UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed
by the
Registrant
☑
Filed
by a Party other than the
Registrant ☐
Check
the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
☑ Definitive Proxy
Statement
☐ Definitive Additional Materials
☐ Soliciting Material under §240.14a-12
SharpSpring, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
☑ No fee
required.
☐ Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction
applies:
(2)
Aggregate number of securities to which transaction
applies:
(3) Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was
determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
☐ Fee paid previously with preliminary
materials.
☐ Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1)
Amount previously paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:
5001
Celebration Pointe Avenue, Suite 410
Gainesville,
FL 32608
June
16, 2020
Dear
Fellow Stockholder:
The
2020 Annual Meeting of Stockholders (the “Annual Meeting”) of SharpSpring,
Inc. (the “Company”) will be held at 10:00
a.m. (Eastern Time) on Thursday, July 9, 2020 at 5001 Celebration
Pointe Avenue, Suite 410, Gainesville, FL 32608. I hope you will be
able to attend.
The
attached Notice of Annual Meeting and Proxy Statement describe the
matters that we expect to be acted upon at the Annual Meeting.
Management will be available to answer any questions you may have
immediately after the Annual Meeting.
Please
sign, date and return the enclosed Proxy without delay. The
Company’s Annual Report on Form 10-K (including audited
financial statements) for the fiscal year ended December 31, 2019,
as amended (“Annual
Report”) accompanies the Proxy Statement. The proxy
materials and Annual Report included in this package are also
available on the internet under the “Investors” page of the
Company’s website at http://sharpspring.com/.
All
shares represented by Proxies will be voted at the Annual Meeting
in accordance with the specifications marked thereon, or if no
specifications are made, (i) as to Proposal No. 1, the Proxy
confers authority to vote “FOR” all of the five (5)
persons listed as candidates for a position on the Board of
Directors; (ii) as to Proposal No. 2, the Proxy confers authority
to vote “FOR” the ratification of Cherry Bekaert LLP as
the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2020; (iii) as to Proposal
No. 3, the Proxy confers authority to vote “FOR” the
approval of the amendment to
the SharpSpring, Inc. 2019 Equity Incentive Plan; and (iv); as to
any other business which comes before the Annual Meeting, the Proxy
confers authority to vote in the Proxy holder’s
discretion.
The
Company’s Board of Directors believes that a favorable vote
for each candidate for a position on the Board of Directors and for
all other matters described in the attached Notice of Annual
Meeting of Stockholders and Proxy Statement is in the best interest
of the Company and its stockholders and recommends a vote
“FOR” all candidates and all other matters.
Accordingly, we urge you to review the accompanying material
carefully and to return the enclosed Proxy promptly.
Your
vote is important and we encourage you to vote promptly. For record
holders, whether or not you are able to attend the Annual Meeting
in person, please follow the instructions contained in the Notice
on how to vote via internet, email, phone, or request a paper proxy
card to complete, sign and return by mail so that your shares may
be voted. If your shares are held in the name of a broker, bank or
other holder of record, follow the voting instructions you receive
from the holder of record to vote your shares.
Thank
you for your investment and continued interest in SharpSpring,
Inc.
/s/
Steven A. Huey
Steven
A. Huey,
Chair of the Board of Directors
SHARPSPRING, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, JULY 9, 2020
To our
Stockholders:
Notice
is hereby given that the 2020 Annual Meeting of Stockholders (the
“Annual
Meeting”) of SharpSpring, Inc. (the
“Company”) will
be held at 10:00 a.m. (Eastern Time) on Thursday, July 9, 2020 at
5001 Celebration Pointe Avenue, Suite 410, Gainesville, FL 32608,
for the following purposes:
1.
To elect five (5)
Directors to the Board of Directors to serve until the 2021 Annual
Meeting of Stockholders or until their successors have been duly
elected or appointed and qualified;
2.
To ratify the
appointment Cherry Bekaert LLP to serve as the Company’s
independent registered public accounting firm for the fiscal year
ending December 31, 2020;
3.
To approve an amendment to increase the number of
shares of common stock available for issuance under the
SharpSpring, Inc. 2019 Equity Incentive Plan to 1,025,000;
4.
To consider and
take action upon such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The
Board of Directors has fixed the close of business on June 8, 2020,
as the Record Date for determining the stockholders entitled to
notice of, and to vote at, the Annual Meeting or any adjournments
thereof.
For a
period of 10 days prior to the Annual Meeting, a stockholders list
will be kept at the Company’s office and shall be available
for inspection by stockholders during usual business hours. A
stockholders list will also be available for inspection at the
Annual Meeting.
Your
attention is directed to the accompanying Proxy Statement for
further information regarding each proposal to be
made.
STOCKHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE URGED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND FAX, EMAIL OR
MAIL IT IN THE ENCLOSED STAMPED, SELF-ADDRESSED ENVELOPE AS
PROMPTLY AS POSSIBLE. IF YOU SIGN AND RETURN YOUR PROXY WITHOUT
SPECIFYING YOUR CHOICES IT WILL BE UNDERSTOOD THAT YOU WISH TO HAVE
YOUR SHARES VOTED IN ACCORDANCE WITH THE DIRECTORS’
RECOMMENDATIONS. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU
DESIRE, REVOKE YOUR PROXY AND VOTE IN PERSON.
By
Order of the Board of Directors
/s/
Steven A. Huey
Steven
A. Huey,
Chair of the Board of Directors
June
16, 2020
PROXY STATEMENT
2020 ANNUAL MEETING OF STOCKHOLDERS
This
Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors (the “Board of Directors” or
“Board”) of
SharpSpring, Inc. of proxies to be voted at the 2020 Annual Meeting
of Stockholders (the “Annual
Meeting”) that will be held at 10:00 a.m. (Eastern
Time) on Thursday, July 9, 2020 at 5001 Celebration Pointe Avenue,
Suite 410, Gainesville, FL 32608 and at any adjournments thereof
(the “Annual
Meeting”). In this Proxy Statement, SharpSpring, Inc.
is referred to as “we,” “us,” “our,” or “Company” unless the context
indicates otherwise. The Annual Meeting has been called to consider
and take action on the following proposals: (i) to elect five (5)
Directors to the Board of Directors; (ii) to ratify the appointment
of Cherry Bekaert LLP to serve as the Company’s independent
registered public accounting firm for the fiscal year ending
December 31, 2020; (iii) to approve the amendment to the
SharpSpring, Inc. 2019 Equity Incentive Plan; and (iv) to consider
and take action upon such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The
Board of Directors knows of no other matters to be presented for
action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting, the persons named in the
proxy will vote on such other matters and/or for other nominees in
accordance with their best judgment. The Company’s Board of Directors
recommends that the stockholders vote in favor of each of the
director nominees and each of the proposals.
Only
holders of record of common stock of the Company at the close of
business on June 8, 2020 (the “Record Date”) will be entitled to
vote at the Annual Meeting.
The
approximate date on which this Proxy Statement, the proxy card and
other accompanying materials are first being sent or given to
stockholders is June 17, 2020. A copy of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2019, as
amended (“Annual
Report”) is enclosed with these materials, but should
not be considered proxy solicitation material. Additionally, the proxy materials and Annual
Report included in this package are also available on the internet
under the “Investors” page of the
Company’s website at http://sharpspring.com/.
The
principal executive offices of our Company are located at 5001
Celebration Pointe Avenue, Suite 410, Gainesville, FL 32608, and
our telephone number is 888-428-9605.
INFORMATION CONCERNING SOLICITATION AND VOTING
Why did I receive this Proxy Statement?
Our
Board of Directors is soliciting your proxy to vote at the Annual
Meeting because you were a stockholder of record at the close of
business on June 8, 2020 (the “Record Date”), and are entitled to
vote at the meeting. The Company has delivered this Proxy Statement
and the Annual Report, along with either a proxy card or a voting
instruction card to you by mail beginning on or about June 17,
2020. This Proxy Statement summarizes the information you need to
know to vote at the Annual Meeting. You do not need to attend the
Annual Meeting to vote your shares.
Who can attend the Annual Meeting?
All
stockholders as of the Record Date, or their duly appointed
proxies, may attend.
What do I need to be admitted to the Annual Meeting?
In
order to be admitted to the Annual Meeting, a stockholder must
present proof of ownership of SharpSpring, Inc. common stock on the
Record Date. Any holder of a proxy from a stockholder must present
the proxy card, properly executed. If your shares are held in the
name of a bank, broker or other holder of record, you must present
proof of your ownership, such as a bank or brokerage account
statement, to be admitted to the meeting. All stockholders must
also present a form of personal identification in order to be
admitted to the meeting.
What am I being asked to vote on at the meeting?
We are
asking our stockholders to elect directors, ratify the appointment
of our independent registered public accounting firm and approve an
amendment to the SharpSpring, Inc. 2019 Equity Incentive
Plan.
Who is entitled to vote?
Stockholders as of
the close of business on the Record Date are entitled to vote. Each
stockholder is entitled to one vote for each share of common stock
held on the Record Date. Stockholders are not entitled to
cumulative voting.
How many votes are needed for approval of each item?
Proposal Number 1. Directors
will be elected by a plurality of the votes cast in person or by
proxy, meaning the five nominees receiving the most votes will be
elected as directors. Stockholders are not entitled to cumulative
voting with respect to the election of directors.
Proposal Number 2. The
appointment of Cherry Bekaert LLP to serve as our independent
registered public accounting firm will be ratified if a majority of
the votes present in person or by proxy and entitled to vote on the
matter vote in favor of the proposal.
Proposal Number 3. The
amendment to our 2019 Employee Stock Plan will be approved if a
majority of the votes present in person or by proxy and entitled to
vote on the matter vote in favor of the proposal.
Unless
a contrary choice is indicated, all duly executed proxies will be
voted in accordance with the instructions set forth on the proxy
card.
What constitutes a quorum?
As of
the Record Date, 11,533,065
shares of our common stock were issued and outstanding. The
presence, either in person or by proxy, of the holders of a
majority of the shares entitled to vote at the Annual Meeting is
necessary to constitute a quorum for the Annual Meeting.
Abstentions and broker non-votes are counted as present and
entitled to vote for purposes of determining a quorum.
How
Do I Vote?
Record
Holders:
1.
Vote by Internet.
Follow the VOTE BY INTERNET instructions on the enclosed proxy
card.
2.
Vote by phone.
Follow the VOTE BY PHONE instructions on the enclosed proxy
card.
3.
Vote by mail.
Follow the VOTE BY MAIL instructions on the enclosed proxy card (a
postage-paid envelope is provided for mailing in the United
States).
4.
Vote by fax. Follow
the VOTE BY FAX instructions on the enclosed proxy
card.
5.
Vote in person.
Attend and vote at the Annual Meeting.
If
you vote by phone, fax or Internet, please DO NOT mail your proxy
card.
Beneficial Owners
(Holding Shares in Street Name):
1.
Vote by Internet.
Follow the VOTE BY INTERNET instructions on the enclosed proxy
card/voting instruction card.
2.
Vote by phone.
Follow the VOTE BY PHONE instructions on the enclosed proxy
card/voting instruction card.
3.
Vote by mail.
Follow the VOTE BY MAIL instructions on the enclosed proxy
card/voting instruction card (a postage-paid envelope is provided
for mailing in the United States).
4.
Vote by fax. Follow
the VOTE BY FAX instructions on the enclosed proxy
card.
5.
Vote in person.
Obtain a valid legal proxy from the organization that holds your
shares and attend and vote at the Annual Meeting.
If
you vote by phone, fax or Internet, please DO NOT mail your proxy
card.
What is the difference between being a “record holder”
and “holding shares in street name?”
Most
stockholders of the Company hold their shares through in a stock
brokerage account or by a nominee rather than directly in their own
name. As summarized below, there are some distinctions between
shares held of record and those owned beneficially.
Record Holders: If your shares
are registered directly in your name with our Company’s
transfer agent, Issuer Direct Corporation, you are considered the
stockholder of record with respect to those shares, and these proxy
materials are being sent directly to you by the Company. As the
stockholder of record, you have the right to grant your voting
proxy directly to us or to vote in person at the Annual Meeting. We
have enclosed a proxy card for you to use.
Beneficial Owners (Holding Shares in
Street Name): If your shares are held in a stock brokerage
account or by a nominee, you are considered the beneficial owner of
the shares which are held in “street name” and these
proxy materials are being forwarded to you by your nominee, who is
considered the stockholder of record with respect to these shares.
