Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The following table sets forth certain information concerning our directors and executive officers as of July 30, 2018:
Name
|
|
Age
|
|
Positions with our Company
|
Thomas B. Pickens III
|
|
60
|
|
Chairman of the Board of Directors
|
Andrea Goren
|
|
49
|
|
Director
|
Robert N. McFarland
|
|
73
|
|
Director
|
Kent Misemer
|
|
67
|
|
Director
|
Donald F. Neville
|
|
51
|
|
Director
|
Tom Wilkinson
|
|
48
|
|
President, Chief Executive Officer
and Corporate Secretary
|
Patrick McClain
|
|
62
|
|
Chief Financial Officer
|
John Graff
|
|
53
|
|
Chief Revenue Officer
|
Tim Dehne
|
|
52
|
|
Chief Operating Officer
|
Thomas B. Pickens III
has served as a member of our board of directors since November 2016, and currently serves as Chairman. From 1982 to 1984, Mr. Pickens was the founder and President of Beta Computer Systems, Inc.; from 1985 to 1995 founder and President of T.B. Pickens & Co.; from 1986 to 1988 founder and General Partner of Grace Pickens Acquisition Partners L.P.; from 1988 to 1989 founder and Managing Partner of Sumpter Partners. From 1988 to 1994 Mr. Pickens was the CEO of Catalyst Energy Corporation and CEO of United Thermal Corporation (NYSE), President of Golden Bear Corporation, President of United Hydro, Inc., President of Slate Creek Corporation and President of Eury Dam Corporation. From 1995 to 2003 Mr. Pickens was the founder and CEO of U.S. Utilities, The Code Corporation, Great Southern Water Corp., South Carolina Water & Sewer, Inc. and the founder and Managing Partner of Pickens Capital Income Fund L.P. From 2004 to 2006 he was the Co-Chairman of the Equity Committee during the bankruptcy of Mirant, Corp. (NASDAQ: MIRKQ). Mr. Pickens is currently the Chairman of the Board of Astrotech Corporation, 1st Detect Corporation, Astrogenetix Corporation and Astral Images, Inc. He has served as the Chairman of the Board of Astrotech Space Operations, Inc., Beta Computer Systems, Inc., Catalyst Energy Corporation, United Thermal (NYSE), Century Power Corporation, Vidilia Hydroelectric Corporation, U.S. Utilities, Great Southern Water Corp. and South Carolina Water & Sewer, Inc. He has served as a member on the boards of Trenwick America Reinsurance Corporation, Spacehab Inc. (NASDAQ), Advocate MD, Optifab, Inc. (NASDAQ) and was the New York chapter Chairman of United Shareholders Association, a shareholders rights organization.
Andrea Goren
has served as a member of our board of directors since December 2004. Mr. Goren is a Managing Director of SG Phoenix LLC, a private equity firm, and has served in that capacity since May 2003. In December 2010, Mr. Goren was appointed as Chief Financial Officer of iSign Solutions Inc. (OTCQB: ISGN). Mr. Goren has also served as a director of iSign Solutions Inc. since August 5, 2010. From January 2008 to January 2010, Mr. Goren served as a director of The Fairchild Corporation. Mr. Goren is co-manager of the managing member of Phoenix, our largest stockholder.
Robert N. McFarland
has served as a member of our board of directors since August 2017.
Most recently, Mr. McFarland served as Assistant Secretary for Information and Technology in the Department of Veterans Affairs (VA) from 2004 through 2006. Since leaving the VA, Mr. McFarland has been providing consulting services in his individual capacity. Prior to joining the VA, Mr. McFarland served as Vice President of Governmental Relations with Dell Computer Corporation, and served in various other management positions with Dell beginning in 1996.
Kent A. Misemer
has served as a member of our board of directors since November 2011. Mr. Misemer has been self-employed as a consultant and investor since 2009. From 2003 through 2009, Mr. Misemer was the Chief Executive Officer and President of Liberty Propane, LLC, a portfolio company of Sterling Capital Partners, an independent retail propane company, which was sold in December 2009. Previously, Mr. Misemer was the President and Chief Executive Officer of Propane Continental. In addition to being a co-founder of Liberty Propane, Mr. Misemer was also involved in the creation of Propane Continental and Tri-Power Fuels, Inc. Mr. Misemer formerly served as a director and member of the audit committee of Cornerstone Records Management, LLC, a private data storage and offsite data management company, until October 2013, when the company was sold. Mr. Misemer formerly served as a director of Pro-Tech Industries, Inc. (OTCQB: PTCK), a regional leader in design/build services for the Fire Life Safety, alarm/detection, electrical and voice/data communications infrastructure segments through January 2012.
