PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors (the "Board") of The LGL Group, Inc. in connection with the solicitation of proxies for use at the 2016 Annual Meeting of Stockholders (the "Annual Meeting") to be held at The LGL Group, Inc., 2525 Shader Rd., Orlando, Florida 32804, on Thursday, June 16, 2016, at 9:00 a.m., local time and any adjournments thereof. This Proxy Statement along with either a proxy card or a voting instruction card are being mailed to stockholders beginning on or about April 29, 2016.
Unless the context otherwise requires, in this Proxy Statement, we use the terms "we," "our," "us" and "the Company" to refer to The LGL Group, Inc. and its subsidiaries.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Q:
Why did I receive this Proxy Statement?
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A:
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The Board is soliciting your proxy to vote at the Annual Meeting because you were a stockholder at the close of business on April 19, 2016, the record date for the Annual Meeting, and are entitled to vote at the Annual Meeting.
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This Proxy Statement provides important information regarding the matters to be acted on at the Annual Meeting.
You do not need to attend the Annual Meeting to vote your shares.
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Q:
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What information is contained in this Proxy Statement?
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A:
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The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the Board and its committees, the compensation of directors and certain executive officers, and certain other required information.
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Q:
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What should I do if I receive more than one set of voting materials?
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A:
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You may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive.
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Q:
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How may I obtain an additional set of proxy materials?
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A:
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All stockholders may write to us at the following address to request an additional copy of these materials:
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The LGL Group, Inc.
2525 Shader Road
Orlando, Florida 32804
Attention: Corporate Secretary
Additionally, stockholders may access this Proxy Statement, our form of proxy card, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the "2015 Form 10-K") on the Internet at
www.lglgroupproxy.com
.
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Q:
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What is the difference between holding shares as a stockholder of record and as a beneficial owner?
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A:
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If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, the "stockholder of record." If you are a stockholder of record, this Proxy Statement, our 2015 Form 10-K and a proxy card have been sent directly to you by the Company.
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If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the "beneficial owner" of shares held in street name. If you own shares held in street name, this Proxy Statement and our 2015 Form 10-K have been forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting by telephone or the Internet, if the broker, bank or nominee offers these alternatives. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a "legal proxy" from the broker, bank or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
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Q:
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What am I voting on at the Annual Meeting?
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A:
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You are voting on the following proposals:
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·
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To elect eight directors to serve until the 2017 Annual Meeting of Stockholders (the "2017 Annual Meeting") and until their successors are duly elected and qualified;
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To adopt and approve the Amended and Restated 2011 Incentive Plan;
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To ratify the appointment of RSM US LLP (f/k/a McGladrey LLP) ("RSM") as our independent registered public accounting firm for the fiscal year ending December 31, 2016;
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To vote on a non-binding advisory resolution to approve the compensation of the Company's named executive officers; and
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To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
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The Board recommends a vote "FOR" the election of each of its nominees;
"FOR" the adoption and approval of the Amended and Restated 2011 Incentive Plan;
"FOR" the ratification of the appointment of RSM as our independent registered public accounting firm for the fiscal year ending December 31, 2016; and "FOR" the approval of a non-binding advisory resolution approving the compensation of our named executive officers.
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A:
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You may vote using any of the following methods:
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Proxy card or voting instruction card
. Be sure to complete, sign and date the card and return it in the prepaid envelope.
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By telephone or the Internet
. If you own shares held in street name, you will receive voting instructions from your bank, broker or other nominee and may vote by telephone or on the Internet if they offer those alternatives. Stockholders of record will not be able to vote by telephone or on the Internet.
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In person at the Annual Meeting
. All stockholders of record may vote in person at the Annual Meeting. You may also be represented by another person at the Annual Meeting by executing a proper proxy designating that person. If you own shares held in street name, you must obtain a legal proxy from your bank, broker or other nominee and present it to the inspector of election with your ballot when you vote at the Annual Meeting.
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Q:
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What can I do if I change my mind after I vote my shares?
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A:
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If you are a stockholder of record, you may revoke your proxy at any time before it is voted at the Annual Meeting by:
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Sending a written notice of revocation to our Corporate Secretary;
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Submitting a new, proper proxy dated later than the date of the revoked proxy; or
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Attending the Annual Meeting and voting in person.
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If you own shares held in street name, you may submit new voting instructions by contacting your broker, bank or nominee. You may also vote in person at the Annual Meeting if you obtain a legal proxy as described in the answer to the previous question. Attendance at the Annual Meeting will not, by itself, revoke a proxy.
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Q:
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What if I return a signed proxy card, but do not vote for some of the matters listed on the proxy card?
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A:
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If you return a signed proxy card without indicating your vote, your shares will be voted in accordance with the Board's recommendations as follows: "FOR" the election of each of its nominees;
"FOR" the adoption and approval of the Amended and Restated 2011 Incentive Plan;
"FOR" the ratification of the appointment of RSM as our independent registered public accounting firm for the fiscal year ending December 31, 2016; and "FOR" the approval of a non-binding advisory resolution approving the compensation of our named executive officers.
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Q:
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Can my broker vote my shares for me without my instructions?
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A:
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Brokers may not use discretionary authority to vote shares on the election of directors, the adoption and approval of the Amended and Restated 2011 Incentive Plan or the approval of a non-binding advisory resolution approving the compensation of our named executive officers, if they have not received instructions from their clients. Please provide voting instructions on these proposals so your vote can be counted.
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Q:
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Can my shares be voted if I do not return my proxy card or voting instruction card and do not attend the Annual Meeting?
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A:
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If you do not vote your shares held of record (registered directly in your name, not in the name of a bank or broker), your shares will not be voted.
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If you do not vote your shares held in street name with a broker, your broker will not be authorized to vote on most items being put to a vote, including the election of directors, the adoption and approval of the Amended and Restated 2011 Incentive Plan or the approval of a non-binding advisory resolution approving the compensation of our named executive officers. If your broker is not able to vote your shares, they will constitute "broker non-votes," which are counted for the purpose of determining the presence of a quorum, but otherwise do not affect the outcome of any matter being voted on at the Annual Meeting.
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Q:
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What are the voting requirements with respect to each of the proposals?
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A:
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In the election of directors, each director receiving a plurality of the affirmative ("FOR") votes cast will be elected. You may withhold votes from any or all nominees. All other proposals require the affirmative ("FOR") votes of a majority of the votes cast on the matter. Thus, abstentions will not affect the outcome of the votes on these proposals.
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If you own shares held in street name and do not provide your broker with voting instructions, your shares may constitute "broker non-votes." Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to be voted on that proposal. Thus, the "broker non-vote" will have no effect on any matter being voted on at this Annual Meeting, assuming that a quorum is present.
