UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No ___)
Filed
by Registrant ☑
Filed
by a Party other than the Registrant ☐
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the appropriate box:
☐
Preliminary Proxy
Statement
☐
Confidential, for
use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☑
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting Material
under Rule 14a-12
HIREQUEST,
INC.
(Name
of Registrant as Specified in Its Charter)
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of Filing Fee (Check the appropriate box):
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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):
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part of the fee is offset as provided by Exchange Act Rule
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paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing:
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111
Springhall Drive
Goose
Creek, South Carolina 29445
LETTER TO STOCKHOLDERS
Dear
Fellow Stockholders of HireQuest, Inc.:
Our
company has undergone an exciting and significant business
transformation over the last year following the July 2019 merger
between Hire Quest, LLC and Command Center, Inc., forming
HireQuest, Inc. We are now a nationwide franchisor of temporary
staffing offices providing on-demand labor solutions primarily in
the light industrial and blue-collar segments of the staffing
industry.
While
we all have been impacted by COVID-19, we look forward to facing
this challenge together and completing our first year as a combined
company. The votes described in the accompanying proxy materials
are vital to obtaining that goal.
We are
pleased to invite you to attend the first annual meeting of
stockholders of this newly combined company. The annual meeting of
stockholders of HireQuest, Inc., a Delaware corporation, will take
place on June 15, 2020 at our corporate headquarters at 111
Springhall Drive, Goose Creek, SC 29445. The meeting will begin at
2:00 p.m. Eastern Time. To encourage social distancing and to
enable stockholders to participate remotely, we will provide
stockholders the opportunity to attend the meeting virtually via
live audio webcast and telephone dial-in. You may attend, vote, and
submit questions during the annual meeting via the internet. You
may also vote prior to the annual meeting via proxy card or by
logging in to www.cstproxyvote.com using the unique control number
printed on your proxy card and following the prompts.
Details
regarding how to attend the meeting online and the business to be
conducted at the annual meeting are described in the accompanying
Notice of the 2020 Annual Meeting to Stockholders and proxy
statement.
Your vote is very important, regardless of the number of shares you
own. Whether or not you plan to attend the meeting in person or
virtually, we urge you to sign, date, and return the proxy at once
in the enclosed envelope, go online at www.cstproxyvote.com to vote
now, or, if you are a beneficial stockholder, contact your bank or
broker for instructions on early voting.
|
Sincerely,
/s/ Richard F. Hermanns
Richard
F. Hermanns
Chairman of the
Board of Directors
April
29, 2020
|
111
Springhall Drive
Goose
Creek, South Carolina 29445
NOTICE OF THE 2020 ANNUAL MEETING OF STOCKHOLDERS
To Be
Held June 15, 2020
The
2020 Annual Meeting of Stockholders of HireQuest, Inc., a Delaware
corporation, will be held at the HireQuest corporate headquarters,
111 Springhall Drive, Goose Creek, South Carolina, 29445, and
virtually via live audio webcast at
http://www.cstproxy.com/hirequest/2020, on June 15, 2020 at 2:00
p.m. Eastern Time (the “Annual Meeting”), for the
following purposes:
1.
To approve the
election of directors ("Proposal #1");
2.
To approve the
adoption of the HireQuest, Inc. 2019 Equity Incentive Plan
("Proposal #2");
3.
To ratify the
selection of Plante & Moran, PLLC as the Company’s
independent registered public accounting firm for the fiscal year
ending December 31, 2020 ("Proposal #3");
4.
To approve, on a
non-binding advisory basis, the compensation paid to the
Company’s named executive officers as disclosed in the
attached proxy statement ("Proposal #4"); and
5.
To transact such
other business as may properly come before the meeting or any
adjournment or postponement thereof.
The
annual meeting may be accessed via live audio webcast. To access
the webcast, please follow the instructions in the section titled
“Virtual Meeting Option” beginning on page 5 of the
accompanying proxy statement. You may also access the meeting via
telephone. The telephone line will be listen-only. Within the
United States and Canada, the toll free number is (877) 770-3647.
Outside of the United States and Canada, the number is +1 (312)
780-0854 (standard rates apply). The passcode for telephone access
is 35148211#.
The
Company will transact no other business at the Annual Meeting
except such business as may properly be brought before the Annual
Meeting or any adjournments or postponements thereof. Please refer
to the accompanying proxy statement for further information with
respect to the business to be transacted at the Annual
Meeting.
Stockholders
of record at the close of business on April 24, 2020 will be
entitled to attend and to vote at the meeting and adjournments of
the meeting.
You are cordially invited to attend the meeting. Even if you do not
plan to attend the meeting, we urge you to vote now. If you are a
registered stockholder, simply sign, date, and return the proxy at
once in the enclosed envelope or go online at www.cstproxyvote.com
to vote now using the unique control number printed on your proxy
card. If you are a beneficial stockholder, you must contact your
banker or broker to obtain instructions on early
voting.
|
By
Order of the Board of Directors of the Company,
/s/ John D. McAnnar
John D.
McAnnar
Secretary
April
29, 2020
|
111
Springhall Drive
Goose
Creek, South Carolina 29445
PROXY
STATEMENT
of
HIREQUEST,
INC.
Annual
Meeting of Stockholders to be held on June 15, 2020
TABLE OF CONTENTS
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PAGE
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Proxy
Statement Summary
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4
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Additional
Information
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5
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Virtual
Meeting Option
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5
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About
this Proxy Statement and Annual Meeting
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6
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Corporate
Governance and Other Board Information
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8
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Standing
Board Committees
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11
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Audit
Committee Report
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13
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Certain
Relationships and Related Party Transactions
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13
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Election
of Directors - Proposal #1
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16
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Director
Compensation
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19
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Business
Experience of Executive Officers
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22
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Certain
Beneficial Owners of Our Common Stock
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23
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Approval
of Equity Incentive Plan - Proposal #2
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24
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Ratification
of Appointment of Auditors - Proposal #3
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30
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Independent
Registered Public Accounting Firm's Fees
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30
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Approval
of Advisory Resolution on Executive Compensation, Say-on-Pay -
Proposal #4
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31
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Compensation
of Named Executive Officers
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31
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Other
Matters Presented at the Annual Meeting
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36
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Stockholder
Proposals for the 2021 Annual Meeting
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36
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Annual
Report on Form 10-K
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36
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Appendix
A - HireQuest, Inc. 2019 Equity Incentive Plan
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A-1
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PROXY STATEMENT SUMMARY
This
summary highlights information contained elsewhere in this proxy
statement. This summary does not contain all of the information
that you should consider, and you should read the entire proxy
statement carefully before voting.
Annual Meeting of Stockholders
Date and Time
June
15, 2020 at 2:00 p.m., Eastern Time
Location
HireQuest,
Inc.
111
Springhall Drive
Goose
Creek, South Carolina 29445
and
Via
live audio webcast at www.cstproxy.com/hirequest/2020
or
Listen-only
via telephone. Within the United
States and Canada, the toll free number is (877) 770-3647. Outside
of the United States and Canada, the number is +1 (312) 780-0854
(standard rates apply). The passcode for telephone access is
35148211#.
Record Date
April
24, 2020
Approximate Date Proxy Materials Are First Mailed to
Stockholders
May 6,
2020
Voting
Stockholders
as of the record date are entitled to vote. Each share of common
stock is entitled to one vote for each director nominee and one
vote for each of the proposals.
Vote Right Away
Even if
you plan to attend our 2020 Annual Meeting of Stockholders, either
in person or virtually, please read this proxy statement with care
and vote right away using one of the methods below. If you are a
registered stockholder, have your proxy card or voting instructions
form in hand and follow the instructions.
●
Go online to
www.cstproxyvote.com to register your vote today;
●
Fill out and return
your proxy card in the enclosed envelope; or
If your
shares are held in the name of a bank, broker, or other holder of
record, you will receive instructions from the holder of record as
to how to vote your shares. You must follow the instructions of the
holder of record for your shares to be voted.
If your
shares are not registered in your own name and you plan to vote
your shares in person at the Annual Meeting, you should contact
your broker or agent to obtain a legal proxy or broker’s
proxy card and bring it to the Annual Meeting to vote or use it to
attend the virtual meeting. For more information on the virtual
meeting, see Virtual Meeting
Option below.
Proposals
At the
Annual Meeting, stockholders of the Company will be asked to
consider and vote on the following proposals:
1.
To approve the
election of directors ("Proposal #1");
2.
To approve the
adoption of the HireQuest, Inc. 2019 Equity Incentive Plan
("Proposal #2");
3.
To ratify the
selection of Plante & Moran, PLLC as the Company’s
independent registered public accounting firm for the fiscal year
ending December 31, 2020 ("Proposal #3");
4.
To approve, on a
non-binding advisory basis, the compensation paid to the
Company’s named executive officers as disclosed in the
attached proxy statement ("Proposal #4"); and
5.
To transact such
other business as may properly come before the meeting or any
adjournment or postponement thereof.
The
Company’s Board of Directors has fixed the close of business
on April 24, 2020 as the record date for determination of
stockholders entitled to receive notice of, and to vote at, the
Annual Meeting or any adjournments or postponements thereof. Only
the Company’s stockholders of record as of the close of
business on the record date are entitled to receive notice of the
Annual Meeting, to attend the Annual Meeting and to vote on all
matters that properly come before the Annual Meeting.
This
proxy statement and the accompanying form of proxy for the
Company’s stockholders are first being mailed or delivered to
the Company’s stockholders on or about May 6,
2020.
ADDITIONAL INFORMATION
This
proxy statement incorporates important business and financial
information about the Company from other documents that are not
included in or delivered with this proxy statement. This
information is available to you without charge upon your request.
You can obtain the documents incorporated by reference into this
proxy statement free of charge by requesting them in writing from
the Company at the Company’s principal mailing address: 111
Springhall Drive, Goose Creek, South Carolina 29445, Attention:
John D. McAnnar, Corporate Secretary or by telephone at (843)
723-7400 ext. 1000.
VIRTUAL MEETING OPTION
The
Annual Meeting may be accessed virtually via live audio webcast.
Both stockholders of record and beneficial or “street
name” stockholders will need to register to be able to attend
the Annual Meeting via live audio webcast, submit their questions
during the meeting and vote their shares electronically at the
meeting by following the instructions below.
If you
are a stockholder of record:
●
You must follow the
instructions provided on your proxy card to first register
at www.cstproxy.com/hirequest/2020 starting on June
8, 2020 at 2:00 p.m., Eastern Time. You must be registered by 11:59
p.m., Eastern Time on June 14, 2020.
●
You will need to
enter your name, email address, and control number (included on
your proxy card) as part of the registration.
●
On the day of the
Annual Meeting, if you have properly registered, you may enter the
Annual Meeting by entering your control number (included on your
proxy card) at www.cstproxy.com/hirequest/2020.
●
If you wish to vote
your shares electronically at the Annual Meeting, you may do so by
following the prompts for voting on the Annual Meeting website (you
will need the control number included on your proxy
card).
If you
are a beneficial or “street name” stockholder, you
must:
●
Obtain a legal
proxy from your broker, bank or other nominee.
●
Once you have your
legal proxy form, contact Continental Stock Transfer to have a
control number generated. You may contact Continental Stock
Transfer at (917) 262-2373 or by email at
proxy@continentalstock.com. “Street name” holders who
wish to attend the Annual Meeting should contact Continental Stock
Transfer no later than June 8, 2020.
●
Once you have
obtained a control number, register at
www.cstproxy.com/hirequest/2020 starting on June 8, 2020 at 2:00
p.m. Eastern Time. You must be registered by 11:59 p.m., Eastern
Time on June 14, 2020.
●
You will need to
enter your name, email address, and control number as part of the
registration.
●
On the day of the
Annual Meeting, if you have properly registered, you may enter the
Annual Meeting by entering your control number at
www.cstproxy.com/hirequest/2020.
●
If you wish to vote
your shares electronically at the Annual Meeting, you may do so by
following the prompts for voting on the Annual Meeting website (you
will need the control number you received from Continental Stock
Transfer).
Registration
for the Annual Meeting will open on June 8, 2020 at 2:00 p.m.,
Eastern Time. The Annual Meeting live audio webcast will begin
promptly at 2:00 p.m., Eastern Time, on June 15, 2020. We encourage
you to access the meeting prior to the start time. You should allow
ample time for the check-in procedures on the day of the Annual
Meeting.
ABOUT THIS PROXY STATEMENT AND ANNUAL MEETING
This
proxy statement constitutes a proxy statement for the Company under
Section 14(a) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). The accompanying Notice of the
2020 Annual Meeting of Stockholders constitutes a notice of meeting
with respect to the Annual Meeting.
You
should rely only on the information contained in or incorporated by
reference into this proxy statement and the accompanying notice. No
one has been authorized to provide you with information that is
different from that contained in, or incorporated by reference
into, this proxy statement or the accompanying notice. This proxy
statement is dated April 29, 2020.
The enclosed proxy is solicited by our Board of
Directors. Such solicitation is being made by mail and
may also be made by directors, officers and regular employees of
HireQuest personally or by telephone.
Any proxy given pursuant to such solicitation may be revoked by the
stockholder at any time prior to the voting thereof by so notifying
us in writing at 111 Springhall Drive, Goose Creek, SC 29445,
attention: Corporate Secretary, or by appearing in person at the
meeting.
Shares represented by proxies will be voted as specified in such
proxies, and if no choice is specified, will be voted in accordance
with the Board’s recommendations: “FOR” each of the Board of
Directors nominees that are standing for election to the Board of
Directors, “FOR” the Equity Incentive Plan Proposal,
“FOR” the proposal to ratify the selection of Plante
& Moran, PLLC as the Company’s independent registered
public accounting firm for the fiscal year ending December 31,
2020, and “FOR” the Say-on-Pay Proposal.
With respect to any other matter that
properly comes before the Annual Meeting, Richard F. Hermanns and
John D. McAnnar will vote as recommended by the Board or, if no
recommendation is given, in their own
discretion.
Shares voted as abstentions on any matter (or a “withhold
authority” vote as to directors) will be counted as present
and entitled to vote for purposes of determining a quorum and for
purposes of calculating the vote with respect to such matter, but
will not be deemed to have been voted in favor of such
matter. If a broker submits a “non-vote” proxy,
indicating that the broker does not have discretionary authority to
vote certain shares on a particular matter, those shares will be
counted as present for purposes of determining a quorum, but will
not be considered present and entitled to vote for purposes of
calculating the vote with respect to such matter.
Effect of Not Casting Your Vote.
If you hold your shares beneficially or in “street
name” it is critical that you cast your vote if you want it
to count in the election of directors, the approval of the
Equity Incentive Plan, and the advisory vote on executive
compensation (Proposals 1, 2, and 4 of this Proxy
Statement). Your bank or broker is not permitted to vote your
uninstructed shares on these proposals. Thus, if you hold your
shares in “street name” and you do not instruct your
bank or broker how to vote on Proposals 1, 2, or 4, your
shares will not be counted as having been voted on the applicable
proposal and therefore will have no effect on the vote, assuming a
quorum is present. Please instruct your bank or broker so your vote
can be counted. Your bank or broker does have discretion to
vote any uninstructed shares on the ratification of the appointment
of the Company’s independent registered public accounting
firm (Proposal 3 of this Proxy Statement).
Changing Your Vote
Even if you submit a vote, you may revoke or change your vote at
any time prior to or during the Annual Meeting either
by:
●
giving
written notice to our Corporate Secretary revoking your
proxy;
●
timely delivering a
later dated proxy;
●
attending the
Annual Meeting and voting in person; or
●
attending the
Annual Meeting virtually and voting online.
Expenses
All the expenses involved in preparing, assembling, and mailing
this proxy statement and the material enclosed with the proxy
statement will be paid by HireQuest. HireQuest may reimburse
banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending
proxy material to beneficial owners of stock.
Outstanding Shares and Voting Rights
The Board of Directors has fixed April 24, 2020, as the record date
for determining stockholders entitled to vote at the Annual
Meeting. Persons who were not stockholders on such date will
not be allowed to vote at the Annual Meeting. At the close of
business on April 24, 2020, 13,544,853 shares of our common
stock were issued and outstanding. Common stock is the only
outstanding class of capital stock and the only class entitled to
vote at the meeting. Each share of common stock is entitled to
one vote on each matter to be voted on at the
meeting. Stockholders are not entitled to cumulative voting
rights.
Under applicable Delaware law, approval of each of the proposals to
be voted on at the meeting except the election of the nominees
requires the affirmative vote of the holders of the greater of
(i) a majority of the voting power of the shares represented
in person or by proxy at the Annual Meeting with authority to vote
on such matter or (ii) a majority of the voting power of the
minimum number of shares that would constitute a quorum for the
transaction of business at the Annual Meeting. The
election of the nominees requires the affirmative vote by a
plurality of the voting power of the shares present and entitled to
vote on the election of directors at a meeting at which a quorum is
present.
Inspector of Elections
A representative of Continental Stock Transfer & Trust will
serve as the inspector of elections.
CORPORATE GOVERNANCE AND OTHER BOARD INFORMATION
Board Composition and Code of Ethics
The Board is currently composed of Richard Hermanns, R. Rimmy
Malhotra, Edward Jackson, Kathleen Shanahan, Payne Brown, Lawrence
Hagenbuch, and JD Smith.
The
Board has adopted the HireQuest, Inc. Code of Ethics and Business
Conduct (the “Code”). A copy of the Code is available
on our website at www.hirequest.com by choosing the “Invest
in HireQuest” tab, then clicking the “Investor
Relations” button, and finally selecting “Corporate
Governance.” We will provide a copy to any stockholder free
of charge upon request. We will satisfy the disclosure requirement
of Item 5.05 of Form 8-K (which requires disclosure on Form 8-K or
the company website of certain waivers or amendments of the Code)
by posting relevant information on our website at
www.hirequest.com. The contents of our website are not incorporated
by reference in this proxy statement.
Board Meetings in 2019
The full Board of Directors held twelve meetings in
2019.
Director Attendance
During the year ended December 31, 2019, each of our directors
attended at least 75% of all meetings of the Board and committees
of which he or she was then a member. We encourage, but do not
require, our directors to attend our annual meeting of
stockholders. All of our current directors who were serving on the
Board at the time of our 2019 annual meeting attended the 2019
annual meeting.
Independent Directors
Following
the Merger, the Board determined that the following directors are
independent pursuant to the Nasdaq Listing Rules: R. Rimmy
Malhotra, Kathleen Shanahan, Edward Jackson, Payne Brown, JD Smith,
and Lawrence Hagenbuch.
The Board expects that Mr. Olmstead, a nominee for election to the
Board this year, would also be independent.
Leadership Structure of the Board
In accordance with our bylaws, our Board of Directors appoints our
Chief Executive Officer and our Chairman, and each of these
positions may be held by the same person or may be held by two
persons. The Board does not have a policy regarding whether the
role of the Chairman and Chief Executive Officer should be
separate. Periodically, the Board assesses these roles and the
board leadership structure to ensure the interests of the Company
and its stockholders are best served.
Mr. Hermanns currently serves as our Chairman and Chief Executive
Officer. In his role as Chairman, Mr. Hermanns presides over
meetings of the full Board of Directors, provides guidance to the
Board and management on a variety of key issues, and is responsible
for long-range strategic planning for the Company. As Chief
Executive Officer, Mr. Hermanns is responsible for the active
management, day-to-day leadership, and performance of the Company.
Our Board has determined that Mr. Hermanns’ involvement as
both Chairman and Chief Executive Officer benefits the Company
because of his proven leadership; extensive knowledge of all
aspects of the Company and its business and risks, its industry,
and its competitors; deep understanding of the Company’s
operations and intimate involvement in the day-to-day business
positioning him to elevate the most critical business issues for
consideration by the Board; and significant personal investment in
the Company that aligns his interests with those of stockholders.
The Board believes that having Mr. Hermanns serve in both
capacities of Chairman and CEO currently allows him to more
effectively execute HireQuest’s strategic initiatives and
business plans and to confront its challenges.
HireQuest also has a Vice Chairman, Mr. Malhotra, who is an
independent director. Mr. Malhotra is an additional resource for
the Board and management with respect to governance and financial
matters. The Vice Chairman has the responsibility and authority to
preside over all meetings of the Board of Directors at which the
Chairman is not present, including executive sessions of the
independent directors, serving as a key liaison between the
Chairman and the independent directors, reviewing and approving
agendas for the Board of Directors, recommending selection for
membership for each board committee, and being available, when
appropriate, for consultation and communication with management,
independent directors, the Chairman, and stockholders.
After careful consideration, our Board has determined that
HireQuest’s current Board structure with a combined Chairman
and CEO role and an independent Vice Chairman, is the most
appropriate leadership structure for HireQuest and its stockholders
given the Company’s ownership and operations.
Director Nominations
The Board of Directors nominates directors for election at each
annual meeting of stockholders and appoints new directors to fill
vacancies when they arise. The Nominating and Governance Committee
has the responsibility to identify, evaluate, recruit, and
recommend qualified candidates to the Board of Directors for
nomination or election.
One of the Board of Directors’ objectives in evaluating
director nominations is to ensure that its membership is composed
of experienced and dedicated individuals with a diversity of
backgrounds, perspectives, and skills. The Nominating and
Governance Committee will select nominees for director based on
their character, judgment, diversity of experience, business
acumen, and ability to act on behalf of all stockholders. We do not
have a formal diversity policy, however, the Nominating and
Governance Committee endeavors to have a Board representing diverse
viewpoints as well as diverse expertise at policy-making levels in
many areas including business, accounting and finance, marketing
and sales, legal, government affairs, regulatory affairs, business
development, technology, and other areas that are relevant to our
activities.
The Nominating and Governance Committee believes that nominees for
director should have experience, such as those mentioned above,
that may be useful to the Company and the Board of Directors, high
personal and professional ethics and the willingness and ability to
devote sufficient time to carry out effectively their duties as
directors. The Nominating and Governance Committee believes it is
appropriate for at least one, and, preferably, multiple, members of
the Board of Directors to meet the criteria for an “audit
committee financial expert” as defined by rules of the SEC,
and for a majority of the members of the Board of Directors to meet
the definition of “independent director” as defined by
the NASDAQ Listing Rules. The Nominating and Governance Committee
also believes it is appropriate for key members of our management
to participate as members of the Board of Directors. Prior to each
annual meeting of stockholders, the Nominating and Governance
Committee identifies nominees first by evaluating the current
directors who are willing to continue in service. These candidates
are evaluated based on the criteria described above, including as
demonstrated by the candidate’s prior service as a director,
and the needs of the Board of Directors with respect to the talents
and experience of its directors. In the event that a director does
not wish to continue in service, the Nominating and Governance
Committee determines not to re-nominate the director, a vacancy is
created on the Board of Directors as a result of a resignation, an
increase in the size of the Board or other event, the Committee
will consider various candidates for Board membership, including
those suggested by the Committee members, by other Board members,
by any executive search firm engaged by the Committee or by
stockholders.
