UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment
No. [ ])
Filed
by Registrant [x]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
[x]
Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission
[ ] Definitive
Proxy Statement
Only (as Permitted
by Rule 14a-6(e)(2))
[ ]
Definitive Additional Materials
[ ]
Soliciting Material Pursuant to §240.14a-12
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box).
[
]
Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title of each class of securities to which transaction
applies:
_________________________________________________________________________
(2)
Aggregate number of securities to which transaction
applies:
_________________________________________________________________________
(3) Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set for the amount on which the
filing fee is calculated and state how it was
determined:
_________________________________________________________________________
(4)
Proposed maximum aggregate value of transaction:
_________________________________________________________________________
(5)
Total fee paid:
__________________________________________________________
[
]
Fee paid previously
with preliminary materials.
[
]
Check box if any
part of the fee is offset as provided by Exchange Act Rule 0-11(a)
(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
1)
Amount Previously Paid:
_________________________________________________________________________
2)
Form, Schedule or Registration Statement No.:
_________________________________________________________________________
3)
Filing Party:
_________________________________________________________________________
4) Date
Filed:
_________________________________________________________________________
Notes:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date:
Wednesday,
August 5, 2020
Time:
2:00
p.m. local time
Place:
Crexendo,
Inc. Corporate Headquarters
1615 S. 52nd
St., Tempe, AZ
85281
Matters
to be voted on:
●
To
consider and vote upon a proposal to ratify the appointment of
Urish Popeck & Co., LLC as our independent registered public
accounting firm for our year ending December 31, 2020;
The
Annual Meeting will also address such other business as may
properly come before the Annual Meeting or any postponement or
adjournment thereof. The foregoing items of business are more fully
described in the Proxy Statement accompanying this
Notice.
Only
stockholders of record at the close of business on June 8,
2020 are entitled to notice of and to vote at the Annual
Meeting. A Notice of Internet Availability of Proxy Materials
containing instructions on how to access our Proxy Statement and
Annual Report for the fiscal year ended December 31, 2019 and
how to vote will be mailed on or about June 21, 2020, to all
stockholders entitled to vote at the meeting.
|
|
By order of our
Board of Directors,
|
|
|
|
|
|
|
|
|
By:
|
/s/
Jeffrey
G. Korn
|
|
|
|
|
Jeffrey G. Korn,
Secretary
|
|
|
|
|
June 22,
2020
|
|
Crexendo, Inc.
_____________________
PROXY STATEMENT
FOR 2020 ANNUAL MEETING OF SHAREHOLDERS
_____________________
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed Proxy is solicited on behalf of the
Crexendo, Inc. ("Crexendo") Board of Directors, or Board, for use
at the Annual Meeting of Stockholders to be held on Wednesday,
August 5, 2020, at 2:00 p.m. local time (the “Annual
Meeting”), and at any postponement or adjournment thereof.
The Annual Meeting will be held at Crexendo’s Corporate
Headquarters at 1615 South 52nd Street, Tempe, AZ,
85281. The purposes of the Annual
Meeting are set forth in the accompanying Notice of Annual Meeting
of Stockholders.
We are monitoring developments regarding the
coronavirus or COVID-19 and preparing in the event any changes for
our annual meeting are necessary or appropriate. If we decide to
make any change, such as to the date or location or to hold the
meeting solely by remote communication, we will announce the change
in advance and post details, including instructions on how
shareholders can participate, on our website www.crexendo.com
and file them with the
SEC.
As permitted by the rules adopted by the
Securities and Exchange Commission, or SEC, we are making these
proxy solicitation materials and the Annual Report for the fiscal
year ended December 31, 2019, including the financial
statements, available to our stockholders electronically via the
Internet. A Notice of Internet Availability of Proxy Materials
containing instructions on how to access our Proxy Statement and
Annual Report for the fiscal year ended December 31, 2019 and
how to vote will be mailed on or about June 22, 2020, to all
stockholders entitled to vote at the meeting. Our principal
executive offices are located at 1615 South 52nd Street, Tempe, AZ,
85281. Our telephone number is
(602) 714-8500.
GENERAL INFORMATION ABOUT THE MEETING
You
may vote if our records show that you own shares of Crexendo as of
June 8, 2020. As of the close of business on June 8, 2020, we had a
total of 15,065,662 shares of common stock issued and
outstanding, which were held of record by approximately 137
stockholders. As of June 8, 2020, we had no shares of preferred
stock outstanding. You are entitled to one vote for each share that
you own.
Voting Your Proxy
If
a broker, bank or other nominee holds your shares, you will receive
instructions from them that you must follow in order to have your
shares voted. If a bank, broker or other nominee holds your shares
and you wish to attend the meeting and vote in person, you must
obtain a “legal proxy” from the record holder of the
shares giving you the right to vote the shares.
Shareholders of
record as of the Record Date can vote their proxy via one of three
ways. It is not necessary to mail your proxy card if you are voting
by internet or fax. If you have questions in regards to your proxy,
or need assistance in voting, please contact our independent proxy
tabulator, Issuer Direct Corp. at 866-752-8683,
proxy@iproxydirect.com.
|
|
VOTE BY MAIL: Please mark, sign, date, and return this Proxy
Card promptly using the enclosed envelope.
|
|
|
VOTE BY FAX: Please mark, sign and date this proxy card
promptly and fax to 202-521-3464.
|
|
|
VOTE BY INTERNET: www.iproxydirect.com
|
If you
submit a proxy using one of the methods described above, your proxy
may be revoked at any time prior to its use by: (1) delivering to
our secretary a signed notice of revocation or a later dated proxy,
(2) attending the meeting and voting in person, or (3) giving
notice of revocation of the proxy at the meeting. Attendance at the
meeting will not in itself constitute the revocation of a proxy.
Prior to the meeting, any written notice of revocation should be
sent to Crexendo, Inc., 1615 South 52nd Street, Tempe, AZ,
85281 Attention: Corporate Secretary. Any notice of revocation that
is delivered at the meeting should be hand delivered to our
corporate secretary before the vote is taken. A stockholder may be
requested to present identification documents for the purpose of
establishing such stockholder’s identity. The last valid vote
you submit chronologically will supersede your prior
vote(s).
One or
more inspectors of election, duly appointed for that purpose, will
count and tabulate the votes cast and report the results of the
votes at the meeting to our management. Your vote at the meeting
will not be disclosed except as needed to permit the inspector to
tabulate and certify the votes, or as is required by
law.
Matters to be Presented
We
are not aware of any matters to be presented other than those
described in this Proxy Statement. If any matters not described in
this Proxy Statement are properly presented at the meeting, the
proxy holders will use their own judgment to determine how to vote
your shares. If the meeting is adjourned, the proxy holders can
vote your shares on the new meeting date as well, unless you have
revoked your proxy instructions.
Cost of This Proxy Solicitation
We
will pay the cost of this proxy solicitation. We may, on request,
reimburse brokerage firms and other nominees for their expenses in
forwarding proxy materials to beneficial owners. In addition to
soliciting proxies by mail, we expect that our directors, officers
and employees may solicit proxies in person or by the Internet,
telephone, or facsimile. None of these individuals will receive any
additional or special compensation for doing this, although we will
reimburse these individuals for their reasonable out-of-pocket
expenses.
How Votes are Counted
The
Annual Meeting will be held if a majority of the outstanding common
stock entitled to vote is represented at the meeting. If you have
returned valid proxy instructions or attend the meeting in person,
your common stock will be counted for the purpose of determining
whether there is a quorum, even if you wish to abstain from voting
on some or all matters at the meeting.
Abstentions and Broker Non-Votes
Shares
that are voted “WITHHELD” or “ABSTAIN” are
treated as being present for purposes of determining the presence
of a quorum and as entitled to vote on a particular subject matter
at the Annual Meeting. If you hold your common stock through a
bank, broker or other nominee, the broker may be prevented from
voting shares held in your account on some proposals (a
“broker non-vote”) unless you have given voting
instructions to the bank, broker or nominee. Shares that are
subject to a broker non-vote are counted for purposes of
determining whether a quorum exists but not for purposes of
determining whether a proposal has passed.
