UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. )
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Filed
by the Registrant [X]
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Filed
by a Party other than the Registrant [ ]
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material under §240.14a-12
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Ballantyne
Strong, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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[X]
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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of each class of securities to which transaction applies:
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number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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maximum aggregate value of transaction:
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paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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PROXY
STATEMENT AND NOTICE
FOR
THE 2020 ANNUAL MEETING OF STOCKHOLDERS
to
be held at
4201
Congress Street, Suite 175
Charlotte,
North Carolina 28209
on
November
30, 2020 at 10:00 a.m. (local time)
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
to
be held November 30, 2020
The
2020 Annual Meeting of Stockholders of Ballantyne Strong, Inc. will be held at our principal executive offices located at 4201
Congress Street, Suite 175, Charlotte, North Carolina 28209*, on November 30, 2020 at 10:00 a.m., local time (including any adjournments
or postponements thereof, the “Annual Meeting”), for the following purposes:
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1.
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To
elect the six director nominees named in the Proxy Statement to our Board of Directors until our 2021 Annual Meeting
of Stockholders.
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2.
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To
consider and act upon a non-binding advisory resolution to approve the compensation of our Named Executive Officers, as described
in the Proxy Statement.
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3.
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To
ratify the appointment of Haskell & White LLP as our independent registered public accounting firm for the fiscal year
ending December 31, 2020.
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4.
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To
transact such other business as may properly be brought before the Annual Meeting or any adjournment or postponement thereof.
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Only
those stockholders of record at the close of business on October 7, 2020 shall be entitled to notice of, and to vote at, the Annual
Meeting.
Your
vote is important. Whether or not you plan to attend the Annual Meeting in person, please vote your proxy card as soon as possible
to assure a quorum. Please vote in one of these three ways:
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(1)
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Visit
the website at www.proxyvote.com and have your proxy card in hand to vote through the Internet, or
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(2)
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Use
the toll-free telephone number listed on the proxy card, or
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(3)
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Mark,
sign, date and promptly return the enclosed proxy card in the postage-paid envelope.
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If
you vote on the website or by telephone, you do not need to return a proxy card by mail, unless you wish to change or revoke your
vote.
Voting
by any of these methods will ensure that you are represented at the Annual Meeting even if you are not there in person. Stockholders
who have previously voted but attend the Annual Meeting may withdraw their proxy if they wish to do so, and vote in person.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on November 30, 2020: The Company’s
Proxy Statement, its Annual Report on Form 10-K for the year ended December 31, 2019 and this Notice are available at www.ballantynestrong.com
or www.proxyvote.com.
Dated
this 8th day of October, 2020.
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By
Order of the Board of Directors,
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D.
Kyle Cerminara
Chairman
of the Board
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*
We intend to hold our Annual Meeting in person. However, we are actively monitoring the COVID-19 pandemic; we are sensitive to
the public health and travel concerns our stockholders may have and the protocols that federal, state and local governments may
impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements
for the Annual Meeting as promptly as practicable, which may include postponing or adjourning the Annual Meeting or holding the
Annual Meeting solely by means of remote communication. We plan to announce any such updates via a press release and posting details
on our website that will also be filed with the Securities and Exchange Commission as proxy material. Please monitor our Annual
Meeting website at www.ballantynestrong.com, under the tab “Investor Relations,” for updated information. If
you are planning to attend our Annual Meeting, please check the website one week prior to the meeting date. As always, we encourage
you to vote your shares prior to the Annual Meeting.
Table
of Contents
BALLANTYNE
STRONG, INC.
2020
Annual Meeting Proxy Statement Summary
Below
are highlights of important information you will find in this Proxy Statement. This summary does not contain all of the information
that you should consider, and you should read the entire Proxy Statement carefully before voting.
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Date, Time and
Location of
Annual Meeting
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November
30, 2020 at 10:00 a.m., Eastern Time
Headquarters
of Ballantyne Strong, Inc.
4201
Congress Street, Suite 175, Charlotte, North Carolina 28209
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Management
Proposals
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1.
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Election
of six director nominees (all incumbent directors) to serve until Ballantyne’s 2021 Annual Meeting: D. Kyle Cerminara,
Lewis M. Johnson, William J. Gerber, Charles T. Lanktree, Robert J. Roschman, and Ndamukong Suh.
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2.
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Approve,
on a non-binding advisory basis, the compensation of Ballantyne’s Named Executive Officers.
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3.
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Ratify
the appointment of Haskell & White LLP as Ballantyne’s independent registered public accounting firm for the 2020
fiscal year.
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Our
Board of Directors recommends a vote “FOR” each of these proposals.
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Director
Nominees
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You
are being asked to vote on these six director nominees. Directors are elected by a plurality of votes cast. Detailed
information about each nominee’s background and areas of expertise can be found beginning on page 8 of the Proxy Statement.
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Age as of
Annual
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Director
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Committee
Membership
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Name
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Meeting
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Since
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Principal
Occupation
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AC
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CC
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NCGC
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D.
Kyle Cerminara
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43
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2015
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Chief
Executive Officer, Co-Founder and Partner
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Fundamental
Global Investors, LLC
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Lewis
M. Johnson
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51
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2016
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President,
Co-Founder and Partner
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Fundamental
Global Investors, LLC
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William
J. Gerber
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62
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2015
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Former
Chief Financial Officer
TD
Ameritrade Holding Corporation
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Charles
T. Lanktree
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2015
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Chief
Executive Officer
Eggland’s
Best, LLC
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Robert
J. Roschman
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55
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2015
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Owner
Triple
R. Associates, Ltd.
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Ndamukong
Suh
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33
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2016
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Professional
Athlete
Tampa
Bay Buccaneers of the NFL
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AC
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Audit
Committee
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Chair
of the Committee
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CC
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Compensation
Committee
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Committee
Member
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NCGC
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Nominating
and Corporate Governance Committee
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Corporate
Governance
Highlights
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Corporate
governance matters (including director and executive officer bios) are discussed beginning on page 8 of the Proxy Statement.
Some highlights include:
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Director
Independence: The Board is composed of a majority of independent directors. All members of the Audit, Compensation and
Nominating and Corporate Governance Committees of the Board of Directors are independent.
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●
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Board
of Directors Leadership Structure and Role of the Board of Directors in Risk Oversight: The Proxy Statement discusses
Mr. Cerminara’s role as Chairman of the Board of Directors, Mr. Johnson’s role as Co-Chairman and the oversight
of risks by the Board of Directors and its standing committees.
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●
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Hedging
and Pledging Policy: Summarizes the Company’s hedging and pledging policy.
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Voting
Standard for Election of Directors: Directors are elected by a plurality of votes cast.
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Board
of Directors Self-Evaluation and Review of Independence of Board of Directors: Annual.
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Related
Party Transactions
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A
summary of Ballantyne’s related party transactions since January 1, 2018 can be found beginning on page 32 of the Proxy
Statement.
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Director
Compensation
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A
summary of director compensation for the 2019 fiscal year, including the modified director compensation program adopted on
June 6, 2019, can be found beginning on page 26 of the Proxy Statement.
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Executive
Compensation
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An
overview of the executive compensation program, including the compensation to executives for 2019 and 2018, can be found beginning
on page 17 of the Proxy Statement.
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Proxy
Solicitor
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Alliance
Advisors LLC. If you have any questions, require any assistance in voting your shares of the Company, need any additional
copies of the Company’s proxy materials, or have any other questions, please call Alliance Advisors LLC at the following
toll-free telephone number: 844-876-6187.
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PROXY
STATEMENT FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON NOVEMBER 30, 2020
This
proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”
or “Board of Directors”) of Ballantyne Strong, Inc. (the “Company,” “Ballantyne,” “we,”
“our” or “us”). The Company’s 2020 Annual Meeting of Stockholders (the “Annual Meeting”)
will be held on November 30, 2020 at 10:00 a.m., local time, at the Company’s principal executive offices located at 4201
Congress Street, Suite 175, Charlotte, North Carolina 28209, which is subject to change for the public health reasons discussed
below. The Company’s telephone number is (704) 994-8279.
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders
to
be held on November 30, 2020
As
permitted by the rules of the Securities and Exchange Commission (the “SEC”), we employ the cost-effective and environmentally-conscious
“notice and access” delivery method. This allows us to give our stockholders access to a full set of our proxy materials
online. Beginning on or about October 16, 2020, we will send to most of our stockholders, by mail or e-mail, a notice, titled
as the Notice of Electronic Availability of Proxy Materials, explaining how to access our proxy materials and vote. This notice
is not a proxy card and cannot be used to vote your shares.
On
or about the same day, we will begin mailing paper copies of our proxy materials to stockholders who have requested them. Those
stockholders who do not receive the Notice of Electronic Availability of Proxy Materials, including stockholders who have previously
requested to receive paper copies of our proxy materials, will receive a copy of this proxy statement, the proxy card, and our
Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”) by mail. The Notice of
Electronic Availability of Proxy Materials also contains instructions on how you can (i) receive a paper copy of the proxy statement,
proxy card and Annual Report if you only received a notice by mail, or (ii) elect to receive your proxy statement, proxy card
and Annual Report over the Internet next year if you received them by mail this year.
What
is the purpose of the Annual Meeting?
At
the Annual Meeting, our stockholders will act upon the matters described in the accompanying notice of meeting.
Who
is entitled to vote at the Annual Meeting?
The
Company has one class of voting shares outstanding. Only stockholders of record of our common stock at the close of business on
October 7, 2020 (the “Record Date”) are entitled to receive notice of the Annual Meeting and to vote the shares of
common stock that they held on the Record Date at the Annual Meeting. As of the close of business on October 7, 2020, the Company
had 14,790,374 shares of common stock outstanding, all of which are entitled to vote at the Annual Meeting. A list of stockholders
as of the Record Date will be available for inspection during ordinary business hours at our principal executive offices located
at 4201 Congress Street, Suite 175, Charlotte, North Carolina 28209 for 10 days before the Annual Meeting. Each share of common
stock will have one vote on each matter to be voted on at the Annual Meeting. The shares of common stock held in treasury are
not considered outstanding and will not be voted.
Who
may attend the Annual Meeting?
All
stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. If you attend the Annual Meeting
in person, you will be asked to present photo identification (such as a state-issued driver’s license) and proof that you
own shares of Ballantyne common stock before entering the meeting. If you are a holder of record, the top half of your proxy card
or your Notice of Electronic Availability of Proxy Materials is your admission ticket. If you hold shares in “street name”
(that is, through a bank, broker or other nominee), a recent brokerage statement or a letter from your broker, bank or other nominee
showing your holdings of Ballantyne common stock is proof of ownership.
As
part of our efforts to maintain a safe and healthy environment at our Annual Meeting, we are closely monitoring statements issued
by the federal, state and local authorities regarding the COVID-19 pandemic. For that reason, we reserve the right to reconsider
the date, time, and/or means of convening the Annual Meeting, including solely by means of remote communications. If we take this
step, we will announce the decision to do so in advance, and details on how to participate will be issued by press release, posted
on our website, and filed with the SEC as additional proxy material. We also encourage attendees to review guidance from public
health authorities on this issue.
What
is the difference between a stockholder of record and a beneficial owner?
If
your shares are registered directly in your name with our transfer agent, Broadridge Financial Solutions, Inc., then you are a
“stockholder of record.” The Notice of Electronic Availability of Proxy Materials or hard copies of our proxy materials
have been provided directly to you by the Company. You may vote by ballot at the Annual Meeting or vote by proxy by completing,
signing, dating and returning the enclosed proxy card (if you received hard copies of our proxy materials) or following the instructions
on the proxy card for voting by Internet or telephone. If your shares are held for you in “street name,” then you
are not a stockholder of record. Rather, the broker, bank or other nominee that holds your shares is the stockholder of record
and you are the “beneficial owner” of the shares. The Notice of Electronic Availability of Proxy Materials or hard
copies of our proxy materials, as well as a voting instruction card, have been forwarded to you by the broker, bank or other nominee.
If you complete and properly sign the voting instruction card and return it in the appropriate envelope, or follow the instructions
on the voting instruction card for voting by Internet or telephone, the broker, bank or other nominee will cause your shares to
be voted in accordance with your instructions. If you are a beneficial owner of shares and wish to vote shares that you hold in
street name in person at the Annual Meeting, then you must obtain a legal proxy, executed in your favor, from the holder of record
(the broker, bank or other nominee).
What
constitutes a quorum?
The
presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of the Company’s common
stock entitled to vote at the Annual Meeting will constitute a quorum, permitting action to be taken and the conduct of business
at the Annual Meeting. As of the Record Date, 14,790,374 shares of common stock were outstanding. Broker non-votes, abstentions
and proxies marked “withhold” for the election of directors will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business. Once a share is represented at the Annual Meeting, it will be deemed present
for quorum purposes throughout the Annual Meeting (including any postponement or adjournment thereof unless a new record date
is or must be set for such postponement or adjournment).
May
I vote by proxy card or by the Internet or telephone?
You
may vote by proxy card or by the Internet or telephone. Voting by any of these methods will ensure that you are represented at
the Annual Meeting even if you are not there in person. Please refer to the voting instructions on the Notice of Electronic Availability
of Proxy Materials and the proxy card. You may also vote by ballot at the Annual Meeting if you attend in person.
May
I change my vote?
Yes.
You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting, whether submitted by mail
or by the Internet or telephone, by (i) delivering a signed written notice stating that you revoke your proxy to the attention
of the Secretary of the Company at 4201 Congress Street, Suite 175, Charlotte, North Carolina 28209 that bears a later date than
the date of the proxy you want to revoke and is received prior to the Annual Meeting, (ii) submitting a valid, later-dated proxy
by the Internet or telephone before 11:59 p.m., Eastern Time, on November 29, 2020, or by mail that is received prior to the Annual
Meeting, or (iii) attending the Annual Meeting (or, if the Annual Meeting is postponed or adjourned, attending the postponed or
adjourned meeting) and voting in person, which automatically will cancel any proxy previously given, or revoking your proxy in
person, but your attendance alone at the Annual Meeting will not revoke your proxy previously given. If you hold your shares in
“street name” through a broker, bank or other nominee, you must contact your broker, bank or other nominee to change
your vote or obtain a written legal proxy to vote your shares if you wish to cast your vote in person at the Annual Meeting.
How
many votes are required to approve each Proposal?
Proposal
One—Election of six directors named in this proxy statement to the Ballantyne Board of Directors, each to hold office
until our 2021 Annual Meeting of Stockholders (the “2021 Annual Meeting”) and until a successor is duly elected and
qualified or until the director’s earlier retirement, resignation or removal.
Under
our Bylaws, the six candidates receiving the highest number of “FOR” votes cast by holders of shares represented
in person or by proxy at the Annual Meeting will be elected. This number is called a plurality. Properly submitted proxies marked
“WITHHOLD” with respect to the election of a director nominee will be counted for purposes of determining if there
is a quorum at the Annual Meeting, but will not be considered to have been voted for the director nominee. Similarly, any broker
non-votes will be counted for purposes of determining if there is a quorum, but will not be considered to have been voted for
the director nominee.
Proposal
Two—Advisory Vote on Executive Compensation.
The
number of votes cast “FOR” advisory approval of the compensation of our Named Executive Officers (as defined below),
either in person or by proxy, at the Annual Meeting must exceed the number of votes cast “AGAINST” advisory approval.
Proposal
Three—Ratification of Independent Registered Public Accounting Firm.
The
number of votes cast “FOR” the ratification of the appointment of Haskell & White LLP as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2020, either in person or by proxy, at the Annual Meeting
must exceed the number of votes cast “AGAINST” the ratification.
Other
Proposals. No other matters are anticipated to be brought before the Annual Meeting.
How
does the Board of Directors recommend I vote?
Unless
you give instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board of Directors unanimously recommends a vote “FOR”:
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1.
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Election
of each of the six director nominees named in this proxy statement to the Board of Directors until our 2021 Annual
Meeting.
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2.
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Approval,
on an advisory, non-binding basis, of the compensation of our Named Executive Officers, as described in this proxy statement.
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3.
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Ratification
of the appointment of Haskell & White LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2020.
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With
respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote as recommended by the Board
of Directors or, if no recommendation is given, in their own discretion.
What
happens if I submit a proxy card and do not give specific voting instructions?
If
you are a stockholder of record and sign and return the proxy card without indicating your voting instructions, your shares will
be voted in accordance with the recommendations of the Board of Directors. With respect to any other matter that properly comes
before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in
their own discretion. As of the filing date of this proxy statement, we did not know of any other matter to be raised at the Annual
Meeting.
If
you are a beneficial owner and do not provide voting instructions to your bank, broker or other nominee, then, under applicable
rules, the broker, bank or other nominee that holds your shares in “street name” may generally vote on “routine”
matters but cannot vote on “non-routine” maters. If the broker, bank or other nominee that holds your shares does
not receive instructions from you on how to vote your shares on a non-routine matter, the broker, bank or other nominee will inform
the inspector of election for the Annual Meeting that it does not have the authority to vote on the matter with respect to your
shares. This is generally referred to as a “broker non-vote.”
Which
voting matters are considered routine or non-routine, and what is the impact of a broker non-vote?