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Q:
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How many votes do I have?
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A:
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You are entitled to one vote for each share of common stock that you hold. As of April 19, 2016, the record date, there were 2,665,434 shares of common stock outstanding.
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Q:
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Is cumulative voting permitted for the election of directors?
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A:
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We do not use cumulative voting for the election of directors.
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Q:
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What happens if a nominee for director does not stand for election?
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A:
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If for any reason any nominee does not stand for election, any proxies we receive will be voted in favor of the remaining nominees and may be voted for a substitute nominee in place of the nominee who does not stand. We have no reason to expect that any of the nominees will not stand for election.
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Q:
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What happens if additional matters are presented at the Annual Meeting?
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A:
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Other than the four items of business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Michael J. Ferrantino, Sr. and Patti A. Smith, will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting.
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Q:
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How many shares must be present or represented to conduct business at the Annual Meeting?
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A:
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A quorum will be present if at least a majority of the outstanding shares of our common stock entitled to vote, totaling 1,332,718 shares, is represented at the Annual Meeting, either in person or by proxy.
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Both abstentions and broker non-votes (described above) are counted for the purpose of determining the presence of a quorum.
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Q:
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How can I attend the Annual Meeting?
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A:
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You are entitled to attend the Annual Meeting only if you were a stockholder as of the close of business on April 19, 2016, the record date, or if you hold a valid proxy for the Annual Meeting. You should be prepared to present photo identification for admittance. If you are a stockholder of record, your name will be verified against the list of stockholders of record on the record date prior to your admission to the Annual Meeting. If you are not a stockholder of record, but hold shares through a broker, bank or nominee (i.e., in street name), you should provide proof of beneficial ownership on the record date, such as your most recent account statement prior to April 19, 2016, a copy of the voting instruction card provided by your broker, bank or nominee, or other similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the Annual Meeting.
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The Annual Meeting will begin promptly on June 16, 2016, at 9:00 a.m., local time. You should allow adequate time for the check-in procedures.
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Q:
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How can I vote my shares in person at the Annual Meeting?
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A:
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Shares held in your name as the stockholder of record may be voted in person at the Annual Meeting. Shares held beneficially in street name may be voted in person at the Annual Meeting only if you obtain a legal proxy from the broker, bank or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy card or voting instruction card as described herein so your vote will be counted if you later decide not to attend the Annual Meeting.
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Q:
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What is the deadline for voting my shares?
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A:
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If you hold shares as the stockholder of record, your vote by proxy must be received before the polls close at the Annual Meeting.
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If you hold shares beneficially in street name, please follow the voting instructions provided by your broker, bank or nominee. You may vote these shares in person at the Annual Meeting only if at the Annual Meeting you provide a legal proxy obtained from your broker, bank or nominee.
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Q:
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Is my vote confidential?
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A:
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Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy card, which are then forwarded to our management.
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Q:
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How are votes counted?
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A:
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For the election of directors, you may vote "FOR" all or some of the nominees or your vote may be "WITHHELD" with respect to one or more of the nominees. For the other items of business, you may vote "FOR," "AGAINST" or "ABSTAIN."
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Q:
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Where can I find the voting results of the Annual Meeting?
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A:
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We intend to announce preliminary voting results at the Annual Meeting and publish final voting results in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (the "SEC") within four business days after the Annual Meeting.
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Q:
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How can I obtain the Company's corporate governance information?
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A:
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The following information is available in print to any stockholder who requests it and is also available on the Investor Relations portion of the Company's website,
www.lglgroup.com
:
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Certificate of Incorporation of The LGL Group, Inc.
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The LGL Group, Inc. By-Laws
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The charters of the following committees of the Board: the Audit Committee, the Nominating Committee and the Compensation Committee
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Our Business Conduct Policy
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Q:
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How may I obtain the Company's 2015 Form 10-K and other financial information?
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A:
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A copy of our 2015 Form 10-K is enclosed with this Proxy Statement.
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Stockholders may request another free copy of our 2015 Form 10-K and other financial information by contacting us at:
The LGL Group, Inc.
2525 Shader Road
Orlando, Florida 32804
Attention: Corporate Secretary
Alternatively, current and prospective investors can access our 2015 Form 10-K at
www.lglgroupproxy.com
.
We will also furnish any exhibit to our 2015 Form 10-K if specifically requested. Our SEC filings are also available free of charge at the SEC's website,
www.sec.gov
and at the Investor Relations portion of our website,
www.lglgroup.com
.
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Q:
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What if I have questions for the Company's transfer agent?
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A:
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Please contact our transfer agent at the telephone number or address listed below with questions concerning stock certificates, transfer of ownership or other matters pertaining to your stock account.
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Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
Toll free number: (877) 868-8027
TDD Hearing Impaired: (800) 952-9245
Foreign Stockholders: (201) 680-6578
TDD Foreign Stockholders: (781) 575-4592
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Q:
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Who can help answer my questions?
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A:
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If you have any questions about the Annual Meeting or how to vote or revoke your proxy, please contact our proxy solicitor at:
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Morrow & Co., LLC
470 West Ave.
Stamford, Connecticut 06902
Toll free number: (800) 607-0088
You can also contact us at:
The LGL Group, Inc.
2525 Shader Road
Orlando, Florida 32804
Attention: Corporate Secretary
For more information about our proxy solicitor, see page 36 of this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the number of shares of our common stock beneficially owned on April 19, 2016, by:
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Each person who is known to us to beneficially own more than 5% of our common stock;
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Each of our directors, nominees and named executive officers; and
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All of our directors and executive officers, as a group.
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The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a "beneficial owner" of a security if that person has or shares voting power, which includes the power to vote or direct the voting of a security, or investment power, which includes the power to dispose of or to direct the disposition of a security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.
Except as otherwise set forth below, the address of each of the persons listed below is: The LGL Group, Inc., 2525 Shader Road, Orlando, Florida 32804.
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Common Stock
Beneficially Owned
(1)
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Name and Address of Beneficial Owner
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Shares
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%
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5% Stockholders:
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Mario J. Gabelli
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465,417
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(2)
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17.0
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Directors and Named Executive Officers:
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Michael J. Ferrantino, Sr.
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87,848
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(3)
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3.2
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Timothy Foufas
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22,117
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(4)
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*
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Marc Gabelli
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375,303
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(5)
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14.1
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Patrick J. Guarino
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24,117
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(4)
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*
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Donald H. Hunter
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10,090
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(4)
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*
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Manjit Kalha
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9,538
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(4)
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*
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Antonio Visconti
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6,113
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(4)
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*
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Patti A. Smith
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1,500
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—
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Frederic V. Salerno, Jr.
