PROPOSAL 1
ELECTION OF DIRECTORS
Pursuant to the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, the Board is divided into three separate classes of directors. At each
Annual Meeting of Stockholders, one class of directors is elected to a term of three years.
J.M. Allain, Marco M. Elser and George W. Schiele have been nominated by the Board, upon the recommendation of the Nominating Committee, for election as directors at the 2017 Annual Meeting. Those elected will serve a three-year term until the 2020 annual meeting of stockholders (the “2020 Annual Meeting”) or until the election and qualification of their successors, or their earlier death, resignation or removal. All directors (other than Mr. Shi) attended the 2016 Annual Meeting of Stockholders. The Amended and Restated Certificate of Incorporation of the Company allows for the Board to consist of a minimum of five and a maximum of fifteen members.
Mr. Allain, Mr. Elser and Mr. Schiele are each current directors who were elected at the 2015 annual meeting of stockholders. Messrs. Elser and Schiele are independent pursuant to the listing requirements of the NYSE MKT Company Guide. There are no family relationships among any of the directors, director nominees and executive officers.
Each nominee has agreed to serve if elected. If a nominee becomes unavailable for election or cannot serve, an event that we do not expect, the Board may substitute another nominee or reduce the number of nominees. The enclosed proxy will be voted for such substitute, if any, as shall be designated by the Board.
Each of the director nominees receiving a plurality of the votes cast at the 2017 Annual Meeting will be elected as a director. You may withhold votes from any or all nominees. Broker non-votes will have no effect on the result of this vote.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR
EACH OF THE NOMINEES.
Director Qualifications
The following paragraphs provide information as of the date of this proxy statement about each nominee and current director. The information presented includes information each nominee and director has given us about his age, all positions he holds, his principal occupation and business experience for the past five years and the names of other publicly-held companies for which he currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each director and director nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment.
Director Nominees
J.M. Allain, 47,
became the President and CEO of the Company on February 16, 2010 and has served as a director since June 2011. Mr. Allain served as President of Panasonic Solutions Company from July 2008 through October 2009; Vice President of Duos Technologies from August 2007 through June 2008; General Manager of Netversant Solutions from October 2004 through June 2005; and Vice President of Adesta, LLC from May 2002 through September 2004. Mr. Allain has familiarity with the operational requirements of complex organizations and has experience dealing with reorganizations and turnarounds. Mr. Allain’s experience and deep understanding of the operations of the Company allow him to make valuable contributions to the Board.
Marco M. Elser, 58,
has served as a director since May 2012. Since 2015, Mr. Elser has served as a partner with Lonsin Capital, a London-based investment banking firm. Since 2014, Mr. Elser also serves on the Board of Directors of Protalex, a Florham Park, NY-based biotechnology company. Mr. Elser previously had been one of the independent directors of North Hills Signal Processing Corporation, a Long Island, NY based technology company, until May 2017; a partner with AdviCorp Plc, a London-based investment banking firm; served as International Vice President of Northeast Securities, managing distressed funds for family offices and small institutions, from 1994 to 2001; served as a first Vice President of Merrill Lynch Capital Markets in Rome and London until 1994; was formerly Chairman of the Board of Pine Brook Capital, a Shelton, CT based engineering company; and was the President of the Harvard Club of Italy until 2014, an association he founded in 2002 with other Alumni in Italy where he has been living since 1984. He received his BA in Economics from Harvard College in 1981. Mr. Elser’s extensive knowledge of international finance and commerce allows him to make valuable contributions to the Board.
George W. Schiele, 86,
has served as a director since December 2009. Mr. Schiele was elected Chairman of the Board (a non-executive position) of the Company on September 29, 2010. Mr. Schiele currently serves as a trust management and private investment officer, and has held such positions since 1974. He is also President of ten other private companies, Vice President or Trustee of nine entities and President or Vice President of two Foundations. From 2003 until 2013 he was a Director of Connecticut Innovations, Inc., one of the nation’s five most active venture capital firms, and was Chairman of its Investment Advisory and Investment Committees from 2004 until 2013, responsible during his tenure for more than 200 VC investments. Mr. Schiele additionally serves as Trustee of ten private trusts from1974 through the present. Mr. Schiele serves as an officer of two charitable foundations since 1974 and 2006 has been Managing Partner of two investment partnerships since 2008, and was a Director and officer of The Yankee Institute until 2016. Mr. Schiele’s long experience in previous start-ups and corporate restructurings and his service to other boards of directors allow him to make valuable contributions to the Board.
