|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The following table sets forth certain
information regarding our directors and officers:
|
Name
|
|
Position with Company
|
|
Age
|
|
Richard
D. Butler
|
|
Director
|
|
68
|
|
Timothy
Matula
|
|
Director
|
|
56
|
|
Dennis
(De) Gao
|
|
Director
|
|
36
|
|
Tony
Isaac
|
|
Director,
Chief Executive Officer, Acting Chief Financial Officer
|
|
62
|
|
Edward
R. Cameron
|
|
President
ARCA Recycling, Inc.
|
|
76
|
|
Bradley
S. Bremer
|
|
President
ApplianceSmart, Inc.
|
|
48
|
|
Rachel
L. Holmes
|
|
Executive
Vice President ARCA Recycling, Inc.
|
|
53
|
|
James
P. Harper
|
|
Chief
Operating Officer
|
|
47
|
Richard D. Butler, Jr.
has been a director of the Company since May 2015. Mr. Butler is the owner of Solution Provider Services, an advisory firm which
provides real estate, corporate and financial advisory services, since 1999, and is the co-Founder, Managing Director and major
shareholder of Ref-Razzer Company, a whistle manufacturing and vending company, since 2005. Prior to this, Mr. Butler was the
Co-Founder and Executive Vice President of Aspen Healthcare, Inc., from 1996 to 1999. From 1993 to 1996, Mr. Butler was a Managing
Director at Landmark Financial and from 1989 to 1993 he was a Partner at Cal Ventures Real Estate Investment Group. Prior to this,
Mr. Butler has also served as the President and Chief Executive Officer of Mt. Whitney Savings Bank, Chief Executive Officer of
First Federal Mortgage Bank, Chief Executive Officer of Trafalgar Mortgage, and Executive Officer and Member of the President’s
Advisory Committee at State Savings & Loan Association (peak assets $14 billion) and American Savings & Loan Association
(NYSE: FCA; peak assets $34 billion). Mr. Butler has served on the board of directors of Live Ventures Incorporated (NASDAQ: LIVE),
a company providing specialized online marketing solutions to small-to-medium sized local business that boost customer awareness
and merchant visibility, since August 2006 (including YP.com from 2006 to 2007). Mr. Butler has been a director of Dataram Corporation
(NASDAQ: DRAM), an independent memory manufacturer, which develops, manufactures, and markets large capacity memory products primarily
used in servers and workstations worldwide, since November 2014. Mr. Butler attended Bowling Green University in Ohio, San Joaquin
Delta College in California, and Southern Oregon State College. Mr. Butler brings to the Board extensive experience in financial
management and executive roles, which enable him to provide important expertise in financial, operating and strategic matters
that impact our Company.
Timothy M. Matula
has
been a director of the Company since August 2016. Mr. Matula is an independent consultant and advises a number of different companies.
He joined Shearson Lehman Brothers as a financial consultant in 1992. In 1994 he joined Prudential Securities and when he left
Prudential in 1997, he was Associate Vice President, Investments, Quantum Portfolio Manager. In April 2007, Mr. Matula entered
into a consent order with the Securities Division of the Washington State Department of Financial Institutions (the “Securities
Division”), which required Mr. Matula to cease and desist from operating as an investment adviser in Washington in any manner
in violation of Washington law and to pay a fine. Mr. Matula had previously been operating as an investment adviser in Washington
but had not been registered as such with the Securities Division. Mr. Matula brings to the Board a broad range of business experience,
investors’ relations and finance. Mr. Matula has extensive experience in SEC and Sarbanes-Oxley compliance matters and accounting
matters. He also has over 15 years’ experience working in Asia with privately held and publicly-held traded companies. He
holds a Bachelor of Science degree in business administration from California State University.
