ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our bylaws permit our Board of Directors to establish
by resolution the authorized number of directors. Our Board of Directors currently consists of four directors, who are divided into three
classes with staggered three-year terms.
All of our directors bring to our Board of Directors
a wealth of executive leadership experience derived from their service as corporate executives as well as service as directors on other
boards. When evaluating director candidates, the Nominating and Governance Committee takes into account all factors it considers appropriate,
which include (i) ensuring that the Board of Directors, as a whole, is diverse and consists of individuals with various and relevant
career experience, relevant technical skills, industry knowledge and experience, and financial expertise (including expertise that could
qualify a director as a “financial expert,” as that term is defined by the rules of the SEC), and (ii) minimum individual
qualifications, including strength of character, mature judgment, familiarity with the Company’s business and industry and independence
of thought. The Nominating and Governance Committee also considers geographical, cultural, experiential and other forms of diversity when
evaluating director candidates. In addition, the Nominating and Governance Committee also may consider the extent to which the candidate
would fill a present need on the Board of Directors. Information about our current directors, including their business experience for
the past five years, appears below.
Class I Director
Susan
M. Westphal, 57, is a continuing Class I director whose current term expires at our 2023 Annual Meeting. Ms. Westphal has served as
a member of our Board of Directors since March 17, 2017. She currently serves as a member of the Audit, Compensation, and Nominating and
Governance Committees. Ms. Westphal, is Chief Counsel at Melissa & Doug, LLC, a leading designer of educational toys and children’s’
products, since February 2016. Ms. Westphal is responsible for a range of legal, strategic, and organizational matters. From January 2012
to January 2016, Ms. Westphal was an attorney with Brody and Associates, LLC. Ms. Westphal was previously an attorney at law firms including
Epstein, Becker, & Green, p.c, where she represented corporate clients in litigations and negotiations in commercial, real estate,
and employment matters. She holds a JD from The George Washington University National Law Center and a BA from Tufts University. Ms. Westphal’s
qualifications to serve on our Board of Directors include her extensive legal and negotiation experience.
Class II Directors
Timothy Brog, 58, is a continuing Class
II director whose current term expires at our 2024 Annual Meeting. Mr. Brog joined us in May 2016 as a member of our Board of Directors
and was appointed as our President and Chief Executive Officer effective March 17, 2017. Mr. Brog served on our Audit Committee from July
1, 2016 until March 17, 2017 and on the Compensation Committee from December 14, 2016 to March 17, 2017. From March 2015 until March 17,
2017, Mr. Brog served as the president of Locksmith Capital Management LLC, an investment advisory firm. Previously, he served as Chairman
of the Board of Directors of Peerless Systems Corporation from June 2008 to February 2015, Chief Executive Officer from August 2010 to
March 2015 and a director beginning in July 2007. Mr. Brog served as a Managing Director and Portfolio Manager to Locksmith Value Opportunity
Fund LP from September 2007 to August 2010. He also served as Managing Director of E2 Investment Partners LLC, a special purpose vehicle
to invest in Peerless, from March 2007 to July 2008. Prior to his experience at Locksmith Capital and E2 Investment Partners, Mr. Brog
was President of Pembridge Capital Management LLC and the Portfolio Manager of Pembridge Value Opportunity Fund LP, a small cap value
hedge fund, from June 2004 to September 2007. He also worked as the Managing Director of The Edward Andrews Group Inc., a boutique investment
bank, from 1996 to 2007. From 1989 to 1995, Mr. Brog was a corporate finance and mergers and acquisitions associate of the law firm Skadden,
Arps, Slate, Meagher & Flom LLP. Mr. Brog has previously served as a director of Eco-Bat Technologies Limited from October 2007 to
July 2019, Chairman of the Board and Chairman of the Audit Committee of Deer Valley Corporation from October 2014 to April 2015, and as
a member of the board of directors of the Topps Company Inc., from July 2006 to October 2007. Mr. Brog received a JD from Fordham University
School of Law in 1989 and a BA from Tufts University in 1986. Mr. Brog’s qualifications to serve on our Board of Directors include
his operational, legal, investment banking, executive management and financial analysis experience.
