`
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [
]
Check
the appropriate box:
[ ]
Preliminary Proxy
Statement
[ ]
Confidential, for
Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X]
Definitive Proxy
Statement
[ ]
Definitive
Additional Materials
[ ]
Soliciting Material
Pursuant to Rule 240.14a-12
TRIO-TECH
INTERNATIONAL
(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):
[X] No fee
required.
[
] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1)
Title of each class
of securities to which transaction applies:
_____________
(2)
Aggregate number of
securities to which transaction applies: _____________
(3)
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):
_____________
(4)
Proposed maximum
aggregate value of transaction: _____________
(5)
Total fee paid:
_____________
[
] Fee paid previously with preliminary
materials:
[
] 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.
(1)
Amount Previously
Paid: _____________
(2)
Form, Schedule or
Registration Statement No.: _____________
(3)
Filing Party:
_____________
(4)
Date Filed:
_____________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On December 4, 2017
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Trio-Tech International, a California corporation (the
“Company”), will be held at our principal executive
offices, located at 16139 Wyandotte Street, Van Nuys, California
91406, on Monday, December 4, 2017 at 10:00 A.M. local time for the
following purposes, as set forth in the attached Proxy
Statement:
1.
Election of
directors to hold office until the next Annual Meeting of
Shareholders;
2.
To consider and vote upon a proposal to approve the Company’s
2017 Employee Stock Option Plan;
3.
To consider and
vote upon a proposal to approve the Company’s 2017 Directors
Equity Incentive Plan;
4.
Transaction of such
other business as may properly come before the meeting or any
adjournment thereof.
The
Board of Directors of the Company (the “Board of
Directors” or the “Board”) has fixed the close of
business on October 9, 2017 as the record date for determining the
shareholders entitled to notice of and to vote at the Annual
Meeting and any adjournment and postponements thereof (the
“Record Date”).
After
careful consideration, the Trio-Tech International Board of
Directors recommends a vote FOR the nominees for director named in
the accompanying Proxy Statement (Proposal 1),
a vote FOR the approval
of the 2017 Employee Stock Option Plan (Proposal 2)
and a
vote FOR the approval of the 2017 Directors Equity Incentive Plan
(Proposal 3).
Shareholders are cordially invited to attend the
Annual Meeting in person.
Whether you plan to attend the
Annual Meeting or not, please complete, sign and date the enclosed
Proxy Card and return it without delay in the enclosed
postage-prepaid envelope. If you do attend the Annual Meeting, you
may withdraw your Proxy and vote personally on each matter brought
before the meeting.
|
|
By Order of the Board of Directors
A.
CHARLES WILSON
Chairman
|
October 16, 2017
Van Nuys, California
IMPORTANT
WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO MARK,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT IF
YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE
VOTED.
THANK YOU FOR ACTING PROMPTLY
Important Notice Regarding the Availability of Proxy Materials for
the Shareholder Meeting to be held on December 4, 2017: The Proxy
Statement and our 2017 Annual Report to
Shareholders
are available at
http://www.triotech.com/ind_rel.htm, which does not have
“cookies” that identify visitors to the
site.
T
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P
ROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF
TRIO-TECH INTERNATIONAL, INC.
To Be Held on
December 4,
2017
This Proxy Statement is furnished in connection
with the solicitation of the enclosed Proxy on behalf of the Board
of Directors (the “Board”) of Trio-Tech International,
a California corporation (“Trio-Tech” or the
“Company”), for use at the annual meeting of
shareholders of the Company (the “Annual Meeting”) to
be held
at our principal executive offices, located at 16139
Wyandotte Street, Van Nuys, California 91406, on Monday, December
4, 2017 at 10:00 A.M. local time, for the purposes of electing
directors, the consideration and voting upon approval
of each of the 2017
Employee Stock Option Plan and
the 2017 Directors Equity
Incentive Plan and such other business as may properly come before
the Annual Meeting. For directions to our principal executive
offices, please call our executive offices at 818-787-7000. This
Proxy Statement and the enclosed proxy card are intended to be
mailed to shareholders on or about October 20, 2017.
Record Date and Voting Securities
The Board of Directors fixed the close of business
on October 9, 2017 as the record date for shareholders entitled to
notice of and to vote at the Annual Meeting. As of that date, there
were
3,533,055 s
hares of the
Company’s common stock (the “Common Stock”)
outstanding and entitled to vote, the holders of which are entitled
to one vote per share.
Voting Generally
The
presence in person or by proxy of holders of a majority of the
shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. Abstentions will be
counted for purposes of determining the presence of a
quorum.
Because
a shareholder’s broker may not vote on behalf of the
shareholder on the election of directors unless the shareholder
provides specific instructions by completing and returning the
voting instruction form, for a shareholder’s vote to be
counted, we ask that our shareholders communicate his/her voting
decisions to the broker or other nominee before the date of the
Annual Meeting or give a proxy to vote his/her shares at the
meeting.
In
the election of directors, a shareholder may cumulate his votes for
one or more candidates, but only if each such candidate’s
name has been placed in nomination prior to the voting and the
shareholder has given notice at the meeting, prior to the voting,
of his intention to cumulate his votes. If any shareholder has
given such notice, all shareholders may cumulate their votes for
the candidates in nomination. If the voting for directors is
conducted by cumulative voting, each share will be entitled to a
number of votes equal to the number of directors to be elected.
These votes may be cast for a single candidate or may be
distributed among two or more candidates in such proportions as the
shareholder thinks fit. The five candidates receiving the highest
number of affirmative votes will be elected. Abstentions will be
counted for purposes of determining the presence of a quorum, but
votes against a candidate or withheld from voting (whether by
abstention, broker non-votes or otherwise) will not be counted
and will have no legal effect on the vote. Discretionary authority
to cumulate votes is solicited hereby.
Approval of the proposal adopting the 2017 Employee Stock Option
Plan requires the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on that proposal.
Abstentions and broker non-votes will not be voted for or against
the proposal. Because abstentions from voting will be considered
shares present at the Annual Meeting and entitled to vote, the
abstentions will have the effect of a negative vote as a majority
of the shares represented at the meeting is required for approval
of the 2017 Employee Stock Option Plan. Because broker non-votes
are not included in the determination of the number of shares
present at the meeting and entitled to vote, broker non-votes will
have no legal effect on the vote.
Approval of the proposal adopting the 2017 Directors Equity
Incentive Plan requires the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on that
proposal. Abstentions and broker non-votes will not be voted for or
against the proposal. Because abstentions from voting will be
considered shares present at the Annual Meeting and entitled to
vote, the abstentions will have the effect of a negative vote as a
majority of the shares represented at the meeting is required for
approval of the 2017 Directors Equity Incentive Plan. Because
broker non-votes are not included in the determination of the
number of shares present at the meeting and entitled to vote,
broker non-votes will have no legal effect on the
vote.
Deadline for Voting by Proxy
In
order to be counted, votes cast by proxy must be received prior to
the Annual Meeting.
R
evocability of
Proxies
Shareholders are requested to date, sign and
return the enclosed Proxy to make certain their shares will be
voted at the Annual Meeting. Any Proxy given may be revoked by the
shareholder at any time before it is voted by delivering written
notice of revocation to the Secretary of the Company, by filing
with the Secretary of the Company a Proxy bearing a later date, or
by attending the Annual Meeting and voting in person. All Proxies
properly executed and returned will be voted in accordance with the
instructions specified thereon. If no instructions are specified,
Proxies will be voted
FOR
the election of the five nominees for directors
named under “Election of Directors” (Proposal
1),
FOR
the
approval of the 2017 Employee Stock Option Plan (Proposal 2)
and
FOR
the approval of the 2017 Directors Equity
Incentive Plan (Proposal 3).
P
ROPOSAL 1
ELECTION
OF DIRECTORS
Information With Respect to Directors
A majority of the independent directors of our
Board has nominated the persons listed below for election to the
Board at the Annual Meeting, to hold office until the next Annual
Meeting and until their respective successors are elected and
qualified. There is one vacancy on the Board of Directors. The
Board does not intend to fill the vacancy at this time due to the
costs associated therewith. It is intended that the Proxies
received, unless otherwise specified, will be voted
FOR
the five nominees named below, all of
whom are incumbent directors of the Company and, with the exception
of Mr. Yong and Mr. Ting, are “independent” as
specified in Section 803 of the NYSE MKT rules and Rule 10A-3 under
the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”). It is not contemplated that any of the
nominees will be unable or unwilling to serve as a director but, if
that should occur, the persons designated as proxies will vote in
accordance with their best judgment. In no event will Proxies be
voted for a greater number of persons than the number of nominees
named in this Proxy Statement. The following chart and accompanying
narrative set forth, as of October 9, 2017, the names of each of
the five nominees for election as a director, his principal
occupation, age, the year he became a director of the Company, and
additional biographical data.
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NAME
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AGE
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PRINCIPAL OCCUPATION
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A.
Charles Wilson
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93
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Chairman of the
Board of Trio-Tech International
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Chairman of the
Board of Ernest Paper Packaging Solutions, Inc.
Attorney at Law and
Business Consultant,
Chairman of the
Board of Daico Industries, Inc.
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S. W.
Yong
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64
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Chief
Executive Officer and President of Trio-Tech
International
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Richard
M. Horowitz
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76
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President of
Management Brokers Insurance, Inc.
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Jason
T. Adelman
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48
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Chief
Executive Officer of Burnham Hill Capital Group
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Victor
H. M. Ting
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63
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Chief
Financial Officer and Vice President of Trio-Tech
International
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A. Charles Wilson
Mr. Wilson has served as a director of Trio-Tech
since 1966, and was President and Chief Executive Officer of the
Company from 1981 to 1989. In 1989, he was elected Chairman of the
Board. Mr. Wilson is also Chairman of the Board of Ernest
Packaging Solution
s, Inc. and Chairman
of Daico Industries, Inc. as well as an attorney admitted to
practice law in California and a business
consultant.
In
determining that Mr. Wilson should serve on the Company’s
Board of Directors, the Board has considered, among other
qualifications, his professional background and experience, his
leadership skills as a result of his nine years serving as
President and Chief Executive Officer of the Company, his service
as a Chairman on other corporate boards and his broad range of
knowledge of the Company’s history and business through his
51 years of service as a director of the Company.
Siew Wai Yong
Mr.
Yong has been a director, Chief Executive Officer and President of
Trio-Tech since 1990. He joined Trio-Tech International Pte. Ltd.
in Singapore in 1976 and was appointed as its Managing Director in
August 1980. Mr. Yong holds a Master’s Degree in Business
Administration, a Graduate Diploma in Marketing Management and a
Diploma in Industrial Management.
In
determining that Mr. Yong should serve on the Company’s Board
of Directors, the Board has considered, among other qualifications,
his 41 year history with the Company, his intimate knowledge of the
Company’s business and operations and the markets in which
the Company operates, as well as the Company’s customers and
suppliers, and his detailed in-depth knowledge of the issues,
opportunities, and challenges facing the Company and its principal
industries.
Richard M. Horowitz
Mr. Horowitz has served as a director of Trio-Tech
since 1990. He has been President of Management Brokers
Insurance, Inc. since 1974.
Mr. Horowitz holds a
Master’s
Degree in Business
Administration from Pepperdine University
.
Mr. Horowitz was the subject of an SEC
administrative proceeding arising out of the sale of certain
annuity products in 2007 by Management Brokers Insurance,
Inc. The proceeding was wholly unrelated to the
Company’s business and was settled in March 2014 without
requiring Mr. Horowitz to admit to any of the allegations.
The Board believes that the proceeding and the actions alleged
thereunder do not impair upon Mr. Horowitz’s ability or
integrity as a director of the Company.
In
determining that Mr. Horowitz should serve on the Company’s
Board of Directors, the Board has considered, among other
qualifications, his extensive experience and expertise in
administration and management based on his position as
President of Management Brokers Insurance, Inc.
for
more than 43 years and his broad range of knowledge of
the Company’s history and business through his 27 years of
service as a director of the Company.
Jason T. Adelman
Mr.
Adelman was elected to the Board of Trio-Tech in April 1997.
Mr. Adelman is the Founder and Chief Executive Officer of Burnham
Hill Capital Group, LLC, a privately held financial services
holding company headquartered in New York City. Mr. Adelman
serves as Managing Member of Cipher Capital Partners LLC, a private
investment fund. Prior to founding Burnham Hill Capital Group, LLC
in 2003, Mr. Adelman served as Managing Director of Investment
Banking at H.C. Wainwright and Co., Inc. Mr. Adelman graduated Cum
Laude with a B.A. in Economics from the University of Pennsylvania
and earned a JD from Cornell Law School where he served as Editor
of the Cornell International Law Journal.
In
determining that Mr. Adelman should serve on the Company’s
Board of Directors, the Board has considered, among other
qualifications, his experience and expertise in finance,
accounting, banking and management based on his positions as
Managing Member of Cipher Capital
Partners LLC
for 12 years and Chief Executive Officer of
Burnham Hill Capital Group LLC
for 13 years, as well as his position as
Managing Director of Investment Banking in the New
York offices of H. C. Wainwright & Co.
Victor H.M. Ting
Mr.
Ting was appointed as a director of Trio-Tech on September 16,
2010. Mr. Ting is the Vice-President and Chief Financial Officer of
the Company. Mr. Ting joined Trio-Tech as the Financial Controller
for the Company’s Singapore subsidiary in 1980. He was
promoted to the level of Business Manager during 1985 and in
December 1989 he was promoted to the level of Director of Finance
and Sales & Marketing, and later he was promoted to the level
of General Manager of the Singapore subsidiary. Mr. Ting was
elected Vice-President and Chief Financial Officer of Trio-Tech
International in November 1992. Mr. Ting holds a Bachelor of
Accountancy Degree and Master’s Degree in Business
Administration.
In
determining that Mr. Ting should serve on the Company’s Board
of Directors, the Board has considered, among other qualifications,
his expertise in finance, accounting and management based on his 25
year history as
Vice-President and
Chief Financial Officer
of the Company and his intimate
knowledge of the Company’s operations.
Vote Required for Election
The
five persons receiving the highest number of affirmative votes will
be elected as directors of the Company. Votes against a nominee or
withheld from voting (whether by abstention, broker non-votes or
otherwise) will have no legal effect on the vote.
P
ROPOSAL 2
APPROVE THE COMPANY’S 2017 EMPLOYEE STOCK OPTION
PLAN
On September 14, 2017,
the Company’s
Board of Directors unanimously adopted, subject to shareholder
approval, the Company’s 2017 Employee Stock Option Plan. The
purpose of the 2017 Employee Stock Option Plan is to encourage
selected employees, consultants and advisors to improve operations
and increase profits of the Company and to accept or continue
employment or association with the Company or its affiliates, to
increase the interest of such persons in the Company’s
welfare through participation in the growth in value of the
Company’s Common Stock, and to enable the Company to attract
and retain top-quality employees, officer, and consultants and
provide them with an incentive to enhance shareholder return. Up to
300,000 shares of Common Stock (subject to adjustment in the event
of stock splits and other similar events) may be issued pursuant to
awards granted under the 2017 Employee Stock Plan. The full text of
the 2017 Employee Stock Option Plan appears as Exhibit 1 to
this Proxy Statement and the description of the 2017 Employee Stock
Option Plan herein is qualified in its entirety by reference to the
text of the Plan.
The
2017 Employee Stock Option Plan is intended to replace the 2007
Employee Stock Option Plan (“2007 Employee Plan”),
which terminated by its terms on September 24, 2017. As of
September 30, 2017, the Company had outstanding stock options to
officers and employees to purchase an aggregate of 276,375 shares
of Common Stock under the 2007 Employee Plan. No further options
may be granted under the 2007 Employee Plan.
The
closing sales price of the Company’s Common Stock as reported
on the New York Stock Exchange on September 30, 2017 was $
5.24.
Approval of the proposal adopting the 2017 Employee Stock Option
Plan requires the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on that proposal.
Abstentions and broker non-votes will not be voted for or against
the proposal. Because abstentions from voting will be considered
shares present at the Annual Meeting and entitled to vote, the
abstentions will have the effect of a negative vote as a majority
of the shares represented at the meeting is required for approval
of the 2017 Employee Stock Option Plan. Because broker non-votes
are not included in the determination of the number of shares
present at the meeting and entitled to vote, broker non-votes will
have no legal effect on the vote.
Description of the 2017 Employee Stock Option Plan
The 2017 Employee Stock Option Plan provides for the grant of
options to selected employees, consultants and advisers of the
Company to purchase up to an aggregate of 300,000 shares of Common
Stock. At present, there are approximately 45 persons eligible to
participate in the 2017 Employee Stock Option Plan. The 2017
Employee Stock Option Plan will be administered by the Board of
Directors or a committee of the Board (the
“Administrator”). The Administrator will have complete
discretion to select the optionees and to establish the terms and
conditions of each option, subject to the provisions of the 2017
Employee Stock Option Plan. Options granted under the 2017 Employee
Stock Option Plan may be “incentive stock options” as
defined in Section 422 of the Code, or nonqualified options, and
will be designated as such.
The exercise price of options granted under the 2017 Employee Stock
Option Plan may be not less than the fair market value of the
Company’s Common Stock on the date of grant. Fair market
value will be determined as provided in the 2017 Employee Stock
Option Plan, which valuation methodology is intended to come within
the parameters of Section 409A of the Code and the regulations
thereunder. The exercise price of options intended to be incentive
stock options must be 110% of fair market value if such option is
granted to an employee who holds more than 10% of the total
combined voting power of the Company voting
securities.