Dennis (De) Gao
has been
a director of the Company since May 2015. Mr. Gao co-founded and, from July 2010 to March 2013, served as the CFO at Oxstones
Capital Management, a privately held company and a social and philanthropic enterprise, serving as an idea exchange for the global
community. Prior to establishing Oxstones Capital Management, from June 2008 until July 2010, Mr. Gao was a product owner at The
Procter & Gamble Company for its consolidation system and was responsible for the Procter & Gamble’s financial report
consolidation process. From May 2007 to May 2008, Mr. Gao was a financial analyst at the Internal Revenue Service's CFO division.
Mr. Gao has served as a director of Live Ventures Incorporated (NASDAQ: LIVE) and as a member of the Audit Committee of Live Ventures
Incorporated since January 2012. Mr. Gao has a dual major Bachelor of Science degree in Computer Science and Economics from University
of Maryland, and an M.B.A. specializing in finance and accounting from Georgetown University’s McDonough School of Business.
Mr. Gao has significant finance, accounting and operational experience and brings substantial finance and accounting expertise
to the Board.
Tony Isaac
has been a
director of the Company since May 2015 and Chief Executive Officer of the Company since May 2016. He served as Interim Chief Executive
Officer of the Company from February 2016 until May 2016. Mr. Isaac has served as Financial Planning and Strategist/Economist
of Live Ventures Incorporated (NASDAQ: LIVE), a company providing specialized online marketing solutions to small-to-medium sized
local business that boost customer awareness and merchant visibility, since July 2012. He is the Chairman and Co-Founder of Isaac
Organization, a privately held investment company. Mr. Isaac has invested in various companies, both private and public from 1980
to present. Mr. Isaac’s specialty is negotiation and problem-solving of complex real estate and business transactions. Mr.
Isaac has served as a director of Live Ventures Incorporated since December 2011. Mr. Isaac graduated from Ottawa University in
1981, where he majored in Commerce and Business Administration and Economics. Mr. Isaac has significant investment and financial
expertise and public board experience.
Edward R. Cameron
is
the founder and has been an executive officer of the Company since its inception in 1976. He has served as President of ARCA Recycling,
Inc. since February 2016 and leads the recycling segment activities of the Company. Previously, he served as President and CEO
of the Company from 1989 until August 2014 and from May 2015 until February 2016. He also served as a director and Chairman of
the Board of the Company from 1989 until February 2016 and prior to 1989 was a director of a predecessor of the Company. Prior
to founding the Company, Mr. Cameron served as a district product manager and an account manager for Burroughs Corporation (a
predecessor of Unisys Corporation) and served in executive positions for several small businesses. Mr. Cameron has a Bachelor
of Science degree in business administration from Montana State University. In his more than 35 years with the Company, Mr. Cameron
brings extensive knowledge of all aspects of the Company, its businesses, industry, markets and day-to-day operations, and the
issues, opportunities and challenges facing the Company.
Bradley S. Bremer
is
President of ApplianceSmart, Inc., a subsidiary of the Company, a position he has held since February 2012. He served as Vice
President of Retail Operations from 2007 until his appointment as President of ApplianceSmart. Mr. Bremer is responsible for directing
all aspects of the Company’s retail division, including the management of sales, advertising and operations for the Company’s
ApplianceSmart stores. He also oversees the selection of ApplianceSmart locations, planning for new stores, development of new
markets, and implementation of retail programs and services. From 2000 to 2007, Mr. Bremer held the position of Retail Operations
Manager for the Company. Mr. Bremer is a graduate of the University of Minnesota.
Rachel L. Holmes
is the
Executive Vice President of ARCA Recycling, Inc. a position she was appointed to in January 2016. She previously held the position
of Vice President of Client Services since July 2015, Vice President of Business Development since April 2008, and Chief of Staff
since April 2012. Ms. Holmes focuses on business development, including strategic planning to obtain new clients for the Company’s
appliance recycling and replacement services, and management of client accounts. She directs the Company’s environmental
and regulatory research; participation in industry and government initiatives; and marketing and communications. She was employed
by the Company from 1991 to 1999 in various corporate planning, marketing and advertising capacities. From 1999 until rejoining
the Company in 2003, she was an independent marketing consultant for the Company. Ms. Holmes earned a B.A. from the University
of Minnesota.