Proposal
1 regarding the election of directors and Proposal 2 regarding advisory approval of the compensation of our Named Executive Officers
are considered non-routine matters under applicable rules. Therefore, a broker, bank or other nominee cannot vote on such proposals
without voting instructions from the beneficial owners. If you do not provide voting instructions to your broker, bank or other
nominee on these proposals, a “broker non-vote” will occur. Although shares constituting broker non-votes will be
counted as present for the purpose of determining a quorum at the Annual Meeting, broker non-votes will not be considered as votes
cast for or withheld from a director nominee or for or against Proposal 2. Accordingly, broker non-votes will have no impact on
the election of directors or Proposal 2.
Proposal
3 concerning the ratification of the appointment of Haskell & White LLP as our independent registered public accounting firm
for the year ending December 31, 2020 is considered a routine matter under applicable rules. Therefore, a broker, bank or other
nominee may generally vote on this matter. No broker non-votes are expected in connection with Proposal 3.
How
will abstentions be counted?
Although
shares constituting abstentions will be counted as present for the purpose of determining a quorum at the Annual Meeting, withheld
votes will not be considered as votes cast for Proposal 1, and abstentions will not be considered as votes cast for Proposals
2 or 3. Accordingly, because the election of directors requires only a plurality vote, withheld votes will have no impact upon
the election of directors, and abstentions will also have no impact on the outcome of Proposal 2 (advisory approval of say-on-pay)
or Proposal 3 (ratification of the independent registered public accounting firm).
Who
pays the expenses incurred in connection with the solicitation of proxies?
We
have retained Alliance Advisors LLC to assist in the solicitation of proxies for the Annual Meeting and will pay Alliance Advisors
LLC a fee of approximately $15,000, including reimbursement of reasonable out-of-pocket expenses and disbursements incurred in
connection with the proxy solicitation. It is anticipated that Alliance Advisors LLC will employ approximately 25 persons to solicit
stockholders of the Company for the Annual Meeting. We have also agreed to indemnify Alliance Advisors LLC against certain losses,
costs and expenses. In addition, proxies may be solicited on our behalf by our directors, officers or employees in person or by
mail, telephone, facsimile or electronic communications, but no additional compensation will be paid to them. We have also requested
brokerage houses and other custodians, nominees and fiduciaries to forward soliciting material to beneficial owners and have agreed
to reimburse those institutions for their out-of-pocket expenses.
How
can I find out the results of the voting at the Annual Meeting?
Preliminary
voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a Current Report
on Form 8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not available
to us in time to file a Form 8-K within four business days after the Annual Meeting, we intend to file a Form 8-K to publish preliminary
results and, within four business days after the final results are known to us, file an amendment to the Form 8-K to publish the
final results.
How
may I get additional copies of the Annual Report?
Our
Annual Report (as amended by Form 10-K/A), including financial statements, is available through our website at www.ballantynestrong.com.
The information provided on the Company’s website is referenced in this proxy statement for information purposes only, and
shall not be deemed to be a part of or incorporated by reference into this proxy statement or any other filings the Company makes
with the SEC. For a printed copy, please contact our Corporate Secretary by mail at: Attn: Corporate Secretary, Ballantyne Strong,
Inc., 4201 Congress Street, Suite 175, Charlotte, North Carolina 28209.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Largest
Owners of Ballantyne Shares
The
following table shows each person or entity that Ballantyne knows to be the beneficial owner of more than five percent of Ballantyne’s
outstanding common stock as of the close of business on the Record Date of October 7, 2020.
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of Beneficial Ownership(1)
|
|
|
Percent of Class(2)
|
|
Fundamental Global Investors, LLC
4201 Congress Street, Suite 140
Charlotte, NC 28209
|
|
|
6,363,286
|
(3)
|
|
|
43.0
|
%
|
Ariel Investments, LLC
200 E. Randolph Street, Suite 2900
Chicago, IL 60601
|
|
|
2,649,581
|
(4)
|
|
|
18.0
|
%
|
Dimensional Fund Advisors LP
6300 Bee Cave Road, Building One
Austin, TX 78746
|
|
|
972,439
|
(5)
|
|
|
6.6
|
%
|
|
(1)
|
This
information is based on Schedules 13G and 13D, as amended, and a Form 4 filed with the SEC. Fundamental Global Investors,
LLC (“Fundamental Global”) filed an amended Schedule 13D on August 18, 2020 and a Form 4 on October 7, 2020; Ariel
Investments, LLC (“Ariel”) filed an amended Schedule 13G on July 10, 2020; and Dimensional Fund Advisors LP (“Dimensional”)
filed an amended Schedule 13G on February 12, 2020.
|
|
|
|
|
(2)
|
Based
upon 14,790,374 shares outstanding on October 7, 2020.
|
|
|
|
|
(3)
|
Fundamental
Global has shared dispositive power over 6,363,286 shares, representing approximately 43.0% of the Company’s
outstanding shares of common stock, and shared voting power over 4,970,995 shares, representing approximately 33.6%
of the Company’s outstanding shares of common stock. The number reported in the table includes the 1,392,291 shares
held by CWA Asset Management Group, LLC (d/b/a Capital Wealth Advisors) (“CWA”), a wealth advisor and multi-family
office of which Fundamental Global owns 50%, for the accounts of individual investors (including shares held in customer accounts
for Messrs. Cerminara and Johnson). Mr. Cerminara, Chairman of our Board of Directors and our former Chief Executive Officer,
serves as Chief Executive Officer, Co-Founder and Partner of Fundamental Global, and Mr. Johnson, Co-Chairman of our Board
of Directors, serves as President, Co-Founder and Partner of Fundamental Global. Excluding the shares held by CWA in their
respective customer accounts, Messrs. Cerminara and Johnson together beneficially own an additional 192,316 shares (including
26,000 shares purchasable pursuant to stock options held by Mr. Cerminara exercisable within 60 days of the Record Date),
thus increasing the total number of shares beneficially owned by Fundamental Global to 6,555,602 shares, or approximately
44.2% of the Company’s outstanding shares of common stock. Fundamental Global, on behalf of the funds managed by it,
has entered into a stock trading plan in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), for the purchase of up to 1.0 million shares of the Company’s common stock (the “10b5-1
Plan”). The 10b5-1 Plan became effective on April 2, 2020 and will terminate on April 2, 2021 or such earlier date as
set forth in the 10b5-1 Plan. Transactions under the 10b5-1 Plan are reported to the SEC in accordance with applicable securities
laws, rules and regulations.
|
|
|
|
|
(4)
|
Ariel
reported that it has sole voting and sole dispositive power over 2,649,581 shares. Ariel reported that its adviser clients
have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, all securities
reported as beneficially owned by Ariel. Ariel also reported that WWJr. Enterprises, Ariel’s client, has an economic
interest in more than 5% of the shares reported as beneficially owned by Ariel.
|
|
|
|
|
(5)
|
Dimensional
reported that it has sole voting power over 946,750 shares and sole dispositive power over 972,439 shares. Dimensional reported
that the funds, group trusts and separate accounts it provides investment management or adviser services to have the right
to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities held in
their respective accounts which are reported as beneficially owned by Dimensional.
|
Share
Ownership of Directors, Director Nominees and Executive Officers
The
following chart sets forth, as of the close of business on the Record Date of October 7, 2020, certain information concerning
beneficial ownership of common stock by each director and director nominee of the Company, each of the Named Executive Officers,
and all current directors and executive officers as a group. The address for each director, director nominee and executive officer
listed is: c/o Ballantyne Strong, Inc., 4201 Congress Street, Suite 175, Charlotte, North Carolina 28209.
|
Name
|
|
Number of Shares Beneficially
Owned(1)
|
|
|
Percent of
Common
Stock(2)
|
|
|
D. Kyle Cerminara, Chairman
|
|
|
6,523,492
|
(3)
|
|
|
44.0
|
%
|
|
Lewis M. Johnson, Co-Chairman
|
|
|
6,395,396
|
(4)
|
|
|
43.2
|
%
|
|
Mark D. Roberson, Chief Executive Officer
|
|
|
78,999
|
(5)
|
|
|
*
|
|
|
Todd R. Major, Chief Financial Officer
|
|
|
10,000
|
(6)
|
|
|
*
|
|
|
Ray F. Boegner, President of Strong Entertainment
|
|
|
253,018
|
(7)
|
|
|
1.7
|
%
|
|
William J. Gerber, Director
|
|
|
35,428
|
(8)
|
|
|
*
|
|
|
Charles T. Lanktree, Director
|
|
|
42,928
|
(9)
|
|
|
*
|
|
|
Robert J. Roschman, Director
|
|
|
49,816
|
(10)
|
|
|
*
|
|
|
Ndamukong Suh, Director
|
|
|
36,402
|
(11)
|
|
|
*
|
|
|
All current directors and executive officers as a group (9 persons)
|
|
|
7,062,193
|
(12)
|
|
|
47.3
|
%
|
|
|
*
|
Less
than 1% of common stock outstanding.
|
|
|
(1)
|
Each
director, director nominee and Named Executive Officer listed in the table owns all outstanding shares directly and has sole
voting and investment power over such shares unless otherwise specified below.
|
|
|
|
|
|
|
(2)
|
Based
upon 14,790,374 shares of common stock outstanding as of October 7, 2020. Beneficial ownership is determined in accordance
with the rules of the SEC and generally requires that such persons have voting or investment power with respect to the
securities. Each named person is deemed to be the beneficial owner of shares of common stock that may be acquired within
60 days of October 7, 2020 upon the exercise of stock options and vesting of restricted stock units (sometimes referred
to as “RSUs”). Accordingly, the number of shares and percentage set forth next to the name of such person,
and all current directors and executive officers as a group, includes shares of directly owned common stock (including
shares of restricted common stock, if any), shares of common stock purchasable pursuant to stock options exercisable within
60 days of the Record Date and shares of common stock potentially issuable upon the vesting of restricted stock units
within 60 days of the Record Date. However, the shares of common stock so issuable upon the exercise of stock options
or vesting of restricted stock units held by any such person are not included in calculating the percentage of
common stock beneficially owned by any other stockholder.
|
|
|
(3)
|
Includes
242,945 shares of common stock directly owned by Mr. Cerminara, 7,540 shares held in Mr. Cerminara’s 401(k) plan, 15,440
shares held by Mr. Cerminara’s wife and children and 26,000 shares purchasable pursuant to stock options exercisable
within 60 days of the Record Date (131,719 of these shares are held by CWA in customer accounts for Mr. Cerminara and his
wife and children). Also includes 4,970,995 shares of common stock beneficially owned by Fundamental Global, which,
with its affiliates, is the largest stockholder of the Company, and 1,260,572 shares held in customer accounts managed by
CWA (excluding Mr. Cerminara’s shares held in CWA accounts), of which Fundamental Global owns 50%. Mr. Cerminara, as
Chief Executive Officer, Co-Founder and Partner of Fundamental Global, is deemed to have shared voting and dispositive power
over the shares beneficially owned by Fundamental Global, and as manager of CWA, is deemed to have shared dispositive power
over the shares beneficially owned by CWA. Mr. Cerminara disclaims beneficial ownership of the shares beneficially owned by
Fundamental Global and CWA except to the extent of his pecuniary interest therein. Does not include (i) 13,334 shares potentially
issuable pursuant to restricted stock units granted on January 26, 2018, (ii) 50,000 shares potentially issuable pursuant
to restricted stock units granted on June 6, 2019, (iii) 28,662 shares potentially issuable pursuant to restricted stock units
granted on July 1, 2020, (iv) 30,000 shares potentially issuable upon the exercise of stock options granted on January 26,
2018, and (v) 24,000 shares potentially issuable upon the exercise of stock options granted on June 6, 2019.
|
|
|
(4)
|
Includes
40,610 shares of common stock directly owned by Mr. Johnson, 8,500 of which are held by CWA in a customer account. Also includes
4,970,995 shares of common stock beneficially owned by Fundamental Global, which, with its affiliates, is the largest
stockholder of the Company, and 1,383,791 shares held in customer accounts managed by CWA (excluding Mr. Johnson’s shares
held in CWA accounts), of which Fundamental Global owns 50%. Mr. Johnson, as President, Co-Founder and Partner of Fundamental
Global, is deemed to have shared voting and dispositive power over the shares beneficially owned by Fundamental Global, and
as manager of CWA, is deemed to have shared dispositive power over the shares beneficially owned by CWA. Mr. Johnson disclaims
beneficial ownership of the shares beneficially owned by Fundamental Global and CWA except to the extent of his pecuniary
interest therein. Does not include (i) 9,709 shares potentially issuable upon the vesting of restricted stock units granted
on July 1, 2019, (ii) 6,667 shares potentially issuable upon the vesting of restricted stock units separately granted on July
1, 2019, and (iii) 28,662 shares potentially issuable upon the vesting of restricted stock units granted on July 1, 2020.
|
|
|
|
|
|
|
(5)
|
Includes
40,332 shares of common stock directly owned by Mr. Roberson, 22,000 shares purchasable pursuant to stock options exercisable
within 60 days of the Record Date, and 16,667 shares potentially issuable upon the vesting of restricted stock units within
60 days of the Record Date. Does not include (i) 16,667 shares potentially issuable upon the vesting of restricted stock
units granted on December 4, 2018, (ii) 43,334 shares potentially issuable upon the vesting of restricted stock units
granted on June 6, 2019, (iii) 24,000 shares potentially issuable upon the exercise of stock options granted on December
4, 2018, and (iv) 24,000 shares potentially issuable upon the exercise of stock options granted on June 6, 2019.
|
|
|
(6)
|
Includes
10,000 shares of common stock directly owned by Mr. Major. Does not include 20,000 shares potentially issuable upon the vesting
of restricted stock units granted on May 31, 2019.
|
|
|
|
|
|
|
(7)
|
Includes
168,018 shares of common stock directly owned by Mr. Boegner and 85,000 shares purchasable pursuant to stock options exercisable
within 60 days of the Record Date. Does not include (i) 13,334 shares potentially issuable upon the vesting of restricted
stock units granted on January 26, 2018, (ii) 26,667 shares potentially issuable upon the vesting of restricted stock units
granted on June 6, 2019, (iii) 16,000 shares potentially issuable upon the exercise of stock options granted on February 28,
2017, (iv) 30,000 shares potentially issuable upon the exercise of stock options granted on January 26, 2018 and (v) 16,000
shares potentially issuable upon the exercise of stock options granted on June 6, 2019.
|
|
|
|
|
|
|
(8)
|
Includes
35,428 shares of common stock directly owned by Mr. Gerber. Does not include (i) 9,709 shares potentially issuable upon the
vesting of restricted stock units granted on July 1, 2019 and (ii) 28,662 shares potentially issuable upon the vesting of
restricted stock units granted on July 1, 2020.
|
|
|
|
|
|
|
(9)
|
Includes
35,428 shares of common stock directly owned by Mr. Lanktree and 7,500 shares directly owned by the Donna B. Lanktree
Family Trust, the trustee of which is Donna B. Lanktree, the spouse of Mr. Lanktree. Does not include (i) 9,709 shares
potentially issuable upon the vesting of restricted stock units granted on July 1, 2019 and (ii) 28,662 shares potentially
issuable upon the vesting of restricted stock units granted on July 1, 2020.
|
|
|
(10)
|
Includes
49,816 shares of common stock directly owned by Mr. Roschman. Does not include (i) 9,709 shares potentially issuable upon
the vesting of restricted stock units granted on July 1, 2019 and (ii) 28,662 shares potentially issuable upon the vesting
of restricted stock units granted on July 1, 2020.
|
|
|
(11)
|
Includes
36,402 shares of common stock directly owned by Mr. Suh. Does not include (i) 9,709 shares potentially issuable upon the
vesting of restricted stock units granted on July 1, 2019 and (ii) 28,662 shares potentially issuable upon the vesting
of restricted stock units granted on July 1, 2020.
|
|
|
(12)
|
Includes
658,979 shares directly owned by all current directors and executive officers as a group, 7,540 shares held in Mr.
Cerminara’s 401(k) plan, 15,440 shares held by Mr. Cerminara’s wife and children, 7,500 shares held by the Donna
B. Lanktree Family Trust, 133,000 shares purchasable pursuant to stock options exercisable within 60 days of the Record Date,
16,667 shares potentially issuable upon the vesting of restricted stock units within 60 days of the Record Date, 4,970,995
shares held by Fundamental Global and 1,252,072 shares held in customer accounts managed by CWA (excluding
Messrs. Cerminara’s and Johnson’s shares held in CWA accounts), of which Fundamental Global owns 50%.
|
PROPOSAL
ONE
ELECTION
OF DIRECTORS
Ballantyne’s
Certificate of Incorporation, as amended (the “Certificate of Incorporation”), and Bylaws, as amended (the “Bylaws”),
provide for the annual election of all directors. The Bylaws allow the Board of Directors to set the number of directors from
time to time and to appoint directors between Annual Meetings. The Board of Directors has set the number of directors at six.
During
2019, the Board of Directors was comprised of seven directors, namely D. Kyle Cerminara, Lewis M. Johnson, William J. Gerber,
Colonel Jack H. Jacobs, Charles T. Lanktree, Robert J. Roschman, and Ndamukong Suh, all of whom were elected at the 2019 Annual
Meeting of Stockholders held on December 17, 2019. On April 2, 2019, Mr. Johnson was appointed as Co-Chairman of the Board of
Directors. Colonel Jacobs resigned from the Board of Directors on October 5, 2020.
