UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
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ENGlobal Corporation
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654 N. Sam Houston Parkway E., Suite 400
Houston, Texas 77060-5914
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
July 15, 2021
Dear
Shareholder:
I am
pleased to invite you to the Annual Meeting of Shareholders of
ENGlobal Corporation (“ENGlobal”). The meeting will be
held at our new headquarters located at Energy Tower III, 11740
Katy Freeway, Suite 11000, Houston, Texas 77079, on Thursday,
August 26, 2021 at 10:00 a.m., local time, to:
●
Elect five
directors to the Board of Directors of ENGlobal;
●
Adopt the ENGlobal
Corporation 2021 Long Term Incentive Plan;
●
Ratify the
appointment of Moss Adams LLP as the independent auditors of
ENGlobal for fiscal year 2021; and
●
Transact such other
business as may properly come before the meeting or any adjournment
thereof.
We are
furnishing proxy materials to our shareholders over the Internet.
You may read, print and download our proxy statement and annual
report at http://www.proxyvote.com. On or about July 15, 2021, we
will mail our shareholders a notice containing instructions on how
to access our proxy materials and vote online. The notice also
provides instructions on how you can request proxy materials be
sent to you by mail or email and how you can enroll to receive
proxy materials by mail or email for future meetings.
Only
shareholders of record at the close of business on July 9, 2021 are
entitled to notice of, and to vote at, the meeting and any
adjournment or postponement thereof. Each share entitles the holder
to one vote. You can vote via the Internet at
http://www.proxyvote.com, or by casting a ballot at the meeting.
You may also vote by telephone by following the instructions found
on the Internet site. If you request to receive proxy materials by
mail or email, you may
vote by any of the above methods or by mailing a completed proxy
card. For specific voting information, see “General
Information” beginning on page 1 of the enclosed proxy
statement. Please submit a proxy
card or voting instructions in advance of the meeting even if you
plan to attend the meeting. Submitting a proxy card or voting instructions
will not prevent you from attending the meeting in person, if you
so desire, but will help ENGlobal ensure a quorum and reduce the
expense of additional proxy solicitation.
Attendance is
limited to shareholders of ENGlobal, their proxy holders and our
guests. Shareholders holding stock in brokerage accounts must bring
a brokerage statement or other evidence of share ownership as of
July 9, 2021 in order to be admitted to the meeting.
We
intend to hold the meeting in person. However, we are sensitive to
concerns related to public health and travel that our shareholders
may have and are monitoring the protocols that federal, state and
local governments may recommend or require in light of the evolving
coronavirus (COVID-19) situation. As a result, we may impose
additional procedures or limitations on meeting attendees (beyond
those described herein) or may decide to hold the meeting in a
different location or solely by means of remote communication
(i.e., a virtual-only meeting). In the event we determine it is
necessary or appropriate to take additional steps regarding how we
conduct the meeting, we will announce this decision in advance, and
details will be posted on our website and filed with the Securities
and Exchange Commission.
Sincerely,
William
A. Coskey, P.E.
Chairman of the
Board
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY
STATEMENT
By
Order of the Board of Directors,
Darren W.
Spriggs
Chief
Financial Officer, Treasurer and Corporate Secretary
2021 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
You may receive a copy of our Annual Report on Form 10-K and other
information at no charge upon request directed to:
Darren
W. Spriggs
Chief
Financial Officer, Treasurer and Corporate Secretary
654 N.
Sam Houston Parkway E., Suite 400
Houston,
Texas 77060-5914
Telephone
281-878-1000
GENERAL INFORMATION
We are
providing these proxy materials to you in connection with the
solicitation of proxies by the Board of Directors (the
“Board”) of ENGlobal Corporation
(“ENGlobal”) for the 2021 Annual Meeting of
Shareholders (the “Meeting”) and for any adjournment or
postponement of the Meeting. In this proxy statement, we refer to
ENGlobal as the “Company,” “we,”
“our,” or “us.”
We are
making these proxy materials available to you on the Internet. On
or about July 15, 2021, we will mail a notice to our shareholders
containing instructions on how to access the proxy materials at
http://www.proxyvote.com and vote online. In addition, shareholders
may request proxy materials to be sent to them by mail or
email.
What is the location of the 2021 Annual Meeting?
The
Meeting will be held at our new headquarters located at Energy
Tower III, 11740 Katy Freeway, Suite 11000, Houston, Texas 77079,
on Thursday, August 26, 2021 at 10:00 a.m., local time or at such
other time and place to which the Meeting may be adjourned or
postponed. We intend to hold the Meeting in person. However, we are
sensitive to concerns related to public health and travel that our
stockholders may have and are monitoring the protocols that
federal, state and local governments may recommend or require in
light of the evolving coronavirus (COVID-19) situation. As a
result, we may impose additional procedures or limitations on
meeting attendees (beyond those described herein) or may decide to
hold the Meeting in a different location or solely by means of
remote communication (i.e., a virtual-only meeting). In the event
we determine it is necessary or appropriate to take additional
steps regarding how we conduct the Meeting, we will announce this
decision in advance, and details will be posted on our website and
filed with the Securities and Exchange Commission (the
“SEC”).
Who is soliciting my proxy?
We are
making these proxy materials available to you in connection with
our solicitation of proxies for use at the Meeting. Specified
directors, officers, and employees of ENGlobal may also solicit
proxies on our behalf, without additional compensation, by email,
mail, telephone, fax, or in person.
Who is paying for this solicitation?
ENGlobal will pay
for the solicitation of proxies, including the cost of preparing
and assembling these proxy materials, making these proxy materials
available on the Internet, mailing notices to our shareholders, and
mailing these proxy materials to our shareholders upon request. We
have retained and paid a fee to Issuer Direct Corp. to assist us in
making our proxy materials available on the Internet and tabulating
our proxies, but we pay no separate compensation solely for the
solicitation of proxies.
What is the purpose of the Meeting?
At the
Meeting, shareholders will be asked to (1) elect directors, (2)
adopt the ENGlobal Corporation 2021 Long Term Incentive Plan and
(3) ratify the appointment of Moss Adams LLP for fiscal year
2021.
Who is entitled to vote at the Meeting?
Only
shareholders of record at the close of business on July 9, 2021,
the record date for the Meeting, are entitled to receive notice of
and to vote at the Meeting. If you were a shareholder of record on
that date, you are entitled to vote all of the shares you held on
that date at the Meeting, or any postponements or adjournments of
the Meeting.
If your
shares are registered directly in your name, you are the holder of
record of these shares, and we will send the notice containing
instructions on how to access the proxy materials and vote online
directly to you. If you hold your shares in a brokerage account or
through a bank or other holder of record, you hold the shares in
“street name,” and your broker, bank or other holder of
record will send voting instructions to you.
How many votes do I have?
You
have one vote at the Meeting, or any postponements or adjournments
of the Meeting, for each share of our common stock you owned as of
the record date. Shareholders do not have cumulative voting
rights.
How do I vote?
You may
submit a proxy or voting instructions over the Internet at
http://www.proxyvote.com by following the instructions provided in
the notice mailed to you or by voting in person at the Meeting. You
may also submit a proxy or voting instructions by telephone by
following the instructions found on the website,
http://www.proxyvote.com. If you request proxy materials by mail or
email, you may submit a proxy or voting instructions by any of the
above methods or by completing and mailing a proxy
card.
If you
hold your shares in street name, you have the right to direct your
broker, bank or other holder of record how to vote by following the
instructions sent to you by the holder of record. If you desire to
vote in person at the Meeting, as a holder in street name, you must
provide a legal proxy from your bank, broker or other holder of
record.
May I revoke my proxy or change my voting
instructions?
Yes,
you may revoke your proxy or change your voting instructions by
(a) voting in person at the Meeting, (b) casting a vote over
the Internet or by telephone at a later date, or (c) sending a
written notice of revocation to our Corporate Secretary by mail to
ENGlobal Corporation, 654 N. Sam Houston Parkway E., Suite 400,
Houston, Texas 77060-5914 or by facsimile at (281) 878-1010;
provided, that, with regard to (b) and (c), the Company receives
such change prior to the Meeting. If you request proxy materials by
mail or email, you may also change your proxy by mailing a proxy
card with a later date, provided that the Company receives the
later dated proxy card prior to the Meeting. If you submit a new
proxy, only your later dated proxy (whether cast by Internet,
telephone, mail or in person) will be counted.
What are the Board’s recommendations?
The
Board’s recommendations are set forth together with the
description of each item in this proxy statement. The Board
recommends a vote FOR the election of
five directors to our Board to serve until the next annual meeting
of shareholders, FOR the adoption of
the ENGlobal Corporation 2021 Long Term Incentive Plan and
FOR the
ratification of the appointment of Moss Adams LLP as the
independent auditors of ENGlobal for fiscal year 2021.
If any
other matter properly comes before the Meeting, with regard to any
proxies submitted by shareholders, William A. Coskey, P.E. and
Darren W. Spriggs, the persons appointed on the proxy card, will
vote as recommended by the Board or, if no recommendation is given,
in their own discretion.
How many votes must be present to hold the Meeting?
We will
have a quorum and will be able to conduct the business of the
Meeting if the holders of a majority of shares of our common stock
outstanding and entitled to vote are represented in person or by
proxy at the Meeting. As of the record date, 35,134,564 shares of
our common stock, representing the same number of votes, were
outstanding. Thus, the presence in person or by proxy of the record
holders of at least 17,567,283 shares of our common stock will be
required to establish a quorum. Shareholders of record who are
present at the Meeting in person or by proxy and who abstain from
voting, including brokers holding customers’ shares of record
who cause abstentions to be recorded at the Meeting, will be
included in the number of shareholders present at the Meeting for
purposes of determining whether a quorum is present.
What vote is required to approve each item?
The
election of directors is decided by a plurality of the votes cast.
For this purpose, “plurality” means that the
individuals receiving the largest number of affirmative votes,
whether or not they receive a majority of the votes, are elected as
directors, up to the maximum number of directors to be chosen at
the election. A properly executed proxy marked “WITHHOLD
AUTHORITY” with respect to the election of one or more
directors will not be voted with regard to the director or
directors indicated, although it will be counted for purposes of
determining whether there is a quorum.
With
regard to each other item voted on at the Meeting, the affirmative
vote of the holders of a majority of the votes cast in person or by
proxy and entitled to vote on the item will be required for
approval. A properly executed proxy marked “ABSTAIN”
with respect to any such matter will not be voted, although it will
be counted for purposes of determining whether there is a quorum.
Accordingly, an abstention will have the effect of a negative
vote.
For
shares held in “street name” through a broker or other
nominee, the broker or nominee may not be permitted to exercise
voting discretion with respect to some of the matters to be acted
upon. Under the rules that govern brokers who are voting with
respect to shares that are held in street name, brokers have the
discretion to vote such shares on routine matters, but not on
non-routine matters. The election of directors and the adoption of,
or amendments to, equity compensation plans are not considered
routine matters. Thus, if shareholders do not give their broker or
nominee specific instructions, their shares may not be voted on
those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such
“broker non-votes” will, however, be counted in
determining whether there is a quorum.
What if I do not mark a voting choice for some of the matters
listed on my proxy card?
If you
request proxy materials by mail or email and send a proxy card
without specifying a vote or an abstention, your shares will be
voted “FOR”: (1) the director nominees listed on the
proxy card and in this proxy statement, (2) the adoption of the
ENGlobal Corporation 2021 Long Term Incentive Plan, and (3) the
ratification of the appointment of Moss Adams LLP as the
independent auditors of ENGlobal for fiscal year 2021.
Could other matters be decided at the Meeting?
We do
not know of any matters that will be considered at the Meeting
other than the items set forth in this proxy statement. If other
matters are properly raised at the Meeting, your proxy authorizes
the proxy holders to vote as they think best, unless authority to
do so is withheld by you in your proxy.
What happens if the Meeting is postponed or adjourned?
Pursuant to Nevada
law, the Meeting may be adjourned by the chairman of the Meeting to
reconvene at the same or some other place. If the adjournment is
for more than 60 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, notice of the adjournment
shall be given to each shareholder of record entitled to vote at
the Meeting. If the adjournment is for less than 60 days, no
additional notice will be delivered.
Who will count the votes?
We will
appoint an inspector of the election who will count the votes at
the Meeting.
What does it mean if I receive more than one proxy
card?
Your
shares are probably registered in more than one account. You should
vote each proxy card you receive. We encourage you to consolidate
all your accounts by registering them in the same name, social
security number and address. This can be accomplished by contacting
your stockbroker. Additionally, our transfer agent, Computershare
Trust Company, N.A., can assist you if you want to consolidate
multiple accounts registered in your name by contacting our
transfer agent at P.O. Box 30170, College Station, TX 77842-3170,
telephone: (781) 575-4238.
How do I get copies of the exhibits filed with ENGlobal’s
Annual Report on Form 10-K?
We are furnishing
our annual report to our shareholders over the Internet. You may
read, print and download our annual report at
http://www.proxyvote.com. You may request the annual report be sent
to you by mail or email by following the instructions on the Notice
of Internet Availability to be mailed to you on or about July 15,
2021. ENGlobal will provide to any shareholder as of the record
date, who so specifically requests in writing, copies of the
exhibits filed with our annual report for a reasonable fee.
Requests for such copies should be directed to Corporate Secretary,
ENGlobal Corporation, 654 N. Sam Houston Parkway E., Suite 400,
Houston, Texas 77060-5914. The Annual Report on Form 10-K may also
be read, downloaded and printed at www.englobal.com. In addition,
copies of all exhibits filed electronically by ENGlobal may be
reviewed and printed from the website of the SEC at:
www.sec.gov.
Where can I find the voting results of the Meeting?
The
preliminary voting results will be announced at the Meeting. The
final results will be published in a current report on Form 8-K to
be filed with the SEC within four business days after the
Meeting.
Who
can help answer my questions?
If you
have any questions or if you need additional copies of this proxy
statement or the enclosed proxy card, you should contact Darren W.
Spriggs, Chief Financial Officer, Treasurer and Corporate
Secretary, at 654 N. Sam Houston Parkway E., Suite 400, Houston,
Texas 77060-5914, telephone 281-878-1000.
SMALLER REPORTING COMPANY
The SEC
has adopted rules allowing smaller reporting companies to tailor
their disclosure to reduce costs. Because the Company qualifies as
a “smaller reporting company” under the SEC rules, the
Company has elected to prepare this proxy statement and other
annual and periodic reports as a “Smaller Reporting
Company” consistent with rules of the SEC. Under the scaled
disclosure obligations, the Company is not required to provide,
among other things, Compensation Discussion and Analysis and
certain other tabular and narrative disclosures relating to
executive compensation.
CORPORATE GOVERNANCE AND BOARD MATTERS
Board Size; Meetings of the Board
Our
Board currently has four members. During 2020, the Board met seven
times and each director attended at least 75% of the meetings held
during the period for which he was a director. Our three
independent directors serve on three Board committees: Audit,
Compensation, and Nominating & Corporate
Governance.
Executive Sessions
In
2020, the Board held multiple executive sessions of its
non-employee directors, David W. Gent, P.E., Randall B. Hale, David
C. Roussel, and Kevin M. Palma. Any non-employee director can
request that an executive session be scheduled.
Board Leadership Structure
The
Company is committed to strong, independent board leadership and
governance, including the flexibility to select and revise its
leadership structure on the basis of the best interests of the
Company and its shareholders at any given point in time. The Board
evaluates this structure in connection with the annual appointments
to the positions of Chairman of the Board (“Chairman”)
and Chief Executive Officer (“CEO”).
We do
not have a written policy with respect to separation of the roles
of Chairman and CEO; however, the Board has believed that it was in
the best interests of the Company and its shareholders to combine
the Chairman and CEO roles and to appoint a Lead Independent
Director annually. By doing so, the Company’s shareholders
had the benefit of Board leadership by the CEO, an executive with
extensive day-to-day knowledge of the Company’s operations,
strategic plan execution and future needs, as well as a Lead
Independent Director who provides Board member leadership. The
Board plans to re-evaluate the structure in connection with the
annual appointments following the Meeting taking into the account
the retirement of Mr. Coskey.
Lead Independent Director
David
W. Gent has served as the Company’s lead independent director
since 2002, and was re-elected by the Board to this role in 2020.
The Lead Independent Director position responsibilities currently
include chairmanship of the Nominating & Corporate Governance
Committee; Chair of the Board meetings at which the Chairman is not
in attendance; liaison between the Chairman and the independent
directors, which includes facilitating communications and assisting
in the resolution of conflicts, if any, between the independent
directors and the Company’s management; providing counsel to
the Chairman and CEO, including provision of appropriate feedback
regarding effectiveness of Board meetings, and otherwise as needed
or requested; and such other responsibilities as the Board
delegates. In performing these responsibilities, the Lead
Independent Director is expected to consult with the chairpersons
of other Board committees as appropriate and solicit their
participation in order to avoid the appearance of diluting the
authority or responsibility of the Board committees and their
chairpersons.
Board and Committees Role in Risk Oversight
The
Board is responsible for oversight of us and our business,
including risk management. Together with the Board’s standing
committees, the Board is responsible for ensuring that material
risks are identified and managed appropriately. The Board and its
committees regularly review material strategic, operational,
financial, compensation and compliance risks with our senior
management. The Audit Committee has oversight responsibility for
financial risk (such as accounting, finance, internal controls and
tax strategy), and also oversees compliance with applicable laws
and regulations. The Compensation Committee and the Board each
discuss the relationship between our compensation policies and
corporate risk to assess whether these policies encourage excessive
risk-taking by executives and other employees. The Nominating &
Corporate Governance Committee oversees compliance with our
corporate governance principles. During its regular course of its
activities, our Audit Committee discusses our policies with respect
to risk assessment and risk management. Each of the
committees’ report to the Board regarding the areas of risk
they oversee.
Director Independence
The
Board has determined that no non-employee director has a
relationship which, in the opinion of the Board, would interfere
with the exercise of his independent judgment in carrying out the
responsibilities of a director, and that Messrs. Gent, Roussel and
Palma meet the criteria for independence under NASDAQ rules. The
Board has also determined that the director nominees, Christopher
Sorrells and Lloyd Kirchner, meet the criteria for independence
under NASDAQ rules. The Board has also determined that the members
of each of its committees, including the Audit Committee and the
Compensation Committee, meet the criteria for membership applicable
to each committee under the NASDAQ listing standards and applicable
SEC rules and regulations.
Director Attendance at Annual Meetings
Although we do not
have a formal policy regarding attendance by members of the Board
at our annual meeting of shareholders, we encourage directors to
attend. Three of our directors attended the 2020 annual
meeting.
Committees of the Board of Directors
Committee Composition and Meetings
Each of
our directors attended at least 75% of the total meetings held by
all Board committees on which they served in 2020.
|
Committee
|
Members
|
|
Audit
Committee
|
Kevin
M. Palma (Chairperson)
David
C. Roussel
David
W. Gent
|
|
Compensation
Committee
|
David
C. Roussel (Chairperson)
Kevin
M. Palma
David
W. Gent
|
|
Nominating
& Corporate Governance Committee
|
David
W. Gent (Chairperson)
Kevin
M. Palma
David
C. Roussel
|
The
Audit, Compensation and Nominating & Corporate Governance
Committees held seven, six, and three meetings, respectively, in
2020.
Summary of Committee Responsibilities
All of
our committee charters are available under the “Investors
– Governance Highlights” section of our website at
www.englobal.com. The charters are reviewed annually.
Audit Committee
The
duties and responsibilities of the Audit Committee are to
oversee:
●
the quality and
integrity of our financial statements;
●
our compliance with
legal and regulatory requirements; and
●
our independent
auditors’ qualifications, independence and
performance.
In
addition, the Audit Committee annually reviews our disclosures
regarding deficiencies, if any, in the design or operation of our
internal controls.
The
Board has determined that Mr. Palma is qualified as audit committee
financial expert under the SEC’s rules and regulations. In
addition, the Board has determined that each member of the Audit
Committee meets the requisite financial literacy and sophistication
requirements under NASDAQ rules.