James P. Harper
is the
Company’s Senior Vice President and Chief Operating Officer, a position he has held since October 2016. Mr. Harper is responsible
for overseeing the Company’s ongoing business operations for ARCA’s recycling business and ApplianceSmart retail store
business, and is instrumental in providing strategic direction to the Company as it continues its growth, optimizing operational
effectiveness and focusing on driving increased customer satisfaction and customer experiences. Mr. Harper served most recently
as Vice President of Business Development and Sales with CLEAResult, a leading energy efficiency services provider, from 2011
to 2015. He previously served as sales executive at EnerNOC, and prior to that worked for over 15 years in senior level
positions at Accenture and Deloitte Consulting providing management consulting to electric and gas utilities on both supply-side
and customer-side initiatives and projects.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires the Company’s officers and directors, and persons who own more than 10% of a registered
class of the Company’s equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or Form
5 with the SEC. Such officers, directors and 10% shareholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of copies
of such forms received by it, or written representations from certain reporting persons, the Company believes that, during the
fiscal year ended December 31, 2016, its officers, directors and 10% shareholders timely complied with all Section 16(a) filing
requirements, except as follows: Mr. Gao and Mr. Butler filed late Form 4s on April 13, 2017, reporting grants of stock options
on December 29, 2016 upon their reelection to the Board of Directors.
Code of Ethics
Our Audit Committee has adopted a code
of ethics applicable to our directors and officers (including our Chief Executive Officer and Chief Financial Officer) and other
of our senior executives and employees in accordance with applicable rules and regulations of the SEC and The NASDAQ Stock
Market. A copy of the code of ethics may be obtained upon request, without charge, by addressing a request to Investor Relations,
ARCA, Inc., 175 Jackson Avenue North, Suite 102, Minneapolis, MN 55343. The code of ethics is also posted on our website
at
www.ArcaInc.com
under “Investor Relations — Corporate Governance.”
We intend to satisfy the disclosure requirement
under Item 10 of Form 8-K regarding the amendment to, or waiver from, a provision of the code of ethics by posting such information
on our website at the address and location specified above and, to the extent required by the listing standards of the NASDAQ Capital
Market, by filing a Current Report on Form 8-K with the SEC disclosing such information.
Audit Committee
The Audit Committee of the Board of
Directors is comprised entirely of non-employee directors. In fiscal 2016, the members of the Audit Committee were Mr. Isaac (until
February 29, 2016, Mr. Gao, Mr. Butler and Mr. Matula (commencing August 19, 2016), each of whom was also an “independent”
director as defined under NASDAQ rules. Mr. Isaac resigned from the Audit Committee upon his appointment as Interim CEO on February
29, 2016, and Mr. Butler was named Chairman of the committee. Mr. Matula was appointed to the board and the Audit Committee on
August 19, 2016. The Audit Committee is responsible for selecting and approving the Company’s independent auditors, for
relations with the independent auditors, for review of internal auditing functions (whether formal or informal) and internal controls,
and for review of financial reporting policies to assure full disclosure of financial condition. The Audit Committee operates
under a written charter adopted by the Board of Directors, which is posted on the Company’s website at
www.ARCAInc.com
under the caption “Investor Relations - Corporate Governance.” The Board has determined that Mr. Butler is an
“audit committee financial expert” as defined in SEC rules.
As disclosed in Item 9B Other Information
of the Original Filing of this Form 10-K, the Audit Committee of the Company is currently comprised of only two independent directors
and therefore does not satisfy the NASDAQ Rule 5605(c)(2), which currently requires that a NASDAQ-listed company have a minimum
of three independent directors. The Board intends to appoint at least one additional director who is considered to be an "independent
director" in accordance with the criteria set forth in NASDAQ Listing Rule 5605(a)(2).
Compensation and Benefits Committee
The Compensation Committee of the Board
of Directors is comprised entirely of non-employee directors. In fiscal 2016, the members of the Compensation Committee were Mr.