As the beneficial owner, you have the right to direct your nominee
on how to vote and are also invited to attend the Annual Meeting.
However, since you are not the stockholder of record, you may not
vote these shares in person at the Annual Meeting unless you
request, complete and deliver a legal proxy from your nominee. Your
nominee has enclosed a proxy card/voting instruction card for you
to use in directing the nominee how to vote your
shares.
What happens if I return my signed proxy but forget to indicate how
I want my shares of common stock voted?
If you
sign, date and return your proxy and do not mark how you want to
vote, your proxy will be counted as a vote “FOR” all of
the nominees for directors and “FOR” all of the other
proposals.
What happens if I do not instruct my broker how to vote or if I
mark “abstain” or “withhold” on the
proxy?
If you mark your proxy “abstain” or
“withhold authority,” your vote will have the same
effect as a vote against the proposal or the election of the
applicable director. If you do not instruct your broker how to
vote, your broker may vote for you on “routine”
proposals but not on “non-routine” proposals. The
ratification of our auditor is considered routine, but the election
of directors and the approval of the amendment to our 2019
Equity Incentive Plan are non-routine.
Therefore, if you do not vote on the election of directors or
provide voting instructions on the approval of the amendment
to our 2019 Equity Incentive Plan,
your broker will not be allowed to vote your shares on these
matters. Broker non-votes with respect to a matter will not be
considered as present and entitled to vote with respect to that
matter and thus will have no effect on the vote for that
matter.
Can
I revoke or change my voting instructions before the
meeting?
For shares that are held in "street name", the stockholder must
follow the directions provided by its bank, broker or other
intermediary for revoking or modifying voting instructions. For
shares that are registered in the stockholder's own name, the proxy
may be revoked by written notification to the Company Secretary
prior to its exercise and providing relevant name and account
information, submitting a new proxy card with a later date (which
will override the earlier proxy) or voting in person at the Annual
Meeting.
Who will count the vote?
Michael
Power, our Chief Financial Officer, will tabulate the votes and act
as inspector of election at the Annual Meeting.
Where can I find the voting results of the Annual
Meeting?
We
intend to publish the final results in a current report on Form 8-K
within four business days after the end of the Annual
Meeting.
What does it mean if I get more than one proxy card?
It
means that you hold shares registered in more than one account. You
must return all proxies to ensure that all of your shares are
voted.
How many copies of the Proxy Statement or Annual Report to
Stockholders will I receive if I share my mailing address with
another security holder?
Unless
we have been instructed otherwise, we are delivering only one Proxy
Statement or Annual Report to Stockholders to multiple security
holders sharing the same address. This is commonly referred to as
“householding.” We will, however, deliver promptly a
separate copy of the Proxy Statement or Annual Report to
Stockholders to a security holder at a shared address to which a
single copy of such documents was delivered, on written or oral
request. Requests for copies of the Proxy Statement or Annual
Report to Stockholders or requests to cease householding in the
future should be directed to Investor Relations, SharpSpring, Inc.,
5001 Celebration Pointe Avenue, Suite 410, Gainesville, FL 32608.
Telephone 888-428-9605. If you share an
address with another stockholder and wish to receive a single copy
of these documents, instead of multiple copies, you may direct this
request to us at the address or telephone number listed above.
Stockholders who hold shares in “street name” may
contact their brokerage firm, bank, broker-dealer or other similar
organization to request information about
householding.
How can I obtain additional proxy materials or other Company
materials?
The
proxy materials and Annual Report included in this package, along
with the Company’s other SEC filings, are available on the
internet under the “Investors” page of the
Company’s website at http://sharpspring.com/.
Additionally, any stockholder desiring additional proxy materials,
a copy of any other document incorporated by reference in this
Proxy Statement, or a copy of the Company’s bylaws should
contact Investor Relations, SharpSpring, Inc., 5001 Celebration
Pointe Avenue, Suite 410, Gainesville, FL 32608. Telephone
888-428-9605.
Who pays for the cost of this proxy solicitation?
The
Company pays for the cost of soliciting proxies on behalf of the
Board of Directors. The Company also will reimburse brokerage firms
and other custodians, nominees and fiduciaries for their reasonable
expenses in forwarding proxy material to beneficial owners. Proxies
may be solicited by mail, telephone, other electronic means or in
person. Directors, officers and regular, full-time employees of the
Company, none of whom will receive any additional compensation for
their services, may by telephone,
facsimile, email or personally, request the return of
proxies.
Who are the largest principal stockholders?
See
“Voting Securities and
Principal Holders Thereof” elsewhere in this Proxy
Statement for a table setting forth each owner of greater than 5%
of the Company’s common stock as of the Record
Date.
What percentages of stock do the directors and officers
own?
Together, they own
approximately 21.8% of our Company common stock as of the Record
Date. For information regarding the ownership of our common stock
by directors and officers, see the section entitled
“Voting Securities and
Principal Holders Thereof” elsewhere in this Proxy
Statement.
Do I have dissenters’ rights of appraisal?
Under
Delaware General Corporation Law, our stockholders are not entitled
to appraisal rights with respect to any of the items proposed to be
voted upon at the Annual Meeting.
Where can I find general information about the
Company?
General
information about us can be found on our website at http://sharpspring.com/.
The information on our website is for informational purposes only
and should not be relied upon for investment purposes. The
information on our website is not incorporated by reference into
this Proxy Statement and should not be considered part of this or
any other report that we file with the Securities and Exchange
Commission (“SEC”). We make available free of
charge, either by direct access on our website or a link to the
SEC’s website, our Annual Report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”),
as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC. Our reports
filed with, or furnished to, the SEC are also available directly at
the SEC’s website at www.sec.gov.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF EACH
DIRECTOR NOMINEEE AND FOR A PROPOSAL IF NO CONTRARY SPECIFICATION
IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION
OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER
BUSINESS THAT MAY COME BEFORE THE ANNUAL MEETING.
INFORMATION REGARDING DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Board of Directors
Our
bylaws provide that the number of directors is determined by
resolution of the Board of Directors. Our Board of Directors is
currently set at five directors and we currently have five
directors serving on our Board of Directors. All current directors
are standing for reelection at the Annual Meeting. Each director is
elected to serve a one (1) year term until the next annual meeting
of stockholders and until the election and qualification of his or
her successor or his or her earlier resignation or
removal.
The
Company’s Nominating and Corporate Governance Committee may
evaluate individuals in the future to consider additional members
for our Board of Directors following the Annual Meeting, although
there is no current active candidate search. Proxies cannot be voted for a greater
number of persons than the number of nominees
named.
The
names of the five directors standing for reelection at the Annual
Meeting, and certain information about each of them, are set forth
below.
Identity of Directors Standing for Reelection
Name
|
|
Age
|
|
Year First
Elected Director
|
|
Positions/Committees
|
|
Independent
|
Steven
A. Huey
|
|
54
|
|
2016
|
|
COB,
AC, CC, NCGC
|
|
yes
|
Richard
Carlson
|
|
47
|
|
2015
|
|
CEO,
P
|
|
no
|
David
A. Buckel
|
|
58
|
|
2014
|
|
AC,
NCGC, FE
|
|
yes
|
Marietta
Davis
|
|
60
|
|
2017
|
|
AC,
CC
|
|
yes
|
Scott
Miller
|
|
48
|
|
2019
|
|
CC,
NCGC
|
|
yes
|
AC -
Audit Committee
CEO, P
- Chief Executive Officer, President
COB -
Chair of the Board of Directors (non-executive)
CC -
Compensation Committee
FE -
Financial Expert
NCGC -
Nominating/Corporate Governance Committee
Business Experience of Directors Standing for
Reelection
Steven A.
Huey. Steven A. Huey has been a director since December
2016 and the chair of our Board of Directors since July 2017. Since
August 2012, Mr. Huey has been Chief Executive Officer of Capture
Higher Ed, a technology firm that helps educational institutions
meet their enrollment goals. Prior to that, from November 2007 to
August 2012, Mr. Huey was Chief Operating Officer of The Learning
House, Inc. Mr. Huey received a B.S. in Accounting and Finance from
Miami University and an MBA from Emory University. Mr. Huey’s
qualifications to serve on our Board of Directors include his
extensive experience as a technology company executive, with a
focus on growing early stage companies.
Richard A. Carlson.
Richard Carlson has been a director
and has served as the Company’s Chief Executive Officer and
President since October 1, 2015. From August 1, 2015 to October 1,
2015, he served as President of the Company. From August 15, 2014
until August 1, 2015, he served as the President of SharpSpring
Technologies, Inc., our wholly owned subsidiary. Mr. Carlson
founded RCTW, LLC (fka SharpSpring, LLC) in December 2011 and
served as its President until it was acquired by the Company on
August 15, 2014. From April 2009 to December 2011, he served as the
Managing Director of US Operations for Panda Security, an
international internet security software company. Mr.
Carlson’s qualifications to serve on our Board of Directors
include his knowledge of marketing automation technology, email
technology, marketing strategies, as well as his general leadership
skills.
David A. Buckel.
David A. Buckel has been a director
since January 2014. Since November 2007 to present, Mr. Buckel has
served as the Managing Director at BVI Venture Services, a
professional services firm that provides experienced, C-Suite
professionals to deliver strategic and functional consulting
services to both private and small public technology companies. Mr.
Buckel has hands-on experience creating accounting and control
systems and processes, financial statements, financial and
operating metrics, dashboards, cash flow forecast, budget
processes, trend analysis and dealing with auditors. Additionally,
Mr. Buckel has been CFO for various NASDAQ and AMEX Companies
leading growth strategy, financial operations and various fund
raising efforts. Mr. Buckel holds an M.B.A in Finance and
Operations Management from Syracuse University and a B.S. in
Accounting from Canisius College. He is also a Certified Management
Accountant (CMA). Mr. Buckel’s qualifications to serve on our
Board of Directors include a strong background and skill set in
areas relating to board service, finance and
management.
Marietta
Davis. Marietta Davis has been a director since July
2017. Ms. Davis is currently an Advisory Board Member at
DataOceans, LLC, a customer communications management solutions and
services company, where she has served since April 2016. She is
also currently a National Board Member of Youth Villages, a
nationally-recognized nonprofit organization that helps children,
young people and families, where she has served since January 2010.
Davis also served as Vice President – US Dynamic Sales at
Microsoft, from 2013 to 2016, where she helped define marketing
strategies for SMB, mid-tier and enterprise customers for Dynamics
CRM Cloud and ERP products and services. Prior to that time, from
2009 to 2013, Davis served as General Manager – Enterprise
Accounts, Greater Southeast District at Microsoft, where she led
the sales organization and managed strategic community engagement
in the areas of economic development and innovation for that
district. Davis holds a B.S. in communications from Bradley
University. Ms. Davis’ qualifications to serve on our Board
of Directors include experience in sales and marketing leadership
roles in the CRM industry, which is highly-correlated to the
Company’s marketing automation industry
segment.
Scott
Miller. Scott Miller
brings nearly two decades of investment management knowledge as
well as significant operating experience to the SharpSpring board.
Since 2011, he has served as the Founder and Managing Member of MVM
Funds, an investment management firm that oversees multiple funds
and limited partnerships, including Greenhaven Road Capital Fund 1,
Greenhaven Road Capital Fund 2, and Greenhaven Road Capital
Offshore LP. Scott also currently serves on the board of Acelero
Learning, an education company that he cofounded and served as the
Chief Financial Officer. Acelero, has grown to over 1,400
employees. Scott received a Bachelor of Arts degree from the
University of Pennsylvania and an MBA degree from Stanford
University. Mr. Miller’s qualifications to serve on our Board
of Directors include experience managing and investing in
growth-focused technology companies.
During
the past ten years, none of our directors or nominees for director
have been involved in any of the proceedings described in Item
401(f) of Regulation S-K.
Transactions with Related Persons
James
Morgan, Richard Carlson’s brother-in-law, served as our Vice
President of Sales in 2018 and 2019, and in 2019 began serving as
the Vice President of Partnerships. During 2019 and 2018, Mr.
Morgan’s total compensation, including base salary,
commissions, bonus and equity compensation approximated $133,500
and $139,000, respectively. Mr. Morgan’s compensation package
is highly variable based on new sales and is comparable to industry
standards. Mr. Morgan also participates in standard Company
employment benefits that are available all Company
employees.