Effective September 11, 2019, our Board of Directors approved and
adopted the Bylaws of HireQuest, Inc. (the “Bylaws”).
The Bylaws included Article 2.4(ii) – Advance Notice of Director
Nominations at Annual Meetings.
A stockholder who wishes to suggest a prospective nominee for the
Board of Directors should notify the Company’s Corporate
Secretary in writing. The notice must include the following
information regarding the nominee: (A) the name, age,
business address and residence address of the nominee, (B) the
principal occupation or employment of the nominee, (C) the class
and number of shares of the corporation that are held of record or
are beneficially owned by the nominee and any derivative positions
held or beneficially held by the nominee, (D) whether and the
extent to which any hedging or other transaction or series of
transactions has been entered into by or on behalf of the nominee
with respect to any securities of the corporation, and a
description of any other agreement, arrangement or understanding
(including any short position or any borrowing or lending of
shares), the effect or intent of which is to mitigate loss to, or
to manage the risk or benefit of share price changes for, or to
increase or decrease the voting power of the nominee, (E) a
description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nominations
are to be made by the stockholder, (F) a written statement executed
by the nominee acknowledging that as a director of the corporation,
the nominee will owe a fiduciary duty under Delaware law with
respect to the corporation and its stockholders, and (G) any other
information relating to the nominee that would be required to be
disclosed about such nominee if proxies were being solicited for
the election of the nominee as a director, or that is otherwise
required, in each case pursuant to Regulation 14A under the 1934
Act (including without limitation the nominee’s written
consent to being named in the proxy statement, if any, as a nominee
and to serving as a director if elected). As to the stockholder
giving such notice, the notice must include: (1) the name and
address, as they appear on the corporation’s books, of the
stockholder proposing such nominee and any Stockholder Associated
Person (as defined in the Bylaws), (2) the class and number of
shares of the corporation that are held of record or are
beneficially owned by the stockholder or any Stockholder Associated
Person and any derivative positions held or beneficially held by
the stockholder or any Stockholder Associated Person, (3) whether
and the extent to which any hedging or other transaction or series
of transactions has been entered into by or on behalf of such
stockholder or any Stockholder Associated Person with respect to
any securities of the corporation, and a description of any other
agreement, arrangement or understanding (including any short
position or any borrowing or lending of shares), the effect or
intent of which is to mitigate loss to, or to manage the risk or
benefit from share price changes for, or to increase or decrease
the voting power of, such stockholder or any Stockholder Associated
Person with respect to any securities of the corporation, and (4)
any material interest of the stockholder or a Stockholder
Associated Person in such business. In addition, to be in proper written
form, a stockholder’s notice to the secretary must be
supplemented not later than ten days following the record date for
notice of the meeting to disclose the information contained in
clauses (2) and (3) above as of the record date for notice of the
meeting. The notice must also include a statement whether either
such stockholder or Stockholder Associated Person will deliver a
proxy statement and form of proxy to holders of a number of the
corporation’s voting shares reasonably believed by such
stockholder or Stockholder Associated Person to be necessary to
elect such nominee. Submission of a prospective nominee must comply
with all requirements set forth in the Company’s
Bylaws.
Communications with the Board
Any interested party may communicate with the Board, the Chairman
of the Board, or the non-employee directors as a group on a
Board-related issue by sending a written communication to:
Corporate Secretary, HireQuest, Inc. 111 Springhall Drive, Goose
Creek, SC 29445. Relevant communications will be distributed to the
Board, or to any individual director or directors as appropriate,
depending on the facts and circumstances outlined in the
communication. Communications that are unrelated to the duties and
responsibilities of the Board will not be forwarded, such as
sponsorship requests, licensing requests, annual report requests,
business solicitations, advertisements, brand comments, and job
inquiries. Any communication that is screened as described above
will be made available to any director upon his or her
request.
Executive Sessions
Our non-employee directors meet regularly in executive sessions
without members of management. The Committees of the Board also
generally meet in executive session after each regular
meeting.
Our Board’s Role in Risk Oversight
The Board and its Committees play an active role in overseeing the
identification, assessment, and mitigation of risks that are
material to the Company. In fulfilling this responsibility, the
Board and its Committees regularly consult with management to
evaluate and, when appropriate, modify the Company's risk
management strategies. While certain categories of risk, such as
related party transactions and oversight of internal control over
financial reporting, are allocated to the Audit Committee, the
entire Board is regularly informed about such risks from management
and the Audit Committee.
The Board regularly reviews information regarding our primary areas
of risk assessment including key risks in the strategic,
competitive, economic, operational, financial, legal, compliance,
regulatory, and reputational realms. Management is charged with
identifying material risks that the Company faces in a timely
manner, implementing strategies that are responsive to the
Company’s risks, evaluating risk and risk management, and
promptly communicating information regarding risk to the
Board.
STANDING BOARD COMMITTEES
Each of the committees listed below is a standing committee of our
Board. The Board has adopted written charters for each committee,
which are available on our website at www.hirequest.com by choosing
the “Invest in HireQuest” tab, then clicking the
“Investor Relations” button, and finally selecting
“Corporate Governance.” We will provide a copy of any committee charter to
any stockholder free of charge upon request. The Board has
determined that all members of the Audit, Compensation, and
Nominations and Corporate Governance Committees are independent and
satisfy the relevant Securities and Exchange Commission and Nasdaq
independence requirements and other requirements for members of
such committees.
The following table presents information on our current board
committees:
Director
|
Audit Committee
|
Compensation Committee
|
Nominations and Corporate Governance Committee
|
Richard Hermanns
|
|
|
|
R. Rimmy Malhotra*
|
X
|
X
|
|
Payne Brown
|
|
X
|
C
|
Kathleen Shanahan
|
X
|
|
X
|
Lawrence Hagenbuch*
|
C
|
|
|
Edward Jackson
|
|
C
|
|
JD Smith
|
|
|
X
|
X = Member
|
|
|
|
C = Chair
|
|
|
|
* = Audit Committee Financial Expert
|
|
|
|
Audit Committee
The Audit Committee, which is established in accordance with
Section 3(a)(58)(A) of the Exchange Act, consists entirely of
directors who meet the independence requirements of Nasdaq and Rule
10A-3 under the Exchange Act. The Board has determined that
Lawrence Hagenbuch and R. Rimmy Malhotra are both “audit
committee financial experts” as defined in Item 407(d)(5)(ii)
of Regulation S-K, and have accounting and financial management
expertise within the meaning of the Nasdaq rules.
The Audit Committee provides oversight by reviewing financial
reports and other financial information of HireQuest, reviewing our
systems of internal control regarding finance, accounting, legal
compliance, and ethics, reviewing our auditing, accounting and
financial reporting process, and administering our related party
transactions policy including review and approval of all potential
related party transactions. The Audit Committee monitors our
financial reporting process and internal control system. The
Audit Committee coordinates, reviews and appraises the audit
efforts of our independent registered public accounting firm. The
Audit Committee communicates directly with the independent
accountants, financial and senior management, and our Board of
Directors regarding the matters related to the Committee’s
responsibilities and duties.
The Audit Committee has the power to investigate any matter brought
to its attention within the scope of its duties. It also has the
authority to retain independent counsel and advisors to fulfill its
responsibilities and duties should it deem doing so advisable. The
current Audit Committee is comprised of Lawrence Hagenbuch (Chair),
Kathleen Shanahan, and R. Rimmy Malhotra. Prior to the Merger, the
Audit Committee was comprised of Galen Vetter (Chair), Lawrence
Hagenbuch, and Steven P. Oman. The Audit Committee held five
meetings in 2019.
Compensation Committee
The Compensation Committee consists entirely of directors who meet
the independence requirements of Nasdaq and Rule 10C-1 under the
Exchange Act. The principal duties and responsibilities of the
Compensation Committee are to review and approve annually the
corporate goals and objectives applicable to the CEO’s
compensation and judge the CEO’s performance, to review and
make recommendations regarding the compensation and performance of
other executive employees, to review and recommend incentive
compensation plans, to review and make recommendations regarding
employment and severance agreements, and to review director
compensation.
The Compensation Committee has the power to select and retain a
compensation consultant as necessary. No such advisors are
currently engaged. The Compensation Committee did not use an
advisor to assist it in determining executive compensation for
2019. Executive management is actively involved in determining
appropriate compensation and making recommendations to the
Compensation Committee for its consideration. The Compensation
Committee generally reviews the compensation programs applicable to
executive officers on an annual basis. In setting compensation
levels for a particular executive, the Committee takes into
consideration the proposed compensation package as a whole and each
element individually, as well as the executive’s past and
expected future contributions to our business.
The current Compensation Committee is comprised of Edward Jackson
(Chair), Payne Brown, and R. Rimmy Malhotra. Prior to the Merger,
the Compensation Committee consisted of Lawrence Hagenbuch (Chair),
R. Rimmy Malhotra, and Steven Bathgate. The Compensation Committee
held three meetings in 2019.
Nominations and Corporate Governance Committee
The Nominations and Corporate Governance Committee consists
entirely of directors who meet the independence requirements of
Nasdaq. The principal duties and responsibilities of the
Nominations and Corporate Governance Committee include determining
qualifications and expertise required to be a director, identifying
and screening individuals qualified to become members of the Board,
making recommendations to the Board regarding selection and
approval of directors, overseeing corporate governance practices
and procedures, and reviewing the Board’s committee
structure.
The current Nominations and Corporate Governance Committee members
are Payne Brown (Chair), Kathleen Shanahan, and JD Smith. Prior to
the Merger, the Nominations and Corporate Governance Committee
consisted of JD Smith (Chair), Galen Vetter, and Steven P. Oman.
The Nominations and Corporate Governance Committee held one meeting
in 2019.
AUDIT COMMITTEE REPORT
Management has the primary responsibility for the Company’s
internal controls and financial reporting process. The independent
registered public accounting firm is responsible for performing an
independent audit of the Company’s consolidated financial
statements in accordance with the standards of the Public Company
Accounting Oversight Board and issuing an opinion thereon. The
Audit Committee’s responsibility is to monitor and oversee
these processes. As part of its ongoing activities, the Audit
Committee has:
●
reviewed
and discussed with management and the independent registered public
accounting firm the Company’s audited consolidated financial
statements for the fiscal year ended December 31,
2019;
●
discussed
with the independent registered public accounting firm the matters
required to be discussed by Public Company Accounting Oversight
Board Auditing Standard No. 1301 (Communications with Audit
Committees), and SEC Regulation S-X, Rule 2-07 (Communication with
Audit Committee);
●
received
the written disclosures and the letter from the independent
registered public accounting firm required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent registered public accounting firm’s
communications with the Audit Committee concerning independence,
and discussed with the independent registered public accounting
firm its independence from the Company; and
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in the
Company’s annual report on Form 10-K for the fiscal year
ended December 31, 2019, for filing with the Securities and
Exchange Commission.
In addition, the Audit Committee appointed Plante & Moran, PLLC
as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2020, and any interim
periods.
Audit Committee
Lawrence Hagenbuch
R. Rimmy Malhotra
Kathleen Shanahan
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions Policy
We
recognize that transactions between the Company and related persons
present a potential for actual or perceived conflicts of interest.
Our general policies with respect to such transactions are included
in our Code of Ethics and Business Conduct, and specific policies
are included in our HireQuest, Inc. Related Party Transactions
Policy (the “Policy”). All employees and directors are
required to follow both policies, and the Audit Committee of the
Board is charged with reviewing and approving all related party
transactions.
Our Policy defines related party transactions as any
transaction, arrangement, or relationship, or any series of similar
transactions, arrangements or relationships, in which (i) the
Company or any of its subsidiaries is or will be a participant,
(ii) the aggregate amount involved in any fiscal year will or may
be expected to exceed the lesser of $120,000 or one percent of the
average total assets of the Company at year end for the last two
completed fiscal years, and (iii) any related party has or will
have a direct or indirect material interest. This also includes any
material amendment or modification to an existing related party
transaction. The Policy, in turn, defines a related party as any
person who is or was (since the beginning of the last fiscal year
for which the Company has filed an Annual Report on Form 10-K and
proxy statement, even if such person does not presently serve in
that role) an executive officer, director, or nominee for director
of the Company, any stockholder owning more than 5% of any class of
the Company's voting securities, or an immediate family member of
any such person.
It is the responsibility of the Audit Committee of the Board to
administer the Policy. The Audit Committee shall review all
of the relevant facts and circumstances of all related party
transactions that require the Committee's approval and either
approve or disapprove of the entry into the related party
transaction. In determining whether to approve or ratify a related
party transaction, the Committee must take into account, among
other factors it deems appropriate, (i) whether the transaction was
undertaken in the ordinary course of business of the Company, (ii)
whether the related party transaction was initiated by the Company,
a subsidiary, or the related party, (iii) whether the transaction
with the related party is proposed to be, or was, entered into on
terms no less favorable to the Company than terms that could have
been reached with an unrelated third party, (iv) the purpose of,
and the potential benefits to the Company of, the related party
transaction, (v) the approximate dollar value of the amount
involved in the related party transaction, particularly as it
relates to the related party, (vi) the related party's interest in
the related party transaction, and (vii) any other information
regarding the related party transaction or the related party that
would be material to investors in light of the circumstances of the
particular transaction.
The
Committee may approve the Related Party Transaction only if the
Committee determines in good faith that, under all of the
circumstances, the transaction is in the best interest of the
Company and its stockholders. The Committee, in its sole
discretion, may impose such conditions as it deems appropriate on
the Company or the related party in connection with the approval of
the Related Party Transaction.
Certain
transactions, including employment of executive officers,
compensation of directors, certain transactions with other
companies in which the relationship of the related party to the
other company does not reach a certain nexus, certain charitable
contributions, transactions in which all stockholders receive
proportional benefits, and indemnification of directors and
officers, are exempted from the Policy.
Related Party Transactions
The following transactions, which have occurred since the beginning
of 2018 involving related parties, have met, or are reasonably
expected to meet, the definition of Related Party Transaction
pursuant to the Policy. Transactions occurring prior to July 15,
2019 occurred when Hire Quest Holdings, LLC was a private
company.
The Worlds Franchisees
Mr. Jackson and immediate family members of Mr. Hermanns have
ownership interests in certain of our franchisees (the
“Worlds Franchisees”). There were 20 Worlds
Franchisees at December 31, 2019 that operated 57 of our 147
offices. There were 23 Worlds Franchisees that operated 50 of Hire
Quest LLC’s 97 offices at December 31, 2018.
Mr. Hermanns’ three children and son-in-law own in the
aggregate between 26.48% and 63.05% of each of the Worlds
Franchisees. Mr. Jackson owns between 10.59% and 25.45% of each of
the Worlds Franchisees.
Royalty fees which the Worlds Franchisees paid the Company for the
relevant periods are set forth below:
|
|
|
|
|
Franchisee
royalty fees paid to the Company
|
$6,964,690
|
$5,900,637
|
Franchisee
royalty fees paid to the Company correspond to a value (based on
current ownership) of approximately $3.1 million and $2.5 paid by
the Worlds Franchisees attributable to the ownership of relatives
of Mr. Hermanns in 2019 and 2018. Royalty fees paid by the Worlds
Franchisees attributable to Mr. Jackson's ownership correspond to a
value of approximately $1.3 million and $1.0 million during the
same time periods.
On July 15, 2019, in connection with the Merger, the Company closed
on the sale of assets of several offices to Worlds Franchisees for
an aggregate purchase price of $2.2 million. Based on their
respective ownership interests in the purchasing Worlds
Franchisees, this corresponds
to a value of approximately $1.1 million for immediate relatives of
Mr. Hermanns and $0.5 million for Mr. Jackson.
Contemporaneously with the sale of these assets, the Company
entered into an agreement with Hire Quest Financial, LLC, another
entity in which Mr. Hermanns and Mr. Jackson collectively own a
majority stake (discussed immediately below), whereby the
promissory notes issued by the Worlds Buyers to the Company in the
aggregate principal amount of approximately $2.2 million were
transferred to HQF in exchange for accounts receivable of an equal
value. Accordingly, the Company received the full payment price for
the office assets upon the closing of the Merger on July 15, 2019,
and the Worlds Franchisees have no outstanding obligation to the
Company with respect to those assets.
Hire Quest Financial LLC
Mr. Hermanns (61.40%) and Mr. Jackson (26.71%) own a majority of
Hire Quest Financial, LLC (“HQF”), a financial services
entity. In addition to the transaction described immediately above,
the following transactions occurred prior to the
Merger.
Prior to March 20, 2018, HQF provided Hire Quest, LLC finance and
insurance related services and a line of credit. HQF charged a
management fee, including the interest charge on the line of
credit, of 2% of the sales of Hire Quest, LLC’s
franchisee-owned and company-owned offices, also known as
system-wide sales. Hire Quest, LLC terminated this arrangement in
March 2018. The total fee paid in 2018 was approximately $249,000.
The amount of the fee allocable to Mr. Hermanns’ ownership
was approximately $152,900. The amount of the fee allocable to Mr.
Jackson’s ownership was approximately $66,500.
During the year ended December 31, 2018, Hire Quest, LLC
transferred approximately $1.8 million of accounts and notes
receivable due from franchisees to HQF, as well as approximately
$600,000 of investments and property and equipment. The amount of
these conveyances allocable to Mr. Hermanns’ ownership was
approximately $1.5 million. The amount of these conveyances
allocable to Mr. Jackson’s ownership was approximately
$641,000. On July 14, 2019, in connection with the Merger, Hire
Quest, LLC conveyed approximately $2.2 million of accounts
receivable to HQF. These transfers were used to pay down
intercompany debt obligations. This corresponds to a value (based
on ownership) of approximately $1.1 million for Mr. Hermanns and
approximately $0.5 million for Mr. Jackson
The intercompany debt was entirely extinguished prior to the
Merger. Currently, there is no intercompany debt. At December 31,
2019 and December 31, 2018, the Company owed HQF $-0- and
approximately $6.7 million, respectively. HQF has no current
business dealings with the Company.
Hirequest Insurance Company
Mr. Hermanns (49.90%), his adult daughter (11.00%), a trust under
his control (0.50%), and Mr. Jackson (26.72%), collectively own a
majority of Hirequest Insurance Company (“HQ Ins.”), a
North Carolina protected cell captive insurance company. Effective
March 1, 2010, Hire Quest, LLC purchased a deductible reimbursement
insurance policy from HQ Ins. to cover losses up to the $500,000
per claim deductible on the Hire Quest, LLC high-deductible
workers’ compensation policy originally obtained through AIG
and, later, through ACE American Insurance Company. Hire Quest, LLC
terminated its policy with HQ Ins. on July 15, 2019 upon the
closing of the Merger.
Premiums paid by Hire Quest, LLC to HQ Ins. for workers’
compensation insurance during the years ended December 31, 2019 and
2018 are approximately $3.6 million and $5.5 million, respectively.
The amounts allocable to Mr. Hermanns' ownership and that of his
family were approximately $2.2 million and $3.4 million,
respectively. The amounts allocable to Mr. Jackson's ownership were
approximately $1.0 million and $1.5 million, respectively. HQI has
no current business dealings with the Company.
Insurance Technologies, Inc.
Mr. Hermanns (19.58%) and Mr. Jackson (42.08%) collectively are the
majority owners of Insurance Technologies, Inc. ("Insurance
Technologies"), an IT development and security firm. On October 24,
2019, the Company entered into an agreement with Insurance
Technologies to add certain cybersecurity protections to our
existing information technology systems and to assist in developing
future information technology systems within our HQ Webconnect
software. Insurance Technologies invoiced the
Company $60,000 in 2019 and has invoiced the Company
approximately $50,000 in 2020 pursuant to this
agreement.
Jackson Insurance Agency and Bass Underwriters
Mr. Jackson owns 51% of Jackson Insurance Agency (“Jackson
Insurance”). Mr. Jackson (42.08%) and Mr. Hermanns (19.58%)
collectively own a majority of Bass Underwriters, a large managing
general agent ("Bass"). Jackson Insurance and Bass brokered Hire
Quest LLC’s property, casualty, general liability, and
cybersecurity insurance prior to the Merger. Since July 15, 2019,
they have brokered these same policies for the Company. Jackson
Insurance, but not Bass, also brokers certain insurance policies on
behalf of some of our franchisees, including the Worlds
Franchisees.
Premiums, taxes, and fees paid to Jackson Insurance and Bass for
the Company's 2020 polices were approximately $561,000, during 2019
were approximately $613,000, and during 2018 were approximately
$212,000. Jackson Insurance and Bass do not retain the majority of
the premiums but they do retain a commission of approximately 9% -
15% of premiums depending on the market. Commissions retained by
Jackson Insurance with respect to the premiums disclosed above were
approximately $68,000, $54,000 and $20,000, respectively. Mr.
Jackson’s interest, based on his ownership, in these amounts
was approximately $35,000, $28,000 and $10,000, respectively.
Commissions retained by Bass were approximately $5,000 for 2020
policies, $21,000 in 2019, and $6,000 in 2018. Mr. Jackson's
ownership interest in Bass corresponds to a value of approximately
$2,000, $9,000 and $3,000 of these commissions respectively. Mr.
Hermanns' ownership interest in Bass corresponds to a value of
approximately $1,000, $4,000 and $1,000
respectively.
ELECTION OF DIRECTORS
(Proposal #1)
At the
meeting, the Board of Directors is to be elected to hold office
until the 2021 annual meeting of stockholders or until successors
are elected and are qualified to serve. Our Board of Directors
currently consists of seven members. Three of the Directors, Mr.
Malhotra, Mr. Hagenbuch, and Mr. Smith, were elected at the 2019
annual meeting of stockholders of Command Center, Inc. The other
four directors, Mr. Hermanns, Mr. Jackson, Ms. Shanahan, and Mr.