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—
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—
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Hendi Susanto
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—
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—
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All executive officers and directors as a group (9 persons)
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536,626
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(6)
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19.8
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*
Less than 1% of outstanding shares.
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(1)
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The applicable percentage of ownership for each beneficial owner is based on 2,665,434 shares of common stock outstanding as of April 19, 2016. Shares of common stock issuable upon exercise of options, warrants or other rights beneficially owned that are exercisable within 60 days are deemed outstanding for the purpose of computing the percentage ownership of the person holding such securities and rights and all executive officers and directors as a group.
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(2)
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Includes (i) 247,861 shares of common stock owned directly by Mario J. Gabelli; (ii) 96,756 shares owned by MJG-IV Limited Partnership, of which Mr. Gabelli is the general partner and has an approximate 5% interest; and (iii) 120,800 shares owned by GGCP, Inc., of which Mr. Gabelli is the chief executive officer, a director and controlling shareholder. Mr. Gabelli disclaims beneficial ownership of the shares owned by MJG-IV Limited Partnership and GGCP, Inc., except to the extent of his pecuniary interest therein. Mr. Gabelli's business address is 401 Theodore Fremd Avenue, Rye, New York 10580-1430. This disclosure is based solely on information in a Statement of Changes in Beneficial Ownership on Form 4 filed by Mr. Gabelli with the SEC on December 31, 2014.
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(3)
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Includes 45,468 shares issuable upon the exercise of options.
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(4)
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Includes 467 shares issuable upon the exercise of options.
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(5)
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Includes (i) 23,934 shares of common stock owned directly by Marc Gabelli; (ii) 467 shares issuable upon the exercise of options held by Mr. Gabelli; and (iii) 350,902 shares held by Venator Merchant Fund, L.P. ("Venator Fund"). Venator Global, LLC ("Venator Global"), which is the sole general partner of Venator Fund, may be deemed to beneficially own the securities owned by Venator Fund. Mr. Gabelli, who is the President and Sole Member of Venator Global, may be deemed to beneficially own the securities owned by Venator Fund. Mr. Gabelli disclaims beneficial ownership of the securities owned by Venator Fund, except to the extent of his pecuniary interest therein.
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(6)
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Reflects ownership of one executive officer who is not a named executive officer. Does not reflect ownership of nominees not currently serving as directors. Includes 486,184 shares of common stock and 75,442 shares issuable upon the exercise of options.
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PROPOSALS TO BE VOTED ON
Proposal No. 1: Election of Directors
There are eight nominees for election to the Board at the Annual Meeting: Michael J. Ferrantino, Sr.; Timothy Foufas; Marc Gabelli; Donald H. Hunter; Manjit Kalha; Frederic V. Salerno, Jr.; Hendi Susanto; and Antonio Visconti. Each of the nominees, except for Messrs. Salerno and Susanto, currently serves as a director. Messrs. Salerno and Susanto were recommended to the Nominating Committee as director nominees by a non-management director.
Patrick J. Guarino, who has served as a director since 2006, will not be standing for re-election at the Annual Meeting. We thank Patrick for his significant contributions and years of diligent service to the Board, the Company and our stockholders.
Our By-Laws provide that the Board is to consist of no fewer than five and no more than 13 members. As of and following the conclusion of the Annual Meeting, the size of the Board will be set at eight members. Each director is elected annually to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Except where authority to vote for directors has been withheld, it is intended that the proxies received pursuant to this solicitation will be voted "FOR" the nominees named below. If for any reason any nominee does not stand for election, such proxies will be voted in favor of the remainder of those named and may be voted for substitute nominees in place of those who do not stand. Management has no reason to expect that any of the nominees will not stand for election.
Biographical summaries and ages of our directors and nominees, and the experiences and skills that led to the conclusion that such persons should serve as directors, are set forth in the table below. Information with respect to the shares of common stock beneficially owned by each of our directors and nominees is set forth in the section titled "Security Ownership of Certain Beneficial Owners and Management." All such information has been furnished to us by our directors and nominees.
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Name
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Age
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Director Since
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Offices and Positions Held With the Company, Business Experience and Principal Occupation for the Last Five Years, and Directorships in Public Corporations and Investment Companies
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Michael J. Ferrantino, Sr.
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73
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2014
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Executive Chairman of the Board, The LGL Group, Inc. (April 2016 to present); Chief Executive Officer, The LGL Group, Inc. (June 2014 to present); Executive Chairman of the Board, M-tron Industries, Inc. (October 2013 to present); President and Chief Executive Officer, Valpey-Fisher Corporation (September 2002 to November 2009), a provider of electronic components used in communications, medical, defense and aerospace, industrial and computer applications for OEMs and contract manufacturers worldwide; President, Micro Networks Division, Integrated Circuit Systems, Inc. (January 2002 to September 2002), a supplier of precision timing devices for optical networking, wireless infrastructure and high end network servers using surface acoustic wave and RF technology; President and Chief Executive Officer, Micro Networks Corporation (pre-2000 to January 2002); and Chairman of the Board of Directors, Micro Networks Corporation (April 2000 to January 2002). Mr. Ferrantino brings to the Board his extensive knowledge and leadership experience in the RF/microwave integrated system and frequency control industries.
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Timothy Foufas
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47
|
2007
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Managing Partner, Plato Foufas & Co. LLC (2005 to present), a financial services company; President, Levalon Properties LLC (2007 to present), a real estate property management company; Senior Vice President, Bayshore Management Co. LLC (2005 to 2006), a real estate property management company; Director of Investments, Liam Ventures Inc. (2000 to 2005), a private equity investment firm; Director, ICTC Group, Inc. (2010 to 2013), a rural local exchange carrier headquartered in Nome, ND. Mr. Foufas brings to the Board his management skills and expertise in financial, investment and real estate matters.
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Marc Gabelli
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48
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2004
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Managing Partner, Horizon Research (January 2013 to present), an investment management and research services provider; Chief Executive Officer, Gabelli Securities International Ltd. (1994 to present), a global alternative asset management platform and merchant advisor; President and Managing Director, GGCP, Inc. (1999 to present), a private corporation that makes investments for its own account; Managing Member, Commonwealth Management Partners LLC (2008 to present), and Director and Managing Partner, GAMA Funds Holdings GmbH (2009 to present). Mr. Gabelli brings to the Board his extensive knowledge of the Company's business and industry due to his longstanding service on the Board, as well as his financial expertise and leadership experience as an executive of various investment firms.