In accordance with the rules under the Code for incentive stock
options, the 2017 Employee Stock Option Plan provides that
incentive stock options granted to any particular employee under
the 2017 Employee Stock Option Plan or any other incentive option
plan adopted by the Company may not become exercisable for more
than $100,000 in fair market value of the stock (measured on the
grant date) in any calendar year. If incentive stock options
granted to one optionee would become exercisable for more than
$100,000 in a calendar year, then the exercisability of such
incentive stock option will be deferred to the extent necessary to
satisfy the $100,000 limit. This restriction does not apply to
nonqualified options, which may be granted without regard to any
limitation on the amount of the stock for which the option may
become exercisable in any calendar year.
In general, upon termination of employment of an optionee, all
options granted to such person which were not exercisable on the
date of such termination will immediately terminate, and any
options that are exercisable on such termination date will be
exercisable for a period of three months (six months in the case of
termination by reason of death or disability) following termination
of employment.
Options may not be exercised more than ten years after the
date of grant (five years after the date of grant if the grant is
an incentive stock option to an employee who owns more than 10% of
the total combined voting power of all classes of capital stock of
the Company). Options granted under the 2017 Employee Stock Option
Plan are not transferable and may be exercised only by the
respective optionees during their lifetime or by their heirs,
executors or administrators in the event of death. The exercise
price under any option may be paid in cash, cashless exercise, or
shares of Common Stock already owned, as may be determined by the
Administrator. Under the 2017 Employee Stock Option Plan, shares
subject to canceled or terminated options are available for
subsequently granted options. The number of options outstanding and
the exercise price thereof are subject to adjustment in the event
of changes in the outstanding Common Stock by reason of stock
dividends, stock splits, reverse stock splits, split-ups,
consolidations, recapitalizations, reorganizations or like events.
The 2017 Employee Stock Option Plan is effective for ten years,
unless sooner terminated or suspended. The 2017 Employee Stock
Option Plan provides that no person shall be granted options
covering more than 100,000 shares of Common Stock during any twelve
month period.
The Board may at any time amend, alter, suspend or discontinue this
Plan. Without the consent of an optionee, no amendment, alteration,
suspension or discontinuance may adversely affect outstanding
options except to conform to the 2017 Employee Stock Option Plan
and options granted hereunder to the requirements of federal or
other tax laws relating to such stock options. No amendment,
alteration, suspension or discontinuance will require shareholder
approval unless (a) shareholder approval is required to preserve
incentive stock option treatment for federal income tax purposes,
or (b) the Board otherwise concludes that shareholder approval
is advisable. However, no amendment will, without the approval of
the shareholders of the Company, effectuate a change for which
shareholder approval is required in order for the Plan to continue
to qualify under Rule 16b-3 (while it is in effect)
promulgated under the Exchange Act or any successor rule
thereto.
Certain Federal Income Tax Consequences
The following is a brief summary of the principal federal income
tax consequences to the Company and an eligible person (who is a
citizen or resident of the United States for U.S. federal income
tax purposes) of nonqualified options and incentive stock options
granted under the 2017 Employee Stock Option Plan. The summary is
not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences. The federal
income tax consequences of an eligible optionee’s award under
the 2017 Employee Stock Option Plan are complex, are subject to
change and differ from person to person. Each optionee should
consult with his or her own tax adviser as to his or her own
particular situation.
This discussion is based on the Internal Revenue Code of 1986, as
amended (the “Code”), Treasury Regulations promulgated
under the Code, Internal Revenue Service rulings, judicial
decisions and administrative rulings as of the date of this Proxy
Statement, all of which are subject to change or differing
interpretations, including changes and interpretations with
retroactive effect. No assurance can be given that the tax
treatment described herein will remain unchanged at the time that
grants of incentive stock options and/or nonqualified options are
made under the 2017 Employee Stock Option Plan.
Nonqualified Options
.
An optionee generally
recognizes no taxable income as the result of the grant of a
nonqualified option. Upon exercise of such an option, the optionee
generally recognizes ordinary income in the amount of the excess of
the fair market value of the shares on the date of exercise over
the option price for such shares. Upon the sale of stock acquired
by the exercise of a nonqualified option, any gain or loss, based
on the difference between the sale price and the amount recognized
as ordinary income upon exercise of the option, will be taxed as
short-term or long-term capital gain or loss, depending upon the
length of time the optionee has held the stock from the date of
exercise. Special rules apply under Section 16(b) of the Exchange
Act if a participant exercises an option within six months of the
date of grant.
No tax deduction is available to the Company upon
either the grant of a nonqualified option or the sale of stock
acquired pursuant to the exercise of such option. Subject to the
limits on deductibility of employee remuneration under Section
162(m) of the Code, the Company will generally be entitled to a tax
deduction at the time the nonqualified option is exercised in an
amount equal to the amount of ordinary income recognized by the
optionee. Nonqualified options granted to executive officers under
the 2017 Employee Stock Option Plan are intended to qualify as
performance-based compensation for purposes of Section 162(m) of
the Code, and the Company should be entitled to a tax deduction in
the amount of ordinary income recognized by such officers upon the
exercise of the options. However, no tax authority or court has
ruled on the applicability of Section 162(m) to the 2017 Employee
Stock Option Plan. The Company retains the right to grant options
under the 2017 Employee Stock Option Plan in accordance with the
terms of the 2017 Employee Stock Option Plan regardless of whether
the Internal Revenue Service or a court having final jurisdiction
with respect to the matter ultimately determines that the
nonqualified options granted to executive officers are not
deductible under Section 162(m) of the Code.
Incentive Stock Options
.
Upon the grant or
exercise of an incentive stock option, the optionee thereof will
not recognize any income for regular federal income tax purposes.
If an optionee exercises an incentive stock option and retains the
shares received for at least two years after the date of grant of
such option and at least one year from the date of the option
exercise, any gain realized upon the subsequent sale of the shares
will be characterized as long term capital gain. If an optionee
disposes of shares acquired upon exercise of an incentive stock
option within two years after the date of grant of such option or
within one year after the date of exercise of such option, the
disposition will be treated as a disqualifying disposition and an
amount equal to the lesser of (1) the fair market value of the
shares on the date of exercise minus the purchase price, or
(2) the amount realized on the disposition minus the purchase
price, will be taxed as ordinary income to the optionee in the
taxable year in which the disposition occurs. The excess, if any,
of the amount realized upon disposition over the fair market value
at the time of the exercise of the option will be treated as long
or short-term capital gain, depending on the length of time the
optionee has held the stock from the date of
exercise.
The exercise of an incentive stock option may subject an optionee
to alternative minimum tax liability because the excess of the fair
market value of the shares at the time an incentive stock option is
exercised over the exercise price of the shares is included in
income for purposes of the alternative minimum tax, even though it
is not included in taxable income for purposes of determining the
regular tax liability of an optionee. Consequently, an optionee may
be obligated to pay alternative minimum tax in the year he or she
exercises an incentive stock option. As the application of the
alternative minimum tax is complex and depends on each
optionee’s individual tax situation, an optionee should
consult his or her own tax advisor in order to determine whether
the exercise of an incentive stock option will subject the optionee
to the alternative minimum tax.
In general, there will be no federal income tax
deduction allowed to the Company upon the grant, exercise, or
termination of an incentive stock option, or upon the sale of
shares acquired pursuant to the exercise of an incentive stock
option. However, in the event of a disqualifying disposition, the
Company will be entitled to a deduction for federal income tax
purposes in an amount equal to the ordinary income, if any,
recognized by an optionee upon disposition of the shares, provided
that the deduction is not otherwise disallowed under the Internal
Revenue Code.
Both nonqualified
options and incentive stock options granted pursuant to the 2017
Employee Stock Option Plan are intended to be exempt from
Section 409A of the Code. The final Treasury Regulations under
Section 409A exclude from the provisions of that section
(i) any stock options that are incentive stock options under
Section 422 of the Code, and (ii) any nonqualified
options granted with an
exercise price of not less than the fair market
value of the stock on the grant date, provided that the number of
shares subject to the option is fixed on the grant date. The 2017
Employee Stock Option Plan contains definitions of “fair
market value” and “grant date” that are
consistent with those set forth in the Treasury Regulations. As a
result, both nonqualified options and incentive stock options
granted pursuant to the 2017 Employee Stock Option Plan should not
be subject to the accelerated income tax and excise tax provisions
of Section 409A of the Code.
The
Board of Directors recommends a vote
FOR
approval of the 2017 Employee Stock
Option Plan.
P
ROPOSAL 3
APPROVE THE COMPANY’S 2017 DIRECTORS EQUITY INCENTIVE
PLAN
On
September 14, 2017, the Company’s Board of Directors
unanimously adopted, subject to shareholder approval, the 2017
Directors Equity Incentive Plan, subject to shareholder approval.
The purpose of the 2017 Directors Equity Incentive Plan is to
incentivize to serve on the Board of Directors of the Company and
contribute to its long- term growth and profitability objectives.
Up to 300,000 shares of Common Stock (subject to adjustment in the
event of stock splits and other similar events) may be issued
pursuant to awards granted under the 2017 Directors Equity
Incentive Plan. The full text of the 2017 Directors Equity
Incentive Plan appears as Exhibit 2 to this Proxy Statement
and the description of the Plan herein is qualified in its entirety
by reference to the text of the Plan.
The
2017 Directors Equity Incentive Plan is intended to replace the
2007 Directors Equity Incentive Plan (“2007 Directors
Plan”), which terminated by its terms on September 24,
2017. As of September 30, 2017, the Company had outstanding
stock options to directors to purchase an aggregate of 420,000
shares of Common Stock under the 2007 Directors Plan. No further
options may be granted under the 2007 Directors’
Plan.
The
closing sales price of the Company’s Common Stock as reported
on the New York Stock Exchange on September 30, 2017 was $
5.24.
Approval of the proposal adopting the 2017 Directors Equity
Incentive Plan requires the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on that
proposal. Abstentions and broker non-votes will not be voted for or
against the proposal. Because abstentions from voting will be
considered shares present at the Annual Meeting and entitled to
vote, the abstentions will have the effect of a negative vote as a
majority of the shares represented at the meeting is required for
approval of the 2017 Directors Equity Incentive Plan. Because
broker non-votes are not included in the determination of the
number of shares present at the meeting and entitled to vote,
broker non-votes will have no legal effect on the
vote.
Description of the 2017 Directors Equity Incentive
Plan
The 2017 Directors Equity Incentive Plan provides for the grant to
directors of the Company of stock options or restricted stock
awards to purchase up to 300,000 shares of Common Stock (the
“Shares”). The 2017 Directors Equity Incentive Plan is
administered by the Board of Directors (the “Board”) or
a committee of the Board (the “Administrator”). The
persons eligible to participate (the “Participants”) in
the 2017 Directors Equity Incentive Plan are the Directors of the
Company (currently five individuals). The Administrator determines
the meaning and application of the provisions of the 2017 Directors
Equity Incentive Plan and related option agreements.
Options granted under the 2017 Directors Equity Incentive Plan may
only be nonqualified options. The exercise price of each option
granted under the 2017 Directors Equity Incentive Plan shall be
100% of the fair market value of the underlying shares on the date
of grant. Fair market value will be determined as provided in the
2017 Directors Equity Incentive Plan, which valuation methodology
is intended to come within the parameters of Section 409A of
the Code and the regulations thereunder. Each option may be fully
exercisable on the date of the grant and has a term of five years
from the date of the grant. Options granted under the 2017
Directors Equity Incentive Plan will be in addition to the cash fee
paid to each Director. Generally, options may be exercised only by
the individual to whom the option is granted, and are not
transferable or assignable, except that in the event of a
Participant’s death or legal disability, the
Participant’s heirs or legal representatives may exercise the
options for a period not to exceed twelve months.
Options will cease to be exercisable, except for a Director who has
served as a non-employee on the Board for more than five years,
within thirty days after termination of the Participant’s
service as a Director, other than upon termination due to death,
disability or retirement or upon termination for cause. Options
will be exercisable within twelve months of death or disability and
within three months of retirement. Upon termination for cause, a
Director’s options shall be rescinded.
With the approval of the Board or an appropriate committee, a
Director may be granted one or more restricted stock awards under
the 2017 Directors Equity Incentive Plan. Such awards will be
grants of Shares on such terms and conditions, consistent with the
other provisions of the Plan, as may be determined by the Board or
the committee and set forth in a restricted stock agreement with
the Directors.
The Board may terminate or amend the 2017 Directors Equity
Incentive Plan without the approval of the Company’s
shareholders, but shareholder approval would be required in order
to amend the 2017 Directors Equity Incentive Plan to increase the
number of shares, to change the class of persons eligible to
participate in the Plan, to extend the maximum five-year exercise
period or to permit an option exercise price to be fixed at less
than 100% of the fair market value as of the date of
grant.
The
amount of shares reserved for issuance under the 2017 Directors
Equity Incentive Plan and the terms of outstanding options shall be
adjusted in the event of changes in the outstanding Shares by
reason of stock dividends, stock splits, reverse stock splits,
split-ups, consolidations, recapitalizations, reorganizations or
like events.
Certain Federal Income Tax Consequences
The following is a brief summary of the principal federal income
tax consequences to the Company and an eligible person (who is a
citizen or resident of the United States for U.S. federal income
tax purposes) of options and restricted stock awards granted under
the 2017 Directors Equity Incentive Plan. The summary is not
intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences. The federal
income tax consequences of an eligible person’s award under
the 2017 Directors Equity Incentive Plan are complex, are subject
to change and differ from person to person. Each Participant should
consult with his or her own tax adviser as to his or her own
particular situation.
This discussion is based on the Internal Revenue Code of 1986, as
amended (the “Code”), Treasury Regulations promulgated
under the Code, Internal Revenue Service rulings, judicial
decisions and administrative rulings as of the date of this Proxy
Statement, all of which are subject to change or differing
interpretations, including changes and interpretations with
retroactive effect. No assurance can be given that the tax
treatment described herein will remain unchanged at the time that
grants of stock options and/or restricted stock are made under the
2017 Directors Equity Incentive Plan.
Options
.
A Participant generally
recognizes no taxable income as the result of the grant of a
nonqualified option. Upon exercise of such a nonqualified option,
the participant generally recognizes ordinary income in an amount
equal to the excess of the fair market value of the shares on the
date of exercise over the option price paid for such shares. Upon
the sale of stock acquired by the exercise of a nonqualified
option, any gain or loss, based on the difference between the sale
price and the amount recognized as ordinary income upon exercise of
the option, will be taxed as short-term or long-term capital gain
or loss, depending upon the length of time the participant has held
the stock from the date of exercise. No tax deduction is available
to the Company upon either the grant of the option or the sale of
stock acquired pursuant to the exercise of such option. The Company
is entitled to a deduction at the time the option is exercised in
an amount equal to the amount of ordinary income recognized by the
Participant upon exercise of the option. Special rules apply under
Section 16(b) of the Exchange Act if a participant exercises an
option within six months of the date of grant.
Under
the terms of the 2017 Directors Equity Incentive Plan, all options
must be granted with an exercise price per share equal to the fair
market value of a share of the Company’s Common Stock on the
grant date. The final Treasury Regulations under Section 409A
exclude from the provisions of that section any stock options
granted with an exercise price of not less than the fair market
value of the stock on the grant date, provided that the number of
shares subject to the option is fixed on the date of grant. The
stock options granted pursuant to the 2017 Directors Equity
Incentive Plan are intended to be exempt from Section 409A, and the
2017 Directors Plan contains definitions of “fair market
value” and “grant date” that are consistent with
those set forth in the Treasury Regulations under Section 409A. As
a result, nonqualified options granted pursuant to the 2017
Directors Equity Incentive Plan should not be subject to the
accelerated income tax and excise tax provisions of Section 409A of
the Code.
Restricted Stock Issuances
. As long as
restricted stock remains both nontransferable and subject to a
substantial risk of forfeiture, there are generally no tax
consequences resulting from the issuance of such restricted stock
for either the participant or the Company. At such time as the
restricted stock either becomes transferable or is no longer
subject to a substantial risk of forfeiture, the participant will
recognize ordinary income in an amount equal to the excess of the
fair market value of the stock at such time over the amount, if
any, that the recipient paid for the stock. However, the
participant may elect under Section 83(b) of the Code, within 30
days after the issuance of such restricted stock, to recognize as
ordinary income at the time of issuance the excess, if any, of the
fair market value of such restricted stock (valued at the date of
issuance as if it were unrestricted) over the amount that the
recipient paid for it, as ordinary income. The Company will be
entitled to a compensation deduction at the time the participant
recognizes ordinary income equal to the amount of ordinary income
recognized by the participant. If such an election under Section
83(b) is made and the stock is ultimately forfeited, the
participant will not be entitled to a deduction for the amount
previously recognized as ordinary income.
When
stock that was formerly restricted stock is sold or otherwise
disposed of, the tax treatment will depend on whether the
participant made the election described in the previous paragraph.