Brown, were appointed on July 15, 2019 pursuant to the Agreement
and Plan of Merger dated April 8, 2019
between and among Command Center, Inc., CCNI One, Inc.,
Command Florida, LLC, Hire Quest Holdings, LLC, and Richard
Hermanns as Member Representative (the
“Merger Agreement”).
One
Director, Mr. Smith, has informed the Company of his intention to
retire from the Board as of the date of the Annual Meeting and, as
such, is not included in this proxy statement as a nominee for
re-election. The Company thanks him for his service.
The
remaining six current members of our Board have been recommended
for re-election. The final nominee, Mr. Olmstead, does not
currently serve on our Board. The Nominating and Governance
Committee recommended Mr. Olmstead’s nomination. The Merger Agreement requires one of Mr. Malhotra
and Mr. Hagenbuch to remain on our Board until the 2021 annual
meeting of stockholders and the other to remain on our Board until
the 2022 annual meeting of stockholders, subject in each case to
election by the stockholders.
Upon
the recommendation of the Nominating and Governance Committee, our
Board of Directors has nominated each of the following seven
individuals to be elected to serve until the 2021 annual meeting.
Each of the nominees has consented to being named in this proxy
statement and has agreed to serve as a director if elected. As of
the date of this proxy statement, our Board of Directors is not
aware of any nominee who is unable or will decline to serve as a
director. The Board of Directors recommends that the stockholders
elect the nominees named below.
Shares represented by executed proxies will be voted, if authority
to do so is not withheld, for the election of the nominees named
below, unless one or more of such nominees should become
unavailable for election, in which event such shares shall be voted
for the election of such substitute nominees as the Board of
Directors may propose. Each person nominated has agreed
to serve if elected, and we know of no reason why any of the listed
nominees would be unavailable to serve.
The Nominees:
Richard Hermanns
Richard Hermanns, age 56, has served as Chairman of the
Board, President and Chief Executive Officer of HireQuest, Inc.
since July 2019. Mr. Hermanns has nearly thirty years of experience
in the temporary staffing industry. He previously served as Chief
Executive Officer and Secretary of Hire Quest, LLC since the
Company’s founding in 2002. He also previously served in the
same capacities for predecessor entities since July 1991. He is
also Chairman of the Board of Directors and President of Hirequest
Insurance Company and has been since its founding in 2010. He has
been Chief Executive Officer of Hire Quest Financial, LLC since its
founding in 2006. Together with Edward Jackson, Mr. Hermanns owns a
majority stake in Bass Underwriters, Inc., a large managing general
insurance agent, and its related companies. Prior to founding Hire
Quest and its related entities, Mr. Hermanns served as Chief
Financial Officer of Outsource International, formerly known as
Labor World USA, Inc., and as an Assistant Vice President for NCNB
National Bank (now Bank of America). Mr. Hermanns graduated
summa cum laude with his
Bachelor of Science degree in Economics and Finance from Barry
University, and his Master of Business Administration in Finance
from the University of Southern California. Mr. Hermanns is also
active in the charitable realm. Among his charitable pursuits, he
founded the Higher Quest Foundation, a non-profit organization
dedicated to fighting global hunger in a more sustainable way. The
particular experience, qualifications, attributes or skills that
led our Board to conclude that Mr. Hermanns should continue to
serve as a director include his continued tenure leading the
Company, his business acumen, and his experience in the temporary
staffing industry. In addition, his significant ownership stake in
HireQuest provides our board with a unique perspective regarding
the long-term strategy of the company.
R. Rimmy Malhotra
R. Rimmy Malhotra, age 44, is the Vice Chairman of
our Board of Directors. Mr. Malhotra serves on the Audit Committee
and the Compensation Committee of our Board. He was appointed to
Command Center’s Board of Directors on April 6, 2016 and was
retained upon the Merger. From 2013 to the present, Mr. Malhotra
has served as the Managing Member and Portfolio Manager for the
Nicoya Fund LP, a private investment partnership. Since November
2019, Mr. Malhotra has served on the Board of Directors of Optex
Systems Holdings, Inc. (OTCQB:OPXS). He is the Chair of Optex
Systems’ Compensation Committee and sits on its Audit
Committee. Previously, from 2008 to 2013 he served as portfolio
manager of the Gratio Values Fund, a mutual fund registered under
the Investment Company Act of 1940, as amended. Prior to this, he
was an investment analyst at a New York based hedge fund. He earned
a Master of Business Administration in Finance from The Wharton
School and a master’s degree in International Relations from
the University of Pennsylvania where he was a Lauder Fellow. Mr.
Malhotra holds undergraduate degrees in Computer Science and
Economics from Johns Hopkins University. The experience,
qualifications, attributes, or skills that led our Board to
conclude that Mr. Malhotra should continue to serve as a director
of our Company include his experience with public equities and his
qualifications as a financial matters expert.
Edward Jackson
Edward Jackson, age 54, has served on the Board since July
2019. Mr. Jackson has more than 35 years of experience in the
insurance industry. He is currently, and has been since August
1994, the President of Bass Underwriters, Inc., a large managing
general insurance agent, in which he and Mr. Hermanns own a
majority stake. In his capacity as president of Bass he oversees
all management operations, marketing strategies, underwriting
reviews, and claims procedures. He also has diverse business
holdings in industries other than insurance. He was previously a
member of and consultant to Hire Quest Holdings, LLC and its
related family of companies. He owns and is president of one of the
largest Haagen Dazs franchise offices in North America, and he
founded a company that provides inspection services for insurance
carriers nationwide. He holds a Bachelor of Science degree in Risk
Management and Insurance from Florida State University. He holds
insurance licenses in General Lines (Property & Casualty), and
Surplus Lines, Health and Life. The particular experience,
qualifications, attributes or skills that led our Board to conclude
that Mr. Jackson should continue to serve as a Director include his
business acumen, his experience leading a large managing general
agent, and his experience in the insurance industry.
Payne Brown
Payne Brown, age 56, has served on the Board since July
2019. Mr. Brown chairs our Nominations and Governance Committee and
serves on our Compensation Committee. Mr. Brown currently serves as
the President of THINK450, a for-profit innovation engine of the
National Basketball Players Association. In this role, he is
charged with creating disruptive and substantive business
relationships for NBA players. Prior to becoming President of
THINK450 in October 2018, Mr. Brown was the Managing Partner of
Econet Media Partners, a licensor of sports content and production
investor in video content in Sub-Saharan Africa. He has also served
as Managing Director of Highbridge Principal Strategies, an
alternative investment management organization founded in 1992,
with a diversified investment platform including hedge funds,
traditional investment management products, and credit and equity
investments with longer-term holding periods. Mr. Brown serves on
the Board of Directors of REVOLT TV, a multimedia platform founded
by Sean “Diddy” Combs. He has been the Chief of Staff
to Dick Parsons during his time as interim CEO of the Los Angeles
Clippers. Mr. Brown has also been a Vice President of Strategic
Initiatives and a corporate officer at Comcast Corporation. He has
served on numerous boards including the Philadelphia Urban League,
Project Home, and the Board of Advisors for the Philadelphia
chapter of the National Association for Multi-Ethnicity in
Communications. Mr. Brown received a Juris Doctor degree from
George Washington University and his Bachelor of Science degree in
Management from Purdue University. The particular experience,
qualifications, attributes or skills that led our Board to conclude
that Mr. Brown should continue to serve as a director of our
Company include his experience serving as an executive in
leadership roles at several different organizations, his business
acumen and relationships, and his broad corporate
experience.
Kathleen Shanahan
Kathleen Shanahan, age 61, has served on the Board since
July 2019. She serves on our Audit Committee and Nominations and
Governance Committee. Ms. Shanahan presently is Co-Chief Executive
Officer of Turtle & Hughes, Inc. Established in 1923, Turtle
& Hughes ranks among the nation’s top twenty electrical
distribution companies serving the industrial, construction,
commercial, electrical contracting, export, and utility industries.
Turtle & Hughes operates in the United States, Canada, Mexico,
and Puerto Rico and is a certified women-owned business. Ms.
Shanahan currently serves as a member of the Board of Directors and
Compensation and Nominating and Corporate Governance Committees of
Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). Ms.
Shanahan was previously Chair and Chief Executive Officer, of
Ground Works Solutions, formerly URETEK Holdings, Inc., a
corporation focused on soil stabilization and densification. She
served as a member of the Board of Directors and Audit Committee of
TRC Companies, Inc. (NYSE:TRR) from 2015 – 2017, and as a
member of the Board of Directors and Chair of the Executive
Compensation Committee of WCI Communities, Inc. (NYSE:WCI) from
2004 – 2007. She has also been the CEO and Chair of
WRSCompass, an environmental engineering and contracting company
with a national footprint. She served as Chief of Staff for Florida
Governor Jeb Bush, Chief of Staff for Vice President-elect Dick
Cheney, Deputy Secretary of the California Trade and Commerce
Agency for Governor Wilson, Special Assistant to then Vice
President George H. W. Bush, and Staff Assistant to President
Ronald Reagan’s National Security Council. Ms. Shanahan
currently serves and has served in the past on several other boards
of public and private corporations as well as government and civic
organizations. She received her undergraduate degree in Nutrition
and Biochemistry from the University of California, San Diego,
Revelle College, and her Master in Business Administration from New
York University. The particular experience, qualifications,
attributes or skills that led our Board to conclude that Ms.
Shanahan should continue to serve as a director of our Company
include her proven leadership skills, her various business and
political relationships, and her service as both executive and
director of multiple organizations.
Lawrence F. Hagenbuch
Lawrence F. Hagenbuch, age 52, was appointed to Command
Center’s Board of Directors in April 2018 and was retained
after the Merger. He brings extensive operations and board
experience to HireQuest, along with expertise in the creation of
innovative marketing and planning strategies. Mr. Hagenbuch is
currently a Managing Director with Huron Consulting, a position he
has held since August 2018. Mr. Hagenbuch currently sits, and has
since November 2019, on the Board of Directors and is the Chair of
the Audit Committee of Optex Systems Holdings, Inc. (OTCQB:OPXS).
Mr. Hagenbuch served on the board of directors and the audit and
compensation committees of the publicly traded firm Remy
International, Inc. (NASDAQ:REMY) from 2008 until the sale of the
company in 2015. He currently serves on the board of directors of
publicly traded company Arotech Corporation (NASDAQ:ARTX). Mr.
Hagenbuch has served in senior management positions at J. Hilburn,
Alix Partners, GE / GE capital, and American National Can. Mr.
Hagenbuch began his professional career in the United States Navy.
Mr. Hagenbuch earned an undergraduate degree in engineering from
Vanderbilt University on a full Navy ROTC scholarship. He later
earned an MBA from the Wharton School of the University of
Pennsylvania. Mr. Hagenbuch currently serves as a founding board
member of the veteran’s service charity, Soldiers Who Salsa.
The particular experience, qualifications, attributes or skills
that led our Board to conclude that Mr. Hagenbuch should continue
to serve as a director of our Company include his years of
operating experience at both large and growth-oriented companies,
in addition to his experience as a director of other public
companies.
Jack A. Olmstead
Jack A. Olmstead, age 66, was appointed as President of
Tri-City Electrical Contractors, Inc., one of Florida’s
leading electrical contractors, in 2001. He has over 37 years of operations
management experience in the electrical construction industry. Mr.
Olmstead also actively participates in trade associations and
continuing education. A past president of The Associated Builders
and Contractors, Inc. (“ABC”) -- Gulf Coast Chapter,
Jack is currently a member of the National Committee for ABC.
Currently serving on the boards for the CEO Council of Tampa and
Build Tampa Bay, Jack is active in the community. He has served on
the Board of Directors for the Central Florida Chapter of the
Children’s Home Society of Florida and is a dedicated
supporter for Lifepath Hospice and PACE Center for Girls in
Hillsborough County. The particular experience, qualifications,
attributes or skills that led our Board to conclude that Mr.
Olmstead should serve as a director of our Company include his many
years of operational experience in an industry we serve, his
participation in strategic planning and growth of a company in a
related industry and his many business connections.
Board Recommendation
The Board of Directors unanimously recommends that the stockholders
vote FOR each of the seven nominees set forth in Proposal #1 to
serve a term that will continue until the next annual meeting of
stockholders.
Retirement of Mr. Smith
In addition to the information provided above for the Directors who
are nominees for election at the Annual Meeting, below is
information concerning Mr. Smith who currently serves on our Board,
and will continue to do so until his retirement from the Board at
the Annual Meeting.
JD Smith
JD Smith, age 47, became a
member of Command Center’s Board of Directors on December 10,
2012 and was retained after the Merger. He serves on the
Board’s Nominations and Governance Committee. Mr. Smith has
worked in real estate investment, construction and development
since 1982. Currently, Mr. Smith is the owner of Real Estate
Investment Consultants, LLC, a turnkey investment service firm
serving all sectors of real estate and investment and development
businesses. He also serves as chairman of the Board of Directors of
iCore Connect, Inc. (OTCQB:ICCT), a publicly held New York based
company and provider of comprehensive healthcare communications
solutions. From 2008 until 2012 he was Director of Development for
CP Financial, a venture capital firm based in Scottsdale, Arizona.
From 1993 until 2008 he developed over two dozen projects in the
Phoenix Metro Area, acting through his companies JD Investments,
Inc., The High Sonoran Group, Inc., and JD Smith Development, LLC.
In 1990 he formed his first operating company to buy and maintain
residential rental properties and obtained his real estate license.
In 1993 he graduated from Arizona State University with a Bachelor
of Science degree in Real Estate.
DIRECTOR COMPENSATION
The following individuals served as Directors of HireQuest, Inc. or
Command Center, Inc. during all or some portion of 2019: Richard F.
Hermanns, R. Rimmy Malhotra, Edward Jackson, Lawrence Hagenbuch,
Kathleen Shanahan, Payne Brown, JD Smith, Galen Vetter, Richard
Coleman, Steven P. Oman, and Steven Bathgate.
The following table summarizes the compensation we paid to
non-employee directors during 2019. Compensation paid to Messrs.
Hermanns and Coleman is disclosed under “Compensation of Named
Executive Officers – Summary Compensation
Table”
below.
Name
|
Fees earned or paid in cash
|
|
|
Edward
Jackson
|
$-
|
$130,850
|
$130,850
|
JD Smith
(2)
|
38,521
|
108,000
|
146,521
|
Kathleen
Shanahan
|
-
|
132,776
|
132,776
|
Lawrence F.
Hagenbuch
|
19,397
|
132,506
|
151,903
|
Payne
Brown
|
-
|
132,776
|
132,776
|
R. Rimmy Malhotra
(3)
|
20,398
|
139,657
|
160,055
|
Steve Bathgate
(4)
|
16,504
|
-
|
16,504
|
Galen Vetter
(4)
|
18,495
|
-
|
18,495
|
Steven Oman
(4)
|
16,863
|
-
|
16,863
|
Total
|
$78,316
|
$776,564
|
$854,880
|
1.
This column
represents the grant date fair value of shares awarded to each
non-employee director in 2019 in accordance with U.S. GAAP. The
amounts were calculated using the closing price of our stock on the
grant date. The amounts include all vested and unvested shares. Of
these amounts, $108,000 represent the value of the Initial
Restricted Shares granted pursuant to the 2019 Director
Compensation Plan (the “Director Compensation Plan”)
disclosed below. The following amounts represent the value of stock
elected in-lieu of Cash Retainers included in this column: Mr.
Jackson - $22,850; Mr. Smith - $0; Ms. Shanahan - $24,776; Mr.
Hagenbuch - $24,506; Mr. Brown - $24,776; Mr. Malhotra -
$31,657.
2.
At the end of
the fiscal year, Mr. Smith had vested options to purchase 12,083
shares of HQI common stock with an average strike price of $8.76
per share.
3.
At the end of
the fiscal year, Mr. Malhotra had options to purchase 8,750 shares
of HQI common stock with an average strike price of $5.50 per
share. 50% of these options have vested. 25% will vest on June 18,
2020, and 25% will vest on June 18, 2021.
4.
Served as
director until July 14, 2019.
Non-Employee Director Compensation Prior to the Merger
Name
|
Fees earned or paid in cash
|
|
|
JD
Smith
|
$20,398
|
-
|
$20,398
|
Lawrence F.
Hagenbuch
|
19,397
|
-
|
19,397
|
R. Rimmy
Malhotra
|
20,398
|
-
|
20,398
|
Steve
Bathgate
|
16,504
|
-
|
16,504
|
Galen
Vetter
|
18,495
|
-
|
18,495
|
Steven
Oman
|
16,863
|
-
|
16,863
|
Total
|
$60,194
|
$-
|
$60,194
|
Non-Employee Director Compensation Following the
Merger
|
Fees earned or paid in cash
|
|
|
Edward
Jackson
|
$-
|
$130,850
|
$130,850
|
JD
Smith
|
18,122
|
108,000
|
126,122
|
Kathleen
Shanahan
|
-
|
132,776
|
132,776
|
Lawrence F.
Hagenbuch
|
-
|
132,506
|
132,506
|
Payne
Brown
|
-
|
132,776
|
132,776
|
R. Rimmy
Malhotra
|
-
|
139,657
|
139,657
|
Total
|
$18,122
|
$776,564
|
$794,687
|
1.
This column represents the grant date fair value of shares awarded
to each non-employee director in 2019 in accordance with U.S. GAAP.
The amounts were calculated using the closing price of our stock on
the grant date. The amounts include all vested and unvested shares.
Of these amounts, $108,000 represent the value of the Initial
Restricted Shares granted pursuant to the 2019 Director
Compensation Plan (the “Director Compensation Plan”)
disclosed below. The following amounts represent the value of stock
elected in-lieu of Cash Retainers included in this column: Mr.
Jackson - $22,850; Mr. Smith - $0; Ms. Shanahan - $24,776; Mr.
Hagenbuch - $24,506; Mr. Brown - $24,776; Mr. Malhotra -
$31,657.
The 2019 Director Compensation Plan
On September 23, 2019, the Board of Directors adopted and approved
the 2019 HireQuest, Inc. Non-Employee Director Compensation Plan
(the “Director Compensation Plan”). On September 25,
2019, the Board adopted and approved certain revisions to the plan.
All subsequent references in this proxy statement to
“Director Compensation Plan” include such
revisions.
Cash Retainers
Pursuant to the Director Compensation Plan, each non-employee
director of the Company who is elected or appointed at an annual
meeting of stockholders is entitled to receive an annual Board
retainer of $36,000 (“Board Annual Retainer”). In
addition, each non-employee director who is appointed to serve on a
committee of the Board (but not the Chair of such committee) is
entitled to receive an annual committee retainer (“Committee
Annual Retainer”) as follows: Audit Committee - $5,500;
Compensation Committee - $3,500; Nominating and Governance
Committee - $3,500. Members of any other special committee
established by the Board are entitled to be paid a Committee Annual
Retainer, if any, as determined by the Board. The Chair of each
committee of the Board is entitled to receive an annual committee
chair retainer (“Committee Chair Annual Retainer”) as
follows: Audit Committee Chair - $8,500; Compensation Committee
Chair - $5,500; Nominating and Governance Committee Chair - $5,500.
The Chair of any other special committee established by the Board
is entitled to a Committee Chair Annual Retainer, if any, as
determined by the Board. The Vice-Chairman of the Board is entitled
to receive an additional annual retainer (“Vice-Chairman
Annual Retainer”) of $12,500. The Board Annual Retainer,
Committee Annual Retainer, Committee Chair Annual Retainer and
Vice-Chairman Annual Retainer are payable in cash, in arrears, in
equal quarterly installments due within 15 days after the end of a
fiscal quarter. At the election of the non-employee director, they
may choose to accept stock in lieu of these retainers. Any
non-employee director who experiences a separation from service
during his or her board term shall receive pro-rated annual
retainers.
Initial
Restricted Shares
Pursuant to the Director Compensation Plan, each non-employee
director serving on the Board as of September 23, 2019 received an
equity award on such date consisting of 15,000 restricted shares of
Company common stock granted pursuant to and in accordance with the
terms of the Company’s 2016 Stock Incentive Plan (such
shares, the “Initial Restricted Shares,” and such plan,
the “2016 Plan”). The Initial Restricted Shares vest in
three equal annual installments beginning on the date that
immediately precedes the 2020 annual meeting of stockholders of the
Company, with the remainder vesting in equal installments on the
first two anniversaries of that date, provided, however that if the
vesting date would otherwise occur during a Company blackout
period, the shares will vest on the first day immediately following
the end of the blackout period. If a non-employee director
experiences a separation from service before the Initial Restricted
Shares fully vest, then the unvested portion is automatically
forfeited. Non-employee directors have the right to vote any
Initial Restricted Shares during the vesting period. In addition,
their restricted share accounts are credited with stock equivalent
to all dividends paid during the vesting period (subject to vesting
of the Initial Restricted Shares).
Annual Restricted Shares
Pursuant to the Director Compensation Plan, all non-employee
directors elected at annual meetings of stockholders commencing
with the Annual Meeting are entitled to receive on the date of each
such meeting an equity award of 5,000 restricted shares of Company
common stock granted pursuant to and in accordance with the terms
of the Company’s 2016 Plan (the “Annual Restricted
Shares”). These Annual Restricted Shares vest in full on the
three-month anniversary of their grant date, provided, however that
if the vesting date would otherwise occur during a Company blackout
period, the shares will vest on the first day immediately following
the end of the blackout period. The other vesting terms match the
vesting terms of the Initial Restricted Shares described
above.
Reimbursement
Non-employee directors are also entitled to reimbursement of
reasonable business expenses incurred in connection with the
performance of their duties.
Stock Ownership Requirements
The Board feels strongly about alignment with shareholders and, as
such, under the Director Compensation Plan, non-employee directors
must own, by the later of July 15, 2021 or the second anniversary
of their initial election or appointment to the Board of the
combined company, shares (but not counting Initial Restricted
Shares or Annual Restricted Shares) having a value equal to the
amount of the Board Annual Retainer in place at the time of the
initial election or appointment to the Board.
