the cash or the fair market value of the shares of our common stock
received (determined as of the date of such receipt) over (b) the amount (if
any) paid for the shares of our common stock by the holder of the Award. The
Company will be entitled at that time to a deduction for the same amount if and
to the extent that amount satisfies general rules concerning deductibility of
compensation.
For an Award that is payable in shares of our common stock that
are restricted as to transferability and subject to substantial risk of
forfeiture, unless a special election is made pursuant to Section 83(b) of the
Code, the holder of the Award must, at the first time the shares become
transferable or not subject to substantial risk of forfeiture, recognize
ordinary income equal to the excess of (x) the fair market value of the shares
of our common stock received (determined as of the first time the shares become
transferable or not subject to substantial risk of forfeiture, whichever occurs
earlier) over (y) the amount (if any) paid for the shares of our common stock by
the holder. The Company will be entitled at that time to a tax deduction for the
same amount if and to the extent that amount satisfies general rules concerning
deductibility.
Special Rules.
Special rules may apply in the case of
individuals subject to Section 16(b) of the Exchange Act. In particular, unless
a special election is made pursuant to Section 83(b) of the Code, shares of
common stock received pursuant to the exercise of an option or SAR may be
treated as restricted as to transferability and subject to a substantial risk of
forfeiture for a period of up to six months after the date of exercise.
Accordingly, the amount of any ordinary income recognized, and the amount of the
Company’s tax deduction, may be determined as of the end of such period.
Additional Tax on Passive Income.
Certain individuals,
estates and trusts whose income exceeds certain thresholds will be required to
pay a 3.8% Medicare surtax on “net investment income” including, among other
things, dividends and net gain from disposition of property (other than property
held in a trade or business). Holders of awards should consult their own tax
advisors regarding the effect, if any, of this tax on their ownership and
disposition of shares of common stock.
Deductibility of Executive Compensation under Code Section
162(m)
. Section 162(m) of the Code generally limits to $1,000,000 the amount
that a publicly-held corporation is allowed each year for the compensation paid
to each of the corporation’s chief executive officer and the corporation’s other
three most highly compensated executive officers (other than the Chief Financial
Officer). However, “qualified performance-based compensation” is not subject to
the $1,000,000 deduction limit. In general, to qualify as performance-based
compensation, the following requirements need to be satisfied: (1) payments must
be computed on the basis of an objective, performance-based compensation standard
determined by a committee consisting solely of two or more “outside directors,”
(2) the material terms under which the compensation is to be paid, including the
business criteria upon which the performance goals are based, and a limit on the
maximum bonus amount which may be paid to any participant pursuant with respect
to any performance period, must be approved by a majority of the corporation’s
shareholders and (3) the committee must certify that the applicable performance
goals were satisfied before payment of any performance-based compensation.
-41-
The 2009 Stock Incentive Plan has been designed to permit
grants of options and SARs issued under the 2009 Stock Incentive Plan to qualify
under the performance-based compensation rules so that income attributable to
the exercise of a non-qualified stock option or an SAR may be exempt from the
$1,000,000 deduction limit. Grants of other Awards under the 2009 Stock
Incentive Plan may not so qualify for this exemption. The 2009 Stock Incentive
Plan’s provisions are consistent in form with the performance-based compensation
rules, so that if the committee that grants options or SARs consists exclusively
of members of the board of directors of the Company who qualify as “outside
director,” and the exercise price (or deemed exercise price, with respect to
SARs) is not less that the fair market value of the shares of common stock to
which such grants relate, the compensation income arising on exercising of those
options or SARs should qualify as performance-based compensation, which is
deductible even if that income would be in excess of the otherwise applicable
limits on deductible compensation income under the Code Section 162(m).
Recommendation of the Board
The Board of Directors recommends a vote “FOR” the approval
of the 2009 Stock Incentive Plan.
PROPOSAL 4- APPROVE A SHARE CONSOLIDATION OF THE
COMPANY’S COMMON STOCK
AND AUTHORIZE THE BOARD, IN ITS
SOLE
DISCRETION, TO EFFECT A SHARE CONSOLIDATION OF OUR
COMMON STOCK AT AN
EXCHANGE RATIO OF NOT LESS THAN 1-
FOR-2 AND NOT GREATER THAN 1-FOR-6, AS
SHALL BE
DETERMINED IN THE SOLE DISCRETION OF THE BOARD BY FILING AN
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION AT ANY
TIME THROUGH
SEPTEMBER 30, 2017
General
The Board has determined that it is advisable and in our best
interest and that of our stockholders to restructure our capital and has
directed to be submitted to stockholders Proposal 4 to authorize the Board, in
its sole discretion to effect a share consolidation (or reverse stock split) of
our Common Stock, at an Exchange Ratio of not less than 1-for-2 and not greater
than 1-for-6, as shall be determined in the sole discretion of the Board, on the
terms described in this Proxy Statement. A more detailed discussion of these
proposals is presented below.
Based on a strong balance sheet and positive net income and
EBITDA since 2013, the Company’s listing on the NYSE MKT does not appear to be
at risk as the Company exhibits the financial metrics required for continuation
of our trading on the exchange. The Board’s primary objective in seeking
authority to effect a share consolidation is to increase the per-share trading
price of our Common Stock. The Board believes that the low market price of our
Common Stock impairs our marketability and acceptance by institutional investors
and other members of the investing public and creates a negative impression of the Company. Theoretically, decreasing the number
of shares of Common Stock outstanding should not, by itself, affect the
marketability of the shares, the type of investor who would be interested in
acquiring them, or our reputation in the financial community. In practice,
however, many investors and market makers consider low-priced stocks as unduly
speculative in nature and, as a matter of policy, avoid investment and trading
in such stocks. The presence of these negative perceptions may adversely affect
not only the pricing of the Common Stock but also the trading liquidity. In
addition, these perceptions may affect our commercial business and our ability
to raise additional capital through equity and debt financings. The Board will
determine whether to effect a share consolidation and, if so, pursuant to which
Exchange Ratio, based upon a number of market and business factors deemed
relevant by the Board at that time, including, but not limited to:
-42-
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historical trading price and volumes of our Common Stock
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•
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existing marketability and liquidity of our Common Stock
and the expected impact of a share consolidation on the trading market,
including the anticipated post-split market price, for our Common Stock;
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•
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potential business and strategic alternatives, if any,
that are available to us at that time; and
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stock market and economic conditions.
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If the Board elects to effect a share consolidation, before we
file the Amendment to our Certificate of Incorporation with the Secretary of
State of the State of Delaware, we shall issue a press release announcing the
terms, including the Exchange Ratio, and effective date of the share
consolidation.
The following table contains examples of approximate
information, as of August 1, 2016, relating to the impact of Proposal 4 on our
Common Stock based on certain of the Exchange Ratios available for selection by
our Board, without giving effect to any adjustments for fractional shares of
Common Stock:
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Number of
|
Number of
|
|
|
Number of
|
Shares of
|
Shares of
|
|
|
Shares of
|
Common
|
Common
|
|
|
Common
|
Stock
|
Authorized
|
|
|
Stock
|
Reserved for
|
Available for
|
|
|
Issued and
|
Future
|
Issuance
|
|
Status
|
Outstanding(1)
|
Issuance
|
(2)
|
|
Pre-Consolidation
|
113,323,500
|
13,511,275
|
123,165,225
|
|
Post-Consolidation 1:2
|
56,661,750
|
6,755,637
|
186,582,613
|
|
Post-Consolidation 1:3
|
37,774,500
|
4,503,758
|
207,721,742
|
|
Post-Consolidation 1:4
|
28,330,875
|
3,377,818
|
218,291,307
|
|
Post-Consolidation 1:5
|
22,664,700
|
2,702,255
|
224,633,045
|
|
Post-Consolidation 1:6
|
18,887,250
|
2,251,879
|
228,860,871
|
|
_____________________________
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(1)
|
As of August 1, 2016 and does not take into account the
cancellation of any fractional shares, with respect to which holders would
be entitled to a cash payment.
See,
“Treatment of fractional
shares.”
|
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(2)
|
We are currently authorized to issue 250,000,000 shares
of Common Stock, which would be unaffected by a share consolidation
implemented pursuant to Proposal 4.
|
Required Vote and Recommendation
The affirmative vote of at least a
majority of the
outstanding shares
of our Common Stock eligible to vote at the annual
meeting will be required to approve the share consolidation. For that reason,
abstentions will have the same effect as votes cast “against” such Proposal.
We therefore urge you to vote “FOR” Proposal 4.
-43-
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE
APPROVAL OF THE
SHARE CONSOLIDATION AS SET FORTH IN PROPOSAL 4
INFORMATION ABOUT THE SHARE CONSOLIDATION
Upon implementation of a share consolidation, the number of
shares of our Common Stock that are issued and outstanding would immediately and
automatically be reduced, as of the effective date of the share consolidation,
by a factor equal to the Exchange Ratio and the number of shares of our Common
Stock subject to outstanding options and warrants would be reduced
proportionately and the respective exercise prices would be increased
proportionately. For example, if the Exchange Ratio selected by the Board is
1-for-5, for every 5 shares of Common Stock held by a stockholder, one share
would remain issued and outstanding. A share consolidation would be implemented
simultaneously for all shares of Common Stock that are issued and outstanding
and all Treasury shares. A share consolidation would affect all stockholders
uniformly and would have no effect on the proportionate holdings of any
individual stockholder, with the exception of adjustments related to the
treatment of fractional shares (see below).
The immediate effect of a share consolidation would be to
reduce the number of shares of our Common Stock that are issued and outstanding
and increase the number of shares that are available for issuance. For example,
on the Record Date, there were 113,323,500 shares of our Common Stock issued and
outstanding and 123,165,225 shares of Common Stock authorized and available for
issuance. If the Exchange Ratio selected by the Board is 1-for-5, after the
share consolidation, there would be 22,664,700 shares of our Common Stock issued
and outstanding and 224,633,045 shares of Common Stock authorized and available
for issuance.