Isaac (until February 29, 2016), Mr. Gao, Mr. Butler (Chairman) and Mr. Matula (commencing August 19, 2016), each of whom was
also an “independent” director as defined under NASDAQ rules. Mr. Isaac resigned from the Compensation Committee upon
his appointment as Interim CEO on February 29, 2016. Mr. Matula was appointed to the board and the Compensation Committee on August
19, 2016. The Compensation Committee is responsible for review and approval of officer salaries and other compensation and benefits
programs and determination of officer bonuses. Annual compensation for the Company’s executive officers, other than the
CEO, is recommended by the CEO and approved by the Compensation Committee. The annual compensation for the CEO is recommended
by the Compensation Committee and formally approved by the full Board of Directors. The Compensation Committee may approve grants
of equity awards under the Company’s stock compensation plans.
In the performance of its duties, the
Compensation Committee may select independent compensation consultants to advise the committee when appropriate. In addition,
the Compensation Committee may delegate authority to subcommittees where appropriate. The Compensation Committee may separately
meet with management if deemed necessary and appropriate. The Compensation Committee operates under a written charter adopted
by the Board of Directors in March 2011, which is posted on the Company’s website at
www.ARCAInc.com
under the caption
“Investor Relations - Corporate Governance.”
Governance Committee
The Nominating and Corporate Governance
Committee (the "Governance Committee") is comprised entirely of non-employee directors. In fiscal 2016, the members
of the Governance Committee were Mr. Isaac (until February 29, 2016), Mr. Gao (Chairman), Mr. Butler and Mr. Matula (commencing
August 19, 2016), each of whom was also an “independent” director as defined under NASDAQ rules. Mr. Isaac resigned
from the Governance Committee upon his appointment as Interim CEO on February 29, 2016. Mr. Matula was appointed to the board
and the Governance Committee on August 19, 2016. The primary purpose of the Governance Committee is to ensure an appropriate and
effective role for the Board of Directors in the governance of the Company. The principal recurring duties and responsibilities
of the Governance Committee include (i) making recommendations to the Board regarding the size and composition of the Board, (ii)
identifying and recommending to the Board of Directors candidates for election as directors, (iii) reviewing the Board’s
committee structure, composition and membership and recommending to the Board candidates for appointment as members of the Board’s
standing committees, (iv) reviewing and recommending to the Board corporate governance policies and procedures, (v) reviewing
the Company’s Code of Business Ethics and Conduct and compliance therewith, and (vi) ensuring that emergency succession
planning occurs for the positions of Chief Executive Officer, other key management positions, the Board chairperson and Board
members. The Governance Committee operates under a written charter adopted by the Board of Directors in March 2011, which is posted
on the Company’s website at
www.ARCAInc.com
under the caption “Investor Relations - Corporate Governance.”
The Governance Committee will consider
director candidates recommended by shareholders. The criteria applied by the Governance Committee in the selection of director
candidates is the same whether the candidate was recommended by a Board member, an executive officer, a shareholder or a third
party, and accordingly, the Governance Committee has not deemed it necessary to adopt a formal policy regarding consideration
of candidates recommended by shareholders. Shareholders wishing to recommend candidates for Board membership should submit the
recommendations in writing to the Secretary of the Company.
The Governance Committee identifies
director candidates primarily by considering recommendations made by directors, management and shareholders. The Governance Committee
also has the authority to retain third parties to identify and evaluate director candidates and to approve any associated fees
or expenses. Board candidates are evaluated on the basis of a number of factors, including the candidate’s background, skills,
judgment, diversity, experience with companies of comparable complexity and size, the interplay of the candidate’s experience
with the experience of other Board members, the candidate’s independence or lack of independence, and the candidate’s
qualifications for committee membership. The Governance Committee does not assign any particular weighting or priority to any
of these factors and considers each director candidate in the context of the current needs of the Board as a whole. Director candidates
recommended by shareholders are evaluated in the same manner as candidates recommended by other persons.
