OLD MARKET CAPITAL Corp DEFR14A, filed Jul 30, 2021
OLD MARKET CAPITAL Corp (OMCC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1_)
Filed by the Registrant ☑ Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under Rule 14a-12 |
NICHOLAS FINANCIAL, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No: |
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Date Filed: |
NICHOLAS FINANCIAL, INC.
2454 McMullen Booth Road
Building C
Clearwater, FL 33759-1343
(727) 726-0763
NOTICE OF ANNUAL GENERAL MEETING
To the Shareholders of Nicholas Financial, Inc.:
NOTICE IS HEREBY GIVEN that the 2021 Annual General Meeting of Shareholders (the “Meeting”) of Nicholas Financial, Inc. (hereinafter called the “Company”) will be held at the Company’s office, located at 3600 ARCO CORPORATE DRIVE CHARLOTTE, NC 28273, SUITE 210, on Thursday, September 2, 2021, at 11:00 a.m. EDT for the following purposes:
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to receive the Report of the Directors; |
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to receive the consolidated financial statements of the Company for its fiscal year ended March 31, 2021, and the report of RSM US LLP, the Company’s Independent Registered Public Accounting Firm, thereon; |
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to elect two directors to hold office until the 2024 Annual General Meeting of Shareholders until their respective successors are duly elected and qualified (Proposal 1); |
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to ratify the appointment of RSM US LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending March 31, 2022 (Proposal 2); |
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to provide an advisory vote on the compensation for our named executive officers as disclosed in the Executive Compensation Discussion and Analysis section and the accompanying compensation tables and narrative discussion contained in the accompanying Proxy Statement and Information Circular (Proposal 3); and |
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to transact such other business as may properly come before the Meeting. |
The Company has also elected provide shareholders the opportunity to attend the Meeting virtually. The URL Path for the virtual meeting is https://agm.issuerdirect.com/nick. Shareholders may attend, vote, and submit questions during the Meeting via the Internet.
Accompanying this Notice are a Proxy Statement and Information Circular and form of proxy card and/or voting instructions form.
Shareholders of record as of the close of business on July 29, 2021 will be entitled to attend and vote at the Meeting, or any adjournment or postponement thereof. A shareholder entitled to attend and vote at the Meeting is entitled to appoint a proxy holder to attend and vote in his or her stead.
Your vote is important. Whether or not you plan to attend the Meeting in person or virtually, we urge you to (i) read the notes on the form of proxy card and then complete, sign and return the proxy card within the time set forth in such notes (if you are a record holder), (ii) read the transfer agent’s voting instruction form or contact your bank or broker for instructions on voting (if you are a beneficial owner), and follow the instructions; or (iii) vote via Internet or by telephone by following the corresponding instructions on the form of proxy card or voting instruction form, as applicable.
The enclosed proxy is solicited by the Board of Directors of the Company but, as set out on the form of proxy card or voting instruction form, you may amend it if you so desire by inserting in the space provided the name of the person you wish to represent you at the Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Annual
General Meeting of Shareholders to be Held on September 2, 2021
Pursuant to rules of the U.S. Securities and Exchange Commission, we have elected to provide access to our proxy materials both by sending you this full set of proxy materials, including a proxy card, and by notifying you of the availability of our proxy materials on the Internet. This Proxy Statement and Information Circular and our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, are available at https://nicholasfinancial.com/?page_id=7397.
DATED at Clearwater, Florida, July 29, 2021.
BY ORDER OF THE BOARD OF DIRECTORS
Douglas Marohn
Corporate Secretary
NICHOLAS FINANCIAL, INC
2454 McMullen Booth Road
Building C
Clearwater, FL 33759-1343
(727) 726-0763
PROXY STATEMENT AND INFORMATION CIRCULAR
AS AT AND DATED JULY 29, 2021
This Proxy Statement and Information Circular accompanies the Notice of the 2021 Annual General Meeting of Shareholders (the “Meeting”) of Nicholas Financial, Inc. (hereinafter called the “Company”) to be held on Thursday, September 2, 2021, at 11:00 a.m. EDT, at the Company’s office, located at 3600 ARCO CORPORATE DRIVE CHARLOTTE, NC 28273, SUITE 210, and is being furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Company (the “Board of Directors” or the “Board”) for use at that Meeting and at any adjournment thereof.
The Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021 (the “Annual Report”), together with this Proxy Statement and Information Circular and the accompanying form of proxy card or voting instruction form (“Proxy”), are first being mailed on or about July 30, 2021 to shareholders entitled to vote at the Meeting. Additional copies will be provided without charge upon written request to Nicholas Financial, Inc., 2454 McMullen Booth Road, Building C, Clearwater, Florida 33759-1340, Attention: Corporate Secretary. Exhibits filed with our Annual Report on Form 10-K will be provided upon written request, in the same manner as noted above.
REVOCABILITY OF PROXY
If the accompanying Proxy is completed, duly signed and returned, or the shares are duly voted via the Internet or by telephone, the shares represented thereby will be voted at the Meeting, unless the Proxy is revoked as described below. The giving of the Proxy does not affect the right to vote in person should the shareholder be able to attend the Meeting, either in person or virtually. If you would like to obtain directions to attend the Meeting in person, please contact Douglas W. Marohn at 727-726-0763.
The shareholder may revoke the Proxy at any time prior to the voting thereof. In addition to revocation in any other manner permitted by law, a Proxy may be revoked by an instrument in writing executed by the shareholder or his attorney authorized in writing, or if the shareholder is a corporation, by a duly authorized officer or attorney thereof (such instrument, a “Notice of Revocation”), and deposited either at the registered office of the Company at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, or, as to any matter in respect of which a vote shall not already have been cast pursuant to such Proxy, with the Chairman of the Meeting on the day of the Meeting, or any adjournment thereof, and upon either of such deposits the Proxy is revoked. If you file a Notice of Revocation, you may then vote (or abstain from voting) your shares in person or virtually at the Meeting; however, if you are a beneficial owner, you must first obtain a proxy from the record holder to do so.
If you are a shareholder of record, you also may revoke your Proxy at any time before your shares are voted by submitting a duly executed proxy card bearing a later date. If you submit a later dated proxy card, then your shares will be voted in accordance with that later dated proxy card.
PERSONS MAKING THE SOLICITATION
THE ENCLOSED PROXY IS BEING SOLICITED BY
THE BOARD OF DIRECTORS OF THE COMPANY
Solicitations will be made by mail and possibly supplemented by telephone or other personal contact to be made without special compensation by regular officers and employees of the Company. The Company may reimburse shareholders’ nominees or agents (including brokers holding shares on behalf of clients) for the cost incurred in obtaining from their principals authorization to execute proxies. No solicitation will be made by specifically engaged employees or soliciting agents. The cost of solicitation of proxies on behalf of the Board of Directors will be borne by the Company.
VOTING SHARES AND OWNERSHIP
OF MANAGEMENT AND PRINCIPAL HOLDERS
As of the date of this Proxy Statement and Information Circular, the Company is authorized to issue 50,000,000 Common Shares without par value and 5,000,000 Preference Shares without par value. As of the close of business on July 29, 2021, the record date for determining shareholders entitled to notice of and to vote at the Meeting, there were issued and outstanding 7,636,951 Common Shares entitled to vote at the Meeting (the “Voting Common Shares”) and no Preference Shares. At the Meeting, on a show of hands, every shareholder present in person and entitled to vote shall have one vote, and on a poll, every shareholder present in person or represented by proxy and entitled to vote shall have one vote, in each case for each share of which such shareholder is the registered holder. Shares represented by proxy will only be voted on a poll.
The following table sets forth certain information regarding the beneficial ownership of the Voting Common Shares as of July 29, 2021 regarding (i) each of the Company’s directors (including the nominees for election or re-election as directors), (ii) each of the Company’s named executive officers, (iii) all directors and officers as a group, and (iv) each person known by the Company to beneficially own, directly or indirectly, more than 5% of the outstanding Voting Common Shares. Except as otherwise indicated, each of the persons listed below has sole voting and investment power over the shares beneficially owned.
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Percentage Owned |
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Douglas Marohn (1) (2) |
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82,826 |
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1.1 |
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Irina Nashtatik (3) |
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- |
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* |
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Jeffrey Royal (4) |
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28,253 |
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* |
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Robin J. Hastings (5) |
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20,095 |
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* |
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Adam K. Peterson (6) (7) |
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2,186,650 |
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28.6 |
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Jeremy Zhu (8) (9) |
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609,800 |
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8.0 |
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Magnolia Capital Fund, LP (10) |
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2,177,272 |
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28.5 |
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The TCW Group, Inc. (11) |
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600,704 |
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7.9 |
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Westlake Services, LLC (12) |
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500,000 |
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6.5 |
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Dimensional Fund Advisors LP (13) |
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497,046 |
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6.5 |
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Renaissance Technologies LLC (14) |
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501,350 |
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6.6 |
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All directors and officers as a group (7 persons) (15) |
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2,927,624 |
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38.3 |
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Less than 1% |
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Mr. Marohn is our President, Chief Executive Officer and Corporate Secretary. Mr. Marohn’s business address is c/o Nicholas Financial, Inc., 2454 McMullen Booth Road, Building C, Clearwater, Florida 33759. |
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Includes 10,550 shares of restricted stock vesting in fiscal year 2022, 15,725 shares of restricted stock vesting in fiscal year 2023, 5,005 shares of restricted stock vesting in fiscal year 2024, and 39 Common Shares held by Mr. Marohn’s spouse. |
(3) Ms. Nashtatik is our Chief Financial Officer.
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Mr. Royal is Chairman of the Board. His business address is 5420 Nicholas Street, Omaha, Nebraska 68132. |
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Includes 5,000 shares issuable upon exercise of currently exercisable options at an exercise price of $12.95 per share. Mr. Hastings is a director. His business address is c/o Nicholas Financial, Inc., 2454 McMullen Booth Road, Building C, Clearwater, Florida 33759. |
(6) Mr. Peterson is a director. His business address is 1411 Harney St., Suite 200, Omaha, Nebraska 68102.