Our Voting Recommendations
When
proxies are properly dated, executed and returned, the shares
represented by such proxies will be voted at the Annual Meeting in
accordance with the instructions of the stockholder. However, if no
specific instructions are given, the shares will be voted in
accordance with the following recommendations of our
Board:
●
FOR”
ratification of Urish Popeck & Co., LLC as our independent
registered public accounting firm for fiscal year 2020;
and
Deadlines for Receipt of Stockholder Proposals
Stockholders
may present proposals for action at a future meeting only if they
comply with the requirements of the proxy rules established by the
SEC and our bylaws. Stockholder proposals that are intended to be
included in our Proxy Statement and form of Proxy relating to the
meeting for our 2021 Annual Meeting of Stockholders under rules set
forth in the Securities Exchange Act of 1934, as amended, or the
Securities Exchange Act, must be received by us no later than
February 21, 2021 to be considered for inclusion.
Beneficial Ownership of Shares
The following table sets forth, as of June 8,
2020, the number of shares of our common stock beneficially owned
by each of the following persons and groups and the percentage of
the outstanding shares owned by each person and group including:
(i) each person who is known by us to be the owner of record or
beneficial owner of more than 5% of the outstanding shares of our
common stock; (ii) each director and nominee; (iii) each of our
NEO’s; and (iv) all of our current directors and executive
officers as a group.
With respect to certain of the individuals listed
below, we have relied upon information set forth in statements
filed with the Securities and Exchange Commission pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934.
Except as otherwise noted below, the address of each person
identified in the following table is c/o Crexendo, Inc.,
1615 South 52nd Street, Tempe, Arizona,
85281.
|
Name of Beneficial Owner
|
|
Number of Outstanding Options and Restricted Stock Units
(1)
|
Total Beneficial Ownership (2)
|
Percent of Class Beneficially Owned
|
|
Steven
G. Mihaylo
|
10,358,504
|
502,730
|
10,861,234
|
69.8%
|
|
Todd
Goergen
|
360,000
|
125,997
|
485,997
|
3.2%
|
|
Jeffrey
Bash
|
169,992
|
85,997
|
255,989
|
1.7%
|
|
David
Williams
|
20,000
|
115,997
|
135,997
|
0.9%
|
|
Anil
Puri
|
13,501
|
115,997
|
129,498
|
0.9%
|
|
Doug
Gaylor
|
4,499
|
494,738
|
499,237
|
3.2%
|
|
Ron
Vincent
|
6,997
|
328,729
|
335,726
|
2.2%
|
|
All
current directors and executive officers as a group (7
persons)
|
10,933,493
|
1,770,185
|
12,703,678
|
75.5%
|
(1)
Reflects options
that will be exercisable or vested, as the case may be, as of June
8, 2020, or within 60 days thereafter and restricted stock
units that are scheduled to vest within 60 days of June 8,
2020.
(2)
Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission, based upon 15,065,662 shares of
common stock outstanding on June 8, 2020. In computing the number
of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock subject to options
held by that person that are currently exercisable or become
exercisable within 60 days following June 8, 2020 and
restricted stock units that are scheduled to vest within 60 days of
June 8, 2020 are deemed outstanding. These shares, however, are not
deemed outstanding for the purpose of computing the percentage
ownership of any other person. The persons and entities named in
the table have sole voting and sole investment power with respect
to the shares set forth opposite such stockholder’s
name.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a)
of the Securities Exchange Act of 1934 requires our directors and
executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of
our common stock and other equity securities. Officers, directors
and greater than ten percent shareholders are required by SEC
regulation to furnish us with copies of all Section 16(a)
forms they file. Based on a review of reports and representations
submitted to us, all reports regarding beneficial ownership of our
securities required to be filed under Section 16(a) for the year
ended December 31, 2019 were timely filed, except for the
following:
1.
Mr. Steven G.
Mihaylo’s April 26, 2019 stock purchase Form 4 was not filed
until May 8, 2019 due to clerical error.
BOARD OF DIRECTORS
Set
forth in the table below are the names, ages and positions of each
Director on our Board. None of our directors or executive officers
has any family relationship to any other director or executive
officer.
|
Name
|
Age
|
Position
|
|
Steven G. Mihaylo
|
76
|
Chairman of the Board, Chief Executive Officer
|
|
Jeffrey P. Bash
|
78
|
Director
|
|
Anil Puri
|
71
|
Director
|
|
David Williams
|
65
|
Director
|
|
Todd Goergen
|
47
|
Director
|
Set
forth below is a brief description of the business experience for
at least the previous five years of our directors:
Directors
Anil Puri
Dr.
Anil Puri is director of the Woods Center for Economic Analysis and
Forecasting at Cal State Fullerton. He served as provost for the
university and dean for the Mihaylo College of Business and
Economics. Prior to becoming Dean in 1998, Dr. Puri was department
chair and professor of economics at California State University,
Fullerton. Dr. Puri is a noted economist and scholar who has served
as the Executive Vice President of the Western Economic Association
International, the second largest professional association of
economists in the United States and is a member of the American
Economic Association, and the National Association of Business
Economists. Dr. Puri brings to the Board extensive business and
financial experience. Dr. Puri has previously served and counseled
public boards and he is a panel member of the National Association
of Business Economists' Survey of Economic Conditions. Dr. Puri is
a Class II director and his term will expire at our 2023 annual
meeting of stockholders.
David Williams
Mr. Williams has been a director of the company
since May 2008. Since 2008, Mr. Williams has served as the
Chairman and Chief Executive Officer at Equity Capital Management
Corp, which provides asset management, and tax oriented consulting
and financing for real estate investors. In addition, Mr.
Williams serves as Counsel and Chief Financial Officer of Pacific
Equities Capital Management Corporation, a real estate holding
company. From 1996 to 2008, Mr. Williams acted as an
independent consultant in taxation, real estate transactions and
venture capital. Mr. Williams served as Chief Financial Officer and
tax counsel at Wilshire Equities Corp., from 1987 to 1990 and as
President from 1990 to 1996. From 1980 to 1987, Mr. Williams rose
from a junior staff member to director position at Arthur Young
& Co., a public accounting firm. The Board recognizes Mr.
Williams' business, finance and tax experience and values his
contributions to Board discussions and to the Company. Mr.
Williams is a certified public accountant in California, Nevada and
Washington, and holds a juris doctorate degree in law from the
McGeorge Law School of University of the Pacific. Mr. Williams
graduated from Stanford University with a Master of Science degree
in engineering finance and a Bachelor of Science degree in
biological science with honors. Mr. Williams is a Class I
director and his term will expire at our 2022 annual meeting of
stockholders.
Jeffrey P. Bash
Mr.
Bash has been a long time investor in Crexendo and has extensive
investing and corporate finance experience. From 2008 to the
present Bash has also worked as a consultant to the private equity
firm, FinTekk AP, LLC of Newport Beach, CA, providing strategic
planning, corporate finance, structure, analysis, research and
report writing services; including advisory services, as
needed, to small private companies. Since 1996, Bash has
been a private investor and advocate for stockholder interests with
both managements and Boards. Prior to 1996, Bash was a
Corporate Vice President & Actuary for New York Life Insurance
Company, becoming a Fellow of the Society of Actuaries (FSA) from
1970 until his retirement in 1995. He has also been a Vice
President of private, family-owned
Richmont Corporation of Dallas, TX, providing corporate finance
services. Mr. Bash received his Bachelor of Arts degree
in mathematics from Oberlin College. Mr. Bash is a Class II
director and his term will expire at our 2023 annual meeting of
stockholders.
Steven G. Mihaylo
Mr.