Set
forth below is a list of the six current directors of the Company, each of whom is nominated for re-election at the Annual
Meeting, and certain information regarding them, including their age as of the Annual Meeting. The information below also sets
forth the year in which each director became a director of the Company. Each director nominee, if elected, will be entitled to
serve until the 2021 Annual Meeting and until a successor is duly elected and qualified or until his earlier retirement, resignation
or removal.
D.
Kyle Cerminara, age 43, has served as a director of Ballantyne since February 2015 and the Company’s Chairman since
May 2015. Mr. Cerminara previously served as the Company’s Chief Executive Officer from November 2015 to April 2020. Since
April 2012, Mr. Cerminara has also served as the Chief Executive Officer, Co-Founder and Partner of Fundamental Global, an SEC
registered investment advisor that manages alternative investment funds and, with its affiliates, is the largest stockholder of
the Company. In addition, Mr. Cerminara is Co-Chief Investment Officer of CWA, a wealth advisor and multi-family office affiliated
with Fundamental Global, which position he has held since December 2012. Mr. Cerminara has also served as President and a director
of FG New America Acquisition Corp. (NYSE: FGNA.U), a special purpose acquisition company since July 2020. Mr. Cerminara
is a member of the Board of Directors of a number of publicly held companies focused in the investment management and reinsurance,
technology and communication sectors, including BK Technologies Corporation (NYSE American: BKTI), a holding company with a wholly-owned
operating subsidiary that manufactures high-specification communications equipment, since July 2015; 1347 Property Insurance Holdings,
Inc. (Nasdaq: PIH), which is implementing business plans to operate as a diversified holding company of reinsurance and investment
management businesses, since December 2016; and Itasca Capital Ltd. (TSXV: ICL) (formerly Kobex Capital Corp.), a publicly traded
investment firm, since June 2016. Mr. Cerminara also has served as a director of Firefly Systems, Inc., a venture-backed digital
advertising company, since August 2020. Mr. Cerminara was appointed chairman of 1347 Property Insurance Holdings, Inc. in May
2018, where he also served as principal executive officer from March 2020 to June 2020, and chairman of Itasca Capital Ltd. in
June 2018. Mr. Cerminara previously served as chairman of BK Technologies Corporation from March 2017 to April 2020. He previously
served on the Board of Directors of Limbach Holdings, Inc. (Nasdaq: LMB), which provides building infrastructure services, from
March 2019 to March 2020, Iteris, Inc. (Nasdaq: ITI), a publicly traded, applied informatics company, from August 2016 to November
2017, and Magnetek, Inc., a publicly traded manufacturer, in 2015. He has served as a Trustee and President of StrongVest ETF
Trust, which was an open-end management investment company and is in the process of being dissolved, since July 2016. He also
previously served on the Board of Directors of blueharbor bank, a community bank, from October 2013 to January 2020. Prior to
these roles, Mr. Cerminara was a Portfolio Manager at Sigma Capital Management from 2011 to 2012, a Director and Sector Head of
the Financials Industry at Highside Capital Management from 2009 to 2011, and a Portfolio Manager and Director at CR Intrinsic
Investors from 2007 to 2009. Before joining CR Intrinsic Investors, Mr. Cerminara was a Vice President, Associate Portfolio Manager
and Analyst at T. Rowe Price from 2001 to 2007 and an Analyst at Legg Mason from 2000 to 2001. Mr. Cerminara received an MBA from
the Darden School of Business at the University of Virginia and a B.S. in Finance and Accounting from the Smith School of Business
at the University of Maryland, where he was a member of Omicron Delta Kappa, an NCAA Academic All-American and Co-Captain of the
men’s varsity tennis team. He also completed a China Executive Residency at the Cheung Kong Graduate School of Business
in Beijing, China. Mr. Cerminara holds the Chartered Financial Analyst (CFA) designation. Mr. Cerminara brings to the Board of
Directors the perspective of the Company’s largest stockholder. He also has extensive experience in the financial industry,
including investing, capital allocation, finance and financial analysis of public companies, and operational experience as our
former Chief Executive Officer, which qualify him to serve on our Board of Directors.
Lewis
M. Johnson, age 51, has served as a director of Ballantyne since May 2016 and became Co-Chairman of the Board of Directors
in April 2019. Since April 2012, Mr. Johnson has served as the President, Co-Founder and Partner of Fundamental Global, an SEC
registered investment advisor that manages alternative investment funds and, with its affiliates, is the largest stockholder of
the Company. In addition, since January 2013, Mr. Johnson has served as Co-Chief Investment Officer of CWA. Prior to co-founding
Fundamental Global and partnering with CWA, Mr. Johnson was a private investor from 2010 to 2012. From 2008 to 2010, Mr. Johnson
served as Portfolio Manager and Managing Director at Louis Dreyfus Highbridge Energy. Previously, Mr. Johnson was a Senior Vice
President, Portfolio Manager and Analyst at Pequot Capital from 2006 to 2007. Prior to joining Pequot Capital, he was a Vice President
and Analyst at T. Rowe Price from 2000 to 2006. He interned as an Analyst at Capital Research and Management during the summer
of 1999 and worked as a Vice President at AYSA from 1992 to 1998. Mr. Johnson received an MBA from the Wharton School of Business
at the University of Pennsylvania in addition to a M.A. in Political Science and a B.A. in International Studies from Emory University,
where he graduated Magna Cum Laude and was a member of Phi Beta Kappa. Mr. Johnson is a member of the Board of Directors of a
number of publicly held companies, including BK Technologies Corporation (NYSE American: BKTI), a holding company with a wholly-owned
operating subsidiary that manufactures high-specification communications equipment, since May 2016; 1347 Property Insurance Holdings,
Inc. (Nasdaq: PIH), which is implementing business plans to operate as a diversified holding company of reinsurance and investment
management businesses, since April 2017; and Itasca Capital Ltd. (TSXV: ICL) (formerly Kobex Capital Corp.), a publicly traded
investment firm, since June 2018. Mr. Johnson was also appointed co-chairman of 1347 Property Insurance Holdings, Inc. in May
2018 and previously served as co-chairman of BK Technologies Corporation from June 2018 to April 2020. Mr. Johnson brings to the
Board of Directors the perspective of the Company’s largest stockholder. He has extensive experience in the financial industry,
including asset management, capital allocation, finance and financial analysis of public companies.
William
J. Gerber, age 62, has served as a director of Ballantyne since May 2015. He served as Chief Financial Officer of TD Ameritrade
Holding Corporation (Nasdaq: AMTD) (“TD Ameritrade”), a provider of securities brokerage services and related technology-based
financial services to retail investors, traders and independent registered investment advisors, from October 2006 to October 2015.
In May 2007, he was named Executive Vice President of TD Ameritrade. In his role as Chief Financial Officer, he oversaw investor
relations, business development, certain treasury functions and finance operations, including accounting, business planning and
forecasting, external and internal reporting, tax and competitive intelligence. From May 1999 until October 2006, he served as
the Managing Director of Finance at TD Ameritrade, during which time he played a significant role in evaluating merger and acquisition
opportunities. Prior to joining TD Ameritrade, he served as Vice President of Acceptance Insurance Companies, Inc. (“Acceptance”),
where he was responsible for all aspects of mergers and acquisitions, investment banking activity, banking relationships, investor
communications and portfolio management. Prior to joining Acceptance, Mr. Gerber spent eight years with Coopers & Lybrand,
now known as PricewaterhouseCoopers, serving as an audit manager primarily focusing on public company clients. Mr. Gerber was
named to Institutional Investor Magazine’s All-America Executive Team as one of the top three CFOs in the Brokerage, Asset
Managers and Exchanges category (2012 and 2013). He was also named a member of the CNBC CFO Council (2013 and 2014). Since January
2017, he has served on the Board of Directors of Northwestern Mutual Series Fund, Inc., a mutual fund company. He has also served
on the Board of Directors of the U.S. holding company for the Royal Bank of Canada since July 2016 and Streck, Inc., a privately
held company, since March 2015. He previously served on the Boys Town National Board of Trustees and the Board of Directors for
CTMG Inc., a privately held pharmaceutical testing company. Mr. Gerber holds a B.B.A. in Accounting from the University of Michigan.
Mr. Gerber is also a Certified Public Accountant in the State of Michigan. Mr. Gerber served as Executive Vice President and Chief
Financial Officer of TD Ameritrade, an online brokerage business, for more than eight years and has extensive financial experience,
bringing valuable skills to our Board of Directors.
Charles
T. Lanktree, age 71, has served as a director of Ballantyne since May 2015. He has served as Chief Executive Officer of Eggland’s
Best, LLC, a joint venture between Eggland’s Best, Inc. and Land O’Lakes, Inc. distributing nationally branded eggs,
since 2012 and also served as its President from 2012 to 2018. Since 1997, Mr. Lanktree has served as President and Chief Executive
Officer of Eggland’s Best, Inc., a franchise-driven consumer egg business, where he previously served as the President and
Chief Operating Officer from 1995 to 1996 and Executive Vice President and Chief Operating Officer from 1990 to 1994. Mr. Lanktree
currently serves on the Board of Directors of Eggland’s Best, Inc. and several of its affiliates. He has also served on
the board of directors of BK Technologies Corporation (NYSE American: BKTI), a holding company with a wholly-owned operating subsidiary
that manufactures high-specification communications equipment, since March 2017. From 2010 to 2013, he served on the Board of
Directors of Eurofresh Foods, Inc., a privately held company, and, from 2004 to 2013, he was on the Board of Directors of Nature’s
Harmony Foods, Inc. Prior to joining Eggland’s Best, Inc., Mr. Lanktree served as the President and Chief Executive Officer
of American Mobile Communications, Inc. from 1987 to 1990 and as the President and Chief Operating Officer of Precision Target
Marketing, Inc. from 1985 to 1987. From 1976 to 1985, he held various executive-level marketing positions with The Grand Union
Company and Beech-Nut Foods Corporation. Mr. Lanktree received an MBA from the University of Notre Dame and a B.S. in Food Marketing
from St. Joseph’s College. He also served in the U.S. Army and U.S. Army Reserves from 1971 to 1977. Mr. Lanktree’s
25 years of experience in consumer marketing and retail operations and his extensive experience as a Chief Executive Officer,
coupled with his knowledge and insight of the retail industry, including distribution and franchising operations, qualifies him
to serve on our Board of Directors.
Robert
J. Roschman, age 55, has served as a director of Ballantyne since May 2015. He has been an owner of Triple R. Associates,
Ltd., a real estate firm with over 100 properties leased to fast food, distribution and retail tenants, since 1992. Mr. Roschman
also holds ownership interests in several development properties throughout Florida. Mr. Roschman previously served on the Board
of Directors of Giant Holdings, Inc., a privately held federally chartered bank with an Internet division, which he founded in
1998 and which merged into Home BancShares, Inc. (Nasdaq: HOMB) in February 2017. From 1987 to 2000, Mr. Roschman was a Co-Founder
and Vice President of Snapps Restaurants, Inc., a 76-store fast food restaurant which merged into Rally’s Hamburgers, Inc.
From 1983 until 1997, he served as a shareholder of Charter Bank in Delray Beach, Florida, which merged into Southtrust Bank in
1997. Mr. Roschman received a B.S. from Florida State University. Mr. Roschman brings over 30 years of experience as an investor
in multiple lines of business, including real estate, franchising, distribution, banking and retail. Mr. Roschman’s extensive
experience as an investor and in managing and overseeing multiple businesses is valuable for evaluating strategic opportunities
and qualifies him to serve on our Board of Directors.
Ndamukong
Suh, age 33, has served as a director of Ballantyne since January 2016. Mr. Suh is an independent private investor and holds
ownership interests in several real estate development projects across Michigan, Nebraska, Oregon and Colorado. Mr. Suh is the
Founder and a director of the Ndamukong Suh Family Foundation. He is also a professional athlete and has been a member of the
Tampa Bay Buccaneers of the National Football League (“NFL”) since 2019. He previously was with the NFL’s Los
Angeles Rams from 2018 to 2019, Miami Dolphins from 2015 to 2017 and Detroit Lions from 2010 to 2014. He currently serves on the
Board of Directors of Ember Technologies, a privately held manufacturer and designer of patented temperature adjustable dishware
and drinkware. Mr. Suh holds a Bachelor’s degree in Engineering focused on Construction Management from the University of
Nebraska. Our Board of Directors believes that Mr. Suh’s well cultivated business and personal network adds unique value
to the Company, which, coupled with his extensive experience as an investor, allows him to evaluate strategic opportunities and
qualifies him to serve on our Board of Directors.
The
Board of Directors unanimously recommends a vote “FOR” the election of each of the director nominees listed above.
CORPORATE
GOVERNANCE
The
Board of Directors operates pursuant to the provisions of the Certificate of Incorporation and Bylaws and has also adopted several
corporate governance policies to address significant corporate governance issues. Our Code of Ethics, Audit Committee Charter,
Nominating and Corporate Governance Committee Charter, and Compensation Committee Charter are available on our website at www.ballantynestrong.com
under the tab “Investor Relations” and then the “Corporate Governance” tab.
Board
Leadership Structure and Role of the Board in Risk Oversight
D.
Kyle Cerminara is the Company’s Chairman of the Board of Directors and former Chief Executive Officer and Lewis M. Johnson
is the Company’s Co-Chairman of the Board of Directors. Messrs. Cerminara and Lewis represent Fundamental Global, the Company’s
largest stockholder, which, together with its affiliates, held approximately 42.9% of the voting and economic interest
in the Company as of the Record Date. As such, Messrs. Cerminara and Lewis may be deemed to be the Company’s controlling
stockholders.
During
2019, Mr. Cerminara served as both Chairman and Chief Executive Officer, which the Board of Directors believed was the best leadership
structure for us and our stockholders at the time. At the time, it was the view of the Board of Directors that a controlling stockholder
who is active in the business should hold both the roles of Chief Executive Officer and Chairman, setting the tone of the organization,
having the ultimate responsibility for all of the Company’s operating and strategic functions, and providing unified leadership
and direction to the Board of Directors and the Company’s executive management. In addition, on April 2, 2019, Lewis M.
Johnson was appointed Co-Chairman of the Board of Directors. As Co-Chairman, Mr. Johnson may exercise certain responsibilities
assigned to him by the Chairman, including (i) presiding over the annual meeting of stockholders and adjourning the annual meeting,
(ii) calling, providing notice of, and presiding over meetings of the Board of Directors, (iii) setting the agenda for the meetings
of the Board of Directors and (iv) exercising any other powers delegated by the Chairman to the Co-Chairman that are granted to
the “chairman” in the Certificate of Incorporation or Bylaws, prior resolutions of the Board of Directors, or other
applicable law. The Co-Chairman’s role also includes providing feedback on the direction and performance of the Company
and helping to lead the Board of Directors in anticipating and responding to changes in our business.
On
April 13, 2020, Mr. Cerminara resigned from his position as our Chief Executive Officer, while continuing to serve as Chairman
of the Board of Directors, with Mr. Johnson as Co-Chairman. The Board believed separating the roles of Chairman of the Board and
Chief Executive Officer at this time was in our and our stockholders’ best interests, as it allowed Mark Roberson, our new
Chief Executive Officer, to focus his time and energy on the day-to-day management of the business, while our Chairman and Co-Chairman
could each focus on providing advice and oversight of management.
The
Board of Directors has not named a lead independent director but receives strong leadership from all of its members. The Audit
Committee, Compensation Committee and Nominating and Corporate Governance Committee of the Board of Directors consist of only
independent members, and our independent directors meet at least annually in executive session without the presence of non-independent
directors and management. In addition, our directors take active and substantial roles in the activities of our Board of Directors
at the full Board meetings. They are able to propose items for Board meeting agendas, and the meetings of the Board of Directors
include time for discussion of items not on the formal agenda. Our Board of Directors believes that this open structure, as compared
to a system in which there is a designated lead independent director, facilitates a greater sense of responsibility among our
directors and facilitates active and effective oversight by the independent directors of the Company’s operations and strategic
initiatives, including any risks. In addition, because our Chairman and Co-Chairman are recommended for appointment annually by
the Nominating and Corporate Governance Committee consisting of independent directors, such directors are able to evaluate the
leadership and performance of our Chairman and Co-Chairman each year.
The
Board of Directors does not believe that one particular leadership structure is appropriate at all times and will continue to
evaluate the Board’s leadership structure from time to time.
One
of the Board of Directors’ key functions is informed oversight of the Company’s risk management process. The Board
of Directors does not have a standing risk management committee, but rather administers this oversight function directly through
the Board of Directors as a whole, as well as through various standing committees of the Board of Directors that address risks
inherent in their respective areas of oversight. In particular, the Board of Directors is responsible for monitoring and assessing
strategic and operational risk exposure, which may include financial, legal and regulatory, human capital, information technology
and security and reputation risks. The Audit Committee has the responsibility to consider and discuss major financial risk exposures
and the steps management has taken to monitor and control these exposures, including guidelines and policies to govern the process
by which risk assessment and management is undertaken. The Nominating and Corporate Governance Committee monitors the effectiveness
of the Company’s corporate governance policies and the selection of prospective members of the Board of Directors and their
qualifications, as well as environmental, social and governance (“ESG”)-related risks. The Compensation Committee,
in conjunction with the Audit Committee, assesses and monitors whether any of the Company’s compensation policies and programs
have the potential to encourage excessive risk-taking. In addition, the Compensation Committee reviews and monitors matters related
to human capital management, including diversity and inclusion initiatives and management of human capital risks. Like all businesses,
we also face threats to our cybersecurity, as we are reliant upon information systems and the Internet to conduct our business
activities. In light of the pervasive and increasing threat from cyberattacks, the Board believes oversight of this risk is appropriately
allocated to the Audit Committee. The Audit Committee, with input from management, assesses the Company’s cybersecurity
risks and the measures implemented by the Company to mitigate and prevent cyberattacks and respond to data breaches, and periodically
reports on the Company’s cybersecurity program to the Board of Directors. In addition, management and the Board of Directors
have recently focused on risks relating to, and the impact on the Company from, the COVID-19 pandemic, and will continue to do
so while the situation remains in flux.