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Includes 2,177,272 shares held of record by Magnolia Capital Fund, LP. Please refer to footnote (10). |
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Mr. Zhu is a director. His business address is 865 South Figueroa Street, Los Angeles, California 90017. |
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Includes 600,704 shares held of record by The TCW Group, Inc. and its direct and indirect subsidiaries and Mr. Zhu personally held 9,096 shares of record. Please refer to footnote (12). |
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As reported in a Schedule 13D/A filed on June 4, 2021, Magnolia Capital Fund, LP, The Magnolia Group, LLC and Adam K. Peterson share beneficial ownership of such shares. The Magnolia Group, LLC is the general partner of Magnolia Capital Fund, LP and Mr. Peterson is the managing member of The Magnolia Group, LLC. Mr. Peterson and The Magnolia Group, LLC are therefore deemed to share beneficial ownership of the shares of common stock held of record by Magnolia Capital Fund, LP. The business address of Magnolia Capital Fund, LP, The Magnolia Group, LLC and Mr. Peterson is 1601 Dodge Street, Ste. 3300 Omaha, Nebraska 68102. |
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The TCW Group, Inc., on behalf of itself and its direct and indirect subsidiaries (collectively, the “TCW Business Unit”), filed a Schedule 13G/A on February 8, 2021. According to the Schedule 13G/A, investment funds affiliated with The Carlyle Group, L.P. (“The Carlyle Group”) hold a minority indirect ownership interest in TCW that technically constitutes an indirect controlling interest in TCW. The principal business of The Carlyle Group is acting as a private investment firm with affiliated entities that include certain distinct specialized business units that are independently operated including the TCW Business Unit. Entities affiliated with The Carlyle Group may be deemed to share beneficial ownership of the securities shown in the table. Information barriers are in place between the TCW Business Unit and The Carlyle Group. The Carlyle Group disclaims beneficial ownership of the shares beneficially owned by the TCW Business Unit and shown in the table. The TCW Business Unit disclaims beneficial ownership of any shares which may be owned or reported by The Carlyle Group and its affiliates. |
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Mr. Zhu is Managing Director of Sepulveda Management, LLC, an affiliate of the TCW Business Unit and investment adviser registered under the Investment Advisers Act. The business address of the TCW Business Unit is 865 South Figueroa Street, Los Angeles, California 90017. |
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As reported in a Schedule 13G filed on May 8, 2015, the principal business address of Westlake Services, LLC is 4751 Wilshire Boulevard #100, Los Angeles, California 90010. |
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Dimensional Fund Advisors LP filed a Schedule 13G/A on February 12, 2021. According to the Schedule 13G,/A Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act, furnishes investment advice to four investment companies registered under the Investment Company Act, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”), and in certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. According to the Schedule 13G/A, in its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds; however, all securities reported in such Schedule 13G/A are owned by the Funds. Dimensional Holdings Inc. is the general partner of Dimensional Fund Advisors LP. The principal business address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746. |
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As reported in a Schedule 13G/A filed on February 11, 2021, the shares held of record by Renaissance Technologies LLC may also be deemed beneficially owned by Renaissance Technologies Holdings Corporation, because of its majority interest in Renaissance Technologies LLC. According to the Schedule 13G/A, both entities have dispositive power with respect to all 501,350 shares and voting power with respect to 495,389 shares. The principal business address of Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation is 800 Third Avenue, New York, New York 10022. |
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Represents shares beneficially owned by all directors and officers as a group as of the record date. Includes unvested restricted stock and shares issuable upon the exercise of stock options exercisable within 60 days of the record date, held by the current directors and officers as a group. |
The Board of Directors has determined that all holders of record of Voting Common Shares as of the close of business on July 29, 2021 (the “Record Date”) will be entitled to receive notice of and to vote at the Meeting. Those shareholders so desiring may be represented by proxy at the Meeting. The Proxy, and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof, must be deposited either at the office of the Registrar and Transfer Agent of the Company, Computershare Investor Services, Inc., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, or at the Corporate Headquarters of the Company at 2454 McMullen Booth Road, Building C, Clearwater, Florida 33759-1343 not less than 48 hours, Saturdays, Sundays, and holidays excepted, prior to the time of the holding of the Meeting or any adjournment thereof. Alternatively, you may vote via Internet or by telephone by following the corresponding instructions on the enclosed Proxy.
QUORUM
Votes cast by proxy or in person at the Meeting will be tabulated by the inspector of elections appointed for the Meeting, who will also determine whether a quorum is present for the transaction of business. The Company’s current Articles provide that a quorum is present if two or more shareholders of the Company are present in person (or represented by proxy) holding an aggregate of at least 33-1/3% of the total issued and outstanding Common Shares of the Company as of the Record Date for the Meeting. The number of issued and outstanding Common Shares currently equals the number of issued and outstanding Voting Common Shares, since any Common Shares held by the Company or the Company’s subsidiary are not considered to be “outstanding.”
ABSTENTIONS AND BROKER NON-VOTES
Abstentions will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum is present. Shares held by nominees for beneficial owners will also be counted for purposes of determining whether a quorum is present if the nominee has the discretion to vote on at least one of the matters presented, even though the nominee may not exercise discretionary voting power with respect to other matters and even though voting instructions have not been received from the beneficial owner (a “broker non-vote”). Neither abstentions nor broker non-votes are counted in determining whether a proposal has been approved. The vote required for each proposal set forth herein, including the election of directors, is set forth under the discussion herein of such proposal.
Shareholders are urged to indicate their votes in the spaces provided on the Proxy. Proxies solicited by the Board of Directors of the Company will be voted in accordance with the directions given therein. Except as indicated below in connection with the election of directors, where no instructions are indicated signed Proxies will be voted FOR each proposal listed in the Notice of the Meeting as set forth more completely herein. Returning your completed Proxy will not prevent you from voting in person [or virtually] at the Meeting should you be present and wish to do so.
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VOTING INSTRUCTIONS FOR RECORD HOLDERS AND BENEFICIAL OWNERS
If your shares are registered directly in your name with our transfer agent, Computershare Investor Services, Inc., then you are a “shareholder of record” or “record holder.” This Proxy Statement and Information Circular and related materials have been provided directly to you by the Company. You may vote by ballot at the meeting (in person or virtually) or vote by proxy (by mail, via Internet, or by telephone). To vote by proxy, sign, date and return the enclosed Proxy or follow the instructions on the Proxy for voting via Internet or by telephone.
If your shares are held for you in a brokerage, bank or other institutional account (that is, held in “street name”), then you are not a shareholder of record. Rather, the institution is the shareholder of record and you are the “beneficial owner” of the shares. The Proxy Statement and Information Circular and accompanying materials have been forwarded to you by that institution. If you complete and properly sign the accompanying Proxy and return it in the enclosed envelope or follow the instructions on the Proxy for voting by Internet or by telephone, the institution will cause your shares to be voted in accordance with your instructions. If you are a beneficial owner of shares and wish to vote in person or virtually at the Meeting, then you must obtain a proxy, executed in your favor, from the holder of record (the institution).
If you are a shareholder of record and attend the Meeting, you may vote in person by ballot at the Meeting. To vote by ballot, you must register and confirm your shareholder status at the Meeting. If the shareholder of record is a corporation, partnership, limited liability company or other entity of which you are an officer or other authorized person, then you should bring evidence of your authority to vote the shares on behalf of the entity. If your shares are held for you in a brokerage, bank or other institutional account (that is, in “street name”), you must obtain a proxy, executed in your favor, from that institution (the holder of record) to vote your beneficially-owned shares by ballot at the Meeting. If you are a shareholder of record, then you may opt to deliver your completed Proxy in person at the Meeting.
You will receive separate Proxies when you own shares in different ways. For example, you may own shares individually, as a joint tenant, in an individual retirement account, in trust or in one or more brokerage accounts. You should complete, sign and return each Proxy you receive or follow the Internet instructions on each card. The instructions on each Proxy may differ. Be sure to follow the instructions on each card.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors recommends each of the nominees set forth below for election as a director and urges each shareholder to vote “FOR” each of the nominees. Proxies in the accompanying form will be voted at the Meeting, unless authority to do so is withheld, in favor of the election as a director of each of the nominees named below. Brokers or other nominees who hold shares for “street name” holders do not have discretionary authority to vote uninstructed shares in the election of directors. Neither broker non-votes nor abstentions will affect the outcome of the vote on the proposal.
The Company’s Board of Directors currently consists of five members divided into three classes. In general, the members of each class serve three-year terms expiring at the third Annual General Meeting of Shareholders after their election, subject to the following exception (the “Structural Exception”):
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If a director was not in office at the time of the Company’s 2020 Annual General Meeting (the “2020 Meeting”) and was not elected to office at the 2020 Meeting, the director must stand for re-election at this Meeting pursuant to the Company’s Articles. |
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In that case, and in order to preserve the 2-2-1 structure of the staggered Board, assuming the director is elected by the shareholders at this Meeting, the term of office of the director will next expire in that year in which the term of office of the predecessor director would have expired, had the predecessor not resigned. If the term of office of the predecessor would have expired in 2021 as so determined, the term of office of the new director, assuming he is elected this year, does not expire again until the 2024 Annual General Meeting. |
The Structural Exception does not apply with respect to any of the five current members of the Board. The Company’s Board of Directors, upon the recommendation of the Nominating/Corporate Governance Committee, has nominated (1) Robin J. Hastings to stand for re-election as a director at the Meeting, to hold office for a term of three years expiring at the 2024 Annual General Meeting of Shareholders, and until his successor has been duly elected and qualified and (2) Jeffrey Royal to stand for re-election as a director at the Meeting, to hold office for a term of three years expiring at the 2024 Annual General Meeting of Shareholders, and until his successor has been duly elected and qualified. No other person has been nominated by the Board to stand for election as a director at the Meeting.
Vote Required
Assuming a quorum is present, the election of each of Messrs. Hastings and Royal as a director requires that a plurality of the total votes cast with respect to Voting Common Shares present, or represented by proxy, vote in favor of his election. (Please note that brokers or other nominees who hold shares for you do not have the discretionary authority to vote your uninstructed shares in the election of directors.) In the event Mr. Hastings and Royal are unable to serve, the persons designated as proxies will cast votes for such other person as they may select in their discretion as a substitute nominee. The Board of Directors has no reason to believe that either of the foregoing nominees will be unavailable, or if elected, will decline to serve.