If Proposal 4 is approved by the required vote and the Board
determines to proceed with a share consolidation, we do not have any specific
plan, commitment, arrangement, understanding or agreement, written or oral, to
utilize the additional authorized shares of Common Stock. However, we expect
that we would continue to issue shares of Common Stock in connection with our
2009 Stock Incentive Plan in amounts determined by the Compensation Committee of
the Board. Moreover, the additional shares of Common Stock would be available
for issuance by action of our Board without the need for further action by our
stockholders, unless stockholder action is specifically required by applicable
law or NYSE MKT rules.
Potential Benefits of a Share Consolidation
In addition to an increase in the number of authorized and
unissued shares of Common Stock that would result from implementing a share
consolidation, there are other considerations affecting the Board’s decision to
seek from our stockholders authority to effect a share consolidation:
Increased Share Price
If the Board determines to implement a share consolidation, our
stock price per share would increase, at least initially, which could return our
stock price to a more favorable level. An increase in the per-share cost of our
shares should enhance the acceptability and marketability of our Common Stock to
the financial community and investing public. Many institutional investors have
policies prohibiting them from holding lower-priced stocks in their portfolios,
which reduces the number of potential buyers for our Common Stock. If our shares
traded at a higher price, we could potentially meet investing guidelines of
institutional investors and investment funds who do not currently consider our
stock to be an eligible investment.
-44-
Moreover, advisors and analysts at many broker-dealers are
reluctant to recommend lower-priced stocks and do not as a practice follow the
trading activity of lower-priced stocks, or if they do follow lower-priced
stocks, frequently require additional monitoring activities.
Increasing our stock price may make it easier for individual
brokers to recommend our Common Stock, which could generate increased interest
in our stock. If we were to generate increased interest in our stock, we
anticipate that our Common Stock potentially would have greater liquidity.
However, there can be no assurance that a share consolidation under Proposal 4
would result in any increased interest in our Common Stock, or that our Common
Stock would achieve a price level that would meet investing guidelines of
institutional investors who have not considered investing in our Common Stock.
Reduced Listing and Transaction Expense
As NYSE MKT listing fees are generally assessed based on the
number of shares outstanding, reducing the number of shares outstanding may
reduce our listing fees. In addition, as investors tend to pay commissions based
on the number of shares traded, commissions on lower-priced stock generally
represent a higher percentage of the stock price than commissions on higher
priced stock. As a result, investors in lower-priced stocks pay transaction
costs which are a higher percentage of their total value, which may limit
interest in our Common Stock. If we were successful in raising our stock price
per share, our investors could potentially incur lower transaction costs in
trading our stock, although stockholders who hold odd-lot positions (less than
100 shares) after a share consolidation could experience increased transaction
costs in selling their shares.
Effects of a Share Consolidation
Effect of a share consolidation on our outstanding shares
of Common Stock
A share consolidation will be effective immediately and without
further action by our stockholders upon the filing of an Amendment to our
Certificate of Incorporation with the Secretary of State of the State of
Delaware. Individual stockholders will own fewer shares after a share
consolidation, equal to the number of shares owned prior to the share
consolidation divided by the Exchange Ratio selected by the Board, and cash in
lieu of any resulting fractional share. A share consolidation will not change
the number of stockholders of record, although it may increase the number of
stockholders holding odd-lot positions in our Common Stock. Following a share
consolidation, all shares will remain fully paid and non-assessable.
Effect of a share consolidation on our authorized capital
stock
As of the date of this Proxy Statement, our authorized capital
stock consists of 250 million shares of Common Stock. If a share consolidation
were effected, the par value of our Common Stock would remain unchanged
post-split at $0.001 per share. The value of our Common Stock as designated on
our consolidated balance sheet would be decreased proportionately based on the
Exchange Ratio with a corresponding increase in additional paid-in capital.
“Earnings per share” would increase proportionately as a result of the share
consolidation since there would be fewer shares outstanding. In future financial
statements, “earnings per share” for periods ending before the share
consolidation would be recast to give retroactive effect to the share
consolidation. We do not anticipate any other material accounting consequence
would arise as a result of the share consolidation.
Because a share consolidation will not reduce the number of
shares of authorized Common Stock provided in our Certificate of Incorporation,
a share consolidation would also result in a significant increase in the number
of authorized and unissued shares of Common Stock. F or example, as of August 1,
2016, we have 113,323,500 shares of Common Stock issued and outstanding and
13,511,275 shares Common Stock reserved for issuance, which, given our
authorized capital of 250,000,000 shares, means that we have 123,165,225
authorized and unissued shares of Common Stock. Following a share consolidation
under a 1-for-5 Exchange Ratio, we would have 22,664,700 post-split shares of
Common Stock issued and outstanding and 2,702,255 shares of common Stock
reserved for issuance, which, given our authorized capital stock of
250,000,000,means that we would have 224,633,045 authorized and unissued shares
of Common Stock. Because our stockholders have no preemptive rights to purchase
or subscribe for any of our unissued Common Stock, the future issuance of
additional shares of Common Stock will reduce our current stockholders’
percentage ownership interest in the total outstanding shares of Common Stock.
An increase in the number of our issued and outstanding shares of Common Stock
in the absence of a proportionate increase in our future earnings and book value
would dilute our projected future earnings per share, if any, and book value per
share of all our outstanding shares of the Common Stock. If these factors were
reflected in the price per share of our Common Stock, the potential realizable
value of a stockholder’s investment could be adversely affected.
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Treatment of fractional shares
No fractional shares will be issued as a result of the share
consolidation. Stockholders who otherwise would be entitled to receive a
fractional share of Common Stock because they hold a number of shares not evenly
divisible by the Exchange Ratio selected by the Board will be entitled to
receive cash in an amount equal to the product obtained by multiplying (i) the
closing sale price of our Common Stock on the business day immediately preceding
the effective date of the share consolidation as reported on the NYSE MKT by
(ii) the number of shares of our Common Stock held by the stockholder that would
otherwise have been exchanged for the fractional share interest. No interest
will be paid on any cash amount representing fractional shares between the
effective date of the share consolidation and the date of payment.
Effect of a share consolidation on options, restricted
stock awards and warrants
The number of shares of Common Stock subject to outstanding
options, restricted stock awards and warrants will automatically be reduced by a
factor equal to the Exchange Ratio applied for the share consolidation. The
per-share exercise price of options and warrants will also be increased by the
same factor, so that the aggregate dollar amount payable for the purchase of
shares of Common Stock subject to options and warrants will remain unchanged.
For example, if an option holder has options to purchase 1,000 shares at an
exercise price of $1.00 per share, if the share consolidation is effected at the
Exchange Ratio of 1-for-5, the number of shares that may be purchased pursuant
to the option will be reduced to 200 shares and the exercise price at which the
shares may be purchased will be proportionately increased to $5.00 per share. In
connection with a share consolidation, the number of shares of Common Stock
issuable upon exercise or conversion of outstanding stock options, restricted
stock awards and warrants will be rounded to the nearest whole share and no cash
payment will be made in respect of such rounding. In addition, under our stock
incentive plan, a share consolidation will reduce the number of shares of Common
Stock available for future issuance in proportion to the Exchange Ratio applied
for the share consolidation.
Warrants issued in connection with our financing activities
will generally be adjusted as described in the foregoing paragraph, subject to
such other adjustments as may be provided in the applicable warrant agreements.
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No appraisal rights
Under the Delaware General Corporation Law, stockholders are
not entitled to dissenters’ or appraisal rights in connection with the proposed
Amendment to our Certificate of Incorporation to implement a share
consolidation. If we implement a share consolidation, we will not independently
make those rights available to our stockholders.
No going private transaction
Notwithstanding the decrease in the number of outstanding
shares of Common Stock resulting from a share consolidation, the share consolidation will not be the first step in a series of plans
or proposals of a “going private transaction” within the meaning of Rule 13e-3
of the Exchange Act.
Certain U.S. Federal income tax consequences of a share
consolidation
The following is a discussion of certain U.S. federal income
tax consequences of a share consolidation. This discussion is included for
general information purposes only and does not purport to address all aspects of
U.S. federal income tax law that may be relevant to stockholders in light of
their particular circumstances or to stockholders who are subject to special
rules, such as former U.S. citizens or long-term residents of the United States,
partnerships and other pass-through entities and holders of interests therein,
financial institutions, tax-exempt organizations, insurance companies, broker
-dealers, mutual funds, passive foreign investment companies and controlled
foreign corporations. This discussion is based on the Internal Revenue Code of
1986, as amended (the “Code”), existing U.S. Treasury regulations and current
administrative rulings and judicial decisions, all of which are subject to
change or differing interpretations, possibly on a retroactive basis, and any
such change or differing interpretations could affect the continuing validity of
this discussion. This summary is not binding on the U.S. Internal Revenue
Service (“IRS”), and there can be no assurance that the IRS (or a court, in the
event of IRS challenge) will agree with the conclusions stated herein. No legal
opinion from legal counsel or ruling from the IRS has been or will be requested
in connection with the share consolidation. In addition, this discussion does
not address tax considerations under state, local, non-U.S. and other laws.
This summary also assumes that each stockholder has held, and
will hold, shares of Common Stock as a “capital asset,” as defined in the Code,
i.e., generally, property held for investment. Finally, the following discussion
does not address the tax consequences of transactions occurring prior to or
after the share consolidation (whether or not such transactions are in
connection with the share consolidation), including, without limitation, the
exercise of options or rights to purchase Common Stock in anticipation of the
share consolidation.