If the participant did not make the election, disposition of the
stock will result in a long or short term capital gain or loss,
depending on the length of time from the date the restrictions
lapsed to the date of sale or other disposition, in an amount equal
to the difference between the amount received on disposition and
the sum of any amount paid by the participant for the restricted
stock and the amount recognized by the participant as ordinary
income on the date the restrictions lapsed. If the participant made
the election, disposition of the stock will result in a long or
short term capital gain or loss, depending on the length of time
from the date of the restricted stock issuance to the date of
disposition, in an amount equal to the difference between the
amount received on disposition and the sum of any amount paid by
the participant for the restricted stock and the amount recognized
by the recipient as ordinary income at the time of the
grant.
The
final Treasury Regulations under Section 409A exclude from the
provisions of that section any restricted stock issued subject to a
substantial risk of forfeiture, regardless of whether the recipient
makes an election under Section 83(b). As a result, restricted
stock issued pursuant the 2017 Directors Equity Incentive Plan
should not be subject to the accelerated income tax and excise tax
provisions of Section 409A of the Code.
The
Board of Directors recommends a vote
FOR
approval of the 2017 Directors
Equity Incentive Plan.
C
ORPORATE GOVERNANCE
Corporate Governance Program
Our
Board of Directors has established a written Corporate Governance
Program to address significant corporate governance issues that may
arise. It sets forth the responsibilities and qualification
standards of the members of the Board of Directors and is intended
as a governance framework within which the Board of Directors,
assisted by its committees, directs our affairs.
Code of Ethics
The
Company has adopted a written code of business conduct and ethics
applicable to all directors, officers, management and employees and
a separate code of ethics applicable to its principal executive
officer, principal financial officer and principal accounting
officer or controller or persons performing similar
functions. A copy of the Company's code of business conduct
and ethics and code of ethics may be obtained, without charge, upon
written request to the Secretary of the Company at 16139 Wyandotte
Street, Van Nuys, California 91406.
Board Leadership Structure
The
Board of Directors believes it is important to select its Chairman
and the Company’s Chief Executive Officer in the manner it
considers in the best interests of the Company at any given point
in time. The Chairman of the Board and CEO of the Company are held
by separate persons as an aid in the Board's oversight of
management. The duties of the non-executive Chairman of the Board
include:
●
presiding
over all meetings of the Board;
●
preparing
the agenda for Board meetings in consultation with the CEO and
other members of the Board;
●
calling
and presiding over meetings of the independent
directors;
●
managing
the Board's process for annual director self-assessment and
evaluation of the Board and of the CEO; and
●
presiding
over all meetings of shareholders.
The
Board believes that there may be advantages to having an
independent chairman for matters such as communications and
relations between the Board, the CEO, and other senior management;
assisting the Board in reaching consensus on particular strategies
and policies; and facilitating robust director, Board, and CEO
evaluation processes.
Risk Management
The
Chief Executive Officer and senior management are primarily
responsible for identifying and managing the risks facing the
Company, and the Board of Directors oversees these efforts. The
Chief Executive Officer and senior management report to the Board
of Directors regarding any risks identified and steps it is taking
to manage those risks. In addition, the Audit Committee identifies,
monitors and analyzes the priority of financial risks, and reports
to the Board of Directors regarding its financial risk
assessments.
Certain Relationships and Related Transactions
The Board’s Audit Committee is responsible
for review, approval, or ratification of “related-person
transactions” between the Company or its subsidiaries and
related persons. Under SEC rules, a related person is a director,
officer, nominee for director, or 5% shareholder of the Company and
their immediate family members. The Company's code of business
conduct and ethics provides guidance to the Audit Committee for
addressing actual or potential conflicts of interests that may
arise from transactions and relationships between
the
Company
and
its
executive officers or directors. Potential
conflicts relating to other personnel must be addressed by the
Chief Executive Officer or the Chief Financial
Officer
.
There were no related party transactions during
the fiscal year ended June 30, 2017 for which disclosure would be
required under SEC rules.
B
OARD MEETINGS AND
COMMITTEES
The
Board held three regularly scheduled and special meetings during
the fiscal year ended June 30, 2017. All of the directors attended
(in person or by telephone) at least 75% of the meetings of the
Board and any committees of the Board on which they served during
the last full fiscal year. Directors are expected to use their best
efforts to be present at the Annual Meeting of Shareholders. All of
our directors attended the Annual Meeting of Shareholders held on
November 28, 2016.
The
Company does not have a standing nominating committee. The Board
consists of five directors, three of whom are
“independent” (as defined under the rules of the NYSE
MKT upon which the Company’s securities are listed), namely
Jason T. Adelman, Richard M. Horowitz and A. Charles Wilson.
Pursuant to a resolution adopted by the Board, a majority of the
independent directors, following a discussion with the entire
Board, has the sole and ultimate responsibility to determine and
nominate Board candidates for election at the Annual Meeting.
Although nominations are made by a majority of the independent
directors, the three current independent directors value the input
of the entire Board and thus discuss proposed nominees at the Board
level before the ultimate nomination determinations are made by the
independent directors. The Board does not believe that it is
necessary, at this time, given the Board composition and such Board
resolution, to have a separately constituted nominating committee.
At such time as the Board composition changes, the Board may elect
to establish a separate nominating committee.
The Board has also adopted a resolution addressing
the nomination process and related matters and it states, among
other things, that the Board believes that the continuing service
of qualified incumbents promotes stability and continuity in the
boardroom, contributing to the Board's ability to work as a
collective body, while giving the Company the benefit of the
familiarity and insight into the Company's affairs that its
directors have accumulated during their tenure. The resolution
further states that the Board will evaluate the performance of its
Board members on an annual basis in connection with the nomination
process. The Board may solicit recommendations for nominees from
persons that the Board believes are likely to be familiar with
qualified candidates, including without limitation members of the
Board and management of the Company. The Board may also determine
to engage a professional search firm to assist in identifying
qualified candidates if the need arises. In addition, the
Board
has the authority to retain third-party consultants to
provide advice regarding compensation issues.
The Board has not adopted specific minimum
qualifications for a position on the Company’s Board or any
specific skills or qualities that the Board believes are necessary
for one or more of its members to possess. However, the Board will
consider various factors including without limitation the
candidate’s qualifications, the extent to which the
membership of the candidate on the Board will promote diversity
among the directors, and such other factors as the Board may deem
to be relevant at the time and under the then existing facts and
circumstances.
The Company does not have a formal policy
with regard to the consideration of diversity in identifying
nominees for director. The Board of Directors seeks to nominate
directors with a variety of skills and experience so that the Board
will have the necessary expertise to oversee the Company’s
business.
The Company did not receive
any recommendations as to nominees for election of directors for
the Annual Meeting of Shareholders to be held on December 4,
2017.
The
Board will consider candidates proposed by shareholders of the
Company and will evaluate all such candidates upon criteria similar
to the criteria used by the Board to evaluate other candidates.
Shareholders desiring to propose a nominee for election to the
Board must do so in writing sufficiently in advance of an annual
meeting so that the Board has the opportunity to make an
appropriate evaluation of such candidate and his or her
qualifications and skills and to obtain information necessary for
preparing all of the disclosures required to be included in the
Company’s proxy statement for the related meeting should such
proposed candidate be nominated for election by shareholders.
Shareholder candidate proposals should be sent to the attention of
the Secretary of the Company at 16139 Wyandotte Street, Van Nuys,
California 91406.
The Board has a standing Compensation Committee,
which currently consists of the three independent directors, namely
Jason T. Adelman, Richard M. Horowitz and A. Charles Wilson,
Chairman. The Compensation Committee determines salary and bonus
arrangements. The Compensation Committee met five times during the
fiscal year ended June 30, 2017. The Compensation Committee has a
written charter. T
he current Compensation
Committee Charter is included as Appendix A to this Proxy
Statement.
For
the
fiscal year ended June 30, 2017, the Compensation Committee did not
retain a third-party consultant to review the Company’s
current policies and procedures with respect to executive
compensation.
The
Board has a separately-designated standing Audit Committee
established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended. The members thereof
consist of Jason T. Adelman, Richard M. Horowitz and A. Charles
Wilson, Chairman. The Board of Directors has determined that the
Audit Committee has at least one financial expert, namely A.
Charles Wilson. The Board of Directors has affirmatively determined
that Mr. Wilson does not have a material relationship with the
Company that would interfere with the exercise of independent
judgment and is “independent” as independence is
defined in Section 803 of the rules of the NYSE MKT. Pursuant to
its written charter, which charter was adopted by the Board of
Directors, the Audit Committee is charged with, among other
responsibilities, selecting our independent public accountants,
reviewing our annual audit and meeting with our independent public
accountants to review planned audit procedures. The Audit Committee
also reviews with the independent public accountants and management
the results of the audit, including any recommendations of the
independent public accountants for improvements in accounting
procedures and internal controls. The Audit Committee held eight
meetings during the fiscal year ended June 30, 2017. Each of the
members of the Audit Committee satisfies the independence standards
specified in Section 803 of the rules of the NYSE MKT and Rule
10A-3 under the Securities Exchange Act of 1934, as amended. The
current Audit Committee Charter is included as Appendix B to this
Proxy Statement..
DIRECTORS’ COMPENSATION
Our
directors play a critical role in guiding our strategic direction
and overseeing our management. In order to compensate them for
their substantial time commitment, we provide a mix of cash and
equity-based compensation. We do not provide pension or retirement
plans for non-employee directors. Our employee directors, S.W. Yong
and Victor Ting, do not receive separate compensation for Board
service.
During the fiscal year ended June 30, 2017,
Richard M. Horowitz and Jason T. Adelman, as non-employee
directors, received quarterly fees in an amount equal to $7,500 for
each quarter and for service on the various committees of which
they are a member. A. Charles Wilson, as a non-employee director,
Chairman of the Board,
Chairman of the Audit Committee and
Chairman of the Compensation Committee, received $16,000 in
quarterly fees for each quarter and for service on the various
committees of which he is a member. The directors were also
reimbursed for out-of-pocket expenses incurred in attending
meetings.
Prior to the termination of the 2007 Directors
Plan and 2007 Employee Plan on September 24, 2017, each of our
directors iswas entitled to participate in our 2007 Directors
Equity Incentive Plan (“2007 Directors Plan”).Plan.
Messrs. Yong and Ting, as employees of the Company, arewere also
entitled to participate in our
2007 Employee Stock Option
Plan (“2007 Employee Plan”).
.
On March 30,
2017, pursuant to the 2007 Directors Plan, Mr. Wilson was granted
an option to purchase 25,000 shares, and Messrs. Horowitz and
Adelman each were granted an option to purchase 12,500 shares of
Common Stock at an exercise price of $4.14 per share. Each such
option vested immediately upon grant and will terminate five years
from the date of grant unless terminated sooner upon termination of
the optionee’s status as a director or otherwise pursuant to
the 2007 Directors Plan.
The exercise price
under the options was set at 100% of fair market value (as defined
in the 2007 Directors Plan) of the Company’s Common Stock on
the date of grant of each such option.
As
of June 30, 2017, there were only 80,000 shares available for grant
under the 2007 Directors Plan. No further options may be granted
pursuant to the 2007 Directors Plan due to its
termination.
The
Compensation Committee reviewed the average directors’ fees
for comparable public companies. The Compensation Committee
believes that the director fees paid to its directors were and are
substantially less than the fees paid to directors of comparable
public companies. Directors’ compensation may be increased
based on the profitability of the Company.
The following table contains information on
compensation for our non-employee members of our Board of Directors
for the
fiscal year ended June 30, 2017.
|
DIRECTOR
COMPENSATION
|
|
||
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Option Awards
($)
(
1
)
|
Total
($)
|
|
A. Charles Wilson
(2)
|
64,000
|
31,000
|
95,000
|
|
Richard M. Horowitz
(3)
|
30,000
|
15,500
|
45,500
|
|
Jason T. Adelman
(4)
|
30,000
|
15,500
|
45,500
|
(1)
The option awards
are based on the fair value of stock options on the grant date
computed in accordance with FASB ASC Topic 718.
(2)
The
total shares underlying option awards outstanding as of June 30,
2017 were 170,000.
(3)
The
total shares underlying option awards outstanding as of June 30,
2017 were 87,500.
(4)
The
total shares underlying option awards outstanding as of June 30,
2017 were 87,500.
S
ECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS, DIRECTORS AND MANAGE
MENT
The
following table sets forth, as of September 30, 2017, certain
information regarding the beneficial ownership of the Common Stock
by (i) all persons known by the Company to be the beneficial owners
of more than 5% of its Common Stock, (ii) each of the directors of
the Company, (iii) each of the Named Executive Officers (as defined
under the heading “EXECUTIVE COMPENSATION” below), and
(iv) all executive officers and directors of the Company as a
group. To the knowledge of the Company, unless otherwise indicated,
each of the shareholders has sole voting and investment power with
respect to shares beneficially owned, subject to applicable
community property and similar statutes.
|
Name
|
Amount of Shares Owned Beneficially
(1)
|
|
Percent of Class
(1)
|
|
|
|
|
|
|
S. W. Yong
(2)
|
527,818
|
|
14.6
%
|
|
A. Charles Wilson
(3)
|
430,500
|
(4)
|
11.6
%
|
|
Richard M. Horowitz
(5)
|
421,864
|
|
11.7
%
|
|
Jason T. Adelman
(6)
|
94,900
|
|
2.6
%
|
|
Victor H. M. Ting
(7)
|
170,177
|
|
4.7
%
|
|
Hwee Poh
Lim
|
80,733
|
|
2.3
%
|
|
All Directors and
Executive
|
|
|
|
|
Officers
as a group (7 persons)
|
1,741,342
|
(8)
|
43.2
%
|
|
FMR
LLC
|
277,400
|
(9)
|
7.9
%
|
(1)
The
percent of class is based upon 3,533,055 shares outstanding and
494,375 stock options issued. The number of shares indicated and
the percentage shown for each individual assumes the exercise of
options that are presently exercisable or may become exercisable
within 60 days from September 30, 2017 which are held by that
individual or by all executive officers and directors as a group,
as the case may be. The address for each of the directors and
executive officers above is in care of the Company at 16139
Wyandotte Street, Van Nuys, California 91406.
(2)
Includes
vested options to purchase an aggregate of 83,750 shares from the
Company at exercise prices from $3.10 to $4.14 per
share.
(3)
Includes
vested options to purchase an aggregate of 170,000 shares from the
Company at exercise prices from $2.07 to $4.14 per
share.
(4)
The
shares are held in a revocable family trust.
(5)
Includes
vested options to purchase an aggregate of 87,500 shares from the
Company at exercise prices from $2.07 to $4.14 per
share.
(6)
Includes
vested options to purchase an aggregate of 87,500 shares from the
Company at exercise prices from $2.07 to $4.14 per
share.
(7)
Includes
vested options to purchase an aggregate of 65,625 shares from the
Company at exercise prices from $3.10 to $4.14.
(8)
Includes
vested options to purchase an aggregate of 494,375 shares from the
Company at exercise prices from $2.07 to $4.14 per
share.
(9)
Based
on Form 13G filed by FMR LLC on February 14, 2017. The address of
FMR LLC is 245 Summer Street, Boston, MA 02210.
The
Company does not know of any arrangements that may at a subsequent
date result in a change of control of the Company.
E
XECUTIVE
OFFICERS
The
following persons were our only executive officers, as of October
9, 2017:
S.W. Yong
- Mr. Yong, age 64, is our President and Chief
Executive Officer.
He is also a member of our Board of
Directors
. Biographical information
regarding Mr. Yong is set forth under the section entitled
“Election of Directors.”
Victor H.M. Ting
- Mr. Ting, age 63, is our
Vice-President and Chief Financial Officer.
He is also a
member of our Board of Directors
.
Biographical information regarding Mr. Ting is set forth under the
section entitled “Election of
Directors.”
Hwee Poh Lim
- Mr. Lim, age 58, is our Corporate
Vice-President-Testing. Mr. Lim joined Trio-Tech in 1982 and became
the Quality Assurance Manager in 1985. He was promoted to the
position of Operations Manager in 1988. In 1990 he was promoted to
Business Manager and was responsible for the Malaysian operations
in Penang and Kuala Lumpur. Mr. Lim became the General Manager of
the Company’s Malaysia subsidiary in 1991. In February 1993,
all test facilities in Southeast Asia came under Mr. Lim’s
responsibility. He holds diplomas in Electronics &
Communications and Industrial Management and a Master’s
Degree in Business Administration. He was elected Corporate
Vice-President-Testing in July 1998.
S. K. Soon –
Ms.
Soon, age 59, joined Trio-Tech Singapore in 1981 and became the
Personnel and Administration Manager in 1985. In 1991, she was
promoted to Group Logistics Manager and was responsible for the
overall logistics and human resources functions for our operations
in Asia. Effective July 1, 2015, she was appointed as Corporate
Vice-President and currently oversees the Company's Logistics and
Human Resources functions
in Asia
.
S
ECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires that
directors, certain officers of the Company and beneficial owners of
more than 10% of our Common Stock file reports of ownership and
changes in ownership with the SEC as to the Company’s
securities beneficially owned by them. Such persons are also
required by SEC rules to furnish the Company with copies of all
Section 16(a) forms they file.
Based
solely on its review of copies of such forms received by the
Company, or on written representations from certain reporting
persons, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with during the fiscal
year ended June 30, 2017.