Typically,
the entire Board of Directors meets with management and the applicable committees of the Board of Directors at least annually
to evaluate and monitor respective areas of oversight. Both the Board of Directors as a whole and the various standing committees
receive periodic reports from individuals responsible for risk management, as well as incidental reports as matters may arise.
It is the responsibility of the committee chairs to report findings regarding material risk exposures to the Board of Directors
as quickly as possible. The Board of Directors’ role in risk oversight does not affect its leadership structure.
Board
Independence
The
Board of Directors is composed of a majority of independent directors as defined by the listing requirements of the NYSE American.
The Board of Directors has determined that Messrs. Gerber, Lanktree, Roschman and Suh are independent directors of the
Company under the listing standards adopted by the NYSE American. In making these independence determinations, the Board of Directors
considered all of the factors that automatically compromise director independence as specified in the NYSE American’s listing
standards and determined that none of those conditions existed. In addition, the Board of Directors considered whether any direct
or indirect material relationship, beyond those factors that automatically compromise director independence, existed between those
directors, their immediate family members, or their affiliated entities, on the one hand, and us and our subsidiaries, on the
other hand. The Board of Directors determined, for those directors identified as independent above, that any relationship that
existed was not material and did not compromise that director’s independence. Our independent directors meet in an executive
session at least once per year. All standing committee members are independent for the purpose of the committees on which they
serve.
Communication
to the Board
Stockholders
and other interested parties wishing to communicate with the Board of Directors or a specific director may do so by delivering
written correspondence to the Corporate Secretary of the Company at: Attn: Corporate Secretary, Ballantyne Strong, Inc., 4201
Congress Street, Suite 175, Charlotte, North Carolina 28209. The Corporate Secretary will present the communication to the appropriate
director or directors.
Board
and Committee Meeting Attendance
The
Board of Directors held five meetings during 2019. During 2019, each current director attended at least seventy-five percent (75%)
of the aggregate of the total number of Board meetings held during the period for which he served as a director and the total
number of meetings held by all committees of the Board on which he served during the periods that he served.
Messrs.
Johnson and Roschman were the only directors that attended the 2019 Annual Meeting of Stockholders. Other than Mr. Cerminara,
none of the directors are expected to attend the Annual Meeting.
Hedging
and Pledging Policy
Under
Ballantyne’s Insider Trading Policy, all directors, officers and employees of Ballantyne and its subsidiaries are prohibited
from engaging in any hedging transactions involving Ballantyne securities or equity securities of any subsidiaries of Ballantyne,
holding Ballantyne securities in a margin account or pledging Ballantyne securities as collateral.
BOARD
COMMITTEES
The
Board of Directors has an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation Committee. The current
charters for each of the committees are available on our website www.ballantynestrong.com under the “Investor
Relations” tab and then the “Corporate Governance” tab. The members of the committees, as of the
Record Date, are identified in the following table:
|
Director
|
|
Audit Committee
|
|
Compensation Committee
|
|
Nominating and Corporate Governance Committee
|
|
D. Kyle Cerminara(1)
|
|
|
|
|
|
|
|
Lewis M. Johnson(2)
|
|
|
|
|
|
|
|
William J. Gerber
|
|
Chair
|
|
X
|
|
|
|
Charles T. Lanktree
|
|
|
|
Chair
|
|
|
|
Robert J. Roschman
|
|
X(3)
|
|
X
|
|
X
|
|
Ndamukong Suh
|
|
|
|
|
|
X
|
(1)
Chairman of the Board of Directors.
(2)
Mr. Johnson was appointed Co-Chairman of the Board of Directors on April 2, 2019.
(3)
Mr. Roschman was appointed as a member of the Audit Committee on April 13, 2020.
Audit
Committee
The
Audit Committee of the Board of Directors consists of Messrs. Gerber (Chair) and Roschman, who are independent for purposes of
serving on the committee under the SEC’s rules and NYSE American’s listing requirements. During 2019, the Audit Committee
had two members, Messrs. Gerber and Jacobs, as permitted for smaller reporting companies. Mr. Roschman was appointed to the Audit
Committee on April 13, 2020. Colonel Jacobs resigned from the Audit Committee on October 5, 2020. The Audit Committee acts
under a written charter adopted by the Board of Directors. All Audit Committee members are financially literate. The Board of
Directors has determined that Mr. Gerber is an “audit committee financial expert” as defined by Item 407(d)(5)(ii)
of Regulation S-K under the Exchange Act. The Audit Committee assists the Board of Directors in fulfilling its responsibilities
for oversight of the quality and integrity of the accounting, internal controls, and reporting practices of the Company, and performs
such other duties as are directed by the Board of Directors. The Audit Committee’s role includes a particular focus on the
qualitative aspects of financial reporting to stockholders, and on the Company’s processes to manage business and financial
risk, and for compliance with significant applicable legal, ethical and regulatory requirements. The Audit Committee’s responsibilities
include, among other things, reviewing policies and procedures regarding transactions, and reviewing and overseeing the transactions,
between the Company and officers, directors and other related parties that are not a normal part of the Company’s business,
and overseeing compliance with the Company’s Code of Ethics and considering conflicts of interest. Annually and on a quarterly
basis, the Audit Committee reviews and discusses matters separately with management of the Company and with the Company’s
independent registered public accounting firm.
The
Audit Committee also conducts periodic oversight of the Company’s risk management, including regularly reviewing the Company’s
cybersecurity and other information technology risks, controls and procedures and the Company’s plans to mitigate cybersecurity
risks and to respond to data breaches.
The
Audit Committee is directly responsible for the appointment of the independent registered public accounting firm engaged to prepare
and issue an audit report on the financial statements of the Company and periodically reviews and evaluates such firm’s
performance and independence from management. All audit and permitted non-audit services are pre-approved by the Audit Committee.
The Audit Committee has delegated the responsibility of approving proposed non-audit services that arise between Audit Committee
meetings to the Audit Committee Chairman, provided that the decision to approve the services is presented for ratification at
the next scheduled Audit Committee meeting. During 2019, the Audit Committee held six meetings.
Compensation
Committee
The
Compensation Committee of the Board of Directors consists of Messrs. Lanktree (Chair), Gerber and Roschman. All members of the
Compensation Committee are independent for purposes of serving on the committee under the NYSE American’s listing requirements
and applicable SEC and tax regulations. The Compensation Committee acts under a written charter adopted by the Board of Directors.
The Compensation Committee is responsible for establishing policies with respect to the compensation of the Company’s officers
and has overall responsibilities for approving and evaluating officer compensation plans, policies and programs of the Company.
The Compensation Committee’s functions include, but are not limited to:
|
|
●
|
Determining
the compensation of the Chief Executive Officer, and overseeing all other executive officers’ compensation, including
salary and payments under the Company’s incentive and stock plans;
|
|
|
|
|
|
|
●
|
Administering
the Company’s stock compensation plans, including approving all individual grants and awards under these plans;
|
|
|
|
|
|
|
●
|
Reviewing
compensation for non-employee directors and recommending changes to the Board of Directors;
|
|
|
|
|
|
|
●
|
Reviewing
and monitoring matters related to human capital management, including talent acquisition, development and retention, internal
pay equity, diversity and inclusion, and corporate culture; and
|
|
|
|
|
|
|
●
|
Conducting
an annual risk assessment to ensure that the Company’s executive compensation plans and programs do not promote the
assumption of excessive risk and remain consistent with the approved overall compensation philosophy and strategy.
|
The
Compensation Committee has the sole authority to retain and to terminate any compensation consultant, legal counsel or financial
or other advisor to be used to assist in the performance of its duties and responsibilities, without consulting or obtaining the
approval of senior management of the Company in advance, and has the sole authority to approve the compensation advisor’s
fees and other retention terms. The Compensation Committee is responsible for annually reviewing an assessment of any potential
conflict of interest raised by the work of a compensation consultant (and other compensation advisor, as required) that is involved
in determining or recommending executive and/or director compensation.
The
Compensation Committee engaged Compensation Resources, Inc. (“Compensation Resources”) as its independent compensation
consultant in October 2019 in connection with the amendment and restatement of the 2017 Omnibus Equity Compensation Plan (as amended
and restated, the “2017 Plan”). Compensation Resources reported directly to the Compensation Committee and provided
advice to the Compensation Committee on the structure and terms of the amended and restated 2017 Plan, which was approved by our
stockholders at the 2019 Annual Meeting of Stockholders on December 17, 2019. Compensation Resources provided no other services
to the Company. Prior to the consultant’s engagement and as part of its annual evaluation of its advisors, the Compensation
Committee solicited information from Compensation Resources regarding any actual or perceived conflicts of interest and to evaluate
its independence. Based on the information received from Compensation Resources, the Compensation Committee believes that the
work Compensation Resources performed in October 2019 did not raise a conflict of interest and that it was independent.
The
Compensation Committee may delegate its authority to a subcommittee of its members. The Compensation Committee held five meetings
during 2019.
Nominating
and Corporate Governance Committee
The
members of the Nominating and Corporate Governance Committee are Messrs. Roschman and Suh. During 2019, the Nominating and
Corporate Governance Committee had three members, Messrs. Jacobs (Chair), Roschman and Suh. Colonel Jacobs resigned from the Nominating
and Corporate Governance Committee on October 5, 2020. As a result of the resignation of Colonel Jacobs as Chair and member of
the Nominating and Corporate Governance Committee, the Board will appoint a new Chair as promptly as practicable. All members
of the Nominating and Corporate Governance Committee are independent for purposes of serving on the committee under the NYSE American’s
listing requirements. The Nominating and Corporate Governance Committee acts under a written charter adopted by the Board of Directors.
The functions of the Nominating and Corporate Governance Committee include, among other items, overseeing all aspects of the Company’s
corporate governance functions, including compliance with significant legal, ethical and regulatory requirements. The Nominating
and Corporate Governance Committee’s functions include, but are not limited to:
|
|
●
|
Overseeing
the annual review of the effectiveness of the Board of Directors and its committees;
|
|
|
|
|
|
|
●
|
Administrating
a director orientation program for all newly-elected or appointed members of the Board of Directors;
|
|
|
|
|
|
|
●
|
Recommending
the assignment of directors to the various committees of the Board of Directors;
|
|
|
|
|
|
|
●
|
Evaluating
emergent ESG-related risks and the Company’s ESG goals, and reviewing and discussing with management strategies, activities,
and policies regarding ESG-related matters and making recommendations to the Board;
|
|
|
|
|
|
|
●
|
Reviewing
and assessing stockholder proposals submitted to the Company for inclusion in the Company’s proxy statement; and
|
|
|
|
|
|
|
●
|
Periodically
reviewing the Company’s corporate governance policies and practices and recommending changes to the Board of Directors
when appropriate in light of the Company’s position, developments in laws and regulations applicable to the Company,
and corporate governance trends and practices.
|
The
Nominating and Corporate Governance Committee also reports to, and assists, the Board of Directors in identifying individuals
for membership on the Board of Directors and recommends to the Board of Directors the director nominees for the Company’s
Annual Meeting of Stockholders. The Nominating and Corporate Governance Committee held one meeting during 2019.
Director
Nomination Process—The Nominating and Corporate Governance Committee believes that the Company is well-served by
its current directors. In the ordinary course, absent special circumstances or a material change in the criteria for membership
on the Board of Directors, the Nominating and Corporate Governance Committee will re-nominate incumbent directors who continue
to be qualified for service on the Board of Directors and are willing to continue as directors. If an incumbent director is not
standing for re-election or if a vacancy occurs between annual stockholder meetings, the Nominating and Corporate Governance Committee
will seek out potential candidates for appointment to the Board of Directors who meet the criteria for selection as a nominee
and have the specific qualities or skills being sought. Director candidates will be selected based upon input from the members
of the Board of Directors, senior management of the Company and, if the Nominating and Corporate Governance Committee deems appropriate,
a third-party search firm.
Candidates
will be chosen for their ability to represent all of the stockholders, and for their character, judgment, fairness and overall
ability. As a group, they are expected to set the appropriate policy for the Company, and to bring to the Board of Directors broad
experience in business matters and an insight and awareness of the appropriate and ever-changing role that corporations should
have in society. Because the advice of those facing similar issues is of particular value, executive officers of other corporations
are desirable candidates. Ballantyne does not have a set policy or process for considering “diversity”, however that
term may be defined, in identifying nominees. However, the Nominating and Corporate Governance Committee strives to identify and
recruit individuals whose diverse talents, experiences and backgrounds enhance the inclusive environment in which the Board of
Directors currently functions. The Nominating and Corporate Governance Committee relies upon its judgment of the foregoing general
criteria and the following personal criteria in selecting candidates for nomination to the Board of Directors:
|
|
●
|
Independence
and absence of conflicts of interest;
|
|
|
|
|
|
|
●
|
Honesty,
integrity and accountability;
|
|
|
|
|
|
|
●
|
Substantial
business experience with a practical application to the Company’s needs;
|
|
|
|
|
|
|
●
|
Willingness
to ask tough questions in a constructive manner that adds to the decision-making process of the Board of Directors;
|
|
|
|
|
|
|
●
|
Demonstrated
ability to think strategically and make decisions with a forward-looking focus;
|
|
|
|
|
|
|
●
|
Ability
to assimilate relevant information on a broad range of topics;
|
|
|
|
|
|
|
●
|
Willingness
to express independent thought;
|
|
|
|
|
|
|
●
|
Team
player;
|
|
|
|
|
|
|
●
|
Willingness
to make a strong commitment of time and attention to the Board of Directors’ processes and affairs; and
|
|
|
|
|
|
|
●
|
Ability
to commit to Company stock ownership.
|
The
Nominating and Corporate Governance Committee will also consider proposals for nominees for director from stockholders which are
made in writing to the Corporate Secretary of the Company and comply with the requirements set forth in the Bylaws. The recommendation
must contain sufficient background information concerning the nominee to enable a proper judgment to be made as to his or her
qualifications. Recommendations must also include a written statement from the candidate expressing a willingness to serve.
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
The
following is a list of the names and ages of the executive officers of the Company as of the Record Date, their business history
and their term of office with the Company.
|
Name
|
|
Age
|
|
Position
and Principal Occupation
|
|
Officer
Since
|
|
Mark
D. Roberson
|
|
55
|
|
Chief
Executive Officer since April 2020 and Executive Vice President, Chief Financial Officer and Treasurer from November 2018
to April 2020. Mr. Roberson brings an extensive background in executive leadership, operations, corporate finance, SEC reporting,
treasury, and mergers and acquisitions. He previously served as Chief Operations Officer of Chanticleer Holdings, Inc., a
Nasdaq-listed restaurant operating company, from May 2015 to November 2018, and as Chief Executive Officer of PokerTek, Inc.,
a then Nasdaq-listed gaming technology company, from February 2010 to October 2014 (having served as Acting Chief Executive
Officer from May 2009 until February 2010). He also served as Chief Financial Officer and Treasurer of PokerTek, Inc. from
October 2007 until October 2014. Mr. Roberson previously held positions of increasing responsibility at Curtiss-Wright, Inc.,
a NYSE-listed aerospace and defense contractor, Krispy Kreme Doughnut Corporation, a then NYSE-listed fast-casual restaurant
franchisor and operator, and LifeStyle Furnishings International, a $2 billion private equity backed furniture manufacturer.
Mr. Roberson is a Certified Public Accountant who started his career with Ernst & Young and PricewaterhouseCoopers. He
earned an MBA from Wake Forest University, a B.S. in Accounting from UNC-Greensboro and a B.S. in Economics from Southern
Methodist University. He has served on the Board of Directors of CynergisTek, Inc. (NYSE American: CTEK), a cybersecurity
and information management consulting firm, since May 2016, where he chairs the Audit Committee and is a member of the Compensation
Committee, which he previously chaired.
|
|
2018
|
|
|
|
|
|
|
|
|
|
Todd
R. Major
|
|
47
|
|
Chief
Financial Officer, Secretary and Treasurer since April 2020 and Senior Vice President, Finance from April 2019 to April 2020.
Mr. Major previously served as Senior Director, Financial and SEC Reporting of Bojangles, Inc., a then Nasdaq-listed restaurant
operating company and franchisor, from March 2015 to April 2019, as Director, Financial Reporting of Premier, Inc. (Nasdaq:
PINC), a healthcare performance improvement company, from September 2014 to February 2015, and as Senior Director, Financial
Reporting of Horizon Lines, Inc, a then NYSE-traded transportation and logistics company, from November 2006 to September
2014. From June 2003 to November 2006, Mr. Major previously held positions of increasing responsibility at Nabi Biopharmaceuticals,
Inc., a then Nasdaq-listed biopharmaceutical company engaged in the development and commercialization of proprietary products.