Mihaylo was appointed our Chief Executive Officer in 2008 and
Chairman of the Board in November 2010. Mr. Mihaylo is the former
Chairman and Chief Executive Officer of Inter-Tel, Incorporated
(“Inter-Tel”), which he founded in 1969. Mr. Mihaylo
led the Inter-Tel revolution from providing business telephone
systems to offering complete managed services and software that
help businesses facilitate communication and increase customer
service and productivity. Before selling Inter-Tel for nearly $750
million in 2007, he grew the business to nearly $500 million in
annual revenue. Mr. Mihaylo led the development of Inter-Tel from
providing business telephone systems to offering complete managed
services and software that helped businesses facilitate
communication and increase customer service and productivity. The
Board nominated Mr. Mihaylo to the Board in part because he is the
Chief Executive Officer of the Company and has more than 40 years
of experience in the industry.
Mr.
Mihaylo was awarded an honorary PhD from California State
University - Fullerton and received a Bachelor of Arts in Business
Administration in Accounting & Finance from California State
University, Fullerton in 1969. Mr. Mihaylo has served on boards of
numerous community organizations including the Arizona Heart
Foundation, Junior Achievement of Arizona, Arizona Museum of
Science and Technology and the Arizona State University College of
Business Dean’s Council of 100. Committed to education, Mr.
Mihaylo is involved with the Karl Eller College of Management at
the University of Arizona and has served on the advisory board of
Junior Achievement of Central Arizona for over 25 years, as a
member of the board of directors, as well as being a member of the
Big Bear High School Education Foundation, and is on the
Dean’s Advisory Board of California State University -
Fullerton. Mr. Mihaylo is a Class I director and his term will
expire at our 2022 annual meeting of stockholders.
Todd A. Goergen
Mr.
Goergen is Founder and Managing Partner of The Ropart Asset
Management Funds and serves on the Investment Committee of Ropart
Investments, LLC. Mr. Goergen's primary responsibilities
include the management of the private equity portfolio, assisting
in asset allocation and oversight of the firm’s outside
investment managers. Additionally, Mr. Goergen has been
responsible for many of the firm's strategy decisions including;
active versus passive management, impact of investment manager
returns and broader investor trends in the alternative investment
industry. Prior to founding the RAM Funds in 2001, Mr.
Goergen began his career in Mergers and Acquisitions and corporate
finance at Donaldson, Lufkin, and Jenrette ("DLJ"). While at DLJ,
Mr. Goergen was involved with over several billion dollars of buy
side and sell side transactions. After DLJ, Mr. Goergen was
Director of Mergers and Acquisitions at Blyth, Inc., a leading
global designer and marketer of personal and decorative
products. Mr. Goergen graduated from Wake Forest University
with concentrations in Economics and Political Science. Mr.
Goergen sits on the board of directors for the following firms:
Cura, Crexendo and Fragmob; and is an observer on the board of
Heal. Additionally, Mr. Goergen is an active member of U.S.
and International Advisory Councils to the Global Leadership
Foundation and is an activist in the preservation of African
wildlife. Mr. Goergen is an avid wine enthusiast and has
written columns for several magazines. Mr. Goergen is a Class I
director and his term will expire at our 2022 annual meeting of
stockholders.
CORPORATE GOVERNANCE
Board Meetings
During
the year ended December 31, 2019, our Board met seven times. Each
director attended at least 75% of the aggregate of the total number
of meetings of our Board and the total number of all meetings held
by committees on which he served during the year ended December 31,
2019. All of our directors are invited, but not required, to attend
the annual meeting. Our Chairman of the Board and major
shareholder, Mr. Mihaylo attended the 2019 annual
meeting.
Information about Committees of our Board of Directors
Our
Board of Directors has established three committees, the Audit
Committee, comprised of Messrs. Williams (chairman), Goergen and
Dr. Puri, the Compensation Committee comprised of Messrs. Goergen
(chairman) and Bash, and the Nominating Committee, comprised of
Messrs. Bash (chairman), Goergen, and Williams. Our Board of
Directors has determined that each of these persons is
“independent” under the rules of the OTCQX Marketplace
and applicable regulatory requirements.
Audit Committee
Mr.
Williams serves as Chairman of our Audit Committee. Our Audit
Committee held four meetings during the year ended December 31,
2019 and operates under a charter adopted by our Board on December
3, 2003. The charter is available on our website at www.crexendo.com.
Our Audit Committee is responsible for reviewing and discussing our
audited financial statements with management, discussing
information with our auditors relating to the auditors' judgments
about the quality of our accounting policies and procedures,
recommending to our Board that the audited financials be included
in our Annual Report on Form 10-K and overseeing compliance with
the Securities and Exchange Commission requirements for disclosure
of auditors' services and activities.
Our
Board of Directors has determined that David Williams, Chairman of
our Audit Committee, is an audit committee financial expert as
defined in Item 407(d) of Regulation S-K under the Securities
Exchange Act of 1934, as amended. No Audit Committee member serves
on more than three publicly-traded companies.
Compensation Committee
Mr.
Goergen serves as Chairman of our Compensation Committee. The
Compensation Committee held one meeting during the year ended
December 31, 2019 and evaluates the performance of executives,
pursuant to the Compensation Committee Charter, a copy of which is
posted on our website at www.crexendo.com.
The Compensation
Committee has decision-making authority with respect to the
compensation of our named executive officers, including our
Chief Executive Officer. The Committee also administers our
long-term incentive plans and has decision-making authority with
respect to stock option grants to employees.
In
carrying out its responsibilities, the Compensation Committee may
engage outside consultants as it determines to be appropriate.
The Compensation
Committee did not retain a compensation consultant during the year
ended December 31, 2019.
Nominating Committee
Mr.
Bash serves as the Chairman of our Nominating Committee. Our
Nominating Committee, which held zero meetings since our last
annual meeting, reviews and suggests candidates for election or
appointment to our Board, and operates pursuant to our Nominating
Committee Charter, a current copy of which is posted on our website
at www.crexendo.com.
Our Nominating Committee may attempt to recruit persons who possess
the appropriate skills and characteristics required of members of
our Board. Our Nominating Committee may use any reasonable means
for recruitment of potential members including their own expertise
or the use of one or more third-party search firms to assist with
this purpose.
In the
course of reviewing potential director candidates, the Nominating
Committee considers nominees recommended by our shareholders. When
considering a potential candidate for service as a director, the
Nominating Committee may consider, in addition to the minimum
qualifications and other criteria approved by our Board, all facts
and circumstances that the Nominating Committee deems appropriate
or advisable, including, among other things, the skills of the
proposed director candidate, his or her availability, depth and
breadth of business experience or other background characteristics,
his or her independence and the needs of our Board. At a minimum,
each nominee, whether proposed by a stockholder or any other party,
is expected to have the highest personal and professional
integrity, demonstrate sound judgment and possesses the ability to
effectively interact with other members of our Board to serve the
long-term interests of our company and shareholders. In addition,
the Nominating Committee may consider whether the nominee has
direct experience in our industry or in the markets in which we
operate and whether the nominee, if elected, assists in achieving a
mix of Board members that represent a diversity of background and
experience. The procedures to be followed by shareholders in
submitting such recommendations are described below in the section
entitled “Submission of Securities Holder Recommendations for
Director Candidates.”
Leadership Structure
Our
Chief Executive Officer serves as the Chairman of the Board. We
believe that this leadership structure is appropriate due to the
nature of our business. Mr. Mihaylo’s experience in
leadership positions throughout our company during his tenure, as
well as his role in developing and executing the strategic plan, is
critical to our future results. Mr. Mihaylo was able to utilize his
in-depth knowledge and perspective gained in running our company to
effectively and efficiently guide the full Board by recommending
Board and committee meeting agendas, leading Board discussions on
critical issues and creating a vital link among the Board,
management and shareholders. Our Board believes this structure
serves our shareholders by ensuring the development and
implementation of our company’s strategies.
