SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
January 12, 201817, 2020
The Annual Meeting of Stockholders of Northern Technologies International Corporation, a Delaware corporation, will be held at NTIC’s corporate executive offices located at 4201 Woodland Road, Circle Pines, Minnesota 55014, beginning at 2:11:00 p.m.a.m., Central Standard Time, on Friday, January 12, 2018,17, 2020, for the following purposes:
1. | To elect |
2. | To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in the accompanying proxy statement. |
3. | To indicate, on an advisory basis, whether future votes to approve executive compensation should occur every one, two, or three years. |
4. | To ratify the selection of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for the fiscal year ending August 31, |
5. | To transact such other business as may properly come before the meeting or any adjournment of the meeting. |
Only those stockholders of record at the close of business on November 17, 201720, 2019 will be entitled to notice of, and to vote at, the meeting and any adjournments thereof. A stockholder list will be available at our corporate offices beginning January 2, 20187, 2020 during normal business hours for examination by any stockholder registered on NTIC’s stock ledger as of the record date, November 17, 2017,20, 2019, for any purpose germane to the Annual Meeting.
We are pleased again this year to use the “Notice and Access” method of providing proxy materials to our stockholders via the Internet. We believe that this process expedites your receipt of our proxy materials, lowers the costs of our Annual Meeting and reduces the environmental impact of our meeting.
By Order of the Board of Directors, | |
Matthew C. Wolsfeld | |
Corporate Secretary |
Matthew C. WolsfeldCorporate Secretary
November 28, 2017December 2, 2019
Circle Pines, Minnesota
Important: Whether or not you expect to attend the meeting in person, please vote by the Internet or telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be voted. A prompt response is helpful and your cooperation is appreciated. |
TABLE OF CONTENTS
________________
table of contents
Page
INTERNET AVAILABILITY OF PROXY MATERIALS | |
PROXY STATEMENT SUMMARY | 1 |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING | |
Date, Time, Place and Purposes of Meeting | |
Who Can Vote | |
How You Can Vote | |
How Does the Board Recommend that You Vote | |
How You May Change Your Vote or Revoke Your Proxy | |
Quorum Requirement | |
Vote Required | |
Other Business | |
Procedures at the Annual Meeting | |
Householding of Annual Meeting Materials | |
Proxy Solicitation Costs | |
PROPOSAL ONE—ELECTION OF DIRECTORS | |
Number of Directors | |
Nominees for Director | |
Information about Current Directors and Board Nominees | |
Additional Information about Current Directors and Board Nominees | |
Board Recommendation | |
PROPOSAL TWO—ADVISORY VOTE ON EXECUTIVE COMPENSATION | |
Introduction | |
Board Recommendation | |
PROPOSAL THREE—ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION | 21 |
Background | 21 |
Reasons for an Annual Say-on-Pay Vote Recommendation | 21 |
Board Recommendation | 22 |
PROPOSAL FOUR—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |
Selection of Independent Registered Public Accounting Firm | |
Audit, Audit-Related, Tax and Other Fees | |
Audit Committee Pre-Approval Policies and Procedures | |
Board Recommendation | |
STOCK OWNERSHIP | |
Beneficial Ownership of Significant Stockholders and Management | |
CORPORATE GOVERNANCE | |
Corporate Governance Guidelines | |
Board Leadership Structure | |
Director Independence | |
Board Meetings and Attendance | |
Board Committees | |
Audit Committee | |
Compensation Committee | |
Nominating and Corporate Governance Committee | |
Director Nominations Process | |
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Board Oversight of Risk | |
Code of Ethics | |
Policy Regarding Director Attendance at Annual Meetings of Stockholders | |
Complaint Procedures | |
Process Regarding Stockholder Communications with Board of Directors | |
DIRECTOR COMPENSATION | |
Summary of Cash and Other Compensation | |
Non-Employee Director Compensation Program | |
Consulting | |
EXECUTIVE COMPENSATION | |
Compensation | |
Summary of Cash and Other Compensation | |
Outstanding Equity Awards at Fiscal Year End | |
Stock Incentive Plan | |
Post-Termination Severance and Change in Control Arrangements | |
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS | |
Introduction | |
Procedures Regarding Approval of Related Party Transactions | |
Description of Related Party Transactions | |
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR | |
Stockholder Proposals for | |
Director Nominations for | |
COPIES OF FISCAL |
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INTERNET AVAILABILITY OF PROXY MATERIALS
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Instead of mailing a printed copy of our proxy materials, including our Annual Report to Stockholders, to each stockholder of record, we have provided access to these materials in a fast and efficient manner via the Internet. We believe that this process expedites your receipt of our proxy materials, lowers the costs of our Annual Meeting and reduces the environmental impact of our meeting. On November 28, 2017,or about December 2, 2019, we beganexpect to begin mailing a Notice of Internet Availability of Proxy Materials to stockholders of record as of November 17, 2017,20, 2019 and we postedpost our proxy materials on the website referenced in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com)(www.proxyvote.com). As more fully described in the Notice of Internet Availability of Proxy Materials, stockholders may choose to access our proxy materials atwww.proxyvote.com or may request proxy materials in printed or electronic form. In addition, the Notice of Internet Availability of Proxy Materials and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. For those who previously requested printed proxy materials or electronic materials on an ongoing basis, you will receive those materials as you requested.