Donald F. Neville
has been a member of our board of directors since January 2017. Mr. Neville is currently the Chief Executive Officer and Chairman of the Board of Terra-HydroChem, Inc. Mr. Neville served as a board member and chair of the audit committee for Stubb’s Legendary Bar-B-Q for over twenty years until that company was sold to McCormick’s in 2015. Mr. Neville previously held executive positions at Field Asset Services, Inc., Reddwerks Corporation, Argyle Security, Inc. (OTCBB: ARGL), ClearCube Technology, Inc. and other technology companies. Mr. Neville began his career as a CPA with Deloitte.
Executive Officers
Tom Wilkinson
has served as our Chief Executive Officer since October 31, 2017, and was our Chief Financial Officer from November 2015 until May 2018. He also served as our Interim Chief Financial Officer beginning in August 2015. Prior to joining us as Chief Financial Officer, Mr. Wilkinson was Chief Financial Officer for Amherst Holdings, a financial services company, beginning in January 2014. Prior to joining Amherst Holdings, Mr. Wilkinson was Managing Partner of PMB Helin Donovan through November 2013, after having been a founding partner of the firm in 2002.
Patrick McClain
has served as our Chief Financial Officer since May 2018. Mr. McClain previously served as Executive Vice President, Chief Financial Officer and Treasurer at Falconstor Software, Inc. (OTCQB: FALC), a Software Defined Storage (“SDS) company, from August 2017 through April 2018. Prior to joining Falconstor Software, Mr. McClain served as Chief Financial Officer of Aurea Software Inc., a $200MM enterprise software platform within ESW Capital LLC, from January 2013 to July 2016. Mr. McCain assumed the roles of our principal financial officer and principal accounting officer.
John Graff
is our Chief Revenue Officer, and has served in this position since May 2018. He previously served as our Vice President of Marketing, serving in that position since February 2017. Prior to joining us, Mr. Graff served as Vice President, Corporate Marketing, and Vice President, Americas for National Instruments Corporation since before May 2013.
Tim Dehne
is our Chief Operating Officer, and has served in this position since May 2018. Mr. Dehne previously served as Vice President of Engineering for Briggo, Inc., a privately held specialty coffee company, from November 2013 to February 2018. Prior to joining Briggo, Inc., Mr. Dehne served a Vice President of Global Marketing at Luminex Corporation (NASDAQ: LMNX) from before May 2013 through August 2013.
There are no family relationships between any of our directors or executive officers. None of our officers or directors has any arrangement or understanding with any other person pursuant to which such officer or director was selected to serve as officer or director.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than ten percent (10%) of a registered class of our equity securities to file reports of ownership and changes in ownership of our common stock and other equity securities with the SEC on a timely basis. Based solely upon a review of Forms 3, 4 and 5 and amendments to these forms furnished to us, we believe all parties subject to the reporting requirements of Section 16(a) of the Exchange Act filed on a timely basis all such required reports during and with respect to our 2018 fiscal year except for late Forms 4 filings for John Graff, Vice President of Marketing, Randy Denny, Vice President Enterprise & America Sales, Andrea Goren, director, Philip Sassower, our former Chairman of the Board, and Mark Holleran, our former President and CEO.
Code of Ethics
We have adopted a code of ethics that applies to the members of our board of directors, our officers, including our principal executive officer and principal financial officer, and all of our other employees. A copy of our code of ethics is available, without charge, upon written request directed to our Chief Financial Officer, Xplore Technologies Corp., 8601 RR 2222, Building II, Austin, Texas 78730.
Audit Committee
Our audit committee must consist of not less than three members of our board of directors, each of whom must be independent, as defined by the rules of the Securities Exchange Commission and The NASDAQ Stock Market, or NASDAQ. The current members of our audit committee are Donald F. Neville, Robert N. McFarland and Kent A. Misemer. Mr. Neville acts as chair of our audit committee. Mr. Neville, Mr. McFarland and Mr. Misemer are independent, as defined by the rules of the Securities Exchange Commission and under the current listing standards of NASDAQ. Our board of directors has determined that Donald F. Neville meets the criteria of an “audit committee financial expert” as that term is defined in the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended. Mr. Neville’s background and experience include his former qualification as a certified public accountant and his
extensive financial management experience, including as
the Chief Financial Officer for Field Asset Services, Inc., Reddwerks Corporation, Argyle Security, Inc. and ClearCube Technology, Inc.
