Item 10. Directors, Executive Officers and Corporate Governance
The Company’s Board of Directors (the “Board”)
currently consists of six members, five of whom are non-management directors. The Board is divided into three classes with each class
serving a three-year term. The term of one class expires at each annual meeting of stockholders of the Company. The Board is comprised
of the following members:
James B. Avery |
Director since August 2018 |
Mr. Avery, age 59, was appointed to the Board in August 2018 pursuant
to the terms of that certain Securities Purchase Agreement, dated August 6, 2018, by and among the Company, North Sound Trading, L.P.
and Golden Harbor Ltd. (the “Purchase Agreement”). Mr. Avery joined Tavistock Group in July 2014 and is currently a Senior
Managing Director. From 2003 to June 2014, Mr. Avery was a Managing Director and Co-Founder of GCA Savvian, a boutique investment bank,
in addition to holding the position of Representative Director for GCA Corporation, GCA Savvian’s parent company publicly traded
on the Tokyo Stock Exchange. Prior to GCA Savvian, Mr. Avery spent 10 years at Morgan Stanley, working in the New York and Silicon Valley
offices where he advised clients across a number of industries on strategy, merger & acquisitions and capital market transactions.
Mr. Avery has also held roles at Edward M. Greenberg Associates, Burson-Marsteller, Westdeutsche Landesbank, and Republic National Bank
of New York. Mr. Avery is currently a member of the board of directors of FrontWell Capital Partners. Mr. Avery received his Bachelor
of Science in Finance from Miami University. Mr. Avery’s management background and expertise in strategic corporate matters and
capital markets provide a valuable background for him to serve as a member of our Board, as Chairman of our Nominating and Corporate Governance
Committee of the Board (the “Nominating and Corporate Governance Committee”), and as a member of the Compensation Committee
of the Board (the “Compensation Committee”) and the Audit Committee of the Board (the “Audit Committee”). Mr.
Avery’s term as a director will expire at the 2023 annual meeting of stockholders of the Company.
Stephanie Bowers |
Director since June 2021 |
Ms. Bowers, age 43, was appointed to the Board in June 2021. Ms. Bowers
has two decades of U.S. government experience at the White House and with the U.S. Department of State , working both in Washington, DC
and U.S. embassies across the globe to promote U.S. economic and commercial interests. Ms. Bowers led the U.S. Embassy in The Bahamas
as Chargé d’Affaires from 2018 to 2020. Prior to that, Ms. Bowers held senior positions in both Democratic and Republican
administrations, including serving as chief of staff for the Western Hemisphere at the State Department from 2016 to 2018, as Deputy Director
of Central America Affairs at the State Department from 2015 to 2016 and as a National Security Council Director at the White House from
2013 to 2014. Her previous Foreign Service experience includes leading engagement on information and communications technology issues
as an Economic Officer in Spain and overseeing some of the U.S. government’s largest foreign assistance initiatives and budgets,
including in the Middle East, South Africa and throughout the Americas and the Caribbean.
Ms. Bowers received bachelor degrees in International Affairs and French
Language and Literature from The George Washington University. She received a Master of Science degree in National Security Strategy from
the National War College, where she was named Distinguished Graduate. Ms. Bowers’ substantial experience in international relations
and government affairs provide valuable perspective and expertise as a member of our Board. Ms. Bowers’ term as a director will
expire at the 2025 annual meeting of stockholders of the Company.
Christopher Harland |
Director since October 2019 |
Mr. Harland, age 65, was appointed to the Board in October 2019. Mr.
Harland is a Partner in the Strategic Advisory Group at PJT Partners, based in New York. Prior to joining PJT Partners, Mr. Harland spent
32 years at Morgan Stanley. From 2008 to March 2015, Mr. Harland served as Chairman and Regional Head of Morgan Stanley Latin America
and was also a member of the Management Committee and International Operating Committee. Under his leadership, Morgan Stanley significantly
expanded the scope of its operations in Brazil and Mexico and opened new offices in Peru, Colombia and Chile. Before assuming responsibility
for Latin America, Mr. Harland was Global Head of the Media and Communications Investment Banking Group from 1996 to 2007. In this capacity
he advised many leading media and communications companies on a variety of acquisitions, divestitures and corporate financings. He is
a trustee of the New York Studio School, a director of Round Hill Developments and a member of the Council on Foreign Relations. Mr. Harland
graduated magna cum laude from Harvard College, attended Oxford University and received a Master of Business Administration from Harvard
Business School where he was a George F. Baker Scholar. Mr. Harland’s experience with international expansion and expertise in capital
markets provide a valuable background for him to serve as a member of our Board, and as a member of the Audit Committee. Mr. Harland’s
term as a director will expire at the 2024 annual meeting of stockholders of the Company.
Christopher Lytle |
Director since October 2020 |
Mr. Lytle, age 53, was appointed to the Board in October 2020. Mr.
Lytle has been president of Longfellow Capital, a private investment firm, since January 2009. He served in a consulting capacity as the
Company’s Head of Government Affairs from April 2020 to October 2020 and has been providing strategic consulting services to the
Company since 2018. Mr. Lytle previously served as the Company’s Chief Strategy Officer and Executive Vice President of Enterprise
SaaS Solutions from August 2017 to October 2018. Prior to joining the Company, Mr. Lytle was President of Cavulus, a privately-held SaaS-based
technology provider in the healthcare industry. Before joining Cavulus, Mr. Lytle was a Managing Director at Morgan Stanley from July
2006 to December 2008 and previously was Lead Portfolio Manager of RCL Capital, a hedge fund focused on small and mid-cap telecom and
wireless technology businesses from July 2006 to December 2008. He also recently became Chairman of Prolifiq, a leading cloud-native provider
of sales- enablement applications to Salesforce customers. Mr. Lytle holds a Bachelor of Arts degree in Economics from Lafayette College.
Mr. Lytle’s knowledge of the Company and experience with enterprise SaaS software solutions provide valuable background for him
to serve as a member of our Board. Mr. Lytle’s term as a director will expire at the 2024 annual meeting of stockholders of the
Company.
Jeffrey Tuder |
Director since June 2017 |
|
Chairman of the Board since August 2022 |
Mr. Tuder, age 50, was appointed to the Board in June 2017.
Mr. Tuder is the Founder and Managing Member of Tremson Capital Management, LLC. Mr. Tuder is also Chief Executive Officer of Concord
Acquisition Corp II & III. Prior to founding Tremson in 2015, he held investment roles at Fortress Investment Group, KSA Capital Management,
JHL Capital Group and CapitalSource Finance. Mr. Tuder began his career in various investment capacities at Nassau Capital, a private
investment firm that managed the private portion of Princeton University’s endowment, and ABS Capital Partners, a private equity
firm affiliated with Alex Brown & Sons. Mr. Tuder currently serves on the board of directors of Unico American. (NASDAQ: UNAM) and
Concord Acquisition Corp III (NYSE: CNDB). Mr. Tuder previously served on the board of directors of MRV Communications, Seachange International
and NamTai Property. Mr. Tuder also has served as a director of a number of privately held companies. Mr. Tuder received a Bachelor of
Arts degree from Yale College. Mr. Tuder’s private equity and hedge fund investment experience, his expertise in evaluating both
public and private investment opportunities across numerous industries, and his ability to think creatively in considering ways to maximize
long-term shareholder value provide a valuable background for him to serve as a Chair of our Board, as Chair of our Audit Committee, Chair
of the Compensation Committee, and as a member of the Nominating and Corporate Governance Committee. Mr. Tuder’s term as a director
will expire at the 2023 annual meeting of stockholders of the Company.
Board Committees
The Board currently has three standing committees: an Audit
Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each committee operates under a written charter
adopted by the Board. All of the charters are publicly available on our website at investor.inseego.com under “Governance.”
You may also obtain a copy of these charters upon sending a written request to our Secretary at our principal executive offices.
Upon the recommendation of the Nominating and Corporate Governance
Committee, the Board appoints committee members annually.