E
QUITY COMPENSATION PLAN
INFORMATION
The Company’s
2007 Employee Plan and 2007 Directors Plan were approved by the
Board on September 24, 2007 and by the shareholders on
December 3, 2007 and were subsequently amended, which
amendments were approved by the Company’s shareholders, on
December 14, 2010. The 2007 Directors Plan was further amended to
increase the number of shares of Common Stock, which amendments
were approved by the Company’s shareholders, on December 9,
2013. As of the date hereof, 600,000 shares are covered by the 2007
Employee Plan and 500,000 shares are covered by the Directors Plan.
The purpose of these two plans is to enable the Company to attract
and retain top-quality employees, officers, directors and
consultants and to provide them with an incentive to enhance
shareholder return.
The 2007 Directors
Plan was further amended to increase the number of shares of Common
Stock, which amendments were approved by the Company’s
shareholders, on December 9, 2013. On September 24, 2017, each of
the 2007 Employee Plan and 2007 Director Plan terminated in
accordance with its terms.
The following table
provides information as of June 30, 2017 with respect to shares of
our Common Stock that may be
were
issued pursuant to our existing equity
compensation plans
which existed as of
that date. No further options may be granted pursuant to the 2007
Employee Plan or the 2007 Directors
Plan.
C
OMPENSATION
DISCUSSION AND ANALYSIS
The Compensation Committee
The
Compensation Committee reviews and approves corporate goals and
objectives relating to the compensation of the Chief Executive
Officer; reviews goals and objectives of other executive officers;
establishes the performance criteria (including both long-term and
short-term goals) to be considered in light of those goals and
objectives; evaluates the performance of the executives; determines
and approves the compensation level for the Chief Executive
Officer; and reviews and approves compensation levels of other key
executive officers.
Compensation Objectives
The
Company operates in a highly competitive and rapidly changing
industry. The key objectives of the Company’s executive
compensation programs are to:
●
attract, motivate
and retain executives who drive Trio-Tech’s success and
industry leadership;
●
provide each
executive, from Vice-President to Chief Executive Officer, with a
base salary based on the market value of that role, and the
individual’s demonstrated ability to perform that
role;
●
motivate executives
to create sustained shareholder value by ensuring all executives
have an “at risk” component of total compensation that
reflects their ability to influence business outcomes and financial
performance.
What Our Compensation Program is Designed to Reward
Our compensation program is designed to reward
each individual executive officer’s contribution to
the advancement of the Company’s overall performance and
execution of our goals, ideas and objectives. It is designed to
reward and encourage exceptional performance at the individual
level in the areas of organization, creativity and responsibility
while supporting the Company’s core values and ambitions.
This in turn aligns the interest of our executive officers with the
interests of our shareholders, and thus with the interests of the
Company.
Determining Executive Compensation
The
Compensation Committee reviews and approves the compensation
program for executive officers annually after the closing of each
fiscal year. Reviewing the compensation program at such time allows
the Compensation Committee to consider the overall performance of
the past fiscal year and the financial and operating plans for the
upcoming fiscal year in determining the compensation program for
the upcoming fiscal year.
The
Compensation Committee also annually reviews market compensation
levels with comparable jobs in the industry to determine whether
the total compensation for our officers remains in the targeted
median pay range. This assessment includes evaluation of base
salary, annual incentive opportunities, and long-term incentives
for the key executive officers of the Company. The Company did not
hire any compensation consultants in connection with setting
executive compensation for the fiscal year ended June 30,
2017.
The
Compensation Committee’s compensation decisions are based on
the Company’s operation performance, the performance and
contribution of each individual officer, and the compensation
budget and objectives of the Company. The Compensation Committee
also considers other factors, such as the experience and potential
of the officer and the market compensation level for a similar
position.
Role of Executive Officers in Determining Executive
Compensation
The
Compensation Committee determines compensation for the Chief
Executive Officer, which is based on different factors, such as
level of responsibility and contributions to the performance of the
Company. The Chief Executive Officer recommends the compensation
for the Company's executive officers (other than the compensation
of the Chief Executive Officer) to the Compensation Committee. The
Compensation Committee reviews the recommendations made by the
Chief Executive Officer and determines the compensation of the
Chief Executive Officer and the other executive officers. The Chief
Executive Officer is not present during voting on, or deliberations
concerning, his compensation.
Components of Executive Compensation
The
Company’s compensation program has three major components:
(1) base annual salary; (2) potential annual cash incentive
awards that are based primarily on financial performance of the
Company or its relevant business operating units; and
(3) long-term incentive compensation in the form of stock
options.
Base Salary
Base
salaries are provided as compensation for day-to-day
responsibilities and services to the Company and to meet the
objective of attracting and retaining the talent needed to run the
business.
Base
salary for our executive officers was determined utilizing various
factors.
One
factor that was taken into account in determining base salary for
our executive officers was the compensation policies of other
companies comparable in size to and within substantially the same
industry as Trio-Tech. Keeping our executive officers’
salaries in line with the market ensures the Company’s
competitiveness in the marketplace in which the Company competes
for talent.
Another
factor taken into account in determining base salary for our
executive officers was salaries paid by us to our executive
officers during the immediately preceding year and increases in the
cost of living.
The
Compensation Committee will review the Company’s financial
condition, macroeconomic conditions and adjust base salaries at
least quarterly in order to ascertain the appropriate time to
restore base salaries to pre-reduction levels.
The
salary for each of our Named Executive Officers for the fiscal year
ended June 30, 2017 and the percentage increase in their salary
from the prior fiscal year’s salary were as
follows:
|
Executives
|
Base
Salary
|
Percent
Increased
(1)
|
|
S.
W. Yong, Chief Executive Officer
|
$
234,372
|
1.5
%
|
|
Victor H. M. Ting,
Vice President and Chief
Financial Officer
|
$
138,846
|
1.5
%
|
|
Hwee Poh Lim, Vice
President-Testing
|
$
90,136
|
1.5
%
|
(1)
Percent increase is
based on the increase in base salary in the currency of Singapore.
The appreciation of Singapore dollars against U.S. dollars is
excluded in the calculation. The base cash compensation for the
above named officers of the Company, each of whom resides in
Singapore, in fiscal year ended June 30, 2017, was denominated in
the currency of Singapore. The exchange rate therefore was
established as of June 30, 2017 and was computed to be 1.3913
Singapore dollars to each U.S. dollar.
Singapore executive
officers’ base salaries are credited with a compulsory
contribution ranging from 2.8% to 10.6% of base salary as required
under Singapore’s provident pension fund.
Bonuses
In
November 2016, The Compensation Committee approved the bonus
formulae for Company's executive officers, as intended to satisfy
the requirements of Section 162(m) of the Code.
The
bonus for each of our Named Executive Officers for the fiscal year
ended June 30, 2017 was as follows:
|
Executives
|
Bonus
|
|
S.
W. Yong, Chief Executive Officer
|
$
63,561
|
|
Victor H. M. Ting,
Vice President and Chief
Financial Officer
|
$
36,824
|
|
Hwee Poh Lim, Vice
President-Testing
|
$
26,625
|
Option Grants
Stock
options are intended to align the interests of key executives and
shareholders by placing a portion of the key executives’
compensation at risk, tied to long-term shareholder value creation.
Stock options are granted at 100% of the “fair market
value” (as defined under the applicable plan) of the
Company’s Common Stock on the date of grant.
The Compensation Committee believes that stock
options are flexible and relatively inexpensive to implement when
compared with cash bonuses. It also has no negative impact on the
Company’s cash flow. The Compensation Committee believes that
long-term incentives in the form of stock options can better
encourage the executive officers to improve operations and increase
profits for the Company through participation in the growth in
value of the Company’s Common Stock.
The
Compensation Committee views any option grant portion of our
executive officer compensation packages as a special form of
long-term incentive compensation to be awarded on a limited and
non-regular basis. The objective of these awards is to ensure that
the interests of our executives are closely aligned with those of
our shareholders. These awards provide rewards to our executive
officers based upon the creation of incremental shareholder value
and the attainment of long-term financial goals. Stock options
produce value to our executive officers only if the price of our
stock appreciates, thereby directly linking the interests of our
executive officers with those of our shareholders.
Awards
of stock options are determined based on the Compensation
Committee’s subjective determination of the amount of awards
necessary, as a supplement to an executive officer’s base
salary, to retain and motivate the executive officer.
In fiscal year 2017, we granted the following
stock options covering the following officers pursuant to
the
2007 Directors Plan
and
2007 Employee Plan as
indicated below.
In fiscal year 2017, prior to the termination of
the 2007 Directors Plan and 2007 Employees Plan, we granted the
following stock options covering the following officers pursuant to
the
2007 Directors Plan
and
2007 Employee Plan as
indicated below.
|
Executives
|
2007 Directors Plan
|
2007 Employee Plan
|
Total
|
|
S. W. Yong, Chief
Executive Officer
|
-
|
25,000
|
25,000
|
|
Victor H. M. Ting,
Vice President and Chief Financial Officer
|
-
|
12,500
|
12,500
|
At the
2013 Annual Meeting of Shareholders, the Company’s
shareholders voted to conduct future advisory votes on executive
compensation on an “every one year” basis. The Board of
Directors had recommended in the proxy statement for the 2013
Annual Meeting a vote for the “every three years”
option. The Board of Directors had made such recommendation based
on its conclusion that an advisory vote at such frequency would
provide the Company’s shareholders with sufficient time to
evaluate the effectiveness of its overall compensation philosophy,
policies and practices in the context of the Company’s
long-term business results, while avoiding more emphasis on short
term variations in compensation and business
results. Therefore, the Board decided to conduct future
advisory votes on executive compensation on an “every three
years” basis until at least the next vote by the
Company’s shareholders on the frequency of such votes, which
will be no later than the Annual Meeting to be held in
2019.
R
EPORT OF THE AUDIT
COMMITTEE
During
the fiscal year ended June 30, 2017, the Audit Committee
fulfilled its duties and responsibilities as outlined in its
charter. The Audit Committee reviewed and discussed the
Company’s audited consolidated financial statements and
related footnotes for the fiscal year ended June 30, 2017, and
the independent auditor’s report on those financial
statements, with the Company’s management and Mazars LLP
(“Mazars”), the Company’s independent auditor.
Management presented to the Audit Committee that the
Company’s financial statements were prepared in accordance
with accounting principles generally accepted in the United States
of America. The Audit Committee has discussed with Mazars the
matters required to be discussed with the Audit Committee by the
statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards
,
Vol. 1 AU Section 380) as adopted by the Public Company Accounting
Oversight Board in Rule 3200T. The Audit Committee’s review
included a discussion with management and the independent auditor
of the quality (not merely the acceptability) of the
Company’s accounting principles, the reasonableness of
significant estimates and judgments, and the disclosures in the
Company’s financial statements, including the disclosures
relating to critical accounting policies.
The
Audit Committee recognizes the importance of maintaining the
independence of the Company’s independent auditor, both in
fact and appearance. The Audit Committee has evaluated
Mazars’s qualifications, performance, and independence,
including that of the lead audit partner. As part of its auditor
engagement process, the Audit Committee considers whether to rotate
the independent audit firm. The Audit Committee has established a
policy pursuant to which all services, audit and non-audit,
provided by the independent auditor must be pre-approved by the
Audit Committee or its delegate. The Company’s pre-approval
policy is more fully described in this Proxy Statement under the
caption “Policy for pre-approval of audit and non-audit
services.” The Audit Committee has concluded that provision
of the non-audit services described in that section is compatible
with maintaining the independence of Mazars. In addition, the Audit
Committee has received the written disclosure and the letter from
Mazars required by the applicable requirements of the Public
Company Accounting Oversight Board regarding Mazars’
communications with the Audit Committee concerning independence and
has discussed with Mazars its independence.
Based
on the above-described review, written disclosures, letter and
discussions, the Audit Committee recommended to the Board of
Directors of the Company that the audited financial statements for
the fiscal year ended June 30, 2017 be included in the
Company’s Annual Report on Form 10-K.
Dated
October 16, 2017
THE
AUDIT COMMITTEE
A.
Charles Wilson, Chairman
Jason
T. Adelman
Richard
M. Horowitz
E
XECUTIVE
COMPENSATION
The
following table shows compensation information concerning
compensation awarded to, earned by or paid for services rendered to
the Company in all capacities during the fiscal years ended June
30, 2017 and 2016 by our Chief Executive Officer and our two most
highly compensated executive officers (other than our Chief
Executive Officer) who were serving as executive officers at the
end of the fiscal year ended June 30, 2017 (the “Named
Executive Officers”).
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)
(1)
|
|
All
Other Compensation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
S. W. Yong
(2)
|
2017
|
234,372
|
63,561
|
35,250
|
(3)
|
22,057
|
(4)
|
355,240
|
|
President and Chief
Executive Officer
|
2016
|
230,859
|
62,180
|
71,750
|
(5)
|
23,555
|
(6)
|
388,344
|
|
|
|
|
|
|
|
|
|
|
|
Victor H. M. Ting
(2)
|
2017
|
138,846
|
36,824
|
17,625
|
(7)
|
19,481
|
(8)
|
212,776
|
|
Vice President and
Chief Financial Officer
|
2016
|
136,763
|
24,872
|
55,250
|
(9)
|
19,249
|
(10)
|
236,134
|
|
|
|
|
|
|
|
|
|
|
|
Hwee Poh
Lim
|
2017
|
90,136
|
26,625
|
--
|
|
21,497
|
(11)
|
138,258
|
|
Vice President -
Testing
|
2016
|
88,784
|
19,548
|
--
|
|
19,341
|
(12)
|
127,673
|
(1)
The
option awards are based on the fair value of stock options on the
grant date computed in accordance with ASC Topic 718.
(2)
Neither
Mr. Yong nor Mr. Ting received any fees for services rendered as a
director of Trio-Tech International.
(3)
A
stock option covering 25,000 shares of Common Stock was granted to
Mr. Yong pursuant to the 2007 Employee Plan on March 30, 2017. The
option has a five-year term and vests over the period as follows:
25% vesting on the grant date and the remaining balance vesting in
equal installments on the next three succeeding anniversaries of
the grant date.
(4)
The
amount shown in the other compensation column includes central
provident fund contributions of $6,598, car benefits of $10,899,
and director fees of $4,560 for service as a director for Trio-Tech
Malaysia and Trio-Tech Kuala Lumpur, which are 55% owned by the
Company. Singapore officers are credited with a compulsory
contribution to their central provident fund at a certain
percentage of their base salaries in accordance with Singapore law,
except for bonuses in this context. The compulsory contribution
with respect to Mr. Yong was 2.8% for fiscal 2017.
(5)
A
stock option covering 25,000 shares of Common Stock was granted to
Mr. Yong pursuant to the 2007 Director Plan on March 21, 2016. The
option has a five-year term and was immediately exercisable in full
as of the grant date. On March 21, 2016, a stock option covering
25,000 shares of Common Stock was granted to Mr. Yong pursuant to
the 2007 Employee Plan. The option has a five-year term and vests
over the period as follows: 25% vesting on the grant date and the
remaining balance vesting in equal installments on the next three
succeeding anniversaries of the grant date.
(6)
The
amount shown in the other compensation column includes central
provident fund contributions of $5,687, car benefits of $13,131,
and director fees of $4,737 for service as a director for Trio-Tech
Malaysia and Trio-Tech Kuala Lumpur, which are 55% owned by the
Company. Singapore officers are credited with a compulsory
contribution to their central provident fund at a certain
percentage of their base salaries in accordance with Singapore law,
except for bonuses in this context. The compulsory contribution
with respect to Mr. Yong was 2.5% for fiscal 2016.
(7)
A
stock option covering 12,500 shares of Common Stock was granted to
Mr. Ting pursuant to the 2007 Employee Plan on March 30, 2017. The
option has a five-year term and vests over the period as follows:
25% vesting on the grant date and the remaining balance vesting in
equal installments on the next three succeeding anniversaries of
the grant date.
(8)
The
amount shown in the other compensation column includes central
provident fund contributions of $6,598, car benefits of $9,610, and
director fees of $3,273 for the service as a director for Trio-Tech
Malaysia and Trio-Tech Kuala Lumpur, which are 55% owned by the
Company. Singapore officers are credited with a compulsory
contribution to their central provident fund at a certain
percentage of their base salaries in accordance with Singapore law,
except for bonuses in this context. The compulsory contribution
with respect to Mr. Ting was 4.8% for fiscal 2017.
(8)
The
amount shown in the other compensation column includes central
provident fund contributions of $6,598, car benefits of $9,610, and
director fees of $3,273 for the service as a director for Trio-Tech
Malaysia and Trio-Tech Kuala Lumpur, which are 55% owned by the
Company. Singapore officers are credited with a compulsory
contribution to their central provident fund at a certain
percentage of their base salaries in accordance with Singapore law,
except for bonuses in this context. The compulsory contribution
with respect to Mr. Ting was 4.8% for fiscal 2017.
(9)
A stock option covering 25,000 shares of Common
Stock was granted to Mr. Ting pursuant to the 2007 Directors Plan
on March 21, 2016. The option has a five-year term and was
immediately exercisable in full as of the grant date. On March 21,
2016, a stock option covering 15,000 shares of Common Stock was
granted to Mr. Ting pursuant to the 2007 Employee Plan. The option
has a five-year term and
vests over the period as follows:
25% vesting on the grant date and the remaining balance vesting in
equal installments on the next three succeeding anniversaries of
the grant date.