Item 11.
Executive Compensation
Summary Compensation Table
The following table sets forth the compensation for our fiscal years ended March 31, 2018 and 2017 earned by or awarded to, as applicable, our principal executive officer, principal financial officer, and our other most highly compensated executive officers during the fiscal year ended March 31, 2018. In this Annual Report on Form 10-K we refer to such officers as our “named executive officers.”
Name and
Principal Position
|
|
Year
|
|
Salary
US($)
|
|
|
|
Bonus
US($)
|
|
|
|
Stock Awards
US($)
|
|
|
Option Awards
US($)(1)
|
|
|
Total
US($)
|
|
Tom Wilkinson, President,
|
|
2018
|
|
|
308,333
|
(2
|
)
|
|
|
250,000
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
558,333
|
|
Chief Executive Officer and
|
|
2017
|
|
|
300,000
|
(2
|
)
|
|
|
81,000
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
381.000
|
|
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Graff, Chief Revenue Officer
|
|
2018
|
|
|
220,833
|
(3
|
)
|
|
|
40,000
|
(3
|
)
|
|
|
—
|
|
|
|
8,540
|
|
|
|
269,373
|
|
|
|
2017
|
|
|
30,038
|
(3
|
)
|
|
|
—
|
|
|
|
|
160,500
|
|
|
|
—
|
|
|
|
190,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick McClain, Chief Financial
|
|
2018
|
|
|
—
|
(4
|
)
|
|
|
—
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Officer*
|
|
2017
|
|
|
—
|
(4
|
)
|
|
|
—
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim Dehne, Chief Operating
|
|
2018
|
|
|
—
|
(4
|
)
|
|
|
—
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Officer*
|
|
2017
|
|
|
—
|
(4
|
)
|
|
|
—
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Holleran, President and
|
|
2018
|
|
|
325,000
|
(5
|
)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
325,000
|
|
Chief Executive Officer
|
|
2017
|
|
|
325,000
|
(5
|
)
|
|
|
120,250
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
445,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Mr. McClain was named as our Chief Financial Officer on May 15, 2018 and Mr. Dehne was named as our Chief Operating Officer on May 15, 2018.
(1)
|
Option award amounts included in this table reflect the grant day fair value of option grants within the fiscal year ended, related to all options granted to the named executive officer, calculated in accordance with FASB ASC Topic 718 and using a Black‑Scholes valuation model.
|
(2)
|
Mr. Wilkinson joined us as Chief Financial Officer on December 1, 2015, after serving as Interim Chief Financial Officer beginning in August 2015, as a consultant. Effective November 1, 2017, Mr. Wilkinson became our Interim Chief Executive Officer, and was made Chief Executive Officer on January 24, 2018. Under the terms of Mr. Wilkinson’s bonus plan, in fiscal year 2017 and 2018 (through becoming Chief Executive Officer), he had the opportunity to earn a cash bonus of up to 40% of his total base salary of $300,000, or $120,000, based on his achievement of revenue, cash flow and profitability objectives, as well as objectives related to financial leadership. Upon becoming Chief Executive Officer, Mr. Wilkinson became eligible for a 100% bonus on his salary of $350,000. Mr. Wilkinson was paid $250,000 and $81,000 of performance bonus in fiscal years 2018 and 2017, respectively, as a result of his level of achievement of these goals, and in consideration of time served in each role.
|
(3)
|
Mr. Graff became our Chief Revenue Officer in May 2018 after having served as Vice President of Marketing since joining us in February 2017. Mr. Graff earned a bonus of $40,000 based upon the overall success of the company and achievement of goals and objectives for his own performance, and that of the marketing department for fiscal year 2018. Mr. Graff is eligible for an overall bonus as Chief Revenue Officer of 50% of his salary.
|
(4)
|
Mr. McClain and Mr. Dehne joined us as Chief Financial Officer and Chief Operating Officer, respectively on May 15, 2018 and therefore had no compensation in fiscal years 2018 or 2017. Each were provided a salary of $250,000 and opportunity to earn a cash bonus of up to 50% of total base salary, primarily based upon the financial success of the company.