The table below sets forth the current composition of our Board committees:
|
|
|
|
|
|
Nominating and |
|
|
|
|
|
|
|
Corporate |
|
Name |
|
Audit |
|
Compensation |
|
Governance |
|
|
Committee |
|
Committee |
|
Committee |
|
James B. Avery |
|
✓ |
|
✓ |
|
☑ |
|
Stephanie Bowers |
|
|
|
|
|
✓ |
|
Christopher Harland |
|
✓ |
|
|
|
|
Jeffrey Tuder |
|
☑ |
|
☑ |
|
✓ |
______________________________ |
|
|
|
|
|
|
|
☑ Chair ✓ Member |
|
|
|
|
|
|
|
Audit Committee
The Audit Committee oversees our accounting and financial
reporting processes and the audits of our financial statements and internal control over financial reporting.
The functions and responsibilities of the Audit Committee include:
| • | engaging our independent registered public accounting firm and conducting an annual review of the independence of that firm; |
| • | reviewing with management and the independent registered public accounting firm the scope and the planning of the annual audit; |
| • | reviewing the annual audited financial statements and quarterly unaudited financial statements with management
and the independent registered public accounting firm; |
| • | reviewing the findings and recommendations of the independent registered public accounting firm and management’s
response to the recommendations of that firm; |
| • | discussing with management and the independent registered public accounting firm, as appropriate, the
Company’s policies with respect to financial risk assessment and financial risk management; |
| • | overseeing compliance with applicable legal and regulatory requirements, including ethical business standards; |
| • | establishing procedures for the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters; |
| • | establishing procedures for the confidential, anonymous submission by employees of concerns regarding questionable
accounting or auditing matters; |
| • | preparing the Audit Committee Report to be included in our annual proxy statement; |
| • | monitoring ethical compliance, including review of related party transactions; and |
| • | periodically reviewing the adequacy of the Audit Committee charter. |
Our independent registered public accounting firm reports directly
to the Audit Committee. Each member of the Audit Committee must have the ability to read and understand fundamental financial statements
and at least one member must have past employment experience in finance or accounting, and the requisite professional certification in
accounting or another comparable experience or background. The Board has determined that each member of the Audit Committee is “independent”
as defined by the NASDAQ Stock Market LLC (“NASDAQ”) listing requirements and SEC rules. The Board has also determined that
Mr. Tuder, the Chair of the Audit Committee, meets the requirements of an “audit committee financial expert” as defined by
SEC rules.
Compensation Committee
The Compensation Committee establishes, administers and oversees
compliance with our policies, programs and procedures for compensating our executive officers and the Board.
The functions and responsibilities of the Compensation Committee include:
| • | establishing and reviewing our general compensation policies and levels of compensation applicable to
our executive officers and our non-management directors; |
| • | evaluating the performance of, and determining the compensation for, our executive officers, including our Chief Executive Officer; |
| • | reviewing regional and industry-wide compensation practices in order to assess the adequacy and competitiveness
of our executive compensation programs; |
| • | administering our employee benefits plans, including approving awards of stock, restricted stock units
(“RSUs”) and stock options to employees and other parties under our equity incentive compensation plans; and |
| • | periodically reviewing the adequacy of the Compensation Committee charter. |
The Board has determined that each member
of the Compensation Committee is “independent” as defined by the NASDAQ listing requirements and SEC rules.
The Compensation Committee has the sole
authority to retain and supervise one or more outside advisors, including outside counsel and consulting firms, to advise the Compensation
Committee on executive and director compensation matters and to terminate any such adviser. In addition, the Compensation Committee has
the sole authority to approve the fees of an outside adviser and other terms of such adviser’s retention by the Company.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee considers,
evaluates and nominates director candidates, including the members of the Board eligible for re-election and the recommendations of potential
director candidates from stockholders.
The functions and responsibilities of the Nominating and Corporate
Governance Committee include:
| • | developing and recommending a set of corporate governance guidelines applicable to the Company; |
| • | identifying and evaluating candidates to serve on the Board, including determining whether incumbent directors
should be nominated for re-election to the Board, and reviewing and evaluating director nominees submitted by stockholders; |
| • | reviewing possible conflicts of interest of prospective Board members; |
| • | recommending director nominees; |
| • | establishing procedures and guidelines for individuals to be considered to become directors; |
| • | recommending the appropriate size and composition of the Board and each of its committees; |
| • | overseeing periodic evaluations of the performance of the Board, the Board committees and the directors; |
| • | monitoring the continued legal compliance of our established principles and policies; and |
| • | periodically reviewing the adequacy of the Nominating and Corporate Governance Committee charter. |
The Board has determined that each member of the Nominating and Corporate
Governance Committee is “independent” as defined by the NASDAQ listing requirements.
Other Information Regarding Our Board of Directors and its Committees
There are no family relationships among any of our directors
and/or executive officers. There are currently no legal proceedings, and during the past 10 years there have been no legal proceedings,
that are material to the evaluation of the ability or integrity of any of our directors.
Advisory Board
In 2021, the Board established an Advisory Board to enhance
the Company’s strategic development, acquire additional expertise of industry leaders, and enable former members of the Board or
the Company’s management to continue to make significant contributions to the Company. One of our former directors, Brian Miller,
currently serves as a member of the Advisory Board.
Compensation Committee Interlocks and Insider Participation
Messrs. Avery and Tuder served on our
Compensation Committee during 2022. None of the members of our Compensation Committee during 2022 has ever been one of our officers or
employees. None of our executive officers currently serves, or has served during the last completed fiscal year, as a member of the board
of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or Compensation
Committee.
Securities Trading Policy/Hedging Prohibition
Directors, officers and other employees
may not engage in any transaction in which they may profit from short-term speculative swings in the value of the Company’s securities.
This includes “short sales” (selling borrowed securities which the seller hopes can be purchased at a lower price in the future)
or “short sales against the box” (selling owned, but not delivered securities), “put” and “call” options
(publicly available rights to sell or buy securities within a certain period of time at a specified price) and hedging transactions, such
as zero-cost collars and forward sale contracts. In addition, this policy is designed to ensure compliance with all insider trading rules.
Information about our Executive Officers
The following table sets forth certain information with respect to
our current executive officers as of April 30, 2022:
Executive | |
Age | |
Title |
Ashish Sharma | |
50 | |
Chief Executive Officer & President |
Robert Barbieri | |
67 | |
Chief Financial Officer |
Doug Kahn | |
64 | |
Executive Vice President, Operations |
Ashish Sharma has served as the Company’s Chief
Executive Officer and President since March 2022. He previously served as the Company’s President from June 2021 to March 2022 and
as President of IoT & Mobile Solutions from February 2020 to June 2021. Prior to that, he had served as the Company’s Executive
Vice President IoT & Mobile Solutions since joining the Company in September 2017. Prior to joining the Company, Mr. Sharma was Chief
Marketing Officer at Spectralink Corporation, a provider of enterprise grade mobile solutions, from December 2015 to September 2017. Prior
to that, Mr. Sharma served as Senior Vice President and General Manager, Americas for Graymatics, Inc., a cognitive media processing company,
from January 2015 to December 2015 and as Chief Marketing Officer at FreeWave Technologies, an industrial wireless networking company,
from November 2010 to January 2015. Mr. Sharma holds a Bachelor of Science in Electrical Engineering from the University of District of
Columbia, a Master of Science in Electrical Engineering from George Mason University and an MBA from the UCLA Anderson School of Management
in Finance, Marketing and Strategy.
Robert Barbieri has served as the Company’s Chief
Financial Officer since October 2021, and served as the Company’s interim Chief Financial Officer from April 2021 to October 2021.