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
The following table sets forth the
cash and non-cash compensation for fiscal years ended December 31, 2016 and January 2, 2016 earned by each person who served as
Chief Executive Officer during 2016, and our other two most highly compensated executive officers who held office as of December
31, 2016 (“named executive officers”):
Summary Compensation Table for
Fiscal Year Ended December 31, 2016
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Award ($)
|
|
Option
Awards ($)
|
|
All
Other
Compensation ($)
|
|
Total
($)
|
|
Tony
Isaac (1)
Chief Executive Officer
|
|
2016
|
|
338,462
|
|
--
|
|
62,000
(4)
|
|
--
|
|
--
|
|
400,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
R. Cameron (2)
President of ARCA Recycling,
Inc.; former Chairman of the Board; former President and CEO
|
|
2016
2015
|
|
300,000
300,000
|
|
--
--
|
|
--
114,000 (5)
|
|
--
96,000 (6)
|
|
--
--
|
|
300,000
417,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffery
Ostapeic (3)
Chief Financial Officer
|
|
2016
2015
|
|
93,323
180,000
|
|
100,000
--
|
|
--
--
|
|
--
--
|
|
3,600
7,200
|
|
196,923
187,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley
S. Bremer
President of ApplianceSmart,
Inc.
|
|
2016
2015
|
|
169,950
169,950
|
|
--
--
|
|
--
--
|
|
--
--
|
|
--
--
|
|
169,950
169,950
|
______________________
|
(1)
|
Mr. Isaac served as Interim Chief Executive Officer of the Company from February 29, 2016 until May 13, 2016, when
he was appointed Chief Executive Officer of the Company. He was paid an annual salary of $550,000.
|
|
|
|
|
(2)
|
Mr. Cameron served as President
and Chief Executive Officer of the Company from 1989 through August 13, 2014, and from May 18, 2015 until February 29,
2016, when he was appointed President of ARCA Recycling, Inc.
|
|
|
|
|
(3)
|
Mr.
Ostapeic was appointed Chief Financial Officer of the Company effective December 18, 2014. He was paid an annual salary of
$180,000 and provided a $600 per month car allowance. Mr. Ostapeic resigned as Chief Financial Officer of the Company effective
July 1, 2016. In connection with his departure, the Company paid Mr. Ostapeic a bonus of $100,000.
|
|
|
|
|
(4)
|
This
amount reflects the fair value of a stock grant awarded to Mr. Isaac during fiscal 2016. The shares were fully vested upon
grant. See Note 10 to the Company's consolidated financial statements.
|
|
|
|
|
(5)
|
This
amount reflects the fair value of a stock grant awarded to Mr. Cameron during fiscal 2015. The shares were fully vested upon
grant. See Note 11 to the Company's consolidated financial statements.
|
|
|
|
|
(6)
|
This
amount reflects the fair value of the options granted to Mr. Cameron during fiscal 2015. See Note 2 to the Company’s
consolidated financial statements for discussion of the assumptions made in the valuation of option grants.
|
Outstanding Equity Awards at
December 31, 2016
The following table provides a summary
of equity awards outstanding for our Named Executive Officers at December 31, 2016:
|
Name
|
|
Number of
Securities Underlying Unexercised Options
(#)
Exercisable
|
|
Number of
Securities Underlying Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price ($)
|
|
Option Expiration
Date
|
|
Tony Isaac
|
|
10,000
|
(1)
|
|
--
|
|
1.98
|
|
05/18/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward R. Cameron
|
|
35,000
|
(2)
|
|
--
|
|
2.30
|
|
08/16/2017
|
|
Edward R. Cameron
|
|
5,000
|
(3)
|
|
--
|
|
4.25
|
|
02/24/2018
|
|
Edward R. Cameron
|
|
100,000
|
(4)
|
|
--
|
|
1.89
|
|
05/09/2020
|
|
Edward R. Cameron
|
|
23,334
|
(5)
|
|
11,666
(5)
|
|
3.00
|
|
02/26/2021
|
|
Edward R. Cameron
|
|
50,000
|
(6)
|
|
50,000
(6)
|
|
1.14
|
|
09/01/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley S. Bremer
|
|
15,000
|
(7)
|
|
--
|
|
3.55
|
|
05/13/2017
|
|
Bradley S. Bremer
|
|
5,000
|
(3)
|
|
--
|
|
4.25
|
|
02/24/2018
|
|
Bradley S. Bremer
|
|
7,500
|
(4)
|
|
--
|
|
1.89
|
|
05/09/2020
|
|
Bradley S. Bremer
|
|
10,000
|
(6)
|
|
5,000
(6)
|
|
3.00
|
|
02/26/2021
|
_______________________
|
|
|
|
(1)
|
Options granted
May 18, 2015 and vested six months thereafter.