|
(5)
|
Mr. Holleran became Chief Executive Officer on April 1, 2017 and served in that capacity through October 31, 2017. Under the terms of Mr. Holleran’s employment agreement, he had the opportunity to earn a cash performance bonus of up to 100% of his base salary of $325,000 in fiscal year 2018 and 2017 based on the achievement of various objectives. Mr. Holleran earned $120,250 of the performance bonus under his employment agreement in fiscal years 2017 in connection with achieving certain revenue, cash flow, profitability, staffing, product development, financial controls and communication objectives in each year. No bonus was paid for fiscal year 2018. Effective October 31, 2017, we entered into a separation agreement with Mr. Holleran terminating his employment, and obligating us to pay him $325,000 in 12 equal monthly installments.
|
Elements of Our Compensation Program
The compensation of our executives is designed to attract, as needed, individuals with the skills necessary for us to achieve our objectives, retain individuals who perform at or above our expectations and reward individuals fairly over time. Our executives’ compensation has three primary components: base salary; an annual cash incentive bonus; and equity‑based compensation. In addition, we provide our executives with benefits that are generally available to our other salaried employees.
As a relatively small company, we recognize that we must pay salaries that help us to attract and retain talented executives who will help us grow, while staying within budgetary constraints. We reward outstanding performance with cash bonuses that in large part are based on financial measures, such as revenue, cash flow, profitability and earnings before interest, taxes, depreciation or amortization, or EBITDA, targets, and the achievement of strategic goals and corporate milestones. In addition, we reward our executives with equity‑based compensation, as we believe equity compensation provides an incentive to our executive officers to build value for us over the long-term and aligns the interests of our executive officers with those of our stockholders. Generally, we use stock options as our equity‑based compensation because we believe that options generate value to the recipient only if the price of our common stock increases during the term of the option. Other than in the event of a change of control, the stock options granted to our executives generally vest solely based on the passage of time. We believe these elements support our underlying philosophy of attracting and retaining talented executives, while remaining within our budgetary constraints, and also creating cash incentives that reward company-wide and individual performance and aligning the interests of our executive officers with those of our stockholders by providing our executive officers equity‑based incentives to ensure motivation over the long-term.
The individual elements of our compensation program are as follows:
Base Compensation.
It is our policy that the base salaries paid to our executive officers should reflect the individual responsibility and experience of the executive officer and the contribution that is expected from the executive officer. Base salaries are reviewed by the compensation committee on an annual basis to satisfy these criteria.
Cash Incentive Bonuses.
Our executive officers are eligible for annual incentive bonuses if they meet key financial and operational objectives. The payment of cash incentive bonuses to executive officers is within the discretion of our compensation committee and is based on our compensation committee’s assessment of our performance and the performance of each executive officer measured in large part against financial objectives, strategic goals and corporate milestones. These financial, strategic and corporate objectives include revenue, cash flow, profitability and EBITDA targets, staffing, product development, financial control and communication objectives and corporate milestones, such as the completion of financings. Our compensation committee may in its discretion award a cash incentive bonus to an executive officer for partial achievement of such executive officer’s objectives. The total amount of the cash incentive bonus available to an executive officer is either based upon a percentage of such executive officer’s base salary or a fixed dollar amount. Bonuses are reviewed by the compensation committee on an annual basis. Furthermore, in recognition of an executive officer’s exceptional performance, our board of directors may award a bonus in excess of that executive officer’s maximum cash incentive bonus.
Each of our named executive officers participates, or participated, in his own individual Management by Objectives plan, which we refer to as a MBO plan, as discussed in footnotes 2, 3 and 4 in the summary compensation table for fiscal years 2018 and 2017 above. The MBO plan of Mr. Holleran was set forth in his employment agreement, which was terminated October 31, 2017.
Equity‑Based Compensation.
We use stock options and restricted stock units, or RSUs, to reward long-term performance and to ensure that our executive officers have a continuing stake in our long-term success. Authority to make stock option and RSU grants to our executive officers rests with our board of directors. In determining the size of stock option and RSU grants, our board of directors considers our actual performance against our strategic plan, individual performance, the extent to which shares subject to previously granted options are vested and the recommendations of our Chief Executive Officer, other members of senior management and our compensation committee.
We do not have any program, plan or obligation that requires us to grant equity compensation on specified dates. We grant stock options at regularly scheduled meetings of our board of directors or at special meetings. All stock options granted have an exercise price equal to or greater than the closing price of our common stock on the date that the grant action occurs.
With respect to establishing compensation for our executive officers, we do not have any formal policies for determining how specific forms of compensation are structured or implemented to reflect the individual performances and/or individual contributions to the specific items of our performance. In addition, we have no policies regarding the adjustment or recovery of awards or payments if the relevant performance measures upon which such award or payment was based are restated or otherwise adjusted in a manner that would reduce the size of an award or payment.