For purposes of this summary, the term “U.S. Holder” means a
beneficial owner of shares of Common Stock that is for U.S. federal income tax
purposes:
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An individual who is a citizen or resident of the U.S.;
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A corporation (or other entity taxable as a corporation
for federal income tax purposes) organized under the laws of the U.S., any
state thereof or the District of Columbia;
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An estate whose income is subject to U.S. federal income
taxation regardless of its source;
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A trust that 1) is subject to the primary supervision of
a court within the U.S. and the control of one or more U.S. persons for
all substantial decisions or 2) has a valid election in effect under
applicable Treasury Regulations to be treated as a U.S. person.
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For purposes of this summary, the term “Non-U.S. Holder” means
a beneficial owner of shares of Common Stock that is an individual, corporation,
estate or trust that is not a U.S. Holder.
U.S. Holders
The share consolidation, if approved and effected, should
result in the following U.S. federal income tax consequences to U.S. Holders:
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No gain or loss would be recognized by the Company as a
result of the share consolidation.
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A U.S. Holder would not recognize gain or loss upon the
receipt of Common Stock in the share consolidation, except to the extent
of cash received in lieu of a fractional share.
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A U.S. Holder’s aggregate tax basis in the post-share
consolidation Common Stock received in the share consolidation would be
equal to the aggregate tax basis of the pre-consolidation shares of Common
Stock exchanged therefor, reduced by the amount of the adjusted tax basis
of any pre- share consolidation shares exchanged for such post-share
consolidation shares that is allocated to any fractional share for which
cash is received.
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A U.S. Holder’s holding period of the post-share
consolidation shares of Common Stock received in the share consolidation
would include such stockholder’s holding period of the pre-share
consolidation shares exchanged therefor.
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Cash Received In Lieu of a Fractional Share
. A U.S.
Holder who receives cash in lieu of a fractional share of post-share
consolidation shares would be treated as having received the fractional share of
post-share consolidation shares pursuant to the share consolidation and then as
having exchanged the fractional share of post-share consolidation shares for
cash in a redemption by the Company. In general, this deemed redemption will be
treated as a sale or exchange, provided the redemption is “not essentially
equivalent to a dividend” as discussed below. Gain or loss generally will be
recognized equal to the difference between the amount of cash received and the
portion of the U.S. Holder’s adjusted tax basis of the pre-share consolidation
shares exchanged in the share consolidation which is allocable to such
fractional share. Such gain or loss generally will be long-term capital gain or
loss if the U.S. Holder’s holding period for such pre-share consolidation shares
is more than one year as of the effective date of the share consolidation, and
otherwise will be short-term capital gain or loss. The deductibility of capital
losses is subject to limitations.
The receipt of cash is “not essentially equivalent to a
dividend” if the reduction in a U.S. Holder’s proportionate interest in the
Company resulting from the share consolidation (taking into account for this
purpose shares of Common Stock and other shares of stock of the Company which
such U.S. Holder is considered to own under certain attribution rules) is
considered a “meaningful reduction” given such U.S. holder’s particular facts
and circumstances. The IRS has ruled that a small reduction by a minority
stockholder whose relative stock interest is minimal and who exercises no
control over the affairs of a corporation can satisfy this test. If the receipt
of cash in lieu of a fractional share is not treated as capital gain or loss
under the test described above, it will be treated first as dividend income to
the extent of a U.S. Holder’s ratable share of the Company’s current and
accumulated earnings and profits, then as a tax-free return of capital to the extent of the portion of the
U.S. Holder’s adjusted tax basis of the pre-share consolidation shares which is
allocable to such fractional share, and any remaining amount will be treated as
capital gain.
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Information Reporting and Backup Withholding
. Payment of
cash in lieu of fractional shares within the United States or conducted through
certain U.S. related financial intermediaries may be subject to both backup
withholding and information reporting. A U.S. Holder would be subject to backup
withholding at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S.
Holder’s correct U.S. taxpayer identification number (generally on IRS Form
W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is
notified by the IRS that such U.S. Holder has previously failed to properly
report items subject to backup withholding tax, or (d) fails to certify, under
penalty of perjury, that such U.S. Holder has furnished its correct U.S.
taxpayer identification number and that the IRS has not notified such U.S.
Holder that it is subject to backup withholding tax. However, certain exempt
persons generally are excluded from these information reporting and backup
withholding rules. Any amounts withheld under the U.S. backup withholding tax
rules generally will be allowed as a credit against a U.S. Holder’s U.S. federal
income tax liability, if any, or will be refunded, if such U.S. Holder furnishes
required information to the IRS in a timely manner.
Non-U.S. Holders
Subject to the discussion in the
next paragraph, a Non-U.S. Holder that receives solely a reduced number of
shares of Common Stock as a result of the share consolidation, if approved and
effected, generally should not recognize any gain or loss for U.S. federal
income tax purposes. A Non-U.S. Holder that receives cash in lieu of a
fractional share pursuant to the share consolidation, if approved and effected,
should not be subject to U.S. federal income tax on any gain recognized on the
deemed redemption of such fractional share unless:
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the gain is effectively connected with the conduct of a
trade or business in the United States (provided, in the case of certain
Non-U.S. Holders entitled to the benefits of an income tax treaty with the
United States);
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with respect to a Non-U.S. Holder who is an individual,
the Non-U.S. Holder is present in the United States for 183 days or more
in the taxable year the share consolidation occurs and certain other
conditions are met; or
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shares of Common Stock constitute a United States real
property interest by reason of the Company’s status as a United States
real property holding corporation (a "USRPHC") for U.S. federal income tax
purposes.
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Generally, a U.S. corporation is a USRPHC if the fair market
value of its U.S. real property interests equals or exceeds 50% of the sum of
the fair market value of its worldwide real property interests and its other
assets used or held for use in a trade or business. The Company believes that it
currently is a USRPHC and that shares of Common Stock should be treated as
regularly traded on an established securities market (within the meaning of
applicable Treasury regulations), but the Company can make no assurances that
the Common Stock will be regularly traded at the time of the share
consolidation. Assuming the Common Stock is treated as regularly traded on an
established securities market, only a Non-U.S. Holder that actually or
constructively owns, or owned at any time during the shorter of the five-year
period ending on the date of the share consolidation or the non-U.S. holder's
holding period for the common stock, more than 5% of the Common Stock (a "5%
Shareholder") will be taxable, with respect to the third bullet point above, on
gain recognized on the receipt of cash in lieu of a fractional share. In
addition, a Non-U.S. Holder that is a 5% Shareholder will be required to satisfy
certain IRS filing requirements in order to avoid recognizing taxable gain, if
any, on the receipt of a reduced number of shares of Common Stock pursuant to
the share consolidation, if effected.
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Non-U.S. Holders that may be treated as 5% Shareholders are
strongly encouraged to consult their tax advisors regarding the tax consequences
to them of the share consolidation, if approved effected, how to satisfy the
applicable IRS filing requirements and the consequences to them of failing to
satisfy those filing requirements.
U.S. Information Reporting and Backup Withholding Tax
.
In general, a Non-U.S. Holder may be subject to both information reporting and
backup withholding. Backup withholding should not apply to the payment of cash
in lieu of a fractional share of Common Stock to a Non-U.S. Holder pursuant to
the share consolidation, if approved and effected, if the Non-U.S. Holder
certifies under penalties of perjury that it is a Non-U.S. Holder (generally on
IRS Form W-8BEN or IRS Form W-8BEN-E) and the applicable withholding agent does
not have actual knowledge or reason to know to the contrary. Backup withholding
is not an additional tax. Any amounts withheld under the backup withholding
rules may be refunded or allowed as a credit against the Non-U.S. Holder's U.S.
federal income tax liability, if any, provided that certain required information
is timely furnished to the IRS.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE CONSOLIDATION AND DOES NOT
PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL RELEVANT TAX
EFFECTS RELATED THERETO. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO THE PARTICULAR FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES OF
THE SHARE CONSOLIDATION IN LIGHT OF THEIR SPECIFIC CIRCUMSTANCES.
Registration and trading of our Common Stock
Our Common Stock is currently registered under Section 12(b) of
the Exchange Act, and we are subject to periodic reporting and other
requirements of the Exchange Act. A share consolidation will not affect the
registration of our Common Stock under the Exchange Act or our obligation to
publicly file financial and other information with the SEC. T o distinguish
pre-share consolidation positions from post-share consolidation positions, our
Common Stock will be assigned a new CUSIP number, which is an identifier used by
participants in the securities industry to identify our Common Stock.
Interests of Directors and Executive Officers in the Share
Consolidation
The Company’s directors and executive officers have no
substantial interest, directly or indirectly, in the matters set forth in
Proposal 4 except to the extent of their ownership of shares or options to
purchase our Common Stock.
Procedures to Implement a Share Consolidation
The share consolidation will occur on the date that the
Amendment to our Certificate of Incorporation effecting the share consolidation
is filed with the Secretary of State of the State of Delaware (the effective
date) unless otherwise specified in such Amendment, without any action on the
part of our stockholders and without regard to the date that any stock
certificates representing the stock prior to the share consolidation are
physically surrendered for new stock certificates.
Exchange of book-entry shares
If the Board implements the share consolidation, stockholders
whose shares are uncertificated and held in “street name” with a broker, either
as direct or beneficial owners, will have their holdings electronically adjusted by their brokers to give effect to the share
consolidation. Any payments in lieu of fractional shares will also be processed
by the brokers.
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Exchange of shares held in certificate form
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES
AND SHOULD NOT
SUBMIT THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM FROM OUR
TRANSFER AGENT
.
As soon as practicable after the effective date, our transfer
agent, acting as exchange agent, will mail to each stockholder of record whose
shares are held in certificate form transmittal forms to be used in forwarding
their certificates for surrender and exchange for the whole number of new shares
of our Common Stock that such stockholder is entitled to receive as a result of
the share consolidation. No new certificates will be issued to a stockholder
until the stockholder has surrendered his or her outstanding certificate(s)
together with the properly completed and executed transmittal form. Stockholders
of record will receive a check from our transfer agent representing the cash
amount due upon surrender to the exchange agent of the certificates representing
any fractional shares.