Messrs. Hastings and Royal are residents of the United States. Certain information is set forth below for each of the nominees:
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DIRECTORS BEING ELECTED AT THE ANNUAL GENERAL MEETING — IF SO ELECTED, TERM EXPIRES 2024 NameAgePrincipal Occupation And Other InformationRobin J. Hastings67Mr. Hastings has served as a director of the Company since August 2015 and Chairman of the Board between July 26, 2017 until January 17, 2019. Until March 2016, Mr. Hastings was the Chief Operating Officer of United Ocean Services (“UOS”), a subsidiary of International Shipholding Corporation, a New York Stock Exchange-listed company. UOS is a U.S. flag shipping company with primary operations in the Gulf of Mexico. Until his retirement, he worked in various capacities for UOS under different ownership, for 28 years. Prior to becoming a director of the Company, Mr. Hastings worked for National Gypsum Company, American Shipbuilding Company and TECO Transport & Trade. Mr. Hastings began his career in the financial arena of TECO Transport & Trade in 1987. He was promoted to Assistant Controller of TECO Transport & Trade before it was purchased by investors and renamed United Maritime Group in 2008. Mr. Hastings held the positions of Controller, Vice President of Commercial Operations and Logistics, and ultimately Chief Operating Officer of United Ocean Services and remained as COO when International Shipholding purchased UOS in 2012. Mr. Hasting received both his Bachelor’s degree in Accounting and Finance and his Master’s degree in Business Administration from the University of South Florida in Tampa, Florida.Mr. Hastings brings considerable financial, accounting and operating skills and experience to the Board.Jeffrey Royal (Chair)45Mr. Royal has served as a director of the Company since October 2017 and as Chairman since January 17, 2019. Since January 2006, Mr. Royal has been the President of Dundee Bank located in Omaha, Nebraska. Prior to joining Dundee Bank, he was Second Vice President of First National Bank of Omaha. Mr. Royal also serves as a director for Boston Omaha Corporation, where Director Adam Peterson serves as the Co-President, Co-Chairperson, and Co-CEO (see below). Mr. Royal received both his Bachelor’s and Master’s degree in Business Administration from Creighton University and completed the Stonier Graduate School of Banking at Georgetown University and the University of Pennsylvania.The Board believes that Mr. Royal’s provides the Board considerable experience and knowledge of accounting and lending
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DIRECTORS CONTINUING IN OFFICE — TERM EXPIRES 2022
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Adam K. Peterson |
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39 |
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Adam K. Peterson has served as a director of the Company since July 2017. Mr. Peterson serves as Co-President, Co-Chairperson, and Co-CEO of Boston Omaha Corporation, a NASDAQ-listed company. Since June 2014, Mr. Peterson has served as the Manager of The Magnolia Group, LLC “Magnolia Group”), an SEC-registered investment adviser and the general partner of Magnolia Capital Fund, LP. |
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(“Magnolia Capital”). Magnolia Group also manages a private real estate fund. As of the record date, Magnolia Capital was the holder of approximately 28.6% of the Company’s Voting Common Shares. Between November 2005 and June 2014, Mr. Peterson served as the Chief Investment Officer of Magnolia Capital Partners, LLC and related entities at a private family investment office, and from May 2004 through June 2006, he was a financial analyst for Peter Kiewit Sons, Inc. Mr. Peterson graduated with a BSBA with a concentration in Finance from Creighton University. |
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The Board believes that Mr. Peterson provides the Board with financial and business analytical experience as an investor who regularly scrutinizes public companies. |
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Douglas Marohn |
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49 |
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Mr. Marohn has served as President and Chief Executive Officer of the Company since December 12, 2017, as the Corporate Secretary since March 1, 2019 and as a director since January 8, 2019. Mr. Marohn previously served as President and Chief Executive Officer of ML Credit Group, LLC (dba Metrolina Credit Company) since January 2014 through November 2017. Between August 2011 and November 2013, Mr. Marohn was Senior Vice President at TMX Finance, overseeing its consumer loan operations. Until July 2011, he spent 14 years with the Company in various positions, the majority of the time as Senior Vice President. |
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With over 26 years of experience in the subprime auto finance industry, including over 17 years with the Company, the Board believes that Mr. Marohn brings valuable executive and operational skills and experience, as well as industry knowledge, to the Board. This led to the conclusion that he should continue to serve as a director of our Company. |
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7
DIRECTORS CONTINUING IN OFFICE — TERM EXPIRES 2023
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Name |
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Age |
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Principal Occupation And Other Information |
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Jeremy Q. Zhu |
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48 |
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Jeremy Q. Zhu has served as a director of the Company since September 2017. Mr. Zhu is the founder, and since December 2016 has been serving as Managing Director, of Sepulveda Management, LLC (“TCW Sepulveda”), previously known as Wedbush Opportunity Capital, LLC (“Wedbush”). TCW Sepulveda is an investment management company and SEC-registered investment adviser affiliated with the TCW Group, Inc. Between June 2007 and December 2016, Mr. Zhu served as the Managing Director and Senior Vice President of Wedbush, focusing on strategic growth initiatives, investments and acquisitions. Prior to joining Wedbush in 2003, Mr. Zhu worked at Lehman Brothers Venture Capital Group and CSC Kalchas Group, a strategy consultancy with numerous multinational corporations as clients. Mr. Zhu is currently also a board member of CalWest Bancorp (OTC company) and served as a board member of Community 1st Bancorp until it was sold in November 2017 (OTC company). Mr. Zhu received his Master’s in Engineering at Princeton University and a Bachelor of Science in Engineering at Cornell University. |
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The Board believes that Mr. Zhu brings a unique combination of leadership, financial and business analytical experience to the Board due to his extensive involvement within the financial industry and his service as a board member with several banking institutions.
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8
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Audit Committee recommend the ratification of the appointment of RSM US LLP (“RSM US LLP” or “RSM”) as Independent Registered Public Accounting Firm of the Company for the fiscal year ending March 31, 2022 and urge each shareholder to vote “FOR” such proposal. Abstentions will not affect the outcome of the vote on this proposal. However, since brokers may exercise discretionary voting power with respect to this proposal, a shareholder’s failure to provide voting instructions will not prevent a broker vote and can therefore affect the outcome of this proposal. Executed and unmarked Proxies in the accompanying form will be voted at the Meeting in favor of this proposal.
The Audit Committee has appointed RSM as Independent Registered Public Accounting Firm of the Company for the fiscal year ending March 31, 2022, and the Board of Directors and Audit Committee propose the ratification of such appointment. If our shareholders do not ratify the appointment of RSM at the Meeting, then the Audit Committee will reconsider its selection of RSM; however, it is not required to change its selection.
We expect representatives of RSM US LLP to be present at the Annual Meeting with the opportunity to make a statement if they so desire, and we expect them to be available to respond to appropriate questions.
Vote Required
Assuming a quorum is present, approval of the ratification of the appointment of RSM as Independent Registered Public Accounting Firm of the Company for the fiscal year ending March 31, 2022 requires that a simple majority of the total votes cast with respect to Voting Common Shares present, or represented by proxy, vote in favor of such proposal.
Fees for Audit and Non-Audit Related Matters
The fees charged by RSM US LLP for professional services rendered to the Company in connection with all audit and non-audit related matters were as follows:
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Fiscal Year Ended March 31, |
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2021 |
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2020 |
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Audit Fees (1) |
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$ |
545,000 |
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$ |
515,000 |
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Audit Related Fees (2) |
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$ |
22,000 |
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$ |
57,352 |
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Tax Related Fees |
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$ |
- |
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$ |
- |
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All Other Fees |
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$ |
- |
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$ |
- |
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(1) |
Audit fees consist of fees for the audit of the Company’s annual consolidated financial statements and reviews of the Company’s consolidated financial statements included in the Company’s quarterly reports on Form 10-Q. |
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(2) |
Audit related fees for the fiscal year ended March 31, 2020 and 2021 were for the audit of the Company’s retirement plan, acquisition, and additional procedures performed during the quarterly reviews. |
For the 2021 fiscal year and the 2020 fiscal year, the Audit Committee concluded that RSM US LLP’s provision of the services described above was compatible with maintaining RSM US LLP’s independence. The Audit Committee pre-approved all of such services. The Audit Committee has established pre-approval policies and procedures with respect to audit and permissible non-audit services to be provided by the Independent Registered Public Accounting Firm.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the Independent Registered Public Accounting Firm in order to assure that the provision of such services does not impair the auditor’s independence. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Management is required to periodically report to the Audit Committee regarding the extent of services provided by the Independent Registered Public Accounting Firm in accordance with this pre-approval, and the fees for the services performed to date. During each of the fiscal years ended March 31, 2021 and 2020, respectively, all services were pre-approved by the Audit Committee in accordance with this policy.
9
PROPOSAL 3: ADVISORY VOTE ON COMPENSATION
OF NAMED EXECUTIVE OFFICERS
The Board of Directors recommends a vote “FOR” the approval of the compensation of our named executive officers as disclosed in the Executive Compensation Discussion and Analysis section and the accompanying compensation tables and narrative discussion contained in this Proxy Statement and Information Circular. Abstentions and broker non-votes will not be counted for purposes of determining whether a majority of votes has been cast in favor of this proposal. Proxies solicited by the Board will be voted “FOR” approval of the compensation, unless a shareholder specifies otherwise.
Under legislation that Congress enacted in 2010, our shareholders may approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in accordance with the executive compensation disclosure rules contained in Item 402 of the U.S. Securities and Exchange Commission’s Regulation S-K. Accordingly, we are seeking input from shareholders with this advisory vote on the compensation of our named executive officers. The vote on this proposal is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our named executive officers as disclosed in the Executive Compensation Discussion and Analysis section and the accompanying executive compensation tables and narrative discussion contained in this Proxy Statement and Information Circular. The Company asks that you support the compensation of our named executive officers as so disclosed. Because your vote is advisory, it will not be binding on the Compensation Committee, the Nominating/Corporate Governance Committee, the Board or the Company. However, the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation.
The Company’s compensation philosophy emphasizes pay for performance. The goal is to provide an opportunity for total compensation that is competitive and sufficient to attract and retain executives and is reflective of our overall executive compensation philosophy which is designed to:
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help attract and retain the most qualified individuals by being competitive with compensation paid to persons having similar responsibilities and duties in other companies in the same and closely related businesses; |
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relate to the value created for shareholders by being directly tied to the financial performance of the Company and the particular executive officer’s contribution to such performance; |
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motivate and reward individuals who help the Company achieve its short-term and long-term objectives and thereby contribute significantly to the success of the Company; and |
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reflect the qualifications, skills, experience, and responsibilities of the particular executive officer. |
We describe the individual elements that make up our total compensation more fully in the Executive Compensation Discussion and Analysis section of this Proxy Statement and Information Circular. We believe our executive compensation programs are structured to support the Company and its business objectives.
Accordingly, for the reasons discussed above, the Board recommends that shareholders vote in favor of the approval of the compensation of our named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the Executive Compensation Discussion and Analysis section, compensation tables and narrative discussion.
We are currently providing shareholders with the opportunity to submit a non-binding, advisory vote on the compensation of our named executive officers on an annual basis.
Vote Required
Assuming a quorum is present, approval of the compensation of our named executive officers requires that a simple majority of the total votes cast with respect to Voting Common Shares present, or represented by proxy, vote in favor of such proposal.
10
BOARD OF DIRECTORS
Committees of the Board of Directors and Meeting Attendance
The Company has not adopted a formal policy that each director must attend each annual general meeting of shareholders, although directors are encouraged to do so. The Company expects all members of the Board to attend the Meeting barring other significant commitments or special circumstances. All of the Company’s Board members attended the Company’s 2020 Annual General Meeting of Shareholders. During the Company’s fiscal year ended March 31, 2021, there were 4 meetings of the Board, 4 meetings of the Audit Committee, 2 meetings of the Compensation Committee and 1 meeting of the Nominating/Corporate Governance Committee, and each incumbent director attended at least 75% of the aggregate of (i) the total number of Board meetings held during the period for which he has been a director and (ii) the total number of meetings of all committees of the Board on which he served held during the periods that he served.
In addition to an Investment Committee, the Board of Directors of the Company has the standing committees listed below.
Audit Committee
On April 1, 2004, the Board of Directors established an Audit Committee, which was comprised of three members during the fiscal year ended March 31, 2021. The committee consists of Messrs. Hastings (Chair), Royal, and Zhu. The Board has determined that Messrs. Hastings, Royal and Zhu satisfy the independence requirements of current Securities and Exchange Commission rules and NASDAQ listing standards. The Board also has determined that each of Messrs. Hastings, Royal and Zhu qualify as an audit committee financial expert as defined under these rules and listing standards.