Risk Oversight
In
general, our Board, as a whole and also at the committee level,
oversees our risk management activities. Our Board annually reviews
management’s long-term strategic plan and the annual budget
that results from that strategic planning process. Using that
information, our Compensation Committee establishes both the
short-term and long-term compensation programs that include all our
executives (including the named executive officers). These
compensation programs are ratified by our Board, as a whole. The
compensation programs are designed to focus management on the
performance metrics underlying the operations of the Company, while
limiting risk exposure to our company. Our Board receives periodic
updates from management on the status of our operations and
performance (including updates outside of the normal Board
meetings). Finally, as noted below, our Board is assisted by our
Audit Committee in fulfilling its responsibility for oversight of
the quality and integrity of our accounting, auditing and financial
reporting practices. Thus, in performing its risk oversight our
Board establishes the performance metrics, monitors on a timely
basis the achievement of those performance metrics, and oversees
the mechanisms that report those performance metrics.
Code of Business Conduct
We have
adopted a Code of Business Conduct and Ethics applicable to our
directors, officers and employees. A copy of this code is posted on
our website at www.crexendo.com. In the event that we amend or
waive any of the provisions of the Code of Business Conduct and
Ethics applicable to our Chief Executive Officer, Chief Financial
Officer, we intend to satisfy our disclosure obligations under Item
5.05 of Form 8-K by posting such information on our
website.
Stockholder Communications
Shareholders and
other interested parties who wish to communicate with
non-management directors of the Company should send their
correspondences to: Crexendo Non-Management Directors, Crexendo,
Inc., 1615 South 52nd Street, Tempe,
Arizona 85281, or by email to nonmanagementdirectors@crexendo.com.
All communications are forwarded directly to the appropriate
non-management director.
Submission of Security Holder Recommendations for Director
Candidates
All
security holder recommendations for director candidates must be
submitted in writing to the Secretary of our Company, Jeffrey G.
Korn, at 1615 South 52nd Street, Tempe,
Arizona 85281, who will forward all recommendations to the
Nominating Committee. All security holder recommendations for
director candidates must be submitted to our company not less than
120 calendar days prior to the date on which the company’s
Proxy Statement was released to shareholders in connection with the
previous year’s annual meeting of shareholders. All security
holder recommendations for director candidates must include
(1) the name and address of record of the security holder,
(2) a representation that the security holder is a record
holder of our security, or if the security holder is not a record
holder, evidence of ownership in accordance with
Rule 14a-8(b), (2) of the Securities Exchange Act of 1934,
(3) the name, age, business and residential address,
educational background, public company directorships, current
principal occupation or employment, and principal occupation or
employment for the preceding five full fiscal years of the proposed
director candidate, (4) a description of the qualifications
and background of the proposed director candidate which addresses
the minimum qualifications and other criteria for directors
approved by our Board from time to time, (5) a description of
all arrangements or understandings between the security holder and
the proposed director candidate, (6) the consent of the
proposed director candidate to be named in the proxy statement, to
have all required information regarding such director candidate
included in the applicable proxy statement, and to serve as a
director if elected, and (7) any other information regarding
the proposed director candidate that is required to be included in
a proxy statement filed pursuant to the rules of the Securities and
Exchange Commission.
DIRECTOR COMPENSATION
The
annual pay package for non-employee directors is designed to
attract and retain highly qualified professionals to represent our
shareholders. We also reimburse our directors for travel, lodging
and related expenses they incur on company-related business,
including Board and committee meetings. In setting director
compensation, we consider the amount of time that directors spend
in fulfilling their duties to the Company as well as the skill
level required by our directors. Directors who are also employees
receive no additional compensation for serving on our Board. For
the year ended December 31, 2019, non-employee director
compensation consisted of the following.
Cash Compensation. For the year
ended December 31, 2019, our non-employee directors received
quarterly cash compensation of $2,500 per quarter following
completion of the first three quarterly meetings and $3,000 per
quarter starting with the November 5, 2019 meeting.
Stock Options. We have granted stock
options to our non-employee directors with an exercise price equal
to the closing price per share on the date of the grant. We do not
grant options with an exercise price below 100% of the trading
price of the underlying shares of our common stock on the date of
grant. Stock options only have a value to the extent the value of
the underlying shares on the exercise date exceeds the exercise
price. Accordingly, stock options provide compensation only if the
underlying share price increases over the option term.
In
granting stock options to our non-employee directors, we also
consider the impact of the grant on our financial performance, as
determined in accordance with accounting guidance. For share-based
equity awards, we record expense in accordance with applicable
accounting guidance. The amount of expense we record pursuant to
accounting guidance may vary from the corresponding compensation
value we use in determining the amount of the awards.
The
following table summarizes the compensation earned by and paid to
our non-employee directors for the year ended December 31,
2019:
|
Director
|
Fees Earned or Paid in Cash
|
|
|
|
|
Todd
Goergen
|
$10,500
|
$14,497(2)
|
$-
|
$24,997
|
|
Jeffrey
P. Bash
|
$10,500
|
$14,497(3)
|
$-
|
$24,997
|
|
David
Williams
|
$10,500
|
$14,497(4)
|
$-
|
$24,997
|
|
Anil
Puri
|
$10,500
|
$14,497(4)
|
$-
|
$24,997
|
(1)
The amounts shown
in the “Stock Awards” and “Option Awards”
column represent the aggregate grant date fair value of the options
granted to the NEOs, computed in accordance with accounting
guidance. Estimates of forfeitures related to service-based vesting
conditions have been disregarded. The assumptions used in the
calculation of these amounts are included in the notes to our
consolidated financial statements for the year ended December 31,
2019, included in our Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 3,
2020.
(2)
As of June 8, 2020
Mr. Goergen held unexercised options to purchase an aggregate of
134,000 shares of our common stock.
(3)
As of June 8, 2020,
Mr. Bash held unexercised options to purchase an aggregate of
94,000 shares of our common stock.
(4)
As of June 8, 2020,
each of Messrs. Williams and Puri held unexercised options to
purchase an aggregate of 124,000 shares of our common
stock.
EXECUTIVE OFFICERS
The
name, age, position and a brief account of the business experience
of each of our executive officers as of June 8, 2020 are set forth
below:
|
Name
|
Age
|
Position
|
|
Steven G. Mihaylo
|
76
|
Chief Executive Officer and Chairman of the Board
|
|
Doug Gaylor
|
54
|
Chief Operating Officer and President
|
|
Ron Vincent
|
44
|
Chief Financial Officer
|
Steven G. Mihaylo
Biographical
information for Mr. Mihaylo is set forth above under
“Board of Directors”
Doug Gaylor
Mr.
Gaylor has served as our President and Chief Operating Officer
(COO) since May 2012. Prior to ascending to the role of
President, Mr. Gaylor was Vice President of Sales for the company,
a position he held since joining the company in 2009. Mr.
Gaylor’s 30+ years in the telecom industry have all been
focused on sales, business development, and executive management
with publicly held telecommunications companies making him a
subject matter expert in UCaaS, call center, and
collaboration.
Prior
to joining Crexendo, Mr. Gaylor held positions of increasing
responsibility, culminating with the position of Sr. Vice
President, at Inter-Tel/Mitel where he was originally hired in
1987. Mr. Gaylor was responsible for overseeing the sales efforts
in the Western United States where he was ultimately responsible
for the activities of approximately 200 sales representatives.
Under his leadership yearly sales for his region reached over $175
million annually. Mr. Gaylor holds a Bachelors of Arts in
Communications from the University of Houston. He is an active
Board Member for multiple non-profit organizations specializing in
education and community support.
Ron Vincent
Mr.
Vincent has served as our Chief Financial Officer since April 2012.
Prior to joining the Company, Mr. Vincent was employed by Ernst
& Young, LLP (EY), as an audit senior manager, which concluded
his fourteen year professional career as an auditor. Mr. Vincent
received a Bachelor of Science in Business from Indiana University
(Bloomington), Kelly School of Business in 1998 and a Master of
Business Administration degree from the University of Phoenix. Mr.