He was a Partner with TechCXO, LLC (“TechCXO”), a professional services firm that provides experienced, C-Suite professionals
to deliver strategic and functional consulting services, from 2019 to 2021. Before joining TechCXO, Mr. Barbieri led his own firm, CxO
Advisory Services, which provided similar strategic and functional consulting services, from 2010 to 2019. Mr. Barbieri has more than
30 years of experience as a senior executive, strategic partner, and management advisor. Mr. Barbieri has served in senior financial leadership
positions with a number of companies, including Chief Financial Officer at ABILITY Network, Inc., a leading healthcare technology company;
Chief Financial Officer at Converge One, a leader in telecommunication technology; Executive Vice President and Chief Financial Officer
at TriZetto, a publicly traded healthcare IT company; Chief Financial Officer at Textura, a cloud collaboration company; Chief Financial
Officer at Apogee Enterprises, a publicly traded glass and coatings technologies company; Chief Financial and Performance Officer at Lawson
Software, Inc., a publicly traded international technology, software and e-commerce solution company; and a senior executive with Air
Products, a global manufacturing and services company. Mr. Barbieri is a Certified Management Accountant and holds both a B.S. in Business
Administration and Accounting and an MBA in Financial Management from Drexel University.
Doug Kahn joined the Company in February 2019 as Executive
Vice President of Operations. Prior to joining the Company, Mr. Kahn was Vice President of Global Supply Chain at Vispero, Inc., a provider
of assistive technology solutions for the visually impaired, from 2018 to 2019. Mr. Kahn was Executive Vice President of Global Operations
and Customer Support for Tintri, Inc., a virtualized storage and storage company from 2014 to 2018. Prior to that, he was Vice President
of Global Purchasing and Vice President of Operations for TomTom International BV, a global GPS company, from 2012 to 2014. Mr. Kahn has
held several additional leadership roles in all major supply chain functions, including Vice President of Supply Chain and IT for Synaptics
Inc. Earlier in his career, Mr. Kahn spent 17 years with Hewlett Packard in roles of increasing responsibility in supply chain development
and operations. Mr. Kahn earned a Bachelor of Arts from the University of California, Berkeley, a Master of Science in Geophysics and
an MBA in finance and statistics from the University of Chicago.
There are no family relationships among any of our executive
officers and/or directors. There are currently no legal proceedings, and during the past 10 years, there have been no legal proceedings,
that are material to the evaluation of the ability or integrity of any of our current executive officers.
Code of Conduct and Ethics
The Board has adopted a Code of Conduct and Ethics that is applicable
to all of our directors, officers and employees. The purpose of the Code of Conduct and Ethics is to, among other things, focus our directors,
officers and employees on areas of ethical risk, provide guidance to help them recognize and deal with ethical issues, provide mechanisms
to report concerns regarding possible unethical or unlawful conduct and to help enhance and formalize our culture of integrity, respect
and accountability. We distribute copies of the Code of Conduct and Ethics to, and conduct periodic training sessions regarding its content
for, our newly elected directors and newly hired officers and employees. We will post information regarding any amendment to, or waiver
from, our Code of Conduct and Ethics on our website in the Investors tab under “Governance” as required by applicable law.
A copy of our Code of Conduct and Ethics is available on our website at investor.inseego.com under “Governance”.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive
officers, and anyone holding 10% or more of a registered class of our equity securities to file reports with the SEC showing their holdings
of, and transactions in, these securities. Based solely on a review of copies of such reports we received, we believe that during 2022
all its reporting persons filed such reports on a timely basis.
Item 11. Executive Compensation
Compensation Discussion and Analysis for Named Executive Officers
The following Compensation Discussion
and Analysis describes the material elements of compensation for the Company’s named executive officers, which consist of: (1) our
President and Chief Executive Officer, (2) our Chief Financial Officer, (3) our Executive Vice President of Operations, and (4) our former
Chief Executive Officer.
Objectives of Compensation Program
The primary objectives of the Company’s
compensation program, including our executive compensation program, are to maintain a pay-for-performance compensation program that will
fairly compensate our executives and employees, attract and retain qualified executives and employees who are able to contribute to our
long-term success, induce performance consistent with clearly defined corporate goals and align our executives’ long-term interests
with those of our stockholders. To that end, the Company’s compensation practices are intended to:
| • | provide overall compensation (assuming that targeted levels of performance are achieved) that is sufficient
to attract and retain executives and key employees; |
| • | tie total compensation to Company performance and individual performance in achieving financial and non-financial objectives; and |
| • | closely align senior management’s interests with stockholders’ interests through long-term equity incentive compensation. |
How the Compensation Committee Determines the Forms and Amounts
of Compensation
The Compensation Committee structures
our compensation programs and establishes compensation levels for our executives and senior officers. The Compensation Committee annually
determines the compensation levels for our executive officers by considering several factors, including competitive market data, each
executive officer’s roles and responsibilities, how the executive officer is performing those responsibilities and our historical
financial performance.
The Compensation Committee considers
the recommendations from our Chief Executive Officer in determining executive compensation. In making his recommendations, the Chief Executive
Officer receives input from our Human Resources Department.
The Compensation Committee makes all
decisions for the total direct compensation, which includes base salary, bonus compensation based upon annual incentive goals and objectives
and long-term stock-based awards, of the Company’s executive officers and other members of the Company’s senior management
team, including the named executive officers.
The Compensation Committee engages independent
compensation consultants from time-to-time to assist the Compensation Committee in its duties, including providing advice regarding industry
trends relating to the form and amount of compensation provided to executives by companies with which we compete for executive talent
and other similarly situated companies. The Compensation Committee retained Compensia during 2021 to provide competitive compensation
data and analysis. The Compensation Committee considers available market data as one factor in making executive compensation decisions,
but has not adopted a specific benchmark or peer group as a guideline in its determination of compensation.
The Compensation Committee annually reviews and
approves corporate goals and objectives relevant to the Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s
performance in light of those goals and objectives, and determines the Chief Executive Officer’s compensation levels based on this
evaluation. In determining the long-term incentive component of the Chief Executive Officer’s compensation, the Committee considers
corporate performance, the impact of incentive awards on the Chief Executive Officer’s total compensation and the awards given to
the Chief Executive Officer in past years. For the other named executive officers, the Compensation Committee receives a performance assessment
and compensation recommendation from the Chief Executive Officer and also exercises its judgment based on the Board’s interactions
with the named executive officers. As with the Chief Executive Officer, the performance evaluation of these executives is based on his
or her contributions to the Company’s performance and other leadership accomplishments.
Components of Executive Compensation
The elements of the Company’s compensation
program are base salaries, bonus compensation based upon incentive goals and objectives and stock-based equity awards. Our compensation
program is designed to balance our need to provide our named executive officers with incentives to achieve our short- and long-term performance
goals with the need to pay competitive base salaries. There is no pre-established policy for allocating between cash and non-cash or short-term
or long-term compensation. Each named executive officer’s current and prior compensation is considered in setting future compensation.
Base Salaries. Base salary is
the guaranteed element of employees’ annual cash compensation. Base salaries are generally based on relative responsibility and
are targeted to provide competitive guaranteed cash compensation. The value of base salary reflects the employee’s long-term
performance, skill set and the market value of that skill set. Base salaries for our named executive officers are reviewed on an annual
basis and adjustments are made to reflect performance-based factors, as well as competitive conditions. The Company does not apply specific
formulas to determine increases. In setting base salaries, the Compensation Committee considers the following factors:
| • | The Company’s overall financial condition; |
| • | Internal relativity, meaning the relative pay differences for different job levels; |
| • | Overall economic conditions and market factors; and |
| • | Consideration of the mix of overall compensation. |
In March 2022, the Compensation Committee increased
the base salary of Mr. Sharma in connection with his appointment as Chief Executive Officer. This decision was based upon Mr. Sharma’s
increase in responsibilities, salary history and internal relativity. Neither Mr. Barbieri’s nor Mr. Kahn’s base salaries
were changed in 2022. The fiscal 2022 base salaries for each of the named executive officers as of the end of 2022 are shown in the following
table.
|
|
Base Salary |
|
Name |
|
(as of 12/31/2022) |
|
Ashish Sharma |
|
$ |
500,000 |
|
Robert Barbieri |
|
$ |
400,000 |
|
Doug Kahn |
|
$ |
325,000 |
|
Annual Incentive Bonuses
The Company believes that as an employee’s
level of responsibility increases, a greater portion of the individual’s cash compensation should be variable and linked to both
quantitative and qualitative expectations, including key financial, operational and strategic metrics. To that end, the Company awards
annual bonuses in order to align employees’ goals with the Company’s financial, strategic and tactical objectives for the
current year.