The Audit Committee assists the Board of Directors with its responsibilities by (A) overseeing the Company’s accounting and financial reporting processes and the audits of the Company’s consolidated financial statements and (B) monitoring (i) the Company’s compliance with legal, risk management and regulatory requirements, (ii) the Company’s Independent Registered Public Accounting Firm’ qualifications and independence, (iii) the Company’s financial reporting process and Independent Registered Public Accounting Firm, and (iv) the Company’s systems of internal control with respect to the integrity of financial records, adherence to its policies and compliance with legal and regulatory requirements. Among other functions, the Audit Committee has direct responsibility to appoint, compensate, retain and oversee the Company’s Independent Registered Public Accounting Firm; has sole authority to pre-approve all audit and non-audit services performed by the Company’s Independent Registered Public Accounting Firm and the fees and terms of each engagement; prepares or authorizes, oversees and reviews the Audit Committee Report; discusses with management and the Independent Registered Public Accounting Firm reports from the Independent Registered Public Accounting Firm with respect to certain audit matters; reviews the Company’s annual and quarterly consolidated financial statements and related public disclosures, earnings press releases and other financial information and earnings guidance provided by the Company; reviews with management the adequacy of internal controls; and reviews and approves related party transactions. The Audit Committee is governed by a written charter, which sets forth the specific functions and responsibilities of the Audit Committee. A copy of the current Audit Committee charter is available on the Company’s web site at www.nicholasfinancial.com under “Investor Center – Corporate Governance.”
Compensation Committee
On June 30, 2005, the Board of Directors established a Compensation Committee, which was comprised of three members during the fiscal year ended March 31, 2021. The committee consists of Messrs. Zhu (Chair), Hastings and Royal. The Board has determined that Messrs. Zhu, Hastings and Royal satisfy the independence requirements of current Securities and Exchange Commission rules and NASDAQ listing standards, that they are “non-employee directors” pursuant to Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and that they are “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The principal responsibilities of the Compensation Committee are to evaluate the performance and approve the compensation of the Company’s Chief Executive Officer and other executive officers and to approve the compensation of non-employee directors; review and endorse a compensation philosophy that supports competitive pay for performance and is consistent with the Company’s corporate strategy; prepare an annual report on executive compensation for inclusion in the Company’s proxy statement; and assist the Board in establishing, and to administer, the Company’s incentive compensation and equity-based plans for key employees and non-employee directors, including the Nicholas Financial, Inc. Equity Incentive Plan and the Nicholas Financial, Inc. 2015 Omnibus Incentive Plan.
The Compensation Committee reviews and approves corporate goals and objectives relevant to the Company’s Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s performance in light of these goals and objectives and establishes his compensation levels based on its evaluation. The specific functions and responsibilities of the Compensation Committee are set forth in its written charter. A copy of the current Compensation Committee charter is available on the Company’s web site at www.nicholasfinancial.com under “Investor Center – Corporate Governance.”
The Compensation Committee may designate one or more subcommittees, each of which must consist of two or more members of the Compensation Committee. Each subcommittee will have and may exercise all the powers and authority of the Compensation Committee, to the extent provided in the committee’s resolutions and to the extent not limited by applicable law or listing standard.
11
Nominating/Corporate Governance Committee
On June 30, 2005, the Board of Directors established a Nominating/Corporate Governance Committee, which was comprised of three members during the fiscal year ended March 31, 2021. The committee consists of Messrs. Zhu (Chair), Hastings and Royal.
The Board has determined that Messrs. Zhu, Hastings, and Royal satisfy the independence requirements of current NASDAQ listing standards.
The principal functions of the Nominating/Corporate Governance Committee are to: identify, consider and recommend to the Board qualified director nominees for election at the Company’s annual meeting; review and make recommendations on matters involving the general operation of the Board and its committees and recommend to the Board nominees for each committee of the Board; and develop and recommend to the Board the adoption and appropriate revision of the Company’s corporate governance policies. The Nominating/Corporate Governance Committee is governed by a written charter, which is reviewed on an annual basis. A copy of the current Nominating/Corporate Governance Committee charter is available on the Company’s web site at www.nicholasfinancial.com under “Investor Center – Corporate Governance.”
Nominations of Directors
The entire Board by majority vote selects the director nominees to stand for election at the Company’s annual general meetings of shareholders and to fill vacancies occurring on the Board, based on the recommendations of the Nominating/Corporate Governance Committee. In selecting nominees to recommend to the Board to stand for election as directors, the Nominating/Corporate Governance Committee examines each director nominee on a case-by-case basis regardless of who recommended the nominee and take into account all factors it considers appropriate. While the Nominating/Corporate Governance Committee does not have a formal policy relating specifically to the consideration of diversity in its process to select and evaluate director nominees, the Committee does consider diversity as part of its overall evaluation of candidates for director nominees. Specifically, the Company’s Corporate Governance Policies provide that the selection of potential directors should be based on all factors the Nominating/Corporate Governance Committee and the Board consider appropriate, which include issues of diversity, age, background and training, business or administrative experience or skills, dedication and commitment, business judgment, analytical skills, problem-solving abilities and familiarity with regulatory environment. To this end, the Nominating/Corporate Governance Committee believes that the following minimum qualifications must be met by a director nominee to be recommended to stand for election as director:
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Each director must display high personal and professional ethics, integrity and values. |
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• |
Each director must have the ability to exercise sound business judgment. |
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Each director must be highly accomplished in his or her respective field, with broad experience at the executive or policy-making level in business, government, education, technology or public interest. |
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Each director must have relevant expertise, experience, be able to offer advice and to offer guidance based on that expertise and experience. |
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Each director must be able to represent all shareholders of the Company and be committed to enhancing long-term shareholder value. |
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Each director must have sufficient time available to devote to activities of the Board and to enhance his or her knowledge of the Company’s business. |
The Nominating/Corporate Governance Committee may use various sources for identifying and evaluating nominees for directors, including referrals from the Company’s current directors, management and shareholders. The Nominating/Corporate Governance Committee will review the resume and qualifications of each candidate identified through any of the sources referenced above, and determine whether the candidate would add value to the Board. With respect to candidates who are determined by the Nominating/Corporate Governance Committee to be potential nominees, one or more members of the committee will contact such candidates to determine the candidate’s general availability and interest in serving. Once it is determined that a candidate is a good prospect, the candidate will be invited to meet with the full Nominating/Corporate Governance Committee, which will conduct a personal interview with the candidate. During the interview, the committee will evaluate whether the candidate meets the guidelines and criteria adopted by the Board as well as explore any special or unique qualifications, expertise and experience offered by the candidate and how such qualifications, expertise and/or experience may complement that of existing Board members. If the candidate is approved by the Nominating/Corporate Governance Committee as a result of the committee’s determination that the candidate will be able to add value to the Board and the candidate expresses his or her interest in serving on the Board, the committee will then review its conclusions with the Board and recommend that the candidate be selected by the Board to stand for election by the shareholders or fill a vacancy or newly created position on the Board.
12
Pursuant to the Nominating/Corporate Governance Committee charter as currently in effect, the committee will investigate and consider shareholder recommendations for director nominations submitted in writing by a shareholder (or group of shareholders) in compliance with the Company’s Articles, SEC rules and other applicable law. Recommendations for director nominees to be considered by the Nominating/Corporate Governance Committee, including recommendations from shareholders of the Company, should be sent in writing, together with a description of each proposed nominee’s qualifications and other relevant biographical information concerning such proposed nominee, to the Nominating/Corporate Governance Committee of the Board of Directors, care of the Secretary of the Company, at the Company’s headquarters, and must be received at least 120 days prior to the anniversary date of the release of the proxy statement relating to the prior year’s Annual General Meeting of Shareholders.
Please refer to the section “Shareholder Proposals” for the deadlines by which shareholders must submit shareholder proposals (including those relating to Board Nominees) under Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and outside of Rule 14a-8.
Leadership Structure and Role in Risk Oversight
Mr. Marohn became CEO of the Company effective as of December 12, 2017 and has served as a director since January 8, 2018. On July 26, 2017, the Board appointed Mr. Hastings to serve as Chairman of the Board. Effective January 17, 2019, the Board appointed Mr. Royal to serve as the Chairman of the Board.
Our Board does not have a policy on whether or not the roles of CEO and Chairman should be separate; indeed, the Board has the authority to choose its Chairman in any way it deems best for our Company at any given point in time. Accordingly, our Board reserves the right to vest the responsibilities of the CEO and Chairman in the same person or in two different individuals, depending upon what it believes is in the best interests of the Company at that time. At the current time, the Board believes that it is most effective for the roles of CEO and Chairman to be separated in order to ensure continuity in leadership and sound oversight.
Our Board, and, in particular, the Audit Committee are involved on an ongoing basis in the general oversight of our material identified enterprise-related risks. In addition, our Investment Committee is responsible for overseeing investment risk management. Our Chief Executive Officer and Chief Financial Officer, with input as appropriate from other appropriate management members, reports and provides relevant information directly to our Board, Audit Committee and/or Investment Committee on various types of identified material financial, investment, reputational, legal and business risks to which we are or may be subject, as well as mitigation strategies for certain key identified material risks. Our Board’s, Audit Committee’s and Investment Committee’s roles in our risk oversight process have not affected our Board leadership structure.
Anti-Hedging Policy
The Company’s Insider Trading Policy prohibits any hedging transactions with respect to the Company’s securities.
Director Independence
In accordance, with NASDAQ rules, the Board has determined that Messrs. Royal, Hastings, and Zhu, collectively representing a majority of members of our Board, are independent directors in that they do not have any relationships with the Company and its businesses that would impair their independence.
Communications with Board of Directors
Shareholders may communicate with the full Board or individual directors by submitting such communications in writing to Nicholas Financial, Inc., Attention: Board of Directors (or the individual director(s)), 2454 McMullen Booth Road, Building C, Clearwater, Florida 33759. Such communications will be delivered directly to the appropriate director(s).
Report of the Audit Committee (1)
The Audit Committee (the “Committee”) oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the consolidated financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Committee reviewed the audited consolidated financial statements in the Annual Report with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements.
The Committee reviewed with the Company’s Independent Registered Public Accounting Firm, who are responsible for expressing an opinion on the conformity of those audited consolidated financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee under standards of the Public Company Accounting Oversight Board. The Audit Committee also discussed with the Company’s Independent Registered Public Accounting Firm matters related to the financial reporting process required to be discussed by Auditing Standard No. 16 as adopted by the Public Company Accounting Oversight
13
Board. In addition, the Audit Committee has received the written disclosures and the letter from the Independent Registered Public Accounting Firm required by Rule 3526 of the Public Company Accounting Standards Board, as currently in effect, and the Audit Committee discussed with the Independent Registered Public Accounting Firm that firm’s independence and considered the compatibility of non-audit services with the Independent Registered Public Accounting Firm’ independence.
The Committee discussed with the Company’s Independent Registered Public Accounting Firm the overall scope and plans for their audit. The Committee meets with the Independent Registered Public Accounting Firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board has approved) that the audited consolidated financial statements be included in the Annual Report for filing with the Commission. The Committee also appointed RSM US LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending March 31, 2022.