Certain Risks Associated with a Share Consolidation
If a share consolidation is effected, there is no assurance
that our market price will remain above $1.00, and the total value of our
outstanding shares may decline.
If the Board determines that a share consolidation is in our
best interest and that of our stockholders, the Board will set the Exchange
Ratio with the intent of raising the price per share of our Common Stock above
$1.00. However, there is no assurance that after the share consolidation is
completed, our Common Stock will maintain its share consolidation adjusted
price. As a result, our stock price could trade below the $1.00 price. Moreover,
a decline in the market price of our Common Stock after a share consolidation
may result in a greater percentage decline than would occur in the absence of a
share consolidation.
Similarly, the total value of our outstanding shares (market
capitalization) immediately after a share consolidation may be lower than
immediately before a share consolidation, and/or the total market capitalization
may decline. If trading activity following a share consolidation has the effect
of reducing the total market capitalization of our Company, we may be unable to
fund our activities, resulting in reductions in our stockholders’ equity.
There are numerous risks and uncertainties that could affect
the value of our Common Stock after a share consolidation including without
limitation risks and uncertainties related directly to our Company, including,
without limitation, the status of our development programs, our cash position
and results of operations in future periods, and our ability to attract and
retain key executive management and professional personnel, as well as other
factors such as market conditions as a whole and the general economic
environment. Even though a share consolidation would not directly impact our
capital, cash position, or the number of our stockholders, there may be
share-consolidation-related trading activity that may have the effect of
depressing the market price of our Common Stock and our market capitalization.
For these reasons, if the Board implements a share consolidation, the market
price of our Common Stock will likely not be sustainable at the arithmetic
result obtained by applying the Exchange Ratio of the share consolidation by the
market price of our stock immediately prior to the effective date of the share
consolidation, and the percentage decline in our market value may be greater
than would occur in the absence of a share consolidation. If the market price of
our Common Stock declines after the share consolidation, our total market capitalization (the aggregate
value of all of our outstanding Common Stock at the then existing market price)
after the consolidation will be lower than before the consolidation.
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A share consolidation may reduce liquidity and increase
volatility of our Common Stock.
Our stock historically has traded at relatively high average
volumes, which often produces pricing efficiencies. Following a share
consolidation, the number of shares available for trading in the public market
will be reduced by a factor equal to the Exchange Ratio. This reduction in
shares could result in depressed trading activity, fewer market makers and less
interest in our stock. This could result in increased volatility and adversely
affect liquidity of our Common Stock.
In addition, investors might consider the increased proportion
of unissued authorized shares to issued shares to have an anti-takeover effect
under certain circumstances, since the proportion allows for dilutive issuances
that could prevent certain stockholders from changing the composition of the
Board of Directors or render tender offers for a combination with another entity
more difficult to successfully complete. The Board of Directors does not intend
for the share consolidation to have any anti-takeover effects.
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K
Our Annual Report to Shareholders, including financial
statements for the fiscal year ended December 31, 2015, accompanies this proxy
statement. The Annual Report to Shareholders is also available on our website at
www.usgeothermal.com. Copies of our Annual Report on Form 10-K, which are on
file with the SEC, are available to any shareholder who submits a request in
writing to U.S. Geothermal Inc., 390 E Parkcenter Blvd, Suite 250, Boise, Idaho
83706. Copies of any exhibits to the Form 10-K are also available upon written
request and payment of a fee covering our reasonable expenses in furnishing the
exhibits.
“HOUSEHOLDING” OF PROXY MATERIALS
The Securities and Exchange Commission has adopted rules that
permit companies and intermediaries such as brokers to satisfy delivery
requirements for proxy statements and annual reports with respect to two or more
shareholders sharing the same address by delivering a single proxy statement or
annual report, as applicable, addressed to those shareholders. This process,
which is commonly referred to as “householding,” potentially provides extra
convenience for shareholders and cost savings for companies. Although we do not
household for our registered shareholders, some brokers household U.S.
Geothermal Inc. proxy materials and annual reports, delivering a single proxy
statement and annual report to multiple shareholders sharing an address unless
contrary instructions have been received from the affected shareholders. Once
you have received notice from your broker that they will be householding
materials to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no longer wish
to participate in householding and would prefer to receive a separate proxy
statement or annual report, or if you are receiving multiple copies of either
document and wish to receive only one, please notify your broker. We will
deliver promptly upon written or oral request a separate copy of our annual
report and/or proxy statement to a shareholder at a shared address to which a
single copy of either document was delivered. For copies of either or both
documents, shareholders should write to U.S. Geothermal Inc., 390 E Parkcenter
Blvd, Suite 250, Boise, Idaho 83706, or call (208) 424-1027.
OTHER MATTERS
We do not know of any other matters that may be presented for
consideration at the annual meeting. If any other business does properly come
before the annual meeting, the persons named as proxies on the enclosed proxy
card will vote as they deem in the best interests of U.S. Geothermal Inc.
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/s/ Kerry D. Hawkley
Kerry D. Hawkley
Chief Financial Officer and Corporate
Secretary
Dated: August 19, 2016
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LOCATION OF U.S. GEOTHERMAL INC. ANNUAL MEETING OF
SHAREHOLDERS
Friday, September 30, 2016 at 10:00 a.m. MDT
U.S. Geothermal
Corporate Office
390 E Parkcenter Blvd, Suite 250
Boise, Idaho
Beneficial owners of common stock held in street name by a
broker, bank or other nominee will need proof of ownership to be admitted to the
meeting. A recent brokerage statement or a letter from your broker, bank or
other nominee is an example of proof of ownership.
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U.S. GEOTHERMAL INC.
2009 STOCK INCENTIVE PLAN
DECEMBER 17, 2009
Table of Contents
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U.S. GEOTHERMAL INC.
2009 STOCK INCENTIVE PLAN
The purpose of the Plan is to promote the interests of
the Company and its stockholders by aiding the Company in attracting and
retaining employees, officers, consultants, independent contractors, advisors
and non-employee directors capable of assuring the future success of the
Company, to offer such persons incentives to put forth maximum efforts for the
success of the Company’s business and to compensate such persons through various
stock-based arrangements and provide them with opportunities for stock ownership
in the Company, thereby aligning the interests of such persons with the
Company’s stockholders.
As used in the Plan, the following terms shall have the
meanings set forth below:
(a) “
Affiliate
” shall mean (i)
any entity that, directly or indirectly through one or more intermediaries, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in each case as determined by the Committee.
(b) “
Award
” shall mean any
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Performance Award, Dividend Equivalent, Stock Award or Other Stock-Based Award
granted under the Plan.
(c) “
Award Agreement
” shall
mean any written agreement, contract or other instrument or document evidencing
an Award granted under the Plan. An Award Agreement may be in an electronic
medium and need not be signed by a representative of the Company or the
Participant. Each Award Agreement shall be subject to the applicable terms and
conditions of the Plan and any other terms and conditions (not inconsistent with
the Plan) determined by the Committee.
(d) “
Board
” shall mean the
Board of Directors of the Company.
(e)
“Change in Control”
shall
have the meaning ascribed to such term in an Award Agreement between the
Participant and the Company.
(f) “
Code
” shall mean the
Internal Revenue Code of 1986, as amended from time to time, and any regulations
promulgated thereunder.
(g) “
Committee
” shall mean the
committee of the Board designated by the Board to administer the Plan. The
Committee shall be comprised of not less than such number of Directors as shall
be required to permit Awards granted under the Plan to qualify under Rule 16b-3,
and each member of the Committee shall be a “non-employee director” within the
meaning of Rule 16b-3 and an “outside director” within the meaning of Section
162(m). The Company expects to have the Plan administered in accordance with the
requirements for the award of “qualified performance-based compensation” within
the meaning of Section 162(m).
(h) “
Company
” shall mean U.S.
Geothermal Inc., a Delaware corporation, and any successor corporation.
(i) “
Director
” shall mean a
member of the Board.
(j) “
Dividend Equivalent
” shall
mean any right granted under Section 6(e) of the Plan.
(k) “
Eligible Person
” shall
mean any employee, officer, consultant, independent contractor, advisor or
non-employee director providing services to the Company or any Affiliate whom
the Committee determines to be an Eligible Person. An Eligible Person must be a
natural person.
(l) “
Exchange Act
” shall mean
the Securities Exchange Act of 1934, as amended.
(m) “
Fair Market Value
” shall
mean, with respect to any property (including, without limitation, any Shares or
other securities), the fair market value of such property determined by such
methods or procedures as shall be established from time to time by the
Committee. Notwithstanding the foregoing, unless otherwise determined by the
Committee, the Fair Market Value of Shares on a given date for purposes of the
Plan shall be the closing sale price of the Shares on the Stock Exchange as
reported on the consolidated transaction reporting system on such date or, if
such Stock Exchange is not open for trading on such date, on the most recent
preceding date that such Stock Exchange is open for trading.
(n) “
Incentive Stock Option
”
shall mean an option granted under Section 6(a) of the Plan that is intended to
meet the requirements of Section 422 of the Code or any successor provision.
(o) “
Insider
” shall have the
meaning assigned to it under the
Securities Act
(Ontario), as amended,
and also includes an Affiliate of any person who is an Insider.
(p) “
Non-Qualified Stock
Option
” shall mean an option granted under Section 6(a) of the Plan that is
not intended to be an Incentive Stock Option.
(q) “
Option
” shall mean an
Incentive Stock Option or a Non-Qualified Stock Option to purchase shares of the
Company.
(r) “
Other Stock-Based Award
”
shall mean any right granted under Section 6(g) of the Plan.
(s) “
Participant
” shall mean an
Eligible Person designated to be granted an Award under the Plan.
(t) “
Performance Award
” shall
mean any right granted under Section 6(d) of the Plan.