Executive Bonuses for 2022. For 2022, the
Compensation Committee established the Senior Management Bonus Program for the year ended December 31, 2022 (the “2022 Bonus
Program”). Under the 2022 Bonus Program, bonus target amounts, expressed as a percentage of base salary, were established for participants.
Bonus payouts for the year were then determined by (a) the achievement by the Company of certain financial goals and/or targets set
forth in the 2022 Bonus Program related to the Company’s revenue performance and cash flow; and (b) each participating employee’s
individual performance. Satisfactory individual performance is a condition to payment.
The Compensation Committee considered the following
when establishing the awards for 2022:
|
• |
|
Bonus Targets. Target bonuses are expressed as a percentage of the participant’s base salary earned during the plan year. Bonus targets were based on job responsibilities and internal relativity. Consistent with the Company’s executive compensation policy, individuals with greater job responsibilities had a greater proportion of their total compensation tied to Company performance in the 2022 Bonus Program. With the exception of Mr. Sharma, bonus targets for the named executive officers were unchanged for 2022 compared to prior years. Prior to 2022, Mr. Sharma had an annual target bonus equal to 50% of his annual base salary. For 2022, Mr. Sharma’s target bonus was increased to 65% to reflect his appointment as Chief Executive Officer. Mr. Mondor was not a participant in the 2022 Bonus Program. The schedule below shows the target incentives for the 2022 awards for each of the named executive officers as a percentage of 2022 base salary: |
|
|
Target Bonus |
|
|
2022 Bonus |
|
Name |
|
% of Salary |
|
|
Dollars |
|
|
Earned |
|
Ashish Sharma |
|
|
65% |
|
|
$ |
325,000 |
|
|
$ |
– |
|
Robert Barbieri |
|
|
50% |
|
|
$ |
200,000 |
|
|
$ |
– |
|
Doug Kahn |
|
|
40% |
|
|
$ |
120,000 |
|
|
$ |
– |
|
|
• |
|
Company performance measures. For all participants in the 2022 Bonus Program, including the named executive officers, the Compensation Committee established performance measures based upon total revenue, cash flow and specific product line revenues. In 2022, The Company failed to meet the performance measures, and no bonuses were awarded to the named executive officers. |
|
• |
|
Personal performance. Based on individual performance, the Compensation Committee has discretion to adjust bonus payouts – either up or down – to reflect the individual performance of each named executive officer during the year. No discretionary bonuses were awarded for fiscal 2022 to the named executive officers. |
Long-Term Incentives. Long-term
incentive awards are a key element of the Company’s total compensation package for the named executive officers. We also have adopted
an equity incentive approach intended to reward longer-term performance and to help align the interest of our named executive officers
with those of our stockholders. We believe that long-term performance is achieved through an ownership culture that rewards performance
by our named executive officers through the use of equity incentives. Our equity incentive plans have been established to provide our
employees, including our named executive officers, with incentives to help align those employees’ interests with the interests of
our stockholders. Our equity incentive plans have provided the principal method for our named executive officers to acquire equity interests
in the Company.
The size and terms of the awards for
an individual recipient will depend upon the level of responsibility of the recipient; the expected future contributions to the growth
and development of the Company; the value of past service; and the number of options and restricted shares owned by other executives in
comparable positions within the Company. The Company’s 2018 Stock Incentive Plan provides for a variety of long-term awards including
stock options, restricted stock, restricted share units and performance awards.
Stock Options and RSU Awards
The Compensation Committee continually
evaluates its equity compensation program to determine whether to issue either restricted stock units (“RSUs”), stock options
or a combination thereof. In making such determinations, the Compensation Committee considers the accounting treatment, the retention
and the number of shares available for grant under the Company’s equity incentive plan and the potential dilutive impact on the
Company’s stockholders.
The Compensation Committee primarily relies on
stock options as the main equity vehicle for our named executive officers. Stock options provide for financial gain derived from the potential
appreciation in stock price from the date that the option is granted until the date that the option is exercised. The grant date is established
when the Compensation Committee approves the grant and all key terms have been determined. The exercise price of stock option grants is
set at the fair market value on the date of grant, which is the closing price on the NASDAQ Stock Market. Under the stockholder-approved
2018 Stock Incentive Plan, the Company may not grant stock options at a discount to the fair market value or reduce the exercise price
of outstanding options, except with the approval of the stockholders or except in the case of a stock split or other similar event. The
Company does not grant stock options with “reload” features and it does not loan funds to employees to enable them to exercise
stock options.
From time to time, our Compensation
Committee may also issue RSUs to our named executive officers. RSUs are generally less dilutive to our stockholders, as fewer shares of
our common stock are granted to achieve an equivalent value relative to stock options, and because RSU awards are an effective retention
tool that maintain value even in cases where the share price is trading lower than the initial grant price.
The equity awards granted to our named executive officers
during 2022 are reflected in the “Grants of Plan-Based Awards Table” below.
Other Elements of Compensation
Perquisites and Other Benefits. The
Company does not provide significant perquisites or personal benefits to our named executive officers. Our named executive officers are
eligible to participate in our health and welfare plans to the same extent as all full-time employees generally.
Retirement Plans. We currently
maintain a 401(k) retirement savings plan that allows eligible employees to defer a portion of their compensation, within limits prescribed
by the Internal Revenue Code, on a pre-tax or after-tax basis through contributions to the plan. Our named executive officers are eligible
to participate in the 401(k) plan on the same terms as other full-time employees generally. Currently, we match contributions made by
participants in the 401(k) plan at $0.50 for each $1.00 contributed on up to 6% an employee’s eligible compensation. We believe
that providing a vehicle for retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation
package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.
Severance and Change-in-Control Arrangements
We generally enter
into offer letters, rather than formal employment agreements, with our named executive officers. The letters set forth the initial salary
and bonus terms for each named executive officer. The current base salaries and bonus targets for the named executive officers are set
forth below.
In addition, each of the named executive
officers, as well as certain other key employees, is a party to an change in control and severance agreement with the Company. The principal
purpose of the agreements is to protect the Company from certain business risks (e.g., threats from loss of confidentiality or
trade secrets, disparagement, solicitation of customers and employees) and to define the Company’s right to terminate the employment
relationship. In return, the executive officers are provided assurances with regard to salary and other compensation and benefits, as
well as certain severance benefits.
For a description of these agreements
and the severance benefits provided under these arrangements, see –Potential Payments Upon Termination or Change-in-Control–Severance
Agreements.
2022 Say-On-Pay Vote
At our 2022 annual meeting of stockholders, our
stockholders approved, on a non-binding, advisory basis, the compensation paid to our named executive officers described in our 2022 proxy
statement. Approximately 89.4% of the votes cast on the matter were voted in favor of this “say-on-pay” approval. The Board
and the Compensation Committee considered the voting results and high level of stockholder support when establishing our executive compensation
programs for fiscal 2022.
Clawback Guidelines
Our Corporate Governance Guidelines provide that
in the event of any accounting restatement of the financial statements of the Company, the Board will review the incentive compensation
and awards made to the executive officers based on the financial results during the period covered by the restatement and, in appropriate
circumstances and to the extent permitted by applicable law and the Company’s policies and plans, seek to recover or cancel the
portion of any such compensation or awards in excess of what would have been received under the restated financial statements. Among the
key factors that the Board will consider in determining whether seeking recovery is appropriate is whether the executive officer engaged
in fraud or willful misconduct that resulted in the need for a restatement.
Tax Considerations
Section 162(m) of the Internal Revenue
Code generally prohibits a publicly-held company from deducting compensation paid to a current or former named executive officer that
exceeds $1 million during the tax year. Certain awards granted before November 2, 2017 that were based upon attaining pre-established
performance measures that were set by the Compensation Committee under a plan approved by our stockholders, as well as amounts payable
to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the
$1 million deductibility limit.
The Compensation Committee notes this
deductibility limitation as one of the factors in its consideration of compensation matters. However, the Compensation Committee generally
has the flexibility to take any compensation-related actions that it determines are in the Company’s and its stockholders’
best interest, including designing and awarding compensation for our executive officers that is not fully deductible for tax purposes.