With respect to newly hired employees, our practice is to make stock grants at the first meeting of our board of directors following such employee’s hire date. We do not have any program, plan or practice to time stock options grants with the public release of material information. We do not time, nor do we plan to time, the release of material information for the purposes of affecting the value of executive compensation.
Compensation of Chairman.
In April 2017, our contract with SG Phoenix LLC, an entity controlled by Philip Sassower (our former Chairman of the Board) and Andrea Goren (a director), for services rendered by Mr. Sassower as our Chairman of the Board expired on its own terms. While conducting a review of our executive compensation, our board of directors extended payments under this agreement on a month-to-month basis at the rate of $25,000 per month for the services of Mr. Sassower. In July 2017, our board of directors completed such review. Based on its findings and effective August 1, 2017, our board of directors, with support from an international consulting firm, approved direct compensation to Mr. Sassower as our Chairman of the Board of $92,000 per year, to be payable monthly in the amount of $7,667, and terminated the month-to-month payments to SG Phoenix LLC as of August 1, 2017. Mr. Sassower resigned as our Chairman of the Board on October 18, 2017, in exchange for payments by us to Mr. Sassower totaling $250,000, payable in 12 equal monthly installments, and we extended the time for Mr. Sassower to exercise his vested options to purchase 262,274 shares of our common stock.
Employment Agreements
Mark Holleran
On June 30, 2006, we entered into an employment agreement with Mark Holleran, our former President and Chief Executive Officer. The agreement was for a period of two years, and was automatically renewable for additional one year periods unless either party gave written notice that it or he does not wish to extend the term, in which case the agreement terminates on June 30 of the next year. The agreement automatically renewed in June 2017 for an additional year. Effective October 31, 2017, we entered into a separation agreement with Mr. Holleran terminating his employment, and obligating us to pay him $325,000 in 12 equal monthly installments. In consideration for his services, during the term of his employment agreement Mr. Holleran was entitled to receive a base salary of $325,000 per year, subject to any increase as may be approved by our board of directors. Mr. Holleran was also entitled to receive a performance bonus of up to 100% of his base salary based on his achievement of objectives in the following categories: revenue, cash flow, profitability, EBITDA, product development, hiring new employees, retention of staff, financial controls and communication, including additional financing.
Transaction Bonus Plan.
Our named executive officers, along with other employees, are eligible to participate in our Transaction Bonus Plan, which is designed to incent and reward our senior management employees upon the sale of our company. Under the plan, an amount equal to 5% of the net proceeds from a sale transaction, up to approximately $69 million currently, with such amount subject to increase on a dollar-for-dollar basis by the amount of gross proceeds received by us in connection with any future issuance of our equity securities, or securities convertible into our equity securities, in any financing transaction, and 10% of the remaining net proceeds from a sale, in each case after deducting the transaction expenses, will be available for payment to participants under the plan. Our board of directors approved the plan to adjust the amount of consideration that the participants in the plan are eligible to receive in connection with (i) the sale of all or substantially all of our outstanding equity securities to an unrelated third party or parties or (ii) the sale of all or substantially all of our assets, including assets of our subsidiaries, to an unrelated third party or parties, each of which the plan defines as a “Transaction.” In connection with the approval of our merger agreement with Zebra Technologies Corporation, we amended and restated the plan to provide for bonuses to be paid to Bryan Bell, our Vice President of Engineering, and, under certain circumstances, Tom Wilkinson, our President. If the proposed merger occurs, Mr. Bell will be paid a bonus of $800,000 and Mr. Wilkinson will be paid a bonus of $3,600,000 under the plan. The Compensation Committee of our Board of Directors has authorized, and our Board of Directors has confirmed, that such bonuses are to be paid in restricted stock issued under our 2009 Stock Plan, as amended.
Pension Benefits.
We do not sponsor any qualified or non-qualified defined benefit plans. We do maintain a 401(k) plan for our employees, including our executive officers. During the 2018 fiscal year, we provided for up to 3% match of contributions made by our employees, including contributions made by our executive officers (but not including our former Chairman of the Board, who was also our Chief Executive Officer during some of the year).
Nonqualified Deferred Compensation.
We do not maintain any non-qualified defined contribution or deferred compensation plans. Our board of directors may elect to provide our executive officers and employees with non-qualified defined contribution or deferred compensation benefits if it determines that doing so is in our best interests.
Other Benefits
. Our executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life and disability insurance and our 401(k) plan, in each case on the same basis as our other employees.
Change in Control Benefits.