On
March 28, 2018, the Company entered into a convertible note
purchase agreement (the “Note Purchase Agreement”) with
SHSP Holdings, LLC (“SHSP Holdings”), pursuant to which
the Company issued to SHSP Holdings an unsecured 5% convertible
promissory note in the aggregate principal amount of $8,000,000
(the “Note”). Simultaneously with the execution of the
Note Purchase Agreement and the issuance of the Note, the Company
entered into the Investors’ Rights Agreement (the
“Investors’ Rights Agreement”) by and among the
Company, SHSP Holdings, Richard Carlson, the Company’s CEO,
and Travis Whitton, the Company’s CTO. Under the
Investors’ Rights Agreement, among other things, SHSP
Holdings will have the right to designate one person for election
to the Company’s Board of Directors for as long as SHSP
Holdings continues to hold any of the Notes, and the Company agreed
to use its reasonable best efforts to cause such person to be
elected to the Board of Directors at each annual meeting of the
Company’s stockholders. SHSP Holdings designated Daniel C.
Allen, an affiliate of SHSP Holdings, who was appointed to our
Board of Directors on April 3, 2018. Mr. Allen is the founder and
manager of Corona Park Investment Partners, LLC
(“CPIP”). CPIP is a member of Evercel Holdings LLC and
is a member and sole manager of SHSP Holdings. Evercel, Inc. is a
member and the manager of Evercel Holdings LLC and is a member of
SHSP Holdings. Additionally, under the Investor Rights Agreement,
SHSP Holdings has customary demand and piggyback registration
rights with respect to the shares of common stock issued or
issuable upon conversion of the Note and, under specified
conditions, held by members of SHSP Holdings.
On
May 9, 2019, the Company entered into and made effective a Note
Conversion Agreement (the “Conversion Agreement”) with
SHSP Holdings and Evercel Holdings, LLC (“Evercel,” and
together with SHSP Holdings, the “Investor”), pursuant
to which the parties agreed to the conversion (the
“Conversion”) of the Note. The Company’s entry
into the Conversion Agreement was unanimously approved by the
disinterested members of the Company’s Board of Directors.
Mr. Allen resigned as a member of our Board of Directors on August
16, 2019.
Under
the Conversion Agreement, the Note was deemed to have been
converted into the Conversion Shares, and any interest in any
amount ceased to accrue or be payable with respect to the Notes,
and SHSP Holdings ceases to be a holder of any Note, and the Note
cease to be outstanding, for purposes of the Investors’
Rights Agreement dated as of March 28, 2018. Effective as of the
issuance and delivery of the Conversion Shares to SHSP Holdings,
the Note was canceled and terminated in their entirety and of no
further force and effect, and any and all indebtedness and other
obligations of the Company under the Note was fully performed and
discharged, and any and all claims or rights of SHSP Holdings or
its affiliates thereunder were fully and finally extinguished and
released. Additionally, under the terms of the Conversion
Agreement, the Company agreed to pay in shares 49% of the remaining
future interest totaling 115,037 shares. Refer to “Note 6:
Convertible Notes” in Part II, Financial Statements and
Supplementary Data in the Company’s Annual Report for
additional information.
Policies and Procedures for Related-Party Transactions
Our
Audit Committee considers and approves or disapproves any related
person transaction as required by NASDAQ regulations.
Corporate Governance
Code
of Ethics and Business Conduct
Our Company has adopted a Code of Ethics and
Business Conduct which constitutes a “code of ethics”
as defined by applicable SEC rules and a “code of
conduct” as defined by applicable NASDAQ rules. Our Code of
Ethics and Business Conduct applies to all of the Company’s
employees, including its principal executive officer, principal
accounting officer, and our Board of Directors. A copy of this Code
is available for review on the “Investors” page of the Company’s website
at http://sharpspring.com/. Requests for a copy of the Code of Ethics and
Business Conduct should be directed to Investor Relations,
SharpSpring, Inc., 5001 Celebration Pointe Avenue, Suite 410,
Gainesville, FL 32608. The Company intends to disclose any changes
in or waivers from its Code of Ethics and Business Conduct by
posting such information on its website or by filing a Form
8-K.
The
proxy materials and Annual Report included in this package, along
with the Company’s other SEC filings, are available on the
internet under the “Investors” page of the
Company’s website at http://sharpspring.com/.
Additionally, any stockholder desiring additional proxy materials,
a copy of any other document incorporated by reference in this
Proxy Statement, or a copy of the Company’s bylaws should
contact Investor Relations, SharpSpring, Inc., 5001 Celebration
Pointe Avenue, Suite 410, Gainesville, FL 32608. Telephone
888-428-9605.
Director
Independence Standards
Applicable NASDAQ
rules require a majority of a listed company’s board of
directors to be comprised of independent directors. In addition,
the NASDAQ rules require that, subject to specified exceptions,
each member of a listed company’s audit, compensation and
nominating and corporate governance committees be independent and
that audit committee members also satisfy independence criteria set
forth in Rule 10A-3 under the Exchange Act. Under applicable NASDAQ
rules, a director will only qualify as an “independent
director” if, in the opinion of the listed company’s
board of directors, that person does not have a relationship that
would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. In order to be
considered independent for purposes of Rule 10A-3, a member of an
audit committee of a listed company may not, other than in his or
her capacity as a member of the audit committee, the board of
directors, or any other board committee, accept, directly or
indirectly, any consulting, advisory, or other compensatory fee
from the listed company or any of its subsidiaries or otherwise be
an affiliated person of the listed company or any of its
subsidiaries.
Director
Independence
In
April 2020, our Board of Directors undertook a review of the
composition of our Board of Directors and its committees and the
independence of each of our directors. Based upon information
requested from and provided by each director concerning his
background, employment and affiliations, including family
relationships, our Board of Directors has determined that each of
David A. Buckel, Steven A. Huey, Marietta Davis, Scott Miller, and
Daniel C. Allen (Mr. Allen resigned August 16, 2019) are/were
“independent directors” as defined under applicable
NASDAQ Stock Market Rules and Exchange Act Rules. In making such
determination, our Board of Directors considered the relationships
that each such non-employee director has/had with our Company and
all other facts and circumstances that our Board of Directors
deemed relevant in determining his/her independence, including the
beneficial ownership of our capital stock by each non-employee
director. The one member of our Board of Directors who is not an
“independent director” is Richard Carlson as a result
of his executive officer status with our Company.
There
are no family relationships between any director, executive
officer, or person nominated or chosen by the Company to become a
director or executive officer.
Board
Committees
Our
Board of Directors has established the committees described below
and may establish others from time to time. The charters for each
of our committees are described below and are available on the
“Investors” page
of the Company’s website http://sharpspring.com/.
We
have a separately designated standing Audit Committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act. Our
Audit Committee is comprised of David A. Buckel, Steven A. Huey,
and Marietta Davis. Mr. Buckel is the chairperson of the committee.
Each member of the Audit Committee is “independent”
within the meaning of Rule 10A-3 under the Exchange Act and the
NASDAQ Stock Market Rules. Our Board of Directors has designated
David A. Buckel as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K. The Audit Committee’s purpose and power are
to (a) retain, oversee and terminate, as necessary, the auditors of
the Company, (b) oversee the Company's accounting and financial
reporting processes and the audit and preparation of the Company's
financial statements, (c) exercise such other powers and authority
as are set forth in the Charter of the Audit Committee of the Board
of Directors, and (d) exercise such other powers and authority as
shall from time to time be assigned thereto by resolution of the
Board of Directors.
The
Audit Committee also has the power to investigate any matter
brought to its attention within the scope of its duties and to
retain counsel and advisors to fulfill its responsibilities and
duties. During our last fiscal year, our Audit Committee held four
meetings and acted by unanimous consent one time.
Compensation Committee
Our
Compensation Committee is comprised of Marietta Davis, Steven A.
Huey and Scott Miller, with Ms.
Davis being the chairperson of the Compensation Committee. Our
Board of Directors has determined that each member of the
Compensation Committee is an independent director for compensation
committee purposes as that term is defined in the applicable rules
of NASDAQ and the Exchange Act, is a “non-employee
director” within the meaning of Rule 16b-3(d)(3) promulgated
under the Exchange Act and is an “outside director”
within the meaning of Section 162(m) of the Internal Revenue Code,
as amended. The Compensation Committee’s purpose and powers
are to (a) review and approve the compensation of the chief
executive officer of the Company and such other employees of the
Company as are assigned thereto by the Board of Directors and to
make recommendations to the Board of Directors with respect to
standards for setting compensation levels, (b) exercise such other
powers and authority as are set forth in a charter of the
Compensation Committee of the Board of Directors, and (c) exercise
such other powers and authority as shall from time to time be
assigned thereto by resolution of the Board of
Directors.
Our
Compensation Committee has the authority to delegate any of its
responsibilities, along with the authority to take action in
relation to such responsibilities, to one or more subcommittees as
the committee may deem appropriate in its sole discretion. If the
Committee elects to delegate any authority to a subcommittee, the
subcommittee shall be comprised of at least two members who qualify
as "non-employee directors" for the purposes of Rule 16b-3 under
the Exchange Act, and as "outside directors" for the purposes of
Section 162(m) of the Internal Revenue Code, as amended. The
Committee is not precluded from accepting solely recommendations
from executive officers
regarding the amount or form of executive and director
compensation. During 2019, our Compensation Committee engaged Pay
Governance, as compensation consultants to provide independent
consulting services in support of the Committee’s objectives
related in general to the competitiveness of the executive
compensation program. The scope of work consisted of assisting the
Company with establishing a group of peer companies, benchmarking
executive pay levels, and assessing the overall competitiveness of
the Company’s equity program.
The
Compensation Committee also has the power to investigate any matter
brought to its attention within the scope of its duties, and to
retain counsel and advisors to fulfill its responsibilities and
duties. During our last fiscal year, our Compensation Committee
held four meetings and acted by unanimous consent two
times.
Nominating and Corporate Governance Committee
Our
Nominating and Corporate Governance Committee is comprised
of Scott Miller, Steven A. Huey
and David A. Buckel, with Mr. Miller being the chairperson of the
Nominating and Corporate Governance Committee.
Our
Board of Directors has determined that each of the committee
members is an independent director for Nominating and Corporate
Governance Committee purposes as that term is defined in the
applicable rules of NASDAQ and the Exchange Act. The Nominating and
Corporate Governance Committee’s purpose and powers are to:
(a) identify potential qualified nominees for director and
recommend to the Board of Directors for nomination candidates for
the Board of Directors, (b) develop the Company's corporate
governance guidelines and additional corporate governance policies,
(c) exercise such other powers and authority as are set forth in a
charter of the Nominating and Corporate Governance Committee of the
Board of Directors, and (d) exercise such other powers and
authority as shall from time to time be assigned thereto by
resolution of the Board of Directors.
The Nominating and
Corporate Governance
Committee also has the power to investigate any matter brought to
its attention within the scope of its duties and to retain counsel
and advisors to fulfill its responsibilities and duties. During our
last fiscal year, our Nominating and Corporate Governance Committee
held four meetings and acted by unanimous consent one
times.
Each of
the five directors standing for reelection at the Annual Meeting
have expressed their willingness to serve as a
director.
When
new candidates for our Board of Directors are sought, all of our
directors evaluate each candidate for nomination as director within
the context of the needs and the composition of the Board of
Directors as a whole. The Board of Directors conducts any
appropriate and necessary inquiries into the backgrounds and
qualifications of candidates. When evaluating director nominees,
our Board of Directors generally seeks to identify individuals with
diverse, yet complementary backgrounds. Our directors consider both
the personal characteristics and experience of director nominees,
including each nominee’s independence, diversity, age,
skills, expertise, time availability and industry background in the
context of the needs of the Board of Directors and the Company. The
Board of Directors believes that director nominees should exhibit
proven leadership capabilities and experience at a high level of
responsibility within their chosen fields, and have the experience
and ability to analyze business and/or scientific issues facing our
Company. In addition to business expertise, the Board of Directors
requires that director nominees have the highest personal and
professional ethics, integrity and values and, above all, are
committed to representing the long-term interests of our
stockholders and other stakeholders. To date, all new candidates
have been i dentified and
recommended by members of our Board of Directors, including
management and non-management directors, our principal executive
officer, and other executive officers, and we have not paid any fee
to a third party to assist in the process of identifying or
evaluating director candidates.
Our
directors will consider candidates for nomination as director who
are recommended by a stockholder and will not evaluate any
candidate for nomination for director differently because the
candidate was recommended by a stockholder.