Nominating & Corporate Governance Committee
The
duties and responsibilities of the Nominating & Corporate
Governance Committee are to:
●
assist the Board by
identifying individuals qualified to become Board members and
recommend to the Board director nominees for election at the annual
meetings of shareholders or for appointments to fill
vacancies;
●
recommend to the
Board director nominees for each Board committee and advise the
Board on the appropriate composition of the Board and its
committees;
●
make an annual
report to the Board on succession planning;
●
advise the Board
about and recommend to the Board appropriate corporate governance
practices and assist the Board in implementing those
practices; and
●
implement the
annual performance review process for the Board and its
committees.
In
addition, the Nominating & Corporate Governance Committee
reviews all relationships each director has with us in connection
with the nomination process and reports the results of its review
to the Board with appropriate recommendations, if any, for
approval.
Compensation Committee
The
duties and responsibilities of the Compensation Committee are
to:
●
review the
Company’s evaluation process, compensation, incentive
compensation and equity-based plans and recommend changes in such
plans to the Board as needed;
●
produce a report,
if required, for inclusion in our Proxy Statement for the annual
meeting of shareholders;
●
evaluate the
performance of our Chief Executive Officer and other
executives;
●
set the
compensation for our Chief Executive Officer and such other
executives as the Compensation Committee deems appropriate and
otherwise discharge the Board’s responsibilities relating to
compensation of our officers and directors;
●
delegate authority
to executive officers to establish compensation levels, incentive
compensation and equity-based plan awards, with oversight and
approval;
●
encourage stock
ownership by directors and executives, including through the use of
equity compensation programs;
●
review director
compensation levels and practices, and recommend, from time to
time, changes in such compensation levels and practices to the
Board; and
●
approve and review
reports of any compensation consultants hired by the Company, and
establish the independence of those consultants.
The
Compensation Committee establishes salaries, incentives and other
forms of compensation for executive officers. The Compensation
Committee currently delegates its authority to establish salaries
(other than the salary of the CEO) to the CEO, and does not
currently engage any compensation consultants to determine the
amount or form of executive and director compensation. From time to
time, the Compensation Committee has reviewed publicly available
data compiled by executive officers of the Company relating to
compensation paid to executive officers and directors in similar
size, publicly traded companies in the same geographic area in
which the Company is located. The Compensation Committee has also
solicited input from the CEO with respect to compensation for
executive officers other than the CEO.
Code of Business Conduct and Ethics
The
Company has adopted a Code of Business Conduct and Ethics that
applies to all of the Company’s directors, officers and
employees in accordance with NASDAQ rules. The purpose and role of
this code is to focus our officers, directors, and employees on
areas of ethical risk, provide guidance to help them recognize and
deal with ethical issues, provide mechanisms to report unethical or
unlawful conduct, and help enhance and formalize our culture of
integrity, honesty and accountability. We have posted this Code of
Business Conduct and Ethics on the “Investors –
Governance Highlights” section of our website at
www.englobal.com.
The
Company also has a Code of Ethics applicable to the Chief Executive
Officer and certain senior financial officers of the Company that
complies with Item 406 of Regulation S-K of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and with
applicable NASDAQ rules. We have posted this Code of Ethics on the
“Investors – Governance Highlights” section of
our website at www.englobal.com.
Director Nominations
Consideration of Director Nominees
Shareholder Nominees
The
Nominating & Corporate Governance Committee will carefully
consider all qualified director candidates, whether such candidates
are recommended by a shareholder or otherwise. Other than the
provisions contained in our bylaws set forth below, the Nominating
& Corporate Governance Committee has not established formal
procedures to be followed by shareholders submitting
recommendations for candidates for the Board. Our bylaws provide
that nominations for the election of directors may be made upon
timely notice given by any shareholder of record entitled to vote
for the election of directors. A timely notice must be made in
writing, contain the information required by our bylaws and be
received by the Secretary of the Company at the principal executive
offices of the Company, not later than the close of business on the
90th
calendar day, nor earlier than the close of business on the
120th
calendar day, immediately before the first anniversary of the
preceding year’s annual meeting. However, in the event that
the date of the upcoming annual meeting is advanced more than 30
calendar days before, or delayed more than 70 calendar days after,
such anniversary date, notice by the shareholder to be timely must
be delivered not later than the close of business on 10th calendar day
following the day on which public announcement of a meeting date is
first made by the Company.
Director Qualifications
The
Nominating & Corporate Governance Committee establishes
criteria for selecting new members of the Board. The Board as a
whole should reflect a range of skills, knowledge and experience in
areas of importance to the Company. Directors must be committed to
upholding the highest standards of personal and professional
integrity and to representing the interests of all shareholders,
not particular shareholder constituencies. The Nominating &
Corporate Governance Committee places no specific restrictions on
the number of terms directors may serve or other Boards on which a
director may sit, but directors must possess sufficient time and
energy to carry out their duties effectively. A majority of
directors must be “independent” under the NASDAQ rules,
and members of the Company’s audit committee must meet NASDAQ
financial literacy and sophistication requirements. In determining
whether a director is independent, the Board will broadly consider
all relevant facts and circumstances.
Identifying and Evaluating Nominees for Directors
The
Nominating & Corporate Governance Committee utilizes a variety
of methods for identifying and evaluating nominees for director.
The Nominating & Corporate Governance Committee regularly
assesses the appropriate size of the Board, and whether any
vacancies on the Board are expected due to retirement or otherwise.
If vacancies are anticipated, or otherwise arise, the Nominating
& Corporate Governance Committee will consider various
potential candidates for director. Candidates may come to the
attention of the Nominating & Corporate Governance Committee
through current Board members, shareholders or other persons. These
candidates will be evaluated at regular or special meetings of the
Nominating & Corporate Governance Committee, and may be
considered at any point during the year. As described above, the
Nominating & Corporate Governance Committee will consider
properly submitted shareholder nominations for candidates for the
Board based on the same criteria. Although not part of any formal
policy, our goal is a balanced and diverse Board, with members
whose skills, backgrounds and experiences are complimentary and,
together, cover the spectrum of areas that impact our business. As
part of this evaluation and to further our commitment to diversity,
the Nominating & Corporate Governance Committee assesses
whether the nominees, as a group, collectively represent a
diversity of views, backgrounds, and experiences that will enhance
the Board’s and our effectiveness.
Communications with the Board
Shareholders may
communicate with the Board, Board committees, non-employee
directors as a group, and individual directors by submitting their
communications in writing to ENGlobal Corporation, 654 N. Sam
Houston Parkway E., Suite 400, Houston, TX 77060-5914, Attention:
Corporate Secretary. Any communication must contain:
●
a representation
that the shareholder is a holder of record of our capital
stock;
●
the name and
address, as they appear on our books, of the shareholder sending
the communication; and
●
the number of
shares of our capital stock that are beneficially owned by such
shareholder.
ENGlobal’s
Corporate Secretary will distribute such communications to the
intended recipient upon receipt, unless the communication is unduly
hostile, threatening, illegal or similarly inappropriate, in which
case the Corporate Secretary has the authority to discard the
communication or to take appropriate legal action regarding the
communication.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Nominees
At the
Meeting, you and the other shareholders will elect five individuals
to serve as directors until the next annual meeting of
shareholders, until their successors are duly elected or appointed
or until their earlier death, resignation, or removal. Two of the
nominees, William A. Coskey and Kevin M. Palma, are currently
members of the Board. Mark A. Hess and Christopher Sorrells were
initially recommended to the Nominating & Corporate Governance
Committee by our Chairman while Lloyd Kirchner was initially
recommended to the Nominating & Corporate Governance Committee
by our Chief Executive Officer. The Nominating & Corporate
Governance Committee, which consists solely of directors that are
independent within the meaning of the rules of the NASDAQ,
recommended the nomination of the five nominees to the Board.
Current directors, David W. Gent and David C. Roussel, were not
renominated for election at the Meeting.
The
individuals named as proxies will vote proxies received for the
election of all nominees, unless you direct them to withhold your
votes. If any nominee becomes unable to serve as a director before
the Meeting, an event that is not presently anticipated,
discretionary authority may be exercised by the persons named as
proxies to vote for substitute nominees proposed by the
Board.
There
are no arrangements or understandings between ENGlobal and any
person pursuant to which such person has been elected as director
or nominated to serve as a director.
The
nominees for director, each of whom has consented to serve, if
elected, are as follows:
|
Name of Nominee:
|
William A. Coskey, P.E.
|
|
Position:
|
Chairman of the Board
|
|
Director Since:
|
1985
|
|
Age:
|
68
|
Present positions and offices with the Company, principal
occupations and other directorships during the past five
years:
Mr.
Coskey founded ENGlobal in 1985 and has served in various
positions, including service as Chairman of the Board since June
2005 and as President and Chief Executive Officer from August 2012
until his retirement in March 2021. From April 2007 until May 2010,
he served as Chief Executive Officer. Prior to that, he served as
Chairman of the Board, Chief Executive Officer and President from
1985 until 2001, Chief Operating Officer from 2001 to 2003, and
President from 2001 to June 2005. Mr. Coskey, an honors graduate,
received a Bachelor of Science in Electrical Engineering from Texas
A&M University in 1975 and is a Registered Professional
Engineer. He served on the Texas A&M University Electrical
Engineering Department Advisory Council from 1999 to 2014, and from
2006 until 2014, he served as Chairman of the Council. Mr. Coskey
received the 2014 Outstanding Alumni Honor Award from the Texas
A&M University College of Engineering. In 2014, Mr. Coskey was
also appointed to the Texas A&M College of Engineering Advisory
Council.
Qualifications for Consideration:
The
Board selected Mr. Coskey to serve as a director because it
believes that, as the founder of ENGlobal, he provides a unique
perspective to the Board. He was responsible for ENGlobal’s
initial public offering in 1994, listing on the American Stock
Exchange in 1998, and listing on the NASDAQ Stock Market in 2007.
In June 2009, he was awarded the Ernst & Young Entrepreneur of
The Year® in the Energy Services category for the Houston
& Gulf Coast Area. The Board believes Mr. Coskey’s
industry knowledge and business experiences give him invaluable
insights into the Company’s challenges, opportunities and
operations.
Present positions and offices with the Company, principal
occupations during the past five years:
Mr.
Hess has served as Chief Executive Officer of ENGlobal Corporation
since March 2021. Mr. Hess previously served as Chief Financial
Officer and Treasurer of ENGlobal Corporation from September 2012
to March 2021, interim Chief Financial Officer from June 2012 to
September 2012, and the Company’s Corporate Controller from
July 2011 until June 2012. Mr. Hess assumed the Corporate Secretary
responsibilities in December 2017 which he held until March 2021.
Prior to joining ENGlobal, Mr. Hess served as Vice President and
Chief Accounting Officer of Geokinetics, Inc., a publicly-traded
seismic data service company, from April 2008 to April 2010. From
November 2004 to April 2008, he served as Director of Finance for
CGGVeritas, a publicly -traded
seismic data service company. In total, he has over 35 years of
experience in various accounting, merger and acquisition, and
finance roles primarily in public companies. Mr. Hess is a licensed
CPA in the state of Texas, holds a Bachelor of Business
Administration in Accounting from the University of Houston and is
an active member of Financial Executives
International.
Qualifications for Consideration:
The
Board selected Mr. Hess to serve as a director because it believes
he possess valuable industry knowledge and business experience in
addition to a decade of experience at ENGlobal.
|
Name of Nominee:
|
Kevin M. Palma
|
|
Position:
|
Independent Director
|
|
Director Since:
|
2016
|
|
Age:
|
42
|
Present positions and offices with the Company, principal
occupations and other directorships during the past five
years:
Mr.
Palma has served as a director of the Company since June 2016, is
Chairman of the Audit Committee and is a member of the Compensation
and Nominating & Corporate Governance Committees. Mr. Palma served as the Chief
Financial Officer of B-29 Investments, LP, an energy private equity
firm, from 2006 until he was promoted to Chief Operating Officer in
December 2018, and also served as the Chief Financial Officer of
B-29 Family Holdings, LLC, a family office, since its inception in
2014 until December 2018. In his role within the private equity
space, Mr. Palma focuses on investment strategy, investment
execution, and portfolio company management for both privately-held
and publicly-traded companies. Mr. Palma currently serves on
several private company boards, including Silver Creek Oil and Gas,
LLC, Caliber Completion Services, LLC, and Klear Bit Technologies,
LLC. His past experiences on private company boards include Crest
Pumping Technologies, LLC and TEC Holdings, LLC (which was recently
rebranded as AXIS Energy Services, LLC). Prior to his roles at
B-29, Mr. Palma was a member of the energy investment banking team
at Raymond James & Associates, focusing on capital market
raises and merger and acquisition activity. Mr. Palma is licensed
as a Certified Public Accountant in the State of Texas, and holds a
Master of Business Administration from the Harvard Business School
in addition to a Bachelor of Business Administration and a Master
of Professional Accounting from the University of
Texas.
Qualifications for Consideration:
The
Board selected Mr. Palma to serve as an independent director
because of his experience in identifying strategic growth trends in
the energy industry, evaluating and completing numerous
acquisitions, and exhibiting an extensive knowledge of financial
markets make him well qualified to serve on ENGlobal’s board
of directors.
|
Name of Nominee:
|
Christopher Sorrells
|
|
Position:
|
Independent Director
|
|
Director Since:
|
N/A
|
|
Age:
|
52
|
Present positions and offices with the Company, principal
occupations and other directorships during the past five
years:
Mr.
Sorrells has served as Chief Executive Officer and as a member of
the board of directors of Spring Valley Acquisition Corporation
(“Spring Valley”) (Nasdaq: SV), a $230 million special
purpose acquisition company (“SPAC”) formed to
consummate an approximately $1 billion initial business combination
in the sustainability industry, since October 2020. Mr. Sorrells
has been an investor, operator, advisor and board member in the
sustainability industry for over 20 years. Mr. Sorrells is also the
Chief Executive Officer and a director of Spring Valley Acquisition
Corp. II, a Cayman Islands exempted company (“Spring Valley
II”), a SPAC similar to Spring Valley. Mr. Sorrells has
served as the Chief Executive Officer of Spring Valley II since
2021. Mr. Sorrells currently serves as Lead Director and Chairman
of the Compensation Committee for Renewable Energy Group, Inc.
(Nasdaq: REGI). Previously, Mr. Sorrells served as a Managing
Director and then as an Operating Partner of NGP Energy Technology
Partners (“NGP ETP”), an affiliate of Natural Gas
Partners (“NGP”), a leading energy private equity fund
with $20.0 billion of assets under management. Mr. Sorrells has
held a number of board positions for numerous public and private
firms, including groSolar, GSE Systems, Inc. (Nasdaq: GVP) and
Living Earth. As an operator, Mr. Sorrells has held a variety of
senior executive leadership roles at sustainability and energy
service focused companies including serving as Chief Operating
Officer and Director of GSE Systems, Inc. and Interim Chief
Executive Officer of Wellsite Fishing & Rental Services, LLC.
Mr. Sorrells started his finance career in the energy, power and
sustainability industries as an investment banker at Salomon Smith
Barney in 1996 and later at Banc of America Securities LLC where he
created one of the first Sustainability-focused investment banking
teams in 2000. Mr. Sorrells received his Master of Accounting from
University of Southern California, an M.B.A. from The College of
William and Mary and a B.A. from Washington and Lee
University.
Qualifications for Consideration:
The
Board selected Mr. Sorrells to serve as an independent director
because it believes that he possess extensive experience within the
energy industry. Mr. Sorrells’ broad career experience in
corporate, governance, and financial roles enables him to provide
leadership expertise as a member of the Board.
|
Name of Nominee:
|
Lloyd Kirchner
|
|
Position:
|
Independent Director
|
|
Director Since:
|
N/A
|
|
Age:
|
57
|
Present positions and offices with the Company, principal
occupations and other directorships during the past five
years:
Mr.
Kirchner has held various executive positions in Engineering,
Business Development, Safety and Quality at Zachry Group since
2014, where he currently serves as Vice President. Mr. Kirchner
joined Zachry Group through its acquisition of Commonwealth
Engineering, LLC where he served as President and CEO. He also held
executive positions in Operations, Sales and Marketing. Prior to
Commonwealth, he was a founding employee of Capstone Turbine
Corporation and held various executive positions in Engineering,
Supply Management, Manufacturing and Product Development. Mr.
Kirchner started his career with Amoco Corporation working in all
three of its business segments: Upstream, Refining and
Chemicals.
Mr.
Kirchner received his Bachelor of Science degree in Mechanical
Engineering from Rice University and a Master of Business
Administration from the University of Chicago. He currently serves
as a board member for the Post Oak School in Houston, the Baylor
College of Medicine and Mercury Chamber Orchestra. Previously, he
was elected to the Executive Board of the Engineering and
Construction Contracting (ECC) Association for 10 years, where he
served in various leadership roles, including Board
Chair.
Qualifications for Consideration:
The
Board selected Mr. Kirchner to serve as an independent director
because it believes he possess the ability to provide insights and
practical wisdom based on his experience and
expertise.
Vote Required
Directors are
elected by a plurality, and the five nominees who receive the most
“FOR” votes will be elected. Abstentions and broker
non-votes will not affect the outcome of the election.
Recommendation of the Board
The
Board recommends that shareholders vote FOR each of the
nominees to serve as a director.
PROPOSAL TWO:
ADOPT THE ENGLOBAL CORPORATION 2021 LONG TERM INCENTIVE
PLAN
Background
In June
2009, the Company’s shareholders approved the 2009 Equity
Incentive Plan (the “Original Plan”) that initially
provided for the issuance of up to 480,000 shares of common stock.
The Board and the shareholders subsequently approved several
amendments to the Original Plan to ultimately increase the number
of shares available for issuance under the Original Plan to
2,580,000 shares. The Original Plan terminated due to the
expiration of its term on June 18, 2019 (“Original
Term”). In April 2020 and June 2020, the Board and
shareholders approved, respectively, the amendment and restatement
of the Original Plan, as the Amended and Restated ENGlobal
Corporation 2009 Equity Incentive Plan (“Restated Original
Plan”) to amend and restate the Original Plan as in effect on
June 18, 2019 as the Restated Original Plan with certain other
changes as provided therein and to provide a term for the Restated
Original Plan from June 11, 2020 to the earlier of June 11, 2021 or
the date of the Company’s 2021 Annual Meeting of the
Shareholders. The number of shares that were available for issuance
pursuant to new awards under the Restated Original Plan was 560,109
shares (which was the number of shares available for issuance
pursuant to new awards under the Original Plan and not subject to
an outstanding award under the Original Plan at end of the Original
Term) plus any shares forfeited, cancelled or otherwise not
issued for any reason under the awards pursuant to the
Original Plan. As of July 9, 2021, there were 84,336 unvested
shares of restricted stock outstanding under the Restated Original
Plan and no shares available for the grant of future awards under
the Restated Original Plan due to its termination on June 11,
2021.
In
order to further and promote the interest of the Company, its
subsidiaries and its shareholders by enabling the Company and its
subsidiaries to attract, retain and motivate employees, directors
and consultants, and to align the interest of those individuals and
the Company’s shareholders, on May 19, 2021, the Board
approved the ENGlobal Corporation 2021 Long Term Incentive Plan
(“Long Term Incentive Plan”), subject to shareholder
approval. All awards previously granted under the Original Plan
shall remain subject to their award agreements and the Original
Plan and its Original Term. Awards granted under the Restated
Original Plan shall be subject to the Restated Original Plan and
its term.
The
Company is seeking shareholder approval of the Long Term Incentive
Plan in order to allow the future issuance of equity to its
employees, consultants and directors. A copy of the Long Term
Incentive Plan is attached to this proxy statement as Appendix A. The Company
believes equity awards encourage achievement of superior results by
providing participants with an opportunity to acquire a proprietary
interest in ENGlobal and additional incentive to work for its
continued success. If the Long Term Incentive Plan is not approved
by a sufficient number of the Company’s shareholders, the
Company will not have an equity incentive plan to use as incentive
to attract, motivate, and retain employees, consultants and
directors who are critical to the success of the Company due the
expiration of the term Restated Original Plan on June 11,
2021.
Summary Description of the Long Term Incentive Plan
The
following summary of the principal terms of the Long Term Incentive
Plan is qualified in its entirety by the full text of the Long Term
Incentive Plan, attached to this proxy statement as Appendix A.