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Donald H. Hunter
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59
|
2013
|
Principal, Donald Hunter LLC (April 2007 to present), a consulting practice based in Wellesley, MA; Chief Operating Officer and Chief Financial Officer, Harbor Global Company Limited (October 2000 to December 2006), a public company that owned and operated international investment management and natural resources subsidiaries; Chief Operating Officer, Pioneer Global Investments, a Division of the Pioneer Group, Inc. (August 1998 to October 2000), a company that provided investment management services and owned several natural resources investments; and Manager of International Finance, the Pioneer Group, Inc. (January 1991 to August 1998), with financial responsibility for international strategic start-up companies. Mr. Hunter was previously a director of Juniper Pharmaceuticals, Inc., a specialty pharmaceuticals company (NASDAQ: JNP), where he served as Chairman of the Audit Committee; LICT Corporation, an integrated provider of broadband and voice services (OTC PK: LICT); and the Pioneer First Polish Trust Fund, where he served as Audit Committee Chairman for the first mutual fund in Poland. Mr. Hunter brings to the Board financial, operating, corporate development, international and mergers and acquisition experience.
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Manjit Kalha
|
41
|
2011
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Managing Partner, Horizon Research (August 2012 to present), a firm that provides investment management and research services; Chief Executive Officer, Horizon AMC (June 2008 to present), a firm that provides investment management and consulting services; Chief Executive Officer and Director, Jeet Associates Private Limited (December 2006 to present), a consulting firm based in New Delhi that provides business strategy, finance, and taxation advisory services; Co-founder and Chief Operating Officer, Radiant Polymers Private Limited (2001 to 2006), a manufacturing company of high quality specialty plastic components. Mr. Kalha brings to the Board his experience in management and manufacturing operations, and an extensive knowledge of global financial markets.
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Frederic V. Salerno, Jr.
|
49
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Strategic Sourcing Manager, Brunswick Corporation (2014 to present); Supply Chain Manager, Poseidon Barge Company (2013 to 2014); Strategic Sourcing Manager, Tuthill Corporation (2009 to 2012); Materials Director, Terex Corporation (2006 to 2008); Strategic Manufacturing Manager, Ingersoll-Rand Corporation, (1995 to 2006). Mr. Salerno brings to the Board 25 years of experience in operations and supply chain management.
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Hendi Susanto
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42
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|
Vice President, Equity Research, Technology Leader, Gabelli & Company, a provider of institutional research and brokerage services (August 2007 to present). Mr. Susanto brings to the Board extensive experience in evaluating investments in technology, and special situations such as mergers and acquisitions, convertible debts and restructuring.
|
|
Antonio Visconti
|
55
|
2014
|
Vice President, Hittite Microwave Corporation (2011 to 2014), a leader in high performance integrated circuits (ICs), modules, and subsystems for RF microwave and millimeter-wave applications; Business Director, Maxim Integrated Products (2010 to 2011), a leading manufacturer of linear and mixed-signal ICs; Chief Executive Officer and Founder, Aczent Inc. (2008 to 2011), a developer of analog solutions for industrial applications, acquired in 2011 by major semiconductor manufacturer; and Vice President and General Manager, National Semiconductor's Data Conversion division (2002 to 2008). Mr. Visconti has over 25 years of experience in the high technology industry and brings to the Board engineering, business development and technology acquisition expertise.
|
|
Patrick J. Guarino
Not standing for re-election at the Annual Meeting
|
73
|
2006
|
Managing Partner, August Properties LLC (2005 to present), a private investment company with real estate and securities holdings; Managing Partner, Independent Board Advisory Services, LLC (2002 to 2005), a corporate governance consulting firm; Retired Executive Vice President, Ultramar Diamond Shamrock Corporation (1996 to 2000), a NYSE, Fortune 200, international petroleum refining and marketing company; Senior Vice President and General Counsel, Ultramar Corporation (1992 to 1996), a NYSE, Fortune 200, international petroleum and marketing company; Senior Vice President and General Counsel, Ultramar PLC (1986 to 1992), a London Stock Exchange listed international, integrated oil company. Mr. Guarino brings to the Board valuable knowledge of and fluency with legal and corporate governance matters, and the perspective of a former General Counsel of a public company.
|
Executive Officers
The following table sets forth information regarding our executive officers, including their business experience for the past five years and prior years.
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Name
|
Age
|
Offices and Positions Held With the Company, Business Experience and Principal Occupation for the Last Five Years
|
|
Michael J. Ferrantino, Sr.
|
73
|
Mr. Ferrantino's business experience, including his term in office, is listed in the section above titled "Directors."
|
|
Patti A. Smith
|
51
|
Chief Financial Officer, Secretary and Treasurer, The LGL Group, Inc. (April 2015 to present); Director of Financial Reporting and Human Resources, The LGL Group, Inc. (March 2015 to April 2015); Financial Reporting and Human Resources Manager, The LGL Group, Inc. (April 2014 to March 2015); Financial Reporting Manager, The LGL Group, Inc. (September 2012 to April 2014); Director of Financial Reporting for CNL Financial Group, Inc. ("CNL"), one of the nation's leading private investment management firms (July 2011 to May 2012); Vice President of Private Equity Accounting for CNL (August 2007 to July 2011).
|
|
Robert Mamazza, Jr., Ph.D.
|
45
|
Vice President and Chief Operating Officer, The LGL Group, Inc. (November 2015 to present);
Chief Technology Officer, Evatec Advanced Technologies AG, a leading manufacturer of high performance optical, optoelectronic and semiconductor devices (January 2015 to July 2015); Chief Technology Officer, Oerlikon Advanced Technologies AG, which was acquired by Evatec in early 2015 (July 2012 to January 2015); Head of Research and Development, Oerlikon Systems, a manufacturer of fully automated, precision PVD equipment for the semiconductor, LED, MEMS and data storage industries (February 2010 to July 2012).
|
Family Relationships between Directors and Executive Officers
There are no family relationships among our directors and executive officers.
Transactions with Related Persons, Promoters and Certain Control Persons
Since January 1, 2014, there were no transactions that are required to be described under Item 404(a) of Regulation S-K promulgated by the SEC. All transactions between us and any of our officers, directors, director nominees, principal stockholders or their immediate family members are to be approved by the Audit Committee, and are to be on terms no less favorable to us than we could obtain from unaffiliated third parties. Such policy and procedures are set forth in a resolution of the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors, executive officers and holders of more than 10% of the Company's common stock to file with the SEC and NYSE MKT initial reports of ownership and reports of changes in the ownership of common stock and other equity securities of the Company. Such persons are required to furnish the Company with copies of all Section 16(a) filings.
Based solely upon a review of the copies of the forms furnished to the Company, the Company believes that its directors, officers and holders of more than 10% of the Company's common stock complied with all applicable filing requirements during the 2015 fiscal year, except that Patti Smith filed a Form 4 on April 6, 2015, disclosing one transaction not reported on a timely basis.
Votes Required
Each nominee receiving a plurality of the affirmative ("FOR") votes cast at the Annual Meeting will be elected to the Board.