Robin J. Hastings, Audit Committee Chair
Jeffrey C. Royal, Audit Committee Member
Jeremy Q. Zhu, Audit Committee Member
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(1) |
The foregoing report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates such report by reference therein. |
14
EXECUTIVE OFFICERS AND COMPENSATION
The Company currently has two (2) executive officers: Douglas Marohn, President, Chief Executive Officer and Corporate Secretary and Irina Nashtatik, Chief Financial Officer. For additional information regarding Mr. Marohn, see “Proposal 1: Election of Directors” above.
Ms. Nashtatik, age 40, joined the Company as Controller in March 2018. Ms. Nashtatik was promoted to Vice President of Finance in August 2019 and continued in the position until November 2019. In that position, in addition to her duties as Controller, she was responsible for the daily management and custodial administration of the credit facility. She was promoted to interim Chief Financial Officer in November 2019, and Chief Financial Officer on July 7, 2020. Prior to joining the Company, she held several leadership positions in accounting, finance, and treasury at Bankers Financial Corporation, USAmeriBank, and Jabil Circuit, Inc., most recently as director of Treasury and Vice President of Treasury and Finance at Bankers Financial Corporation (from March 2014 to July 2017). Ms. Nashtatik earned her M.B.A. from the University of Florida, B.S. in Accounting from the University of South Florida, and B.S. in Economics from the State University Higher School of Economics. She is a Certified Public Accountant (CPA) and a Certified Treasury Professional (CTP).
Executive Compensation Discussion and Analysis
The Company deems the information provided in this section material to an understanding of the compensation of its Named Executive Officers (as defined below). However, the Company has opted to comply with the scaled disclosure requirements available to “smaller reporting companies” as such term is defined in Regulation S-K. Irrespective of the title used for this section, the Company is not required and does not undertake to provide the disclosure mandated for companies that do not qualify as smaller reporting companies, including a “Compensation Discussion and Analysis” as that term is used in Item 402(b) of Regulation S-K.
Role of the Compensation Committee
The Compensation Committee is responsible for:
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evaluating the performance and determining and approving the compensation of the Company’s executive officers, including the Chief Executive Officer (the “CEO”); and |
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overseeing the Company’s compensation and benefit plans for key employees and non-employee directors, including the Company’s equity plans. |
Through this process, the Committee reviews and determines all aspects of compensation for the Named Executive Officers (as defined below) of the Company.
The Named Executive Officers of the Company are:
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Douglas Marohn, President, CEO and Corporate Secretary; and |
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Irina Nashtatik, Chief Financial Officer. |
Process for Determining Executive Compensation
The Compensation Committee is responsible for establishing and monitoring adherence to the Company’s compensation programs. When setting executive compensation, the Compensation Committee applies a consistent approach for all Named Executive Officers. It intends that the combination of elements of executive compensation closely align the executives’ interest with those of the Company’s shareholders. Target total compensation is generally comprised of base salary, annual cash bonus and incentive compensation in the form of equity grants. The Compensation Committee reviews and adjusts executive target total compensation levels annually, and approves the base salary, annual cash bonus and incentive equity awards for each Named Executive Officer.
As part of the compensation process, the Compensation Committee seeks input and information from the CEO and the full Board of Directors before finalizing any salary increases, employment contracts, bonus plans or long-term incentive equity awards for Named Executive Officers. In considering the appropriate compensation for each of the Named Executive Officers, the Compensation Committee takes into consideration, among other things, the CEO’s recommendations, the executive pay for executive officers in comparable positions for companies in the Company’s peer group, the level of inherent risk associated with the position, the specific circumstances of the executive, and the advisory votes of the Company’s shareholders with respect to the compensation of the Named Executive Officer for prior fiscal years. The Compensation Committee has developed a compensation plan that it believes will achieve the following objectives:
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provide incentives for management to think like shareholders and pursue strategies and investments that maximize long-term value; |
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tie long term incentive compensation opportunities to the achievement of long-term financial and strategic goals; |
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provide sufficient levels of wealth creation opportunity to attract and retain highly skilled executives; and |
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maximize the financial efficiency of the program from tax, accounting and cash flow perspectives. |
Compensation Components
The Company’s executive compensation program currently consists of three key elements: base salary, annual incentive bonus and equity incentive compensation.
Base Salary
The Compensation Committee establishes base salaries for the Company’s Named Executive Officers based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies in the Company’s peer group for similar positions. Generally, the Compensation Committee believes that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions and with similar responsibilities at comparable companies in line with our compensation philosophy.
Base salaries are reviewed annually and may be adjusted to realign salaries with market levels after taking into account individual responsibilities, performance and experience.
The annual base salaries for Mr. Marohn, the Company’s President, CEO and Corporate Secretary and Ms. Nashtatik, the Company’s Chief Financial Officer, for the fiscal year ended March 31, 2021 (“Fiscal 2021”) were initially set at $350,000 and $140,000, respectively, and were subsequently raised to $385,000 and $180,000, respectively.
Incentive Bonuses
Pursuant to his employment agreement, for the fiscal year ended March 31, 2021, Mr. Marohn was, and for the fiscal year ending March 31, 2022, Mr. Marohn is, entitled to a non-discretionary cash incentive bonus equal to the greater of his Milestone Bonus (as defined below) and the sum of the cash component and the restricted stock component of his Long-Term Bonus (as defined below) with respect to such fiscal year. Pursuant to her employment agreement, for the fiscal year ended March 31, 2021, Ms. Nashtatik was, and for the fiscal year ending March 31, 2022, Ms. Nashtatik is, entitled to a non-discretionary cash incentive bonus in the amount of her Milestone Bonus.
For the fiscal year ended March 31, 2021, the Company paid $242,095 and $121,047 in non-discretionary incentive bonuses in cash to Mr. Marohn and Ms. Nashtatik, respectively.
Fiscal 2021 – 2022: Milestone Bonuses
The non-discretionary, or performance-based, milestone cash bonus (“Milestone Bonus”) is based on the operating margin achieved by the Company in the relevant fiscal year compared to the relevant target operating margin (as defined in the relevant employment agreement) set forth below. The target operating margins are as follows:
For each fiscal year, if less than 80% of the target operating margin is achieved, no Milestone Bonus is earned. If 80% or more of the target operating margin is achieved, the Milestone Bonus equals the percentage of the target operating margin achieved multiplied by $150,000 for Mr. Marohn and by $75,000 for Ms. Nashtatik.
Fiscal 2021 – 2022: Long-Term Bonuses
Mr. Marohn’s non-discretionary long-term bonus (a “Long-Term Bonus”) with respect to a given fiscal year (the “Determination Year”) is based on (A) the three-year rolling average annual growth in tangible book value per share over the three immediately preceding fiscal years, adjusted in the sole discretion of the Compensation Committee, and (B) Mr. Marohn’s base salary for the Determination Year.
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The Long-Term Bonus consists of two components: a cash component and a restricted stock component (valued at the average closing price of the common stock over the 90 calendar days immediately preceding the final day of the Determination Year), and will be calculated based on the following table:
The number of shares of restricted stock earned as part of the restricted stock component is equal to (I) the product of (x) the base salary for the Determination Year and (y) the relevant percentage set forth in the table above under the heading “Restricted Stock Component” (or otherwise determined by the Compensation Committee in case such growth is higher than 18%), divided by (II) the average closing price of the Company’s common stock on the principal exchange on which it is then traded or quoted over the 90 calendar days ending on the last day of the Determination Year. Any shares of restricted stock so earned vest on the third anniversary of the last day of the Determination Year.
Discretionary Bonuses
For each fiscal year, the Compensation Committee retains sole discretion to pay Mr. Marohn an additional bonus of up to 50% of actual salary earned for such fiscal year. For each fiscal year, the Compensation Committee retains sole discretion to pay Ms. Nashtatik an additional bonus up to $25,000 for such fiscal year.
During the fiscal year ended March 31, 2022, the Compensation Committee awarded a discretionary bonus of $57,905 to Mr. Marohn and $8,953 to Ms. Nashtatik.
Equity Incentive Compensation
The Compensation Committee believes that stock-based awards promote the long-term growth and profitability of the Company by providing executive officers of the Company with incentives to improve shareholder value and contribute to the success of the Company and by enabling the Company to attract, retain and reward the best available persons for executive officer positions.
Prior to August 13, 2015, the Company maintained the Nicholas Financial, Inc. Equity Incentive Plan (the “Equity Plan”). The Equity Plan was terminated on August 13, 2015. While no new awards have been granted under the Equity Plan since that date, awards previously granted under such plan, remain outstanding. Effective August 13, 2015, the Company adopted the Nicholas Financial, Inc. 2015 Omnibus Incentive Plan (the “Omnibus Incentive Plan” or “Plan”). The Omnibus Incentive Plan allows for the grant of equity awards and cash incentive awards to eligible individuals, with up to 750,000 Common Shares reserved for the grant of equity awards under the Plan. The administrator of the Omnibus Incentive Plan (currently the Compensation Committee of our Board of Directors) (the “Administrator”) may designate any of the following as a participant from time to time, to the extent of the Administrator’s authority: any officer or other employee of the Company or its affiliates (including the Named Executive Officers); any individual whom the Company or one of its affiliates has engaged to become an officer or employee; any consultant or advisor who provides services to the Company or its affiliates; or any director, including a non-employee director. Currently, the persons eligible to participate in the Plan consist of approximately 258 employees and four non-employee directors. A more detailed description of the Equity Plan can be found below under the heading “Summary of Equity Plan”. A more detailed description of the Omnibus Incentive Plan can be found below under the heading “Summary of Omnibus Incentive Plan”.
The employment agreements with Mr. Marohn and Ms. Nashtatik provide for a stock purchase matching program (the “Matching Program”), pursuant to which the Company matches 100% of the Company’s common stock purchased by such executive officer before July 1, 2022, with restricted shares of common stock vesting three years after issuance. The amount of stock issuable under the Matching Program is capped at $500,000 in the aggregate under Mr. Marohn’s employment agreement and at $100,000 in the aggregate under Ms. Nashtatik’s employment agreement.
Fiscal 2021 Equity Awards
The equity awards granted in Fiscal 2021 to the Named Executive Officers under the Omnibus Incentive Plan consist solely of awards of time-vested restricted stock under the Matching Program.
Pursuant to the Matching Program, during Fiscal 2021, Mr. Marohn was issued 5,005 shares of restricted stock. No shares of restricted stock were issued under the Matching Program to Ms. Nashtatik.
17
Stock Ownership Requirements
Beginning on March 31, 2023, under the terms of their respective employment agreements and for so long as they remain employed by the Company, the Chief Executive Officer and the Chief Financial Officer are required to maintain ownership of common stock with a fair market value equal to at least 500% and 200%, respectively, of his or her then-effective annual salary. If at any time after March 31, 2023 ownership of the Company’s common stock’s fair market value falls below the stock ownership thresholds, due solely to a decline in the fair market value of the Company’s common stock, they will not be required to acquire additional shares to meet the stock ownership threshold, but will be required to retain all shares then held (except for shares withheld to pay withholding taxes) until such time as they again attain the stock ownership thresholds.