Stock Ownership Requirements
The Board has historically encouraged
its members and members of senior management to acquire and maintain stock in the Company to link the interests of such persons to the
stockholders. However, neither the Board nor the Compensation Committee has established stock ownership guidelines for members of the
Board or the executive officers of the Company.
Securities Trading Policy/Hedging Prohibition
Officers and other employees may not
engage in any transaction in which they may profit from short-term speculative swings in the value of the Company’s securities.
This includes “short sales” (selling borrowed securities which the seller hopes can be purchased at a lower price in the future)
or “short sales against the box” (selling owned, but not delivered securities), “put” and “call” options
(publicly available rights to sell or buy securities within a certain period of time at a specified price) and hedging transactions, such
as zero-cost collars and forward sale contracts. In addition, this policy is designed to ensure compliance with all insider trading rules.
Indemnification Agreements
The Company has entered into indemnification
agreements with each of its directors and executive officers (each, an “Indemnitee”). In general, the indemnification agreements
provide that, subject to certain limitations, the Company will indemnify and hold harmless each Indemnitee against all expenses, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred by such Indemnitee or on such Indemnitee’s behalf,
in connection with certain pending, completed or threatened proceedings, as defined in the indemnification agreements, if the Indemnitee
acted in good faith and reasonably in the best interests of the Company and, with respect to any criminal proceeding, had no reasonable
cause to believe that his or her conduct was unlawful.
Risk Assessment of Compensation Program
In April 2023, management assessed our
compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that
are reasonably likely to have a material adverse effect on us. As part of that assessment, management reviewed the primary elements of
our compensation program, including base salary, short-term incentive compensation and long-term incentive compensation. Management’s
risk assessment included a review of the overall design of each primary element of our compensation program, and an analysis of the various
design features, controls and approval rights in place with respect to compensation paid to management and other employees that mitigate
potential risks to us that could arise from our compensation program. Following the assessment, management determined that our compensation
policies and practices did not create risks that were reasonably likely to have a material adverse effect on us and reported the results
of the assessment to our compensation committee.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of our Board of Directors has submitted
the following report for inclusion in this proxy statement:
The Compensation Committee has reviewed
and discussed with management the Compensation Discussion and Analysis set forth above. Based on such review and discussions, the Compensation
Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Annual Report on
Form 10-K for the year ended December 31, 2022, filed by us with the SEC.
This report of the Compensation Committee
is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not be incorporated by reference
by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation
language in any such filing, except to the extent that we specifically incorporate this information by reference, and shall not otherwise
be deemed filed under such acts.
The foregoing report has been furnished by the Compensation
Committee.
Respectfully submitted,
The Compensation Committee of the Board of Directors
Jeffrey Tuder (Chairman)
James B. Avery
Summary Compensation Table
The following table sets forth information regarding the compensation
of our named executive officers for the years ended December 31, 2022, 2021, and 2020.
Name and Principal Position |
|
Year |
|
Salary
($) |
|
|
Bonus
($)(1) |
|
|
Stock
Awards
($)(2) |
|
Option
Awards
($)(2) |
|
|
All Other
Compensation
($)(3) |
|
|
Total
($) |
|
Ashish Sharma |
|
|
2022 |
|
|
482,308 |
|
|
270,000 |
(4) |
|
|
956,000 |
|
3,741,983 |
|
|
|
12,056 |
|
|
|
5,462,347 |
|
Chief Executive Officer & |
|
|
2021 |
|
|
388,128 |
|
|
175,056 |
(5) |
|
|
– |
|
2,415,000 |
|
|
|
9,626 |
|
|
|
2,987,810 |
|
President |
|
|
2020 |
|
|
317,153 |
|
|
81,985 |
(6) |
|
|
– |
|
1,415,375 |
|
|
|
7,929 |
|
|
|
1,822,442 |
|
Robert Barbieri(7) |
|
|
2022 |
|
|
400,000 |
|
|
225,000 |
(4) |
|
|
– |
|
– |
|
|
|
10,154 |
|
|
|
635,154 |
|
Chief Financial Officer |
|
|
2021 |
|
|
69,231 |
|
|
– |
(5) |
|
|
– |
|
2,456,250 |
|
|
|
405,694 |
(8) |
|
|
2,931,175 |
|
Doug Kahn |
|
|
2022 |
|
|
325,000 |
|
|
200,000 |
(4) |
|
|
– |
|
– |
|
|
|
9,000 |
|
|
|
534,000 |
|
Executive Vice President, |
|
|
2021 |
|
|
311,762 |
|
|
182,597 |
(5) |
|
|
282,600 |
|
857,650 |
|
|
|
8,228 |
|
|
|
1,642,837 |
|
Operations |
|
|
2020 |
|
|
299,776 |
|
|
66,480 |
(6) |
|
|
– |
|
272,295 |
|
|
|
8,250 |
|
|
|
646,801 |
|
Dan Mondor(9) |
|
|
2022 |
|
|
140,385 |
|
|
949,997 |
(4) |
|
|
– |
|
– |
|
|
|
10,134 |
|
|
|
1,100,516 |
|
Former Chief Executive |
|
|
2021 |
|
|
550,411 |
|
|
469,333 |
(5) |
|
|
– |
|
4,830,000 |
|
|
|
12,750 |
|
|
|
5,862,494 |
|
Officer |
|
|
2020 |
|
|
549,589 |
|
|
199,522 |
(6) |
|
|
– |
|
– |
|
|
|
75,251 |
|
|
|
824,362 |
|
____________________
(1) |
Represents bonus payments made during the applicable year for prior year performance. Bonus payments were made through an award of fully vested shares under the 2018 Omnibus Incentive Compensation Plan. The number of RSUs issued was determined by dividing the amount of the bonus award by the 5-day weighted average sales price for the Company’s common stock. Represents the aggregate grant date fair value of the shares issued in the respective fiscal year as computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 9, Share-based Compensation, in the Original Form 10-K. |
(2) |
Represents the aggregate grant date fair value of the stock and option awards granted in the respective fiscal year as computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 9, Share-based Compensation, in the Original Form 10-K. |
(3) |
See the All Other Compensation table below for additional information. |
(4) |
Represents a bonus payment made during fiscal 2022 based on individual and Company performance during 2021. No bonuses were earned with respect to the Company’s performance during fiscal 2022. |
(5) |
Represents a bonus payment made during fiscal 2021 based on individual and Company performance during 2020. |
(6) |
Represents a bonus payment made during fiscal 2020 based on individual and Company performance during 2019. |
(7) |
Mr. Barbieri joined as the Company’s permanent Chief Financial Officer starting October 25, 2021. |
(8) |
Mr. Barbieri served on a consulting basis as Interim Chief Financial Officer from March 2021 to October 2021 and amounts reflect compensation paid to the consulting firm, TechCXO, LLC, for Mr. Barbieri’s services. |
(9) |
Mr. Mondor served as the Company’s Chief Executive Officer until February 28, 2022, and served as Executive Chairman from March 1, 2022 through August 3, 2022. |
All Other Compensation
The following table sets forth information concerning All Other
Compensation in the table above:
Name | |
Year | | |
401(k) Employer Match ($) | | |
Other Compensation ($) | | |
Total ($) | |
Ashish Sharma | |
| 2022 | | |
| 12,056 | | |
| – | | |
| 12,056 | |
| |
| 2021 | | |
| 9,626 | | |
| – | | |
| 9,626 | |
| |
| 2020 | | |
| 7,929 | | |
| – | | |
| 7,929 | |
Robert Barbieri | |
| 2022 | | |
| 10,154 | | |
| – | | |
| 10,154 | |
| |
| 2021 | | |
| – | | |
| 405,694 | (1) | |
| 405,694 | |
Doug Kahn | |
| 2022 | | |
| 9,000 | | |
| – | | |
| 9,000 | |
| |
| 2021 | | |
| 8,228 | | |
| – | | |
| 8,228 | |
| |
| 2020 | | |
| 8,250 | | |
| – | | |
| 8,880 | |
Dan Mondor | |
| 2022 | | |
| 2,602 | | |
| 7,532 | (2) | |
| 10,134 | |
| |
| 2021 | | |
| 12,750 | | |
| – | | |
| 12,750 | |
| |
| 2020 | | |
| 8,550 | | |
| 66,701 | (3) | |
| 75,251 | |
(1) |
Represents compensation paid to TechCXO, LLC for consulting services provided by Mr. Barbieri as interim Chief Financial Officer. |
(2) |
Represents accrued vacation paid upon termination. |
(3) |
Represents a living expense allowance plus tax gross-up. |
Grants of Plan-Based Awards
The table below sets forth information on grants
of options, stock awards and other plan-based awards to the named executive officers in 2022.