(u)
“Performance Goal”
shall
mean one or more of the following performance goals, either individually,
alternatively or in any combination, applied on a corporate, subsidiary, division, business unit or line of business basis: sales,
revenue, costs, expenses, earnings (including one or more of net profit after
tax, gross profit, operating profit, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization and net
earnings), earnings per share, earnings per share from continuing operations,
operating income, pre-tax income, operating income margin, net income, margins
(including one or more of gross, operating and net income margins), returns
(including one or more of return on actual or proforma assets, net assets,
equity, investment, capital and net capital employed), stockholder return
(including total stockholder return relative to an index or peer group), stock
price, economic value added, cash generation, cash flow, unit volume, working
capital, market share, cost reductions and strategic plan development and
implementation. Each such performance goal may be based (i) solely by reference
to absolute results of individual performance or organizational performance at
various levels (e.g., the Company’s performance or the performance of a
subsidiary, division, business segment or business unit of the Company) or (ii)
upon organizational performance relative to the comparable performance of other
companies selected by the Committee. To the extent consistent with Section
162(m), the Committee may also exclude charges related to an event or occurrence
which the Committee determines should appropriately be excluded, including (X)
restructurings, discontinued operations, extraordinary items, and other unusual
or non-recurring charges, (Y) an event either not directly related to the
operations of the Company or not within the reasonable control of the Company’s
management, or (Z) the cumulative effects of tax or accounting changes in
accordance with U.S. generally accepted accounting principles (or other
accounting principles which may then be in effect).
-2-
(v) “
Person
” shall mean any
individual or entity, including a corporation, partnership, limited liability
company, association, joint venture or trust.
(w) “
Plan
” shall mean the U.S.
Geothermal Inc. 2009 Stock Incentive Plan, as amended from time to time.
(x) “
Restricted Stock
” shall
mean any Share granted under Section 6(c) of the Plan. (y) “
Restricted Stock
Unit
” shall mean any unit granted under Section 6(c) of the Plan evidencing
the right to receive a Share (or a cash payment equal to the Fair Market Value
of a Share) at some future date.
(z) “
Rule 16b-3
” shall mean
Rule 16b-3 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, or any successor rule or
regulation.
(aa)
“Section 162(m)”
shall
mean Section 162(m) of the Code, or any successor provision, and the applicable
Treasury Regulations promulgated thereunder.
(bb)
“Section 409A”
shall mean
Section 409A of the Code, or any successor provision, and applicable Treasury
Regulations and other applicable guidance thereunder.
(cc) “
Securities Act
” shall
mean the Securities Act of 1933, as amended.
-3-
(dd) “
Shares
” shall mean shares
of Common Stock, $0.001 par value per share, of the Company or such other
securities or property as may become subject to Awards pursuant to an adjustment
made under Section 4(c) of the Plan.
(ee)
“Specified Employee”
shall
mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or
applicable proposed or final regulations under Section 409A, determined in
accordance with procedures established by the Company and applied uniformly with
respect to all plans maintained by the Company that are subject to Section 409A.
(ff) “
Stock Appreciation Right
”
shall mean any right granted under Section 6(b) of the Plan.
(gg) “
Stock Award
” shall mean
any Share granted under Section 6(b) of the Plan.
(hh) “
Stock Exchange
” shall
mean the principal stock exchange upon which the Shares are listed or upon which
the Shares have been approved for listing.
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Section 3.
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Administration
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(a) Power and Authority of the
Committee. The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan and to applicable law, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to each Participant under the Plan; (iii)
determine the number of Shares to be covered by (or the method by which payments
or other rights are to be calculated in connection with) each Award; (iv)
determine the terms and conditions of any Award or Award Agreement; (v) amend
the terms and conditions of any Award or Award Agreement,
provided
,
however
, that, except as otherwise permitted in connection with an event as
provided under Section 4(c) hereof, the Committee shall not reprice, adjust or
amend the exercise price of Options or the grant price of Stock Appreciation
Rights previously awarded to any Participant, whether through amendment,
cancellation or any other means; (vi) accelerate the exercisability of any Award
or the lapse of any restrictions relating to any Award, (vii) determine whether,
to what extent and under what circumstances Awards may be exercised in cash,
Shares, promissory notes (
provided
,
however
, that the par value of
any Shares to be issued pursuant to such exercise shall be paid in the form of
cash, services rendered, personal property, real property or a combination
thereof and the acceptance of such promissory notes does not conflict with
Section 402 of the Sarbanes-Oxley Act of 2002), other securities, other Awards
or other property, or canceled, forfeited or suspended; (viii) interpret and
administer the Plan and any instrument or agreement, including an Award
Agreement, relating to the Plan; (ix) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; (x) make any other determination and take
any other action that the Committee deems necessary or desirable for the
administration of the Plan; and (xi) adopt such modifications, rules, procedures
and subplans as may be necessary or desirable to comply with provisions of the
laws of non-U.S. jurisdictions in which the Company or an Affiliate may operate,
including, without limitation, establishing any special rules for Affiliates,
Eligible Persons or Participants located in any particular country, in order to
meet the objectives of the Plan and to ensure the viability of the intended benefits of Awards granted
to Participants located in such non-United States jurisdictions. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award or Award Agreement shall be within the sole discretion of the Committee,
may be made at any time and shall be final, conclusive and binding upon any
Participant, any holder or beneficiary of any Award or Award Agreement, and any
employee of the Company or any Affiliate.
-4-
(b) Power and Authority of the Board.
Notwithstanding anything to the contrary contained herein, the Board may, at any
time and from time to time, without any further action of the Committee,
exercise the powers and duties of the Committee under the Plan, unless the
exercise of such powers and duties by the Board would cause the Plan not to
comply with the requirements of Rule 16b-3 or Section 162(m).
(c) Delegation.
The Committee may delegate to one or more officers or
Directors of the Company, subject to such terms, conditions and limitations as
the Committee may establish in its sole discretion, the authority to grant
Options;
provided
,
however
, that the Committee shall not delegate
such authority (i) with regard to grants of Options to be made to officers or
directors of the Company or any Affiliate who are subject to Section 16 of the
Exchange Act, (ii) in such a manner as would cause the Plan not to comply with
the requirements of Section 162(m) or (iii) in such a manner as would contravene
Section 157 of the Delaware General Corporation Law.
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Section 4.
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Shares Available for Awards
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(a) Shares Available. Subject to
adjustment as provided in Section 4(c) of the Plan, the aggregate number of
Shares that may be issued under the Plan shall be equal to 15% of the Company’s
issued and outstanding Shares, calculated as of the first day of each fiscal
year while the Plan is in effect, less any Shares underlying outstanding options
granted pursuant to the Company’s Amended and Restated Stock Option Plan dated
September 29, 2006. Shares to be issued under the Plan may be either authorized
but unissued Shares or Shares re-acquired and held in treasury. Any Shares that
are used by a Participant as full or partial payment to the Company of the
purchase price relating to an Award, or in connection with the satisfaction of
tax obligations relating to an Award, shall again be available for granting
Awards under the Plan. In addition, if any Shares covered by an Award or to
which an Award relates are not purchased or are forfeited, or if an Award
otherwise terminates without delivery of any Shares, then the number of Shares
counted against the aggregate number of Shares available under the Plan with
respect to such Award, to the extent of any such forfeiture or termination,
shall again be available for granting Awards under the Plan. Notwithstanding the
foregoing, (i) the number of Shares available for granting Incentive Stock
Options under the Plan shall not exceed 2,500,000, subject to adjustment as
provided in Section 4(c) of the Plan (ii) the number of Options available for
granting Restricted Stock and Restricted Stock Units shall not exceed 2,500,000,
subject to adjustment as provided in Section 4(c) of the Plan, (iii) the number
of Options that may be granted to Insiders (or when combined with all of the
Company's other security based compensation arrangements) within any one-year
period shall not be exercisable to acquire more than 5% of the Company's outstanding issued Shares from time to
time, (iv) the number of Options that may be granted to any one Insider under
the Plan within any one-year period shall not be exercisable to acquire more
than 5% of the Company's outstanding issue from time to time, and (v) the number
of Options that may be granted to any one Eligible Person shall not be
exercisable to acquire more than 5% of the Company’s outstanding issue from time
to time.
-5-
(b) Accounting for Awards. For
purposes of this Section 4, if an Award entitles the holder thereof to receive
or purchase Shares, the number of Shares covered by such Award or to which such
Award relates shall be counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards under the Plan. For
Stock Appreciation Rights settled in Shares upon exercise, the aggregate number
of Shares with respect to which the Stock Appreciation Right is exercised,
rather than the number of Shares actually issued upon exercise, shall be counted
against the number of Shares available for Awards under the Plan. Awards that do
not entitle the holder thereof to receive or purchase Shares and Awards that are
settled in cash shall not be counted against the aggregate number of Shares
available for Awards under the Plan.
(c) Adjustments. In the event that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is necessary in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Shares (or other securities or other property)
that thereafter may be made the subject of Awards, (ii) the number and type of
Shares (or other securities or other property) subject to outstanding Awards,
(iii) the purchase price or exercise price with respect to any Award and (iv)
the limitations contained in Section 4(d) of the Plan;
provided
,
however
, that the number of Shares covered by any Award or to which such
Award relates shall always be a whole number. Such adjustment shall be made by
the Committee or the Board, whose determination in that respect shall be final,
binding and conclusive.