Michael Mikolajczyk, 70, is a continuing
Class II director whose current term expires at our 2024 Annual Meeting. Mr. Mikolajczyk has served as a member of our Board of Directors
from June 2001 until May 2002 and rejoined our Board of Directors in March 2004. Mr. Mikolajczyk was elected as the chairman of our Board
of Directors in December 2017. Mr. Mikolajczyk also serves as a member of our Audit, Compensation, and Nominating and Governance Committees.
Since September 2003, Mr. Mikolajczyk has served as managing director of Catalyst Capital Management, LLC, a private equity firm. From
2001 through 2003, Mr. Mikolajczyk worked as an independent consultant providing business and financial advisory services to early stage
and mid-cap companies. Mr. Mikolajczyk also served as vice chairman of Diamond Management & Technology Consultants, Inc., a management
and technology consulting firm, from 2000 to 2001, president from 1998 to 2000 and chief financial officer from 1994 to 1998. Mr. Mikolajczyk
served as chief financial officer of Technology Solutions Company, a business solutions provider, from 1993 to 1994. In addition, Mr.
Mikolajczyk served as a director of Diamond Management & Technology Consultants, Inc. from 1994 to 2010 and served as director
of Kanbay International, Inc. from 2004 to 2007. Mr. Mikolajczyk is a CPA in the State of Michigan and holds an MBA from Harvard Business
School and a BS in business from Wayne State University. Mr. Mikolajczyk’s qualifications to serve on our Board of Directors include
his experience as an operating executive and his years of experience providing business and financial advisory services. Mr. Mikolajczyk
is a financial expert with extensive experience in corporate governance.
Class III Director
Jefferson Gramm, 46, is a continuing
Class III director whose current term will expire at our 2022 Annual Meeting. Mr. Gramm, in connection with a Stock Purchase
Agreement dated November 16, 2017, was appointed to the Board on November 16, 2017. He currently serves as a member of our Audit,
Compensation and Nominating and Governance Committees. Mr. Gramm has served as managing director, managing partner and portfolio
manager of Bandera Partners, LLC, a value-oriented investment partnership, and Bandera Partners Management LLC, an affiliate general
partner entity, since August 2006. Previous to Bandera Partners, Mr. Gramm was a managing director of Arklow Capital LLC, a hedge
fund manager focused on distressed and value investments, from October 2004 to July 2006. Mr. Gramm serves as a director of
Innovative Food Holdings, Inc., a distributor of specialty food and food related products, since September 2021 and Tandy Leather
Company, a distributor of leather and related products, since 2014 and as chairman of the board since 2017. Mr. Gramm served as
director of Peerless Systems Corporation from June 2009 to November 2010, as director of Morgan’s Foods Inc., a restaurant
company, from April 2013 to May 2014, and as director of Ambassadors Group, Inc., an educational travel company, from May 2014 to
October 2015. He holds an MBA from Columbia University and a BA from the University of Chicago. Mr. Gramm’s qualifications to
serve on our Board of Directors include his extensive experience in finance, especially in areas of reviewing acquisition targets
and negotiating and the consummation of potential acquisitions.
Current Executive Officers
Timothy E. Brog, age 58, was appointed
as our President and Chief Executive Officer effective March 17, 2017. Mr. Brog has also been a member of our Board of Directors since
May 2016. As of April 24, 2021, until such time as a new candidate is appointed, Mr. Brog took on the role of Acting Chief Financial Officer.
His biographical information is provided above.
CORPORATE GOVERNANCE
Director Independence
Our Board of Directors undertook a review of the
independence of each director and considered whether any director has a material relationship with us that could compromise his or her
ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board of Directors
determined that Messrs. Mikolajczyk, Gramm and Ms. Westphal are independent under the standards for director independence adopted by the
Board of Directors and are “independent directors” as defined under the rules of the NASDAQ Stock Market. Based on the foregoing,
our Board of Directors has concluded that a majority of our Board of Directors has been independent during 2021, as required by the rules
of the NASDAQ Stock Market. The standards for director independence adopted by the Board of Directors are available for review on our
website www.rubicontechnology.com.