When
submitting candidates for nomination to be elected at our annual
meeting of stockholders, stockholders should follow the following
notice procedures and comply with applicable provisions of our
bylaws. To consider a candidate recommended by a stockholder for
nomination at the 2021 Annual Meeting of Stockholders, the
recommendation must be delivered or mailed to and received by our
Secretary within the time periods discussed elsewhere in this Proxy
Statement under the heading “Stockholder Proposals for 2021
Annual Meeting.” The recommendation must include the
information specified in our bylaws for stockholder nominees to be
considered at an annual meeting, along with the
following:
●
The
stockholder’s name and address and the beneficial owner, if
any, on whose behalf the nomination is proposed;
●
The
stockholder’s reason for making the nomination at the annual
meeting, and the signed consent of the nominee to serve if
elected;
●
The number of
shares owned by, and any material interest of, the record owner and
the beneficial owner, if any, on whose behalf the record owner is
proposing the nominee;
●
A description of
any arrangements or understandings between the stockholder, the
nominee and any other person regarding the nomination;
and
●
Information
regarding the nominee that would be required to be included in our
Proxy Statement by the rules of the Securities and Exchange
Commission, including the nominee’s age, business experience
for the past five years and any other directorships held by the
nominee.
The
information listed above is not a complete list of requisite
information. The secretary will forward any timely recommendations
containing the required information to our independent directors
for consideration.
No material changes to the procedures by which our stockholders may
recommend nominees to our Board of Directors has occurred since we
last provided disclosure regarding these procedures in our
Definitive Schedule 14A filed on April 30, 2019.
Board Leadership Structure
Our
bylaws provide the Board of Directors with flexibility to combine
or separate the positions of Chair of the Board of Directors and
Principal Executive Officer in accordance with its determination
that utilizing one or the other structure is in the best interests
of our Company. Our current structure is that of separate Principal
Executive Officer and Chair of the Board of Directors. Richard
Carlson serves as our Principal Executive Officer and is
responsible for the day-to-day operation of our Company. Steven A.
Huey serves as our Chair of the Board of Directors, which is a
non-executive position. Mr. Huey is responsible for performing a
variety of functions related to our corporate leadership and
governance, including coordinating board activities, setting
relevant items on the agenda and ensuring adequate communication
between the Board of Directors and management, which he does in
conjunction with the independent directors. Our Board of Directors
has determined that maintaining the independence of a majority of
our directors helps maintain its independent oversight of
management.
Risk Oversight
The Board oversees risk management
directly and through its committees associated with their
respective subject matter areas. Generally, the Board oversees
risks that may affect the business of the Company as a whole,
including operational matters. The Audit Committee is responsible
for oversight of the Company’s accounting and financial
reporting processes and also discusses with management the
Company’s financial statements, internal controls and other
accounting and related matters. The Compensation Committee oversees
certain risks related to compensation programs and the
Nominating and Corporate Governance Committee oversees certain corporate governance
risks. As part of their roles in overseeing risk management, these
Committees periodically report to the Board regarding briefings
provided by management and advisors as well as the
Committees’ own analysis and conclusions regarding certain
risks faced by the Company. Management is responsible for
implementing the risk management strategy and developing policies,
controls, processes and procedures to identify and manage
risks. The interaction with management occurs not only at
formal board and committee meetings, but also through periodic and
other written and oral communications.
Stockholder Communications with the Board
Stockholders who
desire to communicate with the Board of Directors, or a specific
director, may do so by sending the communication addressed to
either the Board of Directors or any director, c/o SharpSpring,
Inc., 5001 Celebration Pointe Avenue, Suite, 410, Gainesville, FL
32608. These communications will be delivered directly to the
Board, or any individual director, as specified.
Board Meetings and Committees; Annual Meeting
Attendance
During our last fiscal year, our Board of Directors held six Board
meetings. Each current director attended at least 75% of the total
number of Board meetings and their respective committee meetings of
the Board held during our last fiscal year. The Board of Directors
acted at various times by unanimous written consent, as authorized
by our bylaws and the Delaware General Corporation
Law.
Our Company has no policy with regard to Board members' attendance
at our annual meetings of security holders. One Board member
attended our 2019 annual meeting.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires
that our executive officers and directors, and persons who own more
than ten percent of a registered class of our equity securities,
file reports of ownership and changes in ownership with the
SEC. Executive officers, directors and greater-than-ten
percent stockholders are required by SEC regulations to furnish us
with all Section 16(a) forms they file. To the best of our
knowledge, based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to our Company during its most recent
fiscal year and Forms 5 and amendments thereto furnished to our
Company with respect to its most recent fiscal year, and any
written representation referred to in paragraph (b)(1) of Item 405
of Regulation S-K, all of our executive officers, directors
and greater-than-ten percent stockholders complied with all Section
16(a) filing requirements with the following exception: Mr. Daniel
Allen filed one late Form 4, Mr. David Buckel filed one late Form
4, Ms. Marietta Davis filed one late Form 4 and Mr. Steven Huey
filed one late Form 4.
Hedging Disclosure
We
do not have any practices or policies regarding the ability of our
employees (including officers) or directors, or any of their
designees, to purchase financial instruments (including prepaid
variable forward contracts, equity swaps, collars, and exchange
funds), or otherwise engage in transactions, that hedge or offset,
or are designed to hedge or offset, any decrease in the market
value of our equity securities.
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated
by reference into any other Company filing under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this Audit Committee
Report by reference therein.
Role of the Audit Committee
The Audit Committee’s primary responsibilities are generally
as follows:
1.
To retain, oversee
and terminate, as necessary, the auditors of the
Company;
2.
To oversee the
Company's accounting and financial reporting processes and the
audit and preparation of the Company's financial
statements;
3.
To exercise such
other powers and authority as are set forth in the Charter of the
Audit Committee of the Board of Directors; and
4.
To exercise such
other powers and authority as shall from time to time be assigned
thereto by resolution of the Board of Directors.
The Committee has implemented
procedures to ensure that during the course of each fiscal year it
devotes the attention that it deems necessary or appropriate to
each of the matters assigned to it under the Committee’s
charter. In overseeing the preparation of the Company’s
financial statements, the Committee met with management and the
Company’s outside auditors, including meetings with the
outside auditors without management present, to review and discuss
all financial statements prior to their issuance and to discuss
significant accounting issues. Management advised the Committee
that all financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee
discussed the statements with both management and the outside
auditors. The Committee’s review included discussion with the
outside auditors of matters required to be discussed by
the applicable requirements
of the Public Company Accounting Oversight Board (PCAOB) and the
SEC.
The Committee has received the written disclosures and the letter
from the Company’s outside auditors required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the outside auditor’s communications with the
Committee concerning independence, and has discussed with the
outside auditors the outside auditor's independence.
Recommendations of
the Audit Committee. In reliance on the reviews and
discussions referred to above, the Committee recommended to the
Board that the Board approve the inclusion of the Company’s
audited financial statements in the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2019, as
amended, for filing with the SEC.
This Audit Committee Report has been furnished by the Audit
Committee of the Board of Directors.
David
A. Buckel, Chairman
Marietta
Davis
Steven
A. Huey
Executive Officers
Identity of Executive Officers
Name
|
|
Age
|
|
Position
|
Richard
A. Carlson
|
|
47
|
|
Director,
Chief Executive Officer and President
|
Michael Power
|
|
54
|
|
Chief
Financial Officer
|
Travis
Whitton
|
|
40
|
|
Chief
Technology Officer
|
Business Experience of Executive Officers
Richard A.
Carlson. Mr. Carlson’s
business experience is described above under the caption
“Business Experience of Directors Standing for
Reelection.”
Michael
Power. Michael Power has served as our Chief
Financial Officer since December 2, 2019. Mr. Power is responsible
for overseeing our Company’s financial reporting, accounting
and administrative functions. Mr. Power has over three decades of
finance and accounting experience in various leadership roles.
Prior to his appointment, Mr. Power was Executive Vice President,
Chief Financial Officer and Treasurer for ConnectWise, an IT
management and Software-as-a-Service (SaaS) company with more than
1,000 employees, which was acquired in 2019 by Thoma Bravo. Terms
of the ConnectWise deal were not disclosed but it has been reported
at approximately $1.5 billion. Prior to that, Mr. Power served as
Vice President and Controller for CHUBB, formerly ACE Limited. Mr.
Power holds an active CPA in the state of Pennsylvania, CGMA from
the American Institute of CPAs, and obtained a Bachelor of Science
in Accountancy from Villanova University.
Travis
Whitton. Travis Whitton has
served as our Chief Technology Officer since the acquisition of the
SharpSpring assets in August 2014. Mr. Whitton was a co-founder of
RCTW, LLC (fka SharpSpring, LLC) and served as its Chief Technology
Officer from January 2012 until it was acquired by the Company in
August 2014. From September 2007 to January 2012, Mr. Whitton
served as Senior Software Engineer of Grooveshark, an online
streaming music company.
Each
officer is elected annually by the Board of Directors and holds
their office until they resign or are removed by the Board of
Directors or otherwise disqualified to serve, or their successor is
elected and qualified.
During
the past ten years, none of our executive officers have been
involved in any of the proceedings described in Item 401(f) of
Regulation S-K.
Executive Compensation
Compensation Discussion and Analysis
The
compensation committee of our Board of Directors oversees, reviews
and approves all compensation decisions relating to our named
executive officers. In the discussion that follows,
“executives” refers to our 2019 named executive
officers, Messrs. Carlson, Stanczak, Power, and Whitton. Mr.
Stanczak resigned as a named executive officer of our Company on
December 2, 2019.
Objectives and Philosophy of Our Executive Compensation
Program
The primary objectives of the compensation committee with respect
to executive compensation are to:
●
enable
us to attract, retain and motivate the best possible executive
talent by ensuring that our compensation packages are competitive
with those offered by similarly situated companies;
●
align
our executive compensation with our corporate strategies and
business objectives;
●
promote
the achievement of key strategic and financial performance
measures; and
●
align
executives’ incentives with the creation of stockholder
value.
To
achieve these objectives, the compensation committee evaluates our
executive compensation program with the goal of setting
compensation at levels the committee believes are competitive with
those of other companies of a comparable size within our industry.
Executives are also evaluated on their professional growth and
individual contributions to the Company’s success. We provide
a portion of our executive compensation in the form of stock option
awards that vest over time, typically four years, which we believe
promotes the retention of our executives and aligns their interests
with those of our stockholders since this form of compensation
allows our executives to participate in the long-term success of
our Company as reflected in stock price appreciation.
Compensation Challenges
We face challenges in hiring and retaining our
executives and other key employees due to several factors. These
challenges are similar to those faced by other high-growth
technology companies and make recruiting and retaining our
executives and other key employees difficult. Specifically, we face
challenges related to the pace of our operations, the high growth
rate of our businesses, the fact that we are in a competitive
industry and the fact that many of our executives and key employees
are targeted by other companies.
Components of our Executive Compensation Program
The primary elements of our current executive compensation program
are:
●
stock
option awards; and
●
retirement
and other employee benefits
We
do not have any formal or informal policy or target for allocating
compensation between long-term and short-term compensation, between
cash and non-cash compensation or among the different forms of
non-cash compensation. Instead, the Compensation Committee
determines what it believes to be the appropriate level and mix of
the various compensation components based on recommendations from
our chief executive officer, Company performance against stated
objectives and individual performance.
Base Salary
Base
salary is used to recognize the experience, skills, knowledge and
responsibilities required of all our employees, including our
executives. When establishing base salaries, the compensation
committee considers a variety of other factors such as the
executive’s scope of responsibility, individual performance,
prior employment experience and salary history, relative pay
adjustments within the Company and our overall financial
performance. Base salaries are reviewed at least annually by our
compensation committee and may be adjusted from time to time based
upon market conditions, individual responsibilities and Company and
individual performance.
Mr.
Carlson’s salary was increased from $330,000 to $340,000 on
January 1, 2019. During 2018, Mr. Carlson received a base salary of
$330,000.
Mr.
Stanczak joined the company on December 10, 2018 with a base salary
of $185,000.
Mr.
Power joined the company on December 2, 2019 with a base salary of
$250,000.
Mr.
Whitton’s salary was increased from $175,000 to $200,000 on
January 1, 2019. During 2018, Mr. Whitton received a base salary of
$175,000.
The
Company reduced all 2020 base salaries 10% as of April 1, 2020, due
to the impact of the Covid-19 virus.