Change of Control
The Company has change of control provisions in its employment agreements with its Named Executive Officers, the Equity Plan and the Omnibus Incentive Plan (including under the Performance Unit Program). The Company has no additional change of control contracts or arrangements with any of its Named Executive Officers. For further information regarding the employment agreements, see “Potential Payments Upon Termination or a Change of Control – Employment Agreements” and “Summary of Employment Agreements With Named Executive Officers”.
The change of control provisions in the plans and the employment agreements are designed to make a change of control transaction neutral to the economic interests of employees that might be involved in considering such a transaction. The employees subject to these provisions would likely not be in a position to influence the Company’s performance after a change of control or may not be in a position to earn their incentive awards or vest in their equity awards after a change of control. Thus, the provisions are meant to encourage employees that may be involved in considering a change of control transaction to act in the interests of the Company’s shareholders rather than their own interests.
The change of control provisions in the employment agreements with Named Executive Officers and under the Performance Unit Program are described under “Potential Payments Upon Termination or a Change of Control – Employment Agreements” and “– Equity Incentive Plans”. Generally, the Company’s equity compensation plans provide that restricted stock, restricted stock units and performance units will vest in full, and options to purchase Common Shares will become immediately exercisable, either upon a change of control if the successor company does not assume or replace the award, or upon termination of employment without cause within one year after a change of control.
The Compensation Committee believes that the provisions provided for under the Named Executive Officers’ employment agreements and equity compensation plans are appropriate since an employee’s position could be adversely affected by a change of control even if he or she is not terminated. Our equity compensation plans provide, however, that the Compensation Committee may determine in advance of the change of control event that the provisions would not apply and therefore no accelerated vesting would occur.
Other Compensation
Consistent with the Compensation Committee’s pay-for-performance compensation philosophy, the Company intends to continue to maintain modest executive benefits and perquisites for executive officers; however, the Compensation Committee, in its discretion, may revise, amend or add to the officer’s executive benefits and perquisites if it deems it advisable. The Compensation Committee believes these benefits and perquisites are currently at or below median competitive levels for companies in the Company’s peer group. The Company does not provide pension arrangements, post-retirement health coverage, or similar benefits for its executives or employees.
Policy Regarding Retroactive Adjustments
Section 304 of the Sarbanes-Oxley Act of 2002 authorizes a company to claw back certain incentive-based compensation and stock profits of the Chief Executive Officer and Chief Financial Officer if the company is required to prepare an accounting restatement due to the material noncompliance of the company, as a result of misconduct, with any financial reporting requirement under the securities laws. The Compensation Committee does not otherwise have a formal policy regarding whether the Committee will make retroactive adjustments to, or attempt to recover, cash or share-based incentive compensation granted or paid to executive officers in which the payment was predicated upon the achievement of certain financial results that are subsequently the subject of a restatement. The Committee may seek to recover any amount determined to have been inappropriately received by the individual executive to the extent permitted by applicable law.
Tax, Accounting and Other Considerations
Section 162(m) of the Internal Revenue Code (Code) places a limit of $1,000,000 on the amount of compensation that we may deduct in any given year with respect to the CEO and certain of our other most highly paid executive officers. There was an exception to the $1,000,000 limitation prior to calendar year 2018 for performance-based compensation meeting certain requirements. Our stock
18
option awards and performance-based restricted stock unit awards generally are performance-based compensation meeting those requirements and, as such, were typically fully deductible. Performance-based cash bonus compensation awards under our Management Incentive Compensation Program were also possibly tax deductible. Our annual base salary and time-based restricted stock units are generally subject to the Section 162(m) deduction limitations. As a result of the Tax Cut and Jobs Act, the performance-based exception to Section 162(m) has been eliminated, resulting in the foregoing performance compensation in excess of $1,000,000 in calendar year 2018 or later generally not being deductible for the Company, subject to the transition rule for plans and agreements in place on November 2, 2017. To maintain flexibility in compensating executive officers in view of the overall objectives of our compensation program, the Compensation Committee has not adopted a policy requiring that all compensation be tax deductible.
Summary Compensation Table
The following table sets forth for each of the Named Executive Officers: (i) the U.S. dollar value of base salary and bonus earned during each of the fiscal years ended March 31, 2021, 2020 and 2019, respectively; (ii) the aggregate grant date fair value (in U.S. dollars) of stock and option awards granted during each of such fiscal years, computed in accordance with ASC Topic 718; (iii) the U.S. dollar value of all other compensation for each of such fiscal years; and (vi) the U.S. dollar value of total compensation for each of such fiscal years.
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Name and Principal Position |
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Fiscal Year |
|
Salary ($) |
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|
Bonus ($) (1) |
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|
Stock Awards ($) (2) |
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Option Awards ($) |
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Non-Equity Incentive Plan Compensation ($) (3) |
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All Other Compensation ($) |
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Total ($) |
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Douglas W. Marohn |
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2021 |
|
|
366,423 |
|
|
|
57,905 |
|
|
|
40,195 |
|
|
|
|
|
|
|
242,095 |
|
|
|
18,019 |
|
(4) |
|
724,637 |
|
|
President, Chief Executive Officer, |
|
2020 |
|
|
350,000 |
|
|
|
- |
|
|
|
149,316 |
|
|
|
- |
|
|
|
110,000 |
|
|
|
16,000 |
|
(4) |
|
625,316 |
|
|
and Corporate Secretary |
|
2019 |
|
|
350,000 |
|
|
|
110,000 |
|
|
|
111,216 |
|
|
|
- |
|
|
|
50,000 |
|
|
|
17,606 |
|
(4) |
|
638,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irina Nashtatik |
|
2021 |
|
|
175,987 |
|
|
|
8,953 |
|
|
|
- |
|
|
|
- |
|
|
|
121,047 |
|
|
|
42 |
|
|
|
306,029 |
|
|
Chief Financial Officer |
|
2020 |
|
|
138,769 |
|
|
|
12,500 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
151,269 |
|
|
|
|
|
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(1) |
Represents discretionary bonuses. |
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(3) |
Represents the non-discretionary incentive bonuses paid to Mr. Marohn and Ms. Nashtatik pursuant to their employment agreements. |
|
(4) |
Includes health and life insurance premiums. |
Narrative to Summary Compensation Table
For the fiscal year ended March 31, 2021, the executive compensation programs for our Named Executive Officers included some or all of the following:
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|
• |
Base salary |
|
|
• |
Annual cash incentive bonus |
|
|
• |
Equity-based awards |
|
|
• |
Limited perquisites |
|
|
• |
Certain insurance coverages |
|
|
• |
401(k) plan |
|
|
• |
Term life insurance |
We include further details regarding these programs, including information on performance criteria and vesting provisions, in the “Executive Compensation Discussion and Analysis” section. We include further details regarding each Named Executive Officer’s employment agreement (if any) in the “Summary of Employment Agreements with Executive Officers” section.
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding outstanding option and stock awards held at March 31, 2021, by the Named Executive Officers, including the number of shares underlying both exercisable and un-exercisable portions of each stock option, if any, as well as the exercise price and expiration date of each outstanding option, if any.
|
|
Option Awards |
|
|
Stock Awards |
|
|||||||||||||||||||||||||||||||
|
Name |
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
|
Option Exercise Price ($) |
|
|
Option Expiration Date |
|
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($) (1) |
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|
|||||||||
|
Douglas W. Marohn |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,550 |
|
(2) |
$ |
111,514 |
|
|
|
— |
|
|
|
— |
|
|
'President, Chief |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,725 |
|
(3) |
|
166,213 |
|
|
|
|
|
|
|
|
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|
Executive Officer and |
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
5,005 |
|
(4) |
|
52,903 |
|
|
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Corporate Secretary |
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(1) |
The value was determined by multiplying the closing price ($10.57) per Common Share on March 31, 2021 by the number of unvested shares of restricted stock. |
|
(2) |
Represents restricted shares issuable pursuant to the Matching Program, which will vest on various dates during fiscal year 2022. |
|
(3) |
Represents restricted shares issuable pursuant to the Matching Program, which will vest on various dates during fiscal year 2023. |
|
(4) |
Represents restricted shares issuable pursuant to the Matching Program, which will vest on various dates during fiscal year 2024. |
As of March 31, 2021, Ms. Nashtatik did not have any outstanding equity awards.
Potential Payments Upon Termination or a Change of Control
Employment Agreements
The Company has separate employment agreements with each of its current executive officers. The payments to be made to these executive officers pursuant to such employment agreements in the event of disability or death, involuntary termination without cause and termination following a change of control are described below. These employment agreements are described in greater detail under “Summary of Employment Agreements with Executive Officers” section.
Payments Made Under the Employment Agreements Upon Death or Disability
In the event of the termination of employment due to his or her death or disability, an executive officer will receive only such compensation and other benefits to which he or she was entitled under his or her employment agreement, under the terms of his or her outstanding equity plan awards (as described further below), or otherwise as an employee of the Company through the termination date, including payments of base salary through the calendar month in which such termination occurs.
Payments Made Under the Employment Agreements Upon Termination Without Cause, Constructive Termination or Change of Control
Douglas Marohn
In the event of the termination of Mr. Marohn’s employment (i) by the Company other than for cause (as defined in his employment agreement) or (ii) by Mr. Marohn upon (a) a good faith determination by Mr. Marohn that there has been a material breach of his employment agreement by the Company, (b) a material adverse change in his working conditions or status, (c) a significant relocation of his principal office, or (d) upon or within the one-year period following a change of control, a good faith determination by him that there has been any of the following: a breach of his employment agreement by the Company, any adverse change in his working conditions, status, authority, duties, responsibilities (including reporting other than directly to the Board of Directors) or any requirement that he relocate his principal office to a location that is more than ten miles from the location of his principal office immediately prior to the change of control, then Mr. Marohn will receive the following benefits:
(i) subject to the Section 280G cap described below, a one-time, lump-sum severance payment equal to Mr. Marohn’s annual base salary in effect at the time of such termination, pro-rated for the number of days remaining in the then-current term (or, following a change of control, a one-time, lump-sum severance payment equal to two times Mr. Marohn’s annual base salary in effect at the time of such termination);
20
(ii) all restricted stock (other than shares under the Matching Program), restricted stock unit awards, stock options and stock appreciation rights will become fully and immediately vested, and shares issued under the Matching Program will become immediately vested as follows: one-third of the shares shall immediately vest if the termination occurs less than one year after the issuance, two-thirds of the shares shall immediately vest if the termination occurs less than two years (but one year or more) after the issuance, and one hundred percent of the shares shall immediately vest if the termination occurs two years or more after the issuance;
(iii) any performance shares, performance units or similar performance-based equity awards will be deemed earned on a pro-rated basis according as if all performance requirements had been satisfied at the target level (or such higher level as would have been achieved if performance through the date of the termination of employment had continued through the end of the performance period);
(iv) up to eighteen months of benefits continuation; and
(v) up to $15,000 of fees and expenses of consultants and/or legal or accounting advisors.