Board of Directors Leadership Structure
Our Board of Directors is led by an independent
Chairman, Mr. Mikolajczyk. The Board has determined that having an independent Chairman is in the best interest of the Company’s
stockholders at this time and adopted a formal policy to that effect on December 14, 2016. The Board believes that this leadership structure
is appropriate because it strikes an effective balance between management and independent director participation in the Board process.
The independent Chairman role allows our Chief Executive Officer to focus on his management responsibilities in leading the business,
setting the strategic direction of the Company and optimizing the day-to-day performance and operations of the Company. At the same time,
the independent Chairman can focus on Board leadership, providing guidance to the Chief Executive Officer and the Company’s overall
business strategy. The Board believes that the separation of functions between the Chief Executive Officer and Chairman of the Board provides
independent leadership of the Board in the exercise of its management oversight responsibilities, increases the accountability of the
Chief Executive Officer and creates transparency into the relationship among executive management, the Board of Directors and the stockholders.
The independent Chairman regularly presides at executive sessions of the independent directors, without the presence of management.
Board of Directors Oversight of Risk
Our executive management team is responsible for
our day-to-day risk management activities. The Board of Directors oversees these risk management activities, delegating its authority
in this regard to the standing committees of the Board of Directors. The Audit Committee is responsible for discussing with executive
management policies with respect to financial risk and enterprise risk management. The Audit Committee also oversees the Company’s
corporate compliance programs. The Compensation Committee considers risk in connection with its design of compensation programs for our
executives. The Nominating and Governance Committee reviews the Company’s corporate governance principles and their implementation.
Each committee regularly reports to the Board of Directors. In addition to each committee’s risk management oversight, the Board
of Directors regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed.
The Board of Directors believes that each committee’s
risk oversight function, together with the efforts of the full Board of Directors and the Chief Executive Officer in this regard, enables
the Board of Directors to effectively oversee the Company’s risk management activities.
Committees of the Board of Directors and Meetings
Our Board of Directors has established three standing
committees: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. Described below are the membership
and principal responsibilities of each of the standing committees of the Board of Directors, as well as the number of meetings held during
2021. Each of these committees is composed entirely of non-employee directors who have been determined by our Board of Directors to be
independent under the current requirements of the NASDAQ Stock Market and the rules and regulations of the SEC. Each committee operates
under a charter approved by the Board of Directors setting out the purposes and responsibilities of the committee. All committee charters
are available for review on our website, www.rubicontechnology.com.
The Board of Directors held five meetings during
2021. Each of our directors attended at least 75% of the aggregate of the total number of meetings of the Board of Directors and the committees
on which he or she served during 2021. Our non-employee directors meet regularly without our Chief Executive Officer present.
Audit Committee
From January 1, 2021 to December 31, 2021, our
Audit Committee was comprised of Michael E. Mikolajczyk, Susan M. Westphal and Jefferson Gramm.
Mr. Mikolajczyk is the chairman of our Audit Committee.
Our Board of Directors has determined that each member of our Audit Committee, during the period served on the committee, met or meets
the requirements for financial sophistication and independence for Audit Committee membership under the current requirements of the NASDAQ
Stock Market and SEC rules and regulations. Our Board of Directors has also determined that Mr. Mikolajczyk is an “audit committee
financial expert” as defined in the SEC rules. The Audit Committee’s responsibilities include, but are not limited to:
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selecting and hiring our independent registered public accounting firm, and approving the audit and permitted non-audit services to be performed by our independent registered public accounting firm; |
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evaluating the qualifications, experience, performance and independence of our independent registered public accounting firm; |
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monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; |
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reviewing the adequacy, effectiveness and integrity of our internal control policies and procedures; |
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discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent registered public accounting firm our interim and year-end operating results; |
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preparing the Audit Committee report required by the SEC in our annual proxy statement; and |
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overseeing management with respect to enterprise and financial risk management. |
Our Audit Committee held five meetings during
2021.