Recommendation of the Board
The Board recommends a vote "FOR" the election of each of its nominees to the Board to serve until the 2017 Annual Meeting and until their successors are duly elected and qualify.
Proposal No. 2: Adoption and Approval of the Amended and Restated 2011 Incentive Plan
On March 14, 2016, the Board accepted the recommendation of the Compensation Committee and approved the amendment and restatement of our 2011 Incentive Plan (the "2011 Incentive Plan"), subject to adoption and approval by our stockholders, and authorized submission of the Amended and Restated 2011 Incentive Plan in the form attached as
Annex A
to this Proxy Statement (the "Amended and Restated 2011 Incentive Plan") to stockholders for consideration at the Annual Meeting. The Amended and Restated 2011 Incentive Plan reflects certain changes to the terms of the 2011 Incentive Plan, including the following key changes:
|
·
|
The number of shares of common stock available for issuance is increased by 250,000 shares, representing approximately 9.4% of the common stock outstanding as of April 19, 2016, to a total of 750,000 shares; and
|
|
·
|
The annual limitation on the amount of Awards that may be made to any individual is increased by 75,000 shares of Common Stock, representing approximately 2.8% of the common stock outstanding as of April 19, 2016, to a total of 125,000 shares.
|
The Amended and Restated 2011 Incentive Plan will not be effective unless our stockholders approve it at the Annual Meeting. If our stockholders do not approve the Amended and Restated 2011 Incentive Plan at the Annual Meeting, the 2011 Incentive Plan will remain in force and we may be required to re-evaluate our compensation structure to ensure that it remains competitive.
We use incentive awards to attract, motivate and retain talent as well as to align our employees' and non-employee directors' interests with those of our stockholders. The purpose of the proposed amendments is to allow the Company to award the equity incentives important to our compensation program for the foreseeable future, while resulting in no more than a reasonable amount of potential equity dilution. The Board believes that the changes reflected in the Amended and Restated 2011 Incentive Plan, including increasing the number of shares authorized for issuance and increasing the annual limitation on the amount of Awards that may be made to any individual, are in the best interest of our stockholders, and the Board supports these proposals for the following reasons:
|
·
|
If the Amended and Restated 2011 Incentive Plan is not approved, the Company may be compelled to increase significantly the cash-based component of employee compensation, which could reduce the alignment of employee and stockholder interests; and
|
|
·
|
The terms of our equity and other annual and long-term incentive compensation awards and our employee policies are designed to protect stockholder interests and encourage employees to focus on the long-term success of the Company.
|
Summary of the Amended and Restated 2011 Incentive Plan
The following is a summary of the material terms of the Amended and Restated 2011 Incentive Plan. This summary is not complete and is qualified in its entirety by reference to the full text of the Amended and Restated 2011 Incentive Plan attached as
Annex A
to this Proxy Statement.
Purpose
The purpose of the Amended and Restated 2011 Incentive Plan is to promote the long-term success of the Company by attracting, motivating and retaining directors, officers, employees, advisors and consultants of, and others providing services to, the Company and its affiliates through the use of competitive incentives that are tied to stockholder value. The Amended and Restated 2011 Incentive Plan seeks to balance the interests of Amended and Restated 2011 Incentive Plan participants and stockholders by providing incentives in the form of cash bonuses, stock options, restricted stock, performance awards, stock appreciation rights, as well as other stock-based awards to be granted under the Amended and Restated 2011 Incentive Plan and consistent with the terms of the Amended and Restated 2011 Incentive Plan.
Administration
The Amended and Restated 2011 Incentive Plan is administered by our Compensation Committee, which consists of three or more directors, each of whom is a "non-employee director" within the meaning of Rule 16b-3 of the Exchange Act and an "outside director" as defined in Treasury Regulations Section 1.162-27(e)(3) under the Internal Revenue Code of 1986, as amended (referred to herein as the Code), or if no committee exists, the Board. The Compensation Committee has complete authority to determine all provisions of all awards under the Amended and Restated 2011 Incentive Plan, to interpret the Amended and Restated 2011 Incentive Plan, and to make any other determination that it believes necessary and advisable for the proper administration of the Amended and Restated 2011 Incentive Plan. The Compensation Committee's decisions on matters relating to the Amended and Restated 2011 Incentive Plan will be final and conclusive on the Company and participants in the Amended and Restated 2011 Incentive Plan. The Compensation Committee also has the authority to amend or modify the terms of any outstanding awards under the Amended and Restated 2011 Incentive Plan in any manner permitted by the Amended and Restated 2011 Incentive Plan; provided, however, that any recipient of an award adversely affected by such amended or modified terms has consented to such amendment or modification.
Eligible Participants and Types of Awards
Eligible participants in the Amended and Restated 2011 Incentive Plan include officers and other employees of the Company or its subsidiaries, directors, consultants, advisors or other independent contractors who provide services to the Company or its subsidiaries. Participation by officers of the Company or its subsidiaries and any performance objectives relating to such officers must be approved by the Compensation Committee. Participation by others and any performance objectives relating to others may be approved by groups or categories (for example, by pay grade) and authority to designate participants who are not officers and to set or modify such targets may be delegated by the Compensation Committee to the Company's executive management.
Types of awards that may be granted under the Amended and Restated 2011 Incentive Plan include incentive and non-qualified stock options, restricted stock, performance awards, stock appreciation rights and other equity-based awards. The terms of any award will be evidenced by an agreement entered into by and between the Company and the recipient at the time the award is granted (which may include an employment agreement or consulting agreement by and between the Company and the recipient) (the "Award Agreement"). In the event of any inconsistency between the terms of the Award Agreement and the Amended and Restated 2011 Incentive Plan, the terms of the Amended and Restated 2011 Incentive Plan will govern. In the event of any inconsistency between the terms of any employment agreement and any other Award Agreement, the terms of the employment agreement will govern.
The maximum term for any award under the Amended and Restated 2011 Incentive Plan may not exceed 10 years from the grant date, provided that an incentive stock option awarded to a 10% stockholder of the Company or of any affiliate thereof may not be exercisable for more than five years after the grant date.
Available Shares
Subject to adjustment upon certain corporate transactions or events, a maximum of 750,000 shares of our common stock may be issued under the Amended and Restated 2011 Incentive Plan. In addition, subject to adjustment upon certain corporate transactions or events, a participant may not receive awards with respect to more than 125,000 shares of common stock in any year. If an option or other award granted under the Amended and Restated 2011 Incentive Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards. Unless previously terminated by our Board, no new award may be granted under the Amended and Restated 2011 Incentive Plan after the 10
th
anniversary of August 4, 2011, the date that the 2011 Incentive Plan was initially approved by our stockholders.