|
|
|
|
|
(2)
|
Options granted
August 16, 2010 and vested twelve months thereafter.
|
|
|
|
|
(3)
|
Options granted
February 24, 2011 and vested twelve months thereafter.
|
|
|
|
|
(4)
|
Options granted
May 9, 2013 and vested on various dates in the twenty-four months thereafter.
|
|
|
|
|
(5)
|
Options granted
February 26, 2014 and will vest in three equal installments on each anniversary
|
|
|
|
|
(6)
|
Options granted
September 1, 2015 and 50,000 vested immediately and 50,000 vested on the first anniversary.
|
|
|
|
|
(7)
|
Options granted
May 13, 2010 and vested twelve months thereafter.
|
Stock Option Plans
The Company uses stock options to attract
and retain executives, directors, consultants and key employees. Stock options are currently outstanding under three stock option
plans. The Company’s 2016 Equity Incentive Plan (the “2016 Plan”) was adopted by the Board of Directors in October
2016 and approved by the shareholders at the 2016 annual meeting of shareholders. Under the 2016 Plan, the Company has reserved
an aggregate of 2,000,000 shares of its common stock for option grants. The Company’s 2011 Stock Compensation Plan (the
“2011 Plan”) was adopted by the Board of Directors in March 2011 and approved by the shareholders at the 2011 annual
meeting of shareholders. Under the 2011 Plan, the Company reserved an aggregate of 700,000 shares of its common stock for option
grants. The 2011 Plan expired on December 29, 2016, but options granted under the 2011 Plan before it expired will continue to
be exercisable in accordance with their terms. The Company’s 2006 Stock Option Plan (the “2006 Plan”) was adopted
by the Board of Directors in March 2006 and approved by the shareholders at the 2006 annual meeting of shareholders. The 2006
Plan expired on June 30, 2011, but options granted under the 2006 Plan before it expired will continue to be exercisable in accordance
with their terms. As of March 31, 2017, options to purchase an aggregate of 710,250 shares were outstanding, including options
for 20,000 shares under the 2016 Plan, options for 484,500 shares under the 2011 Plan and options for 205,750 shares under the
2006 Plan. The Plans are administered by the Compensation Committee or the full Board of Directors acting as the Committee.
The 2016 Plan permits the grant of
the following types of awards, in the amounts and upon the terms determined by the Administrator:
|
|
•
|
Options
. Options
may either be incentive stock options (“ISOs”) which are specifically designated as such for purposes of compliance
with Section 422 of the Internal Revenue Code or non-qualified stock options (“NSOs”). Options shall vest as determined
by the Administrator, subject to certain statutory limitations regarding the maximum term of ISOs and the maximum value of
ISOs that may vest in one year. The exercise price of each share subject to an ISO will be equal to or greater than the fair
market value of a share on the date of the grant of the ISO, except in the case of an ISO grant to a stockholder who owns
more than 10% of the Company’s outstanding shares, in which case the exercise price will be equal to or greater than
110% of the fair market value of a share on the grant date. The exercise price of each share subject to an NSO shall be determined
by the Board at the time of grant but will be equal to or greater than the fair market value of a share on the date of grant.