Compensation Committee
From January 1, 2021 to December 31, 2021, our
Compensation Committee was comprised of Jefferson Gramm, Michael E. Mikolajczyk and Susan M. Westphal.
Mr. Gramm is the chairman of our Compensation
Committee. The Compensation Committee’s responsibilities include, but are not limited to:
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reviewing and approving our Chief Executive Officer’s and other executive officers’ annual base salaries and annual bonuses; |
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evaluating and recommending to the Board of Directors incentive compensation plans; |
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overseeing an evaluation of the performance of our executive officers; |
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administering, reviewing and making recommendations with respect to our equity compensation plans; and |
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reviewing and making recommendations to the Board of Directors with respect to director compensation. |
The Compensation Committee may, in its sole discretion,
retain or obtain the advice of one or more compensation consultants or other advisors to assist it with these duties.
Our Compensation Committee held two meetings during
2021.
Nominating and Governance Committee
From January 1, 2021 to December 31, 2021, our
Nominating and Governance Committee was comprised of Susan M. Westphal, Jefferson Gramm and Michael E. Mikolajczyk.
Ms. Westphal is the chairman of our Nominating
and Governance Committee. The Nominating and Governance Committee’s responsibilities include, but are not limited to:
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developing and recommending to the Board of Directors criteria for Board of Directors and committee membership; |
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assisting our Board of Directors in identifying prospective director nominees and recommending to the Board of Directors nominees for each annual meeting of stockholders; |
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recommending members for each committee to our Board of Directors; |
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reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our Board of Directors; and |
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overseeing the evaluation of the Board of Directors. |
Our Nominating and Governance Committee held two
meetings during 2021.
Code of Ethics
We have adopted a Code of Ethics that applies
to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to Investor Relations, Rubicon Technology,
Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge. Any
waiver from or amendment to the Code of Ethics granted to our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, will be timely disclosed by filing a Form 8-K.
Policies and Procedures Governing Director
Nominations
The Nominating and Governance Committee considers
candidates for nomination to the Board of Directors from a number of sources, including recommendations by current members of the Board
of Directors and members of management. Current members of the Board of Directors are considered for re-election unless they have notified
us that they do not wish to stand for re-election. The Nominating and Governance Committee will also consider director candidates recommended
by our stockholders, although a formal policy has not been adopted with respect to consideration of such candidates because stockholders
may nominate director candidates pursuant to our bylaws. Stockholders desiring to submit recommendations for director candidates must
follow the following procedures:
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The Nominating and Governance Committee will accept recommendations of director candidates throughout the year; however, in order for a recommended candidate to be considered for nomination for election at an upcoming annual meeting of stockholders, the recommendation must be received by the Acting Secretary of the Company not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the anniversary date of our most recent annual meeting of stockholders, unless the date of the annual meeting is more than 30 days before or more than 60 days after the first anniversary of the preceding year’s annual meeting, in which case notice must be 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 we first publicly announce the date of such annual meeting. If the number of directors to be elected to the Board is increased and the Company does not make public announcement naming all of the nominees for director or specifying the size of the increased Board at least 70 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s nomination notice will also be considered timely with respect to nominees for any newly created positions if such notice is delivered to the Acting Secretary not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company. |
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A stockholder making the recommendation must be a stockholder of record at the time of giving of notice, be entitled to vote at the meeting and comply with the notice procedures set forth in the bylaws. Furthermore, this recommendation must be in writing and must include the following initial information: (i) as to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person that would be required to be disclosed in proxy solicitations for election of directors in an election contest, or would otherwise be required, in each case pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-11 promulgated under the Exchange Act, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, the name and address of such stockholder and beneficial owner, and the class and number of shares of the Company that are owned beneficially and of record by such stockholder and beneficial owner. The Nominating and Governance Committee may subsequently request additional information regarding the candidate. |
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Recommendations must be sent by U.S. Mail, courier or expedited delivery service to Timothy E. Brog, Acting Secretary, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106. |
In evaluating nominees for director, the Nominating
and Governance Committee is guided by, among other things, the objective that the Board of Directors be composed of qualified, dedicated
and highly regarded individuals who have experience relevant to our operations and who understand the complexities of our business environment.