Mr. Major is a Certified Public Accountant and earned an MBA from Queens University of Charlotte and a B.A. in Accounting
from Flagler College.
|
|
2020
|
|
|
|
|
|
|
|
|
|
Ray
F. Boegner
|
|
70
|
|
President
of Strong Entertainment; previously Senior Vice President and Senior Vice President of Sales; Vice President of Sales prior
to November 1996; joined the Company in 1985.
|
|
1997
|
EXECUTIVE
COMPENSATION
Introduction
In
this section of the proxy statement, we disclose our executive compensation for our named executive officers (the “Named
Executive Officers”), consisting of our principal executive officer during 2019 and the two other individuals who were serving
as executive officers at the end of 2019. Our Named Executive Officers for 2019 were as follows:
|
|
●
|
D.
Kyle Cerminara, Chairman and then Chief Executive Officer (in which role he served until April 2020);
|
|
|
|
|
|
|
●
|
Mark
D. Roberson, then Executive Vice President and Chief Financial Officer who now serves as our Chief Executive Officer (as of
April 2020); and
|
|
|
|
|
|
|
●
|
Ray
F. Boegner, President of Strong Entertainment.
|
We
additionally include disclosures regarding the compensation of Todd R. Major, who was appointed Chief Financial Officer, Secretary
and Treasurer in April 2020.
The
disclosures regarding executive compensation in this proxy statement describe our executive compensation program for 2019, which
was not impacted by the COVID-19 pandemic. We have taken certain actions related to executive compensation during 2020 as a result
of the impact of the COVID-19 pandemic on the Company, the economy and the industry, which are described as applicable throughout
this section, and we may take additional measures during the remainder of 2020 to further align 2020 executive compensation with
the current economic environment. All such 2020 executive compensation program decisions will be described in our proxy statement
for the 2021 Annual Meeting.
Base
Salaries
Effective
as of March 1, 2017, Mr. Cerminara received an annual base salary of $225,000 for his service as our Chief Executive Officer and
Mr. Boegner receives an annual base salary of $275,000. Following his resignation as our Chief Executive Officer, Mr. Cerminara
receives our standard non-employee director compensation, as described below under “Director Compensation.”
Mr.
Roberson receives a base salary of $250,000, which salary was negotiated as part of his employment agreement at the time of his
hiring as Executive Vice President and Chief Financial Officer of the Company, effective November 16, 2018.
Mr.
Major receives a base salary of $200,000, which salary was negotiated as part of his employment agreement at the time of his hiring
as Senior Vice President of Finance of the Company, effective March 20, 2019.
In
response to the impact of the COVID-19 pandemic on the Company, the economy, and the industry, each executive officer of the Company
agreed to four temporary reductions in the base salaries otherwise payable to the executive officers, which were expected to be
temporary until the Company resumes normal operations. On April 29, 2020, as approved by the Board on April 30, 2020, Messrs.
Roberson and Boegner agreed to a 60% reduction in each of their salaries, and Mr. Major agreed to a 25% reduction in his salary,
which reductions were effective from April 13, 2020 until June 30, 2020. On July 8, 2020, the Board approved, and Messrs. Roberson,
Boegner and Major agreed to, a 25% reduction in each of their salaries, which reductions were effective from July 1, 2020 until
and including July 31, 2020. On August 17, 2020, as approved by the Board on August 18, 2020, Messrs. Roberson, Boegner and Major
agreed to a 25% reduction in each of their salaries, which reductions were effective from August 1, 2020 until and including August
31, 2020. On September 15, 2020, the Board approved, and Messrs. Roberson, Boegner and Major agreed to, a 25% reduction in each
of their salaries, which reductions were effective from September 1, 2020 until and including September 30, 2020.
Discretionary
Bonuses
After
considering a number of factors, including Company performance, the Compensation Committee determined not to pay any discretionary
cash bonuses to executive officers for 2019 or 2018. The Compensation Committee determined to award equity grants to certain executive
officers as described below.
Long-Term
Incentives
We
use long-term incentive equity awards as a part of our executive compensation program, in order to incentivize and reward the
achievement of longer-term strategic objectives and align the financial interests of the Company’s executive officers with
those of the Company’s stockholders. The Company’s long-term incentive program for its Named Executive Officers has
consisted of restricted stock awards, restricted stock units and nonqualified stock options. Each such type of award, and the
reasons it is used, is described below. At the Company’s 2017 Annual Meeting of Stockholders, the Company’s stockholders
approved the 2017 Plan (prior to its amendment and restatement) as the successor to our 2010 Long-Term Incentive Plan (the “2010
Plan”) and 2014 Non-Employee Directors’ Restricted Stock Plan, and long-term incentive awards granted after the 2017
Annual Meeting of Stockholders have been made under the 2017 Plan. In addition, stockholders approved an amendment and restatement
of the 2017 Plan at the 2019 Annual Meeting of Stockholders.
Restricted
Stock Awards. Restricted stock awards represent the transfer of ownership of a certain number of shares of the Company’s
common stock, subject to restrictions on transfer and a substantial risk of forfeiture based on the recipient’s continued
employment by the Company during the applicable vesting period set out in the award agreement. Restricted stock awards are designed
primarily to encourage retention of executive officers and key employees.
Restricted
Stock Units. RSUs represent a right to receive a specific number of units at the end of the specified period. Each recipient
of RSUs has no rights as a stockholder through such RSUs during the restriction period of the RSUs. Settlement of an RSU award
is made in cash, shares of stock or some combination thereof, as specified in the applicable award agreement. RSUs are designed
to provide retention incentives to our executive officers and key employees.
Nonqualified
Stock Options. Nonqualified stock options represent an option to purchase shares of the Company’s common stock at
an option price equal to the closing price on the NYSE American of the Company’s common stock on the grant date. The stock
options are designed to motivate executives to increase stockholder value as the stock options will only have value if our stockholders
also benefit from increasing stock prices.
2019
Equity Grants
On
June 6, 2019, the Compensation Committee approved grants of stock options and RSUs to Messrs. Cerminara, Roberson and Boegner.
Messrs. Cerminara, Roberson and Boegner received options to purchase 30,000, 30,000 and 20,000 shares of the Company’s common
stock, respectively, at an exercise price of $2.89 per share, pursuant to the 2017 Plan. The stock options have a ten-year term,
and become exercisable in one-fifth annual installments, beginning on the first anniversary of the grant date, subject to continued
employment.
Messrs.
Cerminara, Roberson and Boegner also received 75,000, 65,000 and 40,000 RSUs, respectively, pursuant to the 2017 Plan. These RSUs
vest in one-third annual installments, beginning on the first anniversary of the grant date, subject to continued employment.
On
May 31, 2019, as a signing bonus, the Company granted to Mr. Major 30,000 RSUs pursuant to the 2017 Plan, vesting in one-third
annual installments, beginning on the first anniversary of the grant date, subject to continued employment.
2018
Equity Grants
On
January 26, 2018, the Compensation Committee approved grants of stock options and RSUs to Messrs. Cerminara and Boegner. Each
of these executives was granted a stock option to purchase 50,000 shares of the Company’s common stock, at an exercise price
of $4.70 per share, under the 2017 Plan. The stock options have a ten-year term and become exercisable in one-fifth annual installments,
beginning on the first anniversary of the grant date, subject to continued employment.
The
RSU awards to Messrs. Cerminara and Boegner each covered 40,000 shares of the Company’s common stock, and these RSUs vest
in one-third annual installments, beginning on the first anniversary of the grant date, subject to continued employment.
On
December 4, 2018, as a signing bonus, the Company granted to Mr. Roberson 50,000 RSUs pursuant to the 2017 Plan, vesting in one-third
annual installments, beginning on the first anniversary of the grant date, subject to continued employment, and stock options
to purchase 40,000 shares of the Company’s common stock at an exercise price of $2.25 per share pursuant to the 2017 Plan.
The stock options have a ten-year term and become exercisable in one-fifth annual installments, beginning on the first anniversary
of the grant date, subject to continued employment.
401(k)
Retirement Plan
The
Company’s executive officers are able to participate in the Company’s Retirement and Savings 401(k) Plan (the “401(k)
Plan”), which is a combination savings and profit sharing plan designed to qualify under Section 401 of the U.S. Internal
Revenue Code. Participation in the 401(k) Plan is generally available to all Ballantyne employees on the same terms. Each participant
may defer up to 100% of his or her compensation. The Company may make a discretionary matching contribution equal to a uniform
percentage of salary. Each year the Company determines the amount of the discretionary percentage. In 2019 and 2018, the Company
matched 50% of the amount deferred up to 6% of each participating employee’s contribution. Employee contributions to the
401(k) Plan are non-forfeitable. Employer contributions vest annually over three years on the employee’s employment anniversary.
Benefits may be distributed to participants or their beneficiaries, as the case may be, in the event of a participant’s
death, retirement or other termination of service, or, if the participant so requests, on reaching age 59½. Participants
may be eligible to withdraw benefits in case of hardship.
Contributions
to the 401(k) Plan made by the Company on behalf of the Named Executive Officers are included in the 2019 Summary Compensation
Table.
Employment
Agreements
The
Company currently has written employment agreements with Messrs. Boegner, Roberson and Major. The material provisions of these
employment agreements are discussed below.
Mr.
Boegner’s employment agreement with the Company, which was entered into on February 14, 2012, provides for a base salary,
subject to annual review and adjustment, and Mr. Boegner’s eligibility to participate in and/or receive other benefits under
compensation plans provided to other executive employees of the Company, including an automobile allowance (which allowance was
eliminated effective as of March 1, 2017). He is eligible for performance-based compensation in the form of an annual bonus and
is eligible to receive awards, in the Compensation Committee’s discretion, under the Company’s long-term incentive
plans. Pursuant to his employment agreement, in the event that his employment is terminated by Ballantyne without cause or by
Mr. Boegner for good reason, as these terms are defined in the agreement, then he will receive his base salary for a period equal
to three (3) weeks for each year that he was employed by the Company. In addition, Ballantyne will pay for, or reimburse Mr. Boegner
for, the cost of health insurance during this same period. For more information on the terms of Mr. Boegner’s employment
agreement, see “Potential Payments Upon Termination or Change in Control — Employment Agreements.”
Mr.
Roberson’s employment agreement with the Company, which was entered into as of November 6, 2018, provides for an annual
base salary of $250,000, subject to annual review and adjustment, and he is eligible for performance-based compensation in the
form of an annual bonus targeted at $150,000, payable partly in cash and partly through equity awards as determined by the Compensation
Committee. The bonus will be subject to the achievement of performance metrics and other criteria as determined by the Compensation
Committee. As a signing bonus, the Company granted Mr. Roberson 50,000 RSUs pursuant to the 2017 Plan, vesting over a period of
three years from the date of grant, and stock options to purchase 40,000 shares of the Company’s common stock pursuant to
the 2017 Plan, which options vest over a period of five years from the date of grant. Mr. Roberson is also eligible to participate
in the Company’s 401(k), medical, dental and vision plans and certain other benefits available generally to employees of
the Company. The employment agreement also contains customary non-competition and non-solicitation covenants. Mr. Roberson’s
employment agreement does not provide for any specified severance benefits.
Mr.
Major’s employment agreement with the Company, which was entered into as of March 20, 2019, provides for an annual base
salary of $200,000, subject to annual review and adjustment, and he is eligible for performance-based compensation in the form
of an annual bonus targeted at 25% of base salary, payable in a combination in cash and equity, as determined by the Compensation
Committee. The bonus will be subject to the achievement of performance metrics and other criteria as determined by the Compensation
Committee. As a signing bonus, the Company granted Mr. Major 30,000 RSUs (equal to $75,000 of common stock, as determined based
on the trading price of the Company’s common stock on the date of grant) pursuant to the 2017 Plan, vesting over a period
of three years from the date of grant. The Company also paid a cash signing bonus of $30,000, payable in two equal installments
of $15,000 as of 30 and 60 days, respectively, following the date of the employment agreement, which bonus is subject to forfeiture
in the event Mr. Major resigns from the Company or is terminated for cause. Mr. Major is also eligible to participate in the Company’s
401(k), medical, dental and vision plans and certain other benefits available generally to employees of the Company. The employment
agreement also contains customary non-competition and non-solicitation covenants. Mr. Major is entitled to severance equal to
one year of his base salary in the event of a change in control that results in his termination or if the Senior Vice President
of Finance position is eliminated without Mr. Major being offered a mutually-agreed comparable opportunity at an affiliate of
the Company.
Executive
Compensation Tables
The
following table sets forth information regarding all forms of compensation earned by the Company’s Named Executive Officers
during the last two fiscal years. Messrs. Cerminara and Boegner were employed by the Company during all of fiscal 2019 and 2018.
Mr. Cerminara resigned from his position as the Company’s Chief Executive Officer on April 13, 2020. Mr. Roberson served
as Chief Financial Officer from November 16, 2018 to April 13, 2020 and was appointed as the Company’s Chief Executive Officer
on April 13, 2020.
2019
Summary Compensation Table
Name and
Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(3)
|
|
|
Option
Awards
($)(3)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All
Other
Compensation
($)(10)
|
|
|
Total
($)
|
|
|
D. Kyle
Cerminara (1)
|
|
|
2019
|
|
|
|
225,000
|
|
|
|
—
|
|
|
|
216,750
|
(4)
|
|
|
41,100
|
(7)
|
|
|
—
|
|
|
|
7,855
|
|
|
|
490,705
|
|
|
Chairman and
Former CEO
|
|
|
2018
|
|
|
|
225,000
|
|
|
|
—
|
|
|
|
188,000
|
(5)
|
|
|
91,074
|
(8)
|
|
|
—
|
|
|
|
5,691
|
|
|
|
509,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark D. Roberson (2)
|
|
|
2019
|
|
|
|
250,000
|
|
|
|
—
|
|
|
|
187,850
|
(4)
|
|
|
41,100
|
(7)
|
|
|
—
|
|
|
|
8,615
|
|
|
|
487,565
|
|
|
CEO and Former CFO
|
|
|
2018
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
112,500
|
(6)
|
|
|
37,223
|
(9)
|
|
|
—
|
|
|
|
85
|
|
|
|
174,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ray F. Boegner
|
|
|
2019
|
|
|
|
275,000
|
|
|
|
—
|
|
|
|
115,600
|
(4)
|
|
|
27,400
|
(7)
|
|
|
—
|
|
|
|
11,558
|
|
|
|
429,558
|
|
|
President of Strong Entertainment
|
|
|
2018
|
|
|
|
275,000
|
|
|
|
—
|
|
|
|
188,000
|
(5)
|
|
|
91,074
|
(8)
|
|
|
—
|
|
|
|
9,193
|
|
|
|
563,267
|
|
|
(1)
|
Mr.
Cerminara was named to the Board of Directors on February 20, 2015. On May 13, 2015, Mr. Cerminara was appointed as Chairman
of the Board and on September 23, 2015, as the Company’s Executive Chairman. Mr. Cerminara served as our Chief Executive
Officer from November 24, 2015 to April 13, 2020. He continues to serve as our Non-Executive Chairman of the Board. For 2019
and 2018, Mr. Cerminara did not receive any additional compensation as a director or as Chairman. Following his resignation
as our Chief Executive Officer, Mr. Cerminara receives our standard non-employee director compensation as described below
under “Director Compensation.”
|
|
|
|
|
(2)
|
Mr.