(10)
The
amount shown in the other compensation column includes central
provident fund contributions of $5,203, car benefits of $10,645,
and director fees of $3,401 for the service as a director for
Trio-Tech Malaysia and Trio-Tech Kuala Lumpur, which are 55% owned
by the Company. Singapore officers are credited with a compulsory
contribution to their central provident fund at a certain
percentage of their base salaries in accordance with Singapore law,
except for bonuses in this context. The compulsory contribution
with respect to Mr. Ting was 3.8% for fiscal 2016.
(11)
The
amount shown in the other compensation column includes central
provident fund contributions of $9,531, car benefits of $10,446,
and director fees of $1,520 for service as a director for Trio-Tech
Malaysia and Trio-Tech Kuala Lumpur, which are 55% owned by the
Company. Singapore officers are credited with a compulsory
contribution to their central provident fund at a certain
percentage of their base salaries in accordance with Singapore law,
except for bonuses in this context. The compulsory contribution
with respect to Mr. Lim was 10.6% for fiscal 2017.
(12)
The
amount shown in the other compensation column includes central
provident fund contributions of $7,662, car benefits of $10,100,
and director fees of $1,579 for service as a director for Trio-Tech
Malaysia and Trio-Tech Kuala Lumpur, which are 55% owned by the
Company. Singapore officers are credited with a compulsory
contribution to their central provident fund at a certain
percentage of their base salaries in accordance with Singapore law,
except for bonuses in this context. The compulsory contribution
with respect to Mr. Lim was 8.6% for fiscal 2016.
Narrative Disclosure to Summary Compensation Table
Base Salary
. Base salaries for the
fiscal year ended June 30, 2017 for Messrs. Yong, Ting and Lim were
$234,372, $138,846 and $90,136, respectively.
Bonuses.
Bonuses for the fiscal year
ended June 30, 2017 for Messrs. Yong, Ting and Lim were $63,561,
$36,824 and $26,625, respectively
.
Option Awards.
Stock options are
granted at 100% of the fair market value of the Company’s
Common Stock on the date of grant. Awards of stock options are
determined based on the Compensation Committee’s subjective
determination of amount of awards necessary, as a supplement to an
executive officer’s base salary, to retain and motivate the
executive officer. Options covering 37,500 shares were granted on
March 30, 2017 pursuant to the 2007 Employee Plan, which options
vest over the period as followings:
25% vesting on the grant date and the remaining
balance vesting in equal installments on the next three succeeding
anniversaries of the grant date
in.
All Other Compensation
. All other
compensation includes central provident fund contributions at a
certain percentage of the base salaries in accordance with
Singapore law, car benefits and director fees for service as a
director for certain subsidiaries of the Company.
The
Company does not generally provide its executive officers with
payments or other benefits at, following, or in connection with
retirement. The Company does not have a nonqualified deferred
compensation plan that provides for deferral of compensation on a
basis that is not tax-qualified for its executive
officers.
Outstanding Equity Awards at Fiscal Year-End
The
following table provides information concerning shares of our
Common Stock covered by exercisable and un-exercisable options held
by the Named Executive Officers as of June 30, 2017, our last
completed fiscal year end:
|
OUTSTANDING
EQUITY AWARDS AT JUNE 30, 2017
|
|||||
|
|
Option Awards
|
||||
|
|
Number of
|
|
Number of
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
Unexercised
|
|
Unexercised
|
Option
|
|
|
|
Options
|
|
Options
|
Exercise
|
Option
|
|
|
(#)
|
|
(#)
|
Price
|
Expiration
|
|
Name
|
Exercisable
|
|
Un-exercisable
|
($)
|
Date
|
|
S. W.
Yong
|
6,250
|
(1)
|
18,750
|
$
4.14
|
03/30/2022
|
|
|
25,000
|
(2)
|
-
|
$
3.26
|
03/21/2021
|
|
|
12,500
|
(3)
|
12,500
|
$
3.26
|
03/21/2021
|
|
|
20,000
|
(4)
|
-
|
$
3.10
|
12/09/2018
|
|
|
20,000
|
(5)
|
-
|
$
3.62
|
09/17/2018
|
|
|
|
|
|
|
|
|
Victor
H.M. Ting
|
3,125
|
(1)
|
9,375
|
$
4.14
|
03/30/2022
|
|
|
25,000
|
(2)
|
-
|
$
3.26
|
03/21/2021
|
|
|
7,500
|
(3)
|
7,500
|
$
3.26
|
03/21/2021
|
|
|
15,000
|
(4)
|
-
|
$
3.10
|
12/09/2018
|
|
|
15,000
|
(6)
|
-
|
$
3.62
|
09/17/2018
|
(1)
Stock option
granted on March 30, 2017 pursuant to the 2007 Employee Plan, that
will fully vest on March 30, 2020 (one-fourth of the grant vested
or will vest every year beginning on March 30, 2017).
(2)
Stock option
granted on March 21, 2016 pursuant to the 2007 Directors Plan,
which option was immediately exercisable in full.
(3)
Stock option
granted on March 21, 2016 pursuant to the 2007 Employee Plan, that
will fully vest on March 21, 2019 (one-fourth of the grant vested
or will vest every year beginning on March 21, 2016).
(4)
Stock option
granted on December 9, 2013 pursuant to the 2007 Employee Plan,
that will fully vest on December 9, 2016 (one-fourth of the grant
vested or will vest every year beginning on December 9,
2013).
(5)
Stock option
granted on September 17, 2013 pursuant to the 2007 Directors Plan,
which option was immediately exercisable in full.
(6)
Stock option
granted on September 17, 2013 pursuant to the 2007 Employee Plan,
which option was immediately exercisable in full.
Employment Agreements
None of
our executive officers has employment agreements with the Company
other than standard offer letters signed by all employees upon
employment.
I
NDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The
Audit Committee has selected Mazars as the independent registered
public accounting firm for the fiscal year ended June 30, 2017. A
representative of Mazars is expected to be present at the Annual
Meeting and will have an opportunity to make statements and respond
to appropriate questions.
The following table shows the fees that we paid or
accrued for audit and other services provided by
Mazars in
fiscal
2017 and 2016. All of the
services described in the following fee table were approved in
conformity with the Audit Committee’s pre-approval
process.
|
|
2017
|
2016
|
|
Audit
Fees
|
$
214,640
|
$
214,590
|
|
IT
Audit
|
14,380
|
-
|
|
Tax
Fees
|
6,470
|
6,470
|
|
Total:
|
$
235,490
|
$
221,060
|
Audit Fees
The
amounts set forth opposite “Audit Fees” above reflect
the aggregate fees billed by Mazars or to be billed for
professional services rendered for the audit of the Company’s
fiscal 2017 and fiscal 2016 annual financial statements and for the
review of the financial statements included in the Company’s
quarterly reports during such periods.
Tax
Fees
The
amounts set forth opposite “Tax Fees” above reflect the
aggregate fees billed for fiscal 2017 and 2016 for professional
services rendered for tax compliance and return preparation. The
compliance and return preparation services consisted of the
preparation of original and amended tax returns and support during
the income tax audit or inquiries.
The
Audit Committee’s policy is to pre-approve all audit services
and all non-audit services that our independent accountants are
permitted to perform for us under applicable federal securities
regulations. The Audit Committee’s policy utilizes an annual
review and general pre-approval of certain categories of specified
services that may be provided by the independent accountant, up to
pre-determined fee levels. Any proposed services not qualifying as
a pre-approved specified service, and pre-approved services
exceeding the pre-determined fee levels, require further specific
pre-approval by the Audit Committee. The Audit Committee has
delegated to the Chairman of the Audit Committee the authority to
pre-approve audit and non-audit services proposed to be performed
by the independent accountants. Since June 30, 2004, all services
provided by our auditors require pre-approval by the Audit
Committee. The policy has not been waived in any
instance.
A
DDITIONAL MEETING
INFORMATION
Shareholder Proposals
Shareholders who
wish to present proposals at the Annual Meeting to be held
following the end of the fiscal year ended June 30, 2018 should
submit their proposals in writing to the Secretary of the Company
at the address set forth on the first page of this Proxy Statement.
Proposals must be received no later than June 19, 2018 for
inclusion in next year’s Proxy Statement and Proxy Card. If a
shareholder intends to present a proposal at the next Annual
Meeting but does not seek inclusion of that proposal in the proxy
statement for that meeting, the holders of Proxies for that meeting
will be entitled to exercise their discretionary authority on that
proposal if the Company does not have notice of the proposal by
September 24, 2018.
Proxy Solicitation
The
cost of soliciting the enclosed form of Proxy will be borne by the
Company. In addition, the Company will reimburse brokerage firms
and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such
beneficial owners. Directors, officers and regular employees of the
Company may, for no additional compensation, also solicit proxies
personally or by telephone, electronic transmission, telegram or
special letter.
Annual Report
The
Company’s Annual Report to Shareholders for the year ended
June 30, 2017 is being mailed with this Proxy Statement to
shareholders entitled to notice of the meeting. The Annual Report
includes the consolidated financial statements, unaudited selected
consolidated financial data and management’s discussion and
analysis of financial condition and results of
operations.
Upon
the written request of any shareholder, the Company will provide,
without charge, a copy of the Company’s Annual Report on Form
10-K filed with the Commission for the year ended June 30,
2017. This request should be directed to the Corporate Secretary,
Trio-Tech International, 16139 Wyandotte St., Van Nuys, CA
91406.
O
THER MATTERS
The
shareholders and any other persons who would like to communicate
with the Board can access the website www.triotech.com and fill in
the contact form for any enquiries or information. The form will be
sent directly to the Secretary and the communications for specified
individual directors of the Board will be given to them personally
by the Secretary. In addition, the contact number is listed on the
website and the messages will be passed to the Board
accordingly.
At this
time, the Board knows of no other business that will come before
the Annual Meeting. However, if any other matters properly come
before the Annual Meeting, the persons named as Proxy holders will
vote on them in accordance with their best judgment.
|
|
By Order of the
Board of Directors
A.
CHARLES WILSON
Chairman
|
Exhibit 1
2017 EMPLOYEE STOCK OPTION PLAN
OF
TRIO-TECH INTERNATIONAL
1.
PURPOSES OF THE
PLAN
This
2017 Employee Stock Option Plan (the “Plan”) of
Trio-Tech International, a California corporation (the
“Company”), is hereby established effective as of
September 14, 2017, the date that the Plan was approved and
adopted by the Company’s Board of Directors. The purposes of
the Plan are to:
1.1
Encourage selected employees (including directors who are also
employees), consultants and advisers to improve operations and
increase profits of the Company;
1.2
Encourage selected employees (including directors who are also
employees), consultants and advisers to accept or continue
employment or association with the Company or its Affiliates;
and
1.3
Increase the interest of selected employees (including directors
who are also employees), consultants and advisers in the
Company’s welfare through participation in the growth in
value of the common stock of the Company (the “Common
Stock”).
Options
granted under this Plan (“Options”) may be
“incentive stock options” (“ISOs”) intended
to satisfy the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), or
“nonqualified options” (“NQOs”). The
Company shall have no liability to any optionee hereunder with
respect to the tax treatment of any Option granted and in effect
under the Plan. The Plan is designed to be exempt from Code
Section 409A.
2
.
ELIGIBLE
PERSONS
Every
person who at the date of grant of an Option is a full-time
employee of the Company or of any Affiliate (as defined below) of
the Company is eligible to receive NQOs or ISOs under this Plan.
Every person who at the date of grant is a consultant to the
Company or any Affiliate (as defined below) of the Company is
eligible to receive NQOs under this Plan. The term
“Affiliate” as used in the Plan means a parent or
subsidiary corporation as defined in the applicable provisions
(currently Sections 424(e) and (f), respectively) of the Code. The
term “employee” includes an officer or director who is
an employee of the Company. The term “consultant”
includes persons employed by, or otherwise affiliated with, a
consultant.
3
.
STOCK
SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS
Subject
to the provisions of Section 6.1.1 of the Plan, the total number of
shares of stock which may be issued under Options granted pursuant
to this Plan shall not exceed 300,000 shares of Common Stock. The
shares covered by the portion of any grant under the Plan which
expires unexercised shall become available again for grants under
the Plan. No eligible person shall be granted Options during any
twelve-month period covering more than 100,000 shares.
4
.
ADMINISTRATION
4.1
The Plan shall be administered by the Board of Directors of the
Company (the “Board”) or by a committee (the
“Committee”) to which administration of the Plan, or of
part of the Plan, is delegated by the Board (in either case, the
“Administrator”). The Board shall appoint and remove
members of the Committee in its discretion in accordance with
applicable laws. If necessary in order to comply with Rule 16b-3
promulgated by the Securities and Exchange Commission (“Rule
16b-3”), or any successor rule thereto, and Section 162(m) of
the Code, the Committee shall, in the Board’s discretion, be
comprised solely of “non-employee directors” within the
meaning of Rule 16b-3 and “outside directors” within
the meaning of Section 162(m) of the Code. The foregoing
notwithstanding, the Administrator may delegate nondiscretionary
administrative duties to such employees of the Company as it deems
proper and the Board, in its absolute discretion, may at any time
and from time to time exercise any and all rights and duties of the
Administrator under the Plan.
4.2
Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its discretion: (i) to grant Options;
(ii) to determine the fair market value of the Common Stock subject
to Options; (iii) to determine the exercise price of Options
granted; (iv) to determine the persons to whom, and the time or
times at which, Options shall be granted, and the number of shares
subject to each Option; (v) to interpret this Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to
this Plan; (vii) to determine the terms and provisions of each
Option granted (which need not be identical), including but not
limited to, the time or times at which Options shall vest and be
exercisable; (viii) to modify, amend, terminate or replace any
Option; (ix) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (x)
to make all other determinations deemed necessary or advisable for
the administration of this Plan. The Administrator may delegate
nondiscretionary administrative duties to such employees of the
Company as it deems proper.
4.3
All questions of interpretation, implementation, and application of
this Plan shall be determined by the Administrator. Such
determinations shall be final and binding on all
persons.
5
.
GRANTING
OF OPTIONS; OPTION AGREEMENT
5.1
No Options shall be granted under this Plan after ten years from
the date of adoption of this Plan by the Board and, if not sooner
terminated by action of the Company’s Board of Directors, the
Plan shall terminate automatically as of such tenth anniversary
date.
5.2
Each Option shall be evidenced by a written stock option agreement,
in form satisfactory to the Administrator, executed by the Company
and the person to whom such Option is granted; provided, however,
that the failure by the Company, the optionee, or both to execute
such an agreement shall not invalidate the granting of an Option in
accordance with the terms of such written option agreement as
offered under the Plan, although the exercise of each Option shall
be subject to Section 6.1.3.
5.3
The stock option agreement shall specify whether each Option it
evidences is an NQO or an ISO.
5.4
Subject to Section 6.3.3 with respect to ISOs, the Administrator
may approve the grant of Options under this Plan to persons who are
expected to become employees or consultants of the Company, but are
not employees or consultants at the date of approval, and the date
of approval shall be deemed to be the date of grant unless
otherwise specified by the Administrator. However, no such Options
approved in anticipation of hire by the Company shall be
exercisable or validly existing and in effect before the actual
date of hire.
6
.
TERMS
AND CONDITIONS OF OPTIONS
Each
Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to
the terms and conditions set forth in Section 6.2, but not those
set forth in Section 6.3. ISOs shall also be subject to the terms
and conditions set forth in Section 6.3, but not those set forth in
Section 6.2.
6.1
Terms and Conditions
to which All Options Are Subject.
All Options granted under this Plan shall be
subject to the following terms and conditions:
6.1.1
Changes in Capital
Structure.
In the event of
changes in the outstanding Common Stock by reason of stock
dividends, stock splits, reverse stock splits, split ups,
consolidations, recapitalizations, reorganizations or like events,
an appropriate adjustment shall be made in the number of shares
reserved under the Plan, in the number of shares set forth in
Section 3 hereof, and in the number of shares and the option price
per share specified in any stock option agreement with respect
toany unpurchased shares; provided, however, that the Company shall
not be required to issue fractional shares as a result of any such
adjustments but may make such adjustment as the Administrator deems
appropriate. The Company shall give prompt notice to all optionees
of any adjustment pursuant to this Section.
6.1.2
Corporate
Transactions.
Section 6.1.1
above to the contrary notwithstanding, in the event of any merger,
consolidation or other reorganization of the Company in which the
Company is not the surviving or continuing corporation or in the
event of the liquidation or dissolution of the Company, all options
granted hereunder shall terminate on the effective date of the
merger, consolidation, reorganization, liquidation, or dissolution
unless the agreement with respect thereto provides for the
assumption of such options by the continuing or surviving
corporation. Any other provision of this Plan or the applicable
stock option agreement to the contrary notwithstanding, all
outstanding options granted hereunder shall be fully exercisable
for a period of 30 days prior to the effective date of any such
merger, consolidation, reorganization, liquidation, or dissolution
unless such options are assumed by the continuing or surviving
corporation. The Committee shall notify the holders of all
outstanding options in advance of any such window period for
exercising options.