The Nominating and Governance Committee may also consider other factors such as whether the candidate is independent under the standards
adopted by the Board of Directors and within the meaning of the listing standards of the NASDAQ Stock Market, and whether the candidate
meets any additional requirements for service on the Audit Committee. The Nominating and Governance Committee does not intend to evaluate
candidates recommended by stockholders any differently than other candidates.
Stockholder Communications with the Board of
Directors
Interested parties, including stockholders, may
communicate by mail with all or selected members of the Board of Directors. Correspondence should be addressed to the Board of Directors
or any individual director(s) or group or committee of directors either by name or title (for example, “Chairman of the Nominating
and Governance Committee” or “All Non-Management Directors”). All correspondence should be sent c/o Timothy E. Brog,
Acting Secretary, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106. The Acting Secretary will, in consultation
with the appropriate members of the Board, as necessary, generally screen out communications from stockholders to identify communications
that are (i) commercial, charitable or other solicitations for products, services and funds, (ii) matters of a personal nature
not relevant for stockholders, or (iii) matters that are of a type that render them improper or irrelevant to the functioning of
the Board and the Company.
Attendance at Annual Meeting
Directors are encouraged, but not required, to
attend our annual stockholders’ meeting. All directors attended the 2021 Annual Meeting of Stockholders either in person or telephonically.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires
our directors, executive officers and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership
and reports of changes in ownership of our common stock and to provide us copies of these reports. Based solely on a review of the copies
of these reports furnished to us and written representations that no other reports were required to be filed, we believe that all such
filings applicable to our officers, directors and beneficial owners of greater than 10% of our common stock were made timely during the
fiscal year ended December 31, 2021.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
In 2021, all non-employee directors received an
annual fee of $20,000 cash, payable quarterly. At every Annual Meeting, beginning in 2018, non-employee directors receive $10,000 in restricted
stock units (“RSUs”) which vest on the day immediately preceding the next following Annual Meeting of Stockholders. The Chairman
of the Board and Chairman of the Audit Committee each receive an annual cash retainer of $5,000, payable quarterly.
We also have a policy of reimbursing directors
for travel, lodging and other reasonable expenses incurred in connection with their attendance at Board or committee meetings or conducting
Company business.
The following table sets forth information regarding
the aggregate compensation we paid to the non-employee members of our Board of Directors for 2021.
| Name | |
Fees
earned or
paid in cash
($) | | |
Stock
awards(1)
($) | | |
Total
($) | |
| Michael E. Mikolajczyk | |
| 30,000 | | |
| 10,000 | (2) | |
| 40,000 | |
| Susan M. Westphal | |
| 20,000 | | |
| 10,000 | (3) | |
| 30,000 | |
| Jefferson Gramm | |
| 20,000 | | |
| 10,000 | (4) | |
| 30,000 | |
| (1) | Amounts
reflect the grant date fair value of the restricted stock units granted at the 2020 Annual Meeting (the “2020 RSUs”). |
| (2) | On
June 23, 2021, the 2020 RSUs were automatically converted and Mr. Mikolajczyk was issued 1,010 shares of restricted stock. |
| (3) | On June 23, 2021, the 2020 RSUs were automatically converted
and Ms. Westphal was issued 1,010 shares of restricted stock. |
| (4) | On June 23, 2021, the 2020 RSUs were automatically converted
and Mr. Gramm was issued 1,010 shares of restricted stock. |
Summary Compensation Table
The table below sets forth, the compensation earned
by Timothy E. Brog, the President, Chief Executive Officer and Acting Chief Financial Officer, and Kevin T. Lusardi and Mathew J. Rich,
our former Chief Financial Officers, during fiscal 2021 and fiscal 2020. Such persons are referred to in this Report on Form 10-K/A as
our “named executive officers.” Mr. Lusardi was the Company’s Chief Financial Officer from March 2021 to April 2021.
