KORU Medical Systems, Inc PRE 14A, filed Mar 23, 2021

KORU Medical Systems, Inc. (KRMD)

PRE 14A 2021-03-23 For: 2020-12-31

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	1.		Election of directors
	2.		Approval, on an advisory basis, of the compensation of the Company’s executive officers
	3.		Ratification of the appointment of independent registered public accountants for the 2021 fiscal year
	4.		Approval of the 2021 Omnibus Equity Incentive Plan
	5.		Transaction of any other business that may properly come before the meeting


TABLE OF CONTENTS		Page

Questions and Answers about the Annual Meeting		1

Proposal 1:	Election of Directors	5

Proposal 2:	Advisory Vote to Approve Executive Compensation	7

Proposal 3:	Ratification of Appointment of Independent Registered Public Accountants	7

Proposal 4:	Approval of 2021 Omnibus Equity Incentive Plan	8

Security Ownership of Certain Beneficial Owners and Management		13

Board Structure and Governance		14

Director Compensation		17

Executive Compensation		18

Outstanding Equity Awards at Fiscal Year End		20

Report of The Audit Committee		21

Interest of Certain Persons in Matters to be Acted Upon		21

Delinquent Section 16(a) Reports		21

Other Matters before the Annual Meeting		21

Electronic Availability of Proxy Materials and Annual Report on Form 10-K		22

2022 Annual Meeting of Shareholders		22

Solicitation of Proxies		22

Annual Report on Form 10-K		22


	•	By Internet or mobile device, following the instructions on the Notice or the proxy card, prior to or at the Annual Meeting; or

	•	By mail (if you received your proxy materials by mail), using the enclosed proxy card and return envelope.


	•	Attending the Annual Meeting and voting by one of the methods described in the proxy materials for the Annual Meeting. Your attendance at the Annual Meeting will not by itself revoke a proxy. You must vote your common shares at the meeting, prior to the polls closing, to revoke your proxy. If your common shares are held in “street name,” you will need a nominee-issued proxy from your broker to vote your common shares at the meeting.

	•	Completing and submitting a new valid proxy bearing a later date by Internet, mobile device or mail before 11:59 pm on May 17, 2021.

	•	Giving written notice of revocation to the Company addressed to Corporate Secretary, at the Company’s address above, which notice must be received before the close of business on May 17, 2021.


Name	Age	Position / Held Since

R. John Fletcher	74	Chairman of the Board (since September 2019) Director (since May 2019)

Robert T. Allen	64	Director (since December 2018)

David W. Anderson	67	Director (since February 2016)

James M. Beck	72	Director (since December 2018)

Donna French	55	Director Nominee

Kathy S. Frommer	61	Director (since April 2019)

Daniel S. Goldberger	61	Director (since April 2018)

Joseph M. Manko, Jr.	54	Director (since February 2016)

Shahriar (Shar) Matin	46	Director Nominee, Consultant (since December 2020)


Fees Category	Fiscal Year Ended December 31, 2020	Fiscal Year Ended December 31, 2019
Audit Fees	$42,500	$42,500
All Other Fees	$ 3,000	$ 1,800


	•	stock options, including non-qualified options and incentive stock options, or ISOs;

	•	stock appreciation rights, or SARs;

	•	restricted shares;

	•	deferred stock and restricted stock units;

	•	performance units and performance shares;

	•	dividend equivalents;

	•	bonus shares; and

	•	other stock-based awards.


Name of Principal Shareholders and Identity of Group	Shares Beneficially Owned	Percent of Class		Notes:

Joseph M. Manko, Jr.	11,864,704	27	%	(1)
Kathy S. Frommer	1,715,617	4	%	(2)
Karen Fisher	672,906	2	%	—
Manuel A. Marques	486,830	1	%	—
Daniel S. Goldberger	450,812	1	%	—
James M. Beck	220,858	*		—
David W. Anderson	39,224	*		—
R. John Fletcher	54,439	*		—
Robert T. Allen	22,604	*		—
All Directors and Executive Officers as a Group	15,527,994	35	%	—

Horton Capital Management, LLC	11,864,704	27	%	(1)
First Light Asset Management, LLC	5,871,364	13	%	(3)
* Less than 1%