6.1.3
Time
of Option Exercise
. Subject to
Section 5 and Section 6.3.4, Options granted under this
Plan shall be exercisable (a) immediately as of the effective
date of the stock option agreement granting the Option, or
(b) in accordance with a schedule related to the date of the
grant of the Option, the date of first employment, or such other
date as may be set by the Administrator (in any case, the
“Vesting Base Date”) and specified in the written stock
option agreement relating to such Option. In any case, no Option
shall be exercisable until a written stock option agreement in form
satisfactory to the Company is executed by the Company and the
optionee.
6.1.4
Option Grant
Date
. Except in the case of
advance approvals described in Section 5(d), the date of grant of
an Option under this Plan shall be the date as of which the
Administrator approves the grant with respect to at least the
following determinable features: the identity of the grantee, type
of grant, number of shares, exercise price, vesting schedule and
expiration date. For this purpose, the default provisions of the
Plan shall be deemed incorporated into any grant to the extent that
other terms are not specified for the grant.
6.1.5
Nontransferability of
Option Rights
. No Option
granted under this Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of
descent and distribution. During the life of the optionee, an
Option shall be exercisable only by (or on behalf of) the
optionee.
6.1.6
Payment
.
Except as provided below, payment in full, in cash, of the exercise
price shall be made for all stock purchased at the time written
notice of exercise of an Option is given to the Company, and
proceeds of any payment shall constitute general funds of the
Company. At the time an Option is granted or exercised, the
Administrator, in the exercise of its absolute discretion after
considering any tax, accounting and financial consequences, may
authorize any one or more of the following additional methods of
payment:
6.1.6.1
Subject to the discretion of the Administrator and the terms of the
stock option agreement granting the Option, by delivery of a
properly executed notice of exercise together with irrevocable
instructions to a broker providing for the assignment to the
Company of the proceeds of a sale or loan with respect to some or
all of the shares being acquired upon the exercise of the Option
(including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by
the Board of Governors of the Federal Reserve System) (a
“Cashless Exercise”)); and
6.1.6.2
Subject to the discretion of the
Administrator and the terms of the stock option agreement granting
the Option, delivery by the optionee of Common Stock already owned
by the optionee for all or part of the Option exercise price,
provided the value (determined as set forth in Section 6.1.10) of
such Common Stock is equal on the date of exercise to the Option
exercise price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock. In such case, prior to
the acceptance of such shares of Common Stock, the optionee shall
supply the Board with written representations and warranties,
including without limitation a representation and warranty that the
optionee has good and marketable title to such shares free and
clear of liens and encumbrances. No share of Common Stock shall be
issued until full payment therefor has been made, and until any tax
withholding obligations have been satisfied in a manner acceptable
to the Company.
6.1.
7
Termination
of Employment
. If for any reason
other than death, permanent and total disability, or Cause (see
Section 6.1.8 below), an optionee ceases to be employed by the
Company or any of its Affiliates (such event being called a
“Termination”), Options held at the date of Termination
(to the extent then exercisable) may be exercised in whole or in
part at any time within three months of the date of such
Termination, or such other period of not less than 30 days
after the date of such Termination as is specified in the Option
Agreement (but in no event after the Expiration Date); provided,
however, that if such exercise of the Option would result in
liability for the optionee under Section 16(b) of the Exchange Act,
then such three-month period automatically shall be extended until
the tenth day following the last date upon which optionee has any
liability under Section 16(b) (but in no event after the Expiration
Date). If an optionee dies or becomes permanently and totally
disabled (within the meaning of Section 22(e)(3) of the Code)
while employed by the Company or an Affiliate or within the period
that the Option remains exercisable after Termination, Options then
held (to the extent then exercisable) may be exercised, in whole or
in part, by the optionee, by the optionee’s personal
representative or by the person to whom the Option is transferred
by devise or the laws of descent and distribution, at any time
within six months after the death or six months after the permanent
and total disability of the optionee or any longer period
specified in the Option Agreement (but in no event after the
Expiration Date). For purposes of this Section 6.1.7,
“employment” includes service as a consultant for the
Company or an Affiliate. For purposes of this Section 6.1.7,
an optionee’s employment shall not be deemed to terminate by
reason of sick leave, military leave or other leave of absence
approved by the Company, for as long as the period of any such
leave does not exceed 90 days or, if longer, the duration of
the optionee’s right to reemployment by the Company or any
Affiliate as guaranteed either contractually or by
statute.
6.1.
8
Termination
for Cause
. Notwithstanding any
other provision of the Plan to the contrary, if the
optionee’s Service is terminated for Cause, the Option shall
terminate in its entirety and cease to be exercisable immediately
upon such termination of Service. For the purposes of this Plan,
Cause means any of the following: (i) the optionee’s theft,
dishonesty, willful misconduct, breach of fiduciary duty for
personal profit, or falsification of any Company documents or
records; (ii) the optionee’s material failure to abide by the
Company’s code of conduct or other policies (including,
without limitation, policies relating to confidentiality and
reasonable workplace conduct); (iii) the optionee’s
unauthorized use, misappropriation, destruction or diversion of any
tangible or intangible asset or corporate opportunity of the
Company (including, without limitation, the optionee’s
improper use or disclosure of the Company’s confidential or
proprietary information); (iv) any intentional act by the optionee
which has a material detrimental effect on the Company’s
reputation or business; (v) the optionee’s repeated failure
or inability to perform any reasonable assigned duties after
written notice from the Company of, and a reasonable opportunity to
cure, such failure or inability; (vi) any material breach by the
optionee of any employment or service agreement between the
optionee and the Company, which breach is not cured pursuant to the
terms of such agreement; or (vii) the optionee’s conviction
(including any plea of guilty or nolo contendere) of any criminal
act involving fraud, dishonesty, misappropriation or moral
turpitude, or which impairs the optionee’s ability to perform
his or her duties with the Company.
6.1.9
Withholding and
Employment Taxes
. At the time
of exercise of an Option and as a condition thereto, or at such
other time as the amount of such obligations becomes determinable
(the “Tax Date”), the optionee shall remit to the
Company in cash all applicable federal and state withholding and
employment taxes. Such obligation to remit may be satisfied, if
authorized by the Administrator in its sole discretion, after
considering any tax, accounting and financial consequences, by the
optionee’s (a) paying cash, (b) electing to have the Company
withhold cash or shares having with a fair market value equal to
the amount required to be withheld, (c) delivering to the Company
already-owned shares having a fair market value equal to the
minimum amount required to be withheld or remitted, provided the
delivery of such shares will not result in any adverse accounting
consequences as the Administrator determines in its sole
discretion, (d) selling a sufficient number of shares otherwise
deliverable to the optionee through such means as the Administrator
may determine in its sole discretion (whether through a broker or
otherwise) equal to the tax obligations required to be withheld,
(e) retaining from salary or other amounts payable to the optionee
cash having a sufficient value to satisfy the tax obligations, or
(f) any other means which the Administrator, in its sole
discretion, determines to both comply with applicable laws, and to
be consistent with the purposes of the Plan. The amount of tax
obligations will be deemed to include any amount that the
Administrator agrees may be withheld at the time the election is
made, not to exceed the amount determined by using the maximum
federal, state or local marginal income tax rates applicable to the
optionee or the Company, as applicable, with respect to the Option
on the date that the amount of tax or social insurance liability to
be withheld or remitted is to be determined. The fair market value
of the shares to be withheld or delivered shall be determined as of
the date that the tax obligations are required to be
withheld.
6.1.10
Other
Provisions
. Each Option granted
under this Plan may contain such other terms, provisions, and
conditions not inconsistent with this Plan as may be determined by
the Administrator, and each ISO granted under this Plan shall
include such provisions and conditions as are necessary to qualify
the Option as an “incentive stock option” within the
meaning of Section 422 of the Code.
6.1.11
Determination of
Value
. For purposes of the
Plan, the value of Common Stock or other securities of the Company
shall be determined as follows:
6.1.11.1
If the Common Stock (or other security) is readily tradable on an
established securities market, its fair market value shall be
determined, in accordance with regulations under Code Section 409A,
by any of the following methods selected and consistently followed
by the Administrator from time to time: (i) the last sale before or
the first sale after the grant; (ii) the closing price on the
trading day before or the trading day of the grant; (iii) the
arithmetic mean of the high and low prices on the trading day
before or the trading day of the grant; or (iv) any other
reasonable method using actual transactions in the Common Stock (or
other security) as reported by such market.
6.1.11.2
If the Common Stock (or other security) is not readily tradable on
an established securities market, its fair market value shall be
determined in good faith by the Administrator by a reasonable
application of a reasonable valuation method, taking into
consideration all relevant factors as provided in regulations under
Code Section 409A, or the Administrator may consistently apply,
from time to time, one of the valuation methods presumed to be
reasonable as set forth in said regulations.
6.1.12
Option
Term
. Subject to Section
6.3.5, no Option shall be exercisable more than ten years after the
date of grant, or such lesser period of time as is set forth in the
stock option agreement (the end of the maximum exercise period
stated in the stock option agreement is referred to in this Plan as
the “Expiration Date”).
6.2
Terms and Conditions
to Which Only NQOs Are Subject
.
Options granted under this Plan which are designated as NQOs shall
be subject to the following terms and
conditions:
6.2.1
Exercise
Price
. The exercise price of a
NQO shall be not less than the fair market value (determined in
accordance with Section 6.1.10) of the stock subject to the Option
on the date of grant. NQOs granted under this Plan shall not be
discounted; accordingly they are intended to be exempt from Code
Section 409A.
6.3
Terms and Conditions
to Which Only ISOs Are Subject
.
Options granted under this Plan which are designated as ISOs shall
be subject to the following terms and
conditions:
6.3.1
Exercise
Price
.
6.3.1.1
Except as set forth in Section 6.3.1.2, the exercise price of an
ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair
market value (determined in accordance with Section 6.1.10) of the
stock covered by the Option at the time the Option is
granted.
6.3.1.2
The exercise price of an ISO granted to any person who owns,
directly or by attribution under the Code (currently Section
424(d)), stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of
any Affiliate (a “Ten Percent Shareholder”) shall in no
event be less than 110% of the fair market value (determined in
accordance with Section 6.1.10) of the stock covered by the Option
at the time the Option is granted.
6.3.2
Disqualifying
Dispositions
. If stock acquired
by exercise of an ISO granted pursuant to this Plan is disposed of
in a “disqualifying disposition” within the meaning of
Section 422 of the Code, the holder of the stock immediately before
the disposition shall promptly notify the Administrator in writing
of the date and terms of the disposition and shall provide such
other information regarding the Option as the Administrator may
reasonably require.
6.3.3
Grant
Date
. If an ISO is granted in
anticipation of employment as provided in Section 5(d), the
Option shall be deemed granted, without further approval, on the
date the grantee assumes the employment relationship forming the
basis for such grant, and, in addition, satisfies all requirements
of this Plan for Options granted on that date.
6.3.4
Vesting
.
Notwithstanding any other provision of this Plan, ISOs granted for
any particular optionee under all incentive stock option plans of
the Company and its subsidiaries may not “vest” for
more than $100,000 in fair market value of stock (measured on the
grant dates(s)) in any calendar year. For purposes of the preceding
sentence, an Option “vests” when it first becomes
exercisable. If, by their terms, such ISOs taken together would
vest to a greater extent than the foregoing vesting limit in a
calendar year, and unless otherwise provided by the Administrator,
the vesting limitation described above shall be applied by
deferring (only to the extent necessary to satisfy the $100,000
limit) the exercisability of those ISOs or portions of ISOs which
have the highest per share exercise prices. The ISOs or portions of
ISOs whose exercisability is so deferred shall become exercisable
on the first day of the first subsequent calendar year during which
they may be exercised, as determined by applying these same
principles and all other provisions of this Plan including those
relating to the expiration and termination of ISOs. In no event,
however, will the operation of this Section 6.3.4 cause an ISO to
vest before its terms or, having vested, cease to be vested. To the
extent that any portion of an ISO cannot be deferred to any later
calendar year, then the portion of such ISO that exceeds the
foregoing annual vesting limit for the last calendar year in which
any portion of that ISO is permitted to vest as an ISO, shall be
converted and treated thereafter as an NQO under the Plan and the
optionee shall be notified of that conversion.
6.3.5
Term
.
Notwithstanding Section 6.1.11, no ISO granted to any Ten
Percent Shareholder shall be exercisable more than five years after
the date of grant.
7
.
MANNER
OF EXERCISE
7.1
An optionee wishing to exercise an Option shall give written notice
to the Company at its principal executive office, to the attention
of the officer of the Company designated by the Administrator,
accompanied by payment of the exercise price and withholding taxes
as provided in Sections 6.1.6 and 6.1.8. The date the Company
receives written notice of an exercise hereunder accompanied by
full payment or satisfaction of the exercise price will be
considered as the date such Option was exercised.
7.2
Promptly after receipt of written notice of exercise of an Option
and all payments called for by Section 7.1, the Company shall issue
or cause to be issued the shares acquired pursuant to an option and
shall deliver such shares to or for the benefit of the Optionee by
means of one or more of the following: (a) by delivering to the
optionee evidence of book entry shares of stock credited to the
account of the optionee, (b) by depositing such shares of stock for
the benefit of the optionee with any broker with which the optionee
has an account relationship, or (c) by delivering such shares of
stock to the optionee in certificate form,. An optionee or
permitted transferee of an optionee shall not have any privileges
as a shareholder with respect to any shares of stock covered by the
Option until the date of issuance (as evidenced by the appropriate
entry on the books of the Company or a duly authorized transfer
agent) of such shares.
7.3 Unless exempted by
the Administrator, if an officer or director who is subject to the
provisions of Section 16(b) of the Exchange Act exercises an Option
within six months of the grant of such Option, the shares acquired
upon exercise of such Option may not be disposed of until six
months after the date of grant of such Option
.
8
.
PERFORMANCE-BASED
AWARDS UNDER CODE SECTION 162(M)
8.1
General
.
If the Administrator, in its discretion, decides to grant an Option
intended to qualify as “performance-based compensation”
under Section 162(m) of the Code, the provisions of this Section 8
will control over any contrary provision in the Plan. The
Administrator, in its discretion, also may grant Options that are
not intended to qualify as “performance-based
compensation” under Section 162(m) of the
Code.
8.2
Performance
Goals
. The granting and/or
vesting of Options under the Plan may, in the discretion of the
Administrator, be made subject to the achievement of one or more
Performance Goals. For the purposes of this Plan,
“Performance Goals” means the goal(s) (or combined
goal(s)) determined by the Administrator in its discretion to be
applicable to an optionee with respect to an Option. As determined
by the Administrator, the Performance Goals applicable to an Option
shall provide for a targeted level or levels of achievement using
one or more of the following measures: (a) cash flow, (b) earnings
per share, (c) gross revenue, (d) market share, (e) return on
capital, (f) total shareholder return, or (g) operating
profits.
8.3
Procedures
.
To the extent necessary to comply with the “performance-based
compensation” provisions of Section 162(m) of the Code, with
respect to any Option granted subject to Performance Goals and
intended to qualify as “performance-based compensation”
under such section, on or before the determination date (i.e.,
within the first 25% of the performance period, but in no event
more than ninety (90) days following the commencement of any
performance period or such other time as may be required or
permitted by Section 162(m) of the Code), the Administrator will,
in writing, (i) designate one or more optionees to whom an Option
will be made, (ii) determine the performance period, (iii)
establish the Performance Goals and amounts that may be earned for
the performance period, and (iv) determine any other terms and
conditions applicable to the Option(s).
8.4
Additional
Limitations
. Notwithstanding
any other provision of the Plan, any Option that is granted to an
optionee and is intended to constitute qualified
“performance-based compensation” under Section 162(m)
of the Code will be subject to any additional limitations set forth
in the Code (including any amendment to Section 162(m)) or any
regulations and ruling issued thereunder that are requirements for
qualification as “performance- ased compensation” under
Section 162(m) of the Code, and the Plan will be deemed amended to
the extent necessary to conform to such
requirements.
8.5
Determination of
Amounts Earned
. Following the
completion of each performance period, the Administrator will
certify in writing whether the applicable Performance Goals have
been achieved for such performance period. An optionee will be
eligible to receive payment pursuant to an Option intended to
qualify as “performance-based compensation” under
Section 162(m) of the Code for a performance period only if the
Performance Goals for such period are achieved. In determining the
amounts earned by an optionee pursuant to an Option intended to
qualified as “performance-based compensation” under
Section 162(m) of the Code, the Administrator will have the right
to (a) reduce or eliminate (but not to increase) the amount payable
at a given level of performance to take into account additional
factors that the Administrator may deem relevant to the assessment
of individual or corporate performance for the performance period,
(b) determine what actual Option, if any, will be paid in the event
of a termination of employment as the result of an optionee’s
death or disability or upon a corporate transaction (as described
in Section 6.1.2) or in the event of a termination of employment
following a corporate transaction prior to the end of the
performance period, and (c) determine what actual Award, if any,
will be paid in the event of a termination of employment other than
as the result of a optionee’s death or disability prior to a
Change of Control and prior to the end of the Performance Period to
the extent an actual Award would have otherwise been achieved had
the optionee remained employed through the end of the Performance
Period.
9
.
EMPLOYMENT
OR CONSULTING RELATIONSHIP
Nothing
in this Plan or any Option granted hereunder shall interfere with
or limit in any way the right of the Company or of any of its
Affiliates to terminate any optionee’s employment or
consulting at any time, nor confer upon any optionee any right to
continue in the employ of, or consult with, the Company or any of
its Affiliates.
10
.