Vincent is a licensed Certified Public Accountant in the state of
Arizona. Mr. Vincent is an active member of the OTCQX U.S. Advisory
Council.
EXECUTIVE COMPENSATION AND OTHER MATTERS
Compensation Discussion and Analysis
The
overall objective of our executive compensation program is to help
create long-term value for our shareholders by attracting and
retaining talented executives, rewarding superior operating and
financial performance, and aligning the long-term interests of our
executives with those of our shareholders. Accordingly, our
executive compensation program incorporates the following
principles:
●
We believe that
retaining experienced, competent, goal-oriented executives and
minimizing executive turnover is in our shareholders’ best
interests;
●
We believe that a
portion of our executives’ compensation should be tied to
measures of performance of our business as a whole and that such
measures of performance should be non-discretionary;
●
We believe that a
portion of our executives’ compensation should be tied to
measures of performance within each executive’s specific job
responsibilities and that those measures should be as
non-discretionary as possible;
●
We believe that the
interests of our executives should be linked with those of our
shareholders through the risks and rewards of owning our common
stock;
●
We believe that a
meaningful portion of each executive’s long-term incentives,
and merit increases will vary based upon individual
performance;
●
We believe that
each executive’s performance against corporate and individual
objectives for the previous year should be periodically reviewed,
and that the difficulty of achieving desired results in any
particular year must be considered; and
●
We believe that we
should consider the ability of each executive to support our
long-term performance goals; as well as each executive’s
ability to fulfill his or her management responsibilities and his
or her ability to work with and contribute to our executive
management team.
Executive Compensation Procedures
In
conjunction with our efforts to achieve the executive compensation
objectives and implement the underlying compensation principles
described above, we follow the procedures described
below:
Role of the Compensation Committee
The
Compensation Committee periodically requests and receives survey
data from our human resource department on the compensation levels
and practices of companies that need executive officers with skills
and experience similar to what we require, companies that are in
the same or similar industries as us, and companies with market
capitalizations and revenues similar to us. The Compensation
Committee uses this broad based survey information as a check on
whether our compensation packages are consistent with current
industry practices and are at a level that will enable us to
attract and retain capable executive officers. We did not retain
the services of a compensation consulting firm in
2019.
With
respect to executives other than the Chief Executive Officer, the
Compensation Committee seeks and receives recommendations from the
Chief Executive Officer with respect to performance and appropriate
levels of compensation. The Committee does not request or accept
recommendations from the Chief Executive Officer concerning his own
compensation.
The
Compensation Committee’s conclusions and recommendations on
the compensation packages for our executive officers are based on
the total mix of information from the sources described above, as
well as the Committee Members’ general knowledge of executive
compensation practices and their personal evaluations of the likely
effects of compensation levels and structure on the attainment of
our business and financial objectives.
Each
year, our senior management prepares a business plan and
establishes goals for our company. The Compensation Committee
reviews, modifies (if necessary), occasionally sets, and ultimately
approves these goals, which are then incorporated into the
company’s business plan. Periodically throughout the year,
the Compensation Committee compares Company goals against actual
circumstances and accomplishments. The Compensation Committee may
revise the Company’s goals and business plan if they
determine that circumstances warrant.
The
Compensation Committee relies on its judgment in making
compensation recommendations and decisions after reviewing our
company’s overall performance and evaluating each
executive’s performance against established goals, leadership
ability, responsibilities within the company, and current
compensation arrangements. The compensation program for NEOs and
the Compensation Committee assessment process are designed to be
flexible so as to better respond to the evolving business
environment and individual circumstances.
The
Compensation
Committee may, in its discretion, delegate all or a portion
of its duties and responsibilities to a subcommittee of the
Compensation
Committee consisting of one or more members of the
committee. In particular, the Compensation Committee may
delegate the approval of certain transactions to a subcommittee
consisting solely of members of the committee who are (a)
“Non-Employee Directors” for the purpose of Rule 16b-3
under the Securities Exchange Act of 1934, as in effect from time
to time, and (b) “outside directors” for the purposes
of Section 162(m) of the Internal Revenue Code, as in effect from
time to time.
Elements of our Compensation Programs: What our Compensation
Programs are Designed to Award and Why We Choose Each
Element
Elements of Compensation. We
implement the executive compensation objectives and principles
described above through the use of the following elements of
compensation, each of which is described in greater detail
below:
●
Non-equity
Incentive Bonus Plan
●
Stock Options and
Stock Awards
●
Other Personal
Benefits
The
Compensation Committee evaluates overall compensation levels for
each NEO in relation to other executives within our company and in
relation to the NEO’s prior year compensation. The
Compensation Committee also considers competing offers made to
NEOs, if any. The Compensation Committee considers each element of
compensation collectively with the other elements when establishing
the various forms and levels of compensation for each NEO. The
Compensation Committee approves compensation programs which it
believes are competitive with our peers, such that the combination
of base pay and performance-based bonuses results in an aggregate
rate of cash salary, bonus compensation, equity awards and other
benefits for our NEOs within competitive market
standards.
In
determining long-term equity awards to executives, the Compensation
Committee considers total equity awards available under the Plan,
the number of equity awards to be granted to each executive in
relation to other executives, the overall compensation objective
for each executive, and the number and type of awards to executives
in prior years.
Base Pay. Base salaries of the
NEOs are set at levels that the Compensation Committee believes are
generally competitive with our market peers so as to attract,
reward, and retain executive talent. The Compensation Committee may
opt to pay higher or lower amounts depending on individual
circumstances. The Compensation Committee sets the base pay of the
Chief Executive Officer and the other NEOs. Annual adjustments are
influenced by growth of our operations, revenues and profitability,
individual performance, changes in responsibility, and other
factors. The table below summarizes base pay for our NEOs as of
December 31, 2019:
|
Name
|
|
Position
|
|
Steven
G. Mihaylo
|
$-
|
Chief
Executive Officer and Chairman of the Board
|
|
Doug
Gaylor
|
$235,000
|
Chief
Operating Officer and President
|
|
Ron
Vincent
|
$180,000
|
Chief
Financial Officer
|
Non-equity Incentive Bonus
Plan. We have
utilized incentive bonuses to reward performance achievements and
have in place annual target incentive bonuses for certain of our
executive officers, payable either in whole or in part, depending
on the extent to which the financial performance goals set by the
Compensation Committee are achieved. During fiscal 2019, the target
bonus amount for Messrs. Gaylor and Vincent was
$18,750.
Under
our 2019 Profit Sharing Plan, incentive bonuses for all of the
participants, including the participating NEOs, were determinable
based upon two measures of corporate financial performance that
comprised 100% of the potential target payout. Specifically,
corporate financial performance was measured against our total
revenue and our adjusted EBITDA. For there to be any award to a
participant, the total revenue target must exceed the budgeted
total revenue target approved by the Compensation Committee. If the
revenue target is met and the budgeted adjusted EBITDA achieved,
there shall be an award pool of fifty (50) percent of the excess
adjusted EBITDA above the budgeted adjusted EBITDA approved by the
Compensation Committee, to be allocated to participants based on
the participant’s proportionate share. The Compensation
Committee selected these performance goals because it believed that
these measures aligned with the 2019 priorities for our business
and reflected value generated for our stockholders, and therefore
relying on these goals for the determination of the bonuses tied
payment of bonuses to creation of stockholder value.