Awards Under the Amended and Restated 2011 Incentive Plan
Stock Options
. The terms of specific options, including whether options will constitute "incentive stock options" for purposes of Section 422(b) of the Code, will be determined by the Compensation Committee. The exercise price of an option will be determined by the Compensation Committee. The exercise price may not be lower than 100% (110% in the case of an incentive stock option granted to a 10% stockholder) of the fair market value of the common stock on the date of grant. Notwithstanding the foregoing, an option may be granted with an exercise price lower than the minimum exercise price set forth above if such option is granted pursuant to an assumption or substitution for another option in a manner qualifying with the provisions of Section 424(a) and 409A of the Code to the extent applicable. Each option will be exercisable for such period set by the Compensation Committee, which will generally not exceed 10 years from the date of grant (or five years in the case of an incentive stock option granted to a 10% stockholder). Options will be exercisable at such times and subject to such terms as determined by the Compensation Committee. Unless otherwise specifically provided in an Award Agreement, an option will terminate and cease to be exercisable no later than 90 days after the date on which the holder's employment with or service to the Company or a subsidiary terminates.
Restricted Stock
. Restricted stock consists of shares of common stock granted under the Amended and Restated 2011 Incentive Plan, in such form and on such terms and conditions determined by the Compensation Committee. Such terms or conditions may include, without limitation, restrictions on the sale, assignment, transfer or other disposition or encumbrance of such shares during a restricted period established by the Compensation Committee and that such shares are deemed forfeited upon the recipient's failure to satisfy certain requirements within the restricted period. The Compensation Committee may, at any time and in its sole discretion, shorten or terminate any restricted period, or waive any conditions for the lapse or termination of restrictions with respect to all or any portion of a restricted stock award. The grant of any restricted stock will be evidenced by an Award Agreement. Except as provided in an Award Agreement, restricted stock will cease to vest on the date the recipient's employment with or service to the Company or a subsidiary terminates, and any shares of restricted stock that are not vested as of such date will be forfeited. Except as otherwise provided in the Award Agreement or except as otherwise provided in the Amended and Restated 2011 Incentive Plan, the recipient will be the owner of the restricted stock and shall have all the rights of a stockholder, including the right to receive dividends paid on such restricted stock and the right to vote such restricted stock.
Performance Awards
. A performance award confers upon its recipient certain rights payable to or exercisable by its recipient, in whole or in part, as determined by the Compensation Committee, and conditioned upon the achievement of performance criteria determined by the Compensation Committee. Performance goals established by the Compensation Committee are based on objectively determinable performance goals selected by the Compensation Committee that apply to an individual or group of individuals, or the Company as a whole, over a performance period designated by the Compensation Committee. A performance award may be payable in cash, shares of common stock, other awards under the Amended and Restated 2011 Incentive Plan, or any combination thereof. The payout of any performance award to a recipient may be reduced, but not increased, based on the degree of attainment of performance criteria, or otherwise at the discretion of the Compensation Committee, as may be provided in the Award Agreement.
Stock Appreciation Rights
. A stock appreciation right confers upon its recipient a right to receive payment in cash or shares of common stock (at the discretion of the Compensation Committee) upon exercise of an amount equal to the excess of (i) the fair market value of one share of common stock on the date of exercise (or, at the discretion of the Compensation Committee other than with respect to an incentive stock option, the fair market value at any time during a specified period before or after the date of exercise or a change in control) over (ii) the grant price of the stock appreciation right as determined by the Compensation Committee as of the date of grant. Stock appreciation rights vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee.
Bonus and Other Stock-Based Awards
. The Compensation Committee is authorized to grant such other awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock, including without limitation, shares of common stock awarded purely as a "bonus" and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of common stock, purchase rights, and awards valued by reference to the value of shares of common stock or the value of securities of or the performance of the Company. The Compensation Committee will determine the terms and conditions of any such awards, including but not limited to performance criteria, if any.
Change in Control
Upon the occurrence of a change in control (as defined under the Amended and Restated 2011 Incentive Plan), except to the extent otherwise provided in a particular Award Agreement, all awards will become fully vested and, with respect to any award that is an option or stock appreciation right, exercisable in full. Each participant will be afforded an opportunity to exercise his or her options or stock appreciation rights immediately prior to the occurrence of the change in control (and conditioned upon the consummation of the change in control) so he or she can participate in the transaction if he or she desires.
Clawback
The Compensation Committee will, in all appropriate circumstances, require reimbursement of any annual incentive payment where: (i) the payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of Company financial statements filed with the SEC; and (ii) a lower payment would have been made based upon the restated financial results. In each such instance, the Compensation Committee will, to the extent practicable and in a manner consistent with Section 409A of the Code, seek to recover from the recipient the amount by which his or her incentive payments for the three year period preceding the accounting restatement exceeded the lower payment that would have been made based on the restated financial results.
Amendment and Termination
The Board may amend, suspend or discontinue the Amended and Restated 2011 Incentive Plan at any time, except that it may not amend the Amended and Restated 2011 Incentive Plan in any way that would adversely affect a recipient with respect to an award previously granted without the consent of the affected recipient. In addition, the Board may not amend the Amended and Restated 2011 Incentive Plan without stockholder approval if such approval is then required pursuant to Section 162(m) or 422 of the Code, the regulations promulgated thereunder or the rules of any securities exchange or similar regulatory body.
U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the U.S. federal income tax consequences under current law of equity-based awards that may be granted under the Amended and Restated 2011 Incentive Plan. It does not attempt to describe all possible federal or other tax consequences of participation in the Amended and Restated 2011 Incentive Plan or tax consequences based on particular circumstances.
Incentive Stock Options
An optionholder recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Code Section 422. However, an optionholder may be subject to the alternative minimum tax if the fair market value of our common stock on the date of exercise exceeds the optionholder's purchase price for the shares. Optionholders who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon a sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If an option holder satisfies such holding periods upon a sale of the shares, we will not be entitled to any deduction for federal income tax purposes. If an optionholder disposes of shares within two years after the date of grant or within one year after the date of exercise (referred to as a "disqualifying disposition"), the optionholder will normally recognize ordinary income in the tax year during which the disqualifying disposition occurs equal to the lesser of the difference between (i) the fair market value of the shares on the date of exercise and the purchase price of such shares, or (ii) the sales price and the purchase of such shares. The optionholder will normally also recognize capital gain equal to the difference, if any, between the sales price and the fair market value of such shares on the exercise date. However, if a loss is recognized on the sale (i.e., the sales price is less than the purchase price of the disposed shares), the optionholder will not recognize any ordinary income and such loss will be a capital loss. Any ordinary income recognized by the optionholder upon the disqualifying disposition of the shares generally will result in a deduction by us for federal income tax purposes.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special tax status. An optionholder generally recognizes no taxable income as the result of the grant of such an option. Upon exercise of a nonstatutory stock option, the optionee normally recognizes ordinary income in the amount of the difference between the fair market value of the shares on the exercise date and the option exercise price. If the option holder is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as a capital gain or loss. No tax deduction is available to us with respect to the grant of a nonstatutory stock option or the sale of the stock acquired pursuant to such grant. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the optionholder as a result of the exercise of a nonstatutory stock option.