Other Company Directors
Alan K. Greene, 77,
has served as an independent director since October 2013. Mr. Greene has previously served as a Partner of Price Waterhouse from 1974 to 1995, acting at various times as Managing Partner for cross border transactions and as National Director of tax services for M&A, and in connection with foreign banks and mutual funds with respect to acquisition and investment strategies. Currently, Mr. Greene serves on the board of directors of Intellicorp, Inc. (since 2001) and RAVE, Inc. (since 2005). Previously, he was a director of Connecticut Innovations, Inc. from 2005 until 2015, the Connecticut Clean Energy Fund from 2007 until 2011, Metromedia International Group, Inc. from 2007 until 2011, Enduro Medical Technologies LLC from 2005 until 2013 and Greene Rees Technologies, LLC from 1995 until 2013. Mr. Greene has also held prior board positions at Fortistar Capital, Oswego Hydro, Access Shipping and various other public and private companies through the years. Mr. Greene’s experience serving as chairman of various audit committees of many of these organizations and strong aptitude for technologies allow him to provide valuable contributions to the Board.
Mr. Greene’s term expires at the 2019 Annual Meeting of Stockholders.
Ryan J. Morris, 33,
was appointed as an independent director in April 2016. Mr. Morris serves as President of Meson Capital Partners LLC, a San Francisco-based investment partnership, which he founded in February 2009. Mr. Morris also currently serves on the board of directors of Sevcon, Inc. since December 2013. Previously, Mr. Morris served as a director of InfuSystem Holdings, Inc. from April 2012 to May 2015 (and served as Executive Chairman from April 2012 to May 2015) and Lucas Energy, Inc. from October 2012 to October 2014 (and was Chairman of the Board from December 2012 to November 2013). From June 2011 to July 2012, Mr. Morris served as a member of the equity committee of HearUSA, Inc., responsible for maximizing value to the stockholders. Mr. Morris’ extensive knowledge of finance and his service to other boards of directors allow him to make valuable contributions to the Board. Mr. Morris’ term expires at the 2019 Annual Meeting of Stockholders.
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Alberto Shaio, 69,
became the Chief Operating Officer of the Company on October 6, 2014 and has served as a director since October 2013. He also serves on the Board of Advisors of Scorpion Capital. Previously, Mr. Shaio served as President and CEO of Craftsmen Industries from January 1, 2011 through September 1, 2013. Previously he held various posts with Farrel Corporation (Ansonia CT and Rochdale England) from 1986 until December 31, 2010, including the role of President and CEO since 2003. Mr. Shaio was a Director of the HF Mixing Group (Germany) from 2002 until 2010. From 1970 through 1986, Mr. Shaio was General Manager, Vice President or President of various companies including Pavco, Filmtex (Colombia SA), and the Interamerican Investment Group. He has served on the board of directors of New Energy Corporation, Farrel Corporation, Interactive Systems, Polifilm, Filmtex, PAVCO SA, and Harburg Freudenberg Maschinenbau GmbH (Germany). Mr. Shaio’s extensive international experience and service to numerous other boards of directors allow him to provide valuable contributions to the Board. Mr. Shaio’s term expires at the 2018 Annual Meeting of Stockholders.
Yaozhong Shi, 49,
became a non-executive employee of the Company on July 22, 2015 and has served as a director since June 2014. Mr. Shi was appointed as a director of the Company pursuant to the terms of that certain Securities Purchase Agreement dated as of June 27, 2014 between the Company and Transtech LED Company Limited (“Transtech”). Mr. Shi has been an employee of the Company since July 2015. Mr. Shi has over 25 years of experience in the LED industry. Mr. Shi’s contributions to Transtech have resulted in a successful, well-known brand in the LED display total solution industry that provides solutions for multiple indoor & outdoor applications primarily in the media, entertainment and sports sectors. Mr. Shi’s strong business knowledge and extensive history and resources in the LED display arena allow him to provide valuable contributions to the Board. Mr. Shi’s term expires at the 2019 Annual Meeting of Stockholders.