For the
total revenue financial performance components the Compensation
Committee established a target, and for the adjusted EBITDA
financial performance component the Compensation Committee
established a floor and a ceiling.With respect to the portion of
the bonus based upon the adjusted EBITDA performance criteria, the
participating executive could earn between zero and 100% ratably
based on attainment between the floor and the ceiling. The revenue
target and the adjusted EBITDA floor, target and ceiling were as
follows:
|
Performance Measures
|
|
|
|
|
($ in
thousands)
|
|
|
|
|
Revenue
|
$14,039
|
$14,039
|
$14,039
|
|
Adjusted
EBITDA
|
$896
|
$1,096
|
$1,296
|
|
Percent attainment
of the Target Bonus Amount
|
0%
|
50%
|
100%
|
The
table below illustrates the minimum, target, and maximum bonus
amounts potentially payable to our named executive officers under
the 2019 Profit Sharing Plan:
|
Name
|
|
|
|
|
Douglas
Gayor
|
$-
|
$18,750
|
$37,500
|
|
Ron
Vincent
|
$-
|
$18,750
|
$37,500
|
At
the time that the 2019 Profit Sharing Plan was developed, the
Compensation Committee believed that these targets presented
achievable goals, but were not necessarily certain, and achievement
depended upon successful execution of our business plan. Bonuses
are reviewed and approved by the Compensation Committee, which
determined the performance and operational criteria necessary for
award of such bonuses. The actual bonus amount earned by each
participating executive was determined by the Compensation
Committee based upon attainment of the performance criteria after
our 2019 financial results were reviewed and approved by the Audit
Committee of the Board. Applying the formula described herein to
our 2019 financial performance, the Compensation Committee
determined that this would have resulted in a payout of
approximately 100% of the total ceiling amount for the 2019 Profit
sharing Plan. Accordingly, the Compensation Committee authorized
and approved a payment of annual bonuses to the 2019 Profit Sharing
Plan participants, including our named executive officers. Messrs.
Gaylor and Vincent received bonuses of $37,500 and $37,500,
respectively, which represents approximately 16%, and 21% of their
annual base salary in 2019.
Stock Options and Stock
Awards. The Compensation Committee grants
discretionary, long-term equity awards to our NEOs under the Plan.
These awards have historically been in the form of stock options
and restricted stock units. The Compensation Committee believes
that stock options and stock awards align the interests of NEOs
with the interests of our shareholders and will incentivize the
NEOs to provide stockholder value. The Compensation Committee
believes that such grants provide long-term performance-based
compensation, help retain executives through the vesting periods,
and serve to align management and stockholder interests. In making
awards under the Plan, the Compensation Committee considers grant
size. Options and restricted stock units vest only to the extent
that the NEO remains a company employee through the applicable
vesting dates, typically monthly over three years. We believe the
three year vesting schedule assists in retaining executives and
encourages the NEOs to focus on long-term performance.
We have
granted stock options to our NEOs with an exercise price equal to
the closing price per share on the date of the grant. We do not
grant options with an exercise price below 100% of the trading
price of the underlying shares of our common stock on the date of
grant. Stock options only have a value to the extent the value of
the underlying shares on the exercise date exceeds the exercise
price. Accordingly, stock options provide compensation only if the
underlying share price increases over the option term and the
NEO’s employment continues with us until the vesting
date.
In
granting stock options and restricted stock units to the NEOs, we
also consider the impact of the grant on our financial performance,
as determined in accordance with accounting guidance. For
share-based equity awards, we record expense in accordance with
applicable accounting guidance. The amount of expense we record
pursuant to accounting guidance may vary from the
corresponding compensation value we use in determining the amount
of the awards.
Retirement and Other Personal
Benefits. All of our NEOs receive similar retirement
and other personal benefits. We sponsor the Crexendo, Inc.
Retirement Savings Plan (the “401(k) Plan”) for
eligible employees. Our NEOs participate in the 401(k) Plan. The
401(k) Plan is a broad-based, tax-qualified retirement plan
under which eligible employees, including the NEOs, may make annual
pre-tax salary reduction contributions, subject to the various
limits imposed under the Internal Revenue Code of 1986, as amended
(the “Code”). We make matching contributions
under the 401(k) Plan on behalf of eligible participants,
including the NEOs, at the rate of 100% of the first one percent
and 50% of each additional percentage of each participating
NEO’s salary up to a six percent deferral, with a two-year
vesting schedule for the matched portion. Matching contributions
are not subject to non-discrimination requirements imposed by the
Code. The 401(k) Plan is intended to help us attract and
retain qualified executives through the offering of competitive
employee benefits. We do not maintain any other pension or
retirement plans for the NEOs.
We
provide other traditional benefits and limited perquisites to our
NEOs in order to achieve a competitive pay package as detailed in
the Summary Compensation Table. The Compensation Committee
believes that these benefits, which are detailed in the Summary
Compensation Table under the heading “All Other
Compensation”, are reasonable, competitive, appropriate, and
consistent with our overall executive compensation program. Other
than our company’s contributions to the 401(k) Plan,
these benefits consist principally of personal automobile
reimbursements, country club dues, and gym
memberships.
Compensation of Steven G. Mihaylo, Chief
Executive Officer .Mr. Mihaylo is primarily responsible for
investor relations activities and the general management of our
NEOs. Mr. Mihaylo does not receive a base salary, however, the
Company does pay for insurance premiums which is reported as
compensation. Mr. Mihaylo does not participate in any non-equity
incentive plans, but is eligible to receive stock option awards or
other equity compensation. The Compensation Committee believes Mr.
Mihaylo’s interests are directly aligned with the interests
of our shareholders because of Mr. Mihaylo’s significant
equity holdings in our company and his eligibility to participate
in stock option awards or other equity compensation similar to
Messrs. Gaylor and Vincent.
Compensation of Doug Gaylor, President and
Chief Operating Officer. Mr. Gaylor has general
responsibility for our operations. Mr. Gaylor receives a base
salary similar to the other NEOs. Mr. Gaylor also receives
retirement and other personal benefits similar to the other NEOs.
Mr. Gaylor receives stock options or other equity compensation
similar to Messrs. Mihaylo and Vincent.
Compensation of Ron Vincent, Chief Financial
Officer. Mr. Vincent has general responsibility for our
accounting, finance, and human resource functions. Mr. Vincent
receives a base salary similar to the other NEOs. Mr. Vincent also
receives retirement and other personal benefits similar to the
other NEOs. Mr. Vincent receives stock options or other equity
compensation similar to Messrs. Gaylor and Mihaylo.
Deductibility of Executive
Compensation. Section 162(m) of the Code
imposes a $1 million annual limit on the amount that a public
company may deduct for compensation paid to its chief executive
officer during a tax year or to any of its two other most highly
compensated executive officers who are still employed at the end of
the tax year. The limit does not apply to compensation that meets
the requirements of Code Section 162(m) for
“qualified performance-based” compensation (i.e.,
compensation paid only if the executive meets pre-established,
objective goals based upon performance criteria approved by the
shareholders).
The
Compensation Committee reviews and considers the deductibility of
executive compensation under Section 162(m) of the
Internal Revenue Code. In certain situations, the Compensation
Committee may approve compensation that will not meet the
requirements of Code Section 162(m) in order to ensure
competitive levels of total compensation for our executive
officers. For the years ended December 31, 2019 and 2018, the
compensation paid to the NEOs did not exceed the limitations
imposed by Code Section 162(m).