| |
| |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | |
Estimated Future Payouts Under Equity Incentive Plan Awards | | |
All Other Stock Awards: Number of Shares of Stock | | |
All Other Option Awards: Number of Securities | | |
Exercise or Base Price of Option | | |
Grant Date Fair Value of Stock and Option | |
Name | |
Grant Date | |
Threshold ($) | | |
Target ($) | | |
Maximum ($) | | |
Threshold (#) | | |
Target (#) | | |
Maximum (#) | | |
or Units (#) | | |
Underlying Option (#) | | |
Awards ($/share) | | |
Awards ($)(1) | |
Mr. Sharma | |
3/1/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 200,000 | (2) | |
| – | | |
| – | | |
| 956,000 | |
| |
3/1/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 250,000 | (3) | |
$ | 4.78 | | |
| 885,188 | |
| |
3/1/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 250,000 | (3) | |
$ | 7.50 | | |
| 809,679 | |
| |
3/1/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 250,000 | (3) | |
$ | 10.00 | | |
| 754,559 | |
| |
3/1/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 250,000 | (3) | |
$ | 15.00 | | |
| 675,017 | |
| |
3/1/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 250,000 | (3) | |
$ | 20.00 | | |
| 617,538 | |
| |
3/4/2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 57,692 | (4) | |
| – | | |
| – | | |
| 270,000 | |
Mr. Barbieri | |
3/4/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 48,077 | (4) | |
| – | | |
| – | | |
| 225,000 | |
Mr. Kahn | |
3/4/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 42,735 | (4) | |
| – | | |
| – | | |
| 200,000 | |
Mr. Mondor | |
3/4/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 202,991 | (4) | |
| – | | |
| – | | |
| 949,997 | |
____________________
(1) |
|
Represents the aggregate grant date fair value of the stock and option awards granted in the respective fiscal year as computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 9, Share-based Compensation, in the Original Form 10-K. |
(2) |
|
Represents RSU awards. RSUs are scheduled to vest over a four-year period, with one-fourth vesting on each anniversary of the grant date. |
(3) |
|
Twenty-five percent (25%) of the shares subject to the options shall be first eligible to vest and become exercisable on the first anniversary of the grant date and (b) 1/48 of the shares vest on each monthly anniversary thereafter (such options which have become so eligible, "Eligible Options"), such that one hundred percent (100%) of the options shall become Eligible Options on the four-year anniversary of the Grant Date. The options shall vest and become only if (a) they have become Eligible Options; and (b) the average of the per-share closing price of the Company's common stock as reported on the principal exchange on which the shares are listed has equaled or exceeded the exercise price for ten (10) trading days within any 30 day period prior to the date of exercise. |
(4) |
|
Bonuses paid in March 2022 in the form of immediately vesting RSUs, based upon Company and individual performance during 2021. |
Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding the stock
options and RSUs held by our named executive officers that were outstanding at December 31, 2022.
| |
| |
Option Awards | | |
| | |
Stock Awards | |
Name | |
Grant Date | |
Number of Securities Underlying Unexercised Options Exercisable (#) | | |
Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | | |
Option Exercise Price ($) | | |
Option Expiration Date | | |
Number of shares of stock that have not vested (#)(2) | | |
Market value of shares of stock that have not vested ($)(3) | |
Ashish Sharma | |
3/1/2022 | |
| – | | |
| – | | |
| – | | |
| – | | |
| 200,000 | | |
| 168,000 | |
| |
3/1/2022 | |
| – | | |
| 250,000 | (4) | |
| 4.78 | | |
| 3/1/2032 | | |
| | | |
| | |
| |
3/1/2022 | |
| – | | |
| 250,000 | (4) | |
| 7.50 | | |
| 3/1/2032 | | |
| | | |
| | |
| |
3/1/2022 | |
| – | | |
| 250,000 | (4) | |
| 10.00 | | |
| 3/1/2032 | | |
| | | |
| | |
| |
3/1/2022 | |
| – | | |
| 250,000 | (4) | |
| 15.00 | | |
| 3/1/2032 | | |
| | | |
| | |
| |
3/1/2022 | |
| – | | |
| 250,000 | (4) | |
| 20.00 | | |
| 3/1/2032 | | |
| | | |
| | |
| |
6/6/2021 | |
| 93,750 | | |
| 156,250 | | |
| 9.66 | | |
| 6/6/2031 | | |
| | | |
| | |
| |
2/5/2020 | |
| 177,083 | | |
| 72,917 | | |
| 7.70 | | |
| 2/5/2030 | | |
| | | |
| | |
| |
7/30/2018 | |
| 250,000 | | |
| – | | |
| 1.80 | | |
| 7/30/2028 | | |
| | | |
| | |
| |
9/25/2017 | |
| 150,000 | | |
| – | | |
| 1.38 | | |
| 9/25/2027 | | |
| | | |
| | |
Robert Barbieri | |
10/25/2021 | |
| 109,375 | | |
| 265,625 | | |
| 6.55 | | |
| 10/25/2031 | | |
| | | |
| | |
Doug Kahn | |
12/15/2021 | |
| – | | |
| – | | |
| – | | |
| – | | |
| 33,750 | | |
| 28,350 | |
| |
06/30/2021 | |
| 31,875 | | |
| 53,125 | | |
| 10.09 | | |
| 06/30/2031 | | |
| | | |
| | |
| |
7/29/2020 | |
| 15,104 | | |
| 9,896 | | |
| 13.72 | | |
| 7/29/2030 | | |
| | | |
| | |
| |
10/4/2019 | |
| 33,333 | | |
| 19,417 | | |
| 4.78 | | |
| 10/4/2029 | | |
| | | |
| | |
| |
2/13/2019 | |
| 91,667 | | |
| 8,333 | | |
| 4.84 | | |
| 2/13/2029 | | |
| | | |
| | |
Dan Mondor | |
6/6/2021 | |
| 125,000 | | |
| – | | |
| 9.66 | | |
| 8/3/2023 | | |
| | | |
| | |
| |
6/6/2018 | |
| 1,250,000 | | |
| – | | |
| 2.00 | | |
| 8/3/2023 | | |
| | | |
| | |
| |
6/6/2017 | |
| 462,771 | | |
| – | | |
| 0.94 | | |
| 8/3/2023 | | |
| | | |
| | |
___________________
(1) |
Unless otherwise indicated, stock options are scheduled to vest over a four-year period, with one-fourth vesting on the first anniversary of the grant date and the remainder vesting ratably on a monthly basis thereafter through the fourth anniversary of the grant date. |
(2) |
Represents RSU awards. RSUs are scheduled to vest over a four-year period, with one-fourth vesting on the first anniversary of the grant date and the remainder vesting ratably on a monthly basis thereafter through the fourth anniversary of the grant date. |
(3) |
Calculated based on the closing price per share of our common stock on December 30, 2022 ($0.84). |
(4) |
Twenty-five percent (25%) of the shares subject to the options shall be first eligible to vest and become exercisable on the first anniversary of the grant date and (b) 1/48 of the shares vest on each monthly anniversary thereafter (such options which have become so eligible, "Eligible Options"), such that one hundred percent (100%) of the options shall become Eligible Options on the four-year anniversary of the Grant Date. The options shall vest and become only if (a) they have become Eligible Options; and (b) the average of the per-share closing price of the Company's common stock as reported on the principal exchange on which the shares are listed has equaled or exceeded the exercise price for ten (10) trading days within any 30 day period prior to the date of exercise. |
Option Exercises and Stock Vested
The following table sets forth information
regarding option exercises and stock awards that vested during 2022 with respect to our named executive officers.