Salvatore J. Zizza, 71,
has served as an independent director since December 2009. Mr. Zizza was elected Vice Chairman of the Board (a non-executive position) of the Company on September 29, 2010. Mr. Zizza has previously served as Chief Executive Officer and Chairman of the Board of General Employment Enterprises Inc. from December 23, 2009 until December 26, 2012. Mr. Zizza had served as President and Chief Operating Officer of Bion Environmental Technologies Inc. from January 13, 2003 until December 31, 2005, and has served as Non Executive Chairman of Harbor BioSciences, Inc. since March 27, 2009. He currently serves as the Chairman of Zizza & Associates, LLC. Mr. Zizza serves as the Chairman of Bethlehem Advanced Materials. Additionally, Mr. Zizza serves as a Director of GAMCO Westwood Funds. He has been an Independent Trustee of GAMCO Global Gold, Natural Resources & Income Trust by Gabelli since November 2005 and serves as a Director/trustee of 26 funds in the fund complex of Gabelli Funds. He has been Director of General Employment Enterprises Inc. since January 8, 2010 and has been an Independent Trustee of Gabelli Dividend & Income Trust since 2003. Mr. Zizza has been Independent Director of Gabelli Convertible & Income Securities Fund Inc. since April 24, 1991 and has been a Director of Gabelli Equity Trust, Inc. since 1986 and a Trustee of Gabelli Utility Trust since 1999. He served as Lead Independent Director of Hollis-Eden Pharmaceuticals from March 2006 to March 2009 and as a Director of Earl Scheib Inc. from March 1, 2004 to April 2009. As previously disclosed in the Company’s Prospectus filed on October 14, 2015, the SEC issued a cease and desist order which provides that Mr. Zizza violated Rule 13b2.2 of the Securities Exchange Act of 1934 and in connection therewith Mr. Zizza agreed to pay a $150,000 fine. Mr. Zizza received his Bachelor of Arts in Political Science and his Master of Business Administration in Finance from St. John's University, which also has awarded him an Honorary Doctorate in Commercial Sciences. Mr. Zizza’s extensive experience and service to numerous other boards of directors allow him to provide valuable contributions to the Board. In addition, Mr. Zizza also serves as Chairman of the Audit Committee and is the “audit committee financial expert” as required under the rules of the SEC. Mr. Zizza’s term expires at the 2018 Annual Meeting of Stockholders.
5
CORPORATE GOVERNANCE AND RELATED MATTERS
Board of Directors
Board Composition and Election of Directors
We operate under the direction of our Board. Our Board is responsible for the management of our business and affairs. Our Certificate of Incorporation provides that the number of directors may be determined pursuant to our Amended and Restated Bylaws, which provide that such number may be determined from time to time by our Board. However, under our Amended and Restated Bylaws, the Board shall consist of a minimum of five and a maximum of fifteen directors.
Our directors are divided into three separate classes of directors. At each Annual Meeting of Stockholders, one class of directors is elected to a term of three years or until the election and qualification of their successors, or their earlier death, resignation or removal. There are no family relationships among any of our directors or executive officers.
Independent Directors
While the Company’s Common Stock is traded on the OTCQB, the Company follows the NYSE MKT Company Guide regarding the determination of independence of the Company’s directors. A director is considered independent if the Board determines that the director does not have any direct or indirect material relationship with the Company. Messrs. Allain, Shaio and Shi are employees of the Company and therefore have been determined by the Board to fall outside the definition of “independent director.” Mr. Shi is a Director of Transtech, which is one of the Company’s main suppliers of LED modules. Messrs, Elser, Greene, Morris, Schiele and Zizza are non-employee directors of the Company.
The Board has determined that Messrs. Greene, Morris, Schiele and Zizza are “independent directors” because they had no relationship with the Company other than their capacities as members of the Board and committees thereof. The Board has determined that Mr. Elser’s voting dispositive power as investment manager of Carlisle Investments, Inc. (“Carlisle”), which has made loans to the Company, does not disqualify Mr. Elser from being considered an “independent director.” The Board has determined that its two Audit Committee members, Messrs. Greene and Zizza, are “independent directors”. In addition, our Board has made a subjective determination as to each independent director and independent director nominee that no relationships exist which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our Board reviewed and discussed information provided by the directors, the director nominees and us with regard to each director and director nominee’s business and personal activities and relationships as they may relate to us and to our management. In addition, our Board has concluded that each of Messrs. Greene and Zizza satisfies the heightened audit committee independence standards set forth in Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Board Committees
Our Board has established a standing Audit Committee, Compensation Committee, Executive Committee and Nominating Committee. Each committee operates under a charter approved by our Board. Copies of each committee’s charter are posted on the Investor Relations section of our website at www.trans-lux.com.
Audit Committee
Our Audit Committee consists of Messrs. Greene and Zizza, with Mr. Zizza serving as chairman. Our Board has determined that Mr. Zizza is an “audit committee financial expert” as defined in applicable SEC rules. Our Audit Committee’s responsibilities include:
•
appointing, compensating, retaining and overseeing the work of any public accounting firm engaged by us for the purpose of preparing or issuing an audit report or performing other audit, review or attest services;
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reviewing and discussing with management and the external auditors our audited financial statements;
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considering the effectiveness of our internal control system;
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reviewing and discussing with management the Company’s major financial risk exposures and steps management has taken to monitor and control such exposures and liabilities;
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establishing our policy regarding our hiring of employees or former employees of the external auditors and procedures for the receipt, retention and treatment of accounting related complaints and concerns;
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meeting independently with our external auditors and management;
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reviewing and updating the Audit Committee Charter; and
•
preparing the Audit Committee report required by the proxy rules of the SEC.