Stock Purchase Matching Program
The Director Compensation Plan contains a stock purchase matching
program under which the Company will match 20% of the purchases of
common stock of the Company that a non-employee director makes
during the period ending on the date on which the stock ownership
requirements described above no longer apply to him or her, subject
to certain terms and conditions including: the shares issued
pursuant to the match will be restricted shares issued pursuant to
the Company’s 2016 Plan which will not vest until the second
anniversary of the date on which the triggering purchase was made;
the number of shares of matching restricted stock that the Company
can issue to any one non-employee director pursuant to the match
may not exceed a value of $25,000 in the aggregate in any one-year
period; and the shares of matching restricted stock will vest if
the non-employee director serves on the Board on the vesting date
and owns at least the same number of shares of Company common stock
that were matched at the time of the triggering purchase. The
Compensation Committee administers this program.
Third Party Arrangements
The Company is unaware of any agreements or arrangements between
any director or director nominee and any person or entity other
than the Company relating to compensation or other payment in
connection with any director’s service or
candidacy.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
Information about our executive officers follows:
Name
|
Age
|
Position
|
Richard Hermanns
|
56
|
President, Chief Executive Officer, and Chairman of the
Board
|
John D. McAnnar
|
37
|
Vice President, Secretary, and General Counsel
|
Cory Smith
|
44
|
Treasurer and Chief Financial Officer
|
Mr.
Hermanns’ biography appears above under “Election of Directors – Proposal #1
– The Nominees.”
John D. McAnnar
John D. McAnnar is the General Counsel, Vice President, and
Secretary of HireQuest, Inc. He has served as General Counsel and
Vice President for HireQuest, Inc. and its predecessor, Hire Quest,
LLC since 2014. In that capacity, he manages a broad range of legal
affairs in the employment, construction, insurance and finance,
workers compensation, intellectual property, and other realms. He
previously served in the litigation departments of Carmody
MacDonald, P.C. and Armstrong Teasdale, LLP, where he focused on
complex commercial litigation, corporate, and employment law. Mr.
McAnnar is an adjunct professor at the Charleston School of Law. He
co-founded ArchCity Defenders, Inc., a non-profit organization in
St. Louis, Missouri, that led the push for change in
Missouri’s municipal court system following the Ferguson
unrest. For this work, Mr. McAnnar has received awards including
the National Legal Aid & Defenders Association New Leaders
in Advocacy Award, the Ina M. Boon Social Justice Award from the
St. Louis City NAACP, and many others. He served on St. Louis Mayor
Francis Slay's Vanguard Cabinet and was a Commissioner on the St.
Louis Developmental Disability Resources Commission, a body that
oversaw millions of dollars of taxpayer funds. John
graduated magna cum
laude from the St. Louis University School of Law,
where he was inducted into the Alpha Sigma Nu Jesuit Honor Society
and the Order of the Woolsack. He graduated cum laude from the University of
Pittsburgh with a Bachelor of Arts degree.
Cory Smith
Cory Smith is the Treasurer and
Chief Financial Officer of HireQuest, Inc. He was appointed as
Command Center’s Chief Financial Officer on July 22, 2017.
Mr. Smith was previously employed by Command Center from 2010
through 2015, serving as Controller during the final two years of
his tenure. Before rejoining Command Center, he was employed
by Southeast Staffing beginning in 2015, where he served as the
Vice President of Finance. From 2005 to 2010, Mr. Smith worked as a
Certified Public Accountant, primarily performing attestation work.
Mr. Smith graduated cum laude from Lewis-Clark State College with a
Bachelor of Science in Business Administration.
CERTAIN BENEFICIAL OWNERS OF OUR COMMON STOCK
The following table sets forth as of April 24, 2020, the record
date for the Annual Meeting, certain information with respect to
the shares of our common stock beneficially owned by (i)
stockholders known to us to own more than 5% of the outstanding
shares of our common stock, (ii) each of our directors and Named
Executive Officers, and (iii) all of our executive officers and
directors as a group:
Name and address of Beneficial Owner (1)
|
|
Title of class
|
Amount and nature of beneficial ownership (2)
|
|
Richard F. Hermanns (3)
|
|
Common
Stock
|
5,862,275
|
43.3%
|
John McAnnar (4)
|
|
Common
Stock
|
32,202
|
0.2%
|
Cory Smith (5)
|
|
Common
Stock
|
29,375
|
0.2%
|
JD Smith (6)
|
|
Common
Stock
|
68,998
|
0.5%
|
Edward Jackson (7)
|
|
Common
Stock
|
2,547,103
|
18.8%
|
R. Rimmy Malhotra (8)
|
|
Common
Stock
|
166,983
|
1.2%
|
Payne Brown (9)
|
|
Common
Stock
|
20,989
|
0.2%
|
Kathleen Shanahan (10)
|
|
Common
Stock
|
22,189
|
0.2%
|
Lawrence F. Hagenbuch (11)
|
|
Common
Stock
|
33,626
|
0.2%
|
Jack Olmstead (12)
|
|
Common
Stock
|
-
|
-
|
All
Officers and Directors as a group
|
|
Common
Stock
|
8,783,740
|
64.8%
|
1.
The business
address of each NEO and Director is: care of HireQuest, Inc.,
111 Springhall Drive, Goose Creek, SC 29445.
2.
Beneficial
ownership is calculated in accordance with Rule 13d-3 under the
Exchange Act, and includes shares held outright, shares held by
entities controlled by NEOs and/or Directors, and shares issuable
upon exercise of options or warrants which are exercisable on or
within 60 days of April 24, 2020.
3.
Includes
5,775,842 shares held outright and 52,848 restricted shares which
will vest during the period beginning in September 2021 and ending
in September 2023.
4.
Includes 2,500
shares held outright and 29,702 restricted shares which will vest
during the period beginning in May 2020 and ending in September
2023.
5.
Includes 1,250
shares held outright, 25,000 restricted shares, and options to
purchase 3,125 shares. Mr. Smith's restricted shares will vest
during the period beginning in September 2021 and ending in
September 2023.
6.
Includes
39,961 shares held outright, 16,954 restricted shares, and options
to purchase 12,083 shares.
7.
Includes
2,518,545 shares held outright and 18,547 restricted shares which
will vest during the period beginning in May 2020 and ending in
June 2023.
8.
Includes
25,591 shares held outright, 22,594 restricted shares, 112,235
shares held indirectly through the Nicoya Fund, and options to
purchase 6,563 shares. The shares held by the Nicoya Fund are
directly owned by the Nicoya Fund LLC, a Delaware limited liability
company. This reporting person is the managing member and a
co-owner of Nicoya Capital LLC, which is the managing member and
owner of the Nicoya Fund. Mr. Malhotra's restricted shares will
vest during the period beginning in May 2020 and ending in June
2023.
9.
Includes
18,846 restricted shares which will vest during the period
beginning in May 2020 and ending in June 2023.
10.
Includes 1,000
shares held outright and 19,046 restricted shares which will vest
during the period beginning in May 2020 and ending in June
2023.
11.
Includes
12,303 shares held outright and 19,204 restricted shares which will
vest during the period beginning in May 2020 and ending in June
2023.
12.
Mr. Olmstead
is a nominee for election to the Board of
Directors.
The
Company is unaware of any 5% stockholder, director, or Named
Executive Officer who has pledged as security or has the right to
acquire beneficial ownership of any security of the
Company.
Delinquent 16(a) Reports
Section
16(a) of the Exchange Act requires our directors, certain officers,
and persons who beneficially own more than 10% of our outstanding
common stock to file with the SEC initial reports of ownership and
reports of changes in ownership of our common stock held by such
person. These persons complete questionnaires annually regarding
their ownership of our common stock and the reports they file
pursuant to Section 16(a). We also assist our directors and
officers in the preparation of these forms. Based on our review of
the forms and representations made in the questionnaires, we
believe that all Section 16(a) reports were timely filed in 2019
except that, due to an inadvertent mistake, one Form 4 for each of
Mr. Hermanns and Mr. Jackson was filed one day late with respect to
an issuance of shares from the Company occurring September 13, 2019
as and for Merger consideration.
Change of Control Effected by the Merger
On July 15, 2019, Command Center, Inc. completed its acquisition of
Hire Quest Holdings, LLC in accordance with the terms of the merger
agreement between the parties (the "Merger Agreement"). In
accordance with the Merger Agreement, (i) CCNI One, Inc., a
wholly-owned subsidiary of Command Center, was merged with and into
Hire Quest Holdings (the “First Merger”), with Hire
Quest Holdings being the surviving entity (the “First
Surviving Company”), and (ii) immediately following the First
Merger, the First Surviving Company was merged with and into
Command Florida, LLC, a wholly-owned subsidiary of Command Center
(the “Second Merger” and, together with the First
Merger, the “Merger”), with Command Florida, LLC being
the surviving entity (the “Surviving Company”). Command
Center, Inc. was subsequently renamed HireQuest, Inc.
Upon the closing of the Merger, all of
the ownership interests in Hire Quest Holdings were converted into
the right to receive shares of the Company’s common
stock.
In the aggregate, the members of Hire Quest Holdings received
9,939,668 shares of the Company’s common stock as Merger
consideration, which represented 75.2% of the Company’s
outstanding stock following the issuer tender offer that expired on
July 25, 2019. Of this amount, Richard Hermanns received 5,705,792
shares (representing 43.2% of outstanding stock post-tender) with
an aggregate value of $32,865,361 and Edward Jackson received
2,482,321 shares (representing 18.8% of outstanding stock
post-tender) with an aggregate value of $14,298,168, with each such
value computed based on the closing price of the common stock on
Nasdaq of $5.76 per share on July 15, 2019.
In
addition, Hire Quest Holdings’ members were granted the
authority to appoint four directors to the Board. They appointed
current board members: Richard F. Hermanns, Edward Jackson, Payne
Brown, and Kathleen Shanahan.
APPROVAL OF EQUITY INCENTIVE PLAN
(Proposal #2)
On December 3, 2019, the Board adopted, approved, and recommended
for stockholder approval the 2019 HireQuest, Inc. Equity Incentive
Plan (the “2019 Plan”). The 2019 Plan is intended to
replace the 2016 Plan, which was originally approved by our
stockholders in November 2016. At the time our Board approved the
2019 Plan, the Board determined that, if the 2019 Plan were
approved by the stockholders, no new grants would be made under the
2016 Plan. Pursuant to the terms of the 2019 Plan, any award
already granted under the 2016 Plan as of June 15, 2020 shall
remain in full force and effect, as if the 2016 Plan had not been
amended or terminated.
General Summary of Terms of the 2019 Equity Incentive
Plan
The following is a summary of the material terms of the 2019 Plan.
The full text of the 2019 Plan is attached to this Proxy Statement
as Appendix
A. Please refer to
Appendix
A for a more complete
description of the terms of the 2019 Plan. Capitalized terms not
otherwise defined herein shall have the meaning assigned to them in
the 2019 Plan.
Eligibility: Any
employees, consultants, or directors of the Company along with such
other individuals designated by the Compensation Committee who are
reasonably expected to become a member of any of those categories
are eligible to receive awards under the 2019 Plan. As of December
31, 2019, we had approximately 50 employees, and 6 non-employee
directors who are eligible to participate if selected by the
Compensation Committee. The Compensation Committee’s
selection of eligible participants in the 2019 Plan is generally
based upon the Compensation Committee’s evaluation of, among
other considerations, retention, reward and incentive needs to
stimulate the active interest of such persons in the development
and financial success of the Company and its subsidiaries, to
further align such persons with the interests of stockholders, and
to promote a sense of proprietorship.
Administration: The 2019 Plan
will be administered by the Compensation Committee of the Board or,
in the Board’s sole discretion, by the Board itself. The
Committee or the Board will have the following
powers:
●
to
construe and interpret the 2019 Plan and apply its
provisions;
●
to
promulgate, amend, and rescind rules and regulations relating to
the administration of the 2019 Plan;
●
to
authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the 2019
Plan;
●
to
delegate its authority to one or more Officers of the Company with
respect to awards that do not involve “insiders” within
the meaning of Section 16 of the Exchange Act;
●
to
determine when awards are to be granted under the 2019 Plan and the
applicable grant date;
●
from
time to time to select, subject to the limitations set forth in
this Plan, those eligible award recipients to whom awards shall be
granted;
●
to
determine the number of shares of common stock to be made subject
to each award;
●
to
determine whether each option is to be an incentive stock option or
a non-qualified stock option;
●
to
prescribe the terms and conditions of each award, including,
without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the award
agreement relating to such grant;
●
to
determine the target number of performance shares to be granted
pursuant to a performance share award, the performance measures
that will be used to establish the performance goals, the
performance period(s) and the number of performance shares earned
by a participant;
●
to
amend any outstanding awards, including for the purpose of
modifying the time or manner of vesting, or the term of any
outstanding award; provided, however, that if any such amendment
impairs a participant’s rights or increases a
participant’s obligations under his or her award or creates
or increases a participant’s federal income tax liability
with respect to an award, such amendment shall also be subject to
the participant’s consent;
●
to
determine the duration and purpose of leaves of absences which may
be granted to a participant without constituting termination of
their employment for purposes of the Plan, which periods shall be
no shorter than the periods generally applicable to Employees under
the Company’s employment policies;
●
to
make decisions with respect to outstanding awards that may become
necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments;
●
to
interpret, administer, reconcile any inconsistency in, correct any
defect in and/or supply any omission in the Plan and any instrument
or agreement relating to, or award granted under, the Plan;
and
●
to
exercise discretion to make all other determinations which it
determines to be necessary or advisable for the administration of
the Plan.
The Committee also may modify the purchase price or the exercise
price of any outstanding award, provided that if the modification
effects a repricing, stockholder approval is required before the
repricing is effective.
Common Stock Available for awards: Subject
to adjustment in accordance with Section 11
of the 2019 Plan, no more than 1,500,000 shares of common stock are
available in the aggregate for the grant of awards under the 2019
Plan. No more than 1,000,000 shares may be issued in the aggregate
pursuant to the exercise of incentive stock options. In addition,
no more than 250,000 shares may be issued in the aggregate to any
employee or consultant, and no more than 50,000 shares may be
issued in the aggregate to any non-employee director in any
twelve-month period. Shares of common stock available for distribution
under the Plan may consist, in whole or in part, of authorized and
unissued shares, treasury shares or shares reacquired by the
Company in any manner. All outstanding awards under the 2016
Plan shall continue in effect with the terms and conditions of the
2016 Plan, however, no new awards will be issued under the 2016
Plan after June 15, 2020.
Indemnification: In addition to
such other rights of indemnification as they may have as directors
or members of the Compensation Committee, and to the extent allowed
by applicable laws, the Company must indemnify the Compensation
Committee or Board against the reasonable expenses, including
attorney’s fees, actually incurred in connection with any
action, suit or proceeding or in connection with any appeal
therein, to which the Committee or Board may be party by reason of
any action taken or failure to act under or in connection with the
2019 Plan or any award granted under the 2019 Plan, and against all
amounts paid in settlement or paid in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to bad
faith or actions not in the best interest of the Company, and
provided that, in the case of a criminal proceeding, it had no
reason to believe that the conduct complained of was
unlawful.
Awards: Each award is to be
memorialized in an award agreement, which shall contain such terms,
conditions, and limitations as shall be determined by the Board or
Compensation Committee in their sole discretion. Under the 2019
Plan, the following awards may be granted:
●
Options. An option awarded pursuant to the 2019 Plan may
consist of an incentive stock option or a non-qualified stock
option. Incentive stock options may not be awarded to non-employee
directors. The price at which shares of common stock may be
purchased upon the exercise of options cannot be less than the fair
market value of the common stock on the grant date. For any
participant holding at least ten percent of the Company’s
common stock, the purchase price of an incentive stock option must
be at least 110% of the fair market value of the common stock on
the grant date, and it is not exercisable for five years after the
grant date. The term of options cannot exceed ten years from the
grant date.
●
Stock Appreciation
Rights. The strike price for a
stock appreciation right awarded pursuant to the 2019 Plan cannot
be less than the fair market value of the common stock on the date
on which the stock appreciation right is granted. The term of a
stock appreciation right cannot exceed ten years from the date of
grant.
●
Restricted
Awards. A restricted award is
either an award based on actual shares of common stock (i.e.,
shares of restricted stock) or based on hypothetical common stock
units (i.e., restricted stock units). All restricted awards must
have a minimum restricted period of three months from the grant
date.
●
Performance Share
Awards. The terms, conditions,
and limitations applicable to any performance share awards granted
pursuant to the 2019 Plan will be determined by the Compensation
Committee or the Board. The Committee or the Board will set the
performance goals which may include but not be limited to the
following: (i)
income measures (which include net income, pre-tax income, and
similar measures); (ii) sales measures (which include system-wide
sales, same market sales, new market sales, sales from
acquisitions, and other similar measures); (iii) revenue measures
(including royalty revenue, service revenue, and other similar
measures); (iv) expense measures (including selling, general and
administrative expenses, maintenance of non-temporary payroll
within historical norms, and other similar measures); and (v)
corporate value measures (including accounts receivable turns,
workers’ compensation loss ratios, and other similar
measures).
Performance goals are objective if a third-party having knowledge
of the relevant facts could determine whether the goal is met. Such
a performance goal may be based on one or more of the above
business criteria that apply to an executive officer, one or more
business units, or the Company as a whole. Unless otherwise stated,
such a performance goal need not be based upon an increase or
positive result under a business criterion and could include, for
example, maintaining the status quo.
●
Other Equity-Based Awards and
Cash Awards. In its discretion,
the Compensation Committee or the Board may award other
equity-based or cash awards on such terms and conditions as it
sets.
Vesting: The vesting provisions
of awards may vary and will be set forth in the respective award
agreement. The Compensation Committee may, but is not required to,
provide for an acceleration of vesting or
exercisability.
Taxes: To the extent provided
by the terms of an award agreement and subject to the discretion of
the Compensation Committee or the Board, a participant may satisfy
any federal, state or local tax withholding obligation relating to
the exercise or acquisition of common stock under an Award by any
of the following means (in addition to the Company’s right to
withhold from any compensation paid to the participant by the
company) or by a combination of such means: (a) tendering a cash
payment; (b) authorizing the Company to withhold shares of common
stock from the shares of common stock otherwise issuable to the
participant as a result of the exercise or acquisition of common
stock under the Award, provided,
however, that no shares of
common stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law; or (c) delivering to the
Company previously owned and unencumbered shares of common stock of
the Company.
The following is a summary of certain U.S. federal income tax
consequences of Awards under 2019 Plan, the material terms of which
are discussed above. It does not purport to be a complete
description of all applicable rules, and those rules (including
those summarized here) are subject to change. The summary discusses
only federal income tax laws and does not discuss any state or
local or non-U.S. tax laws that may be applicable.
Incentive Options. In general, no taxable income is realized
by a participant upon the grant of an incentive stock option. If
shares of common stock are issued to a participant pursuant to the
exercise of an incentive stock option, then, generally (i) the
participant will not realize ordinary income with respect to the
exercise of the incentive stock option, (ii) upon sale of the
underlying shares acquired upon the exercise of an incentive stock
option, any amount realized in excess of the exercise price paid
for the shares will be taxed to the participant as capital gain and
(iii) the Company will not be entitled to a deduction. The amount
by which the fair market value of the stock on the exercise date of
an incentive stock option exceeds the purchase price generally
will, however, constitute an item which increases the
participant’s income for purposes of the alternative minimum
tax. However, if the participant disposes of the shares acquired on
exercise before the later of the second anniversary of the date of
grant or one year after the receipt of the shares by the
participant (a “disqualifying disposition”), the
participant generally would include in ordinary income in the year
of the disqualifying disposition an amount equal to the excess of
the fair market value of the shares at the time of exercise (or, if
less, the amount realized on the disposition of the shares), over
the exercise price paid for the shares. If ordinary income is
recognized due to a disqualifying disposition, the Company would
generally be entitled to a deduction in the same amount. Subject to
certain exceptions, an incentive stock option generally will not be
treated as an incentive stock option if it is exercised more than
three months following termination of employment. If an incentive
stock option is exercised at a time when it no longer qualifies as
an incentive stock option, it will be treated for tax purposes as a
non-qualified stock option as discussed below.
Non-qualified Options. In general, no taxable income is
realized by a participant upon the grant of a non-qualified stock
option. Rather, at the time of exercise of the non-qualified stock
option, the participant will recognize ordinary income for income
tax purposes in an amount equal to the excess, if any, of the fair
market value of the ordinary shares purchased over the exercise
price. The Company generally will be entitled to a tax deduction at
such time and in the same amount, if any, that the participant
recognizes as ordinary income. The participant’s tax basis in
any ordinary shares received upon exercise of a non-qualified stock
option will be the fair market value of the ordinary shares on the
date of exercise, and if the shares are later sold or exchanged,
then the difference between the amount received upon such sale or
exchange and the fair market value of such shares on the date of
exercise will generally be taxable as long-term or short-term
capital gain or loss (if the shares are a capital asset of the
participant) depending upon the length of time such shares were
held by the participant.
Stock Appreciation Rights. In general, no taxable
income is recognized by a participant upon the grant of a Stock
Appreciation Right, and the Company will not be entitled to a tax
deduction at that time. Upon exercise, however, the participant
will recognize compensation taxable as ordinary income (and subject
to income tax withholding) equal to the fair market value of any
shares delivered and the amount of cash paid by the Company in
settlement of the rights. The Company generally will be entitled to
a corresponding deduction at that time.
Restricted Stock. In general, no taxable income is
recognized by a participant upon the grant of shares of restricted
stock, and the Company will not be entitled to a tax deduction at
such time, unless the participant makes an election under Section
83(b) of the Internal Revenue Code of 1986, as amended (the
“Code”), to be taxed at that time. If the Section 83(b)
election is made, the participant will recognize compensation
taxable as ordinary income (and subject to income tax withholding)
at the time of the grant, equal to the excess of the fair market
value of the shares at such time over the amount, if any, paid for
such shares. If such Section 83(b) election is not made, the
participant will recognize compensation taxable as ordinary income
(and subject to income tax withholding) at the time the
restrictions lapse, in an amount equal to the excess of the fair
market value of the shares at such time over the amount, if any,
paid for such shares. The Company will generally be entitled to a
corresponding deduction at the time the ordinary income is
recognized by the participant, except to the extent that the
deduction limits of Section 162(m) apply.
In addition, a participant receiving dividends with respect to
restricted stock for which the above-described 83(b) election has
not been made, and prior to the time the restrictions lapse, will
recognize compensation taxable as ordinary income (and subject to
income tax withholding) rather than dividend income. The Company
will generally be entitled to a corresponding deduction, except to
the extent that the deduction limits of Section 162(m)
apply.