Restricted Stock; Stock Appreciation Rights
Generally speaking, the grant of restricted stock will not be taxable to the recipient until such time as the stock vests (i.e., the restrictions lapse or are satisfied), unless the recipient makes a special election to treat the stock as vested upon the date of grant. Upon vesting (or grant, if the special election is made), the recipient will recognize ordinary income in the amount of the difference between the fair market value of the shares and the price paid, if any, for the shares. If the recipient is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the recipient, unless the provisions of Section 162(m) of the Code are applicable.
A holder of a stock appreciation right generally recognizes no taxable income as the result of the grant of such right. Upon exercise of a stock appreciation right, the holder normally recognizes ordinary income in the amount of the fair market value of the shares (or the amount of cash, if any, in lieu of shares) received on the exercise date. If the holder is an employee, such ordinary income generally is subject to withholding of income and employment taxes. No tax deduction is available to us with respect to the grant of a stock appreciation right. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the holder as a result of the exercise of a stock appreciation right.
Other Types of Awards
With respect to other awards under the Amended and Restated 2011 Incentive Plan, generally when the participant receives payment with respect to an award, the amount of cash and fair market value of any other property received will be ordinary income to the participant, and if the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally will be entitled to a tax deduction equal to the amount of ordinary income recognized by the participant.
Section 162(m) of the Code
Section 162(m) of the Code generally precludes a public corporation from taking a deduction for annual compensation in excess of $1.0 million paid to its principal executive officer or any of its three other highest-paid officers (other than the chief financial officer). However, compensation that qualifies under Section 162(m) of the Code as "performance-based" is specifically exempt from the deduction limit. Based on Section 162(m) of the Code and the regulations thereunder, the Company's ability to deduct compensation income generated in connection with the exercise of stock options or stock appreciation rights granted under the Amended and Restated 2011 Incentive Plan should not be limited by Section 162(m) of the Code. Further, the Company believes that compensation income generated in connection with performance awards granted under the Amended and Restated 2011 Incentive Plan should not be limited by Section 162(m) of the Code. The Amended and Restated 2011 Incentive Plan has been designed to provide flexibility with respect to whether restricted stock awards or other awards will qualify as performance-based compensation under Section 162(m) of the Code and, therefore, be exempt from the deduction limit. If the vesting restrictions relating to any such award are based solely upon the satisfaction of one of the performance goals set forth in the Amended and Restated 2011 Incentive Plan, then Company believes that the compensation expense relating to such an award will be deductible by us if the awards become vested. However, compensation expense deductions relating to such awards will be subject to the Section 162(m) deduction limitation if such awards become vested based upon any other criteria set forth in such award.
Vote Required
The affirmative ("FOR") vote of a majority of the votes cast on the matter is required to adopt and approve the Amended and Restated 2011 Incentive Plan.
Recommendation of the Board
The Board recommends a vote "FOR" the adoption and approval of the Amended and Restated 2011 Incentive Plan.
Proposal No. 3: Ratification of Appointment of Independent Registered Public Accounting Firm
Selection of Independent Registered Public Accounting Firm for Fiscal 2016
The Audit Committee has appointed RSM as our independent registered public accounting firm for the fiscal year ending December 31, 2016. Although this appointment does not require ratification, the Board has directed that the appointment of RSM be submitted to stockholders for ratification due to the significance of its appointment. If stockholders do not ratify the appointment of RSM as our independent registered public accounting firm for the fiscal year ending December 31, 2016, the Audit Committee will consider the appointment of another independent registered public accounting firm.
RSM, formerly known as McGladrey LLP, served as our independent registered public accounting firm for the fiscal years ended December 31, 2015 and 2014. Representatives of RSM are expected to be present at the Annual Meeting, will have an opportunity to make a statement and will be available to respond to appropriate questions.
Fees Billed During Fiscal 2015 and 2014
The following table presents aggregate fees billed for professional services rendered by RSM for fiscal years 2015 and 2014. There were no other professional services rendered or fees billed by RSM for fiscal years 2015 and 2014.
|
|
|
2015
|
|
|
2014
|
|
|
Audit Fees
(1)
|
|
$
|
197,000
|
|
|
$
|
196,000
|
|
|
Audit-Related Fees
|
|
|
—
|
|
|
|
—
|
|
|
Tax Fees
|
|
|
—
|
|
|
|
—
|
|
|
All Other Fees
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Include fees for services relating to auditing the Company's annual financial statements, reviewing the Company's financial statements included in the Company's quarterly reports on Form 10-Q, and procedures performed in connection with registration statements.
|
Pre-Approval Policies and Procedures
The Audit Committee policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm are reflected in the Audit Committee Charter. The Audit Committee Charter provides that the Audit Committee shall pre-approve all audit and non-audit services provided by the independent registered public accounting firm and shall not engage the independent registered public accounting firm to perform the specific non-audit services proscribed by law or regulation. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee. The decisions of any Audit Committee member to whom pre-approval authority is delegated must be presented to the full Audit Committee at its next scheduled meeting.
If any services other than audit services are rendered by our independent registered public accounting firm, the Audit Committee determines whether such services are compatible with maintaining our independent registered public accounting firm's independence.
All services performed by our independent registered public accounting firm were pre-approved by the Audit Committee.
Vote Required
The affirmative ("FOR") vote of a majority of the votes cast on the matter is required to ratify the appointment of RSM as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
Recommendation of the Board
The Board recommends a vote "FOR" the ratification of the appointment of RSM as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
Proposal No. 4: Advisory Vote on Executive Compensation
We are asking stockholders to indicate their support for the compensation of our named executive officers named in the "Summary Compensation Table" included in this Proxy Statement. This proposal, commonly known as a "say-on-pay" proposal, gives stockholders the opportunity to express their views on the compensation of our named executive officers. Accordingly, we will ask stockholders to vote "FOR" the following resolution at the Meeting:
"
RESOLVED
,
that the Company's stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company's Proxy Statement for the 2016 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and disclosure."
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board. The Board and the Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our stockholders' concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
Vote Required
The affirmative ("FOR") vote of a majority of the votes cast on the matter is required to adopt the resolution approving the compensation of our named executive officers.