Notwithstanding the foregoing in this Section 4(c), in
the event (i) of any reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the Company
or any other similar corporate transaction or event involving the Company in
which the Company is not the continuing or surviving entity in which the
stockholders of the Company prior to the corporate transaction or event do not
continue to beneficially own at least 50% of the combined voting power of the
resulting entity, or (ii) the Company shall enter into a written agreement to
undergo such a transaction or event, the Committee or the Board may, in its sole
discretion, provide for any of the following:
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(i)
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for either (A) termination of any such Award, whether or
not vested, in exchange for an amount of cash and/or other property, if
any, equal to the amount that would have been attained upon the exercise
of such Award or realization of the Participant’s rights (and, for the
avoidance of doubt, if, as of the date of the occurrence of the
transaction or event described in this Section 4(c), the Committee or the Board determines in good
faith that no amount would have been attained upon the exercise of such Award or
realization of the Participant’s rights, then such Award may be terminated by
the Company without payment) or (B) the replacement of such Award with other
rights or property selected by the Committee or the Board, in its sole
discretion;
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-6-
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(ii)
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that such Award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted
for by similar options, rights or awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and
prices;
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(iii)
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that such Award shall be exercisable or payable or fully
vested with respect to all Shares covered thereby at such date prior to
the effective date of such event as may be determined by the Committee or
the Board, notwithstanding anything to the contrary in the Plan or the
applicable Award Agreement; or
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(iv)
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that the Award cannot vest, be exercised or become
payable after a date certain in the future, which may be the effective
date of such event.
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In the event that the terms of any agreement between the
Company or any Affiliate and a Participant contains provisions that conflict
with and are more restrictive than the provisions of this Section 4(c), then
this Section 4(c) shall prevail and control and the more restrictive terms of
such agreement (and only such terms) shall be of no force or effect.
(d) Award Limitations Under the
Plan.
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(i)
|
Section 162(m) Limitation for Certain Types of Awards. No
Eligible Person may be granted Options, Stock Appreciation Rights or any
other Award or Awards under the Plan, the value of which Award or Awards
is based solely on an increase in the value of the Shares after the date
of grant of such Award or Awards, and which is intended to represent
“qualified performance-based compensation” with the meaning of Section
162(m), for more than 2,500,000 Shares (subject to adjustment as provided
for in Section 4(c) of the Plan), in the aggregate in any taxable
year.
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(ii)
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Section 162(m) Limitation for Performance Awards
Denominated in Shares. No Eligible Person may be granted Performance
Awards denominated in Shares (including, without limitation, Restricted
Stock and Restricted Stock Units), and which are intended to represent
“qualified performance-based compensation” with the meaning of Section
162(m), for more than 2,500,000 Shares (subject to adjustment as provided
for in Section 4(c) of the Plan), in the aggregate in any taxable
year.
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-7-
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(iii)
|
Section 162(m) Limitation for Performance Awards
Denominated in Cash. The maximum amount payable pursuant to all
Performance Awards denominated in cash to any Participant in the aggregate
in any taxable year shall be $100,000 in value, whether payable in cash,
Shares or other property. The limitation contained in this Section
4(d)(iii) does not apply to any Award subject to the limitation contained
in Section 4(d)(i) or Section 4(d)(ii). The limitation contained in this
Section 4(d)(iii) shall apply only with respect to Awards granted under
this Plan, and limitations on awards granted under any other stockholder
approved executive incentive plan maintained by the Company will be
governed solely by the terms of such other
plan.
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Any Eligible Person shall be eligible to be designated a
Participant. In determining which Eligible Persons shall receive an Award and
the terms of any Award, the Committee may take into account the nature of the
services rendered by the respective Eligible Persons, their present and
potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full-time or
part-time employees (which term as used herein includes, without limitation,
officers and directors who are also employees), and an Incentive Stock Option
shall not be granted to an employee of an Affiliate unless such Affiliate is
also a “subsidiary corporation” of the Company within the meaning of Section
424(f) of the Code or any successor provision.
(a) Options. The Committee is
hereby authorized to grant Options to Eligible Persons with the following terms
and conditions and with such additional terms and conditions not inconsistent
with the provisions of the Plan as the Committee shall determine:
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(i)
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Exercise Price
. The purchase price per Share
purchasable under an Option shall be determined by the Committee and shall
not be less than 100% of the Fair Market Value of a Share on the date of
grant of such Option
provided
,
however
, that the Committee
may designate a purchase price below Fair Market Value on the date of
grant (A) to the extent necessary or appropriate, as determined by the
Committee, to satisfy applicable legal or regulatory requirements of a
foreign jurisdiction or (B) if the Option is granted in substitution for a
stock option previously granted by an entity that is acquired by or merged
with the Company or an Affiliate;
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(ii)
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Option Term
. The term of each Option shall be
fixed by the Committee at the time but shall not be longer than 10 years
from the date of grant.
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(iii)
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Time and Method of Exercise
. The Committee shall
determine the time or times at which an Option may be exercised in whole
or in part and the method or methods by which, and the form or forms
(including, without limitation, cash, Shares, promissory notes (
provided
,
however
, that the par value of any Shares to be issued pursuant to such
exercise shall be paid in the form of cash, services rendered, personal
property, real property or a combination thereof and the acceptance of such
promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act of
2002),
other securities, other Awards or other property, or any
combination thereof, having a Fair Market Value on the exercise date equal to
the applicable exercise price) in which, payment of the exercise price with
respect thereto may be made or deemed to have been made. Alternatively, the
Committee may, in its discretion, permit an Option to be exercised by delivering
to the Participant a number of Shares having an aggregate Fair Market Value
(determined as of the date of exercise) equal to the excess if positive, of the
Fair Market Value of the Shares underlying the Option being exercised, on the
date of exercise, over the exercise price of the Option for such Shares.
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-8-
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(iv)
|
Incentive Stock Options
. Notwithstanding anything
in the Plan to the contrary, the following additional provisions shall
apply to the grant of stock options which are intended to qualify as
Incentive Stock Options:
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(A)
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The Committee will not grant Incentive Stock Options in
which the aggregate Fair Market Value (determined as of the time the
Option is granted) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by any Participant during any
calendar year (under this Plan and all other plans of the Company and its
Affiliates) shall exceed $100,000.
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(B)
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All Incentive Stock Options must be granted within ten
years from the earlier of the date on which this Plan was adopted by the
Board or the date this Plan was approved by the stockholders of the
Company.
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(C)
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Unless sooner exercised, all Incentive Stock Options
shall expire and no longer be exercisable no later than 10 years after the
date of grant;
provided
,
however
, that in the case of a
grant of an Incentive Stock Option to a Participant who, at the time such
Option is granted, owns (within the meaning of Section 422 of the Code)
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its Affiliate, such Incentive Stock
Option shall expire and no longer be exercisable no later than 5 years
from the date of grant.
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(D)
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The purchase price per Share for an Incentive Stock
Option shall be not less than 100% of the Fair Market Value of a Share on
the date of grant of the Incentive Stock Option;
provided
,
however
, that, in the case of the grant of an Incentive Stock
Option to a Participant who, at the time such Option is granted, owns
(within the meaning of Section 422 of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or of its Affiliate, the purchase price per Share purchasable under an
Incentive Stock Option shall be not less than 110% of the Fair Market Value of a
Share on the date of grant of the Incentive Stock Option.
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-9-
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(E)
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Any Incentive Stock Option authorized under the Plan
shall contain such other provisions as the Committee shall deem advisable,
but shall in all events be consistent with and contain all provisions
required in order to qualify the Option as an Incentive Stock
Option.
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(b) Stock Appreciation Rights.
The Committee is hereby authorized to grant Stock Appreciation Rights to
Eligible Persons subject to the terms of the Plan and any applicable Award
Agreement. A Stock Appreciation Right granted under the Plan shall confer on the
holder thereof a right to receive upon exercise thereof the excess of (i) the
Fair Market Value of one Share on the date of exercise (or, if the Committee
shall so determine, at any time during a specified period before or after the
date of exercise) over (ii) the grant price of the Stock Appreciation Right as
specified by the Committee, which price shall not be less than 100% of the Fair
Market Value of one Share on the date of grant of the Stock Appreciation Right;
provided
,
however
, that the Committee may designate a grant price
below Fair Market Value on the date of grant (A) to the extent necessary or
appropriate, as determined by the Committee, to satisfy applicable legal or
regulatory requirements of a foreign jurisdiction or (B) if the Stock
Appreciation Right is granted in substitution for a stock appreciation right
previously granted by an entity that is acquired by or merged with the Company
or an Affiliate. Subject to the terms of the Plan and any applicable Award
Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) Restricted Stock and
Restricted Stock Units. The Committee is hereby authorized to grant an Award of
Restricted Stock and Restricted Stock Units to Eligible Persons with the
following terms and conditions and with such additional terms and conditions not
inconsistent with the provisions of the Plan as the Committee shall determine:
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(i)
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Restrictions
. Shares of Restricted Stock and
Restricted Stock Units shall be subject to such restrictions as the
Committee may impose (including, without limitation, any limitation on the
right to vote a Share of Restricted Stock or the right to receive any
dividend or other right or property with respect thereto), which
restrictions may lapse separately or in combination at such time or times,
in such installments or otherwise as the Committee may deem appropriate.
Notwithstanding the foregoing, the Committee may permit acceleration of
vesting of such Awards in the event of the Participant’s death, disability
or retirement or a Change in Control.
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-10-
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(ii)
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Issuance and Delivery of Shares
. Any Restricted
Stock granted under the Plan shall be issued at the time such Awards are
granted and may be evidenced in such manner as the Committee may deem
appropriate, including book-entry registration or issuance of a stock
certificate or certificates, which certificate or certificates shall be
held by the Company. Such certificate or certificates shall be registered
in the name of the Participant and shall bear an appropriate legend
referring to the restrictions applicable to such Restricted Stock. Shares
representing Restricted Stock that are no longer subject to restrictions
shall be delivered to the Participant promptly after the applicable
restrictions lapse or are waived. In the case of Restricted Stock Units,
no Shares shall be issued at the time such Awards are granted. Upon the
lapse or waiver of restrictions and the restricted period relating to
Restricted Stock Units evidencing the right to receive Shares, such Shares
shall be issued and delivered to the holder of the Restricted Stock
Units.