A “change of control” is defined in Mr. Marohn’s employment agreement generally as (i) the sale of one hundred percent of the Company, (ii) the Board as of July 2020 (the “Incumbent Board”) generally ceasing for any reason to constitute the Board, provided that any individual becoming a director subsequent to July 2020, whose election or nomination for election by the Company’s shareholders was approved by a unanimous vote of the directors then comprising the Incumbent Board, is considered as though such individual were a member of the Incumbent Board, (iii) completion of a reorganization, merger or combination in which 100% of the ownership changes, (iv) liquidation or sale of substantially all of the assets (except in limited circumstances) or (v) a determination by the Board of Directors of the Company, in view of the then current circumstances or impending events, that a change of control of the Company has occurred or is imminent, which determination shall be made for the specific purpose of triggering the operative provisions of the employment agreement.
If any severance payment, either alone or when added to any other payment or benefit to which Mr. Marohn is entitled from the Company exceeds the amount that may be paid by the Company without a loss of deduction under Section 280G of the Code, then, under the terms of his employment agreement, the severance payment and any other such payment or benefit will be either cut back, to a level below the level that would trigger the loss of deduction, or paid in full and subjected to the loss of deduction and excise taxes, whichever results in the better after-tax result to the executive officer.
Irina Nashtatik
In the event of the termination of Ms. Nashtatik’s employment (i) by the Company other than for cause (as defined in her employment agreement) or (ii) by Ms. Nashtatik upon (a) a good faith determination by Ms. Nashtatik that there has been a material breach of her employment agreement by the Company, (b) a material adverse change in her working conditions or status, (c) a significant relocation of her principal office, or (d) upon or within the one-year period following a change of control, a good faith determination by her that there has been any of the following: a breach of her employment agreement by the Company, any adverse change in her working conditions, status, authority, duties, responsibilities (including with respect to reporting) or any requirement that she relocate her principal office to a location that is more than ten miles from the location of her principal office immediately prior to the change of control, then Ms. Nashtatik will receive the following benefits:
(i) subject to the Section 280G cap described below, a one-time, lump-sum severance payment equal to Ms. Nashtatik’s annual base salary in effect at the time of such termination, pro-rated for the number of days remaining in the then-current term (or, following a change of control, a one-time, lump-sum severance payment equal to one times Ms. Nashtatik’s annual base salary in effect at the time of such termination);
(ii) all restricted stock (other than shares under the Matching Program), restricted stock unit awards, stock options and stock appreciation rights will become fully and immediately vested, and shares issued under the Matching Program will become immediately vested as follows: one-third of the shares shall immediately vest if the termination occurs less than one year after the issuance, two-thirds of the shares shall immediately vest if the termination occurs less than two years (but one year or more) after the issuance, and one hundred percent of the shares shall immediately vest if the termination occurs two years or more after the issuance;
(iii) any performance shares, performance units or similar performance-based equity awards will be deemed earned on a pro-rated basis according as if all performance requirements had been satisfied at the target level (or such higher level as would have been achieved if performance through the date of the termination of employment had continued through the end of the performance period);
(iv) up to twelve months of benefits continuation; and
(v) up to $7,500 of fees and expenses of consultants and/or legal or accounting advisors.
A “change of control” is defined in Ms. Nashtatik’s employment agreement generally as (i) the sale of one hundred percent of the Company, (ii) the Board as of July 2020 (the “Incumbent Board”) generally ceasing for any reason to constitute the Board, provided that any individual becoming a director subsequent to July 2020, whose election or nomination for election by the
21
Company’s shareholders was approved by a unanimous vote of the directors then comprising the Incumbent Board, is considered as though such individual were a member of the Incumbent Board, (iii) completion of a reorganization, merger or combination in which 100% of the ownership changes, (iv) liquidation or sale of substantially all of the assets (except in limited circumstances) or (v) a determination by the Board of Directors of the Company, in view of the then current circumstances or impending events, that a change of control of the Company has occurred or is imminent, which determination shall be made for the specific purpose of triggering the operative provisions of the employment agreement.
If any severance payment, either alone or when added to any other payment or benefit to which Ms. Nashtatik is entitled from the Company exceeds the amount that may be paid by the Company without a loss of deduction under Section 280G of the Code, then, under the terms of his employment agreement, the severance payment and any other such payment or benefit will be either cut back, to a level below the level that would trigger the loss of deduction, or paid in full and subjected to the loss of deduction and excise taxes, whichever results in the better after-tax result to the executive officer.
Equity Incentive Plans
Payments Made Under the Equity Plan and Omnibus Incentive Plan Upon Death, Disability, Termination Without Cause or Constructive Termination
In the event of termination of a participant’s employment due to death or disability or termination without cause by the Company, all shares of restricted stock granted to such participant under the Equity Plan and the Omnibus Incentive Plan will generally become fully vested and the restrictions on transferability under the terms of the award will lapse. In the event of termination of a participant’s employment without cause by the Company, all shares of restricted stock underlying performance units awarded under the Performance Unit Program will become fully vested based on actual performance achieved and will be settled after the conclusion of the performance period. If such termination occurs following the end of the performance period, all earned shares of restricted stock vest immediately.
In the event of termination of a participant’s employment due to death, disability or retirement, all options granted to such participant under the Equity Plan and Omnibus Incentive Plan will become fully vested on the date of such termination and will be exercisable thereafter for a period of thirty days.
In the event of termination of a participant’s employment due to death or disability prior to the end of a performance period, performance share awards will generally be deemed earned immediately upon such termination in an amount equal to the amount that would have been earned had the target performance level for the performance period been met, and then prorated based on the number of days in the performance period that have elapsed to the date of termination of employment. In the event of termination of a participant’s employment due to death or disability prior to the end of a performance period, shares of restricted stock underlying performance units awarded under the Performance Unit Program will be deemed earned and vested immediately upon such termination in an amount equal to the amount that would have been earned had the target performance level for the performance period been met. In the event of termination of a participant’s employment due to death or disability following the end of a performance period, shares of restricted stock underlying performance units awarded under the Performance Unit Program will be deemed earned and vested immediately upon such termination in an amount equal to the amount that was earned based on actual performance achieved.
In all other cases of termination, non-vested equity awards under the Equity Plan and the Omnibus Incentive Plan will generally be forfeited.
A more detailed description of the Equity Plan can be found below under the heading “Summary of Equity Plan”. A more detailed description of the Omnibus Incentive Plan can be found below under the heading “Summary of Omnibus Incentive Plan”.
Payments Made Under the Equity Plan and Omnibus Incentive Plan Upon a Change of Control
Unless the Compensation Committee provides otherwise in any particular award agreement, and other than as stated below under “Performance Unit Program,” in the event of a change of control of the Company, awards may be assumed or substitute awards may be made by the Company or its successor that contain similar terms and conditions as the awards issued under an equity compensation plan, without participant consent. If awards are assumed or if substitute awards are made, and if the Company or its successor in the change of control transaction terminates a participant within one year following the change of control, then the award will immediately vest on the date of such termination of employment or service, as applicable.
If the Company or its successor does not assume the awards or grant substitute awards, then:
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|
• |
At least 15 days prior to the change of control transaction, all options held by employees of the Company or its affiliates will become fully vested, and the Company will provide a notice to all holders of options of their right to exercise their options up to the date of the change of control. On the change of control date, all options will be cancelled. If it is not |
22
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|
feasible to give 15 days’ notice of cancellation of the options, then the Compensation Committee may determine prior to the change of control date that all options held by employees of the Company or its affiliates will become vested on the date of the change of control, and all holders of options will receive a cash payment, in exchange for cancellation of the options, equal to the value of the option as determined by the Compensation Committee. |
|
|
• |
All shares of restricted stock will vest in full immediately prior to the date of a change of control. |
|
|
• |
Performance share awards will be deemed earned immediately prior to the date of the change of control in an amount equal to the amount that would be earned had the target performance goal for the performance period been met, and then prorated based on the number of days in the performance period that have elapsed to the date of the change of control. |
For purposes of the equity compensation plans, a “change of control” generally includes any of the following events:
|
|
• |
A person or group of persons becomes the beneficial owner of 25% or more of the outstanding Common Shares of the Company or the voting power of any of the Company’s securities, not counting acquisitions approved in advance by the Board of Directors; |
|
|
• |
The members of the Board of Directors on April 1, 2007 for the Equity Plan and July 1, 2015 for the Omnibus Incentive Plan (and any new member appointed or elected to the Board whose appointment, nomination or election was approved by two-thirds of the Board, unless the election is in connection with an election contest) cease to constitute a majority of the Board; |
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• |
The consummation or the sale or other disposition of all, or substantially all, of the Company’s assets; |
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|
• |
The consummation of a complete liquidation or dissolution of the Company; or |
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|
• |
The consummation of a merger or consolidation of the Company with or into any other company in which the Company’s shareholders immediately prior to the merger or consolidation will own less than 50% of the outstanding common shares or voting control of the surviving company. |
Performance Unit Program
Under the Performance Unit Program, if the change of control occurs during a performance period, the awards are converted into time-vested restricted stock of the acquiring company based on the target performance level and, if the change of control occurs following a performance period, the awards are converted into time-vested restricted stock of the acquiring company based on the actual performance level achieved. In either case, the awards would accelerate in the event the executive officer is terminated without cause or voluntarily terminates with good reason within twenty-four months of the change of control. If awards under the Performance Unit Program are not assumed or converted by the acquiring company, then, if the change of control occurs during a performance period, the awards are subject to accelerated vesting based on the target performance level, and if the change of control occurs following a performance period, the awards are subject to accelerated vesting based on actual performance level achieved.
Summary of Employment Agreements with Executive Officers
The Company entered into new employment agreement with Ms. Irina Nashtatik, Chief Financial Officer effective as of July 7, 2020. The Company entered into a new employment agreement with Mr. Douglas Marohn, President and Chief Executive Officer, effective as of July 8, 2020. The following section provides information on our employment agreements with the Named Executive Officers.
Douglas Marohn
The agreement with Mr. Marohn provides for a base salary of $350,000 (thereafter increased to $385,000) and annual milestone or long-term bonuses as described above under “Executive Compensation Discussion and Analysis – Compensation Components – Incentive Bonuses.” The agreement has an initial term expiring June 30, 2022. Thereafter, the agreement automatically renews each year for successive twelve-month periods, unless the Company provides to Mr. Marohn, at least sixty days prior to the expiration of the term, written notification that it intends not to renew the agreement. Upon a change of control, the term of the agreement would be extended until the first anniversary of the change of control. Mr. Marohn’s employment agreement provides that, if he is terminated by the Company without cause, or if he terminates his employment upon (a) a good faith determination by him that the Company has materially breached his employment agreement, (b) a material adverse change in his working conditions or status, (c) a significant relocation of his principal office or (d) upon or within the one-year period following a change of control of the Company, a good faith determination by him that there has been any of the following: a breach of his employment agreement by the Company, any adverse change in his working conditions, status, authority, duties, responsibilities (including reporting other than directly to the Board of Directors) or any requirement that he relocate his principal office to a location that is more than ten miles from the location of his principal office immediately prior to the change of control, then he shall be entitled to a severance payment as described above under “Potential Payments Upon Termination or a Change of Control – Employment Agreements — Payments Made Upon Termination Without Cause, Constructive Termination or Change of Control.” Mr. Marohn’s agreement further provides that, during the term of the agreement and for a period of two years thereafter, Mr. Marohn will not, directly or indirectly, compete with the Company by engaging in certain proscribed activities.