Under our 2009 Stock Incentive Plan, which we refer to as the 2009 Stock Plan, in the event of certain business combinations, including the sale or lease of all or substantially all of our assets, or a merger or consolidation involving us in which the beneficial owners of our capital stock prior to such business combination own 50% or less of the outstanding shares of the common stock of the surviving entity after the business combination or a similar transaction, each of which we refer to as a “corporate transaction,” and subject to any vesting acceleration provisions in an award agreement, outstanding awards will be treated in the manner provided in the agreement relating to the corporate transaction (including as the same may be amended). The corporate transaction agreement will not be required to treat all awards or individual types of awards similarly in the corporate transaction; provided, however, that the corporate transaction agreement will provide for one of the following with respect to all outstanding awards (as applicable):
|
•
|
the continuation of the outstanding award by us, if we are a surviving company;
|
|
•
|
the assumption of the outstanding award by the surviving company or its parent or subsidiary;
|
|
•
|
the substitution by the surviving company or its parent or subsidiary of its own award for the outstanding award;
|
|
•
|
full exercisability or vesting and accelerated expiration of the outstanding award, followed by the cancellation of such award;
|
|
•
|
the cancellation of an outstanding option or stock appreciation right and a payment to the optionee equal to the excess of (x) the fair market value of the shares subject to such option or stock appreciation right (whether or not such option or stock appreciation right is then exercisable or such shares are then vested) as of the closing date of such corporate transaction over (y) its aggregate exercise price; or
|
|
•
|
the cancellation of an outstanding restricted stock unit and a payment to the participant equal to the fair market value of the shares subject to such restricted stock unit (whether or not such restricted stock unit is then vested) as of the closing date of such corporate transaction.
|
Impact of Regulatory Requirements
Deductibility of Executive Compensation.
Our executive officers’ MBO plans, and our Transaction Bonus Plan does not currently provide compensation that qualifies as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. Accordingly, compensation in excess of $1 million paid to a named executive officer during any one year that is attributable to one of those arrangements would not currently be deductible for U.S. federal income tax purposes. We may, in the future, reevaluate those plans and redesign them so that compensation attributable to one or both of those plans would qualify as “performance-based compensation” within the meaning of Section 162(m) and would be deductible for U.S. federal income tax consequences. The 2009 Stock Plan provides for stock options and other awards that qualify as “performance-based compensation,” as well as certain awards, such as restricted share awards, that do not so qualify.
Accounting for Stock-Based Compensation.
We account for stock-based payments in accordance with the requirements of Accounting Standards Codification (“ASC”) 718.
Stock Ownership Requirements
. We do not currently have any requirements or guidelines relating to the level of ownership of our common stock by our directors or executive officers.
Estimated Payments and Benefits upon Termination or Change in Control
The following table sets forth the potential payments to our named executive officers as if we had a Transaction, as defined in our Transaction Bonus Plan, or a change in control transaction, as of the March 31, 2018, the last business day of our 2018 fiscal year.
Name
|
|
Transaction
Bonus Plan (1)
|
|
|
|
|
Market Value of
Accelerated Options (2)
|
|
|
|
Tom Wilkinson—President and Chief Executive Officer
|
|
$
|
3,600,000
|
|
(3
|
)
|
|
$
|
451,144
|
|
(3
|
)
|
|
(1)
|
Triggered by a Transaction.
|
|
(2)
|
Pursuant to the 2009 Plan, our board of directors may determine, at the time of grant or thereafter, that the vesting of options granted under that plan may accelerate upon a change in control transaction. All such options have said acceleration provisions. We assume that the merger pursuant to our existing merger agreement with Zebra Technologies Corporation, which provides for all of our outstanding options, whether vested or unvested, to be converted into the right to receive an amount in cash equal to the product of (a) the excess, if any, of $6.00 over the exercise price of such options and (b) the underlying shares of our common stock, will occur.
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|
(3)
|
Assumes that the merger pursuant to our existing merger agreement with Zebra Technologies Corporation will occur.
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Outstanding Equity Awards at 2018 Fiscal Year-End
The following table sets forth the equity awards outstanding at March 31, 2018 for each of our named executive officers.