Purpose. The purpose
of the Long Term Incentive Plan is to advance the interests of the
Company and its shareholders by providing an incentive to attract,
retain and reward persons performing services for the Company and
by motivating such persons to contribute to the growth and
profitability of the Company.
Administration. The
Board or one or more committees appointed by the Board in
accordance with applicable law will administer the Long Term
Incentive Plan. For this purpose, the Board has delegated general
administrative authority for the Long Term Incentive Plan to the
Compensation Committee. A committee may delegate some or all of its
authority with respect to the Long Term Incentive Plan to another
committee of directors and may delegate certain limited award grant
authority to one or more officers of the Company. (The appropriate
acting body, be it the Board, a committee within its delegated
authority, or an officer within his or her delegated authority, is
referred to in this summary as the “Administrator.”)
The Administrator determines the number of shares that are subject
to awards and the terms and conditions of such awards, including
the price (if any) to be paid for the shares or the award. Along
with other authority granted to the Administrator under the Long
Term Incentive Plan, the Administrator may (i) determine fair
market value, (ii) select recipients of awards, (iii) determine the
number of shares subject to awards, (iv) approve forms of award
agreements, (v) determine the terms and conditions of awards, (vi)
reduce the exercise price of outstanding awards without participant
consent to the fair market value, (vii) amend outstanding awards,
and (viii) allow participants to satisfy withholding tax
obligations through a reduction of shares.
Eligibility. Persons
eligible to receive awards under the Long Term Incentive Plan
include our officers, employees, consultants and members of the
Board. The Administrator determines from time to time the
participants to whom awards will be granted. An award may be
granted by the Administrator to any eligible person to reward
exceptional or special services, contributions or achievements in
the manner and on such terms and conditions (including any
restrictions on such shares) as determined from time to time by the
Administrator. We currently have approximately 208 employees and
four non-employee directors.
Authorized Shares;
Individual Limits on Awards. The maximum aggregate number of
shares of stock that may be issued with respect to awards under the
Long Term Incentive Plan shall be 1,500,000 and may consist of any
of the following: shares of stock held in treasury of the Company,
shares of stock authorized but unissued or shares of stock
reacquired by the Company or any combination of the foregoing. The
maximum aggregate number of such shares of stock authorized for
issuance in the foregoing sentence that may be issued as incentive
stock options shall be 1,500,000 shares of stock.
Shares
of stock of an outstanding award that for any reason expire or are
terminated, forfeited or canceled shall again be available for
issuance under the Long Term Incentive Plan; provided, however,
that amounts withheld for taxes or that are withheld for the
purchase price for options or stock appreciation rights
(“SARs”) shall not again be available for issuance
under the Long Term Incentive Plan, but shares withheld for the
purchase price or for taxes for restricted stock, restricted stock
units, performance awards or other stock-based awards (other than
an option or SAR) shall be available for issuance under the Long
Term Incentive Plan. Awards that by their terms are to be settled
solely in cash shall not be counted against the number of shares of
stock available for the issuance of awards under the Long Term
Incentive Plan.
Additionally,
shares of stock issued under awards granted in assumption,
substitution or exchange for previously granted awards of a company
acquired by the Company do not reduce the shares of stock available
under the Long Term Incentive Plan and available shares under a
stockholder approved plan of an acquired company (as appropriately
adjusted to reflect the transaction) may be used for awards under
the Long Term Incentive Plan and do not reduce the Long Term
Incentive Plan’s shares of stock reserved as provided herein
(subject to NASDAQ listing requirements, as long as the stock is
listed on this exchange or the applicable other exchange
requirements on which the stock is listed).
As is
customary in incentive plans of this nature, the number and kind of
shares available under the Long Term Incentive Plan and the then
outstanding stock-based awards, as well as exercise or purchase
prices, performance targets under certain performance-based awards
and share limits, are subject to adjustment in the event of certain
reorganizations, mergers, combinations, consolidations,
recapitalizations, stock dividends, stock splits, a split-up or a
spin-off, repurchases or exchange, or other similar events, or
extraordinary cash dividends or distributions of property to the
shareholders.
Incentive Awards.
The Long Term Incentive Plan authorizes stock options, SARs,
restricted stock, restricted stock units, performance shares and
performance units, dividends or dividend equivalents, as well as
other awards (described in the Long Term Incentive Plan) that are
responsive to changing developments in management compensation. The
Long Term Incentive Plan retains the flexibility to offer
competitive incentives and to tailor benefits to specific needs and
circumstances. Any award may be paid or settled in cash. An option
or SAR will expire, or other award will vest in accordance with the
schedule set forth in the applicable award agreement.
Stock Option. A stock option is the
right to purchase shares of common stock at a future date at a
specified price per share generally equal to, but no less than, the
fair market value of a share on the date of grant. An option may
either be an incentive stock option (“ISO”) or a
non-statutory stock option (“NSO”). ISO benefits are
taxed differently from NSOs, as described under “Federal
Income Tax Treatment of Awards under the Long Term Incentive
Plan,” below. ISOs also are subject to more restrictive terms
and are limited in amount by the Internal Revenue Code of 1986, as
amended (the “Code”), and the Long Term Incentive Plan.
Full payment for shares purchased on the exercise of any option
must be made at the time of such exercise in a manner approved by
the Administrator.
SARs. A SAR is the right to receive
payment of an amount or the issuance of a number of shares of stock
equal to the excess of the fair market value of a share of common
stock on the date of exercise of the SAR over the exercise price of
the SAR. The exercise price will be established by the
Administrator at the time of grant of the SAR but will not be less
than the fair market value of a share on the date of grant. SARs
may be granted in connection with other awards or
independently.
Restricted Stock. A restricted stock
award is typically an award for the issuance of a fixed number of
shares of common stock that are subject to restrictions. The
Administrator specifies the price, if any, the participant must pay
for such shares and the restrictions (which may include, for
example, continued service and/or performance standards) imposed on
such shares.
Restricted Stock Units. A restricted
stock unit is an award of a contract right that entitles the
recipient to receive an amount of cash or shares of stock equal to
the fair market value of a share of common stock upon the vesting
date.
Other Stock-Based Awards. Other
stock-based awards may be awarded by the Administrator to selected
participants that are denominated or payable in, valued in whole or
in part by reference to, or otherwise related to, shares of stock,
as deemed by the Administrator to be consistent with the purposes
of the Long Term Incentive Plan and the goals of the Company.
Performance awards may be granted by the Administrator in its sole
discretion awarding cash or stock (including restricted stock) or a
combination thereof based upon the achievement of goals as
determined by the Administrator. Types of other stock-based awards
include performance awards, purchase rights, phantom stock, stock
appreciation rights, restricted stock units, performance units,
restricted stock or stock subject to performance goals, shares of
stock awarded that are not subject to any restrictions or
conditions, convertible or exchangeable debentures related to the
stock, other rights convertible into shares of stock, awards valued
by reference to the value of stock or the performance of the
Company or a specified subsidiary, affiliate division or
department, awards based upon performance goals established by the
Administrator and settlement in cancellation of rights of any
person with a vested interest in any other plan, fund, program or
arrangement that is or was sponsored, maintained or participated in
by the Company or any subsidiary.
Limitations on Director Awards. Subject
to adjustments under the Long Term Incentive Plan, the amount of an
award granted to each director in a calendar year shall not exceed
five hundred thousand dollars ($500,000) in value of the aggregate
of stock and cash awards.
The
Administrator may grant stock unit awards and permit deferred
payment of awards, and may determine the form and timing of
payment, vesting, and other terms applicable to stock units or
deferrals.
Acceleration of Awards;
Possible Early Termination of Awards. Upon a change in
control of the Company, (i) the vested portion of the option, to
the extent unexercised and exercisable on the date on which the
participant’s service terminated, may be exercised by the
participant (or the participant’s guardian or legal
representative) at any time prior to the expiration of three (3)
months after the date on which the participant’s service
terminated without cause, but in any event no later than the option
expiration date, and (ii) the exercisability and vesting of the
option or other award and any shares of stock acquired upon the
exercise thereof may otherwise be accelerated effective as of the
date on which the participant’s service terminated to such
extent, if any, as shall have been determined by the Administrator,
in its discretion, and set forth in the award agreement evidencing
such option or other award. Any acceleration on a change in control
may be specified by the Administrator in the award.
Transfer
Restrictions. Subject to certain exceptions, awards under
the Long Term Incentive Plan are not transferable by the recipient
other than by will or the laws of descent and distribution and are
generally exercisable, during the recipient’s lifetime, only
by him or her.
Termination of or Changes
to the Long Term Incentive Plan. The Administrator may
terminate or amend the Long Term Incentive Plan at any time.
However, no grant of awards shall be made after the tenth (10th)
anniversary of the effective date (the “Term”). Subject
to changes in applicable law, regulations or rules that would
permit otherwise, without the approval of the Company’s
shareholders within the time required, there shall be (a) no
increase in the maximum aggregate number of shares of stock that
may be issued under the Long Term Incentive Plan subject to
adjustments permitted under the plan, (b) no change in the class of
persons eligible to receive awards or purchase stock under the Long
Term Incentive Plan or to extend the term of the Long Term
Incentive Plan, (c) no repricing of an option or SAR or other
amendment subject to adjustments permitted under the plan and (d)
no other amendment of the Long Term Incentive Plan that would
require approval of the Company’s shareholders under any
applicable law, regulation or rule or the stock exchange or market
system on which the stock is traded. No termination or amendment of
the Long Term Incentive Plan shall affect any then outstanding
award unless expressly provided by the Administrator or otherwise
provided in the Long Term Incentive Plan. In any event, no
termination or amendment of the Long Term Incentive Plan may
materially adversely affect any then outstanding award without the
consent of the participant, unless such termination or amendment is
required to enable an award designated as an incentive stock option
to qualify as an incentive stock option or is necessary to comply
with any applicable law, regulation or rule, including Code Section
409A or as otherwise permitted under the Long Term Incentive Plan,
including upon a Change in Control.
Federal Income Tax Treatment of Awards under the Long Term
Incentive Plan
Federal
income tax consequences (subject to change) relating to awards
under the Long Term Incentive Plan are summarized in the following
discussion. This summary is not intended to be exhaustive and,
among other considerations, does not describe the detailed tax
implications of deferred compensation provisions of Section 409A of
the Code to the extent an award is subject to and does not satisfy
those rules, nor does it describe state, local, or international
tax consequences.
Options. Generally, a participant will
not recognize any income for federal income tax purposes at the
time an ISO is granted, or on the qualified exercise of an ISO, but
instead will recognize capital gain or loss upon the subsequent
sale of shares acquired in a qualified exercise. The exercise of an
ISO is qualified if an optionee does not dispose of the shares
acquired by such exercise within two (2) years after the ISO grant
date and one (1) year after the exercise date. The Company is not
entitled to a tax deduction as a result of the grant or the
exercise of qualified exercise of an ISO. Generally, if the
exercise of an ISO is not qualified, then it is taxed as an
NSO.
A
participant awarded an NSO will not recognize any income for
federal income tax purposes, nor will the Company be entitled to a
deduction, at the time an NSO is granted. However, when an NSO is
exercised, the optionee will recognize ordinary income in an amount
equal to the difference between the fair market value of the shares
received and the exercise price of the NSO, and subject to Code
Section 162(m) (described below), the Company will generally
recognize a tax deduction in the same amount at the same
time.
Stock Appreciation Rights. Generally,
SARs are not taxed at grant but are taxed as ordinary income on the
date of exercise on the amount that is the difference between the
fair market value per share on the date of exercise and the
exercise price per share, and subject to Code Section 162(m) the
Company will be entitled to a corresponding deduction for such
amount.
Restricted Stock. A participant will
not recognize taxable income upon the grant of an award of
restricted stock (nor will the Company be entitled to a deduction)
unless the participant makes an election under Section 83(b) of the
Code. If the participant makes a Section 83(b) election within 30
days of the date the restricted stock is granted, then the
participant will recognize ordinary income, for the year in which
the award is granted, in an amount equal to the excess of the fair
market value of the shares of common stock at the time the award is
granted over the purchase price, if any, paid for the shares of
common stock. If such election is made and the participant
subsequently forfeits some or all of the shares, then the
participant generally will not be entitled to any refund of taxes
paid as a result of the Section 83(b) election, and may take a loss
only with respect to the amount actually paid for the shares. If a
Section 83(b) election is not made, then the participant will
recognize ordinary income at the time that the forfeiture
provisions or restrictions on transfer lapse in an amount equal to
the excess of the fair market value of the shares of common stock
at the time of such lapse over the original price paid for the
shares of common stock, if any. The participant will have a tax
basis in the shares of common stock acquired equal to the sum of
the price paid, if any, and the amount of ordinary income
recognized at the time the Section 83(b) election is made or at the
time the forfeiture provisions or transfer restriction lapse, as is
applicable. Upon the disposition of shares of common stock acquired
pursuant to an award of restricted stock, the participant will
recognize a capital gain or loss in an amount equal to the
difference between the sale price of the shares of common stock and
the participant’s tax basis in the shares of common stock.
This capital gain or loss will be a long-term capital gain or loss
if the shares are held for more than one (1) year. For this
purpose, the holding period will begin after the date on which the
forfeiture provisions or restrictions lapse if a Section 83(b)
election is not made, or on the date after the award is granted if
the Section 83(b) election is made. Subject to Code Section 162(m),
the Company will generally be entitled to a corresponding tax
deduction at the time the participant recognizes ordinary income on
the restricted stock, whether by vesting or a Section 83(b)
election, in the same amount as the ordinary income recognized by
the participant.
Other Stock-Based Awards Including Performance
Awards. Generally, a
participant will not recognize taxable income upon the grant of
other stock based awards, including restricted stock units,
performance units and performance shares. Generally, upon the
payment or vesting of such awards, a participant will recognize
compensation as taxable ordinary income, and subject to Code
Section 162(m), the Company will be entitled to a deduction in the
same amount at the same time.
Other Tax
Considerations. Upon
accelerated exercisability of options and accelerated lapsing of
restrictions upon restricted stock or other awards in connection
with a “change in control,” certain amounts associated
with such awards could, depending upon the individual circumstances
of the participant, constitute “excess parachute
payments” under the golden parachute provisions of Section
280G of the Code. Whether amounts constitute “excess
parachute payments” depends upon, among other things, the
value of the accelerated awards and the past compensation of the
participant.
Section
409A of the Code generally provides that any deferred compensation
arrangement which does not meet specific written requirements
regarding (i) timing and form of payouts, (ii) advance election of
deferrals and (iii) restrictions on acceleration of payouts results
in immediate taxation of any amounts deferred to the extent not
subject to a substantial risk of forfeiture. In addition, tax on
the amounts included in income are also subject to a twenty percent
(20%) excise tax and interest. In general, to avoid a violation of
Section 409A of the Code, amounts deferred may only be paid out on
separation from service, disability, death, a specified time, a
change in control (as defined by the Treasury Department) or an
unforeseen emergency. Furthermore, the election to defer generally
must be made in the calendar year prior to performance of services,
and any provision for accelerated payout other than for reasons
specified by the Treasury may cause the amounts deferred to be
subject to early taxation and to the imposition of the excise tax.
Section 409A of the Code is broadly applicable to any form of
deferred compensation other than tax-qualified retirement plans and
bona fide vacation, sick leave, compensatory time, disability pay
or death benefits, and may be applicable to certain awards under
the plan. Awards under the plan that are subject to Section 409A of
the Code are intended to satisfy the requirements of Section 409A
of the Code and contain such requirements as may be specified in an
award agreement.
Under
Section 162(m) of the Code, generally, the Company is denied a
deduction for annual compensation to “covered
employees” in excess of $1,000,000 in a calendar
year.
THE FOREGOING IS A SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES THAT GENERALLY WILL ARISE UNDER THE CODE WITH RESPECT
TO AWARDS GRANTED UNDER THE LONG TERM INCENTIVE PLAN AND DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF ALL RELEVANT PROVISIONS OF
THE CODE. MOREOVER, THIS SUMMARY IS BASED UPON CURRENT FEDERAL
INCOME TAX LAWS UNDER THE CODE, WHICH ARE SUBJECT TO CHANGE. THE
TREATMENT OF FOREIGN, STATE, LOCAL OR ESTATE TAXES IS NOT
ADDRESSED. THE TAX CONSEQUENCES OF THE AWARDS ARE COMPLEX AND
DEPENDENT UPON EACH INDIVIDUAL’S PERSONAL TAX SITUATION. ALL
PARTICIPANTS ARE ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR
RESPECTING AWARDS.
Inapplicability of
ERISA. Based upon current law and published interpretations,
ENGlobal does not believe the Long Term Incentive Plan is subject
to any of the provisions of the Employee Retirement Income Security
Act of 1974, as amended.
Plan Benefits
The
grant of awards under the Long Term Incentive Plan to employees,
consultants and non-employee directors, including the executive
officers named in the Summary Compensation Table, is subject to the
discretion of the Administrator. Accordingly, future awards to
employees, consultants and non-employee directors are not
determinable.
Securities Authorized For Issuance Under Equity Compensation
Plans
The
following table sets forth certain information concerning the
Amended and Restated ENGlobal Corporation 2009 Equity Incentive
Plan (the “Restated Plan”) as of December 26,
2020.
|
|
Number of
Securities to be Issued Upon Exercise of Outstanding Options,
Warrants and Rights
|
Weighted-Average
Exercise
Price of
Outstanding
Options,
Warrants and Rights
|
Number of
Securities Remaining Available for Future Issuance Under Equity
Compensation Plan
|
|
Equity compensation
plans approved by security holders (1)
|
—
|
—
|
478,049
|
|
Equity compensation
plan not approved by security holders
|
—
|
—
|
—
|
|
Total
|
—
|
—
|
478,049
|
|
|
(1)
Does not include 110,295 shares of unvested restricted common stock
outstanding at December 26, 2020. The Restated Plan terminated on
June 11, 2021.
|
|||||||||||||
Vote Required
The
approval of the adoption of the Long Term Incentive Plan requires
the affirmative vote of the holders of a majority of the shares
represented at the Meeting, in person or by proxy, and entitled to
vote. For the approval of the adoption of the Restated Plan you may
vote “FOR” or “AGAINST” or abstain from
voting. If you hold your shares in your own name and abstain from
voting on this matter, your abstention will have the effect of a
vote “AGAINST” this proposal. Because brokers do not
have discretionary authority to vote on this proposal, broker
non-votes will not affect the outcome of the vote on this
proposal.
Recommendation of the Board
The
Board recommends that shareholders vote FOR the adoption of
the ENGlobal 2021 Long Term Incentive Plan.
PROPOSAL THREE:
THE RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
OF
ENGLOBAL FOR FISCAL YEAR 2021
The
Audit Committee has appointed Moss Adams LLP, an independent
registered public accounting firm, as the Company’s
independent registered public accounting firm to examine the
consolidated financial statements of ENGlobal for the fiscal year
ended December 25, 2021, and to perform other appropriate audit and
advisory services and is requesting ratification of such
appointment by the shareholders.
In the
event that the shareholders do not ratify the appointment of Moss
Adams LLP, the adverse vote will be considered as a direction to
the Audit Committee to select another independent registered public
accounting firm for the next fiscal year. However, because of the
difficulty and expense of making any substitution of independent
registered public accounting firms after the beginning of the
current fiscal year, it is contemplated that the appointment for
the fiscal year ended December 25, 2021, will be permitted to
stand, unless the Audit Committee finds other reasons for making a
change. It is understood that even if the selection of Moss Adams
LLP is ratified, the Audit Committee, in its discretion, may direct
the appointment of a new independent registered public accounting
firm at any time during the year if the Audit Committee feels that
such a change would be in the best interests of ENGlobal and its
shareholders.
Representatives of
Moss Adams LLP are expected to be present at the Meeting, will have
an opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions.
Vote Required
The
ratification of the appointment of Moss Adams LLP for the year
ending December 25, 2021, requires the affirmative vote of the
holders of a majority of the shares represented at the Meeting, in
person or by proxy, and entitled to vote. For the ratification of
our independent registered public accountants, you may vote
“FOR” or “AGAINST” or abstain from voting.