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Irina Nashtatik
The agreement with Ms. Nashtatik provides for a base salary of $180,000 and annual milestone bonuses as described above under “Executive Compensation Discussion and Analysis – Compensation Components – Incentive Bonuses.” The agreement has an initial term expiring on June 30, 2022. Thereafter, the agreement automatically renews each year for successive twelve-month periods, unless the Company provides to Ms. Nashtatik, at least sixty days prior to the expiration of the term, written notification that it intends not to renew the agreement. Upon a change of control, the term of the agreement would be extended until the first anniversary of the change of control. Ms. Nashtatik’s employment agreement provides that, if she is terminated by the Company without cause, or if she terminates her employment upon (a) a good faith determination by her that the Company has materially breached her employment agreement, (b) a material adverse change in her working conditions or status, (c) a significant relocation of her principal office or (d) upon or within the one-year period following a change of control of the Company, a good faith determination by her that there has been any of the following: a breach of her employment agreement by the Company, any adverse change in her working conditions, status, authority, duties, responsibilities or any requirement that she relocate her principal office to a location that is more than ten miles from the location of her principal office immediately prior to the change of control, then she shall be entitled to a severance payment as described above under “Potential Payments Upon Termination or a Change of Control – Employment Agreements — Payments Made Upon Termination Without Cause, Constructive Termination or Change of Control.” Ms. Nashtatik’s agreement further provides that, during the term of the agreement and for a period of one year thereafter, Ms. Nashtatik will not, directly or indirectly, compete with the Company by engaging in certain proscribed activities.
Summary of Equity Plan
The Equity Plan was adopted by the Board of Directors of the Company on June 15, 2006 and approved by the shareholders of the Company on August 9, 2006. The Equity Plan was terminated on August 13, 2015; no new awards have been granted under such plan since that date, but awards granted under such plan remain outstanding. The purposes of the Equity Plan were:
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to attract, retain and reward individuals who serve as key employees and non-employee directors of the Board; and |
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to increase shareholder value by offering participants the opportunity to acquire Common Shares or receive monetary payments based on the value of such Common Shares. By providing stock-based awards to the Company’s key employees and non-employee directors, the Board of Directors believes those individuals will be provided an incentive to increase shareholder value. |
A more detailed summary of the Equity Plan was included in Proposal 2 of the Company’s Proxy Statement for the 2006 Annual General Meeting and a copy of the Equity Plan was attached to such Proxy Statement as Appendix A, both of which are incorporated herein by reference.
Summary of Omnibus Incentive Plan
The Omnibus Incentive Plan was adopted by the Board of Directors and subsequently approved by the shareholders of the Company on August 13, 2015. The purpose of this Omnibus Incentive Plan is to promote the best interests of the Company and its shareholders by providing key employees and non-employee directors of the Company and its affiliates with an opportunity to acquire a proprietary interest in the Company or receive other incentive compensation on the potentially favorable terms that the Plan provides. It is intended that the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company and its affiliates by those key employees and directors who are primarily responsible for shaping and carrying out the long-range plans of the Company and securing its continued growth and financial success, all of which benefits the shareholders.
The Omnibus Incentive Plan:
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is administered by the Compensation Committee with respect to key employee participants and the Board of Directors with respect to non-employee director participants; |
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permits the grant of options (including incentive stock options), stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, annual cash incentives, long-term cash incentives, dividend equivalent units and other types of stock-based awards; |
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limits the number of awards that the Compensation Committee may grant to any one key employee participant; and |
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reserves 750,000 Common Shares for awards. |
A more detailed summary of the Omnibus Incentive Plan was included in Proposal 3 of the Company’s Proxy Statement for the 2015 Annual General Meeting and a copy of the Equity Plan was attached to such Proxy Statement as Appendix A, both of which are incorporated herein by reference.
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Director Compensation
The following table sets forth information regarding the compensation received by each of the Company’s non-employee directors during the fiscal year ended March 31, 2021:
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Fees Earned or Paid in Cash |
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Stock Awards ($)(1) |
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Option Awards ($)(1) |
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Total ($) |
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Robin Hastings |
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$ |
55,000 |
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20,000 |
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— |
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$ |
75,000 |
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Jeremy Q. Zhu |
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65,000 |
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20,000 |
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— |
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85,000 |
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Adam K. Peterson |
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47,500 |
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20,000 |
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— |
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67,500 |
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Jeffrey Royal |
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55,000 |
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20,000 |
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— |
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75,000 |
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(1) |
Grant date fair value. |
Directors who are not employed by us (“Non-Employee Directors) do not receive any additional compensation for their services as directors. The Compensation Committee reviews the director compensation on annual basis.
Each Non-Employee Director receives an annual retainer of $45,000, with the chair of each standing committee receiving an additional $10,000. Non-Employee Directors do not receive a per meeting fee for ordinary-course Board meetings; however, they receive a meeting fee of $1,000 per non-ordinary course Board meeting (reduced to $750 for telephonic meetings), calculated separately for the Board of Directors and each committee. Generally, each Non-Employee Director receives an annual award of restricted stock with a value of $20,000. Directors joining the Board of Directors mid-year will receive a pro-rated equity award vesting on the date of the following annual general meeting of shareholders.
Upon a change of control of the Company, the awards granted under the Omnibus Incentive Plan to Non-Employee Directors are treated in the same manner as awards made to employees as described above under “Payments Made Under the Equity Plan and Omnibus Incentive Plan Upon a Change of Control.”
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Persons
Since the beginning of the Company’s fiscal year ended March 31, 2019, there have been no transactions with related persons, and there are no currently proposed transactions with related persons, required by applicable SEC rules and regulations to be disclosed hereunder. No director or executive officer of the Company, no nominee for election as a director of the Company, and no associate or affiliate of any of them, is or has been indebted to the Company or its subsidiaries at any time since the beginning of the Company’s fiscal year ended March 31, 2019.
Review, Approval, and/or Ratification of Transactions with Related Persons
The Company recognizes that transactions involving related persons can present potential or actual conflicts of interest and create the appearance that the Company’s business decisions are based on considerations other than the best interests of its shareholders. Therefore, in accordance with the terms of its charter, the Audit Committee of the Board will review and approve all transactions involving related persons. The policy covers, and is not limited to, the SEC’s threshold requirements involving related person transactions.
General Policy
Transactions involving related persons must be approved, or ratified if pre-approval is not feasible, by the Audit Committee of the Board consisting solely of independent directors, who will approve or ratify the transaction only if they determine that it is in the best interests of the Company’s shareholders. In considering the transaction, the Audit Committee will consider all relevant factors, including, as applicable: (i) the business rationale for entering into the transaction; (ii) available alternatives to the transaction; (iii) whether the transaction is on terms no less favorable than terms generally available to an unrelated third-party under the same or similar circumstances; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction. The Audit Committee will also periodically monitor ongoing transactions involving related persons to ensure that there are no changed circumstances that would render it advisable for the Company to amend or terminate the transaction.
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Procedures
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It is the responsibility of management or the affected director or executive officer to bring the matter to the attention of the Audit Committee. |
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Any transaction involving a related person should be presented to the Audit Committee at the next regularly scheduled meeting. |
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All transactions should be pre-approved by the Audit Committee, or if not feasible, ratified by the Audit Committee as promptly as practicable. |
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If a member of the Audit Committee is involved in the transaction, except for purposes of providing material information about the transaction to the Audit Committee, he must be recused from all discussions and decisions about the transaction. |
Ongoing transactions involving related persons shall be reviewed by the Audit Committee on an annual basis at the first regularly scheduled meeting of the fiscal year.
Since the beginning of the Company’s last fiscal year, there have been no transactions required to be reported under the applicable SEC rules where such policies and procedures did not require review, approval or ratification or where such policies and procedures were not followed.
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director or executive officer of the Company, no nominee for election as a director of the Company, no person who has been a director or executive officer of the Company since the commencement of the Company’s last completed fiscal year and no associate or affiliate of any of the foregoing has any material interest, direct or indirect, by way of beneficial ownership or securities or otherwise, in any matter to be acted upon at the Meeting.
SHAREHOLDER PROPOSALS
The deadline for submission of shareholder proposals pursuant to Rule 14a-8 under the Exchange Act for inclusion in the Company’s proxy statement for its 2022 Annual General Meeting of Shareholders is April 1, 2022 (unless the date of the 2022 Annual General Meeting is not within 30 days of September 2, 2022, in which case the deadline will be a reasonable time before we begin to print and send the proxy materials for the 2022 Annual General Meeting).
Under the British Columbia Business Company Act (“BCBCA”), shareholder proposals may be made by registered or beneficial owners of shares entitled to vote at general meetings of shareholders who have been the registered or beneficial owner of such shares for an uninterrupted period of at least two years before the date of signing of the proposal, and who together in the aggregate constitute at least 1% of the issued shares that carry on the right to vote at general meetings or have a fair market value of shares in excess of CAD $2,000. Those registered or beneficial holders must, alongside the proposal, submit and sign a declaration providing the requisite information under the BCBCA. To be a valid proposal, the proposal must be submitted at least three months (the “Submission Deadline”) before the anniversary of the previous year’s annual reference date, which Submission Deadline for the 2022 Annual General Meeting will be June 2, 2022. After such date, notice to the Company of a shareholder proposal submitted other than pursuant to Rule 14a-8 is considered untimely, and the persons named in proxies solicited by the Board of Directors of the Company for the 2022 Annual General Meeting may exercise discretionary voting power with respect to any such proposal (unless the date of the 2022 Annual General Meeting is not within 30 days of September 2, 2022, in which case the deadline will be a reasonable time before we send the proxy materials for the 2022 Annual General Meeting).
HOUSEHOLDING
As permitted by Securities and Exchange Commission rules, only one set of proxy materials is being delivered to multiple shareholders sharing a household unless we received contrary instructions from one or more of such holders prior to the mailing date. In that case, we undertake to deliver promptly on written or oral request made to Nicholas Financial, Inc., 2454 McMullen Booth Road, Building C, Clearwater, FL 33759-1343 (Attn: Chief Financial Officer) or (727) 726-0763, a separate set of the proxy materials. A shareholder can direct us to mail separate sets in the future by request made to the same address or phone number. In addition, a shareholder can request that only a single set be sent to a household that is currently receiving multiple sets, also by directing their request to such address and phone number.
OTHER MATTERS
MANAGEMENT KNOWS OF NO OTHER MATTERS TO COME BEFORE THE MEETING OTHER THAN THOSE REFERRED TO IN THE NOTICE OF MEETING. HOWEVER, SHOULD ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING, THE SHARES REPRESENTED BY THE PROXY SOLICITED HEREBY WILL, ON A POLL, BE VOTED ON SUCH MATTERS IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PERSONS VOTING THE SHARES REPRESENTED BY THE PROXY.
Dated this 29th day of July, 2021
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jeffrey C. Royal
Chairman of the Board
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8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 www.computershare.com Form of Proxy - Annual General Meeting to be held on Thursday, August 27, 2020 01MXJA This Form of Proxy is solicited by and on behalf of Management. Fold