CONDITIONS
UPON ISSUANCE OF SHARES
Shares
of Common Stock shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and
delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended (the “Securities
Act”).
11
.
NONEXCLUSIVITY
OF THE PLAN
The
adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other
incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options other than under the
Plan.
12
.
AMENDMENTS
TO PLAN
The
Board may at any time amend, alter, suspend or discontinue this
Plan. Without the consent of an optionee, no amendment, alteration,
suspension or discontinuance may adversely affect outstanding
Options except to conform this Plan and Options granted under this
Plan to the requirements of federal or other tax laws relating to
such stock Options. No amendment, alteration, suspension or
discontinuance shall require shareholder approval unless
(a) shareholder approval is required to preserve incentive
stock option treatment for federal income tax purposes, or
(b) the Board otherwise concludes that shareholder approval is
advisable; provided, however, that no such amendment shall, without
the approval of the shareholders of the Company, effectuate a
change for which shareholder approval is required in order for the
Plan to continue to qualify under Rule 16b-3 (while it is in
effect) or any successor rule thereto.
13
.
EFFECTIVE
DATE OF PLAN
No
Option shall be exercisable unless and until written consent of the
shareholders of the Company, or approval of shareholders of the
Company voting at a validly called shareholders’ meeting, is
obtained within twelve months after adoption of the Plan by the
Board. If such shareholder approval is not obtained within such
time, Options granted hereunder shall terminate and be of no force
and effect from and after expiration of such twelve-month period to
the extent required by applicable law; otherwise such Options (if
ISOs) shall be converted to NQOs if such conversion would allow
them to remain in effect. Options may be granted and exercised
under this Plan only after there has been compliance with all
applicable federal and state securities laws.
14
.
CHOICE
OF LAW
Except
to the extent governed by applicable local law, the validity,
interpretation, construction and performance of the Plan and each
Award Agreement shall be governed by the laws of the State of
California, without regard to its conflict of law
rules.
IN
WITNESS WHEREOF, this Plan, having been first duly adopted by the
Board of Directors, is hereby executed below by a duly authorized
officer of the Company on this 14th day of September, 2017, to take
effect as of such date as provided herein.
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TRIO-TECH INTERNATIONAL
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By:
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/s/ A. Charles Wilson
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A. Charles Wilson, Director
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Chairman
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Exhibit 2
2017 DIRECTORS
EQUITY INCENTIVE PLAN
OF
TRIO-TECH INTERNATIONAL
1
.
PURPOSES
OF THE PLAN
This
Trio-Tech International 2017 Directors Equity Incentive Plan (the
“Plan”) is hereby established to grant to directors of
Trio-Tech International (the “Company”) a favorable
opportunity to acquire or receive shares of common stock of the
Company (the “Shares”) and to create an incentive for
such persons to serve on the Board of Directors of the Company and
to contribute to its long-term growth and profitability objectives.
The Plan is established effective as of September 14, 2017. The
Plan is designed to be exempt from Code Section 409A.
2
.
ADMINISTRATION
The
Plan shall be administered by the Board of Directors of the Company
(the “Board”) or by a committee from time to time
constituted (the “Committee”) to which administration
of the Plan is delegated by the Board (in either case, the
“Administrator”). The Administrator shall determine the
meaning and application of the provisions of the Plan and all
option agreements executed and restricted stock awards granted
pursuant thereto, and its decisions shall be conclusive and binding
upon all interested persons. Subject to the provisions of the Plan,
the Administrator shall have the sole authority to grant options
and award restricted shares of stock hereunder, to prescribe, amend
and rescind rules and regulations relating to the Plan, to
determine and modify the terms and conditions of each stock option
or restricted stock grant entered into between the Company and any
Participant, and to make all other determinations necessary or
advisable in the implementation and administration of the
Plan.
To the extent necessary to permit any grants or awards made under
the Plan to be exempt from Section 16(b) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated
thereunder, the Committee authorized to grant and administer such
grants or awards to Participants who are subject to Section 16
of said Securities Exchange Act shall consist solely of two or more
“Non-Employee Directors” (as defined for purposes of
Rule 16b-3 under said Act) and shall carry out its
responsibilities in a manner consistent with said Rule 16b-3.
Any member of the Committee shall not take part in the
Committee’s consideration of matters involving grants or
awards to such member.
3
.
ELIGIBILITY;
STATUS AS SHAREHOLDER
All
directors of the Company shall participate in the Plan (the
“Participants”). No person shall have any rights of a
shareholder by virtue of a grant of an option except with respect
to shares actually issued to that person upon the exercise
thereof.
4
.
STOCK
SUBJECT TO PLAN
There
shall be reserved for issue upon the exercise of options granted,
or restricted stock awarded, under the Plan 300,000 Shares or the
number of Shares which, in accordance with the provisions of
Section 9 hereof, shall be substituted therefor. Such Shares may be
authorized but unissued shares or treasury shares. If an option
granted under the Plan shall expire or terminate for any reason
without having been exercised in full, unpurchased Shares subject
thereto shall again be available for the purposes of the
Plan.
5
.
TERMS
OF OPTIONS
Each option granted under the Plan shall be evidenced by a stock
option agreement between the person to whom such option is granted
and the Company. Such stock option agreement shall provide that the
option is subject to the following terms and conditions and to such
other terms and conditions not inconsistent therewith as the
Administrator may deem appropriate in each case:
(a)
Option Exercise Price
. The exercise price to
be paid for each Share upon the exercise of an option shall be 100%
of the fair market value of the Shares on the date the option is
granted. As used in this Plan, the term “date the option is
granted” means the date when the corporate action necessary
to create a legally binding option is completed and the number of
Shares, exercise price, class of underlying stock and identity of
the option recipient are determinable. Fair market value of the
Shares shall be (i) the mean of the high and the low prices of
Shares sold on an established securities market on the date the
option is granted (or, if there was no sale on such date, such mean
for the next preceding trading day on which there was such a sale)
or (ii) if the Common Stock is not readily tradable on an
established securities market on the date the option is granted,
then fair market value shall be determined by a reasonable
application of a reasonable valuation method, in accordance with
the regulations under Code Section 409A, taking into
consideration all relevant factors or, if the Administrator so
chooses from time to time, by applying any valuation method
presumed reasonable under those regulations.
(b)
Grants
. Each option granted
under the Plan shall be exercisable at such time or times, or upon
the occurrence of such event or events, and in such amounts, as the
Board shall specify in the specific option. No option shall be
granted under this Plan more than ten (10) years after the
effective date of the Plan or any earlier termination date of the
Plan.
(c)
Period of Option
. Options granted
hereunder shall have a term of five (5) years from the date of
grant.
(d)
Exercisability
. Each option granted
under the Plan shall be 100% vested and exercisable in full at any
time and from time to time commencing as of the date of grant,
unless otherwise provided in the stock option
agreement.
(e)
Payment for
Stock
. The option exercise
price for Shares purchased under an option shall be paid in full at
the time of purchase. The option agreement
may provide that the
exercise price may be payable, at the election of the holder of the
option, in whole or in part either in cash or by delivery of Shares
in transferable form, such Shares to be valued for such purpose at
its fair market value (as determined under Section 5(a) above) as
of the date on which the option is exercised (c) and that, in
that case and prior to the acceptance of Shares as provided in this
Section 5(e), the Participant shall supply the Board with
written representations and warranties, including without
limitation a representation and warranty that the Participant has
good and marketable title to such shares free and clear of liens
and encumbrances. No Share shall be issued until full payment
therefore has been made, and until any tax withholding obligation
arising under Section 11 below has been satisfied in a manner
acceptable to the Company. No Participant shall have any rights as
an owner of Shares until the date of issuance to him of the stock
certificate evidencing such Shares.
(f)
Nonqualified Options
. All options granted
under the Plan shall be non-qualified options, meaning they do not
qualify as “incentive stock options” under Code
Section 422.
6
.
STOCK
AWARDS
With
the approval of the Board or an appropriate Section 16b-3 Committee
(as described in Section 2 above), a Participant may be granted one
or more Share awards under the Plan. Such awards shall be grants of
Shares on such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Board of
Directors or the Section 16b-3 Committee and set forth in a
Restricted Stock Agreement with the Participant. The Participant
will have all voting, dividend, liquidation and other rights with
respect to the Shares issued to the Participant as a Shares award
under this Section 6 upon the Participant becoming both the holder
of record of such shares; provided, however, that the Committee may
impose such restrictions on the vesting, assignment and transfer of
a Shares award as it deems appropriate. In the event of a
Participant’s termination of service on the Board, any
unvested Shares awarded under the Plan shall vest, continue to
vest, be forfeited and become subject to repurchase as and to the
extent provided in the applicable Restricted Stock
Agreement.
7
.
NONTRANFERABILITY
Options granted pursuant to the Plan shall be nontransferable
except by will or the laws of descent and distribution, and shall
be exercisable during the Participant’s lifetime only by him,
and after his death, by his personal representative or by the
person entitled thereto under his will or the laws of intestate
succession. Shares awarded under Section 6 of the Plan shall
be nontransferable the same as options, except as may be permitted
by the Board in connection with certain events described in
Sections 9(a) or (b) below.
8
.
TERMINATION
OF SERVICE
Upon termination of the Participant’s service on the Board of
Directors (“Termination of Service”), his rights to
exercise options then held by him shall be terminated (and his
outstanding unexercised options shall be forfeited and cancelled)
as of an earlier date than the scheduled expiration date of such
outstanding options, in accordance with the following provisions as
applicable:
(a)
Death
or Disability
. Upon the death or
disability (as defined in Section 22(e)(3) of the Code) of any
person holding options granted under this Plan, his options shall
be exercisable, by the holder’s legal representative or by
the person entitled thereto under his will or the laws of intestate
succession, only if and to the extent they are exercisable on the
date of his death or disability, and such options shall terminate
twelve (12) months after the date of his death or disability (i.e.,
on the anniversary date of his death or disability) or on the
originally scheduled expiration date of such options, whichever
date is earlier.
(b)
Termination for Cause
. A Participant’s
right to exercise stock options shall be rescinded effective as of
the date of termination of his service as a director if the
Participant has been found to be engaged directly or indirectly in
any conduct or activity which is in competition with the Company or
is otherwise adverse to or not in the best interest of the
Company.
(c)
Termination of Service
. In the case of a
Participant who has served as a non-employee on the Company’s
Board of Directors for less than five (5) years, upon his
Termination of Service for any reason other than as set forth in
Section 7(a) or 7(b) hereof, his options shall be exercisable only
if and to the extent they are exercisable on the date of his
Termination of Service and such options shall terminate
30 days after the date of his Termination of Service unless
the holder of the options dies prior thereto, in which event he
shall be deemed to have died on the date of his Termination of
Service; provided, however, in no event shall such options be
exercised more than five (5) years from the date they are granted.
Nothing contained in the Plan or in any option granted pursuant to
the Plan shall obligate the Company or its parent or subsidiary
corporations to continue to engage any director in such or in any
other capacity with the Company, nor confer upon any director any
right to continue as a director of or in any other capacity with
the Company or its parent or subsidiary corporations, if any, nor
limit in any way such right as the Company or its parent or
subsidiary corporations may have to amend, modify or terminate any
person’s compensation, employment, directorship or consulting
or advising agreement at any time.
9
.
ADJUSTMENT
OF SHARES
(a)
In the event of changes in the outstanding Shares by reason of
stock dividends, stock splits, reverse stock splits, split-ups,
consolidations, recapitalizations, reorganizations or like events,
an appropriate adjustment shall be made in the number of shares
reserved under the Plan, in the number of Shares set forth in
Section 4 hereof, and in the number of Shares and the option
price per share specified in any stock option agreement with
respect to any unpurchased Shares; provided, however, that the
Company shall not be required to issue fractional Shares as a
result of any such adjustments but may make such adjustment as the
Administrator deems appropriate. The Company shall give prompt
notice to all Participants of any adjustment pursuant to this
Section.
(b)
Section 9(a) above to the contrary notwithstanding, in the
event of any merger, consolidation or other reorganization of the
Company in which the Company is not the surviving or continuing
corporation or in the event of the liquidation or dissolution of
the Company, all options granted hereunder shall terminate on the
effective date of the merger, consolidation, reorganization,
liquidation, or dissolution unless the agreement with respect
thereto provides for the assumption of such options by the
continuing or surviving corporation. Any other provision of this
Plan or the applicable stock option agreement to the contrary
notwithstanding, all outstanding options granted hereunder shall be
fully exercisable for a period of 30 days prior to the
effective date of any such merger, consolidation, reorganization,
liquidation, or dissolution unless such options are assumed by the
continuing or surviving corporation. The Committee shall notify the
holders of all outstanding options in advance of any such window
period for exercising options.
10
.
SECURITIES
LAW REQUIREMENTS
The
Company may require prospective Participants, as a condition of
either the grant or the exercise of an option, to represent and
establish to the satisfaction of legal counsel to the Company that
all Shares acquired upon the exercise of such option will be
acquired for investment and not for resale. The Company may refuse
to permit the sale or other disposition of any shares acquired
pursuant to any such representation until it is satisfied that such
sale or other disposition would not be in contravention of
applicable state or federal securities law.
11
.
TAX
WITHOLDING
As
a condition for issuing Shares upon exercise of an option or the
grant of a Shares award, the Company may require a Participant to
pay to the Company all applicable federal, state and local taxes
which the Company is required to withhold with respect to such
option exercise or Shares award.
12
.
AMENDMENT
The Board of Directors may amend the Plan at any time, except that
without shareholder approval:
(a)
The number of Shares which may be reserved for issuance under the
Plan shall not be increased except as provided in Section 9
hereof;
(b)
The
option price per Share may not be fixed at less than the price
specified in Section 5(a) hereof;
(c)
The maximum period during which the options may be exercised may
not be extended;
(d)
The class of persons eligible to receive options or restricted
stock awards under the Plan as set forth in Section 3 shall
not be changed;
(e)
This Section 12 may not be amended in a manner that limits or
reduces the amendments which require shareholder approval;
and
(f)
The provisions of the Plan shall not be amended more than once
every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act (if applicable), or the
rules thereunder.
13
.
TERMINATION
The Plan shall
terminate automatically on September 14, 2027. The Board of
Directors may terminate the Plan at any earlier time. The
termination of the Plan shall not affect the validity of any option
agreement outstanding at the date of such termination, but no
option shall be granted after such date.
14
.
EFFECTIVE
DATE OF PLAN
The
Plan shall be effective upon its adoption by the Board of Directors
of the Company. Options may be granted but not exercised prior to
shareholder approval of the Plan. If any options are so granted and
shareholder approval shall not have been obtained on or before
September 14, 2018, such options shall terminate retroactively as
of the date they were granted. Shares awards under Section 6 shall
not be granted prior to shareholder approval of the
Plan.
IN
WITNESS WHEREOF, this Plan, having been first duly adopted by the
Board of Directors, is hereby executed below by a duly authorized
officer of the Company on this 14th day of September, 2017, to take
effect as of such date as provided herein.
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TRIO-TECH INTERNATIONAL
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By:
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/s/ A. Charles Wilson
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A. Charles Wilson, Director
Chairman
of the Board
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Appendix A
COMPENSATION COMMITTEE CHARTER
of the Compensation Committee
of TRIO-TECH INTERNATIONAL
This Compensation Committee Charter (the “
Charter
”) was adopted by the Board of Directors
(the “
Board
”) of Trio-Tech International (the
“
Company
”) on June 29, 2004, and amended on each of
March 05, 2007 and July 02, 2014.
Section 1: Purpose
The purpose of the Compensation Committee (the
“
Committee
”) of the Board of the Company is (1) to
discharge the Board’s responsibilities relating to
compensation of the Company’s chief executive officer and
other officers, including by designing (in consultation with
management and the Board, as the Committee deems appropriate), and
evaluating the compensation plans, policies and programs of the
Company as they relate to the chief executive officer and other
officers and (2) if and to the extent required by law, to produce
an annual report on executive compensation for inclusion in the
Company’s proxy materials in accordance with applicable rules
and regulations of the Securities and Exchange
Commission.
Section 2: Membership
The Committee shall be comprised of two or more directors, as
determined by the Board, each of whom (a) satisfies the
independence requirements of the Section 803A of the NYSE MKT
rules; (b) has been affirmatively determined by the Board to be
“independent” under Section 805(c)(1) of the NYSE MKT
rules; (c) is a “non-employee director” within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the “
1934 Act
”), and (d) is an “outside
director” under the regulations promulgated under Section
162(m) of the Internal Revenue Code of 1986, as amended (the
“
Code
”).
The members of the Committee, including the Chair of the Committee,
shall be appointed by the Board. In appointing members to the
Committee and affirmatively determining that all of the members are
“independent” for purposes of Section 805(c)(1) of the
NYSE MKT rules as noted under Section 2(1)(b) above, the Board must
consider all factors specifically relevant to determining whether a
director has a relationship to the Company which is material to
that director’s ability to be independent from management in
connection with the duties of a Committee member, including, but
not limited to (a) the source of compensation of such director,
including any consulting, advisory or other compensatory fee paid
by the Company to such director; and (b) whether such director is
affiliated with the Company, a subsidiary of the Company or an
affiliate of a subsidiary of the Company. The Board may remove
members from the Committee, with or without cause.
Section 3: Meetings and Procedures
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1.