Cash Bonuses
Cash
bonuses are used to compensate and align our executives toward
certain financial, strategic and operational goals. The
Compensation Committee approves payment of quarterly or annual cash
bonuses as part of the overall compensation packages of our
executive officers, and retains the authority to review and adjust
the overall bonus at year-end. During 2018 and 2019, the executive
cash bonuses paid to our named executive officers were based on
revenue and EBITDA targets for the year, as determined by the
Compensation Committee, with payments varying between annual and
quarterly. For the performance during the years ending December 31,
2018 and 2019, executive bonuses were paid quarterly following the
financial reporting of each quarter. The following summarizes the
executive cash bonus awards paid to our named executive officers,
separated based on both the timing of the payment and the
performance year for which the bonus was earned:
|
|
|
|
|
|
|
|
|
|
|
Name
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Carlson
|
2019
|
$-
|
$117,810
|
$-
|
$86,573
|
$31,238
|
|
2018
|
$69,078
|
$-
|
$51,625
|
$17,453
|
$-
|
|
|
$69,078
|
$117,810
|
$51,625
|
$104,026
|
$31,238
|
|
|
|
|
|
|
Travis
Whitton
|
2019
|
$-
|
$49,500
|
$-
|
$36,375
|
$13,125
|
|
2018
|
$29,605
|
$-
|
$22,125
|
$7,480
|
$-
|
|
|
$29,605
|
$49,500
|
$22,125
|
$43,855
|
$13,125
|
|
|
|
|
|
|
Bradley
Stanczak (1)
|
2019
|
$-
|
$69,300
|
$-
|
$50,925
|
$18,375
|
|
2018
|
$28,200
|
$-
|
$25,000
|
$3,200
|
$-
|
|
|
$28,200
|
$69,300
|
$25,000
|
$54,125
|
$18,375
|
|
|
|
|
|
|
Michael
Power
|
2019
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
2018
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
|
$-
|
$-
|
$-
|
$-
|
$-
|
(1)As
disclosed in Current Report 8-K filed on November 11, 2018, Mr.
Stanczak received a $25,000 signing bonus upon relocation to the
Gainesville, FL area.
Stock Option Awards
Stock
option and stock awards are the primary vehicle for long-term
retention of our executives. Our compensation committee believes
that stock option and stock awards promote, create and reward long
term stockholder value creation, as well as provide a strong
incentive for the executive to remain employed by the
Company.
The
following table shows stock option and stock grants made to
executives during 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Carlson
|
2/21/2019
|
17,500
|
$13.88
|
$123,085
|
-
|
-
|
|
|
|
|
|
|
Travis
Whitton
|
2/21/2019
|
10,294
|
$13.88
|
$72,402
|
-
|
-
|
|
|
|
|
|
|
Michael
Power
|
12/2/2019
|
-
|
-
|
-
|
50,494
|
$596,839
|
|
|
|
|
|
|
Benefits and Other Compensation
We
maintain broad-based benefits that are provided to all of our
employees, including (for U.S. resources) health and dental
insurance, life insurance and a retirement plan. Executives are
eligible to participate in all of our employee benefit plans, in
each case on the same terms as our other employees. No employee
benefit plans are in place solely for the benefit of our
executives.
Severance and Change in Control Benefits
Pursuant to employment agreements we have entered
into with our executives and the terms of our 2010 Restated
Employee Stock Plan and 2019 Equity
Incentive Plan, our executives are entitled to certain benefits in
the event of a change in control of our Company or the termination
of their employment under specified circumstances, including
termination following a change in control. We believe these
benefits help us compete for and retain executive talent and are
generally in line with severance packages offered to executives by
the companies in our peer group. We also believe that these
benefits would serve to minimize the distraction caused by any
change in control scenario and reduce the risk that key talent
would leave the Company before any such transaction closes, which
could reduce the value of the Company if such transaction failed to
close.
2019 Summary Compensation Table
|
|
|
|
|
|
|
Name
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Carlson
|
2019
|
$340,000
|
$117,810
|
$123,085
|
$8,400
|
$589,295
|
Chief Executive Officer and President (Principal Executive
Officer), Director
|
2018
|
$330,000
|
$69,078
|
$233,198
|
$8,250
|
$640,526
|
|
|
|
|
|
|
Travis
Whitton
|
2019
|
$200,000
|
$49,500
|
$72,402
|
$7,316
|
$329,218
|
Chief Technology Officer
|
2018
|
$175,000
|
$29,605
|
$116,599
|
$6,364
|
$327,568
|
|
|
|
|
|
|
Bradley
Stanczak (1)
|
2019
|
$185,000
|
$69,300
|
$-
|
$5,771
|
$260,071
|
Chief Financial Officer (Principal Financial Officer)
|
2018
|
$11,266
|
$28,200
|
$629,121
|
$-
|
$668,587
|
|
|
|
|
|
|
Michael
Power (2)
|
2019
|
$20,032
|
$-
|
$596,839
|
$-
|
$616,871
|
Chief Financial Officer (Principal Financial Officer)
|
2018
|
$-
|
$-
|
$-
|
$-
|
$-
|
______________________________________________
(a)
The amounts in this column reflect earned bonus awards by our named
executive officers under our executive incentive compensation
program.
(b)
The amounts in this column represent the grant date fair values of
option grants as computed based on the Black-Scholes
methodology.
(c)
These amounts consist of our matching contributions to each
executive’s retirement savings plan account and severance
payments
(1) Mr.
Stanczak served as our Chief Financial Officer from December 10,
2018 to December 1, 2019.
(2) Mr.
Power was named as our Chief Financial Officer on December 2,
2019.
During
2019 and 2018, we provided our U.S. employees the ability to
contribute to a 401(k) retirement plan. Under the plan, eligible
employees may elect to defer part of their compensation to the plan
each year. The amount of compensation an employee can elect to
defer is generally expressed as a percentage of the
employee’s compensation up to a maximum of $19,000
for 2019 and $18,500 for 2018. The
Company provides a matching contribution of 100% of employee
deferrals up to 3% of total compensation. We have no other annuity,
pension, retirement or similar benefit plans in place on behalf of
our executive officers.
We
grant stock awards and stock options to our executive officers
based on their level of experience and contributions to our
Company. The aggregate fair value of awards and options are
computed in accordance with FASB ASC 718 and options are reported
in the Summary Compensation Table above in columns (a). The
assumptions made in the computation may be found in Note 15:
Stock-Based Compensation to our financial statements contained in
our latest Form 10-K Annual Report.
At
no time during the last fiscal year was any outstanding option
otherwise modified or re-priced, and there was no tandem feature,
reload feature, or tax-reimbursement feature associated with any of
the stock options we granted to our executive officers or
otherwise.
The
table below summarizes all of the outstanding equity awards for our
named executive officers as of December 31, 2019, our latest fiscal
year end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
Richard
A. Carlson
|
3,646
|
13,854
|
$13.88
|
|
|
-
|
-
|
(1)
|
|
45,834
|
54,166
|
$4.65
|
|
|
-
|
-
|
(1)
|
|
68,750
|
31,250
|
$4.74
|
|
|
-
|
-
|
(1)
|
|
250,000
|
-
|
$4.80
|
|
|
-
|
-
|
(1)
|
|
60,000
|
-
|
$6.29
|
|
|
-
|
-
|
(2)
|
|
|
|
|
|
|
|
|
|
Bradley
Stanczak
|
25,000
|
75,000
|
$12.40
|
|
|
-
|
-
|
(3)
|
|
|
|
|
|
|
|
|
|
Travis
Whitton
|
-
|
10,294
|
$4.65
|
|
|
-
|
-
|
(3)
|
|
22,917
|
27,083
|
$4.65
|
|
|
-
|
-
|
(3)
|
|
24,603
|
10,397
|
$4.74
|
|
|
-
|
-
|
(3)
|
|
23,959
|
1,041
|
$3.34
|
|
|
-
|
-
|
(3)
|
|
25,000
|
-
|
$6.29
|
|
|
-
|
-
|
(2)
|
|
|
|
|
|
|
|
|
|
Michael
Power
|
-
|
-
|
-
|
-
|
-
|
50,494
|
596,839
|
(3)
|
1.
Vests monthly over four years, with 1/48 vesting each
month.
2.
Vests 50% on December 31, 2016, 25% on December 31, 2017 and 25% on
December 31, 2018.
3.
Vests over four years, with 25% vesting on December 2, 2019, and
1/48 of the grant vesting each month thereafter.
Compensation of Non-Employee Directors
Compensation
for our directors is discretionary and is reviewed from time to
time by our Board of Directors. Any determinations with respect to
Board compensation are made by our Board of Directors. Since our
second quarter of 2017, we have compensated all nonemployee
directors with a stipend of $7,500 per quarter ($30,000 per year),
payable quarterly in stock. Typically, newly elected non-employee
directors receive 16,000 stock options upon joining the board,
which vest over four years. All directors are also entitled to
reimbursement for travel expenses for attending director
meetings.
Set
forth below is a summary of the compensation of our directors
during our December 31, 2019 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
C. Allen (1)
|
$7,500
|
$30,373
|
-
|
-
|
-
|
-
|
$37,873
|
David
A. Buckel (1)
|
$7,500
|
$30,373
|
-
|
-
|
-
|
-
|
$37,873
|
Marietta
Davis (1)
|
$7,500
|
$30,373
|
-
|
-
|
-
|
-
|
$37,873
|
Steven
A. Huey (1)
|
$12,500
|
$30,373
|
-
|
-
|
-
|
-
|
$42,873
|
Scott
Miller Jr. (1)(2)
|
$3,750
|
$6,397
|
$82,903
|
-
|
-
|
-
|
$93,051
|
1.
During 2019, SharpSpring’s non-employee directors received a
quarterly stipend, payable in stock and cash, issued in
arrears.
2. Mr.
Miller joined the Board of Directors on August 16, 2019, receiving
a stock option grant of 16,000 vesting over four years (25% on the
first anniversary of the grand date and an additional 1/48 of the
original number of options vesting every month
thereafter.
Compensation Policies and Practices As They Relate To Our Risk
Management
Our
compensation program for employees does not create incentives for
excessive risk taking by our employees or involve risks that are
reasonably likely to have a material adverse effect on us. Our
compensation has the following risk-limiting
characteristics:
●
Our
base pay consists of competitive salary rates that represent a
reasonable portion of total compensation and provide a reliable
level of income on a regular basis, which decreases incentive on
the part of our executives to take unnecessary or imprudent
risks;
●
Option
awards are not tied to formulas that could focus executives on
specific short-term outcomes; and
●
Option
awards, generally, have multi-year vesting which aligns the
long-term interests of our executives with those of our
shareholders and, again, discourages the taking of short-term risk
at the expense of long-term performance.
Securities Authorized for Issuance under Equity Compensation
Plans
Equity
Compensation Plans as of December 31, 2019.
Equity Compensation Plan Information
Plan
category
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants, and RSUs
|
Weighted-averageexercise
price of outstanding options
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
|
|
|
Equity
compensation plans approved by security holders (1)
|
1,977,578
|
$7.30
|
511,338
|
Equity
compensation plans not approved by security holders
|
0
|
$0.00
|
0
|
Total
|
1,977,578
|
$7.30
|
511,338
|
1.
Reflects shares of common stock to be issued pursuant to our 2019
Equity Incentive Plan and our 2010 Restated Employee Stock Plan,
both of which are for the benefit of our directors, officers,
employees and consultants. We have reserved 697,039 shares of
common stock for such persons pursuant to our 2019 Equity Incentive
Plan. We terminated our 2010 Restated Employee Stock Plan in 2019
and no additional awards are made under that plan.
(b)
The weighted-average exercise price is calculated based solely on
the exercise prices of the outstanding options to purchase shares
of our common stock. It does not reflect the shares of our common
stock that will be issued upon the vesting of outstanding awards of
RSUs, which have no exercise price.
Voting Securities and Principal Holders Thereof
As of
the Record Date, we had outstanding 11,533,065 shares of common stock. Each
share of our common stock is entitled to one vote with respect to
each matter on which it is entitled to vote.