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Compensation Committee
Our Compensation Committee consists of Messrs. Elser, Greene and Zizza, with Mr. Greene serving as chairman. Our Compensation Committee’s responsibilities include:
•
providing guidance and periodic monitoring for all of our corporate compensation;
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considering the effectiveness of our employee equity programs;
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administering our stock incentive plans with respect to our executive officers and employee Board members, including the adjustment of base salary each year;
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implementing and administering our incentive compensation programs and authorizing all awards under these incentive programs;
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administering our employee benefit plans; and
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approving all perquisites, equity incentive awards, special cash payments or loans made or paid to executive officers and employee Board members and assisting the Board of Directors in succession planning for executive officers.
At the end of each fiscal year, the Compensation Committee meets to review the performance of executive officers and employee Board members subject to the short-swing profit restrictions of Section 16 of the Exchange Act under those programs and award bonuses thereunder. At that time, the Compensation Committee may also adjust base salary levels for executive officers and employee Board members subject to the short-swing profit restrictions of Section 16 of the Exchange Act and review the overall performance of our employee benefit plans. The Compensation Committee also meets when necessary to administer our stock incentive plan.
The Compensation Committee has determined and reviewed the value and forms of compensation for our named executive officers and other officers based on the committee members’ knowledge and experience, competitive proxy and market compensation information and management recommendations. The Compensation Committee did not engage a compensation consulting firm in fiscal year 2016. The Compensation Committee does not delegate its authority to review, determine and recommend, as applicable, the forms and values of the various elements of compensation for executive officers and directors. The Compensation Committee does delegate to Company management the implementation and record-keeping functions related to the various elements of compensation it has approved.
Nominating Committee
Our Nominating Committee consists of Messrs. Elser, Schiele and Shaio. Our Nominating Committee’s responsibilities include:
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reviewing any stockholder nominations for directors and presenting to our Board a list of individuals recommended for nomination for election to our Board at the annual meeting of stockholders;
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reviewing the disclosure included in our proxy statement regarding our director nomination process;
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reviewing the composition of each Board committee and presenting recommendations for committee memberships to our Board as needed; and
•
reviewing the charter and composition of each Board committee and making recommendations to our Board for the creation of additional Board committees or the change in mandate or dissolution of Board committees.
Executive Committee
Our Executive Committee consists of Messrs. Elser, Schiele and Zizza. Messrs. Elser, Schiele and Zizza are independent, meeting the requirements of Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Each of the members of the Executive Committee qualify as “non-employee directors” for the purposes of Rule 16b-3 under the Exchange Act, and Messrs. Elser, Schiele and Zizza qualify as "outside directors" for the purposes of Section 162(m) of the Internal Revenue Code, as amended. Our Executive Committee’s responsibilities include:
•
providing the President and Chief Executive Officer of the Company with a confidential sounding board for insights and advice, and to provide the Board with a more active formal interface with management and its day to day policy and actions; and
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exercising the powers and authority of the Board, subject to certain limitations set forth in the Company’s charter, during the intervals between meetings of the Board, when, based on the business needs of the Company, it is desirable for the Board to meet but the convening of a special board meeting is not warranted as determined by the Chairman of the Board.
It is the general intention that all substantive matters in the ordinary course of business be brought before the full Board for action, but the Board recognizes the need for flexibility to act on substantive matters where action may be necessary between Board meetings, which, in the opinion of the Chairman of the Board, should not be postponed until the next previously scheduled meeting of the Board.
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Directors’ Attendance at Meetings
During fiscal year 2016, the Board and each of its committees held the following meetings:
•
the Board held four meetings;
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the Audit Committee held four meetings;
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the Compensation Committee did not hold any meetings;
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the Nominating Committee did not hold any meetings; and
•
the Executive Committee did not hold any meetings.
In fiscal year 2016, all directors attended 75% or more of meetings of the Board and committees on which they serve. The Company does not have a formal policy regarding directors’ attendance at annual stockholders meetings, but strongly encourages and prefers that directors attend regular and special Board meetings as well as the annual meeting of stockholders in person, although attendance by teleconference is considered adequate. The Company recognizes that attendance of the Board members at all meetings may not be possible and excuses absences for good cause.