(1)	Based upon Schedule 13D/A filed with the SEC on January 4, 2021 and other information provided to us by HCM, each of Mr. Manko and Horton Capital Management, LLC, a Delaware limited liability company (“HCM”), may be deemed to beneficially own 11,864,704 shares of common stock, including 7,458,001 shares of common stock held by Horton Capital Partners Fund, LP, a Delaware limited partnership (“HCPF”), 3,283,593 shares of common stock held by Horton Freedom, LP, a Delaware limited partnership (“HFF”). Pursuant to investment management agreements, HCM maintains investment and voting power with respect to shares of common stock held by HCPF and HFF. Despite the delegation of investment and voting power to HCM, Horton Capital Partners LLC, a Delaware limited liability company (“HCP”), may be also deemed to be the beneficial owner of shares of common stock held by HCPF and HFF because HCP has the right to acquire investment and voting power through termination of investment management agreements with HCM. In addition, HCM acts as an investment adviser to certain managed accounts. Under investment management agreements with managed account clients, HCM has investment and voting power with respect to 1,123,110 shares of common stock of the Company held in such managed accounts. HCP is the general partner of HCPF and HFF. Mr. Manko, a director of the Company, is the managing member of both HCM and HCP. The address of Mr. Manko, HCM, HCP, HCPF and HFF is 1717 Arch Street, 39th Floor, Philadelphia, PA 19103.

(2)	Includes 1,008,000 shares of common stock held by a family member over which Ms. Frommer has voting and dispositive power pursuant to a power of attorney.

(3)	Based upon a Schedule 13G/A filed on January 8, 2021 with the Securities and Exchange Commission and additional information provided to us by First Light Asset Management, LLC, a Delaware limited liability company (the “Manager”), First Light Focus Fund, LP, a Delaware limited partnership (the “Fund”), is the direct holder of 5,871,364 shares. First Light Focus Fund GP, LLC, a Delaware limited liability company (the “General Partner”), may be deemed to be a beneficial owner of these shares because it is the sole general partner of the Fund. The Manager may be deemed to be a beneficial owner of these shares because it acts as investment adviser to the Fund. Mathew P. Arens may also be deemed to be the beneficial owner of these shares because he controls the Manager in his position as the managing member and majority owner of the Manager. The Manager is an investment adviser registered under Section 203 of the Investment Adviser Act of 1940. Each of the Fund, the General Partner, the Manager and Mr. Arens has shared voting and investment power with respect to, and may be deemed to be the beneficial owner of 5,871,364 shares of the Company. Mr. Arens also directly holds 33,596 shares in an individual capacity with sole control and 76,371 shares held in a joint spousal account over which he shares control. The address of the Manager, the Fund, the General Partner and Mr. Arens is 3300 Edinborough Way #201, Edina, MN 55435.


	•	Periodically assessing the Company’s Corporate Governance Guidelines and Code of Ethics

	•	Recommending a Chairperson of the Board

	•	Recommending members and Chairpersons of Board committees

	•	Recommending new board members for nomination to the Board


Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	All Other Compensation ($)	Total ($)
Robert T. Allen	25,000	25,000	—	50,000
David W. Anderson	30,000	30,000	—	60,000
James M. Beck	30,000	30,000	—	60,000
R. John Fletcher	25,000	75,000	—	100,000
Kathy S. Frommer	25,000	25,000	—	50,000
Joseph M. Manko, Jr. ⁽¹⁾	30,000	30,000	—	60,000
Daniel S. Goldberger	25,000	25,000	—	50,000


(1)	The stock awards were issued to Horton Capital Partners Fund L.P., an affiliate of Mr. Manko.


Name and Position	Year	Salary $	Bonus $⁽⁶⁾	Option Awards $	Nonequity Incentive Plan Compensation $⁽⁵⁾⁽⁷⁾	All Other Compensation $⁽⁸⁾	Total $

Donald B. Pettigrew, Former President and Chief Executive Officer ⁽¹⁾	2020	360,000	—	—	—	18,584	378,584
	2019	357,083	—	1,162,561	262,440	22,551	1,804,635

Karen Fisher, Chief Financial Officer ⁽²⁾	2020	250,000	87,500	—	—	9,583	347,083
	2019	250,000	—	552,987	94,725	5,517	903,229

Manuel Marques, Chief Operating Officer ⁽³⁾	2020	230,000	80,500	—	—	11,400	321,900
	2019	230,000	—	331,792	83,525	11,200	656,517
Daniel S. Goldberger, Former Interim Chief Executive Officer and Executive Chairman⁽⁴⁾	2019	110,462	315,000	—	—	19,900	445,362