Recipients of options have no rights as a stockholder with respect to any shares covered by the award until the award is exercised
and a stock certificate or book entry evidencing such shares is issued or made, respectively.
|
|
|
•
|
Restricted
Stock Awards
. Restricted stock awards consist of shares granted to a participant that are subject to one
or more risks of forfeiture. Restricted stock awards may be subject to risk of forfeiture based on the passage of time or
the satisfaction of other criteria, such as continued employment or Company performance. Recipients of restricted stock awards
are entitled to vote and receive dividends attributable to the shares underlying the award beginning on the grant date.
|
|
|
•
|
R
estricted
Stock Units
. Restricted stock units consist of a right to receive shares (or cash, in the Administrator’s
discretion) on one or more vesting dates in the future. The vesting dates may be based on the passage of time or the satisfaction
of other criteria, such as continued employment or Company performance. Recipients of restricted stock units have no rights
as a stockholder with respect to any shares covered by the award until the date a stock certificate or book entry evidencing
such shares is issued or made, respectively.
|
Compensation of Non Employee
Directors
The Company uses a combination of cash
and share-based incentive compensation to attract and retain qualified candidates to serve on the Board of Directors. In setting
director compensation, the Company considers the significant amount of time that directors expend fulfilling their duties to the
Company as well as the skill level required by the Company of members of the Board.
Non-employee directors of the Company
receive an annual fee of $24,000 for their service as directors. The Chairperson of the Audit Committee receives an additional
annual fee of $6,000. All of the Company’s directors are reimbursed for reasonable travel expenses incurred in attending
meetings.
Non-employee directors also receive
stock options under the 2016 Equity Incentive Plan. Each year, on the date of the Company’s annual meeting, non-employee
directors receive an option to purchase 10,000 shares of common stock. In addition, upon their initial appointment or election
to the Board, non-employee directors receive a one-time grant of options to purchase 10,000 shares of common stock. Generally,
such options become exercisable in full six months after the date of grant and expire ten years from the date of grant.
The table below presents cash and non-cash
compensation paid to non-employee directors during the last fiscal year.
Non-Management
Director Compensation for Fiscal Year Ended December 31, 2016
|
Name (1) (2)
|
|
Fees Earned or
Paid in Cash ($)
|
|
Option
Awards ($)
|
|
All Other
Compensation ($)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
Tony Isaac (3)
|
|
8,426
|
|
--
|
|
--
|
|
8,426
|
|
Dennis (De) Gao
|
|
26,917
|
|
8,900
(4)
|
|
--
|
|
35,817
|
|
Richard D. Butler
|
|
32,708
|
|
8,900
(4)
|
|
--
|
|
41,608
|
|
Timothy Matula
|
|
9,000
|
|
8,700
(4)
|
|
--
|
|
17,700
|
_______________________
|
|
|
|
(1)
|
Edward R. Cameron
has been omitted from this table since he received no additional compensation for serving as a director of the Company. Mr.
Cameron's compensation is described above under “Executive Compensation.”
|
|
|
|
|
(2)
|
From January
2016 until June 2016, non-employee directors of the Company received an annual fee of $15,000 for their service as directors
and an attendance fee of $1,000 per Board meeting. The Chairperson of the Audit Committee received an additional annual fee
of $10,000 and each other member of the Audit Committee received an additional annual fee of $5,000. The Chairperson of the
Compensation and Benefits Committee received an additional annual fee of $1,500, and the Chairperson of the Nominating and
Governance Committee received an additional annual fee of $1,000. All of the Company’s directors were reimbursed for
reasonable travel expenses incurred in attending meetings.
|
|
(3)
|
Tony Isaac was
appointed to Interim Chief Executive Officer on February 29, 2016 and to Chief Executive Officer on May 13, 2016.
|
|
|
|
|
(4)
|
These amounts
reflect the fair value of the options granted during fiscal 2016. See Note 2 to the Company’s consolidated financial
statements for discussion of the assumptions made in the valuation of option grants. At fiscal year-end, the non-management
directors held options to purchase shares of common stock as follows: Mr. Gao, 20,000 shares; Mr. Butler, 20,000 shares; and
Mr. Matula, 10,000 shares.
|