The
following table sets forth, as of the Record Date, the names,
addresses, amount and nature of beneficial ownership and percent of
such ownership of (i) each person or group known to our Company to
be the beneficial owner of more than five percent (5%) of our
common stock; and (ii) each of our officers and directors, and
officers and directors as a group:
|
|
|
|
|
|
|
|
Name and Address
|
Shares Beneficially Owned
|
|
of Beneficial Owner (1)(2)
|
|
|
|
5%
Stockholders(5)
|
|
|
|
Greenhaven Road
Investment Management, LP
|
1,362,697
|
11.82%
|
-
|
c/o
Royce & Associates LLC, 8 Sound Shore Drive, Suite 190,
Greenwich, CT 06830
|
|
|
|
Cat Rock Capital
Management LP
|
1,148,545
|
9.96%
|
-
|
8
Sound Shore Drive, Suite 250, Greenwich, CT 06830
|
|
|
|
Richard H. Witmer,
Jr.
|
828,881
|
7.19%
|
-
|
16
Fort Hills Lane, Greenwich, CT 06831
|
|
|
|
BlackRock,
Inc.
|
684,579
|
5.94%
|
-
|
55
East 52nd Street, New York, NY 10055
|
|
|
|
Long Path Partners,
LP
|
608,038
|
5.27%
|
-
|
4
Landmark Square, Stamford, CT 06901
|
|
|
|
AWM
Investment Company Inc.
|
587,098
|
5.09%
|
-
|
527
Madison Avenue, Suite 2600, New York, NY 10022
|
|
|
|
|
|
|
|
Directors and Executive
Officers (6)
|
|
|
|
Richard
A. Carlson, Chief Executive Officer and President,
Director
|
911,086
|
7.59%
|
464,330
|
Travis
Whitton, Chief Technology Officer
|
279,063
|
2.40%
|
113,635
|
David
A. Buckel, Director
|
41,260
|
*
|
16,000
|
Steven
A. Huey, Director
|
28,118
|
*
|
13,334
|
Marietta
Davis, Director
|
23,053
|
*
|
12,000
|
Scott
Miller, Director (7)
|
1,362,697
|
11.82%
|
|
Michael
Power, Chief Financial Officer
|
4,757
|
*
|
|
All
executive officers and directors as a group (7
persons)
|
2,650,034
|
21.81%
|
619,299
|
*
Represents less than 1% of the outstanding shares of common
stock.
1.
To our best knowledge, as of the date hereof, such holders had the
sole voting and investment power with respect to the voting
securities beneficially owned by them, unless otherwise indicated
herein. Includes the person's right to obtain additional shares of
common stock within 60 days from June 8, 2020.
2.
Unless otherwise noted, in care of SharpSpring, Inc., 5001
Celebration Point Ave Suite 410, Gainesville, FL
32608.
3.
Based on 11,533,065 shares of common stock outstanding on June 8,
2020. Does not include shares underlying: (i) options to purchase
shares of our common stock under our 2010 and 2019 Employee Stock
Plans, or (ii) outstanding warrants to purchase shares of our
common stock.
4.
Represents options exercisable within 60 days from June 8,
2020.
5.
Based solely upon a review of Schedule 13G and Form 4 filings with
the SEC.
6.
If a person listed on this table has the right to obtain additional
shares of common stock within 60 days from June 8, 2020, the
additional shares are deemed to be outstanding for the purpose of
computing the percentage of class owned by such person, but are not
deemed to be outstanding for the purpose of computing the
percentage of any other person.
7.
Additionally includes (i) 673,244 shares of common stock held
directly by Greenhaven Road Capital Fund 1, L.P.; and (ii) 689,453
shares of common stock held directly by Greenhaven Road Capital
Fund 2, L.P.. Mr. Miller serves as the Managing Member of the
General Partner (for itself and on behalf of Greenhaven Fund 1,
Greenhaven Fund 2 and the Investment Manager)
We are
not aware of any arrangements that could result in a change of
control.
PROPOSAL ONE
ELECTION OF DIRECTORS
At the time of the Annual Meeting, our
Board of Directors will consist of five directors: Steven A.
Huey, Richard Carlson, David A. Buckel, Marietta Davis and Scott
Miller. At the Annual Meeting, five directors are to be elected for
a one (1) year term to serve until the next annual meeting of
stockholders and until a successor for such director is elected and
qualified, or until the death, resignation or removal of such
director.
Nominees
There
are five nominees, all of whom currently serve on our Board of
Directors. Set forth below is information regarding the nominees
for election to our Board of Directors:
Name
|
|
Position(s) with the Company
|
|
Year First Elected Director
|
Steven
A. Huey
|
|
Chair
of the Board of Directors
|
|
2016
|
Richard
Carlson
|
|
Chief
Executive Officer; Director
|
|
2015
|
David
A. Buckel
|
|
Director
|
|
2014
|
Marietta
Davis
|
|
Director
|
|
2017
|
Scott
Miller
|
|
Director
|
|
2019
|
Each
person nominated has agreed to serve if elected, and our Board of
Directors has no reason to believe that any nominee will be
unavailable or will decline to serve. In the event, however, that
any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any
nominee who is designated by the current Board of Directors to fill
the vacancy.
Vote Required
Directors will be
elected by a plurality of the votes cast at the Annual Meeting. A
“withhold” vote with respect to any nominee will not
effect the election of that nominee. Each holder of common stock is
entitled to one vote for each share held.
Recommendation of the Board of Directors
The
Board of Directors recommends a vote “FOR” the election of all of the
above nominees.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR 2019
We are
asking stockholders to ratify the appointment of Cherry Bekaert LLP
to serve as our Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2020.
Representatives of Cherry Bekaert LLP will not be present at the
Annual Meeting.
The
following table represents aggregate fees billed to the Company for
the fiscal years ended December 31, 2019 and December 31, 2018 by
Cherry Bekaert LLP.
|
|
|
Audit
Fees
|
$207,587
|
$157,587
|
Audit-Related
Fees
|
7,500
|
12,000
|
Tax
Fees
|
—
|
—
|
All Other
Fees
|
25,600
|
3,500
|
Total
|
$240,687
|
$173,087
|
Audit Fees are the fees billed during the years ended
December 31, 2019 and December 31, 2018 for professional services
rendered by our independent auditors for the audit of the
Company’s annual financial statements and review of financial
statements included in the Company’s Form 10-Q or services
that are normally provided by the audit firm in connection with
statutory and regulatory filings or
engagements.
Audit-Related
Fees are the aggregate
fees billed during the years ended December 31, 2019 and December
31, 2018 for assurance and related services rendered by our
independent auditors that are reasonably related to the performance
of the audit or review of the Company’s financial statements
and are not reported under the category Audit Fees described
above.
Tax Fees are the fees billed during the years ended
December 31, 2019 and December 31, 2018 for tax compliance, tax
advice, and tax planning rendered by our independent
auditors.
All Other
Fees are the aggregate
fees billed for products and services provided during the years
ended December 31, 2019 and December 31, 2018 rendered by our
independent auditors, other than the services reported in the above
categories. This includes work related to the March 7, 2019 equity
issuance, May 9, 2019 Note Conversion Agreement, and November 21,
2019 equity issuance. For the year ened December 31, 2018 the
amount above included work related to the issuance of the
Convertible Promissory Notes on March 28, 2018.
Audit Committee Pre-Approval Policies.
The
Company’s audit committee currently does not have any
pre-approval policies or procedures concerning services performed
by rendered by our independent auditors. However, all the services
performed by rendered by the independent auditors that are
described above were pre-approved by the Company’s audit
committee.
None
of the hours expended on rendered by our independent
auditor’s engagement to audit the Company’s financial
statements for the years ended December 31, 2019 and December 31,
2018 were attributed to work performed by persons other than
rendered by the independent auditor’s full-time, permanent
employees.
Vote Required
The
vote required to ratify the appointment of Cherry Bekaert LLP to
serve as our Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2020 is the
affirmative vote of the holders of a majority of the votes cast at
the Annual Meeting entitled to vote on the matter. Each holder of
common stock is entitled to one vote for each share
held.
Recommendation of the Board of Directors
The
Board of Directors recommends that the stockholders vote
“FOR” the
proposal to ratify the appointment of Cherry Bekaert LLP to serve
as our Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2020.
PROPOSAL THREE
AMENDMENT TO THE
SHARPSPRING, INC. 2019 EQUITY INCENTIVE PLAN
On April 25, 2019, the Board of Directors of the Company adopted and
approved the SharpSpring, Inc. 2019 Equity Incentive Plan (the
“Plan”), subject to stockholder approval prior to
April 25, 2020.
Purpose of the Proposal
The Board of Directors of the Company has approved
and is recommending to shareholders of the Company an amendment to
Company’s 2019 Equity Incentive Plan (the
“Plan” or “2019 Equity Incentive
Plan”) to amend Section
4.1 of the Plan to increase the number of shares of common stock
available for issuance under the Plan to 1,025,000 so that a
sufficient amount of awards are available for issuance in the
future.
The
Board of Directors approved the Plan to ensure that the Company has
adequate ways in which to provide stock based compensation to its
directors, officers, employees, and consultants. The Board of
Directors believes that the ability to grant stock-based
compensation is important to the Company’s future
success.
The
grant of stock-based compensation, such as stock options, can
motivate high levels of performance and provide an effective means
of recognizing employee and consultant contributions to the
Company’s success. In addition, stock-based compensation can
be valuable in recruiting and retaining highly qualified technical
and other key personnel who are in great demand, as well as
rewarding and providing incentives to the Company’s current
employees, directors and consultants.
Additionally,
due to the impact of the Covid-19 virus, as of April 1, 2020 our
Company reduced by 10% all Company employee 2020 base salaries and
in exchange issued all Company employees additional stock-based
compensation pursuant to the Plan.
Our
Board of Directors believes that the increase in the number of
common shares available for issuance under the Plan is necessary in
order to continue to offer stock-based compensation programs that
will allow the Company to carry out the purposes of the Plan,
including attracting and retaining employees who are critical to
the growth and success of the Company and providing the Company
with the flexibility to make compensation adjustments during
certain challenging times such as the current Covid-19
pandemic.
The
Board of Directors approved the Plan to ensure that the Company has
adequate ways in which to provide stock based compensation to its
directors, officers, employees, and consultants. The Board of
Directors believes that the ability to grant stock-based
compensation is important to the Company’s future
success.
Information Regarding Options Granted under the Plan,
Dilution
The
Plan is our only active equity compensation plan. With respect to
the Plan, as of the Record Date:
●
1,585,381 stock options were outstanding
under the Plan
●
The weighted
average exercise price of such options was $7.28
●
The weighted
average remaining term of such options was 7.36 years
●
The total number of
shares available for grant under the Plan was 269,519
●
11,533,065 shares of our common stock were
issued and outstanding
●
78,706 unvested
restricted stock awards were outstanding under the
Plan
●
16,355 unvested
shares were issued in lieu of cash compensation
●
No stock appreciation rights were
outstanding under the Plan
●
No awards were
issued that will be settled solely in cash
●
No
performance-contingent awards were issued
●
The Plan does not
have fungible counting provisions
The Plan incorporates key corporate governance practices, including
the following:
●
Limits
the number of shares available to 697,039, which represents
approximately 6% of our issued and outstanding common shares as of
the Record Date. If the amendment to the Plan is approved by the
shareholders, the Plan will limit the number of shares available to
1,025,000, which represents approximately 8.89% of our issued and
outstanding common shares as of the Record Date;
●
The
price of any outstanding Award may not be repriced without
stockholder approval;
●
Discounted
stock options are not allowed;
●
Reload
options are not provided for under the Plan;
●
Performance
goals may be imposed on grants;
●
The
Plan does not have fungible counting provisions
●
Payment
of the exercise price or applicable taxes made by delivery of
shares, or withholding of shares, in satisfaction of a
participant’s obligation, will not result in additional
shares becoming available for subsequent awards under the
Plan.
Significant Features of the Plan:
The
following is a summary of certain significant features of the Plan.
The information which follows is subject to, and qualified in its
entirety by reference to, the Plan. We urge you to read the Plan in
its entirety.
Awards
that may be granted 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. These awards offer the
Company’s officers, employees, directors and consultants the
possibility of future value, depending on the long-term price
appreciation of the Company’s common stock and the award
holder’s continuing service with the Company.
Stock
options give the option holder the right to acquire from the
Company a designated number of shares of common stock at a purchase
price that is fixed upon the grant of the option. The exercise
price will be not less than the market price of the common stock on
the date of grant. Stock options granted may be either
tax-qualified stock options (so-called “incentive stock
options”) or non-qualified stock options.
Stock Appreciation Rights (SARs), sometimes
referred to as phantom equity, may be granted alone or in tandem with options,
have an economic value similar to that of options. When a SAR for a
particular number of shares is exercised, the holder receives a
payment equal to the difference between the market price of the
shares on the date of exercise and the exercise price of the shares
under the SAR. The exercise price for SARs is the market price of
the shares on the date the SAR is granted. Under the Plan, holders
of SARs may receive this payment – the appreciation value
– either in cash or shares of common stock valued at the fair
market value on the date of exercise. The form of payment will be
determined by the Company.