Roberson served as our Executive Vice President and Chief Financial Officer from November 16, 2018 to April 13, 2020 and was
appointed as our Chief Executive Officer effective April 13, 2020.
|
|
|
|
|
(3)
|
The
amounts in these columns represent the aggregate grant date fair value calculated in accordance with the Financial Accounting
Standards Board Accounting Standards Codification Topic 718. For additional information relating to the assumptions made in
valuing and expensing these awards refer to Note 12 in the Company’s consolidated financial statements included in the
Company’s Annual Report, as filed with the SEC.
|
|
|
|
|
(4)
|
Consists
of the grant date fair value of the June 6, 2019 grant of 75,000, 65,000 and 40,000 RSUs granted to Messrs. Cerminara, Roberson
and Boegner, respectively, pursuant to the 2017 Plan. The RSUs are to be settled in shares of the Company’s common stock
on a one-for-one basis as soon as practicable following the applicable vesting date. The RSUs vest in one-third annual installments,
beginning on the first anniversary of the grant date, subject to continued employment.
|
|
(5)
|
Consists
of the grant date fair value of the January 26, 2018 grant of 40,000 RSUs to each of Messrs. Cerminara and Boegner, in accordance
with the 2017 Plan. The RSUs are to be settled in shares of the Company’s common stock on a one-for-one basis as soon
as practicable following the applicable vesting date. The RSUs vest in one-third annual installments, beginning on the first
anniversary of the grant date, subject to continued employment.
|
|
|
|
|
(6)
|
Consists
of the grant date fair value of the December 4, 2018 grant of 50,000 RSUs, in accordance with the 2017 Plan. The RSUs are
to be settled in shares of the Company’s common stock on a one-for-one basis as soon as practicable following the applicable
vesting date. The RSUs vest in one-third annual installments, beginning on the first anniversary of the grant date, subject
to continued employment. The RSUs were granted as a signing bonus pursuant to the terms of Mr. Roberson’s employment
agreement with the Company.
|
|
|
|
|
(7)
|
Consists
of the grant date fair value of the June 6, 2019 grant of 30,000, 30,000 and 20,000 stock options to Messrs. Cerminara, Roberson
and Boegner, respectively, pursuant to the 2017 Plan. The stock options vest in one-fifth annual installments, beginning on
the first anniversary of the grant date, subject to continued employment.
|
|
|
|
|
(8)
|
Consists
of the grant date fair value of the January 26, 2018 grant of 50,000 stock options to each of Messrs. Cerminara and Boegner,
in accordance with the 2017 Plan. The stock options vest in one-fifth annual installments, beginning on the first anniversary
of the grant date, subject to continued employment.
|
|
|
|
|
(9)
|
Consists
of the grant date fair value of the December 4, 2018 grant of 40,000 stock options in accordance with the 2017 Plan. The stock
options vest in one-fifth annual installments, beginning on the first anniversary of the grant date, subject to continued
employment. The options were granted as a signing bonus pursuant to the terms of Mr. Roberson’s employment agreement
with the Company.
|
|
|
|
|
(10)
|
The
Company provides its executives with certain employee benefits. These benefits include excess life and disability insurance
and contributions made by the Company under the 401(k) Plan. The amounts reported for each Named Executive Officer as All
Other Compensation for 2019 are identified and quantified below.
|
|
|
|
Mr. Cerminara
|
|
|
Mr. Roberson
|
|
|
Mr. Boegner
|
|
|
Employer match on 401(k) Plan
|
|
$
|
6,644
|
|
|
$
|
7,404
|
|
|
$
|
8,313
|
|
|
Excess life and disability insurance
|
|
|
1,211
|
|
|
|
1,211
|
|
|
|
1,130
|
|
|
Accrued vacation pay-out
|
|
|
—
|
|
|
|
—
|
|
|
|
2,115
|
|
|
Total All Other Compensation
|
|
$
|
7,855
|
|
|
$
|
8,615
|
|
|
$
|
11,558
|
|
The
following table sets forth information concerning outstanding equity awards for each of the Company’s Named Executive Officers
as of the end of the last completed fiscal year.
Outstanding
Equity Awards at 2019 Fiscal Year-End
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Name
|
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
|
|
Option Exercise Price ($)
|
|
|
Option Expiration Date
|
|
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(*)
|
|
|
D. Kyle Cerminara(12)
|
|
|
48,000
|
|
|
|
12,000
|
(1)(12)
|
|
|
4.33
|
|
|
|
11/22/2025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
24,000
|
|
|
|
36,000
|
(2)(12)
|
|
|
6.50
|
|
|
|
2/28/2027
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
10,000
|
|
|
|
40,000
|
(3)
|
|
|
4.70
|
|
|
|
1/26/2028
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
30,000
|
(4)
|
|
|
2.89
|
|
|
|
6/6/2029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
(7)
|
|
|
64,800
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,667
|
(8)
|
|
|
86,401
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
75,000
|
(9)
|
|
|
243,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark D. Roberson
|
|
|
8,000
|
|
|
|
32,000
|
(5)
|
|
|
2.25
|
|
|
|
12/4/2028
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
30,000
|
(4)
|
|
|
2.89
|
|
|
|
6/6/2029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,334
|
(10)
|
|
|
108,002
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
65,000
|
(9)
|
|
|
210,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ray F. Boegner
|
|
|
5,000
|
|
|
|
—
|
(6)
|
|
|
4.70
|
|
|
|
1/11/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
24,000
|
|
|
|
8,000
|
(1)
|
|
|
4.33
|
|
|
|
11/22/2025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
16,000
|
|
|
|
24,000
|
(2)
|
|
|
6.50
|
|
|
|
2/28/2027
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
10,000
|
|
|
|
40,000
|
(3)
|
|
|
4.70
|
|
|
|
1/26/2028
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
20,000
|
(4)
|
|
|
2.89
|
|
|
|
6/6/2029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,334
|
(11)
|
|
|
10,802
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,667
|
(8)
|
|
|
86,401
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
40,000
|
(9)
|
|
|
129,600
|
|
*
Based on the closing stock price of our common stock of $3.24 on December 31, 2019, the last trading day of the 2019 fiscal year.
|
(1)
|
The
60,000 and 40,000 stock options granted to Messrs. Cerminara and Boegner, respectively, on November 22, 2015 pursuant to the
2010 Plan become exercisable in five equal annual installments beginning on November 22, 2016 and thereafter on November 22
of each year through 2020. On November 23, 2016, Mr. Boegner exercised options from this grant to acquire 8,000 shares of
the Company’s common stock at an exercise price of $4.33 per share.
|
|
|
|
|
(2)
|
The
60,000 and 40,000 stock options granted to Messrs. Cerminara and Boegner, respectively, on February 28, 2017 pursuant to the
2010 Plan become exercisable in five equal annual installments beginning on February 28, 2018 and thereafter on February 28
of each year through 2022.
|
|
|
|
|
(3)
|
The
50,000 stock options granted to each of Messrs. Cerminara and Boegner on January 26, 2018 pursuant to the 2017 Plan become
exercisable in five equal annual installments beginning on January 26, 2019 and thereafter on January 26 of each year through
2023.
|
|
|
|
|
(4)
|
The
30,000, 30,000 and 20,000 stock options granted to Messrs. Cerminara, Roberson and Boegner, respectively, on June 6, 2019
pursuant to the 2017 Plan become exercisable in five equal annual installments beginning on June 6, 2020 and thereafter on
June 6 of each year through 2024.
|
|
(5)
|
The
40,000 stock options granted to Mr. Roberson on December 4, 2018 pursuant to the 2017 Plan become exercisable in five equal
annual installments beginning on December 4, 2019 and thereafter on December 4 of each year through 2023.
|
|
|
|
|
(6)
|
The
30,000 stock options granted to Mr. Boegner on January 11, 2012 pursuant to the 2010 Plan became exercisable in four equal
installments beginning on January 11, 2013 and thereafter on January 11 of each year through 2016. On both August 11, 2016
and August 30, 2016, Mr. Boegner exercised options from this grant to acquire 5,000 shares of the Company’s common stock.
On June 8, 2017, Mr. Boegner exercised options from this grant to acquire 7,000 shares of the Company’s common stock.
On August 10, 2017, Mr. Boegner exercised options from this grant to acquire 8,000 shares of the Company’s common stock.
|
|
|
|
|
(7)
|
Represents
20,000 shares of restricted stock. The restricted shares vested on February 28, 2020.
|
|
|
|
|
(8)
|
Represents
26,667 RSUs to be settled in shares of the Company’s common stock on a one-for-one basis as soon as practicable following
the applicable vesting date. The RSUs vest in equal annual installments on January 26, 2020 and January 26, 2021.
|
|
|
|
|
(9)
|
Represents
RSUs to be settled in shares of the Company’s common stock on a one-for-one basis as soon as practicable following the
applicable vesting date. The RSUs vest in equal annual installments on June 6, 2020, June 6, 2021 and June 6, 2022.
|
|
|
|
|
(10)
|
Represents
33,334 RSUs to be settled in shares of the Company’s common stock on a one-for-one basis as soon as practicable following
the applicable vesting date. The RSUs vest in equal annual installments on December 4, 2020 and December 4, 2021.
|
|
|
|
|
(11)
|
Represents
3,334 shares of restricted stock. The restricted shares vested on February 28, 2020.
|
|
|
|
|
(12)
|
In
connection with Mr. Cerminara’s April 2020 resignation, 120,000 stock options granted under the 2010 Plan were either
forfeited or expired. Equity awards granted to Mr. Cerminara under the 2017 Plan, consisting of 20,000 vested stock options,
60,000 unvested stock options and 88,334 unvested restricted stock units as of April 13, 2020, remain outstanding and continue
to vest in accordance with their terms due to Mr. Cerminara’s continued service as a member of the Board. On June 12,
2020, the Compensation Committee of the Board approved the treatment of Mr. Cerminara’s outstanding equity awards.
|
Potential
Payments Upon Termination or Change in Control
Employment
Agreements
Pursuant
to Mr. Boegner’s employment agreement with the Company, in the event Mr. Boegner’s employment is terminated by the
Company without cause or by Mr. Boegner for good reason, then he will receive his base salary for a period equal to three (3)
weeks for each year that he has been employed by the Company and all existing insurance benefits shall remain in force until the
last day of the month in which the severance period expires, subject to Mr. Boegner’s continued compliance with certain
restrictive covenants set forth in the employment agreement (including confidentiality and non-solicitation covenants) and his
execution of the Company’s standard form of general release. In addition, Mr. Boegner would be entitled to receive any earned
and unpaid amounts owed to him under the employment agreement and such other accrued benefits as may be provided for under the
agreement. For purposes of Mr. Boegner’s employment agreement, “good reason” means a material breach by the
Company of its obligations to Mr. Boegner under the agreement. In addition, for purposes of the agreement, “cause”
exists if Mr. Boegner (i) acted dishonestly or incompetently or engaged in willful misconduct in performance of his executive
duties, (ii) breached fiduciary duties owed to the Company, (iii) intentionally failed to perform reasonably assigned duties,
(iv) willfully violated any law, rule or regulation, or court order (other than minor traffic violations or similar offenses),
or otherwise committed any act which would have a material adverse impact on the business of the Company, and/or (v) is in breach
of his obligations under the agreement and fails to cure such breach within thirty (30) days after receiving notice of the breach
from the Company.
We
are also obligated under Mr. Boegner’s employment agreement to provide certain payments to Mr. Boegner in the event of his
death or termination by reason of his incapacity. In the event of Mr. Boegner’s death, we are obligated to pay his estate
all accrued sums due and owing to Mr. Boegner with respect to his salary and such other benefits as may be provided under his
agreement. In addition, in the event we terminate Mr. Boegner’s employment by reason of his incapacity, Mr. Boegner is entitled
to any accrued amounts due and owing to him with respect to his salary and such other benefits as may be provided under his agreement.
Pursuant
to Mr. Major’s employment agreement with the Company, in the event of a change in control that results in Mr. Major being
terminated, or if the Senior Vice President of Finance position is eliminated without Mr. Major being offered a mutually-agreed
comparable opportunity at an affiliate of the Company, Mr. Major will be entitled to severance equal to one year of his base salary.
In addition, Mr. Major’s $30,000 cash signing bonus is subject to forfeiture in the event Mr. Major resigns from the Company
or is terminated for cause.
The
employment agreement for Mr. Roberson does not provide for any specified severance benefits. However, Mr. Roberson, along with
Mr. Cerminara, would have been entitled during the 2019 fiscal year to severance and other benefits, such as accrued vacation,
pursuant to the Company’s then-existing severance policy available to all salaried employees.
Mr.
Cerminara resigned as the Company’s Chief Executive Officer on April 13, 2020. He continues to serve as the Company’s
Chairman. In connection with Mr. Cerminara’s resignation, 120,000 stock options granted under the 2010 Plan were either
forfeited or expired. Equity awards granted to Mr. Cerminara under the 2017 Plan, consisting of 20,000 vested stock options, 60,000
unvested stock options and 88,334 unvested restricted stock units as of April 13, 2020, remain outstanding and continue to vest
in accordance with their terms due to Mr. Cerminara’s continued service as a member of the Board. On June 12, 2020, the
Compensation Committee of the Board approved the treatment of Mr. Cerminara’s outstanding equity awards. Following his resignation
as Chief Executive Officer, Mr. Cerminara receives the Company’s standard non-employee director compensation, as described
below under “Director Compensation.”
2017
Omnibus Equity Compensation Plan – Change in Control Provisions
Our
2017 Plan, which was initially approved by our stockholders on June 15, 2017, with the amendment and restatement of the 2017 Plan,
effective as of October 28, 2019, approved by our stockholders on December 17, 2019, generally provides for “double-trigger”
vesting of equity awards in connection with a change in control of the Company, as described below.
To
the extent that outstanding awards granted under the 2017 Plan are assumed in connection with a change in control, except as otherwise
provided in the applicable award agreement or in another written agreement with the participant, all outstanding awards will continue
to vest and become exercisable (as applicable) based on continued service during the remaining vesting period, with performance-based
awards being converted to service-based awards at the “target” level. Vesting and exercisability (as applicable) of
awards that are assumed in connection with a change in control generally would be accelerated in full on a “double-trigger”
basis, if, within two years after the change in control, the participant’s employment is involuntarily terminated without
cause, or by the participant for “good reason.” Any stock options or stock appreciation rights (“SARs”)
that become vested on a “double-trigger” basis generally would remain exercisable for the full duration of the term
of the applicable award.
To
the extent outstanding awards granted under the 2017 Plan are not assumed in connection with a change in control, then such awards
generally would become vested in full on a “single-trigger” basis, effective immediately prior to the change in control,
with performance-based awards becoming vested at the “target” level. Any stock options or SARs that become vested
on a “single-trigger” basis generally would remain exercisable for the full duration of the term of the applicable
award.
The
Compensation Committee has the discretion to determine whether or not any outstanding awards granted under the 2017 Plan will
be assumed by the resulting entity in connection with a change in control, and the Compensation Committee has the authority to
make appropriate adjustments in connection with the assumption of any awards. The Compensation Committee also has the right to
cancel any outstanding awards in connection with a change in control, in exchange for a payment in cash or other property (including
shares of the resulting entity) in an amount equal to the excess of the fair market value of the shares subject to the award over
any exercise price related to the award, including the right to cancel any “underwater” stock options and SARs without
payment therefor.
For
purposes of the 2017 Plan, subject to the exceptions set forth in the 2017 Plan, a “change in control” generally includes
(a) the acquisition of more than 50% of the voting power or value of the Company’s stock; (b) the incumbent board of directors
ceasing to constitute a majority of the board of directors during a twelve-month period; and (c) the acquisition of 50% or more
of the gross fair market value of the Company’s assets over a twelve-month period. The full definition of “change
in control” is set out in the 2017 Plan.
For
purposes of the 2017 Plan, unless otherwise defined in a written agreement with the participant or an applicable severance plan,
“cause”, as a reason for the Company’s termination of a participant’s employment, generally means that
the participant (a) acted dishonestly or incompetently or engaged in willful misconduct in performance of his or her duties; (b)
breached fiduciary duties owed to the Company; (c) intentionally failed to perform reasonably assigned duties, which the participant
did not satisfactorily correct within 30 calendar days following written notification; (d) was convicted or entered a plea of
guilty or nolo contendere of any felony crime involving dishonesty; or (e) otherwise committed any act which could have a material
adverse impact on the business of the Company.
For
purposes of the 2017 Plan, unless otherwise defined in a written agreement with the participant or an applicable severance plan,
“good reason”, as a reason for a participant’s termination of his or her employment, generally means the occurrence
of any of the following without the participant’s consent (and unless timely cured by the Company following notice from
the participant): (a) any material diminution in the participant’s compensation or benefits, unless generally applicable
to all similarly situated employees of the Company; (b) the assignment to the participant of any duties inconsistent with, or
substantially adverse to, his or her status and duties, or a reduction in title; (c) a material breach by the Company or a subsidiary
of its obligations under the participant’s employment agreement, if any; or (d) the relocation of the participant’s
primary work location to a location more than fifty miles away from the current location.
Except
as described above with respect to a change in control, unexercisable stock options, unvested restricted shares and unvested RSUs
generally become forfeited upon termination of employment. The stock options that are exercisable at the time of termination of
employment expire within the earlier of thirty days after such termination or the expiration date of the options. Upon termination
for “cause,” all options, whether or not exercisable, are generally automatically forfeited.
Awards
granted under the 2017 Plan may be subject to forfeiture or recoupment as determined by the Compensation Committee in the event
of certain detrimental activity, such as a participant’s breach of applicable restrictive covenants. Awards granted under
the 2017 Plan also may be subject to forfeiture or recoupment as provided pursuant to any compensation recovery (or “clawback”)
policy that the Company may adopt or maintain from time to time.
2010
Long-Term Incentive Plan – Change in Control Provisions
The
2010 Plan provides that no acceleration of an award shall occur upon or after a “change in control” unless such acceleration
is provided for in the applicable award agreement and determined by the Compensation Committee on a grant-by-grant basis or as
may be provided in an after written agreement between the Company and the grantee. The award agreements for the stock options
and restricted shares granted to Messrs. Cerminara and Boegner under the 2010 Plan provide for accelerated vesting of all unvested
options and restricted shares upon the occurrence of a “change in control” while the grantee is employed by the Company
or a subsidiary of the Company as of the date of the change in control.
For
purposes of the 2010 Plan, subject to the exceptions set forth in the 2010 Plan, a “change in control” generally includes
(i) the acquisition of more than 50% of the Company’s common stock; (ii) over a twelve-month period, the acquisition of
more than 50% of the Company’s common stock or the replacement of a majority of the board of directors by directors not
endorsed by the persons who were members of the board before the new directors’ appointment; and (iii) the acquisition of
more than 50% of the total gross fair market value of all the assets of the Company over a twelve-month period.