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(iii)
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Forfeiture
. Except as otherwise determined by the
Committee, upon a Participant’s termination of employment or resignation
or removal as a director (in either case, as determined under criteria
established by the Committee) during the applicable restriction period,
all Shares of Restricted Stock and all Restricted Stock Units held by the
Participant at such time shall be forfeited and reacquired by the Company;
provided
,
however
, that the Committee may, when it finds
that a waiver would be in the best interest of the Company, waive in whole
or in part any or all remaining restrictions with respect to Shares of
Restricted Stock or Restricted Stock Units, except as otherwise provided
in the Award Agreement.
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(d) Performance Awards. The
Committee is hereby authorized to grant Performance Awards to Eligible Persons
subject to the terms of the Plan and any applicable Award Agreement. A
Performance Award granted under the Plan (i) may be denominated or payable in
cash, Shares (including, without limitation, Restricted Stock and Restricted
Stock Units), other securities, other Awards or other property and (ii) shall
confer on the holder thereof the right to receive payments, in whole or in part,
upon the achievement of one or more objective Performance Goals during such
performance periods as the Committee shall establish. Subject to the terms of
the Plan, the Performance Goals to be achieved during any performance period,
the length of any performance period, the amount of any Performance Award
granted, the amount of any payment or transfer to be made pursuant to any
Performance Award and any other terms and conditions of any Performance Award
shall be determined by the Committee. Performance Awards that are granted to
Eligible Persons who may be “covered employees” under Section 162(m) and that
are intended to be “qualified performance-based compensation” within the meaning
of Section 162(m), to the extent required by Section 162(m), shall be
conditioned solely on the achievement of one or more objective Performance Goals
established by the Committee within the time prescribed by Section 162(m), and
shall otherwise comply with the requirements of Section 162(m), as described
below.
-11-
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(i)
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Timing of Designations; Duration of Performance
Periods
. For each Award intended to be “qualified performance-based
compensation”, the Committee shall, not later than 90 days after the
beginning of each performance period, (i) designate all Participants for
such performance period and (ii) establish the objective performance
factors for each Participant for that performance period on the basis of
one or more of Performance Goals; provided that, with respect to such
Performance Goals, the outcome is substantially uncertain at the time the
Committee actually establishes the Performance Goal. The Committee shall
have sole discretion to determine the applicable performance period,
provided that in the case of a performance period less than 12 months, in
no event shall a performance goal be considered to be pre-established if
it is established after 25 percent of the performance period (as scheduled
in good faith at the time the Performance Goal is established) has
elapsed.
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(ii)
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Certification
. Following the close of each
performance period and prior to payment of any amount to a Participant
with respect to an Award intended to be “qualified performance-based
compensation,” the Committee shall certify in writing as to the attainment
of all factors (including the performance factors for a Participant) upon
which any payments to a Participant for that performance period are to be
based.
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(iii)
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Payment of Qualified Performance Awards
. Certified
Awards shall be paid no later than two and one-half months following the
conclusion of the applicable performance period;
provided, however,
that the Committee may establish procedures that allow for the payment
of Awards on a deferred basis subject to the requirements of Section 409A.
The Committee may, in its discretion, reduce the amount of a payout
achieved and otherwise to be paid in connection with an Award intended to
be “qualified performance-based compensation,” but may not exercise
discretion to increase such amount.
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(iv)
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Certain Events
. If a Participant dies or becomes
permanently and totally disabled before the end of a performance period or
after the performance period and before an Award is paid, the Committee
may, in its discretion, determine that the Participant shall be paid a
pro-rated portion of the Award that the Participant would have received
but for his or her death or disability.
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(e) Dividend Equivalents. The
Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons
under which the Participant shall be entitled to receive payments (in cash,
Shares, other securities, other Awards or other property as determined in the
discretion of the Committee) equivalent to the amount of cash dividends paid by
the Company to holders of Shares with respect to a number of Shares determined
by the Committee. Subject to the terms of the Plan and any applicable Award
Agreement, such Dividend Equivalents may have such terms and conditions as the
Committee shall determine.
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(f) Stock Awards. The Committee
is hereby authorized to grant to Eligible Persons Shares without restrictions
thereon, as deemed by the Committee to be consistent with the purpose of the
Plan. Subject to the terms of the Plan and any applicable Award Agreement, such
Stock Awards may have such terms and conditions as the Committee shall
determine.
(g) Other Stock-Based Awards. The
Committee is hereby authorized to grant to Eligible Persons such other Awards
that are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as are deemed by the Committee to be
consistent with the purpose of the Plan. The Committee shall determine the terms
and conditions of such Awards, subject to the terms of the Plan and any
applicable Award Agreement. Shares or other securities delivered pursuant to a
purchase right granted under this Section 6(g) shall be purchased for
consideration having a value equal to at least 100% of the Fair Market Value of
such Shares, or other securities on the date the purchase right is granted. The
consideration paid by the Participant may be paid by such method or methods and
in such form or forms (including, without limitation, cash, Shares, promissory
notes (
provided
,
however
, that the par value of any Shares to be
issued pursuant to such exercise shall be paid in the form of cash, services
rendered, personal property, real property or a combination thereof and the
acceptance such promissory notes does not conflict with Section 402 of the
Sarbanes-Oxley Act of 2002), other securities, other Awards or other property or
any combination thereof), as the Committee shall determine.
(h) General.
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(i)
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Consideration for Awards
. Awards may be granted
for no cash consideration or for any cash or other consideration as may be
determined by the Committee or required by applicable law.
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(ii)
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Awards May Be Granted Separately or Together
.
Awards may, in the discretion of the Committee, be granted either alone or
in addition to, in tandem with or in substitution for any other Award or
any award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or in
addition to or in tandem with awards granted under any other plan of the
Company or any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.
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(iii)
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Forms of Payment under Awards
. Subject to the
terms of the Plan and of any applicable Award Agreement, payments or
transfers to be made to the Company or an Affiliate upon the grant,
exercise or payment of an Award may be made in such form or forms as the
Committee shall determine (including, without limitation, cash, Shares,
promissory notes (
provided
,
however
, that the acceptance of
such promissory notes does not conflict with Section 402 of the
Sarbanes-Oxley Act of 2002), other securities, other Awards or other
property or any combination thereof), and may be made in a single payment
or transfer, in installments or on a deferred basis, in each case in
accordance with rules and procedures established
by the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents with respect to installment or deferred payments.
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(iv)
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Term of Awards
. Subject to Section 6(a)(iv)(C),
the term of each Award shall be for a period not to exceed 10 years from
the date of grant.
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(v)
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Limits on Transfer of Awards
. Except as otherwise
provided by the Committee or in this Section 6(h)(v), no Award (other than
a Stock Award) and no right under any such Award shall be transferable by
a Participant other than by will or by the laws of descent and
distribution. Notwithstanding the immediately preceding sentence, no
Incentive Stock Option shall be transferable by a Participant other than
by will or by the laws of descent and distribution. The Committee may
establish procedures as it deems appropriate for a Participant to
designate a Person or Persons, as beneficiary or beneficiaries, to
exercise the rights of the Participant and receive any property
distributable with respect to any Award in the event of the Participant’s
death. The Committee, in its discretion and subject to such additional
terms and conditions as it determines, may permit a Participant to
transfer a Non-Qualified Stock Option to any “family member” (as defined
in the General Instructions to Form S-8 (or any successor to such
Instructions or such Form) under the Securities Act) at any time that such
Participant holds such Option,
provided
that such transfers may not
be for value (as defined in the General Instructions to Form S-8 (or any
successor to such Instructions or such Form) under the Securities Act) and
the family member may not make any subsequent transfers other than by will
or by the laws of descent and distribution. Each Award under the Plan or
right under any such Award shall be exercisable during the Participant’s
lifetime only by the Participant (except as provided herein or in an Award
Agreement or amendment thereto relating to a Non-Qualified Stock Option)
or, if permissible under applicable law, by the Participant’s guardian or
legal representative. No Award (other than a Stock Award) or right under
any such Award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the Company or
any Affiliate.
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(vi)
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Restrictions; Securities Exchange Listing
. All
Shares or other securities delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such restrictions as the
Committee may deem advisable under the Plan, applicable federal or state
securities laws and regulatory requirements, and the Committee may cause
appropriate entries to be made with respect to, or legends to be placed on
the certificates for such Shares or other securities to reflect such
restrictions. The Company shall not be required to deliver any Shares or
other securities covered by an Award unless and until the requirements of
any federal or state securities or other laws, rules or regulations (including the rules of the
Stock Exchange and any other securities exchange upon which the Shares are
listed or quoted) as may be determined by the Company to be applicable are
satisfied.
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(vii)
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Section 409A Provisions
. Notwithstanding anything
in the Plan or any Award Agreement to the contrary, to the extent that any
amount or benefit that constitutes “deferred compensation” to a
Participant under Section 409A and applicable guidance thereunder is
otherwise payable or distributable to a Participant under the Plan or any
Award Agreement solely by reason of the occurrence of a Change in Control
or due to the Participant’s disability or “separation from service” (as
such term is defined under Section 409A), such amount or benefit will not
be payable or distributable to the Participant by reason of such
circumstance unless the Committee determines in good faith that (i) the
circumstances giving rise to such Change in Control, disability or
separation from service meet the definition of a change in ownership or
control, disability, or separation from service, as the case may be, in
Section 409A(a)(2)(A) of the Code and applicable proposed or final
regulations, or (ii) the payment or distribution of such amount or benefit
would be exempt from the application of Section 409A by reason of the
short-term deferral exemption or otherwise. Any payment or distribution
that otherwise would be made to a Participant who is a Specified Employee
(as determined by the Committee in good faith) on account of separation
from service may not be made before the date which is six months after the
date of the Specified Employee’s separation from service (or if earlier,
upon the Specified Employee’s death) unless the payment or distribution is
exempt from the application of Section 409A by reason of the short term
deferral exemption or otherwise.