(1)	Mr. Pettigrew entered into an employment agreement to serve as the Company’s Chief Commercial Officer on September 4, 2018. Pursuant to this agreement, Mr. Pettigrew received an annual base salary, which was $325,000 until February 2, 2019, at which time it he was appointed as President and Chief Executive Officer and his base salary was increased to $360,000. Pursuant to the employment agreement, Mr. Pettigrew was eligible to earn an annual bonus in accordance with our policy and procedure for granting of a specified executive bonus, which is equivalent to 50% of annual base salary based on achievement of objectives set by us as part of the annual budget process, payable by March 15 of the following year. Under the agreement, pursuant to the Company’s 2015 Stock Option Plan, as amended, Mr. Pettigrew received non-qualified stock options to purchase up to 1,000,000 shares of common stock at a per share exercise price of $1.23 subject to vesting. Under the agreement, Mr. Pettigrew was also entitled to reimbursement for commuting expenses to and from the corporate offices, which amounts are included in all other compensation. Mr. Pettigrew resigned from his employment on January 22, 2021 and, pursuant to a separation agreement then entered into, will receive an amount equal to 12 months of his then-current annual base salary, to be paid in accordance with our normal payroll practices after the termination date, as well as premiums for Mr. Pettigrew’s health insurance as currently enrolled on the termination date. In accordance with their terms, his non-qualified stock options vested in full as of his termination date.

(2)	Ms. Fisher entered into an employment agreement with us on January 15, 2015, which was amended and restated effective January 1, 2020. Pursuant to the employment agreement, Ms. Fisher is eligible to earn an annual bonus in accordance with our policy and procedure for granting of a specified executive bonus, which is equivalent to 30% of annual base salary based on achievement of objectives set by us as part of the annual budget process, payable by March 15 of the following year. Effective January 1, 2019, Ms. Fisher’s annual base salary is $250,000. Pursuant to the original agreement and our 2015 Stock Option Plan, as amended, Ms. Fisher was awarded incentive stock options to purchase up to 500,000 shares of our common stock at $0.38 per share, all of which have vested. Upon termination of Ms. Fisher’s employment by us without Cause or for Good Reason (as defined in the agreement), subject to her execution of a customary general release of claims in favor of us the Company and its affiliates, Ms. Fisher will be entitled to receive an amount equal to 12 months of her then-current annual base salary, to be paid in accordance with our normal payroll practices after the termination date. Ms. Fisher will further be entitled to payment of her annual bonus, if earned. For the same 12-month period after the termination date, we will also pay premiums for Ms. Fisher’s health insurance as currently enrolled on the termination date.

(3)	Mr. Marques entered into an employment agreement with us on October 10, 2017 for the position of Vice President of Operations and Engineering and subsequently on December 5, 2018 was promoted to Chief Operating Officer. Pursuant to the agreement, Mr. Marques receives an annual base salary and is eligible to earn an annual bonus in accordance with our policy and procedure for granting of a specified executive bonus, which is equivalent to 30% of the annual base salary based on the achievement of objectives set by us as part of the annual budget process. Mr. Marques’ current base salary is $230,000. Pursuant to this agreement and our 2015 Stock Option Plan, as amended, Mr. Marques was awarded incentive stock options to purchase up to 250,000 shares of our common stock vesting quarterly over a four-year term and automatically if Mr. Marques’ employment is terminated by the Company without cause. Upon termination of Mr. Marques’ employment by other than for Cause (as defined in the agreement), subject to his execution of a customary general release of claims in favor of us and our affiliates, Mr. Marques will be entitled to receive an amount equal to 12 months of Mr. Marques’ then-current annual base salary, to be paid in accordance with our normal payroll practices after the termination date. Upon qualified termination following a Change in Control, all outstanding, unvested previously granted options will be treated as having accelerated vesting and become fully vested upon triggering event. If terminated without Cause within eighteen months of a Change in Control event, the cash portion of base salary shall be paid for the equivalent of eighteen months of base salary.

(4)	Mr. Goldberger entered into an employment agreement with us for his service as Interim Chief Executive Officer on October 12, 2018. The agreement provided for a monthly base salary of $30,000 and a signing bonus of $75,000. The agreement provided Mr. Goldberger would receive a performance bonus based upon amounts payable to the person who first succeeds Mr. Goldberger as our chief executive officer, which performance bonus would be equal 50% of the initial annual base salary and 50% of the initial target bonus payable to such successor. Effective February 1, 2019, Mr. Pettigrew succeeded Mr. Goldberger as Chief Executive Officer, and Mr. Goldberger received the performance bonus, paid half in cash and half in shares of common stock. Upon execution of the employment agreement, Mr. Goldberger received a 10-year non-qualified option to purchase up to 500,000 shares of our common stock at a per share exercise price of $1.57. Of the option shares, 100,000 vested immediately, and the remaining 400,000 vest at the rate of 25,000 shares per completed quarter. The options will immediately vest and be exercisable in full upon a change in control within the meaning of the Company’s 2015 Stock Option Plan, as amended. As Executive Chairman, Mr. Goldberger received an annual salary of $120,000 and was eligible for an annual performance bonus of up to 50% of his annual salary in accordance with our policy and procedure for granting of a specified executive bonus based on achievement of goals. Effective September 30, 2019, Mr. Goldberger resigned as Executive Chairman, but remains a director. Upon Mr. Goldberger’s resignation, the Board awarded Mr. Goldberger’s performance bonus in the amount of $45,000 paid in cash.