DIRECTOR
COMPENSATION
The
following table sets forth the compensation paid to the Company’s directors in fiscal 2019, except for Mr. Cerminara, who
did not receive any separate compensation for his service as a director during 2019. Following Mr. Cerminara’s resignation
as the Company’s Chief Executive Officer on April 13, 2020, Mr. Cerminara receives the Company’s standard non-employee
director compensation.
|
|
|
Fees Earned
Or Paid in
Cash ($)(1)
|
|
|
Stock Awards ($)(3)
|
|
|
Option Awards ($)
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
|
Nonqualified Deferred
Compensation Earnings
($)
|
|
|
All Other
Compensation ($)
|
|
|
Total ($)
|
|
|
William J. Gerber(2)
|
|
|
38,750
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
83,750
|
|
|
Jack H. Jacobs(2)
|
|
|
33,750
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
78,750
|
|
|
Lewis M. Johnson
|
|
|
28,500
|
|
|
|
75,900
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
104,400
|
|
|
Charles T. Lanktree(2)
|
|
|
34,000
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79,000
|
|
|
Robert J. Roschman
|
|
|
28,500
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73,500
|
|
|
Ndamukong Suh
|
|
|
34,750
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79,750
|
|
|
(1)
|
Represents
the annual retainer fee paid to each director and cash payments for attendance at meetings of the Board of Directors and meetings
of the committees of the Board of Directors both in person and via teleconference prior to the modification of the director
compensation program in June 2019. Although not included in the above table, the directors are reimbursed for their out-of-pocket
expenses of attending meetings of the Board of Directors.
|
|
|
|
|
(2)
|
Mr.
Gerber earned $10,000 for acting as Chairman of the Audit Committee, Mr. Lanktree earned $5,000 for acting as Chairman of
the Compensation Committee and Colonel Jacobs earned $5,000 for acting as Chairman of the Nominating and Corporate Governance
Committee. Colonel Jacobs resigned from the Board of Directors on October 5, 2020.
|
|
|
|
|
(3)
|
On
July 1, 2019, Messrs. Gerber, Jacobs, Johnson, Lanktree, Roschman and Suh were each granted 14,563 RSUs under the 2017
Plan. In addition, Mr. Johnson was granted an additional 10,000 RSUs for his role as Co-Chairman of the Board of Directors.
The RSUs vest in three equal annual installments on July 1, 2020, July 1, 2021 and July 1, 2022, provided that, if the
director makes himself available and consents to be nominated by the Company for continued service as a director of the
Company, but is not nominated to the Board of Directors for election by stockholders, other than for good reason as determined
by the Board of Directors in its discretion, then the RSUs will vest in full as of the director’s last date of service
as a director of the Company. Each RSU represents a contingent right to receive one share of common stock of the Company.
The amounts shown in this column include the fair value of the annual RSU award on the date of grant, which was $3.09
per share. For additional information relating to the assumptions made in valuing and expensing these awards for 2019,
refer to Note 12 in the Company’s consolidated financial statements included in the Company’s Annual Report,
as filed with the SEC.
The
aggregate number of unvested RSU awards outstanding as of December 31, 2019 for each of Messrs. Gerber, Jacobs, Lanktree,
Roschman and Suh was 14,563. The aggregate number of unvested RSU awards outstanding as of December 31, 2019 for Mr. Johnson
was 24,563.
|
Prior
to the modification of our director compensation program in June 2019, our non-employee directors received an annual cash retainer
of $25,000, paid in quarterly installments, and the following cash payments for attending meetings of the Board of Directors and
meetings of committees of the Board of Directors: (i) $1,500 for each meeting of the Board of Directors attended in person; (ii)
$500 for each meeting of the Board of Directors attended via teleconference; (iii) $500 for each meeting of a committee of the
Board of Directors attended in person; and (iv) $250 for each meeting of a committee of the Board of Directors attended via teleconference.
Each non-employee director also received an annual grant of RSUs with a value of $30,000. Each RSU represented a contingent right
to receive one share of common stock of the Company and vested on the one-year anniversary of the grant date. In addition, the
Chairman of the Board of Directors and the Chairman of the Audit Committee each received an annual cash retainer of $10,000, paid
in quarterly installments, and the Chairman of the Compensation Committee and the Chairman of the Nominating and Corporate Governance
Committee each received an annual cash retainer of $5,000, paid in quarterly installments. The non-employee directors also received
reimbursement of reasonable out-of-pocket expenses for attending meetings of the Board of Directors.
On
June 6, 2019, we modified the compensation program for all non-employee directors. The new program was adopted to remain competitive
in attracting and retaining qualified Board members and to better align director compensation to other public companies of comparable
size to the Company. The terms of the new program are as follows:
|
|
●
|
Each
non-employee director receives an annual cash retainer of $25,000, paid in quarterly installments;
|
|
|
|
|
|
|
●
|
The
Chairman of the Audit Committee receives an additional annual cash retainer of $10,000, paid in quarterly installments;
|
|
|
|
|
|
|
●
|
The
Chairman of the Compensation Committee as well as the Chairman of the Nominating and Corporate Governance Committee each receives
an additional cash retainer of $5,000, paid in quarterly installments;
|
|
|
|
|
|
|
●
|
Each
non-employee director receives an annual grant of RSUs with a value of $45,000, vesting in three equal annual installments,
beginning with the first anniversary of the grant date, provided that, if the director makes himself available and consents
to be nominated by the Company for continued service as a director of the Company, but is not nominated to the Board of Directors
for election by stockholders, other than for good reason as determined by the Board of Directors in its discretion, then the
RSUs will vest in full as of the director’s last date of service as a director of the Company (effective as of July
1, 2019); and
|
|
|
|
|
|
|
●
|
Each
non-employee director receives reimbursement for reasonable out-of-pocket expenses for attending meetings of the Board of
Directors and its committees.
|
The
2017 Plan includes a limit on the amount of compensation payable to our non-employee directors. Specifically, the 2017 Plan provides
that the aggregate grant date fair value of all awards granted to any single non-employee director during any single calendar
year (determined as of the applicable grant date(s) under applicable financial accounting rules), when taken together with any
cash fees paid to the non-employee director during the same calendar year, may not exceed $200,000.
2020
Director Compensation
On
July 1, 2020, each of the non-employee directors (including Mr. Cerminara) was granted 28,662 RSUs under the 2017 Plan. The RSUs
vest in three equal annual installments on July 1, 2021, July 1, 2022 and July 1, 2023, provided that, if the director makes himself
available and consents to be nominated by the Company for continued service as a director of the Company, but is not nominated
to the Board of Directors for election by stockholders, other than for good reason as determined by the Board of Directors in
its discretion, then the RSUs will vest in full as of the director’s last date of service as a director of the Company.
Each RSU represents a contingent right to receive one share of common stock of the Company.
In
response to the impact of the COVID-19 pandemic on the Company, the economy, and the industry, the Board of Directors waived its
cash compensation for the first half of 2020.
REPORT
OF THE AUDIT COMMITTEE
The
following report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed”
with the Securities and Exchange Commission, nor shall this report be incorporated by reference into any filing made by the Company
under the Securities Act of 1933, as amended, or the Exchange Act.
The
Company’s management is responsible for the preparation of the Company’s financial statements and for maintaining
an adequate system of internal controls and processes for that purpose. Haskell & White LLP (“Haskell & White”)
acted as the Company’s independent registered public accounting firm for the year ended December 31, 2019 and was responsible
for conducting an independent audit of the Company’s annual financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (the “PCAOB”) and issuing a report on the results of their audit. The Audit
Committee is responsible for providing independent, objective oversight of both of these processes.
The
Audit Committee has reviewed and discussed the audited financial statements for the year ended December 31, 2019 with management
of the Company and with representatives of Haskell & White. The discussions with Haskell & White included all matters
that Haskell & White was required to communicate and discuss with the Audit Committee by the applicable requirements of the
PCAOB and the SEC.
In
addition, the Audit Committee reviewed the independence of Haskell & White. The Audit Committee discussed Haskell & White’s
independence with them and has received written disclosures and a letter from Haskell & White regarding their independence
as required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit
committee concerning independence.
Based
upon its review and the discussions noted above, the Audit Committee recommended to the Board that the Company’s audited
consolidated financial statements for the year ended December 31, 2019 be included in the Company’s Annual Report.
The
foregoing report is submitted by the Audit Committee in accordance with the requirements of the Exchange Act and the rules and
regulations thereunder.
William
J. Gerber (Chair)*
Jack
H. Jacobs
*
Robert J. Roschman was appointed as a member of the Audit Committee effective April 13, 2020. Mr. Roschman did not sign this report
because he was not a member of the Audit Committee at the time of the Audit Committee’s review, discussion and recommendation
to the Board regarding the inclusion of the audited financial statements in our Annual Report.
PROPOSAL
TWO
ADVISORY
APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Background
At
the 2017 Annual Meeting of Stockholders, the stockholders approved, by advisory vote, an annual frequency for future advisory
votes on the compensation of the Company’s Named Executive Officers (“say-on-pay vote”). This advisory vote
was accepted by the Board of Directors. Stockholders are expected to have the opportunity to vote on the frequency of future votes
on Named Executive Officer compensation at the 2023 Annual Meeting of Stockholders.
The
annual advisory say-on-pay vote on executive compensation is provided to stockholders as required by the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 and Section 14A of the Exchange Act and is a non-binding vote on the compensation of
the Company’s Named Executive Officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules
promulgated by the SEC, including the 2019 Summary Compensation Table and the other related tables and narrative disclosure. As
a smaller reporting company, we are not required to provide a separately-captioned “Compensation Discussion and Analysis”
section in this proxy statement.
The
advisory say-on-pay vote is not a vote on the Company’s general compensation policies, compensation of the Board of Directors,
or the Company’s compensation policies as they relate to risk management.
The
Compensation Committee believes the Company’s executive compensation program reflects a strong philosophy that rewards performance
and is closely aligned with stockholders’ long-term interests. We recognize that the COVID-19 pandemic could significantly
impact 2020 financial results and compensation outcomes and, accordingly, have taken steps to temporarily reduce our executive
officer and non-employee director compensation, as discussed under “Executive Compensation” and “Director Compensation”
in this proxy statement.
Non-Binding
Advisory Resolution
We
are asking our stockholders to indicate their support for the Company’s executive compensation program as described in this
proxy statement. This proposal gives our stockholders the opportunity to express their views on our Named Executive Officers’
compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our
Named Executive Officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we will ask
our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED,
that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure
rules of the SEC, including the narrative compensation discussion sections, the compensation tables and any related materials
disclosed in the Company’s Proxy Statement, is hereby APPROVED.”
This
advisory say-on-pay vote on executive compensation is not binding on the Board of Directors or the Compensation Committee. However,
the Board of Directors values the opinion of our stockholders and will take into account the result of the vote when making future
decisions regarding executive compensation. The next say-on-pay vote is currently expected to occur at our 2021 Annual Meeting.
Required
Vote
The
number of votes cast by stockholders, either in person or by proxy, at the Annual Meeting “for” advisory approval
of the compensation of our Named Executive Officers pursuant to the above resolution must exceed the number of votes cast “against”
advisory approval.
Our
Board of Directors recommends a vote “FOR” adoption of the advisory resolution approving the compensation of the Company’s
Named Executive Officers.
PROPOSAL
THREE
RATIFICATION
OF APPOINTMENT OF THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Haskell
& White has served as the Company’s independent registered public accounting firm since April 11, 2019. It is expected
that representatives of Haskell & White will attend the Annual Meeting, either in person or telephonically, will have an opportunity
to make a statement if they so desire and will be available to respond to appropriate questions from stockholders.
Change
in Accountants
Former
Independent Registered Public Accounting Firm
On
April 11, 2019, we dismissed BDO USA, LLP (“BDO”) as our independent registered public accounting firm and appointed
Haskell & White as our new independent registered public accounting firm, effective immediately. The Audit Committee approved
the change in the auditors, following a competitive request for proposal process with several independent registered public accounting
firms.
During
the two fiscal years ended December 31, 2018, and the subsequent interim period through April 11, 2019, there were no: (1) disagreements
with BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion
to the subject matter of the disagreement, or (2) reportable events.
The
audit reports of BDO on the Company’s financial statements as of and for the years ended December 31, 2018 and 2017 did
not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope
or accounting principles.
The
Company provided BDO with a copy of the foregoing disclosures and requested BDO furnish the Company with a letter addressed to
the SEC stating whether or not it agrees with the above disclosures. A copy of this letter, dated April 11, 2019, was filed as
an exhibit to our Current Report on Form 8-K filed with the SEC on April 12, 2019.
New
Independent Registered Public Accounting Firm
On
April 11, 2019, we appointed Haskell & White as our new independent registered public accounting firm, effective immediately.
During the fiscal years ended December 31, 2018 and 2017, and during all subsequent interim periods through April 11, 2019, the
Company did not consult Haskell & White regarding the application of accounting principles to a specified transaction, either
completed or proposed, the type of audit opinion that might be rendered on the Company’s financial statements or any matter
that was the subject of a “disagreement” with its former auditors or a “reportable event” as those terms
are defined in Item 304 of Regulation S-K.
Audit
Fees
The
following table sets forth the aggregate fees for professional services rendered by Haskell & White for the year ended December
31, 2019 and by BDO for the year ended December 31, 2018.
|
|
|
2019
|
|
|
2018
|
|
|
Audit Fees(1)
|
|
$
|
243,000
|
|
|
$
|
482,500
|
|
|
Audit-Related Fees(2)
|
|
|
—
|
|
|
|
18,643
|
|
|
Tax Fees
|
|
|
—
|
|
|
|
—
|
|
|
All Other Fees
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
243,000
|
|
|
$
|
501,143
|
|
|
(1)
|
Includes
fees for professional services rendered during the fiscal year for the audit of our annual financial statements and for reviews
of the financial statements included in our quarterly reports on Form 10-Q. In addition, includes fees for professional services
rendered by BDO related to the review of the Company’s filing of equity method investment financial statements and issuance
of the related consent in 2018.
|
|
|
|
|
(2)
|
Includes
fees for professional services rendered for the review of standalone financial statements for one of the Company’s subsidiaries.
|
The
Audit Committee has implemented pre-approval procedures consistent with the rules adopted by the SEC. All audit and permitted
non-audit services are pre-approved by the Audit Committee. The Audit Committee has delegated the responsibility of approving
proposed non-audit services that arise between Audit Committee meetings to the Audit Committee Chairman, provided that the decision
to approve the services is presented for ratification at the next scheduled Audit Committee meeting.
Ratification
of Haskell & White as our Independent Registered Public Accounting Firm
The
Audit Committee has appointed Haskell & White as the independent registered public accounting firm to perform an audit of
the Company’s consolidated financial statements for the year ending December 31, 2020. The Audit Committee is directly responsible
for the appointment, compensation, retention, and oversight of the Company’s independent registered public accounting firm,
and it oversees the negotiation of the fees that are paid for these services. In the course of these responsibilities, the Audit
Committee periodically considers whether it would be in the Company’s and stockholders’ interests to change the Company’s
independent registered public accounting firm. In addition, the Audit Committee ensures the mandatory, regular rotation of the
lead audit partner, and in connection with that rotation, the Audit Committee and its Chairman are involved in the selection of
the new lead audit partner.
After
reviewing the performance of Haskell & White during the course of 2019 and 2020 and Haskell & White’s independence,
among other matters, the Audit Committee believes that the continued retention of Haskell & White to serve as the Company’s
independent registered public accounting firm for 2020 is in the best interests of the Company and its stockholders. This appointment
is being presented to the stockholders for ratification.
Although
applicable law does not require stockholder ratification of the appointment of Haskell & White as the Company’s independent
registered public accounting firm, our Board of Directors has determined to ascertain the position of our stockholders on the
appointment. If stockholders fail to ratify the appointment of Haskell & White as the Company’s independent registered
public accounting firm, the Audit Committee will reconsider whether to retain Haskell & White, but may ultimately decide to
retain them. Any decision to retain Haskell & White or another independent registered public accounting firm will be made
by the Audit Committee and will not be resubmitted to stockholders. In addition, even if stockholders ratify the appointment of
Haskell & White, the Audit Committee retains the right to appoint a different independent registered public accounting firm
for fiscal 2020 if the Audit Committee determines that it would be in the Company’s best interests to do so.
Required
Vote
The
ratification of the appointment of the independent registered public accounting firm will be approved if the number of votes cast
“for” the ratification of Haskell & White exceed the number of votes cast “against” ratification.
Our
Board of Directors recommends a vote “FOR” ratification of the appointment of Haskell & White as the Company’s
independent registered public accounting firm for the fiscal year ending December 31, 2020.
STOCKHOLDER
PROPOSALS
In
accordance with the rules of the SEC, stockholders wishing to submit proposals for inclusion in the proxy statement for the 2021
Annual Meeting must submit their proposals to the Company on or before June 18, 2021, unless the date of the 2021 Annual Meeting
is more than 30 days from the anniversary date of the Annual Meeting, in which case the proposals must be submitted a reasonable
time before the Company begins to print and send its proxy materials. Such proposals should be sent by certified mail, return
receipt requested, to the Company at 4201 Congress Street, Suite 175, Charlotte, North Carolina 28209, Attention: Corporate Secretary.
In addition to being submitted in a timely manner, stockholder proposals must comply with the other requirements of Rule 14a-8
under the Exchange Act in order to be included in the Proxy Statement for the 2021 Annual Meeting.