Mr. Rich was the Company’s Chief Financial Officer from November 2019 to October 2020.
| Name and Principal Position | |
Year | |
Salary
($) | | |
Bonus
($) | | |
Stock
Awards
($) | | |
All Other
Compensation
($) | | |
Total
($) | |
| Timothy E. Brog | |
2021 | |
| 350,000 | | |
| — | | |
| 341,055 | (1) | |
| — | | |
| 691,055 | |
| President, Chief Executive Officer & Acting Chief Financial
Officer | |
2020 | |
| 350,000 | | |
| 30,000 | (2) | |
| 146,880 | (2) | |
| — | | |
| 526,880 | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Kevin T. Lusardi(3) | |
2021 | |
| 19,048 | | |
| — | | |
| — | | |
| — | | |
| 19,048 | |
| Former Chief Financial Officer | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Mathew J. Rich | |
2020 | |
| 133,269 | | |
| 20,000 | | |
| — | | |
| 2,000 | | |
| 155,269 | |
| Former Chief Financial Officer | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| (1) | Pursuant
to Mr. Brog’s employment agreement, he was eligible for a bonus based upon certain objectives set forth by the Compensation Committee
and agreed to by him and a discretionary bonus. For work performed in 2020 and paid in 2021, as part of his objective bonus, Mr. Brog
was eligible to earn up to 42,067 shares of the Company’s common stock if certain goals were achieved. The Board of Directors determined
that Mr. Brog’s 2020 objectives were only partially met and as a result Mr. Brog was granted 31,550 shares of common stock in 2021
for work performed in 2020. |
| (2) | Pursuant
to Mr. Brog’s employment agreement, he was eligible for a bonus based upon certain objectives set forth by the Compensation Committee
and agreed to by him and a discretionary bonus. For work performed in 2019 and paid in 2020, as part of his objective bonus, Mr. Brog
was eligible to earn up to 40,500 shares of the Company’s common stock if certain goals were achieved. The Board of Directors determined
that Mr. Brog’s 2019 objectives were only partially met and as a result Mr. Brog was granted 17,280 shares of common stock and
$30,000 in cash in 2020 for work performed in 2019. |
| (3) | Prior
to his appointment as CFO in March 2021, Mr. Lusardi served as a consultant to the Company from December 2020 to the date of such appointment
and was paid $50,346 for his services during that period. |
Discussion of Summary Compensation Table
Our executive compensation policies and practices
for fiscal 2021 and 2020, pursuant to which the compensation set forth in the “Summary Compensation Table” table was paid
or awarded, are described below.
Base salary
Pursuant to the terms of their employment agreements,
the annual base salaries for 2021 for Mr. Brog and Mr. Lusardi were $350,000 and $170,000, respectively. We formally evaluate executive
performance on an annual basis, and these evaluations are one of the factors considered in making adjustments to base salaries.
Incentive bonuses
The primary objectives of our incentive bonus
plan are to provide an incentive for superior work, to motivate our executives toward even higher achievement and business results, to
tie our executives’ goals and interests to ours and our stockholders’ and to enable us to attract and retain highly qualified
individuals. These targets are typically set in the first three months of the year. The targets under our objective incentive bonus plan
are mutually agreed upon by the independent directors and each of the executives.
Objective incentive compensation
In 2008, our Board of Directors adopted a policy
generally to grant equity awards to executives once per year to the extent equity awards are to be granted during such year (except in
the case of newly hired executives, as described below). With respect to newly hired executives, our practice is typically to make equity
grants at the first meeting of the Board of Directors following such executive’s hire date. We do not have any program, plan or
practice to time equity awards in coordination with the release of material non-public information.
Pursuant to Mr. Brog’s employment agreement,
he was eligible for a bonus based upon certain objectives set forth by the Compensation Committee and agreed to by him.