Summary Compensation Table
The
table below summarizes the total compensation paid or earned by
each of our NEOs for the year ended December 31, 2019 (marked as
“2019” in the year column), and for the year ended
December 31, 2018 (marked as “2018” in the year
column).
|
Name and Principal Position
|
|
|
|
|
|
Non-Equity Incentive Plan (2)
|
|
|
|
Steven Mihaylo
(3)
|
2019
|
$4,007
|
$-
|
$-
|
$60,744
|
$-
|
$7,276
|
$72,027
|
|
Chief
Executive Officer
|
2018
|
$4,089
|
$-
|
$-
|
$-
|
$-
|
$7,056
|
$11,145
|
|
|
|
|
|
|
|
|
|
|
Doug Gaylor
(4)
|
2019
|
$233,654
|
$-
|
$-
|
$60,744
|
$37,500
|
$17,553
|
$349,451
|
|
Chief
Operating Officer & President
|
2018
|
$225,385
|
$-
|
$-
|
$86,765
|
$-
|
$14,753
|
$326,903
|
|
|
|
|
|
|
|
|
|
|
Ron Vincent
(4)
|
2019
|
$175,962
|
$-
|
$33,750
|
$-
|
$37,500
|
$15,970
|
$263,182
|
|
Chief
Financial Officer
|
2018
|
$166,731
|
$-
|
$-
|
$67,484
|
$-
|
$13,437
|
$247,652
|
(1)
The amounts shown
in the “Stock Awards” and “Option Awards”
columns represent the aggregate grant date fair value of the
options and restricted stock units granted to the NEOs, computed in
accordance with accounting guidance. Estimates of forfeitures
related to service-based vesting conditions have been disregarded.
The assumptions used in the calculation of these amounts are
included in notes to our consolidated financial statements for the
year ended December 31, 2019, included in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 3, 2020.
(2)
The amounts shown
in the “Non-equity Incentive Plan” column represents
the non-equity incentive bonus earned under the 2019 Profit Sharing
Plan.
(3)
All other
compensation for Mr. Mihaylo consists of country club
dues.
(4)
All other
compensation for Messrs. Gaylor and Vincent consists primarily of
matching contributions to the 401(k) Plan, automobile allowance,
country club dues, gym memberships, and other miscellaneous
benefits, none of which exceeded $10,000.
Outstanding Equity Awards as of December 31, 2019
The
table below provides information on the holdings of stock options
and stock awards by the NEOs as of December 31, 2019.
|
|
|
|
|
Name
|
Number of Securities of Underlying Unexercised Options (#)
Exercisable
|
Number of Securities Underlying Unexercised Options (#)
Unexercisable
|
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
|
Steven
Mihaylo
|
170,000
|
-
|
|
$5.90
|
5/17/2021
|
-
|
$-
|
|
|
191,678
|
-
|
|
$4.08
|
3/1/2022
|
-
|
$-
|
|
|
140,000
|
-
|
|
$3.19
|
3/4/2021
|
-
|
$-
|
|
|
11,080
|
28,920
|
(2)
|
$2.25
|
2/12/2026
|
-
|
$-
|
|
|
|
|
|
|
|
|
|
|
Doug
Gaylor
|
10,000
|
-
|
|
$3.30
|
7/16/2020
|
-
|
$-
|
|
|
25,000
|
-
|
|
$5.90
|
5/17/2021
|
-
|
$-
|
|
|
25,000
|
-
|
|
$4.08
|
3/1/2022
|
-
|
$-
|
|
|
50,000
|
-
|
|
$3.55
|
5/15/2022
|
-
|
$-
|
|
|
50,000
|
-
|
|
$2.45
|
3/18/2023
|
-
|
$-
|
|
|
40,000
|
-
|
|
$3.19
|
3/4/2021
|
-
|
$-
|
|
|
75,000
|
-
|
|
$1.85
|
1/5/2022
|
-
|
$-
|
|
|
150,000
|
-
|
|
$1.11
|
12/31/2022
|
-
|
$-
|
|
|
25,000
|
-
|
|
$1.56
|
3/7/2024
|
-
|
$-
|
|
|
26,176
|
18,824
|
(1)
|
$2.93
|
3/9/2025
|
-
|
$-
|
|
|
11,080
|
28,920
|
(2)
|
$2.25
|
2/12/2026
|
-
|
$-
|
|
|
|
|
|
|
|
|
|
|
Ron
Vincent
|
25,000
|
-
|
|
$3.55
|
5/15/2022
|
-
|
$-
|
|
|
50,000
|
-
|
|
$2.45
|
3/18/2023
|
-
|
$-
|
|
|
25,000
|
-
|
|
$3.19
|
3/4/2021
|
-
|
$-
|
|
|
75,000
|
-
|
|
$1.85
|
1/5/2022
|
-
|
$-
|
|
|
100,000
|
-
|
|
$1.11
|
12/31/2022
|
-
|
$-
|
|
|
25,000
|
-
|
|
$1.56
|
3/7/2024
|
-
|
$-
|
|
|
20,359
|
14,641
|
(1)
|
$2.93
|
3/9/2025
|
|
|
|
|
-
|
-
|
|
$-
|
|
10,835
|
$46,049(3)
|
(1)
Remaining
unexercisable options vest ratably on a monthly basis through March
9, 2021.
(2)
Remaining
unexercisable options vest ratably on a monthly basis through
February 12, 2022.
(3)
Remaining
restricted stock units vest ratably on a monthly basis through
February 12, 2022.
Option Exercises and Stock Vested
The
following table presents information about the exercise of stock
options and vesting of stock awards by NEOs during the year ended
December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
Name
|
Number of shares acquired on exercise (#)
|
Value realized on exercise ($)
|
Number of shares acquired on vesting (#)
|
Value realized on vesting ($)
|
|
Steven
Mihaylo
|
70,322
|
$63,290
|
-
|
$-
|
|
Ron
Vincent
|
-
|
$-
|
4,165
|
$14,257
|
Potential Payments upon Termination or
Change-in-Control
Acceleration of Vesting of Options and Other
Stock Awards upon Change in Control. All
outstanding stock options awarded to the NEOs become fully vested
upon a “change in control,” without regard to whether
the NEO terminates employment in connection with or following the
change in control.
If a
change in control results in acceleration of vesting of an
NEO’s otherwise unvested stock options and other stock
awards, and if the value of such acceleration exceeds 2.99 times
the NEO’s average W-2 compensation from employment with the
company for the five taxable years preceding the year of the change
in control (the “Base Period Amount”), the acceleration
would result in an excess parachute payment under Code
Section 280G equal to the value of such acceleration which is
in excess of the NEO’s average W-2 compensation from
employment with the company for the five taxable years preceding
the year of the change in control. An NEO would be subject to
a 20% excise tax under Code Section 4999 on any such excess
parachute payment and we would be unable to deduct the excess
parachute payment.
———————
PROPOSAL I
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
———————
At the
meeting we will ask our stockholders to ratify the appointment of
Urish Popeck & Co., LLC (“Urish Popeck”) as our
independent registered public accounting firm to audit our
consolidated financial statements as of and for the year ending
December 31, 2020. A representative of Urish Popeck may be present
at the meeting, and will have the opportunity to make a statement
if he or she desires to do so and to respond to appropriate
questions.
Stockholder
ratification of the selection of Urish Popeck as our independent
registered public accounting firm is not required by our bylaws or
other applicable legal requirements. However, our Board is
submitting the selection of Urish Popeck to the stockholders for
ratification as a matter of good corporate governance. If the
stockholders fail to ratify the selection, the Audit Committee will
reconsider whether to retain Urish Popeck as our independent
registered public accounting firm. Even if the selection is
ratified, the Audit Committee, in its discretion may direct the
appointment of a different independent registered public accounting
firm at any time during the year if it determines that such a
change would be in our best interests and in the best interests of
our stockholders.
Approval of the
proposal to ratify the appointment of Urish Popeck to serve as our
independent registered public accounting firm for the year ending
December 31, 2020 requires that the votes cast in favor of the
proposal at the meeting must exceed the votes cast against the
proposal.
The Board recommends a vote “FOR” the proposal to
ratify the appointment of Urish Popeck as our
independent registered public accounting firm for the year ending
December 31, 2020.
AUDIT COMMITTEE REPORT
In
accordance with the Audit Committee Charter adopted by our Board on
December 3, 2003, the Audit Committee is responsible for reviewing
and discussing our audited financial statements with management,
discussing information with our independent registered public
accounting firm relating to such firm’s judgments about the
quality of our accounting policies and practices, recommending to
our Board that the audited financials be included in our Annual
Report on Form 10-K and overseeing compliance with the Securities
and Exchange Commission requirements for disclosure of such
firm’s services and activities. Currently the Audit Committee
is comprised of Goergen, Puri and Williams. Our Board has
determined that each of these persons is independent. The Audit
Committee Charter is in compliance with all regulatory
requirements, and is published on our website.