Name
|
|
Number of
Securities
Underlying
Unvested
Restricted Stock Units (#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
|
|
|
Equity Incentive
Plan Awards
Number of
Securities
Underlying
Unearned
Options (#)
|
|
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
Tom Wilkinson- President, Chief Executive
|
|
|
—
|
|
|
|
72,854
|
|
|
|
36,428
|
|
(1
|
)
|
|
|
5.49
|
|
|
11/3/2020
|
|
Officer and Corporate Secretary
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
(2
|
)
|
|
|
2.70
|
|
|
1/24/2028
|
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick McClain- Chief Financial Officer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Graff— Chief Revenue Officer
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
(3
|
)
|
|
|
2.70
|
|
|
1/24/2028
|
|
|
|
|
33,333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim Dehne— Chief Operating Officer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
* Mr. Wilkinson was named our Interim Chief Executive Officer effective October 31, 2017 and Chief Executive Officer on January 24, 2018. He continued to serve as Chief Financial Officer until Mr. McClain became Chief Financial Officer on May 15, 2018.
(1)
|
Options to purchase 36,428 vest on November 3, 2018.
|
(2)
|
Options to purchase 33,333 vest on January 24, 2019, 2020 and 2021.
|
(3)
|
Options to purchase 1,666 vest on January 24, 2019, 2020 and 2021
|
Fiscal Year 2018 Director Compensation
In June 2006, our board of directors approved a director compensation plan pursuant to which we will pay each of our directors a fee to attend board meetings. In addition, from time to time, we grant options to purchase shares of our common stock to our directors. We also reimburse our directors for their out-of-pocket expenses incurred in connection with attending our board meetings and board committee meetings. Compensation for our directors, including cash and equity compensation, is determined, and remains subject to adjustment, by our board of directors.
On January 24, 2018, our board of directors approved an increase in the annual cash compensation to be paid to each member of our board of directors such that the Chairman of the Board receive $67,000 annually, the chairman of the audit committee receives $58,000 annually, the chairman of the nomination and governance committee receive $48,000 annually and the chairman of the compensation committee receive $52,000 annually. All other members of our board of directors will be paid $48,000 annually. Additionally, at the January 24, 2018 meeting of our board of directors, each member of our board of directors were granted 3,500 RSUs with three year vesting, and a total of 32,500 stock options with a strike price of $2.70 per share, three year vesting and a ten-year term.
Prior to that time, our directors were paid $24,000 in annual cash fees, paid quarterly in the amount of $6,000 and quarterly committee fees of $2,000 for each committee on which a director served.
The following table sets forth compensation information for our directors who are not a named executive officer for our fiscal year ended 2018.
Name
|
|
Fees Earned
or Paid
in Cash ($)
|
|
|
|
|
Stock
Awards ($)(2)
|
|
|
Option
Awards ($)(1)
|
|
|
Total ($)
|
|
Philip S. Sassower
|
|
|
29,000
|
|
(3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
29,000
|
|
Andrea Goren
|
|
|
29,250
|
|
|
|
|
|
9,450
|
|
|
|
8,511
|
|
|
|
47,211
|
|
Brian E. Usher‑Jones
|
|
|
30,000
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
Thomas B. Pickens, III
|
|
|
46,750
|
|
|
|
|
|
9,450
|
|
|
|
25,533
|
|
|
|
81,733
|
|
Bob McFarland
|
|
|
32,000
|
|
|
|
|
|
9,450
|
|
|
|
53,323
|
|
|
|
94,773
|
|
Kent Misemer
|
|
|
43,000
|
|
|
|
|
|
9,450
|
|
|
|
12,766
|
|
|
|
65,216
|
|
Donald F. Neville
|
|
|
44,500
|
|
|
|
|
|
9,450
|
|
|
|
17,022
|
|
|
|
70,972
|
|
(1)
|
In August 2017, Mr. McFarland received a grant of options to purchase 30,000 shares of our common stock. The options vest over three years and have a term of seven years from the date of the grant. In January 2018, Mr. Goren, Mr. Pickens, Mr. McFarland, Mr. Misemer and Mr. Neville received a grant of options to purchase 5,000, 15,000, 5,000, 7,500, and 10,000 shares of our common stock, respectively. The options vest over three years and have a term of ten years from the date of the grant.
|
(2)
|
In January 2018, Mr. Goren, Mr. Pickens, Mr. McFarland, Mr. Misemer and Mr. Neville each received a grant of 3,500 restricted stock units. The restricted stock units vest over three years.
|
(3)
|
We also paid SG Phoenix LLC, an entity controlled by Mr. Sassower and Mr. Goren, $100,000 for Mr. Sassower’s services. Mr. Sassower resigned as our Chairman of the Board on October 18, 2017, in exchange for payments by us to Mr. Sassower totaling $250,000, payable in 12 equal monthly installments.