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 at no cost.
Restricted shares are forfeitable and
non-transferable until the shares vest. The vesting date or dates
and other conditions for vesting are established when the shares
are awarded. 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"), may also be granted.
The
Plan also provides for performance compensation awards,
representing the right to receive a payment, which may be in the
form of cash, shares of common stock, or a combination, based on
the attainment of pre-established goals.
All
of the permissible types of awards under the Plan are described in
more detail as follows:
Purposes of
Plan: The purposes of the
Plan are to: (a) enable the Company to attract and retain the types
of employees, consultants and directors who will contribute to the
Company's long range success; (b) provide incentives that align the
interests of employees, consultants and directors with those of the
shareholders of the Company; and (c) promote the success of the
Company's business.
Administration
of the Plan: The Plan is
administered by a committee of one or more members of the Board of
Directors appointed by the Board of Directors to administer the
Plan or, in the Board's sole discretion, by the Board of Directors
(the “Committee”). Among other things, the Committee
has the authority to select persons who will receive awards,
determine the types of awards and the number of shares to be
covered by awards, and to establish the terms, conditions,
restrictions and other provisions of awards. The Committee has
authority to establish, amend and rescind rules and regulations
relating to the Plan.
Eligible
Recipients: Persons
eligible to receive awards under the Plan will be those officers,
employees, consultants, and directors of the Company and its
subsidiaries (if any) who are selected by the Company’s Board
of Directors or the Committee of the Board administering the Plan.
As of the Record Date, approximately 240 individuals were eligible
to participate in the Plan.
Shares
Available Under the Plan: The maximum number of shares of our common
stock that may be delivered to participants under the Plan
is 1,025,000 (plus the number
of shares of Common Stock underlying any award granted under the
2010 Restated Employee Stock Plan that expires, terminates or is
canceled or forfeited under the terms of the 2010 Restated Employee
Stock Plan); subject to adjustment for certain corporate changes
affecting the shares, such as stock splits. Shares subject to an
award under the Plan for which the award is canceled, forfeited or
expires again become available for grants under the Plan. Shares
subject to an award that is settled in cash will not again be made
available for grants under the Plan. Payment of the exercise price
or applicable taxes made by delivery of shares, or withholding of
shares, in satisfaction of a participant’s obligation, will
not result in additional shares becoming available for subsequent
awards under the Plan.
Stock Options:
General. Subject to the provisions of the Plan, the
Committee has the authority to determine all grants of stock
options. That determination will include: (i) the number of shares
subject to any option; (ii) the exercise price per share; (iii) the
expiration date of the option; (iv) the manner, time and date of
permitted exercise; (v) other restrictions, if any, on the option
or the shares underlying the option; and (vi) any other terms and
conditions as the Committee may determine.
Option
Price. The exercise price for
stock options will be determined at the time of grant. Normally,
the exercise price may not be less than the fair market value on
the date of grant. As a matter of tax law, the exercise price for
any incentive stock option awarded may not be less than the fair
market value of the shares on the date of grant. However, incentive
stock option grants to any person owning 10% or more of the
Company’s voting stock must have an exercise price of not
less than 110% of the fair market value on the grant
date.
Exercise of
Options. An option may be
exercised only in accordance with the terms and conditions for the
option agreement as established by the Committee at the time of the
grant. The option must be exercised by notice to the Company,
accompanied by payment of the exercise price. Payments may be made
in cash or, at the option of the Committee, by actual or
constructive delivery of shares of common stock to the holder of
the option based upon the fair market value of the shares on the
date of exercise.
Expiration or
Termination. Options, if
not previously exercised, will expire on the expiration date
established by the Committee at the time of grant. In the case of
incentive stock options, such term cannot exceed ten years provided
that in the case of holders of 10% or more of the Company’s
voting stock, such term cannot exceed five years. Options will
terminate before their expiration date if the holder’s
service with the Company or a subsidiary terminates before the
expiration date. The option may remain exercisable for specified
periods after certain terminations of employment, including
terminations as a result of death, disability or retirement, with
the precise period during which the option may be exercised to be
established by the Committee and reflected in the grant evidencing
the award.
Incentive and Non-Qualified
Options. As described
elsewhere in this summary, an incentive stock option is an option
that is intended to qualify under certain provisions of the
Internal Revenue Code of 1986, as amended (the
“Code”) for more favorable tax treatment than
applies to non-qualified stock options. Any option that does not
qualify as an incentive stock option will be a non-qualified stock
option. Under the Code, certain restrictions apply to incentive
stock options. For example, the exercise price for incentive stock
options may not be less than the fair market value of the shares on
the grant date and the term of the option may not exceed ten years.
In addition, an incentive stock option may not be transferred,
other than by will or the laws of descent and distribution, and is
exercisable during the holder’s lifetime only by the holder.
In addition, no incentive stock options may be granted to a holder
that is first exercisable in a single year if that option, together
with all incentive stock options previously granted to the holder
that also first become exercisable in that year, relate to shares
having an aggregate market value in excess of $100,000, measured at
the grant date.
Stock
Appreciation Rights: Awards of stock appreciation rights or
“SARs” may be granted alone or in tandem with stock
options. SARs provide the holder with the right, upon exercise, to
receive a payment, in cash or shares of stock, having a value equal
to the excess of the fair market value on the exercise date of the
shares covered by the award over the exercise price of those
shares. Essentially, a holder of a SAR benefits when the market
price of the common stock increases, to the same extent that the
holder of an option does, but, unlike an option holder, the SAR
holder need not pay an exercise price upon exercise of the
award.
Stock
Awards: Stock Awards can
also be granted under the Plan. A stock award is a grant of shares
of common stock or of a right to receive shares in the future.
These awards will be subject to such conditions, restrictions and
contingencies as the Committee shall determine at the date of
grant. Those may include requirements for continuous service and/or
the achievement of specified performance goals.
Cash
Awards: A cash award is an
award that may be in the form of cash or shares of common stock or
a combination, based on the attainment of pre-established
performance goals and other conditions, restrictions and
contingencies identified by the Committee.
Other
Equity-Based 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, restrictions and contingencies
identified by the Committee.
Performance
Goals: are 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.
Other
Material Provisions: Awards will be evidenced by a written
agreement, in such form as may be approved by the Committee. In the
event of various changes to the capitalization of the Company, such
as stock splits, stock dividends and similar re-capitalizations, an
appropriate adjustment will be made by the Committee to the number
of shares covered by outstanding awards or to the exercise price of
such awards. The Committee is also permitted to include in the
written agreement provisions that provide for certain changes in
the award in the event of a change of control of the Company,
including acceleration of vesting. Except as otherwise permitted by
the Committee, awards will not be transferable, other than by will
or the laws of descent and distribution. Prior to any award
distribution, the Company is permitted to deduct or withhold
amounts sufficient to satisfy any employee withholding tax
requirements. Our Board also has the authority, at any time, to
discontinue the granting of awards. The Board also has the
authority to alter or amend the Plan or any outstanding award or
may terminate the Plan as to further grants, provided that no
amendment will, without the approval of the Company’s
shareholders, to the extent that such approval is required by law
or the rules of an applicable exchange, increase the number of
shares available under the Plan, change the persons eligible for
awards under the Plan, extend the time within which awards may be
made, or amend the provisions of the Plan related to amendments. No
amendment that would adversely affect any outstanding award made
under the Plan can be made without the consent of the holder of
such award.
Federal
Income Tax Consequences: The following is based on current laws,
regulations and interpretations, all of which are subject to
change. It does not purport to be complete and does not describe
the state, local or foreign tax considerations or the consequences
for any particular individual.
Non-qualified Options. Under
current federal income tax law, the grant of
a non-qualified option under the Plan will have no
federal income tax consequences to us or the optionee (unless the
options are publicly traded). Generally, upon exercise of
a non-qualified stock option granted under the Plan, the
excess of the fair market value of the stock at the date of
exercise over the option price (the “Spread”) is taxable to the optionee as ordinary
income and is subject to withholding. All such amounts taxable to
an employee are deductible by us as compensation expense. The
deduction will be allowed for our taxable year which includes the
end of the taxable year in which the optionee includes an amount in
income.
Generally,
the shares received on exercise of an option under the Plan are not
subject to restrictions on transfer or risks of forfeiture and,
therefore, the optionee will recognize income on the date of
exercise of a non-qualified stock option. However, if the
optionee is subject to Section 16(b) of the Exchange Act, the
Section 16(b) restriction will be considered a substantial
risk of forfeiture for tax purposes. Under current law, employees
who are either our directors or officers will be subject to
restrictions under Section 16(b) of the Exchange Act during
their term of service and for up to six months after termination of
such service. SEC Rule 16b-3 provides an exemption
from the restrictions of Section 16(b) for the grant of
derivative securities, such as stock options, under qualifying
plans. Because the Plan satisfies the requirements for exemption
under SEC Rule 16b-3, the grant of options will not be
considered a purchase and the exercise of the options to acquire
the underlying shares of common stock will not be considered a
purchase or a sale. Thus, ordinary income will be recognized and
the Spread will be measured on the date of exercise.
The
taxable income resulting from the exercise of
a non-qualified stock option will constitute wages for
employees and is generally subject to withholding. We will be
required to make whatever arrangements are necessary to ensure that
funds equaling the amount of tax required to be withheld, if any,
are available for payment, including the deduction of required
withholding amounts from the optionee’s other compensation
and requiring payment of withholding amounts as part of the
exercise price. The tax basis for the common stock acquired is the
option price plus the taxable income recognized. An optionee will
recognize gain or loss on the subsequent sale of shares acquired
upon exercise of a non-qualified stock option in an
amount equal to the difference between the amount realized and the
tax basis of such shares. Such gain or loss will be long-term or
short-term capital gain or loss, depending upon whether the shares
have been held for more than one year.
Incentive Stock
Options. There will
be no federal income tax consequences to us or the employee as a
result of the grant of an incentive stock option. The optionee also
will not recognize income when the incentive stock option is
exercised (subject to the alternative minimum tax rules discussed
below). Generally, we receive no deduction at the time of
exercise.
In
the event of a disposition of shares acquired upon exercise of an
incentive stock option, the tax consequences depend upon how long
the employee has held the shares. If the employee does not dispose
of the shares within two years after the incentive stock option was
granted, or within one year after the incentive stock option was
exercised and shares were purchased, then the employee must
recognize only a long-term capital gain or loss. We are not
entitled to any deduction under these circumstances.
If
the optionee fails to satisfy either of the foregoing holding
periods, then he or she must recognize ordinary income in the year
of disposition (referred to as a “disqualifying
disposition”). The amount of such ordinary income generally
is determined under the rules applicable
to non-qualifiedoptions (see above) based on the Spread at the
date of exercise. However, such ordinary income will in no event
exceed the amount of the gain realized on the sale, provided that
the disposition involves an arm’s-length sale or
exchange with an unrelated party. Any gain in excess of the amount
taxed as ordinary income will be treated as capital gain. In the
year of the disqualifying disposition, we are entitled to a
deduction equal to the amount of ordinary income recognized by the
optionee.
The Spread under an incentive stock option is
treated as an adjustment in computing alternative minimum taxable
income (“AMTI”) for the year of exercise. As a result,
the Spread on an incentive stock option will be included in income
for purposes of the alternative minimum tax even though it is not
included in taxable income for purposes of determining the regular
tax liability of an optionee. A subsequent disqualifying
disposition of shares acquired upon exercise of an incentive stock
option will eliminate the AMTI adjustment if the disposition occurs
in the same taxable year as the exercise. A disqualifying
disposition in a subsequent taxable year will not affect the
alternative minimum tax computation in the earlier
year.
Payment of Option Exercise
Price in Shares. To
the extent an optionee pays all or part of the option exercise
price of a non-qualified stock option by tendering shares
of common stock owned by the optionee, the tax consequences
described above apply except that the number of shares of common
stock received upon such exercise which is equal to the number of
shares surrendered in payment of the option price will have the
same tax basis and holding periods as the shares surrendered. The
additional shares of common stock received upon such exercise will
have a tax basis equal to the amount of ordinary income recognized
on such exercise and a holding period which commences on the day
following the date of recognition of such income. Under Treasury
regulations, if an optionee exercises an incentive stock option by
tendering shares of common stock previously acquired by the
exercise of an incentive stock option that have not satisfied
statutory holding period requirements, a disqualifying disposition
will occur and the optionee will recognize income and be subject to
other basis allocation and holding period
requirements.