Our
management has the primary responsibility for our financial
statements as well as our financial reporting process, policies and
internal controls. Our independent registered public accounting
firm is responsible for performing an audit of our financial
statements and expressing an opinion as to the fair presentation of
such financial statements in accordance with U.S. generally
accepted accounting principles. Our Audit Committee is responsible
for, among other things, reviewing the results of the audit
engagement with our independent registered public accounting firm;
reviewing the adequacy, scope and results of the internal
accounting controls and procedures; reviewing the degree of
independence of our independent registered public accounting firm;
reviewing the fees of such firm; and recommending the engagement of
our independent registered public accounting firm to the full
Board.
In this
context, the Audit Committee reviewed and discussed our audited
financial statements as of and for the year ended December 31, 2019
with management and our independent registered public accounting
firm. The Audit Committee discussed with our independent registered
public accounting firm the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit
Committees), as amended. In addition, the Audit Committee received
written confirmation, in accordance with standards of the Public
Company Accounting Oversight Board, and discussed with our
independent registered public accounting firm their independence
from our company. The Audit Committee has also considered whether
such firm’s provision of non-audit services to us is
compatible with maintaining such firm’s
independence.
The
members of the Audit Committee are not engaged in the accounting or
auditing profession. In the performance of their oversight
function, the members of the Audit Committee necessarily relied
upon the information, opinions, reports and statements presented to
them by our management of and by our independent registered public
accounting firm. As a result, the Audit Committee's oversight and
the review and discussions referred to above do not assure that
management has maintained adequate financial reporting processes,
policies and internal controls, that our financial statements are
accurate, that the audit of such financial statements has been
conducted in accordance with the standards of the Public Company
Accounting Oversight Board or that our independent registered
public accounting firm meets the standards for auditor
independence.
Based on the review and discussions
above, the Audit Committee recommended that the audited financial
statements be included in our Annual Report on Form 10-K for the
year ended December 31, 2019. The Audit Committee also
selected Urish Popeck as Crexendo’s independent registered
public accounting firm for the fiscal year ending December 31,
2020. The Board of Directors is recommending that the stockholders
ratify this selection at the Annual Meeting.
Members
of the Audit Committee
David
Williams, Chairman
Todd
Goergen
Anil
Puri
The above report of the Audit Committee will not be deemed to be
incorporated by reference to any filing by us under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that we specifically incorporate the same by
reference.
Fees of Independent Registered Public Accounting Firm
We have
set forth below the aggregate fees paid or accrued for professional
services rendered by Urish Popeck during the years ended December
31, 2019 and 2018. All of the services described in the following
fee table were approved in conformity with the Audit
Committee’s pre-approval process.
|
|
Year Ended
December 31,
2019
|
Year Ended
December 31,
2018
|
|
Audit Fees (1)
(audit of our annual financial
statements, review of our quarterly financial statements, review of
our SEC filings and correspondence with the
SEC)
|
$128,250
|
$131,393
|
|
Tax Fees (2)
|
38,948
|
50,271
|
|
|
$167,198
|
$181,664
|
(1)
Audit Fees: Fees
paid or accrued for professional services rendered for the audit
and reviews of our financial statements filed with the SEC on Forms
10-K and 10-Q, and reviews of our correspondence with the
Securities and Exchange Commission.
(2)
Tax Fees: Fees
billed for the preparation of federal and state income tax returns
and other tax consultation services.
Pre-Approval Policies and Procedures
The
Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by our
independent registered public accounting firm. The policy generally
provides for the pre-approval of the scope of and fees for services
in the defined categories of audit services, audit-related
services, and tax services. Pre-approval is usually provided by the
Audit Committee on a project-by-project basis before the
independent registered public accounting firm is engaged to provide
that service, and for de minimus projects only, pre-approval is
provided with a not-to-exceed fee level determined for a group of
such de minimus projects. The pre-approval of services may be
delegated to the Chairman of the Audit Committee, but the decision
must be reported to and ratified by the full Audit Committee at its
next meeting.
ADDITIONAL INFORMATION
Shareholders Sharing The Same Address
We
are sending only one copy of our annual report and proxy statement
to stockholders who share the same address unless they have
notified us that they want to continue receiving multiple copies.
This practice is designed to reduce duplicate mailings and save
significant printing and processing costs as well as natural
resources.
If you received only one mailing this year and you
would like to have additional copies of our annual report and/or
proxy statement mailed to you, or you would like to opt out of
receiving only one mailing for future mailings, please submit your
request to our Corporate Secretary, Crexendo, Inc., 1615 South
52nd
Street, Tempe, AZ,
85281, Attn: Investor Relations or call Jeffrey Korn in our Legal department at
(623) 242-0002. We will promptly send additional copies of the
annual report and/or proxy statement upon receipt of such request.
You may also contact us if you received multiple copies of the
annual meeting materials and would prefer to receive a single copy
in the future.
Other Matters
We know of no other matters to be submitted for the Annual Meeting.
If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the accompanying form of
proxy to vote the shares they represent as the Board of Directors
may recommend.
|
|
By
Order of the Directors
/s/
Jeffrey G. Korn
Jeffrey G. Korn, Secretary
Dated:
June 22, 2020
|
|
|
|
|
|
|
|
CREXENDO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – AUGUST 5, 2020 AT 2 PM LOCAL
TIME
|
|
|
|
|
|
|
CONTROL ID:
|
|
|
|
|
|
|
|
|
REQUEST ID:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The undersigned, being a stockholder of Crexendo,
Inc., hereby authorizes Jeffrey G. Korn, with the full power of
substitution, to represent the undersigned at the Annual Meeting of
Stockholders (the “Meeting”) of Crexendo to be held at
Crexendo, Inc., 1615 South 52nd
Street, Tempe, AZ, 85281 on August 5,
2020, at 2:00 p.m., local time, and at any adjournment or
postponement thereof, with respect to all votes that the
undersigned would be entitled to cast, if then personally present,
as appears on the reverse side of this proxy.
In
their discretion, the proxies are authorized to vote with respect
to matters incident to the conduct of the Meeting and upon such
other matters as may properly come before the Meeting. This proxy
may be revoked at any time before it is exercised.
|
|
|
|
|
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VOTING INSTRUCTIONS
|
|
|
|
|
|
|
|
If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAIL:
|
Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
|
|
|
|
|
|
|
|
FAX:
|
Complete the reverse portion of this Proxy Card
and Fax to 202-521-3464.
|
|
|
|
|
|
|
|
INTERNET:
|
https://www.iproxydirect.com/CXDO
|
|
|
|
|
|
|
|
PHONE:
|
1-866-752-VOTE(8683)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ANNUAL MEETING OF THE STOCKHOLDERS OF
CREXENDO, INC.
|
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE: ☒
|
|
|
|
|
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
|
|
|
|
|
|
|
|
Proposal
1
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
|
|
|
|
To
consider and vote upon a proposal to ratify the appointment of
Urish Popeck & Co., LLC as our independent registered public
accounting firm for our year ending December 31, 2020.
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTROL ID:
|
|
|
|
|
|
|
|
|
|
|
|
REQUEST ID:
|
|
|
|
|
|
|
|
MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING:
☐
|
|
The Board of Directors recommends a vote of “FOR” for
proposal 1.
|
|
|
|
MARK HERE FOR ADDRESS CHANGE ☐ New Address (if applicable):
__________________________
__________________________
__________________________
IMPORTANT: Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized
person.
Dated:
________________________, 2020
|
|
|
|
|
(Print Name of
Stockholder and/or Joint Tenant)
|
|
|
|
(Signature of
Stockholder)
|
|
|
|
(Second Signature
if held jointly)
|