Restricted Stock Units. In
general, taxable income is not recognized by a participant upon the
grant of a restricted stock unit, and the Company will not be
entitled to a tax deduction at that time. The participant will
recognize compensation taxable as ordinary income (and subject to
income tax withholding), however, at the time of the settlement of
the award, equal to the fair market value of any shares delivered
and the amount of cash paid by the Company. The Company will be
entitled to a corresponding deduction, except to the extent that
the deduction limits of Section 162(m) apply.
Unrestricted Stock. In
general, a participant will recognize compensation taxable as
ordinary income (and subject to income tax withholding) upon the
grant of unrestricted stock, and of restricted stock subject only
to restrictions on transferability, equal to the excess of the fair
market value of the shares at such time over the amount, if any,
paid for such shares. The Company will generally be entitled to a
corresponding deduction at that time, except to the extent that the
deduction limits of Section 162(m) apply.
Section 162(m). Section
162(m) of the Code imposes an annual limit of $1 million per person
on the corporate tax deduction for compensation paid by a company
to its chief executive officer, its chief financial officer and its
top three highest paid officers in a given year, and each person
who has been a covered employee for any prior tax year beginning
after December 31, 2016 (“Covered Employees”). The Tax
Cuts and Jobs Act, signed into law in December 2017, substantially
modified Section 162(m) of the Code by, among other things,
eliminating the exemption for performance-based compensation. As a
result, beginning in 2018, compensation paid to Covered Employees
in excess of $1 million will generally be nondeductible, whether or
not it is a performance award granted pursuant to the 2019
Plan.
The foregoing general tax discussion is intended for the
information of our stockholders considering how to vote with
respect to this proposal, and not as tax guidance to participants
in the 2019 Plan. We strongly urge participants to consult their
own tax advisors regarding the federal, state, local, foreign, and
other tax consequences of participating in the 2019
Plan.
Adjustments: In
the event of changes in the outstanding Common Stock or in the
capital structure of the Company by reason of any stock or
extraordinary cash dividend, stock split, reverse stock split, an
extraordinary corporate transaction such as any recapitalization,
reorganization, merger, consolidation, combination, exchange, or
other relevant change in capitalization occurring after the grant
date of any award pursuant to the 2019 Plan, Awards granted under
the 2019 Plan and any award agreements contemplated by the 2019
Plan, the exercise price of options and stock appreciation rights,
the performance goals to which performance share awards and cash
awards are subject, the maximum number of shares of common stock
subject to all awards as stated in the 2019 Plan will be equitably
adjusted or substituted, as to the number, price or kind of a share
of common stock or other consideration subject to such awards to
the extent necessary to preserve the economic intent of such award.
In the case of adjustments made pursuant to the 2019 Plan, unless
the Committee specifically determines that such adjustment is in
the best interests of the Company or its affiliates, the Committee
shall, in the case of incentive stock options, ensure that any
adjustments under the 2019 Plan will not constitute a modification,
extension or renewal of the incentive stock options within the
meaning of Section 424(h)(3) of the Code, and in the case of
non-qualified stock options, ensure that any adjustments pursuant
to the 2019 Plan will not constitute a modification of such
non-qualified stock options within the meaning of Section 409A of
the Code. Any adjustments made pursuant to the 2019 Plan shall be
made in a manner which does not adversely affect the exemption
provided pursuant to Rule 16b-3 under the Exchange Act. The Company
shall give each participant notice of an adjustment and, upon
notice, such adjustment shall be conclusive and binding for all
purposes.
Use of Proceeds from Stock: Any
proceeds from the exercise of stock options shall constitute
general funds of the Company.
Effect of Change in Control: In
the event of a change in control, as defined in the 2019 Plan, all
outstanding options and stock appreciation rights become
immediately exercisable and the restricted period will immediately
expire with respect to all restricted stock and restricted stock
units. All performance periods will end on the date of the change
in control and the Compensation Committee or Board will determine
the extent to which performance goals have been met and cause to be
paid partial or full awards with respect to such performance goals.
In addition, the Company may cancel any outstanding awards and pay
to the holders cash or stock equivalent to the value of such
outstanding awards.
Amendment, Modification, Suspension, or
Termination: The Board may
amend or terminate the 2019 Plan including in such a manner as to
provide eligible participants with the maximum benefits provided
under the provisions of the Code relating to incentive stock
options or to nonqualified deferred compensation provisions of
Section 409A of the Code or to bring the provisions of the 2019
Plan into compliance with applicable laws except that (i) no
amendment shall be effective prior to its approval by the
stockholders of the Company to the extent stockholder approval is
otherwise required by applicable legal requirements, and (ii) no
amendment that would impair the rights of any participant under any
award previously granted to such participant without written
consent of the participant.
Clawback: All awards under the
2019 Plan will be subject to any clawback or recoupment policies of
the Company, as may be in effect from time to time, or as otherwise
required by law or the exchange on which the Company’s
securities are listed.
Section 409A of the Code; The
2019 Plan is intended to comply with Section 409A of the Code, to
the extent subject thereto, and, accordingly, to the maximum extent
permitted, the 2019 Plan shall be interpreted and administered to
be in compliance therewith. Any payments described in the 2019 Plan
that are due within the “short-term deferral period” as
defined in Section 409A of the Code shall not be treated as
deferred compensation unless applicable laws require otherwise.
Notwithstanding anything to the contrary in the 2019 Plan, to the
extent required to avoid accelerated taxation and tax penalties
under Section 409A of the Code, amounts that would otherwise be
payable and benefits that would otherwise be provided pursuant to
the 2019 Plan during the six (6) month period immediately following
any participant’s termination of continuous service shall
instead be paid on the first payroll date after the six-month
anniversary of the participant’s separation from service (or
the participant’s death, if earlier). Notwithstanding the
foregoing, neither the Company, the Board, nor the Compensation
Committee shall have any obligation to take any action to prevent
the assessment of any additional tax or penalty on any participant
under Section 409A of the Code and neither the Company, the Board,
nor the Compensation Committee will have any liability to any
participant for such tax or penalty.
Effective Date; Plan Termination: The 2019 Plan will become effective on June 15,
2020 if the stockholders approve the plan. No award pursuant to the
2019 Plan may be granted more than 10 years after the date it
becomes effective. The Board may suspend or terminate the 2019 Plan
pursuant to its terms.
New Plan Benefits
Awards under the 2019 Plan will be made by the Compensation
Committee or the Board in its discretion and depend on several
factors. Generally, the future awards that would be received under
the 2019 Plan by our officers, employees, non-employee directors,
or consultants are discretionary and are therefore not determinable
at this time.
Registration with the SEC
We intend to file a Registration Statement on Form S-8 relating to
the issuance of our common stock under the 2019 Plan with the SEC
pursuant to the Securities Act of 1933, as amended, as soon as is
practicable after the mailing of this proxy statement. The
affirmative vote of the holders of our common stock having a
majority of the voting power eligible to vote and voting, either in
person or by proxy, at the annual meeting will be required to
approve the 2019 Plan.
Board Recommendation
Our Board of Directors unanimously recommends that stockholders
vote “FOR” the approval and adoption of the HireQuest,
Inc. 2019 Equity Incentive Plan.
RATIFICATION OF APPOINTMENT OF AUDITORS
(Proposal #3)
In accordance with the Audit Committee’s charter, the Audit
Committee is responsible for the appointment and retention of our
independent registered accounting firm.
The Audit Committee has appointed Plante & Moran, PLLC
(“Plante Moran”) to serve as our independent registered
public accounting firm for our fiscal year ending December 31,
2020. While stockholder ratification of the selection of Plante
Moran as the Company’s independent registered public
accounting firm is not required by the Company's bylaws or
otherwise, the Board is submitting this selection to the
stockholders for ratification as a matter of corporate practice. In
2019 and 2018, Plante Moran rendered professional services in
connection with the audit of our financial statements, including
review of quarterly reports and other filings with the SEC. We
believe that Plante Moran is knowledgeable about our operations and
accounting practices and well qualified to act as our independent
registered public accounting firm.
If the proposal to ratify Plante Moran’s appointment is not
approved, other certified public accountants will be considered by
the Audit Committee, but the Committee may also decide to retain
Plante Moran as independent registered public accounting firm for
2020. Even if the selection is ratified, the Audit Committee, in
its discretion, may appoint a different independent accounting firm
at any time during the year if it determines that such a change
would be in the best interests of the Company and its
stockholders.
Representatives of Plante Moran are expected to be present at the
Annual Meeting and accordingly will be available to make any
statements or to respond to any questions.
Board Recommendation
The Board of Directors unanimously recommends that the stockholders
vote FOR the ratification of the appointment of Plante & Moran,
PLLC as the Company’s independent public accountant for
fiscal year 2020.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S
FEES
The following table summarizes the fees that Plante Moran charged
us for the listed services during 2019 and 2018:
Type of fee
|
|
|
Audit
fee
|
$227,500
|
$110,245
|
Audit
related fees
|
-
|
-
|
Tax
fees
|
-
|
-
|
All
other fees
|
19,300
|
-
|
|
$246,800
|
$110,245
|
Audit Fees
Audit fees consist of fees billed for professional services
provided in connection with the audit of the Company’s
consolidated financial statements and reviews of our quarterly
consolidated financial statements.
Audit Related Fees
Audit related fees consist of assurance and related services that
include, but are not limited to, internal control reviews, attest
services not required by statute or regulation, and consultation
concerning financial accounting and reporting standards, and not
reported under “Audit fees.”
Tax Fees
Tax fees consist of the aggregate fees billed for professional
services for tax compliance, tax advice, and tax planning. These
services include preparation of federal income tax
returns.
All Other Fees
All other fees consist of fees billed for products and services
other than the services reported above.
Pre-Approved Policies and Procedures
Our Audit Committee reviewed the audit services rendered by Plante
Moran and concluded that such services were compatible with
maintaining the auditors’ independence. All audit, non-audit,
tax services, and other services performed by our independent
accountants are pre-approved by our Audit Committee to ensure that
such services do not impair the auditors’ independence from
us. We do not use Plante Moran for financial information system
design and implementation. These services, which include designing
or implementing a system that aggregates source data underlying the
financial statements or generates information that is significant
to our financial statements, are provided internally. We do not
engage Plante Moran to provide compliance outsourcing
services.
APPROVAL OF ADVISORY RESOLUTION ON EXECUTIVE
COMPENSATION
SAY-ON-PAY
(Proposal #4)
We are
providing stockholders with the opportunity to cast an advisory
vote on executive compensation as described below. Pursuant to
Section 14A of the Securities Exchange Act of 1934, as amended,
stockholders are entitled to an advisory (non-binding) vote on
compensation programs for our Named Executive Officers (sometimes
referred to as “say-on-pay”). Accordingly, we are
asking stockholders to approve, on an advisory basis, the
compensation of our Named Executive Officers disclosed in the
section entitled “Compensation of Named Executive
Officers” below. We believe that it is appropriate to seek
the views of stockholders on the design and effectiveness of the
Company’s executive compensation program. The Company will
conduct its next say-on-pay vote at the 2021 annual meeting of
stockholders.
Our
compensation program is designed to support our business goals,
promote short- and long-term profitable growth of the Company, and
align compensation with the long-term interests of our
stockholders.
Approval
of this proposal requires the affirmative vote of the majority of
the votes cast. We value the opinions expressed by our stockholders
in this advisory vote, and our Compensation Committee, which is
responsible for overseeing and administering our executive
compensation programs, will consider the outcome of the vote when
designing our compensation programs and making future compensation
decisions for our Named Executive Officers. Abstentions and broker
“non-votes,” if any, will not have any impact on this
advisory vote.
The
Board is asking stockholders to cast a non-binding, advisory vote
“FOR” the following resolution:
“RESOLVED,
that the stockholders of HireQuest, Inc. approve on an advisory
basis, the compensation paid to our Named Executive Officers as
disclosed pursuant to the compensation disclosure rules of the SEC,
including the compensation tables and accompanying narrative
disclosure included in this proxy statement.”
Board Recommendation
The Board of Directors unanimously recommends that the stockholders
vote FOR the say-on-pay proposal.
Because
the vote is advisory, it will not be binding upon the Board, and
the Compensation Committee or the Board will not be required to
take any action as a result of the outcome of the vote on this
proposal. The Compensation Committee and the Board will carefully
assess the voting results, and if those results reflect any broadly
held issues or concerns, the Board will consult directly with
stockholders to better understand their views.
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following individuals served as Named Executive Officers
(“NEOs”) of HireQuest, Inc. or Command Center, Inc.
during all or some portion of 2019: Richard F. Hermanns, John D.
McAnnar, Cory Smith, Richard K. Coleman, Jr. and Brendan
Simaytis.
Summary Compensation Table
The following table summarizes the compensation we paid to our NEOs
during 2019 and 2018:
Name and Principal Position
|
|
Year
|
|
|
|
|
|
|
Richard F.
Hermanns
|
|
2019
|
$458,619
|
$250,000
|
$379,708
|
$-
|
$-
|
$1,088,327
|
President,
Chief Executive Officer, and Director
|
|
2018
|
503,199
|
-
|
-
|
-
|
-
|
503,199
|
John
McAnnar
|
|
2019
|
176,215
|
54,002(3)
|
183,460
|
-
|
-
|
413,677
|
Executive Vice
President and General Counsel
|
|
2018
|
165,000
|
36,915
|
-
|
-
|
-
|
201,915
|
Cory
Smith
|
|
2019
|
180,000
|
56,478
|
180,000
|
-
|
50,000(6)
|
466,478
|
Chief
Financial Officer
|
|
2018
|
172,500
|
23,763
|
-
|
-
|
27,728(7)
|
223,991
|
Richard K. Coleman, Jr. (1)
|
|
2019
|
193,219
|
200,100
|
-
|
-
|
171,000(8)
|
564,319
|
Former
President, Chief Executive Officer, and
Director
|
|
2018
|
243,750
|
100,000
|
-
|
316,335
|
297(9)
|
660,382
|
Brendan Simaytis (2)
|
|
2019
|
174,247
|
52,478
|
-
|
-
|
101,000(10)
|
327,725
|
Former
Executive Vice President and General Counsel
|
|
2018
|
196,250
|
35,644
|
-
|
-
|
90(9)
|
231,984
|
1.
Mr.
Coleman’s tenure as an officer ended on August 6,
2019.
2.
Mr.
Simaytis’ tenure as an officer ended on July 14,
2019.
3.
This bonus
amount includes $25,002 foregone by Mr. McAnnar for which he
received restricted shares of stock of an equivalent
value.
4.
This column
represents the grant date fair value of shares awarded in
accordance with U.S. GAAP. The amounts were calculated using the
closing price of our stock on the grant date.
5.
This column
represents the grant date fair value of options awarded to Mr.
Coleman in accordance with U.S. GAAP. This amount was calculated
using the Black-Scholes pricing model.
6.
Represents a
change in control bonus paid to Mr. Smith.
7.
Represents
rental expense incurred by Mr. Smith which was paid by the
Company.
8.
Represents
severance paid to Mr. Coleman.
9.
Represents
life insurance premiums paid by the Company.
10.
Represents a
change in control bonus of $50,000 and fees paid by the Company
pursuant to a consulting agreement of $51,000.
Outstanding Equity Awards
The following table shows our outstanding equity awards held by
Named Executive Officers as of December 31, 2019:
|
|
|
Name
|
Number of shares underlying vested options
|
Number of shares underlying non-vested options
|
|
|
Number of shares of stock that have not
vested (2)
|
Market value of shares of stock that have not
vested (3)
|
Cory Smith (1)
|
3,125
|
1,041
|
$5.40
|
|
25,000
|
$177,250
|
Richard
F. Hermanns
|
-
|
-
|
-
|
-
|
50,000
|
354,500
|
John
McAnnar
|
-
|
-
|
-
|
-
|
25,000
|
177,250
|
1.
These options
vest in four equal installments, 25% on the date of grant, and 25%
at each of the first three anniversaries of the grant
date.
2.
These shares
vest 50% on September 23, 2021 and 6.25% during each of the
subsequent eight fiscal quarters.
3.
The market value is based on our closing stock price of $7.09 on
December 31, 2019.
Richard Hermanns Employment Agreement
Mr. Hermanns’ employment agreement provides for Mr. Hermanns
to continue serving as the Company’s President and Chief
Executive Officer during an initial term through August 31, 2022
(the “Term”) and to receive an annual base salary of
$375,000, payable at periodic intervals in accordance with normal
payroll practices, and subject to increase in the sole discretion
of the Compensation Committee and/or the Board. Pursuant to his
agreement, Mr. Hermanns received a one-time bonus in the amount of
$250,000 for the year ending December 31, 2019 (the “2019
Bonus”). Mr. Hermanns is also eligible for (i) a
discretionary bonus with respect to each fiscal year beginning with
the fiscal year ending December 31, 2019 in the Compensation
Committee’s sole discretion; (ii) a pre-tax income bonus
beginning with the fiscal year ending December 31, 2020 and for
each fiscal year thereafter during the Term equal to annual pre-tax
income of the Company and all of its subsidiaries on a combined
system-wide basis during the fiscal year multiplied by one-half of
one percent and adjusted by the Compensation Committee in good
faith to account for extraordinary items; and (iii) a sales
increase bonus beginning with the fiscal year ending December 31,
2020 and for each fiscal year thereafter during the Term equal to
eight times the percentage year-over-year increase in System-Wide
Sales multiplied by Mr. Hermanns’ then-existing annualized
base salary. “System-Wide Sales” is defined as the sum
of all sales generated by franchisees of any subsidiary of the
Company on a combined basis.
Mr. Hermanns was granted and issued 50,000 restricted shares of
Company common stock pursuant to the Company’s 2016 Plan,
subject to the terms and conditions of the 2016 Plan (the
“Hermanns Restricted Shares”). The Hermanns Restricted
Shares vest according to the following schedule: 50% on September
1, 2021, and 6.25% per fiscal quarter for each of the first eight
fiscal quarters occurring thereafter subject to accelerated vesting
upon termination of Mr. Hermanns’ employment under certain
conditions. Mr. Hermanns is also entitled to vacation and other
employee benefits in accordance with Company policies.
Mr. Hermanns’ employment can be terminated by either Mr.
Hermanns or the Company for any reason (or no reason) in accordance
with the terms of the agreement and by providing 60 days' written
notice of such termination to the other party. If the employment is
terminated for "cause" or by resignation without "good cause" (as
each of those terms is defined in the agreement) or due to death or
disability, Mr. Hermanns or his estate will receive any unpaid base
salary plus accrued paid time off or vacation, accrued and unpaid
bonuses, reimbursable expenses, and continued health care benefits
at Mr. Hermanns’ expense. If Mr. Hermanns’ employment
is terminated due to death or disability, Mr. Hermanns or his
estate is also entitled to an amount equal to the base salary Mr.
Hermanns would have earned in the 60 day period following his death
or permanent disability, the limited death, disability, and income
continuation benefits provided under any applicable plan, and
pro-rata vesting of the Hermanns Restricted Shares calculated as if
his restricted stock had vested monthly.
If the employment is terminated by the Company without
“cause” or Mr. Hermanns resigns for “good
reason," Mr. Hermanns is entitled to receive any unpaid base salary
plus accrued paid time off or vacation, pro-rated payment of the
pre-tax income bonus and sales increase bonus, an amount equal to
Mr. Hermanns' base salary for an eighteen month period,
reimbursable expenses, and continued health care benefits at Mr.
Hermanns’ expense. In addition, all restrictions on
outstanding equity awards, including the Hermanns Restricted
Shares, will lapse such that Mr. Hermanns will be fully vested in
such awards. If the employment terminates due to non-renewal of the
agreement, Mr. Hermanns is entitled to receive any unpaid base
salary plus accrued paid time off or vacation, pro-rated payment of
the pre-tax income and sales increase bonuses, and all restrictions
on outstanding equity awards, including the Hermanns Restricted
Shares, will lapse such that Mr. Hermanns will be fully vested in
such awards.
If a “change of control” (generally defined in the
agreement at the 50% level) occurs prior to the end of the Term,
the agreement is extended automatically for a one-year renewal
period beginning on the date of the change of control (a
“Post-Change of Control Renewal Period”). If Mr.
Hermanns’ employment is terminated during the Post-Change of
Control Renewal Period, he is entitled to a one-time, lump-sum
severance payment equal to 150% of his base salary then in effect,
and all restrictions on outstanding equity awards, including the
Hermanns Restricted Shares, will lapse such that Mr. Hermanns will
be fully vested in such awards.
John McAnnar Employment Agreement
Mr. McAnnar’s employment agreement provides for Mr. McAnnar
to continue serving as the Company’s Vice President, General
Counsel, and Secretary during an initial term through August 31,
2021 (the “Term”) and to receive an annual base salary
of $190,000, payable at periodic intervals in accordance with
normal payroll practices, and subject to increase in the sole
discretion of the Compensation Committee and/or the Board. Mr.
McAnnar received a one-time bonus in the amount of $25,000 for the
year ending December 31, 2019 (the “2019 Bonus”) which
he elected to take in stock. Mr. McAnnar will also be eligible for
(i) a discretionary bonus with respect to each fiscal year
beginning with the fiscal year ending December 31, 2019 in the
Compensation Committee’s sole discretion; and (ii) a
performance bonus beginning with the fiscal year ending December
31, 2020 of up to 50% of his base salary upon achieving the various
tiered goals to be specified in the Company’s senior
executive bonus plan.
Upon execution of the McAnnar Agreement, Mr. McAnnar was granted
and issued 25,000 restricted shares of Company common stock
pursuant to the Company’s 2016 Plan, subject to the terms and
conditions of the 2016 Plan (the “McAnnar Restricted
Shares”). The McAnnar Restricted Shares vest according to the
following schedule: 50% on September 1, 2021, and 6.25% per fiscal
quarter for each of the first eight fiscal quarters occurring
thereafter subject to accelerated vesting upon termination of Mr.
McAnnar’s employment under certain conditions. Mr. McAnnar is
also entitled to vacation and other employee benefits in accordance
with Company policies.
Mr. McAnnar’s employment can be terminated by either Mr.