Name and Position | |
Option Awards Number of Shares Acquired On Exercise (#) | | |
Value Realized on Exercise ($)(1) | | |
Stock Awards Number of Shares Acquired On Vesting (#) | | |
Value Realized on Vesting ($)(2) | |
Ashish Sharma | |
| – | | |
$ | – | | |
| 107,692 | | |
$ | 506,113 | |
Robert Barbieri | |
| – | | |
$ | – | | |
| 48,077 | | |
$ | 222,597 | |
Doug Kahn | |
| – | | |
$ | – | | |
| 53,985 | | |
$ | 208,551 | |
Dan Mondor | |
| 137,229 | | |
$ | 406,767 | | |
| 202,991 | | |
$ | 939,848 | |
Potential Payments Upon Termination or Change-in-Control
Change-in-Control and Severance Agreements
The Company has entered into Change-in-Control
and Severance Agreements with Messrs. Sharma, Barbieri and Kahn - all with substantially identical provisions - to provide severance benefits
in the event the executive’s employment is terminated. A description of the material terms of the agreements, including the severance
benefits payable under these agreements is set forth below.
In addition, prior to his transition
to Executive Chairman on March 1, 2022, the Company was a party to a Change-in-Control and Severance Agreement with Mr. Mondor, which
agreement terminated effective upon his transition.
Under the terms of the agreements, if
the employment of a named executive officer is terminated by the Company without cause or by the named executive officer for good reason
not in connection with a Change-in-Control, then the named executive officer is entitled to the following severance benefits:
| • | an amount equal to the named executive officer’s unpaid base salary and incentive pay through the
date of termination and any other amounts owed to the named executive officer under our compensation plans; |
| • | an amount equal to six months of the named executive officer’s base salary, payable in cash in the
form of salary continuation; |
| • | immediate vesting of the portion of the named executive officer’s outstanding equity awards under
our compensation plans that would have vested or become exercisable had his employment continued through the next vesting date; |
| • | a lump-sum bonus payment equal to the pro-rated portion of the target bonus in the year of termination
based on actual achievement of corporate performance goals and assumed full achievement of any individual performance goals; and |
| • | continued participation for up to nine months by the named executive officer and his dependents in our
group health plan, at the same benefit and contribution levels in effect immediately prior to the termination; |
provided, however, that in order to receive the aforementioned
severance benefits (other than the named executive officer’s unpaid base salary and incentive pay through the date of termination
and any other amounts owed to the named executive officer under our compensation plans), the named executive officer must execute a general
release of claims.
Under the agreements, subject to the executive’s execution
of a general release of claims (other than with respect to the first severance benefit noted below), the named executive officer is entitled
to the following severance benefits, in lieu of the benefits described above, if the named executive officer ’s employment is terminated
by the Company without cause or by the named executive officer for good reason during a Change-in-Control Period:
| • | an amount equal to the named executive officer’s unpaid base salary and incentive pay through the
date of termination and any other amounts owed to the named executive officer under our compensation plans; |
| • | an amount equal to the sum of 18 months of the named executive officer’s base salary; |
| • | an amount equal to 12 months of the named executive officer’s target annual bonus opportunity; |
| • | immediate vesting of outstanding equity awards under our compensation plans; and |
| • | continued participation for up to 18 months by the named executive officer and his dependents in our group
health plan, at the same benefit and contribution levels in effect immediately before the termination. |
The Change-in-Control and Severance Agreements described above
utilize the following definitions:
“Cause” means:
| • | any act of material misconduct or material dishonesty by the named executive officer in the performance of his or her duties; |
| • | any willful failure, gross neglect or refusal by the named executive officer to attempt in good faith to perform his or her duties
to the Company or to follow the lawful instructions of the Board (except as a result of physical or mental incapacity or illness) which
is not promptly cured after written notice; |
| • | the named executive officer’s commission of any fraud or embezzlement against the Company (whether or not a misdemeanor); |
| • | any material breach of any written agreement with the Company, which breach has not been cured by the named
executive officer (if curable) within 30 days after written notice thereof to the named executive officer by the Company; |
| • | the named executive officer’s being convicted of (or pleading guilty or nolo contendere to) any
felony or misdemeanor involving theft, embezzlement, dishonesty or moral turpitude; and/or |
| • | the named executive officer’s failure to materially comply with the material policies of the Company
in effect from time to time relating to conflicts of interest, ethics, codes of conduct, insider trading, or discrimination and harassment,
or other breach of the named executive officer’s fiduciary duties to the Company, which failure or breach is or could reasonably
be expected to be materially injurious to the business or reputation of the Company. |
“Good Reason” means
the occurrence, without the named executive officer ’s consent, for more than thirty days after such named executive officer provides
the Company a written notice detailing such conditions of:
| • | a material diminution in his or her base compensation; |
| • | a material diminution in his or her job responsibilities, duties or authorities; or |
| • | a relocation of his or her principal place of work by more than 50 miles. |
“Change-in-Control” means:
| • | a transaction after which an individual, entity or group owns 50% or more of the outstanding shares of
our common stock, subject to limited exceptions; |
| • | a sale of all or substantially all of the Company’s assets; or |
| • | a merger, consolidation or similar transaction, unless immediately following such transaction (a) the holders
of our common stock immediately prior to the transaction continue to beneficially own more than 50% of the combined voting power of the
surviving entity in substantially the same proportion as their ownership immediately prior to the transaction, (b) no person becomes the
beneficial owner, directly or indirectly, of more than 50% of the total voting power of the outstanding shares of the voting securities
eligible to elect directors of the surviving entity and |
(c) at least a majority of the members of the board of directors
of the surviving entity immediately following the transaction were also members of the Board at the time the Board approved the transaction.
“Change-in-Control Period”
means the period commencing 30 days prior to a Change-in-Control and ending on the 12-month anniversary of such Change-in-Control.
Equity Award Agreements
The following is a summary of the material
terms applicable to the outstanding equity awards held by our named executive officer s as of December 31, 2022.
2018 Incentive Plan. The award
agreements covering grants of stock options and RSUs made to our named executive officer s under our 2018 Incentive Plan provide that
the Board, in its discretion, may accelerate the vesting of any unvested stock options or RSUs in the event of a change-in-control.
Under our 2018 Incentive Plan, a “change-in-control”
is defined as:
| • | any person becoming the beneficial owner of 50% or more of the combined voting power of the then-outstanding
shares of our common stock, subject to certain exceptions; |
| • | a majority of the Board ceasing to be comprised of directors who (a) were serving
as members of the Board on May 11, 2018 or (b) became members of the Board after May 11, 2018 and whose nomination, election or appointment
was approved by a vote of two-thirds of the then-incumbent directors; |
| • | a reorganization, merger, consolidation, sale of all or substantially all of the assets of the Company
or similar transaction, unless the holders of our common stock immediately prior to the transaction beneficially own more than 50% of
the combined voting power of the shares of the surviving entity and certain other conditions are satisfied; or |
| • | a liquidation or dissolution of the Company approved by the Company’s stockholders. |
Mondor Transition Agreement
Effective March 1, 2022, Mr. Mondor transitioned from the role of Chief
Executive Officer of the Company to Executive Chairman, to serve in such capacity until the Company’s 2022 annual meeting of stockholders,
pursuant to the terms of a transition agreement between Mr. Mondor and the Company (the “Transition Agreement”). Pursuant
to the Transition Agreement, Mr. Mondor’s base salary as Executive Chairman was $100,000 per year, until his employment with the
Company ended at our 2022 annual meeting of stockholders on August 3, 2022. Mr. Mondor was also entitled to a cash success fee of $50,000
for successfully recruiting certain employees during his transition period. On March 1, 2022, the vesting of 25% of the options granted
to Mr. Mondor on June 6, 2021 accelerated and became immediately exercisable, and the remaining options under such grant were cancelled.
On June 21, 2022, the Transition Agreement was amended to (i) provide that the Company will pay for COBRA coverage for Mr. Mondor through
December 31, 2022, and (ii) to extend the post-termination exercise period for Mr. Mondor’s vested stock options to 12 months following
the termination of his employment with the Company.