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Section 7.
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Amendment and Termination; Corrections
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(a) Amendments to the Plan. The
Board may amend, alter, suspend, discontinue or terminate the Plan at any time;
provided
,
however
, that, notwithstanding any other provision of
the Plan or any Award Agreement, prior approval of the stockholders of the
Company shall be required for any amendment to the Plan that:
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(i)
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requires stockholder approval under the rules or
regulations of the Securities and Exchange Commission, the Stock Exchange
or any other securities exchange that are applicable to the
Company;
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(ii)
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increases the number of shares authorized under the Plan
as specified in Section 4(a) of the Plan;
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(iii)
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increases the number of shares subject to the limitation
contained in Section 4(d)(i) or Section 4(d)(ii) of the Plan or the dollar
amount subject to the limitation contained in Section 4(d)(iii) of the
Plan;
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(iv)
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permits the award of Options or Stock Appreciation Rights
at a price less than 100% of the Fair Market Value of a Share on the date
of grant of such Option or Stock Appreciation Right, contrary to the
provisions of Section 6(a)(i) and Section 6(b)(ii) of the Plan;
or
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(v)
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would cause Section 162(m) to become unavailable with
respect to the Plan.
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(b) Amendments to Awards. Subject
to the provisions of the Plan, the Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided in the Plan, the Committee may not
amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, but no such action may adversely affect the
rights of the holder of such Award without the consent of the Participant or
holder or beneficiary thereof. The Company intends that Awards under the Plan
shall satisfy the requirements of Section 409A to avoid any adverse tax results
thereunder, and the Committee shall administer and interpret the Plan and all
Award Agreements in a manner consistent with that intent. If any provision of
the Plan or an Award Agreement would result in adverse tax consequences under
Section 409A, the Committee may amend that provision (or take any other action
reasonably necessary) to avoid any adverse tax results and no action taken to
comply with Section 409A shall be deemed to impair or otherwise adversely affect
the rights of any holder of an Award or beneficiary thereof.
(c) Correction of Defects,
Omissions and Inconsistencies. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Award or Award
Agreement in the manner and to the extent it shall deem desirable to implement
or maintain the effectiveness of the Plan.
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Section 8.
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Income Tax Withholding
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In order to comply with all applicable federal, state,
local or foreign income tax laws or regulations, the Company may take such
action as it deems appropriate to ensure that all applicable federal, state,
local or foreign payroll, withholding, income or other taxes, which are the sole
and absolute responsibility of a Participant, are withheld or collected from
such Participant. In order to assist a Participant in paying all or a portion of
the applicable taxes to be withheld or collected upon exercise or receipt of (or
the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (a) electing to
have the Company withhold a portion of the Shares otherwise to be delivered upon
exercise or receipt of (or the lapse of restrictions relating to) such Award
with a Fair Market Value equal to the amount of such taxes or (b) delivering to
the Company Shares other than Shares issuable upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes. The election, if any, must be made on or before the
date that the amount of tax to be withheld is determined.
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Section 9.
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General Provisions
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(a) No Rights to Awards. No Eligible
Person, Participant or other Person shall have any claim to be granted any Award
under the Plan, and there is no obligation for uniformity of treatment of
Eligible Persons, Participants or holders or beneficiaries of Awards under the
Plan. The terms and conditions of Awards need not be the same with respect to
any Participant or with respect to different Participants.
(b) Award Agreements. No Participant
shall have rights under an Award granted to such Participant unless and until an
Award Agreement shall have been duly executed on behalf of the Company and, if
requested by the Company, signed by the Participant, or until such Award
Agreement is delivered and accepted through an electronic medium in accordance
with procedures established by the Company.
(c) Plan Provisions Control. In the
event that any provision of an Award Agreement conflicts with or is inconsistent
in any respect with the terms of the Plan as set forth herein or subsequently
amended, the terms of the Plan shall control.
(d) No Rights of Stockholders. Except
with respect to Restricted Stock and Stock Awards, neither a Participant nor the
Participant’s legal representative shall be, or have any of the rights and
privileges of, a stockholder of the Company with respect to any Shares issuable
upon the exercise or payment of any Award, in whole or in part, unless and until
such Shares have been issued.
(e) No Limit on Other Compensation
Arrangements. Nothing contained in the Plan shall prevent the Company or any
Affiliate from adopting or continuing in effect other or additional compensation
plans or arrangements, and such plans or arrangements may be either generally
applicable or applicable only in specific cases.
(f) No Right to Employment. The grant
of an Award shall not be construed as giving a Participant the right to be
retained as an employee of the Company or any Affiliate, or the right to be
retained as a director, nor will it affect in any way the right of the Company
or an Affiliate to terminate a Participant’s employment at any time, with or
without cause, or remove a director in accordance with applicable law. In
addition, the Company or an Affiliate may at any time dismiss a Participant from
employment, or remove a director who is a Participant, free from any liability
or any claim under the Plan or any Award, unless otherwise expressly provided in
the Plan or in any Award Agreement. By participating in the Plan, each
Participant shall be deemed to have accepted all the conditions of the Plan and
the terms and conditions of any rules and regulations adopted by the Committee
and shall be fully bound thereby.
(g) Governing Law. The internal law,
and not the law of conflicts, of the State of Delaware shall govern all
questions concerning the validity, construction and effect of the Plan or any
Award, and any rules and regulations relating to the Plan or any Award.
(h) Severability. If any provision of
the Plan or any Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the Committee,
materially altering the purpose or intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction or Award, and the remainder
of the Plan or any such Award shall remain in full force and effect.
-17-
(i) No Trust or Fund Created. Neither
the Plan nor any Award shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the Company or any
Affiliate and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate pursuant
to an Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Affiliate.
(j) Other Benefits. No compensation or
benefit awarded to or realized by any Participant under the Plan shall be
included for the purpose of computing such Participant’s compensation or
benefits under any pension, retirement, savings, profit sharing, group
insurance, disability, severance, termination pay, welfare or other benefit plan
of the Company, unless required by law or otherwise provided by such other plan.
(k) No Fractional Shares. No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award, and the Committee shall determine whether cash shall be paid in lieu of
any fractional Share or whether such fractional Share or any rights thereto
shall be canceled, terminated or otherwise eliminated.
(l) Headings. Headings are given to
the sections and subsections of the Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material or relevant to
the construction or interpretation of the Plan or any provision thereof.
(m) Consultation With Professional Tax
and Investment Advisors. The holder of any Award granted hereunder acknowledges
that the grant, exercise, vesting or any payment with respect to such an Award,
and the sale or other taxable disposition of the Shares acquired pursuant to the
Plan, may have tax consequences pursuant to the Code or under local, state or
international tax laws. Such a holder further acknowledges that such holder is
relying solely and exclusively on the holder’s own professional tax and
investment advisors with respect to any and all such matters (and is not
relying, in any manner, on the Company or any of its employees or
representatives). Finally, such a holder understands and agrees that any and all
tax consequences resulting from the Award and its grant, exercise, vesting or
any payment with respect thereto, and the sale or other taxable disposition of
the Shares acquired pursuant to the Plan, is solely and exclusively the
responsibility of such holder without any expectation or understanding that the
Company or any of its employees, representatives or Affiliates will pay or
reimburse such holder for such taxes or other items.
(n) Forfeiture. All Awards under this
Plan shall be subject to forfeiture and/or penalty conditions or provisions as
determined by the Committee and set forth in the applicable Award Agreement.
Notwithstanding the foregoing provisions, unless otherwise provided by the
Committee in the applicable Award Agreement, this Section 9(n) shall not be
applicable to any Participant following a Change in Control.
-18-
(o) Foreign Employees and Foreign
Law Considerations. The Committee may grant Awards to Eligible Persons who are
foreign nationals, who are located outside the United States, who are United
States citizens or resident aliens on global assignments in foreign nations, who
are not compensated from a payroll maintained in the United States, or who are
otherwise subject to (or could cause the Company to be subject to) legal or
regulatory provisions of countries or jurisdictions outside the United States,
on such terms and conditions different from those specified in the Plan as may,
in the judgment of the Committee, be necessary or desirable to foster and
promote achievement of the purposes of the Plan, and, in furtherance of such
purposes, the Committee may make such modifications, amendments, procedures, or
subplans as may be necessary or advisable to comply with such legal or
regulatory provisions.
(p) Blackout Periods.
Notwithstanding any other provision of this Plan or any Award to the contrary,
the Company shall have the authority to establish any “blackout” period that the
Company deems necessary or advisable with respect to any or all Awards.
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Section 10.
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Effective Date of the Plan
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The Plan shall be effective upon its adoption by the
Board,
provided
,
however
, that in the event the Plan is not
approved by the stockholders of the Company within one year thereafter, the Plan
will be terminated and all Awards granted under the Plan will be terminated and
deemed null and void,
provided
,
however
, that with respect to any
Shares (including Shares of Restricted Stock) issued under the Plan prior to
such termination, the Plan shall be deemed to be effective. The Plan shall be
subject to approval by the stockholders of the Company at the annual meeting of
stockholders of the Company to be held on December 17, 2009, and the Plan shall
be effective as of the date of such stockholder approval.
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Section 11.
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Term of the Plan
|
No Award shall be granted under the Plan after ten years
from the earlier of the date of adoption of the Plan by the Board or the date of
stockholder approval or any earlier date of discontinuation or termination
established pursuant to Section 7(a) of the Plan;
provided, however,
that
in the case of a Performance Award intended to be “qualified performance-based
compensation,” no such Performance Award shall be granted under the Plan after
the fifth year following the year in which stockholders approved the Performance
Goals unless and until the Performance Goals are re-approved by the
stockholders. However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may extend beyond such
dates, and the authority of the Committee provided for hereunder with respect to
the Plan and any Awards, and the authority of the Board to amend the Plan, shall
extend beyond the termination of the Plan.
-19-
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