McAnnar or the Company for any reason (or no reason) in accordance
with the terms of the agreement and by providing 60 days' written
notice of such termination to the other party. If the employment is
terminated for "cause" or resignation without "good reason" (as
each of those terms is defined in the agreement) or due to death or
disability, Mr. McAnnar or his estate will receive any unpaid base
salary plus accrued paid time off or vacation, accrued and unpaid
bonuses, reimbursable expenses, and continued health care benefits
at Mr. McAnnar’s expense. If Mr. McAnnar’s employment
is terminated due to death or disability, Mr. McAnnar or his estate
is also entitled to an amount equal to the base salary Mr. McAnnar
would have earned in the 60 day period following his death or
permanent disability, the limited death, disability, and income
continuation benefits provided under any applicable plan, and
pro-rata vesting of the McAnnar Restricted Shares calculated as if
his restricted stock had vested monthly.
If the employment is terminated by the Company without
“cause” or Mr. McAnnar resigns for “good reason,"
Mr. McAnnar is entitled to receive any unpaid base salary plus
accrued paid time off or vacation, pro-rated payment of the
performance bonus, an amount equal to Mr. McAnnar’s base
salary for a period equal to one month for every year of total
employment by the Company and its affiliates up to a maximum of six
months, reimbursable expenses, continued health care benefits at
Mr. McAnnar’s expense, and pro-rata vesting of the McAnnar
Restricted Shares calculated as if his restricted stock had vested
monthly. If the employment terminates due to non-renewal of the
agreement, Mr. McAnnar is entitled to receive any unpaid base
salary plus accrued paid time off or vacation, pro-rated payment of
the Performance Bonus, and 50% of the McAnnar Restricted Shares
shall immediately vest.
If a “change of control” (generally defined in the
agreement at the 50% level) occurs prior to the end of the Term,
the agreement is extended automatically for a one-year renewal
period beginning on the date of the change of control (a
“Post-Change of Control Renewal Period”). If Mr.
McAnnar’s employment is terminated during the Post-Change of
Control Renewal Period, he is entitled to a one-time, lump-sum
severance payment equal to 150% of his base salary then in effect,
and all restrictions on outstanding equity awards, including the
McAnnar Restricted Shares, will lapse such that Mr. McAnnar will be
fully vested in such awards.
Cory Smith Employment Agreement
Mr. Smith’s employment agreement provides for Mr. Smith to
continue serving as the Company’s Chief Financial Officer
during an initial term through September 30, 2019. Upon the Change
of Control effected by the Merger on July 15, 2019, Mr. Smith's
agreement renewed for an additional two-year term. He is entitled
to receive an annual base salary of $180,000, payable at periodic
intervals in accordance with the Company’s normal payroll
practices, and subject to increase in the sole discretion of the
Compensation Committee and/or the Board. Mr. Smith received (i) a
lump sum payment of $50,000 upon the closing of the Merger, and
(iii) relocation assistance, including reimbursement for moving
costs related to his move to HireQuest corporate headquarters in
Goose Creek, South Carolina. Mr. Smith is also eligible for (i) a
discretionary bonus with respect to each fiscal year beginning with
the fiscal year ending December 31, 2019 in the Compensation
Committee’s sole discretion; and (ii) a performance bonus
beginning with the fiscal year ending December 31, 2020 of up to
50% of his base salary upon achieving the various tiered goals to
be specified in the Company’s senior executive bonus plan.
Mr. Smith is entitled to vacation and other employee benefits in
accordance with the Company’s policies.
Mr.
Smith's employment can be terminated at any time by either Mr.
Smith or the Company for any reason (or no reason) in accordance
with the terms of the agreement by providing 45 days' written
notice of such termination to the other party. If Mr. Smith's
employment is terminated by the Company for "cause" or without
"good reason" (as each of those terms is defined in the agreement),
Mr. Smith is entitled to receive the unpaid base salary and bonuses
earned, reimbursement of all expenses, continued health care
benefits at Mr. Smith's expense, and immediate vesting of all
options and all other awards except and only to the extent that (i)
any agreement with respect to an award specifically provides
otherwise and (ii) such vesting would not result in the imposition
of the additional tax under Section 409A of the Code. If Mr.
Smith's employment is terminated with the Company due to death or
permanent disability, his estate or personal representative will
continue to receive Mr. Smith's Base Salary during the six month
period following the date of termination or of determination of
permanent disability. Mr. Smith or his estate will also remain
eligible to receive any limited death, disability, and/or income
continuation benefits, if any, which will be payable in accordance
with the terms of the plans pursuant to which such limited death or
disability benefits are provided.
If Mr. Smith’s employment is terminated by the Company
without “cause” or by Mr. Smith for “good
reason," he will be entitled to receive (i) his base salary through
the end of the Term of the or for six months, whichever period is
longer, (ii) the immediate vesting of all options and other awards
held by Mr. Smith under the Company’s equity incentive plans,
subject to certain exclusions, (iii) reimbursement of expenses and
(iv) a pro-rated payment of bonuses.
Mr. Smith was issued 25,000 restricted shares of Company common
stock pursuant to the Company’s 2016 Plan, subject to the
terms and conditions of the 2016 Plan (the “Smith Restricted
Shares”). The Smith Restricted Shares vest and become
unrestricted according to the following schedule: 50% on September
1, 2021, and 6.25% per fiscal quarter for each of the first eight
fiscal quarters occurring thereafter; provided, however, that if Mr. Smith’s employment is
terminated by the Company “without cause” or Mr. Smith
resigns for “good reason,” as provided in his
employment agreement, his shares will vest pro-rata based on the
months of employment after September 23, 2019 measured in respect
to the four-year vesting schedule, and all non-vested shares
thereafter will immediately cease vesting and be forfeited. Should
Mr. Smith’s employment end for any other reason, all
non-vested shares will immediately cease vesting and be
forfeited.
Executive Stock Purchase Matching Program
On September 25, 2019, the Board approved an executive stock
purchase matching program applicable to Messrs. Hermanns, Smith,
and McAnnar, under which the Company will match 20% of the
purchases of common stock of the Company that an executive makes
during the period ending upon the executive’s termination
from employment with the Company (which purchases do not include
stock received by the executive as compensation), subject to
certain terms and conditions including: the shares issued pursuant
to the match will be restricted shares issued under the
Company’s 2016 Plan which will not vest until the second
anniversary of the date on which the triggering purchase was made;
the number of shares of matching restricted stock that the Company
can issue to any one executive pursuant to the match may not exceed
a value of $25,000 in the aggregate in any one-year period; and the
shares of matching restricted stock will vest if the executive is
employed by the Company and/or a subsidiary on the vesting date and
owns at least the same number of shares of Company common stock
that were matched at the time of the triggering
purchase.
Richard Coleman Severance Agreement
Effective August 6, 2019, the Company and Richard K. Coleman, Jr.,
the Company’s then-Chief Operating Officer, severed Mr.
Coleman’s employment relationship with the Company. On August
29, 2019, the Company and Mr. Coleman entered into a Separation and
Release of Claims Agreement (the
“Agreement”).
As consideration for Mr. Coleman’s execution, non-revocation
of, and compliance with, the Agreement, including without
limitation his general release and waiver of claims and other
post-termination obligations, the Company agreed to provide the
following benefits to which Mr. Coleman would not otherwise have
been entitled (in each case less all relevant taxes and other
withholdings): (a) a lump sum payment of $1,000, (b) a lump sum
payment of $170,000, which the parties agreed would satisfy all
salary, wages, commissions, bonuses, and other compensation,
including without limitation, all Base Salary, Performance Bonuses,
other Bonus Opportunities, Expense Reimbursement, Fringe Benefits,
Paid Time Off, Accrued Obligations, and Severance Benefits, as
those terms are defined in Mr. Coleman’s Amended and Restated
Employment Agreement dated March 31, 2019, which would become due
to Mr. Coleman through August 29, 2019, and (c) eligibility to
participate in COBRA continuation coverage. All stock options and
other equity compensation granted to Mr. Coleman by the Company,
including, without limitation, options to purchase 100,000 shares
of the Company’s common stock granted to him pursuant to his
Employment Agreement dated April 1, 2018, were
cancelled.
Brendan Simaytis Employment and Consulting Agreement
Mr. Simaytis’ employment agreement expired by its own terms
on November 15, 2019. On June 30, 2019, the Company entered into a
Consulting and Nondisclosure Agreement with Mr. Simaytis (the
“Consulting Agreement”). Pursuant to the Consulting
Agreement, Mr. Simaytis agreed to serve as a consultant to the
Company to assist with certain financial and operational matters
from November 15, 2019 through February 14, 2020. In consideration
for his services as a consultant, the Company paid Mr. Simaytis
$51,000 during the term of the Consulting Agreement.
Retirement Plans
The
Company does not currently sponsor any tax-qualified or
non-qualified retirement plans.
OTHER MATTERS PRESENTED AT THE ANNUAL MEETING
There
are no stockholder proposals for the Annual Meeting. The Company
has no knowledge of any other matters that may come before the
Annual Meeting and does not intend to present any other matters.
However, if any other matters shall properly come before the Annual
Meeting or any adjournment, the persons soliciting proxies will
have the discretion to vote as they see fit unless directed
otherwise.
STOCKHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING
Proposals to be included in the Company’s Proxy
Statement
Stockholders
wishing to submit proposals for inclusion in the Company’s
proxy statement for the 2021 annual meeting of stockholders under
Rule 14a-8 must ensure that such proposals meet the requirements of
Rule 14a-8, in addition to those imposed by our bylaws, and are
received by the Company at 111 Springhall Drive, Goose Creek, SC
29445, Attention: John D. McAnnar, on or before January 7, 2021
(unless the date of the 2021 annual
meeting is not within 30 days of June 15, 2021, in which case the
deadline will be a reasonable time before we begin to print and
send the proxy materials for the 2021 annual
meeting).
Other Proposals and Nominations
Our
bylaws govern the submission of nominations for director or other
business proposals that a stockholder wishes to have considered at
a meeting of stockholders, but which are not included in our proxy
statement for that meeting. Under our bylaws, nominations for
director or other business proposals to be addressed at our 2021
annual meeting may be made by a stockholder entitled to vote who
has delivered a notice to the Corporate Secretary no later than the
close of business on March 22, 2021 and not earlier than February
20, 2021 (unless the date of the 2021 annual meeting is advanced by
more than 30 days prior to or delayed by more than 60 days after
the one-year anniversary of the date of the Annual Meeting, in
which case, for notice by the stockholder to be timely, it must be
so received by the Corporate Secretary not earlier than the close
of business on the 120th day prior to the 2021 annual meeting and
not later than the close of business on the later of (i) the 90th
day prior to the 2021 annual meeting, or (ii) the tenth day
following the day on which public announcement of the date of the
2021 annual meeting is first made). The notice must contain the
information required by the bylaws. These advance notice provisions
are in addition to, and separate from, the requirements that a
stockholder must meet in order to have a proposal included in the
proxy statement under the rules of the SEC. A proxy granted by a
stockholder will give discretionary authority to the proxies to
vote on any matters introduced pursuant to the above advance notice
bylaw provisions, subject to applicable rules of the SEC. Copies of
our bylaws are available on our website, www.hirequest.com, by
selecting “Invest in HireQuest,” then selecting
“Investor Relations,” and finally looking under the
“Corporate Governance” tag, or may be obtained from the
Corporate Secretary at no charge by requesting a copy in
writing.
ANNUAL REPORT ON FORM 10-K
A copy
of our Annual Report on Form 10-K for the year ended December 31,
2019 (without exhibits) accompanies the notice of meeting and this
proxy statement. The Annual Report is incorporated herein by
reference. We will furnish to any stockholder, free of charge upon
written request, any exhibit described in the list accompanying the
Form 10-K. Any request should include a representation that the
stockholder was the beneficial owner of shares of our common stock
on April 24, 2020, the record date for the 2020 Annual Meeting, and
should be directed to John D. McAnnar, Secretary and General
Counsel, at 111 Springhall Drive, Goose Creek, SC
29445.
|
By the
Order of the Board of Directors
/s/ John D. McAnnar
John D.
McAnnar
Corporate
Secretary
April
29, 2020
|
APPENDIX A
EQUITY INCENTIVE PLAN
HireQuest, Inc.
2019 Equity Incentive Plan
ADOPTED
BY THE BOARD OF DIRECTORS:
DECEMBER
3, 2019
APPROVED
BY STOCKHOLDERS:
_______________________________________
HireQuest, Inc. 2019 Equity Incentive Plan
1.1
General
Purpose. The name of this plan
is the HireQuest, Inc. 2019 Equity Incentive Plan (the
“Plan”). The purposes of the Plan are (a) to
enable HireQuest, Inc., a Delaware corporation (the
“Company”), and any Affiliate to attract and retain
the types of Employees, Consultants, and Directors who will
contribute to the Company’s long range success; (b) to
provide incentives that align the interests of Employees,
Consultants, and Directors with those of the stockholders of the
Company; (c) to promote the financial success of the
Company’s business; and (d) to encourage the sense of
proprietorship of such Employees, Consultants, and
Directors.
1.2
Eligible
Award Recipients.
The persons eligible to receive Awards
are the Employees, Consultants, and Directors of the Company and
its Affiliates and such other individuals designated by the
Committee who are reasonably expected to become Employees,
Consultants, and Directors after the receipt of
Awards.
1.3
Available
Awards. Awards that may be granted under the Plan include:
(a) Incentive Stock Options, (b) Non-qualified Stock Options, (c)
Stock Appreciation Rights, (d) Restricted Awards, (e) Performance
Share Awards, (f) Cash Awards, and (g) Other Equity-Based
Awards.
“Affiliate” means a corporation or other entity that,
directly or through one or more intermediaries, controls, is
controlled by or is under common control with, the
Company.
“Applicable
Laws” means the
requirements related to or implicated by the administration of the
Plan under applicable state corporate law, United States federal
and state securities laws, the Code, any stock exchange or
quotation system on which the shares of Common Stock are listed or
quoted, and the applicable laws of any foreign country or
jurisdiction where Awards are granted under the
Plan.
“Award” means any right granted under the Plan,
including an Incentive Stock Option, a Non-qualified Stock Option,
a Stock Appreciation Right, a Restricted Award, a Performance Share
Award, a Cash Award, or an Other Equity-Based
Award.
“Award
Agreement” means a
written agreement, contract, certificate or other instrument or
document evidencing the terms and conditions of an individual Award
granted under the Plan which may, in the discretion of the Company,
be transmitted electronically to any Participant. Each Award
Agreement shall be subject to the terms and conditions of the
Plan.
“Beneficial
Owner” has the meaning
assigned to such term in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that in calculating the beneficial ownership
of any particular Person, such Person shall be deemed to have
beneficial ownership of all securities that such Person has the
right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable only
after the passage of time. The terms “Beneficially
Owns” and “Beneficially Owned” have a
corresponding meaning.
“Board” means the Board of Directors of the
Company, as constituted at any time.
“Cash Award” means
an Award denominated in cash that is granted under Section
7.4
of the Plan.
“Cause”
means:
With respect to any Employee or Consultant, unless the applicable
Award Agreement states otherwise:
(a)
If
the Employee or Consultant is a party to an employment or service
agreement with the Company or its Affiliates and such agreement
provides for a definition of Cause, the definition contained
therein; or
(b)
If
no such agreement exists, or if such agreement does not define
Cause, a finding by the Committee in its sole and absolute
discretion that the Employee or Consultant has: (i) committed, or
entered a plea of guilty or no contest to, a felony or a crime
involving moral turpitude or committed any other act involving
willful malfeasance or material fiduciary breach with respect to
the Company or an Affiliate; (ii) engaged in conduct that results
in or is reasonably likely to result in harm to the reputation or
business of the Company or any of its Affiliates; (iii) exhibited
gross negligence or willful misconduct with respect to the Company
or an Affiliate; (iv) engaged in the material violation of state or
federal securities laws; or (v) failed, refused or neglected to
perform his or her duties or to implement the directives of the
Company.
With respect to any Director, unless the applicable Award Agreement
states otherwise, a determination by a majority of the
disinterested Board members, in their sole and absolute discretion,
that the Director has engaged in any of the following:
(a)
malfeasance
in office;
(b)
gross
misconduct or neglect;
(c)
false
or fraudulent misrepresentation inducing the director’s
appointment;
(d)
willful
conversion of corporate funds; or
(e)
repeated
failure to participate in Board meetings on a regular basis despite
having received proper notice of the meetings in
advance.
The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to whether a
Participant has been discharged for Cause.
“Change in
Control”
means:
(a)
One Person (or more than one Person acting as a
group) acquires ownership of stock of the Company that, together
with the stock held by such person or group, constitutes more than
50% of the total fair market value or total voting power of the
stock of the Company; provided,
that, a Change in Control shall
not occur if any Person (or more than one Person acting as a group)
owns more than 50% of the total fair market value or total voting
power of the Company’s stock and acquires additional
stock;
(b)
One person (or more than one person acting as a
group) acquires (or has acquired during the twelve-month period
ending on the date of the most recent acquisition) ownership of the
Company’s stock possessing 50% or more of the total voting
power of the stock of such corporation; provided,
that, a Change in Control shall
not occur if any Person (or more than one Person acting as a group)
owns Company stock possessing 50% or more of the total voting power
of the stock and acquires additional stock;
(c)
A
majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is
not endorsed by a majority of the Board before the date of
appointment or election; or
(d)
One
person (or more than one person acting as a group), acquires (or
has acquired during the twelve-month period ending on the date of
the most recent acquisition) assets from the Company that have a
total gross fair market value equal to or more than 40% of the
total gross fair market value of all of the assets of the Company
immediately before such acquisition(s).
“Code” means the Internal Revenue Code of 1986,
as it may be amended from time to time. Any reference to a section
of the Code shall be deemed to include a reference to any
regulations promulgated thereunder.
“Committee” means a committee of one or more members
of the Board appointed by the Board to administer the Plan in
accordance with Section 3, provided,
however, that the committee, if
necessary, shall be comprised of independent non-employee directors
as such term is defined in Rule 16b-3 with respect to Awards for
all Company insiders.
“Common Stock” means the common stock, $0.001 par value
per share, of the Company, or such other securities of the Company
as may be designated by the Committee from time to time in
substitution thereof.
“Company” means HireQuest, Inc. a Delaware
corporation, and any successor thereto.
“Consultant” means
any individual or entity which performs bona fide services to the
Company or an Affiliate, other than as an Employee or Director, and
who may be offered securities registerable pursuant to a
registration statement on Form S-8 under the Securities
Act.
“Continuous
Service” means that the
Participant’s service with the Company or an Affiliate,
whether as an Employee, Consultant, or Director, is not interrupted
or terminated. The Participant’s Continuous Service shall not
be deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Consultant, or Director or a change in
the entity for which the Participant renders such service,
provided
that there is no interruption
or termination of the Participant’s Continuous
Service; provided further that
if any Award is subject to Section
409A of the Code, this sentence shall only be given effect to the
extent consistent with Section 409A of the Code. For example, a
change in status from an Employee of the Company to a Director of
an Affiliate will not constitute an interruption of Continuous
Service. The Committee or its delegate, in its sole discretion, may
determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal
or family leave of absence. The Committee or its delegate, in its
sole discretion, may determine whether a Company transaction, such
as a sale or spin-off of a division or subsidiary that employs a
Participant, shall be deemed to result in a termination of
Continuous Service for purposes of affected Awards, and such
decision shall be final, conclusive and
binding.
“Deferred Stock Units
(DSUs)” has the meaning
set forth in Section 7.2 hereof.
“Director” means a member of the
Board.
“Disability” means, unless the applicable Award
Agreement says otherwise, that the Participant is unable to engage
in any substantial gainful activity by reason of any medically
determinable physical or mental impairment; provided, however,
for purposes of determining the term
of an Incentive Stock Option pursuant to Section 6.10
hereof, the term Disability shall have
the meaning ascribed to it under Section 22(e)(3) of the Code. The
determination of whether an individual has a Disability shall be
determined under procedures established by the Committee. Except in
situations where the Committee is determining Disability for
purposes of the term of an Incentive Stock Option pursuant to
Section 6.10 hereof within the meaning of Section 22(e)(3) of
the Code, the Committee may rely on any determination that a
Participant is disabled for purposes of benefits under any
long-term disability plan maintained by the Company or any
Affiliate in which a Participant participates.
“Disqualifying
Disposition” has the
meaning set forth in Section 14.11.
“Effective
Date” shall mean the date
that the Company’s stockholders approve this Plan if such
stockholder approval occurs before the first anniversary of the
date the Plan is adopted by the Board.
“Employee” means any person, including an Officer or
Director, employed by the Company or an Affiliate;
provided,
that, for purposes of
determining eligibility to receive Incentive Stock Options, an
Employee shall mean an employee of the Company or a parent or
subsidiary corporation within the meaning of Section 424 of the
Code. Mere service as a Director or payment of a director’s
fee by the Company or an Affiliate shall not be sufficient to
constitute “employment” by the Company or an
Affiliate.
“Exchange Act” means the Securities Exchange Act of 1934,
as amended.
“Fair
Market Value” means, as
of any date, the value of the Common Stock as determined below. If
the Common Stock is listed on any established stock exchange or a
national market system, including without limitation, the NASDAQ
Stock Market, the Fair Market Value shall be the closing price of a
share of Common Stock (or if no sales were reported the closing
price on the date immediately preceding such date) as quoted on
such exchange or system on the day of determination, as reported in
the Wall
Street Journal or other similar
publication. If the Common Stock is not so listed but is traded on
an over-the-counter market, the mean between the closing bid and
asked price on that date, or, if there are no such price as
available for such date, on the last preceding date on which such
prices shall be available, as reported by the National Quotation
Bureau Incorporated shall be the Fair Market Value. In the absence
of an established market for the Common Stock, the Fair Market
Value shall be determined in good faith by the Committee and such
determination shall be conclusive and binding on all
persons.
“Fiscal Year” means
the Company’s fiscal year.
“Free
Standing Rights” has the
meaning set forth in Section 7.1(a).