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The
Chair of the Committee (or in his or her absence, a member
designated by the Chair) shall preside at each meeting of the
Committee and set the agendas for Committee meetings. The Committee
shall have the authority to establish its own rules and procedures
for notice and conduct of its meetings as long as they are not
inconsistent with any provisions of (a) the Company’s
Articles of Incorporation or bylaws that are applicable to the
Committee; (b) applicable federal or state laws; or (c) the rules
of the NYSE MKT.
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2.
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The
Committee shall meet on a regularly scheduled basis at least two
times per year and more frequently as the Committee deems necessary
or desirable.
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3.
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All
non-management directors that are not members of the Committee may
attend and observe meetings of the Committee, but shall not
participate in any discussion or deliberation unless invited to do
so by the Committee, and in any event shall not be entitled to
vote. The Committee may, at its discretion, include in its meetings
members of the Company’s management, representatives of the
independent accountant and any other financial personnel employed
or retained by the Company or any other persons whose presence the
Committee believes to be necessary or appropriate; provided,
however that the Chief Executive Officer may not be present during
voting or deliberation as and to the extent set forth in the rules
of the NYSE MKT. The Committee may also exclude from its meetings
any persons it deems appropriate, including but not limited to, any
non-management director that is not a member of the
Committee.
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4.
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The
Committee, in its sole discretion may retain or obtain the advice
of a compensation consultant, independent legal counsel and/or
other advisers as the Committee believes to be necessary, desirable
or appropriate.
The
Committee will be directly responsible for the appointment,
compensation and oversight of the work of any compensation
consultant, independent legal counsel and other adviser retained by
the Committee. The Committee is required to conduct the following
assessment with respect to the selection of any compensation
consultant, legal counsel or other adviser and may only select such
compensation consultant, legal counsel or other adviser after
taking into account all relevant factors, including specifically
the following factors:
-
The provision of
other services to the Company by the person that employs the
compensation consultant, legal counsel or other
adviser;
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The amount of fees
received from the Company by the person that employs the
compensation consultant, legal counsel or other adviser, as a
percentage of the total revenue of the person that employs the
compensation consultant, legal counsel or other
adviser;
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The policies and
procedures of the person that employs the compensation consultant,
legal counsel or other adviser that are designed to prevent
conflicts of interest;
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Any business or
personal relationship of the compensation consultant, legal counsel
or other adviser with a member of the Committee;
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Any stock of the
Company owned by the compensation consultant, legal counsel or
other adviser; and
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Any business or
personal relationship of the compensation consultant, legal
counsel, other adviser or the person employing the adviser with an
executive officer of the Company.
Notwithstanding
the foregoing, the Committee need not make the above assessment if
(a) it elects to use the Company’s in-house legal counsel (if
any) or (b) the role of such compensation consultant, legal counsel
or other adviser is limited to the following activities for which
no disclosure is required under item 407(e)(3)(iii) of Regulation
S-K promulgated under the 1934 Act: (i) consulting on any
broad-based plan that does not discriminate in scope, terms, or
operation, in favor of executive officers or directors of the
Company, and that is available generally to all salaried employees;
or (ii) providing information that either is not customized for a
particular company or that is customized based on parameters that
are not developed by the compensation consultant, and about which
the compensation consultant does not provide advice.
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5.
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There
is no requirement for the Committee to implement or act
consistently with the advice or recommendations of the compensation
consultant, independent legal counsel or other adviser to the
Committee. Nothing in the above Section 3(4) shall be construed to
affect the ability or obligation of the Committee to exercise its
own judgment in fulfillment of its duties. Furthermore, there is no
requirement that the compensation consultant, independent legal
counsel or other adviser to the Committee be independent, only that
the Committee consider the enumerated factors set forth in Section
3(4) above before selecting such compensation consultant,
independent legal counsel or other adviser to the Committee, and
the Committee may select or receive advice from any compensation
adviser it prefers including ones that are not independent but only
after considering the above six factors.
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6.
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The
Company shall provide for appropriate funding, as determined by the
Committee, for payment of reasonable compensation to a compensation
consultant, independent legal counsel or other adviser retained by
the Committee in accordance with Section 3(4) above and for
ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties.
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7.
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The
Chair shall report to the Board following meetings of the Committee
and as otherwise requested by the Chairman of the
Board.
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8.
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Notwithstanding
anything in this charter to the contrary, the Committee is not
precluded from approving awards (either with or without board
ratification) or from seeking board ratification or approval as may
be required to comply with applicable tax or state corporate
laws.
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Section 4: Duties and Responsibilities
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1.
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The
Chief Executive Officer’s compensation must be determined, or
recommended to the Board for determination, by the Committee. The
Chief Executive Officer may not be present during voting or
deliberations on his or her compensation. The Committee shall, at
least once each calendar year, review and approve corporate goals
and objectives relating to the compensation of the Chief Executive
Officer and shall, with input from the Chief Executive Officer,
annually establish the performance criteria (including both
long-term and short-term goals) to be considered in light of those
goals and objectives in connection with the Chief Executive
Officer’s next annual performance evaluation. At the end of
each year, the Chief Executive Officer shall make a presentation or
furnish a written report to the Committee indicating his or her
progress against such established performance criteria. Thereafter,
with the Chief Executive Officer absent, the Committee shall meet
to review the Chief Executive Officer’s performance,
determine and approve the compensation of the Chief Executive
Officer based on such evaluation and report thereon to the Board.
The results of the review and evaluation shall be communicated to
the Chief Executive Officer by the Chairman of the Board of
Directors.
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2.
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The
compensation for all other officers (as that term is interpreted
under the rules of the NYSE MKT) must be determined, or recommended
to the Board for determination, by the Committee. In that regard,
and to the extent applicable, the Committee shall review and
approve all officers’ employment agreements and severance
arrangements.
The
Committee shall, at least once each calendar year, review and
approve all compensation for directors and all other employees of
the Company or its subsidiaries with a base salary greater than or
equal to $250,000.
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3.
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The
Committee shall manage and periodically review, the Company’s
executive officers’ annual bonuses; long-term incentive
compensation, stock options, employee pension and welfare benefit
plans (e.g., 401(k), employee stock purchase plan, etc.) and with
respect to each plan shall have responsibility for:
●
general
administration as provided in each such plan;
●
setting performance
targets under all annual bonus and long-term incentive compensation
plans as appropriate and committing to writing any and all
performance targets for all executive officers who may be
“covered employees” under Section 162(m) of the Code
within the first 90 days of the performance period to which such
target relates or, if shorter, within the period provided by
Section 162(m) of the Code in order for such target to be
“pre-established” within the meaning of Section
162(m);
●
certifying that any
and all performance targets used for any performance based equity
compensation plans have been met before payment of any executive
bonus or compensation or exercise of any executive award granted
under any such plan(s);
●
approving all
amendments to, and terminations of, all compensation plans and any
awards under such plans;
●
granting any awards
under any performance-based annual bonus, long-term incentive
compensation and equity compensation plans to the Chief Executive
Officer, officers (as interpreted under the NYSE MKT rules),
current employees with the potential to become the CEO or a
“covered employee” under Section 162(m) of the Code,
including stock options and other equity rights (e.g., restricted
stock, stock purchase rights);
●
approving which
executive officers are entitled to awards under the Company’s
stock option plan(s); and
●
repurchasing
securities from terminated employees if and to the extent deemed to
be appropriate and provided such repurchase is made in compliance
with state corporate laws.
All
plan reviews should include reviewing the plan’s
administrative costs, reviewing current plan features relative to
any proposed new features, and assessing the performance of the
plan’s internal and external administrators if any duties
have been delegated.
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4.
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The
Committee shall determine the Company’s policy with respect
to change of control or “parachute”
payments.
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5.
|
The
Committee shall review and approve executive officer and director
indemnification and insurance matters.
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6.
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The
Committee shall prepare and approve the Compensation Committee
report to be included as part of the Company’s annual proxy
statement if and to the extent that the Company is required to
include such report or, if not required, determines to include such
report, in its annual proxy statement.
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7.
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The
Committee shall review and reassess this Charter at least once
every two fiscal years (and more frequently if there are changes in
applicable law or if the Committee otherwise believes it to be
prudent) and submit any recommended changes to the Board for its
consideration.
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Section 5: Delegation of Duties
In fulfilling its responsibilities hereunder, the Committee shall
be entitled to delegate any or all of its responsibilities to a
subcommittee of the Committee, to the extent consistent with the
Company’s Articles of Incorporation and bylaws, applicable
federal and state law and the rules of the markets in which the
Company’s securities then trade, except that it shall not
delegate (a) its responsibility to determine (or recommend to the
Board for determination) the compensation of the Chief Executive
Officer and the officers of the Company (as that term is
interpreted under the rules of the NYSE MKT) or (b) its
responsibilities for any matters where it has determined such
compensation is intended to comply with Section 162(m) of the Code
or is intended to be exempt from Section 16(b) under the 1934 Act
pursuant to Rule 16b-3 by virtue of being approved by a committee
of “outside directors.”
Section 6: Disclosure of Charter
This Charter shall be made available to any stockholder who
otherwise requests a copy. The Company’s Annual Report to
Stockholders shall state the foregoing.
Appendix B
AUDIT COMMITTEE CHARTER
of the Audit Committee
of TRIO-TECH INTERNATIONAL
This Audit Committee Charter (the “
Charter
”) was adopted by the Board of Directors
(the “Board”) of Trio-Tech International (the
“
Company
”) on June 29, 2004, and amended on each of
December 10, 2012 and July 02, 2014.
The primary function of the audit committee is to assist the Board
of Directors of Trio-Tech International in fulfilling its oversight
responsibilities for, among other things, (1) the integrity of the
Company’s financial statements, (2) the Company’s
compliance with certain legal and regulatory requirements, (3) the
Company’s independent accountant’s qualifications and
independence, and (4) the performance of the Company’s
internal audit function and independent accountants.
Section 1: Membership Requirements
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1.
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The
audit committee shall be comprised of no less than two members.
Each member shall be a director of the Company and must otherwise
be “independent” as defined in Section 803A of the
rules of the NYSE MKT and Rule 10A-3 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”). None of such committee members may have participated
in the preparation of the financial statements of the Company or
any then current subsidiary thereof at any time during the three
years prior to the date upon which such determination is being
made. Each of such members shall be able to read and understand
fundamental financial statements, including a balance sheet, income
statement and cash flow statement. At least one member of the audit
committee shall be “financially sophisticated” in that
he has or has had past employment experience in finance or
accounting, requisite professional certification in accounting or
any other comparable experience or background which results in that
member’s financial sophistication, including having been a
chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities. Such members
shall also meet such other standards, if any, as may be required by
law or regulation.
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2.
|
The
Board of Directors shall select and fill vacancies on the audit
committee with members thereof meeting the above requirements. The
members shall designate one member as the Chairperson of the audit
committee. A member may only be removed by a vote of the majority
of the Board of Directors.
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3.
|
The
audit committee may fix its own rules of procedure, provided such
rules are consistent with the articles and bylaws of the company,
this charter and then existing law.
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Section 2: General Responsibilities
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1.
|
The
audit committee provides open avenues of communication among the
independent accountant and the Board of Directors.
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2.
|
The
audit committee will make regular reports to the full Board of
Directors and may make appropriate recommendations.
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3.
|
The
audit committee has the power to conduct or authorize
investigations into matters within the audit committee’s
scope of responsibilities.
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4.
|
The
audit committee is authorized to retain independent counsel,
accountants and other advisers as it deems necessary to carry out
its duties.
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5.
|
The
audit committee will meet on at least a quarterly basis each fiscal
year and, if circumstances require, more frequently.
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6.
|
The
audit committee chairman has the power to call a committee meeting
whenever he or she thinks there is a need. An audit committee
member should not vote on any matter in which he or she has an
interest. The audit committee may ask members of management or
others to attend the meeting and is authorized to receive all
pertinent information from management.
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7.
|
The
audit committee is responsible for the preapproval of all auditing
services and non-audit services (except for those non-audit
services specified in Section 10A(i)(1)(B) of the Exchange Act).
The audit committee may delegate to one or more designated members
of the audit committee the authority to grant preapprovals required
by the preceding sentence. The decision of any member to whom such
authority is delegated as provided in the preceding sentence shall
be presented to the full audit committee at each of its scheduled
meetings.
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8.
|
The
Company will provide for appropriate funding, as determined by the
audit committee, for payment of (a) compensation to the independent
accountants engaged for the purpose of preparing or issuing an
audit report or performing other audit, review or attest services
for the Company; (b) compensation to any advisers employed by the
audit committee under paragraph 4 of this Section 2; and (c)
ordinary administrative expenses of the audit committee that are
necessary or appropriate in carrying out its duties.
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Section 3: Responsibilities for Engaging Independent
Accountants
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1.
|
The
audit committee shall be directly responsible for the appointment,
compensation, retention and oversight of the work of the
Company’s independent accountants engaged (including
resolution of disagreements between management and the independent
accountants regarding financial reporting) for the purpose of
preparing or issuing an audit report or performing other audit,
review or attest services for the Company. To that end, the audit
committee is responsible for the evaluation and, where appropriate,
replacement of the independent accountants for company audits (or
the nomination thereof if it is determined to seek shareholder
approval of the independent accountants). The audit committee also
will review and set any fees paid to the independent accountants.
The audit committee will require the independent accountant to
report directly to the audit committee.
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2.
|
The
audit committee will take such action as it reasonably believes is
necessary to confirm and assure the independence of the independent
accountant. In that regard, the audit committee is responsible for
actively engaging in dialogue with the independent accountant with
respect to any disclosed relationships or services that may impact
on the objectivity and independence of the independent accountant
and for taking, or recommending that the Board of Directors take
appropriate action to oversee the independence of the independent
accountant.
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3.
|
The
audit committee will consider, in consultation with the independent
accountant the audit scope and procedural plans made by the
independent accountant.
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4.
|
The
audit committee will listen to management and the primary
independent accountant if either thinks there might be a need to
engage additional auditors. The audit committee will decide whether
to engage an additional firm and, if so, which one.
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Section 4: Responsibilities for Reviewing the Annual External Audit
and the Review of Quarterly and Annual Financial
Statements
|
1.
|
The
audit committee will take action to ensure that the independent
accountant understands that its ultimate accountability is to the
Board of Directors and the audit committee, as representatives of
the Company’s shareholders, that it must be available to the
full Board of Directors at least annually and that it will provide
the audit committee with a timely analysis of significant financial
reporting issues. Furthermore, the audit committee will ensure
receipt from the independent accountant of a formal written
statement delineating all relationships between the independent
accountant and the Company, consistent with Independence Standards
Board Standard 1.
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2.
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The
audit committee will ask management and the independent accountant
about significant risks and exposures and will assess
management’s steps to minimize them.
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3.
|
The
audit committee will review the following with the independent
accountant:
●
The adequacy of the
Company’s internal controls, including computerized
information system controls and security.
●
Any significant
findings and recommendations made by the independent accountant
together with management’s responses to them.
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4.
|
Shortly
after the annual examination is completed, the audit committee will
review and discuss the following with management and the
independent accountant:
●
The Company’s
annual financial statements and related footnotes.
●
The independent
accountant’s audit of and report on the financial
statements.
●
The independent
accountant’s qualitative judgments about the appropriateness,
not just the acceptability, of accounting principles and financial
disclosures and how aggressive (or conservative) the accounting
principles and underlying estimates are.
●
Any serious
difficulties or disputes with management encountered during the
course of the audit.
●
Anything
else about the audit procedures or findings that GAAS requires the
independent accountant to discuss with the audit
committee.
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5.
|
The
audit committee will consider, review and discuss with management
any significant findings during the year and management’s
responses to them.
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6.
|
The
audit committee will review annual SEC filings.
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7.
|
The
audit committee will review the interim financial reports with
management and the independent accountant before those interim
reports are released to the public or filed with the SEC or other
regulators.
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8.
|
The
audit committee will prepare such letters and reports as may be
required to be prepared by it under federal or state law and/or
under the standards and requirements of the self-regulatory
organization upon which the Company’s shares are then being
traded.
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Section 5: Internal Audit Function
In overseeing the internal audit function, the Committee
shall:
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1.
|
review,
at least annually, the mandate, planned activities, staffing
resources and organizational structure of the internal audit
function and, if appropriate, recommend changes;
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2.
|
review
the internal audit reports, together with management's response to
any identified weaknesses;
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3.
|
review,
at least semi-annually, the internal audit reports and the
resultant action by management; and
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4.
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review
any other reports submitted to the Committee by the Internal Audit
Department.
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The audit committee shall have the authority to communicate
directly with the Internal Auditor.
Section 6: Periodic Responsibilities
|
1.
|
Review
and reassess the adequacy of this charter on an annual basis and
recommend any proposed changes to the Board of Directors for
approval.
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2.
|
Review
policies and procedures covering officers’ expense accounts
and perquisites including their use of corporate assets, and
consider the results of any review of those areas by the
independent accountant.
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3.
|
Review
legal and regulatory matters that may have a material effect on the
Company’s financial statements and review compliance policies
and programs and reports from regulators.
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4.
|
Meet
with the independent accountant and management in separate
executive sessions to discuss any matters the audit committee or
these groups believe should be discussed privately with the audit
committee.
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5.
|
Establish
procedures for (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and (b) the confidential,
anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.
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