If you hold your shares in your own name and abstain from voting on
this matter, your abstention will have the effect of a vote
“AGAINST” this proposal. Because brokers generally have
discretionary authority to vote on the ratification of our
independent registered public accountants, broker non-votes are
generally not expected to result from the vote on this
proposal.
Recommendation of the Board
The
Board recommends that shareholders vote FOR the ratification of the
appointment of Moss Adams LLP as the independent registered public
accounting firm of ENGlobal for fiscal year 2021.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Directors and Executive Officers
The
following table shows the number of shares of our common stock
beneficially owned as of July 9, 2021, by each director, each
director nominee, the executive officers named in the
“Summary Compensation Table” and all directors and
executive officers as a group. None of these shares are pledged as
security.
|
Name of
Beneficial Owner
|
Amount and
Nature of Beneficial Ownership(1)
|
Percent of
Class(2)
|
|
|
|
|
|
Mr.
Coskey
|
8,840,697(3)
|
25.16%
|
|
Mr.
Gent
|
360,366
|
1.03%
|
|
Mr.
Roussel
|
340,366
|
*
|
|
Mr.
Palma
|
44,131(4)
|
*
|
|
Mr.
Hess
|
337,043(5)
|
*
|
|
Mr.
Williams
|
54,718(6)
|
*
|
|
Mr.
Sorrells
|
0
|
*
|
|
Mr.
Kirchner
|
0
|
*
|
|
|
|
|
|
All directors and
executive officers as a group (8 persons)
|
10,016,732(7)
|
28.51%
|
*
Represents less
than 1% of the shares of common stock outstanding.
|
(1) Beneficial
ownership of common stock has been determined for this purpose in
accordance with Rule 13d-3 under the Exchange Act, under which a
person is deemed to be the beneficial owner of securities if such
person has or shares voting power or investment power with respect
to such securities, has the right to acquire beneficial ownership
within 60 days, or acquires such securities with the purpose or
effect of changing or influencing the control of
ENGlobal.
|
|
(2) Based on 35,134,564
shares issued and outstanding on July 9, 2021.
|
|
(3) Includes 8,840,597
shares of common stock held in the name of Alliance 2000, Ltd.,
whose general partner is jointly owned by Mr. Coskey and his
spouse. Mr. Coskey has shared power to vote and dispose of such
shares.
|
|
(4) Includes 35,000
shares of common stock that are held in a Beneficiary
IRA.
|
|
(5) Includes 10,000
shares of restricted stock which were granted to Mr. Hess on August
10, 2017 that will vest on August 10, 2021 and 11,312 shares of
restricted stock granted on March 9, 2021 that will vest in equal
annual installments over a three year period.
|
|
(6) Includes 7,500
shares of restricted stock which were granted to Mr. Williams on
August 10, 2017 that will vest on August 10, 2021 and 2,262 shares
of restricted stock granted on March 9, 2021 that will vest in
equal annual installments over a four year period.
|
|
(7) Includes 56,673
shares of unvested restricted stock granted to our executive
officers.
|
Principal Shareholders
Except
as set forth below, the following table sets forth information as
of July 9, 2021, about persons whom we know to be the beneficial
owners of more than 5% of our issued and outstanding common stock
based solely on our review of the statement of beneficial ownership
filed by these persons/entities with the SEC as of the date of such
filing:
|
Name and Address
of Beneficial Owner
|
Amount and Nature
of Beneficial Ownership (1)
|
Percent of
Class(1),(2)
|
|
Alliance 2000,
Ltd.
3 Dashwood
Court
The Hills,
Texas
78738-1469
|
8,840,697(3)
|
25.16%
|
|
|
|
|
|
CVI
Investments, Inc.
P.O. Box
309GT
Ugland
House
South Church
Street
George
Town
Grand
Cayman
KY1-1104
Cayman
Islands
|
2,380,953(4)
|
6.78%
|
|
|
|
|
|
Heights Capital
Management, Inc.
101 California
Street, Suite 3250
San Francisco,
California 94111
|
|
|
|
Empery Asset
Management, LP
Ryan M.
Lane
Martin D.
Hoe
1 Rockefeller
Plaza, Suite 1205
New York, New York
10020
|
2,380,953(5)
|
6.78%
|
|
|
|
|
|
Sabby Volatility
Warrant Master Fund, Ltd.
c/o Ogier Fiduciary
Services (Cayman) Limited
89 Nexus Way,
Camana Bay
Grand Cayman
KY1-9007
Cayman
Islands
|
|
|
|
Sabby Management,
LLC
10 Mountainview
Road, Suite 205
Upper Saddle River,
New Jersey 07458
|
|
|
|
Hal
Mintz
c/o Sabby
Management, LLC
10 Mountainview
Road, Suite 205
Upper Saddle River,
New Jersey 07458
|
2,380,953(6)
|
6.78%
|
(1)
Beneficial
ownership of common stock has been determined for this purpose in
accordance with Rule 13d-3 under the Exchange Act, under which a
person is deemed to be the beneficial owner of securities if such
person has or shares voting power or investment power with respect
to such securities, has the right to acquire beneficial ownership
within 60 days, or acquires such securities with the purpose or
effect of changing or influencing the control of
ENGlobal.
(2)
Based on 35,134,564
shares issued and outstanding on July 9, 2021.
(3)
Alliance 2000, Ltd.
is a Texas limited partnership whose general partner is jointly
owned by Mr. Coskey and his spouse.
(4)
The foregoing
information is based solely upon information contained in a
Schedule 13G filed by CVI Investments, Inc. with the SEC on June 8,
2021. CVI Investments, Inc. and Heights Capital Management, Inc.
have shared voting and dispositive power over all of the shares
reported.
(5)
The
foregoing information is based solely upon information contained in
a Schedule 13G filed by Empery Asset Management, LP with the SEC on
June 8, 2021. Empery Asset Management, LP, Ryan M. Lane and Martin
D. Hoe. have shared voting and dispositive power over all of the
shares reported.
(6)
The
foregoing information is based solely upon information contained in
a Schedule 13G filed by Sabby Management, LLC with the SEC on June
9, 2021. Sabby Volatility Warrant Master Fund, Ltd., Sabby
Management, LLC and Hal Mintz have shared voting and dispositive
power over all of the shares reported.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The
Board has adopted a policy requiring that all transactions between
the Company and its officers, directors, principal shareholders and
their respective affiliates be on terms no less favorable to the
Company than could be obtained from unrelated third parties and
that any such transactions be approved by a majority of the
disinterested members of the Board. Pursuant to such policy, the
Company’s Audit Committee is responsible for the review and
assessment of all related party transactions.
EXECUTIVE OFFICERS
Our
executive officers serve at the pleasure of our Board of Directors
and are subject to annual appointment by the Board at the first
meeting following the annual meeting of shareholders. Set forth
below is a brief description of the business experience of each of
our executive officers, except Mr. Hess, whose biography is
listed above.
|
Executive Officer:
|
Darren W. Spriggs
|
|
Position:
|
Chief Financial Officer, Corporate Secretary and
Treasurer
|
|
Age:
|
51
|
Present positions and offices with the Company, principal
occupations during the past five years:
Mr.
Spriggs has served as Chief Financial Officer, Corporation
Secretary and Treasurer since March 2021. Mr. Spriggs previously
served as Corporate Controller of the Company since June 2019.
Prior to joining the Company, Mr. Spriggs served as Director of
Accounting for ABM Industries Inc., a Fortune 500 company providing
end-to-end facility solutions to commercial, industrial and
governmental facilities, from April 2008 to June 2019. From 2007 to
2008, he served as Financial Planning Manager for Kinder Morgan,
Inc., a major midstream energy company whose pipeline network
transports natural gas, refined petroleum products and crude oil.
From 2002 to 2007, Mr. Spriggs served as a Financial Reporting
Manager for David Weekley Homes, the largest privately held
homebuilder in the U.S. From 2000 to 2002, he served as Assistant
Controller for American Tower Inc., a leading independent owner,
operator and developer of broadcast and wireless communication
towers. Mr. Spriggs is a licensed CPA and CMA in the state of
Texas, and holds a Bachelor of Business Administration in
Accounting from the Texas A&M University.
|
Executive Officer:
|
Roger Westerlind
|
|
Position:
|
President
|
|
Age:
|
65
|
Mr.
Westerlind has served as President of
ENGlobal Corporation since March 2021. Mr. Westerlind previously
served as President of the Company’s subsidiary, ENGlobal
U.S., Inc., since December 2020 and was responsible for
Engineering, Procurement and Construction (EPC), Automation and
Business Development. Prior to joining ENGlobal, Mr. Westerlind was
a consultant for InterOil Group on business development, project
management and project execution activities from 2016 to December
2020. Mr. Westerlind served as President-International Division of
Dynamic Industries from 2004 to 2016, where he spearheaded that
company’s strategy for international operations and major
project development. Through these efforts, he helped reposition
Dynamic Industries from a small local Louisiana fabrication and
maintenance company to an internationally recognized engineering
and construction management contractor for large multinational,
integrated oil and gas companies as well as large engineering and
construction firms. Prior to joining Dynamic Industries, from 1989
to 2004, Mr. Westerlind held various senior positions with ABB
Group, a leader in power and automation technologies enabling
utility and industrial customers to improve performance while
lowering environmental impact. His most recent position with ABB
was Vice President, ABB Lummus Global Oil & Gas, where he
marketed the company’s process technologies, project
management and engineering, procurement and construction management
services to the oil and gas, petrochemical and refining industries
worldwide. Mr. Westerlind holds a degree in Electronics Engineering
from Göteborgs Tekniska Institut (GTI) and an MBA from IHM
Business School, both in Gothenburg, Sweden.
|
Executive Officer:
|
R. Bruce Williams
|
|
Position:
|
Senior Vice President
|
|
Age:
|
68
|
Present positions and offices with the Company, principal
occupations during the past five years:
Mr.
Williams is currently serving as a Senior Vice President for
ENGlobal’s Renewable Energy segment. He served as Senior Vice
President of the Houston Engineering and Construction segment from
March 2017 until December 2020. Mr. Williams served as the Chief
Operating Officer from December 2013 through March 2017 and the
President of ENGlobal Government Services, Inc. from September 2012
through March 2017. He served as Senior Vice President,
Midwest/Southwest Operations of ENGlobal’s Engineering and
Construction segment from September 2012 to September 2013. He
initially joined ENGlobal in 2004, and from November 2010 until
September 2012, he served in various roles at ENGlobal, including
General Manager of the Tulsa Office, Vice President of Midwest and
Southwest Operations, Senior Project Manager of Engineering/
Projects, and acting General Manager of ENGlobal Government
Services, Inc. Prior to joining ENGlobal, Mr. Williams served as
Vice President – Engineering for U.S. Transcarbon LLC, a
petroleum coke gasification project developer, from April 2008
until October 2010. In total, he has over 35 years of domestic and
international experience in engineering and project management,
including several project management positions of increasing
responsibility in the U.S., Middle East, Papua New Guinea, Asia,
Mexico and Brazil. Mr. Williams has an undergraduate degree in
Chemistry from the University of Northern Iowa, with post graduate
studies in Environmental Management from the University of Houston
and MBA studies at Incarnate Word University.
EXECUTIVE
COMPENSATION TABLES
Summary Compensation Table
The
following table sets forth information regarding compensation
earned during the last two fiscal years by our Chief Executive
Officer, Chief Financial Officer, and Senior Vice President (the
“named executive officers”).
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus(1)
($)
|
Stock
Awards(2)
($)
|
Non-Equity Incentive
Plan Compensation(3)
|
All Other Compensation(4)
($)
|
Total
($)
|
|
Mr. Coskey ~ Former President & Chief
Executive Officer(5)
|
2020
|
49,442
|
-
|
-
|
-
|
-
|
49,442
|
|
Mr. Coskey ~ Former President & Chief
Executive Officer(5)
|
2019
|
49,442
|
-
|
-
|
-
|
-
|
49,422
|
|
|
|
|
|
|
|
|
|
|
Mr. Hess ~ Former Chief Financial Officer,
Secretary & Treasurer(6)
|
2020
|
250,016
|
-
|
-
|
-
|
9,616
|
259,632
|
|
Mr. Hess ~ Former Chief Financial Officer,
Secretary & Treasurer(6)
|
2019
|
246,126
|
-
|
-
|
-
|
-
|
246,126
|
|
|
|
|
|
|
|
|
|
|
Mr. Williams ~
Senior Vice President
|
2020
|
236,912
|
69,984
|
-
|
-
|
-
|
306,896
|
|
Mr. Williams ~
Senior Vice President
|
2019
|
236,912
|
-
|
-
|
-
|
-
|
236,912
|
|
(1) This column
includes compensation paid pursuant to ENGlobal U.S. Inc.’s
Growth Incentive Plan which provides a variable compensation
component for developing and selling significant projects for the
Company, including products and services. ENGlobal U.S. Inc.
adopted the plan on November 5, 2019.
(2) This column shows
the grant date fair value of equity awards computed in accordance
with stock-based compensation accounting rules (FASB ASC Topic
718). Values for awards subject to performance conditions are
computed based upon the probable outcome of the performance
condition as of the grant date. For a description of certain
assumptions made in the valuation of stock awards, see Part II,
Item 8, Note 10 in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 26, 2020 filed with the SEC on
March 11, 2021.
|
|
(3) The Non-Equity
Incentive Plan includes amounts awarded pursuant to the
Company’s Short Term Incentive Plan. Metrics are set annually
and are generally contingent on the Company reaching certain levels
of Net Operating Income.
|
|
(4) All Other
Compensation includes paid time off, or PTO, cash outs. Does not
include perquisites or personal benefits if the aggregate amount is
less than $10,000. Does not include medical, dental, life, short
and long term disability or paid time off benefits which were
available to all employees.
(5) Mr. Coskey retired
from his officer positions effective March 12, 2021.
(6) Mr. Hess was
appointed Chief Executive Officer effective March 12,
2021.
|
Outstanding Equity Awards at Fiscal Year End 2020
The
following table sets forth information as of December 26, 2020
regarding outstanding equity awards held by the named executive
officers. On December 24, 2020, the closing price on NASDAQ for the
Company’s common stock was $2.95 per share.
|
|
Restricted Stock
Awards
|
|||
|
Name
|
Number
of
Shares
That
Have
Not
Vested(1)
|
Market Value
of
Shares of
Stock
That Have
Not
Vested
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares That
Have
Not
Vested
|
Equity Incentive
Plan
Awards: Market
Value
of Unearned
Shares
That Have Not
Vested
|
|
|
|
|
|
|
|
Mr. Coskey
|
--
|
--
|
--
|
--
|
|
Mr. Hess(1)
|
10,000
|
$29,500
|
--
|
--
|
|
Mr. Williams(2)
|
7,500
|
$22,125
|
--
|
--
|
|
(1) Includes 10,000
shares that were granted under the Amended and Restated 2009 Equity
Incentive Plan (the “2009 Plan”) on August 10, 2017,
which will vest 10,000 shares on August 10, 2021.
|
||||
|
(2) Includes 7,500 shares
that were granted under the 2009 Plan on August 10, 2017 which will
vest on August 10, 2021
|
Employment Agreements; Termination and Change-in-Control
Arrangements
Messrs.
Hess and Westerlind are each a party to a written employment
agreement (the “Employment Agreements”) with ENGlobal
and ENGlobal U.S., respectively. The Employment Agreements provide
for an annual base salary, subject to discretionary increases by
the Board, and other compensation in the form of cash bonuses,
incentive compensation, stock options, stock appreciation rights,
and restricted stock awards. Additionally, the executives receive
health, life, and other insurance benefits in accordance with the
terms of the Company’s benefit plans, and the Company
provides management level support services and reimbursement for
specified business expenses.
The
Employment Agreements provide for severance payments and benefits
in the case of termination of employment. If employment ends
because of death, the Company will pay any accrued but unpaid
salary, additional compensation, and other benefits earned up to
that date. In the case of a physical or mental disability that
prevents the executive from performing his services under the
Employment Agreement for a period of three months, the Company may
terminate the executive’s employment. If the Company
terminates an executive’s employment in such cases of
disability, the Employment Agreements provide that the Company will
continue to pay the executive his full salary and benefits for the
six months following the date of termination (the “Initial
Severance Period”). At the Company’s option, severance
payments consisting of 100% of the monthly amount of the
executive’s base salary in the case of Mr. Hess and 50% of
the monthly amount of the executive’s base salary in the case
of Mr. Westerlind, and full benefits may be extended for an
additional six-month period following the Initial Severance
Period.
If the
Company terminates an executive’s employment for
“cause,” as defined in the Employment Agreements, the
Company will pay any accrued but unpaid salary, additional
compensation, and other benefits earned up to the effective date of
termination. If the Company terminates an executive’s
employment without “cause,” the Employment Agreement
provides that the Company will continue to pay the executive his
full salary and benefits for the Initial Severance Period. At the
Company’s option, severance payments consisting of 100% of
the monthly amount of the executive’s base salary in the case
of Mr. Hess and 50% of the monthly amount of the executive’s
base salary in the case of Mr. Westerlind, and full benefits may be
extended for an additional six-month period following the Initial
Severance Period.
The
Employment Agreements include a covenant not to compete following
termination of employment for a period of up to one year, as well
as confidentiality provisions that are customary in nature and
scope, for such agreements.
The
terms of the Employment Agreements were set through the course of
arms-length negotiations with the executives. As part of these
negotiations, the Compensation Committee analyzed the terms of the
same or similar arrangements for comparable executives employed by
some of the companies in our peer group. The Compensation Committee
used this approach in setting the amounts payable and the
triggering events under the Employment Agreements. The Employment
Agreements’ termination of employment provisions were entered
into in order to address competitive concerns by providing the
executives with a fixed amount of compensation that would offset
the potential risk of foregoing other opportunities. At the time of
entering into the Employment Agreements, the Compensation Committee
considered ENGlobal’s aggregate potential obligations in the
context of retaining the executives and their expected
compensation.
Executive Perquisites
Our use
of perquisites as a component of compensation is limited and
largely based on historical practices and policies of our Company.
These perquisites and other benefits are provided to assure
competitiveness and provide an additional retention incentive for
these executives. Our Compensation Committee endeavors to adhere to
a high level of propriety in managing executive benefits and
perquisites. We do not own a plane and do not provide any personal
aircraft use for executives.
Other Compensation
From
time to time, we make available to employees and executives certain
other fringe benefits. We may provide club memberships, tickets to
sporting or cultural events, tickets to community events, etc. To
the extent that such items are taxable to the individual, they are
considered to be part of the individual’s compensation
package.
Review of and Conclusion Regarding All Components of Executive
Compensation
Based
on our performance during the past several years, and in light of
our executives’ efforts in directing the Company, the
Compensation Committee and the Board have determined that the
compensation paid to our named executive officers, serves the best
interests of our shareholders and continues to emphasize programs
that the Compensation Committee and the Board believe positively
affect shareholder value.
DIRECTOR COMPENSATION
The
following table discloses cash and equity awards and other
compensation earned, paid or awarded, as the case may be, to each
of the Company’s non-employee directors during the fiscal
year ended December 26, 2020.
|
Name
|
Fees Earned or
Paid in Cash ($)(1)
|
Stock Awards
($)(2)
|
Option Awards
($)
|
All Other
Compensation ($)
|
Total
|
|
|
|
|
|
|
|
|
Randall B.
Hale(3)
|
$34,000
|
$50,000
|
--
|
--
|
$84,000
|
|
David W.
Gent
|
$30,000
|
$50,000
|
--
|
--
|
$80,000
|
|
David C.
Roussel
|
$30,000
|
$50,000
|
--
|
--
|
$80,000
|
|
Kevin M.
Palma
|
--
|
--
|
--
|
--
|
--
|
(1)
Amount paid in cash
to non-employee directors for director compensation earned for
their 2020 Board service.
(2)
This column shows
the grant date fair value of equity awards computed in accordance
with stock-based compensation accounting rules (FASB ASC Topic
718). Values for awards subject to performance conditions are
computed based upon the probable outcome of the performance
condition as of the grant date. For a description of certain
assumptions made in the valuation of stock awards, see Part II,
Item 8, Note 10 in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 26, 2020 filed with the SEC on
March 11, 2021. Represents 49,020 shares of restricted stock at a
fair market value per share price of $1.02 granted to each director
on June 11, 2020, as described below under “Restricted Stock
Grants.” As of December 26, 2020, Messrs. Hale, Gent and
Roussel each had a total of 36,765 shares of restricted stock that
were unvested.