“Good Reason”
means, unless the applicable Award Agreement states
otherwise:
(a)
If
an Employee is a party to an employment or service agreement with
the Company or its Affiliates and such agreement provides for a
definition of Good Reason, the definition contained therein;
or
(c)
If
no such agreement exists or if such agreement does not define Good
Reason, the occurrence of one or more of the following without the
Participant’s express written consent, which circumstances
are not remedied by the Company within thirty (30) days of its
receipt of a written notice from the Participant describing the
applicable circumstances (which notice must be provided by the
Participant within ninety (90) days of the Participant’s
knowledge of the applicable circumstances): (i) any material,
adverse change in the Participant’s duties, responsibilities,
authority, title, status or reporting structure; (ii) a material
reduction in the Participant’s base salary or bonus
opportunity; or (iii) a geographical relocation of the
Participant’s principal office location by more than fifty
(50) miles.
“Grant
Date” means the date on
which the Committee adopts a resolution, or takes other appropriate
action, expressly granting an Award to a Participant that specifies
the key terms and conditions of the Award or, if a later date is
set forth in such resolution, then such date as is set forth in
such resolution.
“Incentive Stock
Option” means an Option
that is designated by the Committee as an incentive stock option
within the meaning of Section 422 of the Code and that meets the
requirements set out in the Plan.
“Incumbent
Directors” means
individuals who, on the Effective Date, constitute the
Board, provided that
any individual becoming a Director
subsequent to the Effective Date whose election or nomination for
election to the Board was approved by a vote of at least two-thirds
of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for Director without objection to
such nomination) shall be an Incumbent Director. No individual
initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to
Directors or as a result of any other actual or threatened
solicitation of proxies by or on behalf of any person other than
the Board shall be an Incumbent Director.
“Non-Employee
Director” means a
Director who is a “non-employee director” within the
meaning of Rule 16b-3.
“Non-qualified Stock
Option” means an Option
that by its terms does not qualify or is not intended to qualify as
an Incentive Stock Option.
“Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated
thereunder.
“Option” means an Incentive Stock Option or a
Non-qualified Stock Option granted pursuant to the
Plan.
“Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person
who holds an outstanding Option.
“Option Exercise
Price” means the price at
which a share of Common Stock may be purchased upon the exercise of
an Option.
“Other Equity-Based Award” means an Award that is not an Option, Stock
Appreciation Right, Restricted Stock, Restricted Stock Unit, or
Performance Share Award that is granted under Section
7.4
and is payable by delivery of Common
Stock and/or which is measured by reference to the value of Common
Stock.
“Participant” means an eligible person to whom an Award
is granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Award.
“Performance
Goals” means, for a
Performance Period, the one or more goals established by the
Committee for the Performance Period based upon business criteria
or other performance measures determined by the Committee in its
discretion.
“Performance
Period” means the one or
more periods of time not less than one fiscal quarter in duration,
as the Committee may select, over which the attainment of one or
more Performance Goals will be measured for the purpose of
determining a Participant’s right to and the payment of a
Performance Share Award or a Cash Award.
“Performance Share
Award” means any Award
granted pursuant to Section 7.3 hereof.
“Performance
Share” means the grant of
a right to receive a number of actual shares of Common Stock or
share units based upon the performance of the Company during a
Performance Period, as determined by the
Committee.
“Permitted
Transferee” means: (a) a
member of the Optionholder’s immediate family (child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships), any person
sharing the Optionholder’s household (other than a tenant or
employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the
Optionholder) control the management of assets, and any other
entity in which these persons (or the Optionholder) own more than
50% of the voting interests; (b) third parties designated by the
Committee in connection with a program established and approved by
the Committee pursuant to which Participants may receive a cash
payment or other consideration in consideration for the transfer of
a Non-qualified Stock Option; and (c) such other transferees as may
be permitted by the Committee in its sole
discretion.
“Person” means a
person as defined in Section 13(d)(3) of the Exchange
Act.
“Plan” means this HireQuest, Inc. 2019 Equity
Incentive Plan, as amended and/or amended and restated from time to
time.
“Prior Plan” means
the Command Center, Inc. 2016 Stock Incentive
Plan.
“Related
Rights” has the meaning
set forth in Section 7.1(a).
“Restricted
Award” means any Award
granted pursuant to Section 7.2(a).
“Restricted
Period” has the meaning
set forth in Section 7.2(a).
“Rule
16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3,
as in effect from time to time.
“Securities
Act” means the Securities
Act of 1933, as amended.
“Stock
Appreciation Right” means
the right pursuant to an Award granted under Section
7.1
to receive, upon exercise, an amount
payable in cash or shares equal to the number of shares subject to
the Stock Appreciation Right that is being exercised multiplied by
the excess of (a) the Fair Market Value of a share of Common Stock
on the date the Award is exercised, over (b) the exercise price
specified in the Stock Appreciation Right Award
Agreement.
“Stock
for Stock Exchange” has
the meaning set forth in Section 6.5.
“Substitute Award” has the meaning set forth in Section
4.6.
“Ten
Percent Stockholder”
means a person who owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of
any of its Affiliates.
“Total Share Reserve” has the meaning set forth in
Section 4.1.
3.1
Authority
of Committee. The Plan shall be
administered by the Compensation Committee of the Board or, in the
Board’s sole discretion, by the Board. Subject to the terms
of the Plan, the Committee’s charter and Applicable Laws, and
in addition to other express powers and authorization conferred by
the Plan, the Committee shall have the
authority:
(a)
to construe and interpret the Plan and apply its
provisions;
(b)
to promulgate, amend, and rescind rules and regulations relating to
the administration of the Plan;
(c)
to authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the
Plan;
(d)
to delegate its authority to one or more Officers of the Company
with respect to Awards that do not involve “insiders”
within the meaning of Section 16 of the Exchange Act;
(e)
to determine when Awards are to be granted under the Plan and the
applicable Grant Date;
(f)
from time to time to select, subject to the limitations set forth
in this Plan, those eligible Award recipients to whom Awards shall
be granted;
(g)
to determine the number of shares of Common Stock to be made
subject to each Award;
(h)
to determine whether each Option is to be an Incentive Stock Option
or a Non-qualified Stock Option;
(i)
to prescribe the terms and conditions of each Award, including,
without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the Award
Agreement relating to such grant;
(j)
to determine the target number of Performance Shares to be granted
pursuant to a Performance Share Award, the performance measures
that will be used to establish the Performance Goals, the
Performance Period(s) and the number of Performance Shares earned
by a Participant;
(k)
to amend any outstanding Awards,
including for the purpose of modifying the time or manner of
vesting, or the term of any outstanding Award; provided,
however, that if any such
amendment impairs a Participant’s rights or increases a
Participant’s obligations under his or her Award or creates
or increases a Participant’s federal income tax liability
with respect to an Award, such amendment shall also be subject to
the Participant’s consent;
(l)
to determine the duration and purpose of leaves of absences which
may be granted to a Participant without constituting termination of
their employment for purposes of the Plan, which periods shall be
no shorter than the periods generally applicable to Employees under
the Company’s employment policies;
(m)
to make decisions with respect to outstanding Awards that may
become necessary upon a change in corporate control or an event
that triggers anti-dilution adjustments;
(n)
to interpret, administer, reconcile any inconsistency in, correct
any defect in and/or supply any omission in the Plan and any
instrument or agreement relating to, or Award granted under, the
Plan; and
(o)
to exercise discretion to make all other determinations which it
determines to be necessary or advisable for the administration of
the Plan.
The Committee also may modify the purchase price or the exercise
price of any outstanding Award, provided that
if the modification effects a
repricing, stockholder approval shall be required before the
repricing is effective.
3.2
Committee
Decisions Final. All decisions
made by the Committee, or by resolution of the Board, pursuant to
the provisions of the Plan shall be final and binding on the
Company and the Participants, unless such decisions are determined
to be arbitrary and capricious by a court having
jurisdiction.
3.3
Delegation.
The Committee or the Board may delegate administration of the Plan
to a committee or committees of one or more members of the
Board, provided that
the Compensation Committee shall not
delegate any powers, duties, or obligations with respect to any
Awards or benefits to any insider subject to Section 16 of the
Exchange Act. With respect to such insiders, the Committee shall be
those members of the Compensation Committee of the Board that
qualify as independent Non-Employee Directors or such other
committee appointed by the Board in compliance with Rule 16b-3. The
term “Committee” shall apply to any person or persons to
whom authority to administer this Plan has been delegated. The
Board may revest in the Board the administration of the Plan at any
time. The Committee shall act pursuant to a vote of the majority of
its members or by the written consent of all of its members.
Minutes shall be kept of all of its meetings and copies thereof
shall be provided to the Board. Subject to the limitations
prescribed by the Plan and the Board, the Committee may establish
and follow such rules and regulations for the conduct of its
business as it may determine to be advisable.
3.4
Indemnification.
In addition to such other rights of indemnification as they may
have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by
the Company against the reasonable expenses, including
attorney’s fees, actually incurred in connection with any
action, suit or proceeding or in connection with any appeal
therein, to which the Committee may be party by reason of any
action taken or failure to act under or in connection with the Plan
or any Award granted under the Plan, and against all amounts paid
by the Committee in settlement thereof (provided,
however, that the settlement
has been approved by the Company, which approval shall not be
unreasonably withheld) or paid by the Committee in satisfaction of
a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee did not act in good
faith and in a manner which such person reasonably believed to be
in the best interests of the Company, and provided that, in the
case of a criminal proceeding, the Committee had no reason to
believe that the conduct complained of was unlawful;
provided,
however, that within 60 days
after the institution of any such action, suit or proceeding, such
Committee shall, in writing, offer the Company the opportunity at
its own expense to handle and defend such action, suit or
proceeding.
4.
Shares Subject to the Plan.
4.1
Subject to adjustment in accordance
with Section 11, no
more than 1,500,000 shares of Common Stock shall be available in
the aggregate for the grant of Awards under the Plan (the
“Total
Share Reserve”). No
Awards shall be made pursuant to the Prior Plan after the Effective
Date of this Plan. All outstanding Awards under the Prior Plan,
though, shall continue in effect in accordance with their terms and
the terms of the Prior Plan. During the terms of the Awards, the
Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Awards.
4.2
Shares of Common Stock available for distribution under the Plan
may consist, in whole or in part, of authorized and unissued
shares, treasury shares or shares reacquired by the Company in any
manner.
4.3
Subject to adjustment in accordance
with Section 11, no
more than 1,000,000 shares of Common Stock may be issued in the
aggregate pursuant to the exercise of Incentive Stock Options
(the “ISO
Limit”).
4.4
Subject to adjustment in accordance with Section 11, no more than
250,000 shares of Common Stock may be issued in the aggregate to
any Employee or Consultant and no more than 50,000 shares of Common
Stock may be issued in the aggregate to any Director in any
twelve-month period.
4.5
Any shares of Common Stock subject to an Award that expires or is
canceled, forfeited, or terminated without issuance of the full
number of shares of Common Stock to which the Award related will
again be available for issuance under the Plan. Notwithstanding
anything to the contrary contained herein: shares subject to an
Award under the Plan shall not again be made available for issuance
or delivery under the Plan if such shares are (a) shares tendered
in payment of an Option, (b) shares delivered or withheld by the
Company to satisfy any tax withholding obligation, or (c) shares
covered by a stock-settled Stock Appreciation Right or other Awards
that were not issued upon the settlement of the Award.
4.6
Awards may, in the sole discretion of
the Committee, be granted under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by an
entity acquired by the Company or with which the Company combines
(“Substitute
Awards”). Substitute
Awards shall not be counted against the Total Share Reserve;
provided, that, Substitute Awards issued in connection with the
assumption of, or in substitution for, outstanding options intended
to qualify as Incentive Stock Options shall be counted against the
ISO limit. Subject to applicable stock exchange requirements,
available shares under a stockholder-approved plan of an entity
directly or indirectly acquired by the Company or with which the
Company combines (as appropriately adjusted to reflect such
acquisition or transaction) may be used for Awards under the Plan
and shall not count toward the Total Share
Limit.
5.
Eligibility.
5.1
Eligibility for
Specific Awards. Incentive
Stock Options may be granted only to Employees. Awards other than
Incentive Stock Options may be granted to Employees, Consultants,
and Directors and those individuals whom the Committee determines
are reasonably expected to become Employees, Consultants, and
Directors following the Grant Date.
5.2
Ten
Percent Stockholders. A Ten
Percent Stockholder shall not be granted an Incentive Stock Option
unless the Option Exercise Price is at least 110% of the Fair
Market Value of the Common Stock on the Grant Date and the Option
is not exercisable after the expiration of five years from the
Grant Date.
6.
Option Provisions.
6.1
Each Option granted under the Plan shall be evidenced by an Award
Agreement. Each Option so granted shall be subject to the
conditions set forth in this Section 6, and to such other
conditions not inconsistent with the Plan as may be reflected in
the applicable Award Agreement. All Options shall be separately
designated Incentive Stock Options or Non-qualified Stock Options
at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common
Stock purchased on exercise of each type of Option. Notwithstanding
the foregoing, the Company shall have no liability to any
Participant or any other person if an Option designated as an
Incentive Stock Option fails to qualify as such at any time or if
an Option is determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code
and the terms of such Option do not satisfy the requirements of
Section 409A of the Code. The provisions of separate Options need
not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following
provisions:
6.2
Term.
Subject to the provisions of Section 5.2 regarding Ten Percent Stockholders, no Incentive
Stock Option shall be exercisable after the expiration of 10 years
from the Grant Date. The term of a Non-qualified Stock Option
granted under the Plan shall be determined by the Committee;
provided,
however, no Non-qualified Stock
Option shall be exercisable after the expiration of 10 years from
the Grant Date.
6.3
Exercise
Price of an Incentive Stock Option. Subject to the provisions of Section
5.2
regarding Ten Percent Stockholders,
the Option Exercise Price of each Incentive Stock Option shall be
not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Grant Date. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an Option
Exercise Price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section
424(a) of the Code.
6.4
Exercise
Price of a Non-qualified Stock Option. The Option Exercise Price of each Non-qualified
Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, a Non-qualified Stock Option may be
granted with an Option Exercise Price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 409A of the
Code.
6.5
Consideration.
The Option Exercise Price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (a) in cash or by certified or
bank check at the time the Option is exercised or (b) in the
discretion of the Committee, upon such terms as the Committee shall
approve, the Option Exercise Price may be paid: (i) by delivery to
the Company of other Common Stock, duly endorsed for transfer to
the Company, with a Fair Market Value on the date of delivery equal
to the Option Exercise Price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby
the Participant identifies for delivery specific shares of Common
Stock that have an aggregate Fair Market Value on the date of
attestation equal to the Option Exercise Price (or portion thereof)
and receives a number of shares of Common Stock equal to the
difference between the number of shares thereby purchased and the
number of identified attestation shares of Common Stock (a
“Stock
for Stock Exchange”);
(ii) a “cashless” exercise program established with a
broker; (iii) by reduction in the number of shares of Common Stock
otherwise deliverable upon exercise of such Option with a Fair
Market Value equal to the aggregate Option Exercise Price at the
time of exercise; (iv) by any combination of the foregoing methods;
or (v) in any other form of legal consideration that may be
acceptable to the Committee. Unless otherwise specifically provided
in the Option, the exercise price of Common Stock acquired pursuant
to an Option that is paid by delivery (or attestation) to the
Company of other Common Stock acquired, directly or indirectly from
the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). Notwithstanding the
foregoing, during any period for which the Common Stock is publicly
traded (i.e., the Common Stock is listed on any established stock
exchange or a national market system) an exercise by a Director or
Officer that involves or may involve a direct or indirect extension
of credit or arrangement of an extension of credit by the Company,
directly or indirectly, in violation of Section 402(a) of the
Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any
Award under this Plan.
6.6
Transferability of an
Incentive Stock Option. An
Incentive Stock Option shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.7
Transferability of a
Non-qualified Stock Option. A
Non-qualified Stock Option may, in the sole discretion of the
Committee, be transferable to a Permitted Transferee, upon written
approval by the Committee to the extent provided in the Award
Agreement. If the Non-qualified Stock Option does not provide for
transferability, then the Non-qualified Stock Option shall not be
transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to
the Company, in a form satisfactory to the Company, designate a
third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the
Option.
6.8
Vesting of
Options. Each Option may, but
need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. The vesting
provisions of individual Options may vary. No Option may be
exercised for a fraction of a share of Common Stock. The Committee
may, but shall not be required to, provide for an acceleration of
vesting and exercisability in the terms of any Award Agreement upon
the occurrence of a specified event.
6.9
Termination of
Continuous Service. Unless
otherwise provided in an Award Agreement or in an employment
agreement the terms of which have been approved by the Committee,
in the event an Optionholder’s Continuous Service terminates
(other than upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the
earlier of (a) the date three months following the termination of
the Optionholder’s Continuous Service or (b) the expiration
of the term of the Option as set forth in the Award
Agreement; provided
that, if the termination of
Continuous Service is by the Company for Cause, all outstanding
Options (whether or not vested) shall immediately terminate and
cease to be exercisable. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in
the Award Agreement, the Option shall
terminate.
6.10
Extension
of Termination Date. An
Optionholder’s Award Agreement may also provide that if the
exercise of the Option following the termination of the
Optionholder’s Continuous Service for any reason would be
prohibited at any time because the issuance of shares of Common
Stock would violate the registration requirements under the
Securities Act or any other state or federal securities law or the
rules of any securities exchange or interdealer quotation system,
then the Option shall terminate on the earlier of (a) the
expiration of the term of the Option in accordance with
Section 6.1 or (b) the expiration of a period after
termination of the Participant’s Continuous Service that is
three months after the end of the period during which the exercise
of the Option would be in violation of such registration or other
securities law requirements.
6.11
Disability
of Optionholder. Unless
otherwise provided in an Award Agreement, in the event that an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s Disability, the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled
to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (a) the date 12
months following such termination or (b) the expiration of the term
of the Option as set forth in the Award Agreement. If, after
termination, the Optionholder does not exercise his or her Option
within the time specified herein or in the Award Agreement, the
Option shall terminate.
6.12
Death of
Optionholder. Unless otherwise
provided in an Award Agreement, in the event an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s death, then the Option may be exercised
(to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate,
by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder’s death, but only within the
period ending on the earlier of (a) the date 12 months following
the date of death or (b) the expiration of the term of such Option
as set forth in the Award Agreement. If, after the
Optionholder’s death, the Option is not exercised within the
time specified herein or in the Award Agreement, the Option shall
terminate.
6.13
Incentive
Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds $100,000, the
Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as
Non-qualified Stock Options.
7.
Provisions of Awards Other Than Options.
Stock Appreciation
Rights.
Each Stock Appreciation Right granted under the Plan shall be
evidenced by an Award Agreement. Each Stock Appreciation Right so
granted shall be subject to the conditions set forth in this
Section 7.1, and to such other conditions not inconsistent with the
Plan as may be reflected in the applicable Award Agreement. Stock
Appreciation Rights may be granted alone
(“Free
Standing Rights”) or in
tandem with an Option granted under the Plan
(“Related
Rights”).
Any Related Right that relates to a Non-qualified Stock Option may
be granted at the same time the Option is granted or at any time
thereafter but before the exercise or expiration of the Option. Any
Related Right that relates to an Incentive Stock Option must be
granted at the same time the Incentive Stock Option is
granted.
(c) Term of Stock Appreciation Rights
The term of a Stock Appreciation Right granted under the Plan shall
be determined by the Committee; provided,
however, no Stock Appreciation
Right shall be exercisable later than the tenth anniversary of the
Grant Date.
(d) Vesting of Stock Appreciation Rights
Each Stock Appreciation Right may, but need not, vest and therefore
become exercisable in periodic installments that may, but need not,
be equal. The Stock Appreciation Right may be subject to such other
terms and conditions on the time or times when it may be exercised
as the Committee may deem appropriate. The vesting provisions of
individual Stock Appreciation Rights may vary. No Stock
Appreciation Right may be exercised for a fraction of a share of
Common Stock. The Committee may, but shall not be required to,
provide for an acceleration of vesting and exercisability in the
terms of any Stock Appreciation Right upon the occurrence of a
specified event.
(e) Exercise and Payment
Upon exercise of a Stock Appreciation Right, the holder shall be
entitled to receive from the Company an amount equal to the number
of shares of Common Stock subject to the Stock Appreciation Right
that is being exercised multiplied by the excess of (i) the Fair
Market Value of a share of Common Stock on the date the Award is
exercised, over (ii) the exercise price specified in the Stock
Appreciation Right or related Option. Payment with respect to the
exercise of a Stock Appreciation Right shall be made on the date of
exercise. Payment shall be made in the form of shares of Common
Stock (with or without restrictions as to substantial risk of
forfeiture and transferability, as determined by the Committee in
its sole discretion), cash or a combination thereof, as determined
by the Committee.
(f) Exercise Price
The exercise price of a Free-Standing Right shall be determined by
the Committee but shall not be less than 100% of the Fair Market
Value of one share of Common Stock on the Grant Date of such Stock
Appreciation Right. A Related Right granted simultaneously with or
subsequent to the grant of an Option and in conjunction therewith
or in the alternative thereto shall have the same exercise price as
the related Option, shall be transferable only upon the same terms
and conditions as the related Option, and shall be exercisable only
to the same extent as the related Option; provided,
however, that a Stock
Appreciation Right, by its terms, shall be exercisable only when
the Fair Market Value per share of Common Stock subject to the
Stock Appreciation Right and related Option exceeds the exercise
price per share thereof and no Stock Appreciation Rights may be
granted in tandem with an Option unless the Committee determines
that the requirements of Section 7.1(b) are satisfied.
(g) Reduction in the Underlying Option Shares
Upon any exercise of a Related Right, the number of shares of
Common Stock for which any related Option shall be exercisable
shall be reduced by the number of shares for which the Stock
Appreciation Right has been exercised. The number of shares of
Common Stock for which a Related Right shall be exercisable shall
be reduced upon any exercise of any related Option by the number of
shares of Common Stock for which such Option has been
exercised.
A Restricted Award is an Award of actual shares of Common Stock
(“Restricted
Stock”) or hypothetical
Common Stock units (“Restricted Stock
Units”) having a value
equal to the Fair Market Value of an identical number of shares of
Common Stock, which may, but need not, provide that such Restricted
Award may not be sold, assigned, transferred or otherwise disposed
of, pledged or hypothecated as collateral for a loan or as security
for the performance of any obligation or for any other purpose for
such period (the “Restricted
Period”) as the Committee
shall determine. Each Restricted Award granted under the Plan shall
be evidenced by an Award Agreement. Each Restricted Award so
granted shall be subject to the conditions set forth in this
Section 7.2, and to such other conditions not inconsistent with the
Plan as may be reflected in the applicable Award
Agreement.