2021 Goals
In 2020 and prior years, Mr. Brog’s
goals were primarily related to the sale of certain assets and the growth and preservation of the Company’s cash balance. In
2021, Mr. Brog’s primary goal was to identify and consummate an acquisition. The Compensation Committee decided that Mr.
Brog’s bonus for work performed in 2021 would be solely discretionary and that there would be no objective goals or bonus. To
date, Mr. Brog did not receive an objective nor a discretionary bonus for work performed in 2021.
2020 Goals
In 2020, Mr. Brog was eligible to earn up to 42,067
shares (the “2020 Objective Bonus Shares”) of the Company’s common stock if certain goals were achieved. He was also
eligible for a bonus solely at the discretion of the Board.
Similar to Mr. Brog’s 2019 goals, his 2020
goals included targets that the Board believed was critical to the long-term success of the Company. Specifically, growth of the per-share
value of the Company’s cash and assets, and progress towards a value-added acquisition. There were no set formula to weight the
importance of each target -- the Board considered Mr. Brog’s performance in relation to both targets to determine the amount of
his bonus.
Target #1: Progress towards an acquisition
The Board wished to incentivize Mr. Brog to further
develop the Company’s acquisition pipeline, with the ultimate goal of finding suitable acquisition targets and eventually closing
a transaction. To achieve Target #1, the Board wanted to see material progress from Mr. Brog in improving deal-flow and allocating more
time to the search for acquisitions.
Target #2: 2020 Cash Per Share
Similar to 2019, the Board also wished to incentivize
Mr. Brog in his efforts to preserve capital, generate cash from the core business, and create additional value through share repurchases.
Because the Company has begun to deploy capital into share repurchases, the Board believes it should focus on the growth in value per
share.
As of December 31, 2019, Rubicon’s net short-term
investments, cash and cash equivalents and restricted cash were as follows:
| Cash and cash equivalents: | |
$ | 8,709,000 | |
| Restricted Cash: | |
$ | 171,000 | |
| Short-term investments: | |
$ | 15,458,000 | |
| Total Cash: | |
$ | 24,338,000 | |
Rubicon had 2,702,171 shares outstanding on December
31, 2019
The term “Total Cash” was defined
as cash and cash equivalents, restricted cash and short-term investments. The total current liabilities as of December 31, 2019 were $1,556,000
(“TCL”). The difference between the Total Cash ($24,338,000) and the TCL ($1,556,000) as of December 31, 2019 was $22,782,000.
“Liquid Value per Share” was defined
as Total Cash minus TCL, divided by shares outstanding. At December 31, 2019, Liquid Value per Share was $8.43.
If the Liquid Value per Share as of December 31, 2020 was equal to
or greater than $9.54, Mr. Brog would have achieved Target #2. Liquid Value per Share would be adjusted for any unusual items that occur
in 2020.
Severance and change in control arrangements
Payments upon termination are described below
under “Termination of Employment or Change in Control”.
OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR-END
The following table sets forth the outstanding
equity awards for our named executive officers as of December 31, 2021.
| | |
Option Awards | | |
Stock Awards | |
| Name | |
Number of securities underlying unexercised options (#) exercisable | | |
Number of securities underlying unexercised options (#) unexercis-able | | |
Option exercise price
($) | | |
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
($)(2) | | |
Equity
incentive
plan
awards:
number of
unearned
shares, units or other rights that
have not
vested
(#) | | |
Equity
incentive
plan
awards:
market
or payout
value of
unearned
shares, units or other rights that have not
vested
($) | |
| Timothy Brog | |
| — | | |
| — | | |
| — | | |
| | | |
| 25,000 | (1) | |
| 224,250 | | |
| | | |
| | |
| (1) |
The award of 25,000 RSUs vests in the amounts set forth below on the first date the 15-trading day average closing price of the Company’s common stock equals or exceeds the corresponding target price for the common stock before December 28, 2025: 12,500 - $12.00 and 12,500 - $13.00, provided that Mr. Brog remains employed with us through the applicable vesting dates. This award did not vest in 2021. |
| |
|
| (2) |
The market value of unvested stock awards is calculated by multiplying the number of unvested RSUs by $8.97, the closing price of the Company’s common stock on The NASDAQ Stock Market on December 31, 2021. |
TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL
Mr. Brog’s Severance Terms.