(3)
Mr. Hale resigned
from the Board on February 23, 2021.
The
principal objectives of our director compensation programs are to:
(i) compensate for time spent on the Company’s behalf, and
(ii) align the compensation programs with long-term value to the
Company’s shareholders. We attempt to accomplish these
objectives in an economical manner through a combination of
reasonable director retainer fees and equity incentive grants to
the directors.
Retainer Fees
Historically, our
non-employee directors received a cash retainer as compensation for
their service to the Company, and our Chairman of the Audit
Committee also received an additional cash retainer as compensation
for such service. Our non-employee directors are also eligible for
reimbursement of travel and other miscellaneous expenses associated
with attendance at Board and Committee meetings. However, due to
the losses that the Company incurred during 2016 and 2017, the
Compensation Committee recommended and the Board approved that cash
retainer fees be suspended effective October 1, 2017 and reviewed
for reinstatement on a quarterly basis. Cash retainer fees were
reinstated during fiscal year 2020. Our non-employee directors,
Messrs. Gent, Hale and Roussel, each received an annual cash
retainer of $30,000 as compensation for their service to the
Company and Mr. Hale received an additional $4,000 for his service
as Audit Committee Chairman.
Restricted Stock Grants
Under
the Plan, non-employee directors are eligible to receive equity
grants. Our non-employee directors typically receive the equity
grants in June concurrent with the annual shareholder meeting. On
June 11, 2020, in recognition of the services provided by its Board
for the 2020-2021 service term, our non-employee directors, Messrs.
Gent, Hale and Roussel, each received 49,020 restricted shares of
the Company’s common stock, valued at $50,000 based on the
fair market value of the shares on the date of grant, or $1.02 per
share. One quarter of the shares vested on September 30, 2020. Due
to the losses that the Company incurred in 2016 and 2017, the
Compensation Committee recommended and the Board had suspended the
vesting provisions of the 42,735 restricted shares issued to
Messrs. Gent, Hale and Roussel in 2017; in 2020, the Board lifted
the suspension and the shares vested on May 5, 2020.
Mr.
Palma does not receive any compensation from the Company for his
service as a director, but is eligible for reimbursement of travel
and other miscellaneous expenses associated with attendance at
Board and Committee meetings.
HEDGING AND PLEDGING PROHIBITIONS
Our
Insider Trading Policy, which applies to all directors, officers
and employees of the Company, prohibits hedging or monetization
transactions or similar arrangements with respect to ENGlobal
stock, purchases of ENGlobal stock on margin or engaging in short
sales, or purchases or sales of puts, calls or other derivative
securities with respect to ENGlobal stock. In addition, officers
and directors of the Company are prohibited from encumbering any
portion of their ENGlobal securities or using ENGlobal securities
as collateral for any purpose, unless any such transaction is
approved in advance by the Chairman and Chief Executive Officer and
the Lead Independent Director.
AUDIT MATTERS
Report of the Audit Committee
The information contained in this Report of the Audit Committee
shall not be deemed to be “soliciting material” or to
be “filed” or incorporated by reference in future
filings with the SEC, or to be subject to the liabilities of
Section 18 of the Exchange Act, except to the extent that we
specifically incorporate it by reference into a document filed
under the Securities Act of 1933, as amended, or the Exchange
Act.
In
accordance with its written charter, the Audit Committee assists
the Board in, among other matters, oversight of our financial
reporting process, including the effectiveness of our internal
accounting and financial controls and procedures, and controls over
our accounting, auditing, and financial reporting practices. A copy
of the Audit Committee Charter is available on the “Investors
– Governance Highlights” section of our website at
www.englobal.com.
The
Board has determined that all three members of the Audit Committee
are “independent” based upon the standards adopted by
the Board, which incorporate the independence requirements under
applicable laws, rules and regulations.
Management is
responsible for the financial reporting process, the preparation of
consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America, and
our system of internal controls and procedures designed to ensure
compliance with accounting standards and applicable laws and
regulations. Our independent registered public accounting firm is
responsible for auditing the financial statements. The Audit
Committee’s responsibility is to monitor and review these
processes and procedures. The members of the Audit Committee are
not professionally engaged in the practice of accounting or
auditing and we are not professionals in those fields. The Audit
Committee relies, without independent verification, on the
information provided to us and on the representations made by
management that the financial statements have been prepared with
integrity and objectivity and on the representations of management
and the opinion of the independent registered public accounting
firm that such financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America.
During
fiscal year 2020, the Audit Committee held seven meetings. The
Audit Committee’s meetings were conducted so as to encourage
communication among the members of the Audit Committee, management,
and our independent registered public accounting firm, Moss Adams
LLP. Among other things, the Audit Committee discussed with our
internal and independent auditors the overall scope and plans for
ENGlobal’s audits. The Audit Committee met separately with
the independent registered public accounting firm, with and without
management, to discuss the results of their examinations and their
observations and recommendations regarding our internal controls.
The Audit Committee also discussed with our independent registered
public accounting firm all matters required to be discussed by the
applicable requirements of the Public Company Accounting Oversight
Board and the SEC.
The
Audit Committee reviewed and discussed our audited consolidated
financial statements as of and for the year ended December 26,
2020, with management and our independent registered public
accounting firm. Management’s discussions with the Audit
Committee included a review of critical accounting
policies.
The
Audit Committee obtained from the independent auditors a formal
written statement describing all relationships between us and our
registered public accounting firm that might bear on the
independence of the independent registered public accounting firm
consistent with the applicable requirements of the Public Company
Accounting Oversight Board regarding the independent registered
public accounting firm communications with audit committees
concerning independence The Audit Committee discussed with the
independent registered public accounting firm any relationships
that may have an impact on the auditors’ objectivity and
independence and satisfied itself as to the auditors’
independence. The Audit Committee has reviewed and approved the
amount of fees paid to Moss Adams LLP for audit and non-audit
services. The Audit Committee concluded that the provision of
services by Moss Adams LLP is compatible with the maintenance of
Moss Adams LLP’s independence.
At
seven of its meetings during 2020, the Audit Committee met with
members of senior management and the independent registered public
accounting firm to review the certifications provided by the Chief
Executive Officer and Chief Financial Officer under the
Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC
and the overall certification process. At these meetings, Company
officers reviewed each of the Sarbanes-Oxley certification
requirements concerning internal control over financial reporting
and any fraud, whether or not material, involving management or
other employees with a significant role in internal control over
financial reporting.
Based
on the above-mentioned review and discussions with management, and
the independent registered public accounting firm, and subject to
the limitations on our role and responsibilities described above
and in the Audit Committee Charter, the Audit Committee recommended
to the Board of Directors that ENGlobal’s audited
consolidated financial statements be included in its Annual Report
on Form 10-K for the fiscal year ended December 26, 2020, for
filing with the SEC.
Audit
Committee of the Board of Directors,
Kevin
M. Palma, Chairman
David
W. Gent
David
C. Roussel
March 11, 2021
Principal Auditor Fees
Moss
Adams LLP was appointed as the Company’s independent auditors
on November 16, 2017 and has audited the Company’s 2020 and
2019 consolidated financial statements. During 2020 and 2019, Moss
Adams LLP did not audit the Company’s internal control over
financial reporting because the Company is a “smaller
reporting company” as defined under the rules of the Exchange
Act. The Audit Committee has determined that the audit-related
services provided by Moss Adams LLP are compatible with maintaining
its independence in the conduct of its auditing functions pursuant
to the auditor independence rules of the SEC. No non-audit services
were provided by Moss Adams LLP in 2020 and 2019.
The
following table shows the fees paid or accrued by ENGlobal for the
audit and other services provided by Moss Adams LLP for fiscal
years 2020 and 2019.
|
|
2020
|
2019
|
|
|
|
|
|
Audit
Fees
|
163,000
|
172,000
|
|
Audit-Related
Fees
|
--
|
--
|
|
Tax
Fees
|
--
|
--
|
|
All Other
Fees
|
--
|
--
|
|
Total
|
163,000
|
172,000
|
As
defined by the SEC, (i) “audit fees” are fees for
professional services rendered by the Company’s independent
registered public accounting firm for the audit of the
Company’s annual financial statements and review of financial
statements included in the Company’s Quarterly Reports on
Form 10-Q, or for services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for those fiscal years; (ii) “audit-related
fees” are fees for assurance and related services by the
Company’s independent registered public accounting firm that
are reasonably related to the performance of the audit or review of
the Company’s financial statements and are not reported under
“audit fees”; (iii) “tax fees” are fees for
professional services rendered by the Company’s independent
registered public accounting firm for tax compliance, tax advice,
and tax planning; and (iv) “all other fees” are fees
for products and services provided by the Company’s
independent registered public accounting firm, other than the
services reported under “audit fees,”
“audit-related fees,” and “tax
fees.”
Pre-Approval Policy
Under
applicable SEC rules, except for the ability to designate a portion
of this responsibility as described below, the full Audit Committee
is required to pre-approve the audit and non-audit services
performed by the independent registered public accounting firm in
order to ensure that they do not impair the auditors’
independence from ENGlobal. The Audit Committee may delegate
pre-approval authority to a member of the Audit Committee, and if
it does, the decisions of that member must be presented to the full
Audit Committee at its next scheduled meeting. The SEC’s
rules specify the types of non-audit services that an independent
auditor may not provide to its audit client and establish the Audit
Committee’s responsibility for administration of the
engagement of the independent registered public accounting
firm.
Consistent with the
SEC’s rules, the Audit Committee Charter requires that the
Audit Committee review and pre-approve all audit services and
permitted non-audit services provided by the independent registered
public accounting firm to ENGlobal or any of its subsidiaries,
except that the Audit Committee Chairman has the right to approve
up to $25,000 of services in any year. During 2020, all fees were
pre-approved by the Audit Committee.
OTHER MATTERS
To the
best of the knowledge, information and belief of the directors,
there are no other matters which are to be acted upon at the
Meeting. If such matters arise, the form of proxy provides that
discretionary authority is conferred on the designated persons in
the enclosed form of proxy to vote with respect to such
matters.
The
Company has received no notice of any other items to be submitted
for consideration at the Meeting and, except for reports of
operations and activities by management, which are for
informational purposes only and require no approval or disapproval,
and consideration of the minutes of the preceding annual meeting
for approval, which may involve technical corrections to the text
where actions taken were incorrectly recorded, but which require no
action of approval or disapproval of the subject matter, management
does not know of or contemplate any other business that will be
presented for action by the shareholders at the Meeting. If any
further business is properly presented at the Meeting, the persons
named as proxies will act in their discretion on behalf of the
shareholders they represent.
SHAREHOLDER PROPOSALS FOR 2022
Under
Rule 14a-8 of the Exchange Act, shareholder proposals must be
received by the Company no later than March 17, 2022 to be
considered for inclusion in the Company’s proxy statement
relating to the 2022 Annual Meeting of Shareholders or, if the
Company changes the date of the 2022 Annual Meeting by more than 30
days from the date of the 2021 Annual Meeting, then shareholder
proposals must be received by the Company a reasonable time before
the Company begins to print and send its proxy materials for the
2022 Annual Meeting of Shareholders.
In
addition, pursuant to our bylaws, shareholder proposals to be
presented at the 2022 Annual Meeting of Shareholders of the Company
(whether or not to be included in the Company’s proxy
statement) must be made upon timely notice. A timely notice must be
made in writing, contain the information required by our bylaws and
be received by the Secretary of the Company at the principal
executive offices of the Company not earlier than the close of
business on the 120th calendar day, nor
later than the close of business on the 90th calendar day,
immediately before the first anniversary of the 2021 Annual Meeting
of Shareholders. However, in the event that the date of the 2022
Annual Meeting is advanced more than 30 calendar days before, or
delayed more than 70 calendar days after, such anniversary date,
notice by the shareholder to be timely must be delivered not later
than the close of business on the 10th calendar day
following the day on which public announcement of a meeting date is
first made by the Company. For information regarding the nomination
of director candidates, please see “Consideration of Director
Nominees - Shareholder Nominees” on page 8 of this proxy
statement.
SHAREHOLDERS SHARING THE SAME ADDRESS
The SEC
has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for shareholder
meeting materials with respect to two or more shareholders sharing
the same address by delivering a single set of meeting materials
addressed to those shareholders. This process, which is commonly
referred to as “householding,” potentially means extra
convenience for shareholders and cost savings for
companies.
A
number of brokers with account holders who are ENGlobal
shareholders will be “householding” our proxy
materials. A single set of meeting materials will be delivered to
multiple shareholders sharing an address unless contrary
instructions have been received from the affected shareholders.
Once you have received notice from your broker that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate set of shareholder meeting materials,
please notify your broker or ENGlobal. Direct your written request
to Investor Relations at ENGlobal Corporation, 654 N. Sam Houston
Parkway E., Suite 400, Houston, TX 77060-5914, (281) 878-1000.
Shareholders who currently receive multiple copies of shareholder
meeting materials at their addresses and would like to request
“householding” of their communications should contact
their brokers.
ANNUAL REPORT TO SHAREHOLDERS
A copy
of ENGlobal’s Annual Report on Form 10-K, which includes our
consolidated financial statements, is being delivered to you with
this proxy statement. You may also read, print and download our
annual report at http://www.proxyvote.com. The annual report may
also be read, downloaded and printed at
www.englobal.com.
APPROVAL OF THE BOARD OF DIRECTORS
The
contents of this proxy statement have been approved by the Board of
Directors, and the Board of Directors has authorized the mailing of
this proxy statement to the shareholders of the
Company.
By
Order of the Board of Directors,
Darren
W. Spriggs
Chief
Financial Officer, Treasurer and Corporate Secretary
Houston,
Texas
July
15, 2021
APPENDIX A
ENGLOBAL CORPORATION 2021 LONG TERM INCENTIVE PLAN
ENGLOBAL CORPORATION
2021 LONG TERM INCENTIVE PLAN
(Effective August 26, 2021)
TABLE OF CONTENTS
|
|
|
Page
|
|
SECTION 1 ESTABLISHMENT; PURPOSE AND TERM OF PLAN
|
|
A-1
|
|
1.1
Establishment
|
A-1 | |
|
1.2
Purpose
|
A-1 | |
|
1.3
Term
of Plan
|
A-1 | |
|
SECTION 2 DEFINITIONS AND CONSTRUCTION
|
|
A-1 |
|
2.1
Definitions
|
A-1 | |
|
2.2
Construction
|
A-9 | |
|
SECTION 3 ADMINISTRATION
|
|
A-9 |
|
3.1
Administration
by the Committee
|
A-9 | |
|
3.2
Authority
of Officers
|
A-10 | |
|
3.3
Powers
of the Committee
|
A-10 | |
|
3.4
Administration
with Respect to Insiders
|
A-11 | |
|
3.5
Indemnification
|
A-12 | |
|
SECTION 4 SHARES SUBJECT TO PLAN
|
|
A-12 |
|
4.1
Maximum
Number of Shares Issuable
|
A-12 | |
|
4.2
Adjustments
for Changes in Capital Structure
|
A-13 | |
|
4.3
Shares
Available for Awards and Payouts
|
A-13 | |
|
SECTION 5 ELIGIBILITY AND AWARD LIMITATIONS
|
|
A-14 |
|
5.1
Persons
Eligible for Awards
|
A-14 | |
|
5.2
Award
Agreements
|
A-15 | |
|
5.3
Award
Grant Restrictions
|
A-15 | |
|
5.4
Fair
Market Value Limitations for Incentive Stock Options
|
A-15 | |
|
5.5
Repurchase
Rights, Right of First Refusal and Other Restrictions on
Stock
|
A-16 | |
|
SECTION 6 TERMS AND CONDITIONS OF OPTIONS
|
|
A-16 |
|
6.1
Exercise
Price
|
A-16 | |
|
6.2
Exercisability,
Vesting and Term of Options
|
A-16 | |
|
6.3
Payment
of Exercise Price
|
A-17 | |
|
SECTION 7 RESTRICTED STOCK
|
|
A-18
|
|
7.1
Award
of Restricted Stock
|
A-18 | |
|
7.2
Restrictions
|
A-18 | |
|
7.3
Issuance
of Stock
|
A-20 | |
|
SECTION 8 OTHER STOCK-BASED AWARDS, PERFORMANCE AWARDS AND
DIVIDENDS, OR DIVIDEND EQUIVALENTS
|
|
A-20 |
|
8.1
Grant
of Other Stock-Based and Performance Awards
|
A-20 | |
|
8.2
Other
Stock-Based Award and Performance Awards Terms
|
A-20 | |
|
8.3
Dividends
or Dividend Equivalents.
|
A-21 | |
|
8.4
Limitations
for Director Awards.
|
A-21 | |
|
SECTION 9 EFFECT OF TERMINATION OF SERVICE
|
|
A-22 |
|
9.1
Option
Exercisability and Award Vesting
|
A-22 | |
|
9.2
Extension
of Option if Exercise Prevented by Applicable Law
|
A-23
|
|
|
9.3
Extension
if Participant Subject to Section 16(b)
|
A-23
|
|
|
SECTION 10 WITHHOLDING TAXES
|
|
A-24
|
|
10.1
Tax
Withholding
|
A-24
|
|
|
10.2
Share
Withholding
|
A-24 | |
|
10.3
Incentive
Stock Options
|
A-24 | |
|
SECTION 11 PROVISION OF INFORMATION
|
|
A-24 |
|
SECTION 12 COMPLIANCE WITH SECURITIES LAW, OTHER APPLICABLE LAWS
AND COMPANY POLICIES
|
|
A-25
|
|
SECTION 13 NONTRANSFERABILITY OF AWARDS AND STOCK
|
|
A-26
|
|
SECTION 14 NONCOMPETITIVE ACTIONS
|
|
A-26
|
|
SECTION 15 TERMINATION OR AMENDMENT OF PLAN
|
|
A-26
|
|
SECTION 16 STOCKHOLDER APPROVAL
|
|
A-27
|
|
SECTION 17 NO GUARANTEE OF TAX CONSEQUENCES
|
|
A-27
|
|
SECTION 18 SEVERABILITY
|
|
A-27
|
|
SECTION 19 GOVERNING LAW
|
|
A-27
|
|
SECTION 20 SUCCESSORS
|
|
A-28
|
|
SECTION 21 RIGHTS AS A STOCKHOLDER
|
|
A-28
|
|
SECTION 22 NO SPECIAL EMPLOYMENT OR SERVICE RIGHTS
|
|
A-28
|
|
SECTION 23 REORGANIZATION OF COMPANY
|
|
A-28
|
|
SECTION 24 CODE SECTION 409A
|
|
A-29
|
|
SECTION 25 ASSUMPTIONS OF AWARDS AND ADJUSTMENTS UPON A CHANGE IN
CONTROL
|
|
|
ENGLOBAL CORPORATION
2021 LONG TERM INCENTIVE PLAN
SECTION 1
ENGlobal
Corporation previously established the Amended and Restated
ENGlobal Corporation 2009 Equity Incentive Plan (the
“2009
Plan”). The term of the 2009 Plan expires on the
earlier of June 11, 2021 or the date of the Company’s 2021
annual meeting of shareholders. The Board hereby approves and
authorizes the establishment of the ENGlobal Corporation 2021 Long
Term Incentive Plan effective on the date of the Company’s
2021 annual meeting of shareholders if approved by the shareholders
(the “Effective
Date”) subject to the approval of the Company’s
shareholders on the date of the Company’s 2021 annual meeting
of shareholders (the “Plan”). This
Plan shall not amend the 2009 Plan or any award granted under the
2009 Plan.
The
purpose of the Plan is to advance the interests of the Company and
its stockholders by providing an incentive to attract, retain and
reward persons performing services for the Company and by
motivating such persons to contribute to the growth and
profitability of the Company.
The
Plan shall continue in effect until the earlier of its termination
by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all
restrictions on such shares of Stock under the terms of the Plan
and the agreements evidencing Awards granted under the Plan have
lapsed. However, all Awards shall be granted on or before the date
which is ten (10) years from the Effective Date. No future awards
will be granted under the 2009 Plan, but all outstanding awards
under the 2009 Plan shall continue under the 2009 Plan until they
expire according to their terms.