Recommendation of the Board
The Board recommends a vote "FOR" the adoption of the resolution approving the compensation of the Company's named executive officers.
CORPORATE
GOVERNANCE
Director Independence
As required under NYSE MKT rules, a majority of the members of a listed company's board of directors must qualify as "independent," as affirmatively determined by such board of directors. The Board has determined that Messrs. Foufas, Hunter, Kalha, Salerno, Susanto and Visconti are independent within the meaning of NYSE MKT rules. In determining that Mr. Kalha is independent, the Board considered that Mr. Kalha and Mr. Gabelli are partners in a joint venture, which relationship the Board determined would not interfere with Mr. Kalha's independence, as defined by NYSE MKT rules.
Board and Committee Meetings
The Board met six times during the fiscal year ended December 31, 2015. Each of the directors attended at least 75% of the aggregate of (i) the total number of meetings of the Board (held while he was a director); and (ii) the total number of meetings held by all committees of the Board on which he served (while he served on such committees). All of our incumbent directors attended the Company's 2015 Annual Meeting
of Stockholders
.
The Audit Committee, Compensation Committee and Nominating Committee met four times, three times and two times, respectively, during the 2015 fiscal year.
Board Committees
The three principal committees of the Board and their duties are described below.
Audit Committee
. The incumbent members of the Audit Committee are Messrs. Hunter (Chairman), Foufas and Kalha. The Board has determined that all Audit Committee members are financially literate and independent in accordance with SEC and NYSE MKT rules concerning audit committee membership requirements. Mr. Hunter qualifies as an "audit committee financial expert" as defined under the Exchange Act. The Audit Committee operates in accordance with its charter. The charter gives the Audit Committee the authority and responsibility for the appointment, retention, compensation and oversight of our independent registered public accounting firm, including pre-approval of all audit and non-audit services to be performed by our independent registered public accounting firm. The Audit Committee also reviews the independence of our independent registered public accounting firm, reviews with management and our independent registered public accounting firm our annual financial statements prior to their filing with the SEC, reviews the report by our independent registered public accounting firm regarding management procedures and policies and determines whether our independent registered public accounting firm has received satisfactory access to our financial records and full cooperation of corporate personnel in connection with their audit of our records. The Audit Committee also reviews our financial reporting process on behalf of the Board and reviews the financial information issued to stockholders and others, including a discussion of the quality and reasonableness of the accounting principles used, the reasonableness of significant judgments, and the clarity of discussions in the financial statements, and monitors the systems of internal control and the audit process. Management has primary responsibility for the financial statements and the reporting process. The Audit Committee Charter is available at
www.lglgroup.com
.
Compensation Committee
. The incumbent members of the Compensation Committee are Messrs. Foufas (Chairman), Hunter and Visconti. All members of the Compensation Committee are independent in accordance with NYSE MKT rules for compensation committee members. The responsibilities of the Compensation Committee are to review the Company's compensation and benefits policies and objectives, determine whether our officers and directors are compensated in accordance with these policies and objectives, and carry out the Board's responsibilities relating to compensation of our executives. The Compensation Committee Charter is available at
www.lglgroup.com.
See further discussion of the Compensation Committee's role in setting executive compensation beginning on page 29.
Nominating Committee
. The incumbent members of the Nominating Committee are Messrs. Kalha (Chairman), Foufas and Hunter. All members of the Nominating Committee are independent in accordance with NYSE MKT rules. The responsibilities of the Nominating Committee are to identify individuals qualified to become Board members and recommend that the Board select director nominees for election at the annual meetings of stockholders. The Nominating Committee Charter is available at
www.lglgroup.com
.
Director Nominations
In evaluating and determining whether to nominate a candidate for a position on the Board, the Nominating Committee utilizes a variety of methods and considers criteria such as high professional ethics and values, relevant management and/or manufacturing experience and a commitment to enhancing stockholder value. Candidates may be brought to the attention of the Nominating Committee by current Board members, stockholders, officers or other persons. The Nominating Committee will review all candidates in the same manner regardless of the source of the recommendation.
The Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Nominating Committee strives to nominate director candidates with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee the Company's businesses.
The Nominating Committee also considers stockholder recommendations for director nominees that are properly received in accordance with the Company's By-Laws and applicable rules and regulations of the SEC. In order to validly nominate a candidate for election or reelection as a director, stockholders must give timely notice of such nomination in writing to the Corporate Secretary and include, as to each person whom the stockholder proposes to nominate, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, and the other rules and regulations 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). For more information on director candidate nominations by stockholders, see "Stockholder Proposals" herein.
Board Leadership Structure
The Board is led by Mr. Ferrantino, the Executive Chairman of the Board and our Chief Executive Officer. The Board does not have a policy regarding a separation of the roles of Chief Executive Officer and Chairman of the Board, as the Board believes it is in the best interests of the Company to make that determination based on the then-current position and direction of the Company and the membership of the Board. The Board has determined that combining the roles of Chief Executive Officer and Executive Chairman of the Board is in the best interests of the Company's stockholders at this time. This structure leverages Mr. Ferrantino's significant industry and management experience for the Board while aligning the leadership of the Company's day-to-day operations and strategic initiatives.
Board Role in Risk Oversight
Senior management is responsible for assessing and managing the Company's various exposures to risk on a day-to-day basis, including the creation of appropriate risk management programs and policies. We have developed a consistent, systemic and integrated approach to risk management to help determine how best to identify, manage and mitigate significant risks throughout the Company, which includes our system of internal controls over financial reporting, annual reviews conducted by our directors and officers, monitoring compliance with our Business Conduct Policy and general liability insurance coverage. The Board is responsible for overseeing management in the execution of its responsibilities and for assessing the Company's approach to risk management. The Board exercises these responsibilities periodically as part of its meetings and also through the Board's three principal committees, each of which examines various components of enterprise risk as part of its responsibilities. In addition, an overall review of risk is inherent in the Board's consideration of the Company's long-term strategies and in the transactions and other matters presented to the Board, including capital expenditures, acquisitions and divestitures, and financial matters.
Stockholder Communications
Stockholders may communicate with the Board, including the non-management directors, by sending an e-mail to our Corporate Secretary at
pasmith@lglgroup.com
or by sending a letter to The LGL Group, Inc., 2525 Shader Road, Orlando, Florida 32804, Attention: Corporate Secretary. The Corporate Secretary will submit all such correspondence to any specific director to whom the correspondence is directed.
Code of Ethics
We adopted a code of ethics as part of our Business Conduct Policy, which applies to all of our employees, including our principal executive, financial and accounting officers. Our Business Conduct Policy is available at
www.lglgroup.com
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Amendments to and waivers of our code of ethics and Business Conduct Policy will be disclosed on our website.