Board Leadership Structure
The roles of Chairman and Chief Executive Officer are separate positions. Mr. Schiele serves as our Chairman and Mr. Allain serves as our Chief Executive Officer. We separate the roles of Chairman and Chief Executive Officer in recognition of the differences between the two roles. The Chief Executive Officer is responsible for setting our strategic direction and our day-to-day leadership and performance, while the Chairman of the Board provides guidance to the Chief Executive Officer and presides over meetings of the Board. We do not have a lead independent director.
Risk Oversight
Our Board of Directors and its Audit Committee are actively involved in risk management. Both the Board and Audit Committee regularly review the financial position of the Company and its operations, and other relevant information, including cash management and the risks associated with the Company’s financial position and operations. The Board regularly receives reports from senior management on areas of material risk to our Company, including our liquidity, operational and legal and regulatory risks. Pursuant to its charter, the Audit Committee reviews our major financial risk exposures and the steps management has taken to monitor and control such exposures, and it also meets periodically with management to discuss policies with respect to risk assessment and risk management.
Nominations for Directors
Director Qualifications
The full Board is responsible for selecting persons to fill vacancies on the Board and recommending candidates for election by the stockholders. The Board has delegated the process of considering candidates to the Nominating Committee. In evaluating director nominees, the Nominating Committee considers director nominees on the basis of, among other things, experience, expertise, skills, knowledge, integrity, understanding the Company’s business and willingness to devote time and effort to Board responsibilities.
In assessing potential new directors, the Nominating Committee considers individuals from various disciplines and diverse backgrounds so that the Board has a broad diversity of experience, professions, skills and backgrounds. The Nominating Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Our Board has no formal policy with regard to the consideration of diversity in identifying director nominees, but the Board believes that the backgrounds and qualifications of the directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Other than the foregoing, there are no specific minimum qualifications that the Nominating Committee believes that a Committee-recommended nominee to the Board must possess, although the Nominating Committee may also consider such other factors as it may deem are in our best interests or the best interests of our stockholders. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.
In its deliberations, the Nominating Committee is aware that our Board must have at least one director who qualifies as an “audit committee financial expert” as defined by SEC rules. The Nominating Committee also believes it appropriate for certain key members of our management to participate as members of the Board.
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Stockholder Nominations
The Nominating Committee will evaluate any director candidates recommended by a stockholder according to the same criteria as a candidate identified by the Nominating Committee.
Any stockholder who intends to nominate a director at our 2018 Annual Meeting must notify our Acting Corporate Secretary in writing at the address set forth at the beginning of this proxy statement of such intent in a timely manner in accordance with Article 5(c) of our Amended and Restated Bylaws. In accordance with the advance notice provisions of our Amended and Restated Bylaws, to be timely, director nominations must be delivered to or mailed and received by the Acting Corporate Secretary of the Company not later than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting (or May 21, 2018). However, in the event that the date of the 2018 Annual Meeting is advanced more than 30 days prior to such anniversary date or delayed more than 60 days after such anniversary date, then to be timely such notice must be received by us on or before the later of (i) 90 days prior to the date of the meeting or (ii) the tenth day following the day on which public announcement of the date of the meeting was made. The notice must include the information specified in our Amended and Restated Bylaws.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics Guidelines (the “Ethics Code”) that applies specifically to board members and executive officers. The Ethics Code is designed to promote compliance with applicable laws and regulations, to promote honest and ethical conduct, including full, fair, accurate and timely disclosure in reports and communications with the public. The Ethics Code is available for viewing on the Company’s website at
www.trans-lux.com
in the “Investor Relations” Section. Any amendments to, or waivers from, the Ethics Code will be posted on the website. In addition, the Board adopted a Whistle Blowing policy, which provides procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters, as well as the confidential, anonymous submission of concerns regarding questionable accounting or auditing practices.
Stockholder Communication with the Board
The Board maintains a process for stockholders to communicate with the Board or with individual directors. Stockholders who wish to communicate with the Board or with individual directors should direct written correspondence to our Acting Corporate Secretary at our Company’s headquarters located at 445 Park Avenue, Suite 2001, New York, New York 10022. Any such communication must contain:
•
a representation that the stockholder is a holder of record of our capital stock;
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the name and address, as they appear on our books, of the stockholder sending such communication; and
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the class and number of shares of our capital stock that are beneficially owned by such stockholder.
The Acting Corporate Secretary will forward such communications to our Board or the specified individual director to whom the communication is directed unless such communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Acting Corporate Secretary has the authority to discard the communication or to take the appropriate legal action regarding such communication.