SECTION 2
Whenever used
herein, the following terms shall have their respective meanings
set forth below:
(a) “2009 Plan”
shall have the meaning described in Section 1.1.
(b) “Affiliate”
means, with
respect to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person and
shall include a Subsidiary. The term “control”
includes, without limitation, the possession, directly or
indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise. With respect to any Award that is deferred
compensation subject to Code Section 409A, for the purposes of
applying Code Section 409A to such Award the term Affiliate shall
mean all Persons with whom the Participant’s employer would
be considered a single employer under Code Section 414(b) or 414(c)
as defined and modified in Code Section 409 as determined by the
Committee. Notwithstanding the foregoing, with respect to
Nonstatutory Stock Options and Stock Appreciation Rights, if
necessary for such Awards to be exempt from Code Section 409A, as
determined by the Committee, for purposes of grants of such Awards,
Affiliate shall only include an entity if the Stock would
constitute “service recipient
stock” within the meaning of Code Section
409A.
(c) “Applicable
Laws”
means the
requirements relating to the administration of equity-based awards
or equity compensation plans under U.S. federal and state corporate
laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction
where Awards are, or shall be, granted under the Plan.
(d) “Award”
shall mean a
grant of an Option, Restricted Stock, Other Stock-Based Award,
including without limitation, Stock Appreciation Rights, Restricted
Stock Units, Performance Awards, Dividends or Dividend Equivalents
to a Participant under this Plan.
(e) “Award
Agreement”
means a
written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted
to the Participant and any shares of Stock acquired upon the
exercise thereof, and which may be in electronic form. The Award
Agreement consists of the Award Agreement and the Notice of Grant
of an Award incorporated therein by reference, or such other form
or forms as the Committee may approve from time to time, and which
may be in electronic form.
(f) “Board”
means the
Board of Directors of the Company.
(g) “Cashless
Exercise” shall have the meaning set forth in Section
6.3(a) hereto.
(h) “Cause” shall
mean, except as otherwise defined in the Participant’s Award
Agreement, when used in connection with the termination of a
Participant’s Service, the termination of the
Participant’s Service by the Company or any Company Affiliate
by reason of (i) the conviction of the Participant by a court of
competent jurisdiction as to which no further appeal can be taken
of a crime involving moral turpitude or a felony; (ii) the
commission by the Participant of a material act of fraud upon the
Company or any Company Affiliate, or any customer or supplier
thereof; (iii) the misappropriation of any funds or property of the
Company or any Company Affiliate, or any customer or supplier
thereof; (iv) the willful, continued and unreasonable failure
by the Participant to perform the material duties assigned to him
that is not cured to the reasonable satisfaction of the Company
within 7 days after written notice of such failure is provided to
Participant by the Board or Chief Executive Officer of the Company
(the “CEO”) (or by
another officer of the Company or a Company Affiliate who has been
designated by the Board or CEO for such purpose); (v) the
engagement by the Participant in any direct and material conflict
of interest with the Company or any Company Affiliate without
compliance with the Company’s or Company Affiliate’s
conflict of interest policy, if any, then in effect; or (vi)
the engagement by the Participant, without the written approval of
the Board or CEO, in any material activity which competes
with the business of the Company or any Company Affiliate or
which would result in a material injury to the business,
reputation or goodwill of the Company or any Company
Affiliate.
(i) A
“Change in Control”
means the
occurrence of any of the following events:
(i) any
“person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of the Company representing
50% or more of the total voting power represented by the
Company’s then outstanding voting securities;
(ii) the sale or
disposition by the Company of all or substantially all of the
Company’s assets other than (A) the sale or disposition of
all or substantially all of the assets of the Company to a person
or persons who beneficially own, directly or indirectly, at least
50% or more of the combined voting power of the outstanding voting
securities of the Company at the time of the sale or (B) pursuant
to a spin-off type transaction, directly or indirectly, of such
assets to the Company’s stockholders;
(iii) a change in the
composition of the Board occurring within a two-year period, as a
result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent
Directors” are directors who either (A) are Directors
as of the effective date of the Plan, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such
election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to
the Company); or
(iv) a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
its parent) at least 50% of the total voting power represented by
the voting securities of the Company or such surviving entity or
its parent outstanding immediately after such merger or
consolidation.
Notwithstanding the
foregoing, with respect to an Award that is deferred compensation
subject to Code Section 409A and only to the extent required by
Code Section 409A for compliance with Code Section 409A, a Change
in Control shall have the meaning of an event described in Treasury
Regulation 1.409A-3(i)(5)(v).
(j) “Code”
means the
Internal Revenue Code of 1986, as amended, and any applicable
notices, rulings and regulations promulgated
thereunder.
(k) “Committee”
means the Board or, if so appointed by the Board, the compensation
committee of the Board or any other committee duly appointed by the
Board to administer the Plan in compliance with Applicable Laws,
which such committee may consist of one or more natural persons who
are “non-employee directors” under Rule
16b-3.
(l) “Company”
means
ENGlobal Corporation, a Nevada corporation, and any successor to
ENGlobal Corporation.
(m) “Consultant”
means an
individual who is a natural person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to the
Company or its Affiliates, including individuals who serve as
directors of the Company or an Affiliate of the Company but who are
not a Director, provided that the identity of such individual, the
nature of such services or the entity to which such services are
provided are not in connection with the offer or sale of securities
in a capital raising transaction, and do not directly or indirectly
promote or maintain a market for the Company’s securities or
would not preclude the Company from offering or selling securities
to such individual pursuant to the Plan in reliance on either the
exemption from registration provided under the Securities Act or,
if the Company is required to file reports pursuant to Section 13
or 15(d) of the Exchange Act, registration on a Form S-8
Registration Statement under the Securities Act.
(n) “Director”
means a
member of the Board who is a non-employee director within the
meaning of Rule 16b-3 or other Applicable Law, and who meets the
requirements of Applicable Law to be an “independent
director,” and who is certified by the Board as an
independent director.
(o) “Disability”
means, unless otherwise defined in the Award Agreement, as
determined by the Committee in its discretion exercised in good
faith, a physical or mental condition of the Employee that would
entitle him to payment of disability income payments under the
Company’s long term disability insurance policy or plan
for employees, as then effective, if any; or in the event that the
Participant is not covered, for whatever reason, under the
Company’s long-term disability insurance policy or plan,
Disability means a permanent and total disability as defined in
Section 22(e)(3) of the Code. A determination of Disability may be
made by a physician selected or approved by the Committee and, in
this respect, the Participant, by accepting an Award, agrees to
submit to any reasonable examination by such physician upon
request.
(p) “Dividends
or Dividend Equivalents”
means an
Award as specified in Section 8.3.
(q) “Effective
Date”
shall have
the meaning set forth in Section 1.1 hereto.
(r) “Employee”
means any
individual treated as an employee (including a director of the
Company or a Company Affiliate who is also treated as an employee)
of the Company on the records of the Company or of any of the
Company’s Affiliates on the records of such Affiliate and,
with respect to any Incentive Stock Option granted to such
individual, who is an employee of the Company or a
“Parent” (which
is a parent corporation of the Company within the meaning of
Section 424(e) of the Code, whether now or hereinafter existing) or
a Subsidiary of the Company for purposes of Sections 422, 424
and 3401(c) of the Code; provided, however, that neither service as
a director of the Company or of a Company Affiliate nor payment of
a director’s fee shall be sufficient to constitute employment
for purposes of the Plan. The Company shall determine in good faith
and in the exercise of its discretion whether an individual has
become or has ceased to be an Employee and the effective date of
such individual’s employment or termination of employment, as
the case may be. For purposes of an individual’s rights, if
any, under the Plan as of the time of the Company’s
determination, all such determinations by the Company shall be
final, binding and conclusive, notwithstanding that the Company,
the Board, the Committee or any court of law or governmental agency
subsequently makes a contrary determination.
(s) “Exchange
Act”
means the
Securities Exchange Act of 1934, as amended.
(t) “Fair
Market Value”
means as
follows:
If the
Stock is not publicly traded within the meaning of Code Section
409A or applicable securities laws at the time a determination of
the Fair Market Value of a share of Stock is required to be made
hereunder, the determination of Fair Market Value for purposes of
the Plan shall be made by the Committee in its discretion exercised
in good faith, and to the extent any Award is intended to be exempt
from Code Section 409A, consistent with Code Section 409A as it
shall determine. In this respect, the Committee may rely on such
financial data, appraisals, valuations, experts, and other sources
as, in its sole and absolute discretion, it deems advisable under
the circumstances.
While
the Stock is publicly traded within the meaning of Code Section
409A or applicable securities laws, the Fair Market Value of one
share of Stock on the date in question is deemed to be (i) the
closing sales price on the immediately preceding trading day of a
share of Stock as reported on NASDAQ or other principal securities
exchange on which shares of Stock are then listed or admitted to
trading, or (ii) if not quoted on NASDAQ or such other
principal securities exchange, the average of the closing bid and
asked prices on the immediately preceding trading day for a share
of Stock as quoted by the OTC Markets Group or the National
Association of Securities Dealers’ OTC Bulletin Board System,
or (iii) any other method permitted by Code Section 409A as
determined by the Committee in its discretion and consistently
applied. If there was no public trade of Stock on the date in
question, Fair Market Value shall be determined by reference to the
last preceding date on which such a trade was so reported or such
other method consistent with Code Section 409A to the extent
applicable for the Award to be exempt from the Code Section 409A
deferred compensation requirements.
(u) “Incentive
Stock Option”
means an
Option intended to be (as set forth in the Award Agreement) and
which qualifies as an incentive stock option within the meaning of
Section 422(b) of the Code.
(v) “Insider”
means an
Officer, a Director or other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.
(w) “New Shares”
shall have the meaning set forth in Section 4.2
hereto.
(x) “Nonstatutory
Stock Option”
means an
Option not intended to be (as set forth in the Award Agreement) or
which does not qualify as an Incentive Stock Option.
(y) “Notice
of Grant of an Award”
means the
Notice of Grant of an Award executed by the Company and the
Participant on the date of the grant of the Award. The Notice of
Grant of an Award and the execution thereof may be effected by
electronic form in accordance with Company policies.
(z) “Officer”
means any person designated by the
Board as an officer of the Company.
(aa) “Option”
means a right
to purchase Stock pursuant to the terms and conditions of the Plan.
An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(bb) “Option
Expiration Date”
shall have
the meaning set forth in Section 9.1(a) hereto.
(cc) “Other
Stock-Based Awards”
shall mean
Awards described in Section 8 and shall include, without
limitation, Stock Appreciation Rights.
(dd) “Participant”
means an
Employee, Director or Consultant who has been granted one or more
Awards hereunder.
(ee) “Performance
Awards”
shall mean
Awards described in Section 8.
(ff) “Permitted
Transferee” has the meaning provided such term in
Section 13.
(gg) “Person”
means any
individual or other natural person, partnership, corporation,
limited liability company, group, trust or other legal
entity.
(hh) “Plan”
shall have
the meaning set forth in Section 1.1 hereto.
(ii) “Retirement”
means, unless otherwise defined in the Award Agreement, the
Participant’s termination of employment after age 65 and 5
years of service with the Company or Company
Affiliate.
(jj) “Restricted
Stock”
shall mean an Award granted to a
Participant pursuant to Section 7 hereof.
(kk) “Restricted Stock
Unit” shall mean an Award granted under Section 8.1
hereof subject to restrictions and terms and conditions as
determined by the Committee in its sole discretion and settled in
Stock, cash or a combination thereof as determined by the Committee
in the Award and Award Agreement.
(ll) “Restriction
Period”
means the
period of time determined by the Committee and set forth in the
Award Agreement during which the transfer of Restricted Stock by
the Participant is restricted.
(mm) “Rule
16b-3”
means
Rule 16b-3 under the Exchange Act, as amended from time to
time, or any successor rule or regulation.
(nn) “Securities
Act”
means the
Securities Act of 1933, as amended.
(oo) “Section 409A
Plan”
shall have
the meaning described in Section 24.
(pp) “Service”
means a
Participant’s employment or service with the Company or any
of its Affiliates, whether in the capacity of an Employee, a
Director or a Consultant. A Participant’s Service shall not
be deemed to have terminated merely because of a change in the
capacity in which the Participant renders Service to the Company or
Affiliate (or in the case of an Incentive Stock Option the Parent
or Subsidiary of the Company) or a change in the Company or
Affiliate (or in the case of an Incentive Stock Option the Parent
or Subsidiary of the Company) for which the Participant renders
such Service, provided that there is no interruption or termination
of the Participant’s Service. Furthermore, a
Participant’s Service with the Company or an Affiliate (or in
the case of an Incentive Stock Option the Parent or Subsidiary of
the Company) shall not be deemed to have terminated if the
Participant takes any military leave, temporary illness leave,
authorized vacation or other bona fide leave of absence; provided,
however, that if any such leave exceeds three (3) months, the
Participant’s Service shall be deemed to have terminated
unless the Participant’s right to return to Service with the
Company is provided by either statute or contract or Board
approval. Notwithstanding the foregoing, unless otherwise
designated by the Company or provided by statute or contract, a
leave of absence shall not be treated as Service. The
Participant’s Service shall be deemed to have terminated
either upon an actual termination of Service or upon the company
for which the Participant performs Service ceasing to be the
Company or an Affiliate (or in the case of an Incentive Stock
Option the Parent or Subsidiary of the Company). Subject to the
foregoing, the Company, in its discretion, shall determine whether
the Participant’s Service has terminated and the effective
date of such termination, and provided further that respect to an
Incentive Stock Option Service shall be consistent with the
employment requirements of Code Sections 422 and 424 for tax
treatment as an Incentive Stock Option. Notwithstanding the
foregoing, with respect to any Award that is subject to 409A,
separation from service shall be determined by the Committee under
the applicable rules of Code Section 409A.
(qq) “Stock”
means the
common stock of the Company, par value $0.001 per share, as
adjusted from time to time in accordance with Section 4.2 or
Section 25 hereto.
(rr) “Stock Appreciation
Right” or “SAR”
Shall mean a
stock-based right granted under Section 8.1.
(ss) “Subsidiary”
means any
corporation (whether now or hereafter existing) which constitutes a
“subsidiary” of
the Company, as defined in Section 424(f) of the Code.
(tt) “Substitute
Awards”
shall have
the meaning in Section 4.1.
(uu) “Ten
Percent Owner Participant”
means a
Participant who, at the time an Option is granted to the
Participant, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the
Company or Parent or Subsidiary within the meaning of
Section 422(b)(6) of the Code.
(vv) “Term”
shall have
the meaning described in Section 15.
Captions and titles
contained herein are for convenience only and shall not affect the
meaning or interpretation of any provision of the Plan. Except when
otherwise indicated by the context, the singular shall include the
plural and the plural shall include the singular. Words of the
masculine gender shall include the feminine and neuter, and vice
versa. Use of the term “or” is not intended to be
exclusive, unless the context clearly requires otherwise. Section
headings as used herein are inserted solely for convenience and
reference and do not constitute any part of the interpretation or
construction of the Plan.
SECTION 3
The
Plan shall be administered by the Committee. All questions of
interpretation of the Plan, construction of its terms, or of any
Award shall be determined by the Committee, and such determinations
shall be final and binding upon all persons having an interest in
the Plan or such Award. Except to the extent prohibited by
Applicable Law, the Committee may delegate to one or more
individuals the day-to-day administration of the Plan and any of
the functions assigned to it in this Plan. Such delegation may be
revoked at any time.
Any
Officer shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to
the Company herein, provided the Officer has apparent authority
with respect to such matter, right, obligation, determination or
election.
In
addition to any other powers set forth in the Plan and subject to
the provisions of the Plan, the Committee shall have the full and
final power and authority, in its discretion:
(a) to determine the
persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock to be subject to each
Award;
(b) to designate Awards
as Restricted Stock or Options or Other Stock-Based Awards or
Performance Awards or Dividends or Dividend Equivalents, and to
designate Options as Incentive Stock Options or Nonstatutory Stock
Options;
(c) to determine the
Fair Market Value of shares of Stock or other
property;
(d) to determine the
terms, conditions and restrictions applicable to each Award (which
need not be identical) and any shares of Stock acquired upon the
exercise and/or vesting thereof, including, without limitation,
(i) the exercise price of the Option or Stock Appreciation
Right, (ii) the method of payment for shares of Stock
purchased upon the exercise and/or vesting of an Award,
(iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Award or such shares of
Stock, including by the withholding or delivery of shares of Stock,
(iv) the timing, terms and conditions, including but not
limited to performance goals, of the exercisability of the Award or
the vesting of any shares of Stock, (v) the time of the
expiration of the Award, (vi) the effect of the
Participant’s termination of Service on any of the foregoing,
(vii) the provision for electronic delivery of Awards and/or book
entry of the same, and (viii) all other terms, conditions and
restrictions applicable to the Award or such shares of Stock not
inconsistent with the terms of the Plan;
(e) to approve one or
more forms of the Award Agreement;
(f) to amend, modify,
extend, cancel, or renew any Award, or to waive any restrictions or
conditions applicable to any Award or any shares acquired upon the
exercise thereof; provided, however, that no such amendment,
modification, extension or cancellation shall materially adversely
affect a Participant’s Award without a Participant’s
consent, except as otherwise permitted in the Plan;
(g) to accelerate,
continue, extend or defer the exercisability and/or vesting of any
Award, including with respect to the period following a
Participant’s termination of Service;
(h) to prescribe, amend
or rescind rules, guidelines and policies relating to the Plan, or
to adopt supplements to, or alternative versions of, the Plan,
including, without limitation, as the Committee deems necessary or
desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be
granted Awards;
(i) to correct any
defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations
and take such other actions with respect to the Plan or any Award
as the Committee may deem advisable to the extent not inconsistent
with the provisions of the Plan or Applicable Law; and
(j) notwithstanding the
foregoing, except as provided in Sections 4.1, 4.2, 4.3 and Section
25, the terms of an outstanding Award may not be amended by the
Committee, without approval of the Company’s stockholders,
to: reprice an Award or otherwise (i) reduce the exercise price of
an outstanding Option or to reduce the exercise price of an
outstanding Stock Appreciation Right, (ii) cancel an outstanding
Option or outstanding Stock Appreciation Right in exchange for
other Options or Stock Appreciation Rights with an exercise price
that is less than theexercise price of the cancelled Option or the
cancelled Stock Appreciation Right, as applicable, or (iii) cancel
an outstanding Option with an exercise price that is greater than
the Fair Market Value of a share of Stock on the date of
cancellation or cancel an outstanding Stock Appreciation Right with
an exercise price that is greater than the Fair Market Value of a
share of Stock on the date of cancellation in exchange for cash or
another Award. In addition, no Option reloading will be
permitted.
With
respect to participation by Insiders in the Plan, at any time that
any class of equity security of the Company is registered pursuant
to Section 12 of the Exchange Act, the Plan shall be administered
in compliance with the requirements, if any, of Rule 16b-3 and
all other Applicable Laws, including any required blackout periods.
At any time the Company is required to comply with Securities
Regulation BTR, all transactions under this Plan respecting the
Company’s securities shall comply with Securities Regulation
BTR and the Company’s insider trading policies, as revised
from time to time, or such other similar Company policies,
including but not limited to policies relating to blackout periods.
Any ambiguities or inconsistencies in the construction of an Award
shall be interpreted to give effect to such limitation. To the
extent any provision of the Plan or Award Agreement or action by
the Committee or Company fails to so comply, such provision or
action shall be deemed null and void to the extent permitted by law
and deemed advisable by the Committee in its
discretion.