(b) Restricted Stock and Restricted Stock Units
(i) Each Participant granted Restricted Stock shall execute and
deliver to the Company an Award Agreement with respect to the
Restricted Stock setting forth the restrictions and other terms and
conditions applicable to such Restricted Stock. If the Committee
determines that the Restricted Stock shall be held by the Company
or in escrow rather than delivered to the Participant pending the
release of the applicable restrictions, the Committee may require
the Participant to additionally execute and deliver to the Company
(A) an escrow agreement satisfactory to the Committee, if
applicable and (B) the appropriate blank stock power with respect
to the Restricted Stock covered by such agreement. If, upon request
by the Company, a Participant fails to execute an agreement
evidencing an Award of Restricted Stock and, if applicable, an
escrow agreement and stock power, the Award shall be null and void.
Subject to the restrictions set forth in the Award, the Participant
generally shall have the rights and privileges of a stockholder as
to such Restricted Stock, including the right to vote such
Restricted Stock and the right to receive dividends;
provided
that, any cash dividends and
stock dividends with respect to the Restricted Stock shall be
withheld by the Company for the Participant’s account, and
interest may be credited on the amount of the cash dividends
withheld at a rate and subject to such terms as determined by the
Committee. The cash dividends or stock dividends so withheld by the
Committee and attributable to any particular share of Restricted
Stock (and earnings thereon, if applicable) shall be distributed to
the Participant in cash or, at the discretion of the Committee, in
shares of Common Stock having a Fair Market Value equal to the
amount of such dividends, if applicable, upon the release of
restrictions on such share and, if such share is forfeited, the
Participant shall have no right to such
dividends.
(ii) The terms and conditions of a grant of Restricted Stock Units
shall be reflected in an Award Agreement. No shares of Common Stock
shall be issued at the time a Restricted Stock Unit is granted, and
the Company will not be required to set aside funds for the payment
of any such Award. A Participant shall have no voting rights with
respect to any Restricted Stock Units granted hereunder. The
Committee may also grant Restricted Stock Units with a deferral
feature, whereby settlement is deferred beyond the vesting date
until the occurrence of a future payment date or event set forth in
an Award Agreement (“Deferred Stock
Units”). At the
discretion of the Committee, each Restricted Stock Unit or Deferred
Stock Unit (representing one share of Common Stock) may be credited
with an amount equal to the cash and stock dividends paid by the
Company in respect of one share of Common Stock
(“Dividend
Equivalents”). Dividend
Equivalents will be deemed re-invested in additional Restricted
Stock Units or Deferred Stock Units based on the Fair Market Value
of a share of Common Stock on the applicable dividend payment date
and rounded to the nearest whole share.
(c) Restrictions
(i) Restricted Stock awarded to a Participant shall be subject to
the following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set forth
in the applicable Award Agreement: (A) if an escrow arrangement is
used, the Participant shall not be entitled to delivery of the
stock certificate; (B) the shares shall be subject to the
restrictions on transferability set forth in the Award Agreement;
(C) the shares shall be subject to forfeiture to the extent
provided in the applicable Award Agreement; and (D) to the extent
such shares are forfeited, the stock certificates shall be returned
to the Company, and all rights of the Participant to such shares
and as a stockholder with respect to such shares shall terminate
without further obligation on the part of the Company.
(ii) Restricted Stock Units and Deferred Stock Units awarded to any
Participant shall be subject to (A) forfeiture until the expiration
of the Restricted Period, and satisfaction of any applicable
Performance Goals during such period, to the extent provided in the
applicable Award Agreement, and to the extent such Restricted Stock
Units or Deferred Stock Units are forfeited, all rights of the
Participant to such Restricted Stock Units or Deferred Stock Units
shall terminate without further obligation on the part of the
Company and (B) such other terms and conditions as may be set forth
in the applicable Award Agreement.
(iii) The Committee shall have the authority to remove any or all
of the restrictions on the Restricted Stock, Restricted Stock Units
and Deferred Stock Units whenever it may determine that, by reason
of changes in Applicable Laws or other changes in circumstances
arising after the date the Restricted Stock or Restricted Stock
Units or Deferred Stock Units are granted, such action is
appropriate.
(d) Restricted Period
With respect to Restricted Awards, the Restricted Period shall
commence on the Grant Date and end at the time or times set forth
on a schedule established by the Committee in the applicable Award
Agreement. In no event shall a Restricted Period be less than three
months.
No Restricted Award may be granted or settled for a fraction of a
share of Common Stock. The Committee may, but shall not be required
to, provide for an acceleration of vesting in the terms of any
Award Agreement upon the occurrence of a specified
event.
(e)
Delivery
of Restricted Stock and Settlement of Restricted Stock
Units
Upon the expiration of the Restricted Period with respect to any
shares of Restricted Stock, the restrictions set forth in Section
7.2(c) and the applicable Award Agreement shall be of no
further force or effect with respect to such shares, except as set
forth in the applicable Award Agreement. If an escrow arrangement
is used, upon such expiration, the Company shall deliver to the
Participant, or his or her beneficiary, without charge, the stock
certificate evidencing the shares of Restricted Stock which have
not then been forfeited and with respect to which the Restricted
Period has expired (to the nearest full share) and any cash
dividends or stock dividends credited to the Participant’s
account with respect to such Restricted Stock and the interest
thereon, if any. Upon the expiration of the Restricted Period with
respect to any outstanding Restricted Stock Units, or at the
expiration of the deferral period with respect to any outstanding
Deferred Stock Units, the Company shall deliver to the Participant,
or his or her beneficiary, without charge, one share of Common
Stock for each such outstanding vested Restricted Stock Unit or
Deferred Stock Unit (“Vested Unit”) and shares of Common Stock having a Fair
Market Value equal to such Dividend Equivalents and the interest
thereon, if any; provided,
however, that, if explicitly
provided in the applicable Award Agreement, the Committee may, in
its sole discretion, elect to pay cash or part cash and part Common
Stock in lieu of delivering only shares of Common Stock for Vested
Units. If a cash payment is made in lieu of delivering shares of
Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the
Restricted Period lapsed in the case of Restricted Stock Units, or
the delivery date in the case of Deferred Stock Units, with respect
to each Vested Unit.
(f) Stock Restrictions
Each certificate representing Restricted Stock awarded under the
Plan shall bear a legend in such form as the Company deems
appropriate.
Performance Share
Awards.
(a) Grant of Performance Share Awards
Each Performance Share Award granted under the Plan shall be
evidenced by an Award Agreement. Each Performance Share Award so
granted shall be subject to the conditions set forth in this
Section 7.3, and to such other conditions not inconsistent with the
Plan as may be reflected in the applicable Award Agreement. The
Committee shall have the discretion to determine: (i) the number of
shares of Common Stock or stock-denominated units subject to a
Performance Share Award granted to any Participant; (ii) the
Performance Period applicable to any Award; (iii) the conditions
that must be satisfied for a Participant to earn an Award; and (iv)
the other terms, conditions and restrictions of the
Award.
(b) Earning Performance Share Awards
The number of Performance Shares earned by a Participant will
depend on the extent to which the performance goals established by
the Committee are attained within the applicable Performance
Period, as determined by the Committee. Criteria used to establish
Performance Goals may include but shall not be limited to: (i)
income measures (which include net income, pre-tax income, and
similar measures); (ii) sales measures (which include system-wide
sales, same market sales, new market sales, sales from
acquisitions, and other similar measures); (iii) revenue measures
(including royalty revenue, service revenue, and other similar
measures) (iv) expense measures (including selling, general and
administrative expenses, maintenance of non-temporary payroll
within historical norms, and other similar measures); and (v)
corporate value measures (including accounts receivable turns,
workers’ compensation loss ratios, and other similar
measures). The Committee may also grant Performance Share Awards
that are based on criteria other than those set forth
above.
7.4
Other
Equity-Based Awards and Cash Awards. The Committee may grant Other Equity-Based
Awards, either alone or in tandem with other Awards, in such
amounts and subject to such conditions as the Committee shall
determine in its sole discretion. Each Equity-Based Award shall be
evidenced by an Award Agreement and shall be subject to such
conditions, not inconsistent with the Plan, as may be reflected in
the applicable Award Agreement. The Committee may grant Cash Awards
in such amounts and subject to such Performance Goals, other
vesting conditions, and such other terms as the Committee
determines in its discretion. Cash Awards shall be evidenced in
such form as the Committee may determine.
8.
Securities Law Compliance. Each Award Agreement shall provide that no shares
of Common Stock shall be purchased or sold thereunder unless and
until (a) any then applicable requirements of state or federal laws
and regulatory agencies have been fully complied with to the
satisfaction of the Company and its counsel and (b) if required to
do so by the Company, the Participant has executed and delivered to
the Company a letter of investment intent in such form and
containing such provisions as the Committee may require. The
Company shall use reasonable efforts to seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to grant Awards and to issue and
sell shares of Common Stock upon exercise of the Awards;
provided,
however, that this undertaking
shall not require the Company to register under the Securities Act
the Plan, any Award or any Common Stock issued or issuable pursuant
to any such Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Awards unless and until
such authority is obtained.
9.
Use of Proceeds from Stock. Proceeds from the sale of Common Stock pursuant to
Awards, or upon exercise thereof, shall constitute general funds of
the Company.
10.
Miscellaneous.
10.1
Acceleration of
Exercisability and Vesting. The
Committee shall have the power to accelerate the time at which an
Award may first be exercised or the time during which an Award or
any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at
which it may first be exercised or the time during which it will
vest.
10.2
Stockholder
Rights. Except as provided in
the Plan or an Award Agreement, no Participant shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Award unless
and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for
which the record date is prior to the date such Common Stock
certificate is issued, except as provided in Section
11
hereof.
10.3
No
Employment or Other Service Rights. Nothing in the Plan or any instrument executed
or Award granted pursuant thereto shall confer upon any Participant
any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall
affect the right of the Company or an Affiliate to terminate (a)
the employment of an Employee with or without notice and with or
without Cause; or (b) the service of a Director pursuant to the
By-laws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the Company
or the Affiliate is incorporated, as the case may
be.
10.4
Transfer;
Approved Leave of Absence. For
purposes of the Plan, no termination of employment by an Employee
shall be deemed to result from either (a) a transfer of employment
to the Company from an Affiliate or from the Company to an
Affiliate, or from one Affiliate to another, or (b) an approved
leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Employee’s right to
reemployment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted
or if the Committee otherwise so provides in writing, in either
case, except to the extent inconsistent with Section 409A of the
Code if the applicable Award is subject
thereto.
10.5
Withholding
Obligations. To the extent
provided by the terms of an Award Agreement and subject to the
discretion of the Committee, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (a) tendering a cash
payment; (b) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common
Stock under the Award, provided,
however, that no shares of
Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law; or (c) delivering to the
Company previously owned and unencumbered shares of Common Stock of
the Company.
11. Adjustments
Upon Changes in Stock. In the
event of changes in the outstanding Common Stock or in the capital
structure of the Company by reason of any stock or extraordinary
cash dividend, stock split, reverse stock split, an extraordinary
corporate transaction such as any recapitalization, reorganization,
merger, consolidation, combination, exchange, or other relevant
change in capitalization occurring after the Grant Date of any
Award, Awards granted under the Plan and any Award Agreements, the
exercise price of Options and Stock Appreciation Rights, the
Performance Goals to which Performance Share Awards and Cash Awards
are subject, the maximum number of shares of Common Stock subject
to all Awards stated in Section 4 will be equitably adjusted or substituted, as to
the number, price or kind of a share of Common Stock or other
consideration subject to such Awards to the extent necessary to
preserve the economic intent of such Award. In the case of
adjustments made pursuant to this Section 11, unless the Committee
specifically determines that such adjustment is in the best
interests of the Company or its Affiliates, the Committee shall, in
the case of Incentive Stock Options, ensure that any adjustments
under this Section 11 will not constitute a modification, extension
or renewal of the Incentive Stock Options within the meaning of
Section 424(h)(3) of the Code and in the case of Non-qualified
Stock Options, ensure that any adjustments under this Section 11
will not constitute a modification of such Non-qualified Stock
Options within the meaning of Section 409A of the Code. Any
adjustments made under this Section 11 shall be made in a manner
which does not adversely affect the exemption provided pursuant to
Rule 16b-3 under the Exchange Act. The Company shall give each
Participant notice of an adjustment hereunder and, upon notice,
such adjustment shall be conclusive and binding for all
purposes.
12.
Effect of Change in Control.
12.1
Unless otherwise provided in an Award Agreement, notwithstanding
any provision of the Plan to the contrary:
(a) In the event of a Change in Control, all outstanding Options
and Stock Appreciation Rights shall become immediately exercisable
with respect to 100% of the shares subject to such Options or Stock
Appreciation Rights, and the Restricted Period shall expire
immediately with respect to 100% of the outstanding shares of
Restricted Stock or Restricted Stock Units.
(b) With respect to Performance Share Awards and Cash Awards, in
the event of a Change in Control, all incomplete Performance
Periods in respect of such Awards in effect on the date the Change
in Control occurs shall end on the date of such change and the
Committee shall (i) determine the extent to which Performance Goals
with respect to each such Performance Period have been met based
upon such audited or unaudited financial information then available
as it deems relevant and (ii) cause to be paid to the applicable
Participant partial or full Awards with respect to Performance
Goals for each such Performance Period based upon the
Committee’s determination of the degree of attainment of
Performance Goals or, if not determinable, assuming that the
applicable “target” levels of performance have been
attained, or on such other basis determined by the
Committee.
To the extent practicable, any actions taken by the Committee under
the immediately preceding clauses (a) and (b) shall occur in a
manner and at a time which allows affected Participants the ability
to participate in the Change in Control with respect to the shares
of Common Stock subject to their Awards.
12.2
In addition, in the event of a Change in Control, the Committee may
in its discretion and upon at least 10 days’ advance notice
to the affected persons, cancel any outstanding Awards and pay to
the holders thereof, in cash or stock, or any combination thereof,
the value of such Awards based upon the price per share of Common
Stock received or to be received by other stockholders of the
Company in the event. In the case of any Option or Stock
Appreciation Right with an exercise price (or SAR Exercise Price in
the case of a Stock Appreciation Right) that equals or exceeds the
price paid for a share of Common Stock in connection with the
Change in Control, the Committee may cancel the Option or Stock
Appreciation Right without the payment of consideration
therefor.
12.3
The obligations of the Company under the Plan shall be binding upon
any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or
upon any successor corporation or organization succeeding to all or
substantially all of the assets and business of the Company and its
Affiliates, taken as a whole.
13.
Amendment of the Plan and Awards.
13.1
Amendment
of Plan. The Board at any time,
and from time to time, may amend or terminate the Plan. However,
except as provided in Section 11 relating to adjustments upon changes in Common
Stock and Section 13.3, no
amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary to
satisfy any Applicable Laws. At the time of such amendment, the
Board shall determine, upon advice from counsel, whether such
amendment will be contingent on stockholder
approval.
13.2
Stockholder
Approval. The Board may, in its
sole discretion, submit any other amendment to the Plan for
stockholder approval.
13.3
Contemplated
Amendments. It is expressly
contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees,
Consultants, and Directors with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to
the nonqualified deferred compensation provisions of Section 409A
of the Code or to bring the Plan or Awards granted under it into
compliance therewith.
13.4
No
Impairment of Rights. Rights
under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
13.5
Amendment
of Awards. The Committee at any
time, and from time to time, may amend the terms of any one or more
Awards; provided,
however, that the Committee may
not affect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
14. General
Provisions.
14.1
Forfeiture
Events. The Committee may
specify in an Award Agreement that the Participant’s rights,
payments and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain events, in addition to applicable vesting
conditions of an Award. Such events may include, without
limitation, breach of non-competition, non-solicitation,
confidentiality, or other restrictive covenants that are contained
in the Award Agreement or otherwise applicable to the Participant,
a termination of the Participant’s Continuous Service for
Cause, or other conduct by the Participant that is detrimental to
the business or reputation of the Company and/or its
Affiliates.
14.2
Clawback.
Notwithstanding any other provisions in this Plan, the Company may
cancel any Award, require reimbursement of any Award by a
Participant, and effect any other right of recoupment of equity or
other compensation provided under the Plan in accordance with any
law, regulation, or stock exchange listing requirement (or any
Company policy that may be adopted or modified from time to time).
In addition, a Participant may be required to repay to the Company
previously paid compensation, whether provided pursuant to the Plan
or an Award Agreement, in accordance with such law, regulation,
listing requirement, or Company policy.
14.3
Other
Compensation Arrangements.
Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only
in specific cases.
14.4
Deferral
of Awards. The Committee may
establish one or more programs under the Plan to permit selected
Participants the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would
entitle the Participant to payment or receipt of shares of Common
Stock or other consideration under an Award. The Committee may
establish the election procedures, the timing of such elections,
the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, shares or other consideration so
deferred, and such other terms, conditions, rules and procedures
that the Committee deems advisable for the administration of any
such deferral program.
14.5
Unfunded
Plan. The Plan shall be
unfunded. Neither the Company, the Board nor the Committee shall be
required to establish any special or separate fund or to segregate
any assets to assure the performance of its obligations under the
Plan.
14.6
Recapitalizations.
Each Award Agreement shall contain provisions required to reflect
the provisions of Section 11.
14.7
Delivery.
Upon exercise of a right granted under this Plan, the Company shall
issue Common Stock or pay any amounts due within a reasonable
period thereafter. Subject to any statutory or regulatory
obligations the Company may otherwise have, for purposes of this
Plan, 30 days shall be considered a reasonable
period.
14.8
No
Fractional Shares. No
fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash,
additional Awards or other securities or property shall be issued
or paid in lieu of fractional shares of Common Stock or whether any
fractional shares should be rounded, forfeited or otherwise
eliminated.
14.9
Other
Provisions. The Award
Agreements authorized under the Plan may contain such other
provisions not inconsistent with this Plan, including, without
limitation, restrictions upon the exercise of Awards, as the
Committee may deem advisable.
14.10
Section
409A. The Plan is intended to comply with Section 409A
of the Code to the extent subject thereto, and, accordingly, to the
maximum extent permitted, the Plan shall be interpreted and
administered to comply therewith. Any payments described in the
Plan that are due within the “short-term deferral
period” as defined in Section 409A of the Code shall not be
treated as deferred compensation unless Applicable Laws require
otherwise. Notwithstanding anything to the contrary in the Plan, to
the extent required to avoid accelerated taxation and tax penalties
under Section 409A of the Code, amounts that would otherwise be
payable and benefits that would otherwise be provided pursuant to
the Plan during the six (6) month period immediately following the
Participant’s termination of Continuous Service shall instead
be paid on the first payroll date after the six-month anniversary
of the Participant’s separation from service (or the
Participant’s death, if earlier). Notwithstanding the
foregoing, neither the Company, the Board, nor the Committee shall
have any obligation to take any action to prevent the assessment of
any additional tax or penalty on any Participant under Section 409A
of the Code and neither the Company, the Board, nor the Committee
will have any liability to any Participant for such tax or
penalty.
14.11
Disqualifying
Dispositions. Any Participant
who shall make a “disposition” (as defined in Section
424 of the Code) of all or any portion of shares of Common Stock
acquired upon exercise of an Incentive Stock Option within two
years from the Grant Date of such Incentive Stock Option or within
one year after the issuance of the shares of Common Stock acquired
upon exercise of such Incentive Stock Option (a
“Disqualifying
Disposition”) shall be
required to immediately advise the Company in writing as to the
occurrence of the sale and the price realized upon the sale of such
shares of Common Stock.
14.12
Section
16. It is the intent of the
Company that the Plan satisfy, and be interpreted in a manner that
satisfies, the applicable requirements of Rule 16b-3 as promulgated
under Section 16 of the Exchange Act so that Participants will be
entitled to the benefit of Rule 16b-3, or any other rule
promulgated under Section 16 of the Exchange Act, and will not be
subject to short-swing liability under Section 16 of the Exchange
Act. Accordingly, if the operation of any provision of the Plan
would conflict with the intent expressed in this Section 14.13,
such provision to the extent possible shall be interpreted and/or
deemed amended to avoid such conflict.
14.13
Beneficiary
Designation. Each Participant
under the Plan may from time to time name any beneficiary or
beneficiaries by whom any right under the Plan is to be exercised
in case of such Participant’s death. Each designation will
revoke all prior designations by the same Participant, shall be in
a form reasonably prescribed by the Committee and shall be
effective only when filed by the Participant in writing with the
Company during the Participant’s
lifetime.
14.14
Expenses.
The costs of administering the Plan shall be paid by the
Company.
14.15
Severability.
If any of the provisions of the Plan or any Award Agreement is held
to be invalid, illegal or unenforceable, whether in whole or in
part, such provision shall be deemed modified to the extent, but
only to the extent, of such invalidity, illegality or
unenforceability and the remaining provisions shall not be affected
thereby.
14.16
Plan
Headings. The headings in the
Plan are for purposes of convenience only and are not intended to
define or limit the construction of the provisions
hereof.
14.17
Non-Uniform
Treatment. The
Committee’s determinations under the Plan need not be uniform
and may be made by it selectively among persons who are eligible to
receive, or actually receive, Awards. Without limiting the
generality of the foregoing, the Committee shall be entitled to
make non-uniform and selective determinations, amendments and
adjustments, and to enter into non-uniform and selective Award
Agreements.
15.
Effective Date of Plan. The Plan shall become effective as of the
Effective Date, but no Award shall be exercised (or, in the case of
a stock Award, shall be granted) unless and until the Plan has been
approved by the stockholders of the Company, which approval shall
be within twelve (12) months before or after the date the Plan is
adopted by the Board.
16.
Termination or Suspension of the Plan. The Plan shall terminate automatically on the date
that is ten (10) years after the Effective Date. No Award shall be
granted pursuant to the Plan after such date, but Awards
theretofore granted may extend beyond that date. The Board may
suspend or terminate the Plan at any earlier date pursuant to
Section 13.1 hereof. No Awards may be granted under the Plan
while the Plan is suspended or after it is
terminated.
17.
Choice of Law. The law of the State of Delaware shall govern all
questions concerning the construction, validity and interpretation
of this Plan, without regard to such state’s conflict of law
rules.