	Number of	Number of
	Securities	Securities
	Underlying	Underlying
	Unexercised	Unexercised	Option	Option
	Options	Options	Exercise	Expiration
Name	Exercisable	Unexercisable	Price ($)	Date
Karen Fisher	—	400,000⁽¹⁾	1.57	01/26/2029
Daniel S. Goldberger	300,000⁽²⁾	200,000⁽²⁾	1.57	10/11/2028
Manuel A. Marques	—	62,500⁽³⁾	0.50	10/10/2022
Manual A. Marques	—	225,000⁽⁴⁾	1.57	01/26/2029
Donald B. Pettigrew	500,000⁽⁵⁾	500,000⁽⁵⁾	1.23	09/03/2023
Donald B. Pettigrew	333,333⁽⁶⁾	666,666⁽⁶⁾	1.70	05/31/2029


(1)	Incentive stock options granted under the 2015 Stock Option Plan that vest 20% annually on anniversary date commencing January 29, 2019.

(2)	Non-qualified stock options granted under the 2015 Stock Option Plan, of which 100,000 vested on October 12, 2018, and the remaining 400,000 will vest at the rate of 25,000 shares per completed quarter commencing with the three-month period beginning on the first day of the month following October 12, 2018. These options will immediately vest and be exercisable in full upon a Change in Control within the meaning of the Company’s 2015 Stock Option Plan.

(3)	Incentive stock options granted under the 2015 Stock Option Plan that vest 15,625 shares quarterly, commencing October 11, 2017.

(4)	Incentive stock options granted under the 2015 Stock Option Plan that vest 25% annually on anniversary date commencing January 29, 2019.

(5)	Non-qualified stock options granted under the 2015 Stock Option Plan of which 25% vest after one year and 12.5% will vest every six months thereafter until fully vested. These non-qualified stock options vested 100% in connection with the separation agreement entered into on January 22, 2021.

(6)	These incentive stock options were forfeited in connection with the separation agreement entered into on January 22, 2021.


REPRO MED SYSTEMS, INC.	Your Mobile or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Votes submitted electronically over the Internet must be received by 11:59 p.m., Eastern Time, on May 17, 2021.

		INTERNET www.cstproxy.com Use the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares.

		MOBILE VOTING On your Smartphone/Tablet, open the QR Reader and scan the below image. Once the voting site is displayed, enter your Control Number from the proxy card and vote your shares.

PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY.		MAIL – Mark, sign and date your proxy card and return it in the postage-paid envelope provided.


(5)	Each of our named executive officers currently (except Mr. Goldberger) received an over-achievement performance bonus for 2019, which was equal to 50% of their awarded performance bonus.

(6)	Taking into account the unusual nature of events in 2020 that impacted the Company’s performance, including the global pandemic, and with the consent of the recipients, the Board determined to pay these discretionary bonuses in 2020 in lieu of bonuses calculated pursuant to the previously disclosed 2020 Management Incentive Compensation Plan (“MICP”). Each of these bonuses include a “heroes bonus” to recognize the extraordinary efforts made by the CFO and COO to support the Company during the pandemic.

(7)	The MICP provides the opportunity for a cash bonus to eligible participants, and set certain components of the MICP for each of KORU’s executive officers for the year ended December 31, 2020 and 2019. However, no bonus was paid to the Executives under the MICP for the year ended December 31, 2020.

(8)	All Other Compensation in 2020 and 2019 includes the matching contributions under our 401(k) savings plan for all executives except for Mr. Pettigrew who also had commuting expenses.


Signature	Signature, if held jointly	Date	, 2021.
Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such.


Article 1. Effective Date, Objectives and Duration	3

Article 2. Definitions	3

Article 3. Administration	7

Article 4. Shares Subject to the Plan	10

Article 5. Eligibility and General Conditions of Awards	12

Article 6. Stock Options	14

Article 7. Stock Appreciation Rights	16

Article 8. Restricted Shares	17

Article 9. Performance Units and Performance Shares	18

Article 10. Deferred Stock and Restricted Stock Units	19

Article 11. Dividend Equivalents	19

Article 12. Bonus Shares	20

Article 13. Other Stock-Based Awards	20

Article 14. Non-Employee Director Awards	20

Article 15. Amendment, Modification, and Termination	20

Article 16. Section 409A	21

Article 17. Withholding	21

Article 18. Additional Provisions	22