EACH
PERSON WHO IS OR WAS A MEMBER OF THE BOARD OR THE COMMITTEE SHALL
BE INDEMNIFIED BY THE COMPANY AGAINST AND FROM ANY DAMAGE, LOSS,
LIABILITY, COST AND EXPENSE THAT MAY BE IMPOSED UPON OR REASONABLY
INCURRED BY HIM IN CONNECTION WITH OR RESULTING FROM ANY CLAIM,
ACTION, SUIT, OR PROCEEDING TO WHICH HE MAY BE A PARTY OR IN WHICH
HE MAY BE INVOLVED BY REASON OF ANY ACTION TAKEN OR FAILURE TO ACT
UNDER THE PLAN (INCLUDING SUCH INDEMNIFICATION FOR A PERSON’S
OWN, SOLE, CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY),
EXCEPT FOR ANY SUCH ACT OR OMISSION CONSTITUTING WILLFUL OR
INTENTIONAL MISCONDUCT, FRAUD OR GROSS NEGLIGENCE. SUCH PERSON
SHALL BE INDEMNIFIED BY THE COMPANY FOR ALL AMOUNTS PAID BY HIM IN
SETTLEMENT THEREOF, WITH THE COMPANY’S APPROVAL, OR PAID BY
HIM IN SATISFACTION OF ANY JUDGMENT IN ANY SUCH ACTION, SUIT, OR
PROCEEDING AGAINST HIM, PROVIDED HE SHALL GIVE THE COMPANY AN
OPPORTUNITY, AT ITS OWN EXPENSE, TO HANDLE AND DEFEND THE SAME
BEFORE HE UNDERTAKES TO HANDLE AND DEFEND IT ON HIS OWN BEHALF. THE
FOREGOING RIGHT OF INDEMNIFICATION SHALL NOT BE EXCLUSIVE OF ANY
OTHER RIGHTS OF INDEMNIFICATION TO WHICH SUCH PERSONS MAY BE
ENTITLED UNDER THE COMPANY’S ARTICLES OF INCORPORATION OR
BYLAWS, AS A MATTER OF LAW, OR OTHERWISE, OR ANY POWER THAT THE
COMPANY MAY HAVE TO INDEMNIFY THEM OR HOLD THEM
HARMLESS.
SECTION 4
Subject
to adjustment as provided in Section 4.2, Section 4.3 and
Section 25, the maximum aggregate number of shares of Stock that
may be issued with respect to Awards under the Plan shall be one
and one half million (1,500,000) and may consist of any of the
following: shares of Stock held in treasury of the Company, shares
of Stock authorized but unissued or shares of Stock reacquired by
the Company or any combination of the foregoing. The maximum
aggregate number of such shares of Stock authorized for issuance in
the foregoing sentence that may be issued as Incentive Stock
Options shall be one and one half million (1,500,000) shares of
Stock. Shares of Stock of an outstanding Award that for any reason
expire or are terminated, forfeited or canceled shall again be
available for issuance under the Plan; provided, however, that
amounts withheld for taxes or that are withheld for the purchase
price for Options or SARs shall not again be available for issuance
under the Plan, but shares withheld for the purchase price or for
taxes for Restricted Stock, Restricted Stock Units, Performance
Awards or Other Stock-Based Awards (other than an Option or SAR)
shall be available for issuance under the Plan. Awards that by
their terms are to be settled solely in cash shall not be counted
against the number of shares of Stock available for the issuance of
Awards under the Plan. Shares of stock issued under Awards granted
in assumption, substitution or exchange for previously granted
awards of a company acquired by the Company (“Substitute
Awards”) do not reduce the shares of Stock available
under the Plan and available shares under a stockholder approved
plan of an acquired company (as appropriately adjusted to reflect
the transaction) may be used for Awards under the Plan and do not
reduce the Plan’s shares of Stock reserved as provided herein
(subject to NASDAQ listing requirements, as long as the Stock is
listed on this exchange or the applicable other exchange
requirements on which the Stock is listed).
In the
event of any stock dividend or extraordinary cash dividend, stock
split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and
class of shares of Stock subject to the Plan and to any outstanding
Awards, and in the exercise price per share of any outstanding
Awards and with respect to Options, if applicable, in accordance
with Code Sections 424 and 409A. If a majority of the shares of
Stock, which are of the same class as the shares of Stock that are
subject to outstanding Awards, are exchanged for, converted into,
or otherwise become (whether or not pursuant to a change in
control) shares of another company (the “New
Shares”), the Committee may, in its sole
discretion, unilaterally amend the outstanding Awards to provide
that such Awards are exercisable for New Shares. In the event of
any such amendment, the number of New Shares subject to, and the
exercise price per New Share of, the outstanding Awards shall be
adjusted in a fair and equitable manner as determined by the
Committee, in its discretion, and with respect to Options in
accordance with Code Sections 424 and 409A and the regulations
thereunder. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number, and in no event
may the exercise price of any Award be decreased to an amount less
than the par value, if any, of the stock subject to the Award. The
adjustments determined by the Committee pursuant to this
Section 4.2 shall be final, binding and
conclusive.
(a) The following
Awards and payouts shall reduce, on a one share for one share
basis, the number of shares of Stock authorized for issuance under
Section 4.1 of the Plan:
(i) Options;
(ii) SARs (except a
tandem SAR);
(iii) Restricted
Stock;
(iv) A payout of an
Other Stock-Based Award in shares of Stock (other than for a SAR or
Option);
(v) A payout of
Performance Awards or Restricted Stock Units in shares of Stock;
and
(vi) A payout of
Dividends or Dividend Equivalents in Stock.
(b) Notwithstanding the
foregoing, any Award that is payable solely in cash shall not
reduce the number of shares of Stock authorized under Section
4.1.
(c) Shares of Stock
shall be restored to the Plan on the same basis for which the type
of Award reduced the number of shares of Stock authorized for
issuance under Section 4.1 as follows:
(i) A payout of a SAR,
tandem SAR, Restricted Stock Award, Performance Award or Other
Stock-Based Award in the form of cash;
(ii) Except as expressly
provided in Section 4.1, a cancellation, termination, expiration,
forfeiture, or lapse for any reason (with the exception of the
termination of a tandem SAR upon exercise of the related Option, or
the termination of a related Option upon exercise of the
corresponding tandem SAR) of any shares of Stock subject to an
Award;
(iii) Payment for the
purchase price or the withholding of shares of Stock for taxes
under a Restricted Stock Award, Restricted Stock Unit, Performance
Award or Other Stock-Based Award (other than an Option or a SAR);
and
(iv) Notwithstanding the
foregoing, shares of Stock not issued or delivered as a result of
net settlement of an Award that is a SAR or Option or shares used
to pay the exercise price or withholding taxes related to an
outstanding SAR or Option or shares of Stock repurchased on the
open market with the proceeds of an exercise price for a SAR or
Option shall not be restored to the Plan or made available for
issuance for Awards under the Plan.
SECTION 5
Awards
may be granted only to Employees, Consultants, and Directors. For
purposes of the foregoing sentence, “Employees,”
“Consultants,” and “Directors”
shall include prospective Employees, prospective Consultants and
prospective Directors to whom Awards are granted in connection with
written offers of employment or other service relationships with
the Company subject to their actual commencement of Service.
Eligible Persons may be granted more than one (1) Award.
Eligibility in accordance with this Section shall not entitle any
Person to be granted an Award, or, having been granted an Award, to
be granted an additional Award.
Each
Participant to whom an Award is granted shall be required to enter
into an Award Agreement with the Company, in such a form as is
provided by the Committee. The Award Agreement shall contain
specific terms as determined by the Committee, in its discretion,
with respect to the Participant’s particular Award. Such
terms need not be uniform among all Participants or any similarly
situated Participants. The Award Agreement may include, without
limitation, vesting, forfeiture and other provisions specific to
the particular Participant’s Award, as well as, for example,
provisions to the effect that the Participant (i) shall not
disclose any confidential information acquired during employment
with the Company or while providing service to the Company, (ii)
shall abide by all the terms and conditions of the Plan and such
other terms and conditions as may be imposed by the Committee,
(iii) shall not interfere with the employment or other Service of
any Employee or service provider of the Company, (iv) shall not
compete with the Company or become involved in a conflict of
interest with the interests of the Company, (v)shall forfeit an
Award if terminated for Cause, (vi) shall be subject to transfer
restrictions respecting the Award or Stock, (vii) shall be subject
to any other agreement between the Participant and the Company
regarding shares of Stock that may be acquired under an Award
including, without limitation, an agreement restricting the
transferability of the Award or shares of Stock by Participant or
any other restrictions or requirements of any stockholders’
agreement that is in effect from time to time, or (viii) shall
abide by any Company clawback policies as may be in effect from
time to time, or that the Award shall be subject to any provisions
or definitions the Committee deems necessary or desirable to comply
with Code Section 409A. An Award Agreement shall include such terms
and conditions as are determined by the Committee, in its
discretion, to be appropriate with respect to any individual
Participant.
Any
person who is not an Employee on the effective date of the grant of
an Award to such person may be granted only a Nonstatutory Stock
Option, Restricted Stock or Other Stock-Based Award. An Incentive
Stock Option Award granted to an Employee of the Company, or its
Parent or Subsidiary as defined in Code Section 424(f), orto a
prospective Employee of the Company, or its Parent or its
Subsidiary as defined in Code Section 424(f) upon the condition
that such person become an Employee shall be deemed granted
effective on the date such person commences service as an Employee
with the Company, with an exercise price determined as of such date
in accordance with Section 6.1.
To the
extent that Options designated as Incentive Stock Options (granted
under all stock option plans of the Company or Parent or Subsidiary
as defined in Code Section 422, including the Plan) become
exercisable by a Participant for the first time during any calendar
year for Stock having an aggregate Fair Market Value greater than
one hundred thousand dollars ($100,000), the portion of such
options which exceeds such amount shall be treated as Nonstatutory
Stock Options. For purposes of this Section 5.4, Options
designated as Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value
of Stock shall be determined as of the time the Option with respect
to such Stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.4,
such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as
required or permitted by such amendment to the Code. If an Option
is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set
forth in this Section 5.4, the Company at the request of the
Participant may designate which portion of such Option the
Participant is exercising. In the absence of such designation, the
Participant shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Separate shares of Stock
representing each such portion shall be issued upon the exercise of
the Option.
Shares
of Stock under the Plan may be subject to a right of first refusal,
one or more repurchase options, or other conditions and
restrictions pursuant to a contract entered into by the Company and
its stockholders or otherwise as determined by the Committee or as
provided in the Award Agreement, in the Committee’s
discretion. The Company shall have the right to assign at any time
any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the
Company. Upon request by the Company, each Participant shall
execute any agreement, including but not limited to, the Award
Agreement evidencing such transfer restrictions prior to the
receipt of shares of Stock hereunder and shall promptly present to
the Company any and all shares of Stock acquired hereunder for the
placement of appropriate legends evidencing any such transfer
restrictions, if applicable.
SECTION 6
Options
shall be evidenced by Award Agreements specifying the number of
shares of Stock covered thereby, in such form as the Committee
shall from time to time establish. No Option or purported Option
shall be a valid and binding obligation of the Company unless
evidenced by an Award Agreement. Award Agreements may incorporate
all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and
conditions:
The
exercise price for each Option shall be established in the
discretion of the Committee; provided, however, that
(a) subject to adjustments permitted under the Plan under
Section 4.2 and Section 25, and other than with respect
to Substitute Awards, the exercise price per share for an Option
shall be not less than the Fair Market Value of a share of Stock on
the effective date of grant of the Option, and (b) no
Incentive Stock Option granted to a Ten Percent Owner Participant
shall have an exercise price per share of Stock less than one
hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding
the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price
lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of
Sections 424 and 409A of the Code.
(a) Exercisability
Options
shall be exercisable at such time or times, or upon such event or
events, and subject to such terms, conditions, performance criteria
and restrictions as shall be determined by the Committee and set
forth in the Award Agreement evidencing such Option; provided,
however, that (i) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of
such Option provided that an Option, that is not an Incentive Stock
Option, may be exercised for the thirty (30)-day period after the
expiration of a limitation on the Participant’s ability to
exercise due to Section 16(b) of the Exchange Act, the
Company’s insider trading policy or other Applicable Law
which may extend beyond the ten (10)-year term for this limited
purpose to the extent consistent with Code Section 409A so that the
Option is not modified or extended in a manner that would result in
an excise tax under Code Section 409A, (ii) no Incentive Stock
Option granted to a Ten Percent Owner Participant shall be
exercisable after the expiration of five (5) years after the
effective date of grant of such Option, and (iii) no Option granted
to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such
person commences Service. Subject to the foregoing, unless
otherwise specified by the Committee in the grant of an Option, any
Option granted hereunder shall terminate ten (10) years after the
effective date of grant of the Option, unless earlier terminated in
accordance with its provisions.
(b) Vesting
The
Committee shall specify the vesting schedule, if any, in the
applicable Award Agreement.
(c) Incentive
Stock Options
Unless
otherwise provided in the Option Agreement with respect to death or
Disability of the Participant, the Incentive Stock Options may only
be exercised within three (3) months after the Participant’s
termination of Service.
(a) Forms
of Consideration Authorized
Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made in cash, by
check or cash equivalent or upon approval by the Committee in its
sole discretion by any of the following (i) subject to Section
6.3(b)(i) below, by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant having a
Fair Market Value not less than the exercise price;
(ii) subject to the Company’s rights set forth in
Section 6.3(b)(ii) below, by causing the Company to withhold from
the shares of Stock issuable upon the exercise of the Option the
number of whole shares of Stock having a Fair Market Value, as
determined by the Company, not less than the exercise price (a
“Cashless
Exercise”); (iii) by such other consideration as
may be approved by the Committee from time to time to the extent
permitted by Applicable Law; or (iv) by any combination of
cash or any of the foregoing or any combination of (i-iii) thereof.
The Committee may at any time or from time to time grant Options
which do not permit all of the foregoing forms of consideration to
be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.
(b) Limitations
on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company,
or attestation to the ownership, of shares of Stock to the extent
such tender or attestation would constitute a violation of the
provisions of any law, regulation or agreement restricting the
redemption of the Company’s stock.
(ii) Cashless Exercise. The Company reserves,
at any and all times, the right, in the Company’s sole and
absolute discretion, to establish, decline to approve or terminate
any program or procedures for the exercise of Options by means of a
Cashless Exercise in order to comply with Applicable
Law.
SECTION
7
(a) Grant
In
consideration of the performance of Service by any Participant who
is an Employee, Consultant or Director, Stock may be awarded under
the Plan by the Committee as Restricted Stock with such
restrictions during the Restriction Period as the Committee may
designate in its discretion, any of which restrictions may differ
with respect to each particular Participant. Restricted Stock may
also be awarded as an Other Stock-Based Award subject to
performance goals under Section 8.2. Restricted Stock shall be
awarded for no additional consideration or such additional
consideration as the Committee may determine, which consideration
may be equal to or more than the Fair Market Value of the shares of
Restricted Stock on the grant date. The terms and conditions of
each grant of Restricted Stock shall be evidenced by an Award
Agreement.
(b) Immediate
Transfer Without Immediate Delivery of Restricted
Stock
Unless
otherwise specified in the Participant’s Award Agreement,
each Restricted Stock Award shall constitute an immediate transfer
of the record and beneficial ownership of the shares of Restricted
Stock to the Participant in consideration of the performance of
Service as an Employee, Consultant or Director, as applicable,
entitling such Participant to all voting, dividends and other
ownership rights in such shares of Stock.
As
specified in the Award Agreement, a Restricted Stock Award may
limit the Participant’s dividend and voting rights during the
Restriction Period in which the shares of Restricted Stock are
subject to a “substantial risk of
forfeiture” (within the meaning given to such term
under Code Section 83) and restrictions on transfer. In the Award
Agreement, the Committee may apply any restrictions to the
dividends that the Committee deems appropriate.
(a) Forfeiture
of Restricted Stock
Restricted Stock awarded to a
Participant may be subject to the following restrictions until the
expiration of the Restriction Period: (i) a restriction that
constitutes a substantial risk of forfeiture (as defined in Code
Section 83), and a restriction on transferability; and (ii)
any other restrictions, including restrictions that do not
constitute a substantial risk of forfeiture restriction or a
restriction on transferability that the Committee determines in
advance are appropriate, and may include, without limitation,
rights of repurchase or first refusal in the Company or provisions
subjecting the Restricted Stock to a continuing substantial risk of
forfeiture in the hands of any transferee. Any such restrictions
shall be set forth in the particular Participant’s Award
Agreement. Unless otherwise specified by the Committee in the Award
Agreement, the Restricted Stock that is subject to restrictions
which are not satisfied shall be forfeited and all rights of the
Participant to such Stock shall terminate.
(b) Issuance
of Restricted Stock
Reasonably promptly after the date of
grant with respect to shares of Restricted Stock, the Company shall
take the actions as it determines necessary in its sole discretion
to cause the Stock to be issued subject to the forfeiture
provisions and other requirements as the Committee determines
necessary. Stock awarded pursuant to a grant of Restricted Stock
may be evidenced in a manner as the Committee shall deem
appropriate, including without limitation book entry, shares of
Restricted Stock issued in the name of the Participant and held,
together with a stock power endorsed in blank, by the Committee or
Company (or their delegates), or in trust or in escrow pursuant to
an agreement satisfactory to the Committee, as determined by the
Committee, until such time as the restrictions on transfer have
expired or the Committee may provide for the transfer of the shares
of the Restricted Stock to a transfer agent on behalf of the
Participant pursuant to terms as determined by the Committee to
maintain the restricted status of the shares until vested. If the
Company issues a Stock certificate, registered in the name of the
Participant to whom such shares of Restricted Stock were granted,
evidencing such shares, the Company shall not cause to be issued
such a Stock certificate unless it has received a stock power duly
endorsed in blank with respect to such shares of Stock. Each such
Stock certificate shall bear the following legend or any other
legend approved by the Company:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the Plan and an Award Agreement entered into between
the registered owner of such shares and ENGlobal Corporation. A
copy of the Plan and Award Agreement are on file in the corporate
offices of ENGlobal Corporation.
Such
legend shall not be removed from the certificate evidencing such
shares of Restricted Stock until such shares vest pursuant to the
terms of the Award Agreement.
(c) Vesting
The
Award Agreement shall specify the vesting schedule.
(d) Removal
of Restrictions
The
Committee, in its discretion, shall have the authority to remove
any or all of the restrictions on the Restricted Stock if it
determines that, by reason of a change in Applicable Law or another
change in circumstance arising after the grant date of the
Restricted Stock, such action is appropriate.
Subject
to withholding taxes under Section 10 and to the terms of the Award
Agreement, upon the lapse of the forfeiture restrictions as set
forth in the Award Agreement, the unrestricted shares of Stock
shall be evidenced in such manner as determined by the Committee
and shall be issued to the Participant promptly after the
restrictions have lapsed in a manner as determined by the Committee
in its sole discretion.
SECTION 8
Other
Stock-Based Awards may be awarded by the Committee to selected
Participants that are denominated or payable in, valued in whole or
in part by reference to, or otherwise related to, shares of Stock,
as deemed by the Committee to be consistent with the purposes of
the Plan and the goals of the Company. Performance Awards may be
granted by the Committee in its sole discretion awarding cash or
Stock (including Restricted Stock) or a combination thereof based
upon the achievement of goals as determined by the Committee. Types
of Other Stock-Based Awards or Performance Awards include, without
limitation, purchase rights, phantom stock, Stock Appreciation
Rights, Restricted Stock Units, performance units, Restricted Stock
or Stock subject to performance goals, shares of Stock awarded that
are not subject to any restrictions or conditions, convertible or
exchangeable debentures related to the Stock, other rights
convertible into shares of Stock, Awards valued by reference to the
value of Stock or the performance of the Company or a specified
Subsidiary, Affiliate division or department, Awards based upon
performance goals established by the Committee and settlement in
cancellation of rights of any person with a vested interest in any
other plan, fund, program or arrangement that is or was sponsored,
maintained or participated in by the Company or any Subsidiary.
Stock Appreciation Rights will be subject to the same terms
respecting Nonstatutory Stock Options as provided in Sections 6.2
and 6.3 hereof unless otherwise provided in the Award Agreement.
Other Stock-Based Awards may be awarded either alone or in addition
to or in tandem with any other Awards. Other Stock Based Awards and
Performance Awards may be paid in Stock, cash or a combination
thereof.
(a) Written
Agreement. The terms
and conditions of each grant of an Other Stock-Based Award or
Performance Award shall be evidenced by an Award
Agreement.