Pursuant to the terms of his employment agreement, if Mr. Brog’s employment is terminated by us without “cause”
or if he resigns for “good reason,” he will receive a continuation of his annual base salary for twelve months thereafter
and all of his outstanding RSU awards will become vested, provided that Mr. Brog delivers a release of claims to the Company. In addition,
he is entitled to receive any unused vacation pay, any bonus earned prior to the termination date that remained unpaid, and continuation
of his medical and welfare benefits for a period of twelve months thereafter. If within two years after a “change in control,”
as defined in the 2016 Plan and summarized below, we terminate Mr. Brog without cause or he resigns for good reason, he will be entitled
to a lump sum payment equal to 100% of his annual base salary in lieu of the salary continuation described above.
For purposes of Mr. Brog’s agreement (i) ”cause”
generally is defined as willful misconduct materially and adversely affecting us; theft, fraud, embezzlement or similar behavior; indictment
or conviction of a felony; or willfully failing to substantially perform the material duties of his position, other than failure resulting
from incapacity due to physical or mental illness, following a demand for performance delivered by the Board of Directors and a specified
cure period of not less than 10 days; and (ii) ”good reason” generally is defined as a material reduction in base salary
or benefits; substantial diminution in Mr. Brog’s duties, responsibilities or title, if uncured by us within 30 days of receipt
of notice from Mr. Brog; or Mr. Brog is required by the Board to work in the Company’s office located in any place other than in
the New York metropolitan area for more than 12 days in any one month in order to maintain employment with the Company.
Restrictive Covenants. Each
executive’s employment agreement contained or contains customary non-competition and non-solicitation covenants. These restrictions
survive for a period of 12 months after the executive’s resignation or termination, and in the event of a breach of his or her employment
agreement, the period is automatically extended by the period of the breach.
Equity Compensation Awards. The
equity compensation awards granted under the 2016 Plan or 2007 Plan may become vested upon a change in control. The 2016 and 2007 Plans
provide that in the event of “change in control,” as defined in the 2016 and 2007 Plans, each outstanding award will be treated
as the Compensation Committee determines, including that the successor corporation or its parent or subsidiary may be required to assume
or substitute an equivalent award for each outstanding award. The Compensation Committee is not required to treat all awards similarly.
If there is no assumption or substitution of outstanding awards, the award recipient will fully vest in and have the right to exercise
all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock and RSUs will lapse and all
performance goals or other vesting requirements for performance awards will be deemed achieved at 100% of target levels and all other
terms and conditions will be deemed met. If an option or stock appreciation right is not assumed or substituted, the Compensation Committee
will provide notice to the award recipient that the option or stock appreciation right will be fully vested and exercisable for a period
of time determined by the Compensation Committee in its discretion, and the option or stock appreciation right will terminate upon the
expiration of such period. Notwithstanding the Compensation Committee’s general discretionary authority described above, the individual
award agreements may provide for the vesting of such awards upon the occurrence of a change in control. Under the 2016 and 2007 Plans,
a “change in control” is deemed to occur when (i) a person becomes the beneficial owner (directly or indirectly) of at
least 50% of the voting power represented by the Company’s outstanding voting securities, (ii) the Company sells or disposes
of all or substantially all of its assets, (iii) the composition of the Board of Directors changes within a two-year period resulting
in fewer than a majority of the directors being “incumbent directors” (as defined in the 2016 and 2007 Plans), or (iv) a
merger or consolidation of the Company is consummated with any other corporation resulting in the voting securities of the Company outstanding
immediately prior thereto representing (either by remaining outstanding or by being converted into voting securities of the surviving
entity or its parent) less than 50% of the total voting power represented by the voting securities of the Company or such surviving entity
or its parent outstanding immediately after such merger or consolidation.