The
Company’s Bylaws set forth certain procedures which stockholders must follow in order to nominate a director or present
any other business, not submitted for inclusion in the proxy statement, at an annual stockholders’ meeting. Generally, a
stockholder must give timely notice to the Corporate Secretary of the Company. To be timely, such notice must be received by the
Company at its principal executive offices not less than 60 nor more than 90 days prior to the first anniversary of the preceding
year’s annual meeting (that is, for the 2021 Annual Meeting, no earlier than September 1, 2021 and no later than October
1, 2021). However, in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, notice must be so delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on
which public announcement (as defined in the Bylaws) of the date of such meeting is first made. The Bylaws specify the information
which must accompany such stockholder notice. Details of the provision of the Bylaws may be obtained by any stockholder from the
Corporate Secretary of the Company. The Company reserves the right to reject, rule out of order, or take other appropriate action
with respect to any proposal that does not comply with these and other applicable requirements.
RELATED
PERSON TRANSACTIONS
The
Company’s Audit Committee Charter requires the Audit Committee to review policies and procedures regarding transactions
between the Company and officers, directors and other related parties that are not a normal part of the Company’s business.
There are no formal written policies or procedures used by Board of Directors or the Audit Committee to review, approve or ratify
related party transactions. Rather, the Board of Directors or the Audit Committee reviews all related party transactions on a
case by case basis for potential conflict of interest situations on an ongoing basis and uses its discretion in approving all
such transactions. The Board of Directors or the Audit Committee will apply the standards of Item 404(a) of Regulation S-K when
evaluating certain relationships and related transactions.
On
an annual basis, the Company determines whether there are any related party transactions that need to be evaluated and approved
by the Board of Directors or the Audit Committee based on the responses received from each director and executive officer based
on an annual questionnaire completed by the director or executive officer. While there are no formal written policies or procedures
used, the Board of Directors or the Audit Committee may consider the following factors in evaluating related party transactions:
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the
nature of the related person’s interest in the transaction;
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the
presence of standard prices, rates, charges or terms otherwise consistent with arms-length dealings with unrelated third parties;
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the
materiality of the transaction to each party;
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the
reasons for the Company entering into the transaction with the related person;
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the
potential effect of the transaction on the status of a director as an independent, outside or disinterested director or committee
member; and
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any
other factors the Board of Directors or the Audit Committee may deem relevant.
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All
of the arrangements discussed below were approved by the Audit Committee and/or the independent members of our Board of Directors.
StrongVest
Global Advisors, LLC
StrongVest
Global Advisors, LLC (“StrongVest”), a wholly-owned subsidiary of the Company, served as the investment advisor to
CWA Income ETF (the “Fund”), an exchange-traded fund and series of StrongVest ETF Trust (the “Trust”).
CWA, which is 50% owned by Fundamental Global, the largest stockholder of the Company, was the sub-advisor to the Fund. Mr. Cerminara,
the Company’s Chairman and former Chief Executive Officer, is Chief Executive Officer, Co-Founder and Partner of Fundamental
Global and Co-Chief Investment Officer of CWA, and Mr. Johnson, Co-Chairman of the Board of Directors, is President, Co-Founder
and Partner of Fundamental Global and Co-Chief Investment Officer of CWA. Messrs. Cerminara and Johnson are managing members of
Fundamental Global, and each owns a 33.3% ownership interest in Fundamental Global.
In
October 2019, StrongVest and the Trust were discontinued and wound down. Prior to the winding down of StrongVest and the Trust,
certain executive officers, employees and directors of the Company held various positions with StrongVest and the Trust and may
continue to hold such positions until the entities are dissolved. Mr. Cerminara, the Chairman and former Chief Executive Officer
of the Company, served as President, Principal Executive Officer and Trustee of the Trust and Chief Executive Officer of StrongVest.
Ryan R.K. Turner, a former employee of the Company, served as President of StrongVest. John Puglia, a former employee of the Company,
served as Treasurer and Principal Financial Officer of the Trust and as Treasurer and Secretary of StrongVest and Mr. Jeffrey
L. Sutton, an employee of the Company, also served as Chief Compliance Officer of StrongVest and as Chief Compliance Officer and
Secretary of the Trust.
Pursuant
to an investment advisory agreement between the Fund and StrongVest (the “Advisory Agreement”), the Fund paid StrongVest
a unitary fee for the services it provided payable on a monthly basis at the annual rate of 0.75% of the Fund’s average
daily net assets, which fee was $41,444 and $64,993 in fiscal 2019 and fiscal 2018, respectively. Out of the unitary management
fee, StrongVest was obligated to pay or arrange for the payment of substantially all expenses of the Fund, including the cost
of transfer agency, custody, fund administration, legal, audit and other services and the fees and expenses of independent trustees
(“Fund Expenses”), except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary
expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business. StrongVest’s
unitary management fee was designed to cause substantially all of the Fund’s expenses to be paid and to compensate StrongVest
for providing services for the Fund. Pursuant to a sub-advisory agreement between StrongVest and CWA (the “Sub-Advisory
Agreement”), StrongVest was obligated to pay CWA a fee for the services it provided payable on a monthly basis equal to
50% of the advisory fee that the Fund paid StrongVest (net of the Fund Expenses paid by StrongVest). Because Fund Expenses paid
by StrongVest exceeded 50% of the advisory fee that the Fund paid StrongVest, StrongVest did not pay any amounts to CWA pursuant
to this arrangement.
blueharbor
bank
On
April 27, 2017, we entered into a debt agreement with blueharbor bank consisting of (1) a $2.0 million five-year term loan secured
by a first lien deed of trust on our Alpharetta, Georgia facility, bearing interest at a fixed rate of 4.5% and payable in equal
monthly installments of principal and interest calculated based on a 20-year amortization schedule with a final balloon payment
of approximately $1.7 million due on May 10, 2022, and (2) a line of credit of up to $1.0 million secured by a second lien deed
of trust on our Alpharetta, Georgia facility, bearing interest at the Prime Rate published in the Wall Street Journal plus 0.25%
(4.75% at December 31, 2017) and with a term ending May 10, 2018. On April 23, 2018, we entered into an agreement with blueharbor
bank to extend the maturity date of the $1.0 million line of credit to May 10, 2019. Under the debt agreement, we were required
to maintain a ratio of total liabilities to tangible net worth not in excess of 3 to 1 and maintain minimum liquidity of $2.0
million. As of December 31, 2017, the balance of the term loan including current maturities was $2.0 million. We also had outstanding
borrowings on our line of credit of $0.5 million and had the ability to borrow up to an additional $0.5 million. As of December
31, 2017, we were in compliance with our debt covenants. During the year ended December 31, 2017, the Company repaid approximately
$32,000 of principal on the term loan and paid an aggregate of $66,000 of interest under the debt agreement.
On
June 29, 2018, we closed a sale-leaseback transaction of our Alpharetta, Georgia facility pursuant to which we sold the facility
to Metrolina Alpharetta, LLC (“Metrolina”), a third party, for a purchase price of $7.0 million, with the Company
simultaneously leasing the facility back pursuant to a 10-year lease agreement at an annual base rent equal to $600,000 during
the first year of the lease term, with the annual rent thereafter increasing annually by 2%. As part of the closing, we issued
ten-year warrants to Metrolina to purchase up to 100,000 shares of our common stock pursuant to a warrant agreement. At the closing,
approximately $2.94 million of the sale proceeds was used to repay all outstanding amounts owed under, and to terminate, the $2.0
million five-year term loan and the line of credit of up to $1.0 million with blueharbor bank secured by the Alpharetta facility.
Prior to the closing of the sale-leaseback, we had repaid approximately $32,000 in principal on the term loan during 2018. We
paid an aggregate of $68,000 of interest under the debt agreement in 2018.
Mr.
Cerminara, our Chairman and former Chief Executive Officer, served as a member of the board of directors of blueharbor bank from
October 2013 to January 2020. In addition, the funds managed by Fundamental Global, of which Mr. Cerminara is the Chief Executive
Officer, Co-Founder and Partner, and Mr. Johnson, Co-Chairman of our Board of Directors, is the President, Co-Founder and Partner,
and its affiliates together beneficially own less than 5% of the stock of blueharbor bank. The independent members of our Board
of Directors approved our debt agreement with blueharbor bank.
Fundamental
Global Investors, LLC
Share
Purchase Transaction
On
September 9, 2018, the Company entered into a letter agreement with Fundamental Global, pursuant to which the Company sold 1,147,087
shares of common stock of BK Technologies, Inc. (now known as BK Technologies Corporation) to funds managed by, and other affiliates
of, Fundamental Global, at a price of $3.95 per share, which represented the immediately preceding closing price on the NYSE American
stock exchange. On March 11, 2019, BK Technologies, Inc. reorganized into a holding company structure which resulted in BK Technologies
Corporation becoming the publicly-traded direct parent company of BK Technologies, Inc. The gross proceeds to the Company were
approximately $4,530,994. Mr. Cerminara, the Company’s Chairman and former Chief Executive Officer, is the Chief Executive
Officer, Co-Founder and Partner of Fundamental Global, and Mr. Johnson, Co-Chairman of the Board of Directors, is the President,
Co-Founder and Partner of Fundamental Global. The transaction was approved by the Audit Committee, comprised of only independent
directors.
Firefly
Transaction
On
May 21, 2019, Strong Digital Media, LLC, a wholly-owned subsidiary of the Company (“SDM”), entered into a Taxicab
Advertising Collaboration Agreement and a Unit Purchase Agreement (collectively, the “Firefly Agreements”) with Firefly
Systems, Inc. (“Firefly”), pursuant to which SDM agreed to make available to Firefly 300 digital taxi tops and the
parties agreed to coordinate the fulfilling of SDM’s agreements with the Metropolitan Taxicab Board of Trade, Inc. and Creative
Mobile Media, LLC, each dated February 8, 2018. As consideration for entering into the Firefly Agreements, the Company received
$4,785,072 of Firefly’s Series A-2 preferred shares (“Firefly Shares”). The Firefly Shares, including those
subsequently issued pursuant to an earn-out provision, were subject to a repurchase option for a period of three years to cover
SDM’s indemnity obligations and other post-closing covenants under the Firefly Agreements. As a condition to the transaction,
SDM agreed to hold the Firefly Shares in Fundamental Global Venture Partners, LP (“FGVP”), an investment fund managed
by Fundamental Global Advisors, LLC in which SDM was the sole limited partner.
On
August 3, 2020, SDM entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Firefly, pursuant
to which SDM agreed to sell substantially all of the assets primarily related to its Strong Outdoor operating business to Firefly
and continue to make available 300 digital taxi tops to Firefly. SDM retained certain accounts receivable as well as liabilities
other than executory obligations under transferred contracts to the extent such liabilities are required to be performed following
closing or constitute certain deferred revenue. The transaction closed on the same day.
As
consideration for entering into the Asset Purchase Agreement, SDM received approximately $0.6 million in cash consideration and
approximately $3.2 million of Firefly’s Series A-3 preferred shares.
In
connection with the closing of the transactions contemplated by the Asset Purchase Agreement, (i) SDM received approximately $1.1
million of Firefly’s Series A-2 preferred shares, which constituted the remaining shares to be issued pursuant to the Unit
Purchase Agreement dated May 21, 2019, (ii) Firefly no longer has an option to repurchase any of the Series A-2 preferred shares
issued to SDM, (iii) accounts payable to Firefly were cancelled and forgiven, and (iv) the Taxicab Advertising Collaboration Agreement
dated May 21, 2019 was terminated. SDM currently holds approximately $5.7 million of Firefly Series A-2 preferred shares, which
includes the shares issued to SDM as part of the May 2019 transaction. As contemplated by the Asset Purchase Agreement, the newly
issued Series A-2 preferred shares of Firefly are held by SDM, and the previously issued Series A-2 preferred shares of Firefly
held by FGVP were transferred to SDM. The Asset Purchase Agreement includes customary representations and warranties. SDM is indemnifying
Firefly for excluded liabilities related to the transferred business.
Convergent
Media Systems Corporation, an indirect subsidiary of the Company (“Convergent”), entered into a Master Services Agreement
(the “Master Services Agreement”) with Firefly, pursuant to which Convergent agreed to provide certain support services
to Firefly, including remote equipment monitoring and diagnostics of screens until no later than December 31, 2022 and transition
advertising instruction and integration services, content management services, ad-hoc reporting and analysis, wireless service,
advertising content management services, and mapping data until no later than six months from closing. As consideration for entering
into the Master Services Agreement, Convergent received $2.0 million in cash consideration.
On
August 3, 2020, Strong/MDI Screen Systems, Inc., a direct subsidiary of the Company (“Strong/MDI”), entered into a
Stock Purchase Agreement (the “Stock Purchase Agreement”) with Firefly, pursuant to which MDI agreed to purchase $4.0
million of Firefly’s Series A-3 preferred shares at the initial closing, which took place on the same day, and the Company
or its affiliated entities may purchase an additional $2.0 million of Firefly’s Series A-3 preferred shares at a second
closing subject to certain conditions. As contemplated by the Stock Purchase Agreement and ancillary investment agreements, the
Company and its affiliated entities will have the right to designate a director to be elected to the board of directors of Firefly,
subject to holding, together with its affiliates, approximately $7.2 million of Firefly’s Series A-3 preferred shares and
other conditions. The Company and its affiliated entities currently hold $7.2 million of Series A-3 preferred shares and have
designated D. Kyle Cerminara, Chairman of the Board of Directors and a principal of the Company’s largest stockholder, to
Firefly’s board of directors. Mr. Cerminara was appointed to the Firefly board on August 3, 2020.
Indemnification
Obligations
The
funds managed by Fundamental Global, including the funds that directly own shares of our common stock, have agreed to indemnify
Fundamental Global and its principals, including Messrs. Cerminara and Johnson, or any other person designated by Fundamental
Global, for claims arising from Messrs. Cerminara’s and Johnson’s service on our Board of Directors, provided that
a fund’s indemnity obligations are secondary to any obligations we may have with respect to Messrs. Cerminara’s and
Johnson’s service on our Board of Directors.
Itasca
Financial, LLC
On
May 19, 2020, the Company entered into a Financial and Consulting Services Agreement (the “Itasca Financial Agreement”)
with Itasca Financial LLC (“Itasca Financial”), pursuant to which Itasca Financial agreed to advise the Company on
aspects of its strategic direction. In exchange for Itasca Financial’s services, the Company agreed to pay Itasca Financial
a retainer fee of $50,000, payable in two installments of $25,000, and a monthly fee of $20,000. The parties had agreed not to
terminate the Itasca Financial Agreement for a period of three months from May 19, 2020, after which time it may now be terminated
by either party at any time with prior written notice of at least 30 calendar days. As of the date of this Proxy Statement, the
Company has paid $130,000 to Itasca Financial. Upon termination of the Itasca Financial Agreement by either party, the Company
has agreed to pay Itasca Financial a termination fee of $100,000, which can be payable in a combination of cash and stock at the
Company’s discretion, and if any such fee is paid in stock, then the Company has agreed to grant Itasca Financial unlimited
piggyback registration rights for such stock. The Itasca Financial Agreement also includes expense reimbursement provisions and
indemnification provisions in favor of Itasca Financial and its affiliates.
Fundamental
Global, with its affiliates, is the controlling stockholder of the Company. D. Kyle Cerminara, the Chief Executive Officer, Co-Founder
and Partner of Fundamental Global, is the Chairman of the Board of Directors and former Chief Executive Officer of the Company,
and Lewis M. Johnson, the President, Co-Founder and Partner of Fundamental Global, is Co-Chairman of our Board of Directors. Fundamental
Global, with its affiliates, is the controlling stockholder of 1347 Property Insurance Holdings, Inc., and Larry G. Swets, Jr.
serves as Interim Chief Executive Officer and principal executive officer of 1347 Property Insurance Holdings, Inc. and as a member
of its board of directors. In addition, Mr. Swets founded and serves as the managing member of Itasca Financial, which provides
services to the Company, as described above, as well as to other companies affiliated with Fundamental Global. Mr. Swets also
serves as Chief Executive Officer and a director of FG New America Acquisition Corp., of which Mr. Cerminara serves as President
and a director.
Indemnification
Agreements
On
September 1, 2020, the Company entered into indemnification agreements with each of its directors and executive officers. Under
the terms of the indemnification agreements, subject to certain exceptions specified in the indemnification agreements, the Company
will, among other things, indemnify its directors and executive officers to the fullest extent permitted by law in the event such
director or executive officer becomes subject to or a participant in certain claims or proceedings as a result of his service
as a director or officer. The Company will also, subject to certain exceptions and repayment conditions, advance to such director
or executive officer specified indemnifiable expenses incurred in connection with such claims or proceedings.
As
discussed above, the funds managed by Fundamental Global have agreed to certain indemnification obligations, which are secondary
to any obligations we may have with respect to Messrs. Cerminara’s and Johnson’s service on our Board of Directors
ADDITIONAL
INFORMATION
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who beneficially own more
than 10% of the Company’s stock, to file initial reports of ownership and reports of changes in ownership with the SEC.
Ballantyne believes that all persons subject to these reporting requirements filed the required reports on a timely basis during
2019.
If
you have any questions, require any assistance in voting your shares in the Company, need any additional copies of the Company’s
proxy materials, or have any other questions, please call Alliance Advisors LLC, the Company’s proxy solicitor, at the toll-free
telephone number included below.
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Alliance
Advisors LLC
200
Broadacres Drive, 3rd Floor
Bloomfield,
NJ 07003
Toll-free
number: 844-876-6187
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