(b) Purchase
Price. To the extent
that a Stock Appreciation Right is intended to be exempt from Code
Section 409A, the exercise price per share of Stock shall not be
less than one hundred percent (100%) of Fair Market Value of a
share of Stock on the date of the grant of the Stock Appreciation
Right and shall otherwise comply with Code Section
409A.
(c) Performance Goals and Other
Terms. In its discretion, the Committee may specify such
criteria, performance periods or performance goals for vesting in
Other Stock-Based Awards or Performance Awards and payment thereof
to the Participant as it shall determine; and the extent to which
such criteria, periods or goals have been met shall be determined
by the Committee. All terms and conditions of Other Stock-Based
Awards and Performance Awards shall be determined by the Committee
and set forth in the Award Agreement.
If the
Committee determines, in its discretion exercised in good faith,
that the established performance measures or objectives are no
longer suitable to the Company’s objectives because of a
change in the Company’s business, operations, corporate
structure, capital structure, or other conditions the Committee
deems to be appropriate, the Committee may modify the performance
measures and objectives to the extent it considers such
modification to be necessary.
Other
Stock-Based Awards or Performance Awards may be paid in shares of
Stock, cash or other consideration or a combination thereof related
to such shares, in a single payment or in installments on such
dates as determined by the Committee, all as specified in the Award
Agreement.
The
terms of any Award granted under the Plan shall be set forth in an
Award Agreement, as determined by the Committee in its sole
discretion, whether such Awards (other than Options and Stock
Appreciation Rights) shall receive dividends or amounts equivalent
to cash, Stock or other property as dividends on Stock
(“Dividend
Equivalents”) with respect to the number of shares of
Stock covered by the Award; provided, however, any Dividends or
Dividend Equivalents with respect to shares of Stock covered by an
Award shall be subject to restrictions and risk of forfeiture to
the same extent as those shares of Stock covered by the Award with
respect to such Dividends or Dividend Equivalents. Notwithstanding
the foregoing, in no event will Dividends or Dividend Equivalents
be awarded with respect to an Option or Stock Appreciation
Rights.
Subject
to adjustments pursuant to Sections 4.2, 4.3 and 25, the amount of
an Award granted to each Director in a calendar year shall not
exceed five hundred thousand dollars ($500,000) in value of the
aggregate of Stock and cash Awards.
SECTION 9
Subject
to earlier termination of the Option or other Award as otherwise
provided herein and unless otherwise provided by the Committee in
the Award Agreement, an Award and Option shall be vested and an
Option shall be exercisable after a Participant’s termination
of Service only during the applicable time period determined in
accordance with this Section 9.1 and thereafter shall
terminate:
(a) Disability or
Death. If the
Participant’s Service terminates because of the Disability or
death of the Participant, the unvested portion of any Award shall
be forfeited and terminated and the vested portion of an Option may
be exercised by the Participant or the applicable of his guardian
or legal representative or estate for a period of three (3) months
after the date on which the Participant’s Service terminated
due to Disability or one (1) year after the date on which the
Participant’s Service terminated due to death, respectively,
but in any event no later than the date of expiration of the
Option’s term, which in no event shall exceed ten (10) years
from the date of grant, as set forth in the Award Agreement
evidencing such Option, except as provided in Section 6.2(a)(i) for
a Nonstatutory Stock Option or SAR (the “Option Expiration
Date”).
(b) Change in
Control. Upon a
Change in Control then (i) the vested portion of the Option, to the
extent unexercised and exercisable on the date on which the
Participant’s Service terminated, may be exercised by the
Participant (or the Participant’s guardian or legal
representative) at any time prior to the expiration of three (3)
months after the date on which the Participant’s Service
terminated without Cause, but in any event no later than the Option
Expiration Date, and (ii) the exercisability and vesting of
the Option or other Award and any shares of Stock acquired upon the
exercise thereof may otherwise be accelerated effective as of the
date on which the Participant’s Service terminated to such
extent, if any, as shall have been determined by the Committee, in
its discretion, and set forth in the Award Agreement evidencing
such Option or other Award.
(c) Termination for
Cause. The effect of
a termination for Cause shall be specified in the Award
Agreement.
(d) Other Termination of
Service. If the
Participant’s Service terminates for any other reason
(including Retirement), except Disability, death, termination after
a Change in Control, or Cause, any Award or Option, to the extent
unvested shall be forfeited by the Participant on the date on which
the Participant’s Service is terminated, and any vested
Option may be exercised by the Participant at any time prior to the
expiration of three (3) months after the date on which the
Participant’s Service terminated, but in any event no later
than the Option Expiration Date.
Notwithstanding the
foregoing, other than termination for Cause, if the exercise of an
Option within the applicable time periods set forth in
Section 9.1 is prevented by the provisions of Section 12
below, the Option shall remain exercisable until thirty (30) days
(or such longer period of time as determined by the Committee, in
its discretion) after the date the Participant is notified by the
Company that the Option is exercisable, but in any event no later
than the Option Expiration Date subject to the limited mandatory
extension as provided in Section 6.2(a)(i) if
applicable.
Notwithstanding the
foregoing, other than termination for Cause, if a sale within the
applicable time periods set forth in Section 9.1 of shares of
Stock acquired upon the exercise of the Option would subject the
Participant to liability under Section 16(b) of the Exchange
Act, the Option (if exercisable) shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the
date on which a sale of such shares by the Participant would no
longer be subject to such liability, (ii) three (3) months
after the Participant’s termination of Service, or
(iii) the Option Expiration Date subject to the limited
mandatory extension as provided in Section 6.2(a)(i) if
applicable.
SECTION
10
All
Awards are subject to, and the Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to
the Company, an amount sufficient to satisfy federal, state, and
local taxes, domestic or foreign, required by law or regulation to
be withheld with respect to any taxable event arising as a result
of the Plan or an Award hereunder and all Awards are subject to the
Company’s right hereunder.
With
respect to tax withholding required upon the exercise of Options,
upon the lapse of restrictions on Restricted Stock, or upon any
other taxable event arising as a result of any Awards, the
Committee in its discretion, may elect to satisfy the withholding
requirement, in whole or in part, by having the Company withhold
shares of Stock having a Fair Market Value on the date the tax is
to be determined equal to the minimum statutory total tax which
could be imposed on the transaction (or such higher amount if
consistent with the equity treatment of the Award under the
applicable accounting rules). All such elections shall be subject
to any restrictions or limitations that the Committee, in its
discretion, deems appropriate. Any fraction of a share of Stock
required to satisfy such obligation shall be disregarded and the
amount due shall instead be paid in cash by the Participant or
rounded up as determined by the Committee to the extent consistent
with accounting rules.
With
respect to shares of Stock received by a Participant pursuant to
the exercise of an Incentive Stock Option, if such Participant
disposes of any such shares within (i) two (2) years from the date
of grant of such Option or (ii) one (1) year after the transfer of
such shares to the Participant, the Company shall have the right to
withhold from any salary, wages or other compensation payable by
the Company to the Participant an amount sufficient to satisfy
federal, state and local tax withholding requirements attributable
to such disqualifying disposition.
SECTION
11
Each
Participant shall be given access to information concerning the
Company equivalent to that information generally made available to
the Company’s common stockholders.
SECTION 12
OTHER APPLICABLE
LAWS AND COMPANY POLICIES
The
Plan, Award Agreements, the grant of Awards and the issuance of
shares of Stock shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to
securities and all other Applicable Laws, regulations and
requirements of any stock exchange or market system upon which the
stock is listed or traded. Options may not be exercised and Stock
may not be issued if the issuance of shares of Stock would
constitute a violation of any applicable federal, state or foreign
securities laws or other Applicable Laws or regulations or the
requirements of any stock exchange or market system upon which the
Stock may then be listed. In addition, no Option may be exercised
and no shares of Stock may be issued unless (a) a registration
statement under the Securities Act shall at the time be in effect
with respect to the shares issuable or (b) in the opinion of
legal counsel to the Company, the shares issuable may be issued in
accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. If the shares of
Stock issuable pursuant to an Award are not registered under the
Securities Act, the Company may imprint on the certificate for such
shares the following legend or any other legend which legal counsel
for the Company considers necessary or advisable to comply with the
Securities Act:
THE
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON
SUCH REGISTRATION OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED FOR
SUCH SALE OR TRANSFER.
The
inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s
legal counsel to be necessary to the lawful issuance and sale of
any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which
such requisite authority shall not have been obtained. As a
condition to the exercise of any Option or the issuance of shares
of Stock, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence
compliance with any Applicable Law or regulation and to make any
representation or warranty with respect thereto as may be requested
by the Company.
Unless
otherwise specifically provided in an Award Agreement, all Awards
and all shares of stock issued and any payments are subject to the
Company’s clawback policies adopted by the Company at any
time and as amended from time to time.
SECTION 13
During
the lifetime of the Participant, an Award shall be exercisable only
by the Participant or the Participant’s guardian or legal
representative. Subject to the provisions in this Section 13, an
Award may be assignable or transferable by the Participant only by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in Section 414(p) of
the Code, and only if it is so specified in the Award Agreement;
provided, however, that an Incentive Stock Option may only be
assignable or transferable by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent
permitted by the Committee in the Award Agreement, and in
accordance with Applicable Law, in its discretion, and set forth in
the Award Agreement evidencing such Option, a Nonstatutory Stock
Option shall be assignable or transferable subject to the
applicable limitations, if any, under the Securities Act, and the
General Instructions to Form S-8 Registration Statement under the
Securities Act. However, the transferee or transferees must be any
child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, in each case with
respect to the Participant, any person sharing the
Participant’s household (other than a tenant or employee of
the Company), a trust in which these persons have more than fifty
percent (50%) of the beneficial interest, a foundation in which
these persons (or the Participant) control the management of
assets, or any other entity in which these persons (or the
Participant) own more than fifty percent (50%) of the voting
interests (collectively, “Permitted
Transferees”); provided further that, (a) there may be
no consideration for any such transfer and (b) subsequent transfers
of Options transferred as provided above shall be prohibited except
subsequent transfers back to the original holder of the Option and
transfers to other Permitted Transferees of the original
holder.
SECTION 14
The
Committee may provide in an Award Agreement a requirement to enter
into a noncompetition agreement in connection with the Award or the
effect of a violation of a noncompetition agreement on an
Award.
SECTION 15
The
Committee may terminate or amend the Plan at any time. However, no
grant of Awards shall be made after the tenth (10th) anniversary of the
Effective Date (the “Term”).
Subject to changes in Applicable Law, regulations or rules that
would permit otherwise, without the approval of the Company’s
stockholders within the time required, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that
may be issued under the Plan (except by operation of the provisions
of Section 4 and Section 25), (b) no change in the class
of persons eligible to receive Awards or purchase Stock under the
Plan or to extend the Term of the Plan, (c) no repricing of an
Option or SAR or other amendment as provided in Section 3.3(j)
(except by operation of Sections 4 or 25 hereof) and (d) no
other amendment of the Plan that would require approval of the
Company’s stockholders under any Applicable Law, regulation
or rule or the stock exchange or market system on which the Stock
is traded. No termination or amendment of the Plan shall affect any
then outstanding Award unless expressly provided by the Committee
or otherwise provided in the Plan. In any event, no termination or
amendment of the Plan may materially adversely affect any then
outstanding Award without the consent of the Participant, unless
such termination or amendment is required to enable an Award
designated as an Incentive Stock Option to qualify as an Incentive
Stock Option or is necessary to comply with any Applicable Law,
regulation or rule, including Code Section 409A or as otherwise
permitted under the Plan, including upon a Change in
Control.
SECTION
16
The
Plan was approved by the Board effective as of the Effective Date
subject to Company stockholder approval on the date of the
Company’s 2021 annual meeting of shareholders.
SECTION 17
Neither
the Company, any Company Affiliate, the Board nor the Committee nor
any of their directors, members, officers, employees or any agent
of the foregoing makes any commitment or guarantee that any
federal, state or local tax treatment will apply or be available to
any person participating or eligible to participate
hereunder.
SECTION 18
In the
event that any provision of this Plan shall be held illegal,
invalid or unenforceable for any reason, such provision shall be
fully severable, but shall not affect the remaining provisions of
the Plan, and the Plan shall be construed and enforced as if the
illegal, invalid, or unenforceable provision was not included
herein.
SECTION 19
The
Plan and Awards shall be interpreted, construed and constructed in
accordance with the laws of the State of Nevada without regard to
its conflicts of law provisions, except as may be superseded by
Applicable Laws of the United States.
SECTION 20
All
obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise, of all
or substantially all of the business and/or assets of the
Company.
SECTION 21
The
holder of an Award shall have no rights as a stockholder with
respect to any shares of Stock covered by the Award until the date
the Stock is issued to him or her for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be
made for dividends or other rights for which the record date is
prior to the date such Stock is issued.
SECTION 22
Nothing
contained in the Plan or Award Agreement shall confer upon any
Participant receiving a grant of any Award any right with respect
to the continuation of his or her Service or interfere in any way
with the right of the Company (or a Company Affiliate), subject to
the terms of any separate employment agreement to the contrary, at
any time to terminate such Service or to increase or decrease the
compensation of the Participant from the rate in existence at the
time of the grant of any Award.
SECTION 23
The
existence of an Award shall not affect in any way the right or
power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other
changes in Company’s capital structure or its business, or
any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or
affecting the shares of Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
SECTION 24
To the
extent that any Award is deferred compensation subject to Code
Section 409A, the Award Agreement shall comply and all such Awards
shall be interpreted to comply with the requirements of Code
Section 409A including, without limitation, to the extent
required using applicable definitions from Code Section 409A, and
to the extent required by Code Section 409A, using a more
restrictive definition of Change in Control to comply with Code
Section 409A or a more restrictive definition of Disability as
provided in Code Section 409A. To the extent an Award is deferred
compensation subject to Code Section 409A, the Award shall specify
a time and form of payment schedule. In addition if any Award
constitutes deferred compensation under Section 409A of the Code (a
“Section
409A Plan”), then the Award shall be subject to the
following requirements, if and to the extent required to comply
with Code Section 409A, and as determined by the Committee and
specified in the Award Agreement:
(a) Payments under the
Section 409A Plan may not be made earlier than (i) the
Participant’s separation from service, (ii) the date of the
Participant’s Disability, (iii) the Participant’s
death, (iv) a specified time (or pursuant to a fixed schedule)
specified in the Award Notice at the date of the deferral of such
compensation, (v) a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the
assets of the Company, or (vi) the occurrence of an unforeseeable
emergency;
(b) The time or
schedule for any payment of the deferred compensation may not be
accelerated, except to the extent provided in applicable Treasury
Regulations or other applicable guidance issued by the Internal
Revenue Service; and
(c) Any elections with
respect to the deferral of such compensation or the time and form
of distribution of such deferred compensation shall comply with the
requirements of Section 409A(a)(4) of the Code.
With
respect to any Award that is subject to Code Section 409A, in the
case of any Participant who is specified employee, a distribution
on account of a separation from service may not be made before the
date which is six (6) months after the date of the
Participant’s separation from service (or, if earlier, the
date of the Participant’s death). For purposes of the
foregoing, the terms “separation from
service” and “specified
employee”, all shall be defined in the same manner as
those terms are defined for purposes of Section 409A of the Code,
and the limitations set forth herein shall be applied in such
manner (and only to the extent) as shall be necessary to comply
with any requirements of Section 409A of the Code that are
applicable to the Award as determined by the Committee. If an Award
is subject to Code Section 409A, as determined by the Committee,
the Committee may interpret or amend any Award to comply with Code
Section 409A without a Participant’s consent even if such
amendment would have any adverse effect on a Participant’s
Award. With respect to an Award that is subject to Code Section
409A, the Board may amend or interpret the Plan as it deems
necessary to comply with Section 409A, including, without
limitation, limiting the Committee’s or Company’s
discretion with respect to an Award that constitutes deferred
compensation to the extent it would violate Code Section 409A, and
no Participant consent shall be required even if such an amendment
would have any adverse effect on a Participant’s Award.
Notwithstanding the foregoing, none of the Company, the Committee,
any Company Affiliate, the Board or their directors, members,
officers, employees or agents of any of the foregoing guarantee or
are responsible for the tax consequences to a Participant for an
Award including, without limitation, an excise tax under Code
Section 409A.
SECTION 25
UPON A CHANGE IN CONTROL
(a) Assumption under the Plan
of Outstanding Substitute Awards. Notwithstanding any other
provision of the Plan, the Committee, in its absolute discretion,
may authorize the assumption and continuation under the Plan of
outstanding and unexercised stock options or other types of
stock-based Substitute Awards. Any such action shall be upon such
terms and conditions as the Committee, in its discretion, may deem
appropriate, including provisions to preserve the holder’s
rights under the previously granted and unexercised option or other
stock-based Substitute Award, such as, for example, retaining the
treatment as an Option under this Plan.
(b) Assumption of Awards by a
Successor. Subject to the accelerated vesting in any Award
Agreement that applies in the event of a Change in Control, in the
event of a Corporate Event (defined below), each Participant shall
be entitled to receive, in lieu of the number of shares of Stock
subject to Awards, such shares of capital stock or other securities
or property as may be issuable or payable with respect to or in
exchange for the number of shares of Stock which Participant would
have received had he exercised the Award immediately prior to such
Corporate Event, together with any adjustments (including, without
limitation, adjustments to the option price and the number of
Shares issuable on exercise of outstanding Options). For this
purpose, shares of Restricted Stock shall be treated the same as
unrestricted outstanding shares of Stock. A “Corporate
Event” means
any of the following: (i) a dissolution or liquidation of the
Company, (ii) a sale of all or substantially all of the
Company’s assets, (iii) a merger, consolidation or
combination involving the Company (other than a merger,
consolidation or combination (A) in which the Company is the
continuing or surviving corporation and (B) which does not
result in the outstanding shares of Stock being converted into or
exchanged for different securities, cash or other property, or any
combination thereof), or (iv) if so determined by the
Committee, any other “corporate
transaction” as defined in Code Sections 424 or
Code Section 409A. The Committee shall take whatever other action
it deems appropriate to preserve the rights of Participants holding
outstanding Awards, including, without limitation, to continue the
exemption from deferred compensation treatment under Code Section
409A.
(c) Notwithstanding
Section 25(b) if a Change in Control occurs, except a Change in
Control solely on account of Section 2.1(i)(ii), then the
Committee, at its sole discretion, shall have the power and right
to (but subject to any accelerated vesting specified in an Award
Agreement).
(i) cancel, effective
immediately prior to the occurrence of the Change in Control, each
outstanding Award (whether or not then exercisable) (including the
cancellation of any Options for which the exercise price is greater
than the consideration to be received), and with respect to Options
and SARs that currently have an exercise price less than the
consideration to be received immediately prior to the Change in
Control, pay to the Participant an amount in cash equal to the
excess of (i) the value, as determined by the Committee, of the
property (including cash) received by the holders of Stock as a
result of such Change in Control over (ii) the exercise price of
such Award, if any; provided, however, this subsection shall be
inapplicable to an Award granted within six (6) months before the
occurrence of the Change in Control but only if the Participant is
an Insider and such disposition is notexempt under Rule 16b-3 (or
other rules preventing liability of the Insider under Section 16(b)
of the Exchange Act) and, in that event, the provisions hereof
shall be applicable to such Award after the expiration of six (6)
months from the date of grant; or
(ii) provide for the
exchange or substitution of each Award outstanding immediately
prior to such Change in Control (whether or not then exercisable)
for another award with respect to the Stock or other property for
which such Award is exchangeable and, incident thereto, make an
equitable adjustment as determined by the Committee, in its
discretion, in the exercise price of the Award, if any, or in the
number of shares of Stock or amount of property (including cash)
subject to the Award; or
(iii) provide for
assumption of the Plan and such outstanding Awards by the surviving
entity or its parent.
The
Committee, in its discretion, shall have the authority to take
whatever action it deems to be necessary or appropriate to
effectuate the provisions of this Section 25.
[REMAINDER
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IN
WITNESS WHEREOF, the undersigned Officer of the Company certifies
that the foregoing sets forth the ENGlobal Corporation 2021 Long
Term Incentive Plan effective as of the Effective Date as duly
adopted by the Board.
ENGLOBAL
CORPORATION
By:
Name:
Title:
A-33
29