Potential Payments Upon Termination or Change in Control Table
The following table summarizes the potential payments to our named
executive officers in two scenarios: (1) upon termination by us without cause or the executive’s resignation for good reason apart
from a change in control; or (2) upon termination by us without cause or the executive’s resignation for good reason within 30 days
prior to or 12 months following a Change-in-Control. The table assumes that the termination of employment or Change-in-Control, as applicable,
occurred on December 31, 2022. The value of the accelerated vesting of stock and option awards was computed using $0.84, which was the
price of our common stock at December 30, 2022 (less, in the case of option awards, the exercise price per share of such option awards).
The employment of Mr. Mondor terminated effective August 3, 2022. Accordingly,
he is not included in the table below as he would not have been entitled to any benefits in the event of the occurrence of any of the
triggering events described in the table on December 31, 2022.
|
Involuntary Termination |
Involuntary Termination |
|
Without Cause/Resignation |
Without Cause/Resignation |
|
for Good Reason Apart from a |
for Good Reason in |
|
Change in Control |
Connection with a Change in |
Name/Benefit |
($) (1) |
Control ($) (2) |
Ashish Sharma |
|
|
Cash severance |
575,000 |
1,075,000 |
Accelerated Vesting of Equity |
42,000 |
168,000 |
Health Benefits |
18,000 |
36,000 |
Total |
635,000 |
1,279,000 |
Robert Barbieri |
|
|
Cash severance |
400,000 |
800,000 |
Accelerated Vesting of Equity |
– |
– |
Health Benefits |
13,500 |
27,000 |
Total |
413,500 |
827,000 |
Doug Kahn |
|
|
Cash severance |
292,500 |
617,500 |
Accelerated Vesting of Equity |
7,088 |
28,350 |
Health Benefits |
9,000 |
27,000 |
Total |
308,588 |
672,850 |
____________________ |
|
|
| (1) | Represents base salary for 6 months, a prorated target annual bonus for the year of termination, and continued
health plan coverage for up to 9 months at our expense. Also includes the value the equity awards eligible for accelerated vesting upon
such termination. |
| (2) | Represents base salary for 18 months, payable in a lump sum, the executive’s target annual bonus
for the year of termination, and continued health plan coverage for up to 18 months at our expense. Also reflects the value of the accelerated
vesting of all outstanding stock and option awards. |
CEO Pay Ratio
As required by the Dodd-Frank Wall Street
Reform and Consumer Protection Act, we are providing disclosure regarding the ratio of the annual total compensation of Mr. Sharma, who
was our Chief Executive Officer during the majority of fiscal 2022, to the median of the total annual compensation of our employees other
than Mr. Sharma. We identified our employee with the median annual compensation using cash compensation for calendar year 2022 of all
employees who were employed by us on December 31, 2022, at which date our global workforce consisted of 405 employees, of which 229 were
U.S. employees and 176 were non-U.S. employees. We did not include any contractors or other non-employee workers in our employee population.
We annualized the compensation for any employees who commenced work during calendar 2022. We believe cash compensation for all employees
is reasonable to use as a consistently applied compensation measure because we do not have a broad-based equity award plan. We selected
December 31, 2022, which is within the last three months of our fiscal 2022, for the date as of when we would identify the employee with
the median annual compensation, because it enabled us to make such identification in a reasonably efficient and economical manner.
After identifying the employee with the
median total cash compensation for the 12 months ended December 31, 2022, we calculated total compensation for this employee for the fiscal
year ended December 31, 2022 using the same methodology that we use for our named executive officers in the Summary Compensation Table
above.
For fiscal 2022, the total compensation
of Mr. Sharma was $5,462,347, and the total compensation of our employee with median annual compensation was $88,588. Accordingly, we
estimated our CEO pay ratio for fiscal 2022 to be 62 to 1.
Director Compensation
We use a combination of cash and equity-based
incentive compensation to attract and retain qualified candidates to serve on the Board. Upon the recommendation of the Compensation Committee,
the Board makes all compensation decisions for our non-management directors. In recommending director compensation, the Compensation Committee
considers, among other things, the amount of time required of directors to fulfill their duties. A director who is also an employee of
the Company does not receive additional compensation for serving as a director.
Cash Compensation. The Board has approved the following
components of the annual cash retainer fee to our non-management directors for
Board and Board committee service in 2022 (which amounts are prorated
for directors who only served for a portion of the year):
| |
Chair | | |
Member | |
| |
| | |
| |
Board of Directors | |
$ | 80,000 | (1) | |
$ | 40,000 | |
Audit Committee | |
$ | 20,000 | | |
$ | 10,000 | |
Compensation Committee | |
$ | 14,000 | | |
$ | 6,000 | |
Nominating and Corporate Governance Committee | |
$ | 10,000 | | |
$ | 5,000 | |
(1) For independent directors only. If
the Chair is also an employee or officer of the Company they will not receive retainers for service on the Board.
Equity-Based Compensation. The
Board approved the following components for equity compensation to be awarded to each non-management director of the Company for fiscal
2022.
| • | An initial equity award upon joining the Board in the form of RSUs with an economic value of $145,000.
The RSUs vest in three equal annual installments beginning with the first anniversary of the grant date. |
| • | Thereafter, an annual equity award in the form of RSUs with an economic value of $125,000 that vests in
full on the first anniversary of the grant date. |
Based on the foregoing policy, the Compensation
Committee awarded non-management directors 49,801 RSUs in August 2022 as compensation for Board service from August 2022 until the 2023
annual meeting of stockholders. The non-management directors will be eligible for annual awards during 2023 as described above. In addition,
the Compensation Committee made a supplemental special grant to Mr. Lytle of 39,841 immediately vested RSUs in recognition of extraordinary
service to the Board.
Director Compensation Table. The
table below summarizes the compensation paid to our non-management directors for service on the Board for the fiscal year ended December
31, 2022. In addition to the payments below, the Company reimburses directors for reasonable out-of-pocket expenses incurred in connection
with attending Board and Board committee meetings.
Name | |
Fees Earned in Cash ($) | | |
Stock Awards ($)(1)(2) | | |
All Other Compensation ($) | | |
Total ($) | |
James B. Avery(3) | |
| 66,000 | | |
$ | 125,001 | | |
| – | | |
$ | 191,001 | |
Stephanie Bowers | |
| 45,000 | | |
$ | 125,001 | | |
| – | | |
$ | 170,001 | |
Christopher Harland | |
| 50,000 | | |
$ | 125,001 | | |
| – | | |
$ | 175,001 | |
Christopher Lytle | |
| 40,000 | | |
$ | 225,001 | (4) | |
| – | | |
$ | 265,001 | |
Jeffrey Tuder | |
| 85,466 | | |
$ | 125,001 | | |
| – | | |
$ | 210,467 | |
_____________________
(1) |
Represents the aggregate grant date fair value of the equity awards granted in 2022 as computed in accordance with Accounting Standards Codification (“ASC”) Topic 718, excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 9, Share-based Compensation, in the Original Form 10-K. |
(2) |
The following table shows, for each of our non-management directors, the aggregate number of shares subject to stock options and unvested stock awards outstanding as of December 31, 2022. |
Name | |
Stock Awards (#) | | |
Option Awards (#) | |
James B. Avery (issued to Tavistock Financial LLC) | |
| 49,801 | | |
| – | |
Stephanie Bowers | |
| 59,034 | | |
| – | |
Christopher Harland | |
| 49,801 | | |
| – | |
Christopher Lytle | |
| 55,096 | | |
| – | |
Jeffrey Tuder | |
| 49,801 | | |
| 56,912 | |
(3) |
As required by the terms of his employment with Tavistock Financial, LLC, all cash director fees earned by Mr. Avery are paid to Tavistock Foundation, Inc., a non-profit incorporated and existing under the laws of the State of Florida, and all equity awards to which he would be entitled for service as a director of the Company are issued to Tavistock Financial LLC. |
(4) |
Includes both an annual grant made to Mr. Lytle and a supplemental special grant in recognition of extraordinary service. |