Restricted Stock
Awards. Stock
granted under the Plan may, in the determination of the Committee,
be subject to rights of repurchase and other transfer restrictions.
The tax consequences of stock granted under the Plan depends on
whether the stock is subject to restrictions and if so, whether the
restrictions are deemed to create a “substantial risk of
forfeiture” under Code Section 83 (for example, stock
granted under the Plan which is subject to our right to repurchase
the stock at a price that is less than fair market value which
right lapses over a period of continued employment is considered a
“substantial risk of forfeiture” under Code
Section 83).
If
stock is not subject to a “substantial risk of
forfeiture,” the recipient normally will recognize taxable
ordinary income equal to the value of the stock in the year in
which the stock is granted less the amount paid for that stock. If
the stock is subject to a “substantial risk of
forfeiture,” the recipient normally will recognize taxable
ordinary income as and when the “substantial risk of
forfeiture” lapses in the amount of the fair market value of
the shares no longer subject to the “substantial risk of
forfeiture” less the amount paid for the stock. Upon
disposition of the stock, the recipient will recognize a capital
gain or loss equal to the difference between the selling price and
the sum of the amount paid for the stock plus any amount recognized
as ordinary income upon grant or vesting of the stock. The gain or
loss will be long or short-term depending on how long the recipient
held the stock. In general, the holding period for the stock
commences when the stock is no longer subject to a substantial risk
of forfeiture.
A
recipient of stock subject to a “substantial risk of
forfeiture” may make an election under Code
Section 83(b) to recognize ordinary income in the year the
recipient purchases the restricted stock, rather than waiting until
the “substantial risk of forfeiture” lapses. If the
stock recipient makes a Section 83(b) election, the recipient
will be required to recognize as ordinary income in the year the
recipient purchases the stock the difference, if any, between the
fair market value of the stock on the purchase date and the
purchase price paid. If the stock recipient makes a
Section 83(b) election, the recipient will not be required to
recognize any income when the “substantial risk of forfeiture
lapses.”
Generally,
with respect to employees, we are required to withhold from regular
wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness,
the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, we will generally be
entitled to a business expense deduction equal to the taxable
ordinary income realized by the stock recipient.
Stock Appreciation
Rights. Generally,
the recipient of a SAR will not recognize any taxable income at the
time the SAR is granted. With respect to stand-alone SARs, if the
holder receives the appreciation inherent in the SARs in cash, the
cash will be taxable as ordinary compensation income to the
employee at the time that it is received. If the holder receives
the appreciation inherent in the stand-alone SARs in stock, the
holder will recognize ordinary compensation income equal to the
excess of the fair market value of the stock on the day it is
received over any amounts paid by the holder for the
stock.
The
income recognized by the holder of a stand-alone SAR will generally
be subject to U.S. income tax withholding and employment
taxes.
In
general, we will not be entitled to a federal income tax deduction
upon the grant or termination of stand-alone SARs. However, upon
the exercise of a stand-alone SAR, we will be entitled to a
deduction for federal income tax purposes equal to the amount of
ordinary income that the holder is required to recognize as a
result of the exercise, provided that the deduction is not
otherwise disallowed under the Code.
Performance Compensation
Awards. Generally,
the recipient of a performance compensation award will not
recognize any taxable income at the time the award is made but will
generally recognize taxable income at the time the award is paid.
If the performance compensation award is payable in cash, the cash
will be taxable as ordinary compensation income to the participant
at the time that it is received. If the holder receives the
performance compensation award in stock, the participant will
recognize ordinary compensation income equal to the excess of the
fair market value of the stock on the day it is received over any
amounts paid by the holder for the stock.
The
income recognized by the holder of a performance compensation award
will generally be subject to U.S. income tax withholding and
employment taxes.
In
general, we will not be entitled to a federal income tax deduction
upon the grant or termination of performance compensation awards.
However, upon payment of a performance compensation award, we will
be entitled to a deduction for federal income tax purposes equal to
the amount of ordinary income that the participant is required to
recognize as a result of such payment, provided that the deduction
is not otherwise disallowed under the Code.
Limitations on
Deductions. Section 162(m) of the Code
denies a deduction to any publicly held corporation for
compensation paid to certain “covered employees” in a
taxable year to the extent that compensation to each covered
employee exceeds $1 million.
Compliance with
Section 409A of the Code. Code Section 409A imposes
requirements on non-qualified deferred compensation
plans. The requirements include the timing of elections to defer,
the timing of distributions and prohibitions on the acceleration of
distributions. Failure to satisfy these requirements may result in
the immediate taxation of the arrangement, the imposition of an
additional 20% income tax on the participant and the possible
imposition of interest and penalties on the unpaid tax. Proposed
regulations generally provide that the type of equity incentives
provided under the Plan will not be
considered non-qualified deferred compensation. However,
some awards could be covered by Section 409A of the
Code. For example, the modification of a stock option or stock
appreciation right with an exercise price less than fair market
value of the underlying common stock could
constitute non-qualified deferred compensation. In such
event, the administrator normally would expect to design and
administer any such award in a manner that ordinarily should avoid
adverse federal income tax consequences under Section 409A of
the Code to any affected participant. In the event that an award
under the Plan is determined to
constitute “non-qualified deferred
compensation” that would be subject to additional tax under
Section 409A of the Code, the Committee may impose such
additional conditions as it deems necessary to avoid the imposition
of the additional tax.
Recognition of Compensation
Expense. In accordance
with ASC 718, Compensation-Stock
Compensation, the Company is
required to recognize compensation expense in its income statement
for the grant-date fair value of stock options and other
equity-based compensation issued to its employees and directors,
the amount of which can only be determined at the time of
grant.
Plan Benefits
Awards,
if any, that will be made to eligible persons under the Plan are
subject to the discretion of the Committee and, therefore, we
cannot currently determine the benefits or number of shares subject
to awards that may be granted in the future to our employees,
officers, directors and consultants under the Plan.
Compensation for our directors
is discretionary and is reviewed from time to time by our Board of
Directors. Any determinations with respect to Board compensation
are made by our Board of Directors. Since our second quarter of
2017, we have compensated all non-employee directors with a stipend
of $7,500 per quarter ($30,000 per year), payable quarterly in
stock. However, during 2019, non-employee directors received
quarterly stipends, payable in stock and cash, issued in arrears.
All stock granted to our directors are Stock Awards issued from the
Plan.
Typically, newly
elected non-employee directors receive 16,000 stock options upon
joining our Board of Directors, which vest over four years, which
will also be issued from the Plan.
Copy of Plan and Proposed Amendment
Set
forth below is where you can find a complete copy of the 2019
Equity Incentive Plan, along with the proposed
amendment:
|
|
2019
Equity Incentive Plan
|
Appendix
A to Schedule 14A filed on April 30, 2019
|
Proposed
Amendment
|
Appendix
A to this Schedule 14A
|
Vote Required
The
vote required to approve the proposed amendment to the 2019
Equity Incentive Plan is the affirmative vote of the holders of a
majority of the votes cast at the Annual Meeting entitled to vote
on the matter. Each holder of common stock is entitled to one vote
for each share held.
Recommendation of the Board of Directors
The Board of Directors recommends that the
shareholders vote “FOR” approval of the amendment to the 2019
Equity Incentive Plan.
STOCKHOLDER PROPOSALS FOR 2021 ANNUAL MEETING
In
order for stockholder proposals to be included in our proxy
statement for the 2021 Annual Meeting, we must receive them at our
principal executive offices, 5001 Celebration Pointe Avenue, Suite
410, Gainesville, FL 32608, by February 16 2021, being 120 days
prior to the date of the first anniversary of the date of our proxy
statement for the 2020 Annual Meeting of Stockholders. All other
stockholder proposals, including nominations for directors, in
order to be voted on at the 2021 Annual Meeting, must be received
by us not earlier than March 11, 2021 and not later than April 10,
2021 being, respectively, 120 days and 90 days prior to the date of
the first anniversary of the 2020 Annual Meeting of Stockholders.
In the event that the 2021 Annual Meeting is called for a date that
is not within 30 days before or after the anniversary date of the
2020 Annual Meeting of Stockholders, notice by a stockholder in
order to be timely must be so received not later than the close of
business on the 10th day following the day on which such
notice of the date of the 2021 Annual Meeting is mailed or such
public disclosure of the date of the 2021 Annual Meeting is made,
whichever first occurs.
OTHER MATTERS
Our
Board of Directors knows of no other matters to be presented for
stockholder action at the Annual Meeting. However, if other matters
do properly come before the Annual Meeting or any adjournments or
postponements thereof, our Board of Directors intends that the
persons named in the proxies will vote upon such matters in
accordance with the best judgment of the proxy
holders.
Whether
or not you intend to be present at the meeting, you are urged to
fill out, sign, date and return the enclosed proxy at your earliest
convenience.
Gainesville,
FL
June
16, 2020
APPENDIX A
Amendment No. 1
to
SharpSpring, Inc. 2019 Equity Incentive Plan
The SharpSpring, Inc.
2019 Equity Incentive Plan (the “Plan”)
is hereby amended as follows (capitalized terms used herein and not
defined herein shall have the respective meaning ascribed to such
terms in the Plan):
1.
Section 4.1 of the Plan shall be deleted in its entirety and
replaced with the following:
4.1 Subject to adjustment in accordance with
Section 11, no more than 1,025,000 shares of Common Stock plus
the number of shares of Common Stock underlying any award granted
under the 2010 Restated Employee Stock Plan that expires,
terminates or is canceled or forfeited under the terms of the 2010
Restated Employee Stock Plan shall be available for the grant of
Awards under the Plan (the "Total Share
Reserve"). 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.
2.
All other provisions of the Plan remain in full force and effect,
other than any provision that conflicts with the terms and spirit
of this amendment.
Adopted by the Board of Directors on June 15, 2020
Adopted by the Shareholders on _____________
SHARPSPRING, INC
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS –
JULY
9, 2020 AT 10:00 AM LOCAL TIME
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CONTROL
ID:
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REQUEST
ID:
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This
proxy, when properly executed, will be voted in the manner directed
herein. If no such direction is made, this proxy will be
voted in accordance with the Board of Directors recommendations.
The undersigned hereby appoint(s)
Richard Carlson and/or Michael Power with the power of substitution
and resubstitution to vote any and all shares of capital stock of
SharpSpring, Inc. (the "Company") which the undersigned would be
entitled to vote as fully as the undersigned could do if personally
present at the Annual Meeting of the Company, to be held on
Thursday, July 9, 2020 at 10:00 a.m. local time, and at any
adjournments thereof, hereby revoking any prior proxies to vote
said stock, upon the following items more fully described in the
notice of any Proxy Statement for the Annual Meeting (receipt of
which is hereby acknowledged).
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(CONTINUED
AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING
INSTRUCTIONS
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If
you vote by phone, fax or internet, please DO NOT mail your proxy
card.
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MAIL:
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Please mark, sign, date, and return this Proxy Card promptly using
the enclosed envelope.
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FAX:
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Complete the reverse portion of this Proxy Card and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/SHSP
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL MEETING OF THE STOCKHOLDERS OF
SHARPSPRING, INC
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PLEASE
COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:
☒
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PROXY SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
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Proposal
1
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FOR
ALL
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AGAINST
ALL
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FOR
ALL
EXCEPT
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Election
of Directors
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☐
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☐
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Steven
A. Huey
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☐
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Richard
Carlson
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☐
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CONTROL
ID:
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David
A. Buckel
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☐
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REQUEST
ID:
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Marietta
Davis
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☐
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Scott
Miller
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☐
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Proposal
2
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FOR
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AGAINST
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ABSTAIN
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Ratification
of the appointment of Cheery Bekaert LLP to serve as the
Company’s Independent Registered Public Accounting firm for
fiscal year 2020.
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◻
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◻
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Proposal
3
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FOR
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AGAINST
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ABSTAIN
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Approval
of the amendment to the 2019 Equity Incentive
Plan.
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◻
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◻
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◻
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NOTE
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In
their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the
meeting.
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MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING:
◻
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MARK HERE FOR
ADDRESS CHANGE
◻ New
Address (if applicable):
_______________________________________
_______________________________________
_______________________________________
IMPORTANT: Please sign exactly as your
name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
Dated:
________________________, 2020
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(Print Name of
Stockholder and/or Joint Tenant)
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(Signature of
Stockholder)
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(Second Signature
if held jointly)
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