|
(4)
|
Mr. Usher-Jones served on the board of directors until August 2017. He was provided with a continuance of board fees through the end of the calendar year.
|
2009 Stock Incentive Plan
On July 28, 2009, we adopted the 2009 Stock Plan. The 2009 Stock Plan provides for equity‑based awards in the form of incentive stock options and non-statutory options, restricted shares, stock appreciation rights and restricted stock units. Awards are made to selected employees, directors and consultants to promote stock ownership among award recipients, to encourage their focus on strategic long-range corporate objectives, and to attract and retain exceptionally qualified personnel. Upon the original approval and adoption of the 2009 Stock Plan by our stockholders, up to 62,750 shares of our common stock were issuable under the 2009 Stock Plan. On December 16, 2010, our stockholders approved an increase in the number of shares of our common stock available for issuance under the 2009 Stock Plan from 62,750 to 187,500. On September 24, 2013, our stockholders approved amendments to the 2009 Stock Plan to increase the maximum number of shares of our common stock issuable under the plan from 187,500 to 1,687,500 and to increase the number of shares of our common stock relating to awards under that plan that any single participant may receive in any calendar year from 20,000 to 500,000. On March 24, 2016, our stockholders approved amendments to the 2009 Stock Plan to increase the maximum number of shares of our common stock issuable under the plan from 1,687,500 to 3,000,000. On November 30, 2017 our stockholders approved amendments to the 2009 Stock Plan to increase the maximum number of shares of our common stock issuable under the plan from 3,000,000 to 4,000,000. Generally, the vesting of options and the retention of restricted shares granted under the 2009 Stock Plan are conditioned on a period or successive periods of continuous service of the award recipient. Expired options that remain unexercised and shares forfeited to or repurchased by us will become available for future grant under the 2009 Stock Plan. All references to the number of shares of our common stock issuable under the 2009 Stock Plan prior to September 13, 2012 have been adjusted to give effect to the 1-for-400 reverse stock split consummated on that date.
As of March 31, 2018, the maximum aggregate number of shares of our common stock reserved for issuance upon the exercise of all options granted under the 2009 Stock Plan may not exceed an aggregate of 4,000,000 shares, and options to purchase 1,695,190 shares of our common stock had been awarded and are outstanding pursuant to grants under the 2009 Stock Plan. The options granted under the plan generally vest over a three-year period in equal annual installments and expire five years after the issuance date.
Employee Stock Purchase Plan
On November 5, 2008, we adopted the 2009 Employee Stock Purchase Plan, which we refer to as the ESPP. The ESPP establishes a series of offering periods during which most of our employees have an opportunity to purchase our common stock through payroll deductions. To be eligible, an employee must have completed one year of employment and regularly work over 20 hours per week and over 5 months per year. Prior to each offering period, a participant elects to have between 1% and 20% of his or her base compensation set aside for the purchase of the shares upon purchase dates, which occur at the end of each calendar quarter. The ESPP was amended by stockholder vote on March 24, 2016, making the purchase price under the ESPP to be 95% of the lower of (A) the fair market value per share of our common stock on the start date of the offering period or (B) the fair market value per share of our common stock as of the end of each calendar quarter during the offering period.
The offering period for our fiscal year 2018 began on April 1, 2017 and terminated on March 31, 2018, and had an average purchase price of $1.92 per share. The fair market value per share of our common stock on the start date of the fiscal year 2018 offering period is $2.01 per share. The offering period for our fiscal year 2019 began on April 1, 2018 and will terminate on March 31, 2019. However, under the terms of our merger agreement with Zebra Technologies Corporation, we suspended the ESPP on July 5, 2018.
Upon the adoption of the ESPP, up to 12,500 shares were reserved for purchase under the ESPP (5,000,000 before giving effect to the 1-for-400 reverse stock split described above). On September 24, 2013, our stockholders approved an increase in the number of shares of our common stock available for issuance under the ESPP from 12,500 to 32,500. On March 12, 2015, our stockholders approved an increase in the number of shares of our common stock available for issuance under the ESPP from 32,500 to 52,500. On March 24, 2016, our stockholders approved an increase in the number of shares of our common stock available for issuance under the ESPP from 52,500 to 300,000. As of March 31, 2018, 178,549 shares of our common stock had been purchased under the ESPP. The ESPP may have additional offering periods until the shares reserved for the ESPP have been exhausted or the ESPP is terminated. It is intended that shares purchased under the ESPP qualify for special tax treatment under Section 423 of the Internal Revenue Code.