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PROXY STATEMENT SUMMARY
Important Notice Regarding________________
This executive summary provides an overview of the Availabilityinformation included in this proxy statement. We recommend that you review the entire proxy statement and our 2019 Annual Report to Stockholders before voting.
2020 ANNUAL MEETING OF STOCKHOLDERS
DATE AND TIME
Friday, January 17, 2020
11:00 a.m. (Central Time)
LOCATION
4201 Woodland Road
Circle Pines, MN 55014
Proposal | Board’s Vote Recommendation | Page |
Proposal No. 1: Election of directors | FOR | 14 |
Proposal No. 2: Advisory vote on executive compensation | FOR | 19 |
Proposal No. 3: Advisory vote on frequency of advisory vote on executive compensation | EVERY ONE YEAR | 21 |
Proposal No. 4: Ratification of appointment of independent registered public accounting firm | FOR | 23 |
RECORD DATE
November 20, 2019 | Holders of record of our common stock at the close of business on November 20, 2019 are entitled to notice of, to attend, and to vote at the 2020 Annual Meeting of Stockholders or any continuation, postponement, or adjournment thereof |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 17, 2020
This proxy statement and our 2019 Annual Report to Stockholders are available on the Internet, free of Proxy Materialscharge, atwww.proxyvote.com. On this website, you will be able to access this proxy statement, our 2019 Annual Report, and any amendments or supplements to these materials that are required to be furnished to stockholders. We encourage you to access and review all of the important information contained in the proxy materials before voting.
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Fiscal2019 BUSINESS HIGHLIGHTS
Below are highlights of our financial, operational and strategic achievements during fiscal 2019.
Financial
Net Sales | Our total net sales increased 8.4% from $51.4 million in fiscal 2018 to $55.8 million in fiscal 2019. |
Natur-Tec® Sales | Sales of Natur-Tec® products increased by 74.9%, marking another year of double-digit growth. |
Quarterly Cash Dividends | We paid a quarterly cash dividend of $0.06 per share during fiscal 2019, an increase of 20% over last year’s dividend. |
Stock Split | Our June 28, 2019, we effected a 2-for-1 stock split, intended to make investing in our stock more accessible to potential investors. |
Operational
21 Joint Ventures | Our 21 joint ventures provide us with access to global markets with an annual global market potential estimated at $520 million. |
7 Operating Subsidiaries | We maintain seven wholly or majority-owned operating subsidiaries in North America, South America, Europe and Asia. |
60 Countries | Our network of joint ventures and subsidiaries allows us to operate in 60 countries worldwide, allowing us reach customers globally. |
Strategic
Industrial Manufacturing Industry | ZERUST® rust and corrosion inhibiting packaging solutions resolve corrosion problems while reducing operating costs, increasing productivity and enhancing customer satisfaction. During fiscal 2019, ZERUST® industrial sales were negatively impacted as a result of slowing global economic growth and the impacts of the trade dispute between the U.S. and China. |
Oil and Gas Industry | Our global network of trained corrosion management professionals and channel partners help us develop specialized corrosion mitigation solutions for the oil and gas industry, provide local support and conduct client training. During fiscal 2019, we continued to add new customers, but the oil and gas industry is characterized by long-sales cycles and market volatility, which impacts our quarterly and annual trends within this market. |
Bioplastics Industry | Our Natur-Tec® biobased and compostable plastics are manufactured using NTIC’s patented and/or proprietary technologies and are intended to replace conventional plastics and thereby reduce our customers’ carbon footprint and provide environmentally sound waste disposal options. During fiscal 2019, we experienced significant global growth for our leading bioplastic solutions as governments instituted organic diversion programs and mandates and consumers pursued alternatives to single use plastics, such as compostable bioplastics. |
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CORPORATE GOVERNANCE HIGHLIGHTS
ü Annual election of directors | ü Recent Board refreshment efforts |
ü Majority of independent directors | ü 100% Board meeting attendance by directors |
ü Independent Board Chairman | ü No poison pill |
ü Three fully independent Board committees | ü Annual say-on-pay vote |
ü Corporate governance guidelines | ü Robust clawback policy |
ü Annual review of governance documents | ü No guaranteed bonuses or significant perks |
BOARD OF DIRECTORS COMPOSITION AND DIVERSITY
The Board of Directors understands the importance of adding diverse, experienced talent to the Board of Directors in order to establish an array of experience and strategic views. The Nominating and Corporate Governance Committee is committed to refreshment efforts to ensure that the composition of the Board of Directors and each of its committees encompasses a wide range of perspectives and knowledge. In October 2019, we added two new independent, female directors to the Board of Directors. The charts below reflect the current composition of the Board and, therefore, include Barbara D. Colwell, who is not standing for re-election at the Annual Meeting.
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BOARD OF DIRECTORS NOMINEES
Below are the directors nominated for election by stockholders at the 2020 Annual Meeting of Stockholders to be Held on January 12, 2018:
The Noticefor a one-year term. With the exception of Annual MeetingMs. Calderon and Ms. Kemp who joined our Board of Stockholders and Proxy Statement and
Annual Report to Stockholders, including our Annual Report on Form 10-K
forDirectors in October 2019, all director nominees listed below served during the fiscal year ended August 31, 2017,2019 and attended 100% of all Board meetings and nearly 100% of the sum of all meetings of the Board of Directors and its committees, as applicable. Barbara D. Colwell, a current director, is not standing for re-election at the Annual Meeting.
Director | Age | Serving Since | Independent |
Nancy E. Calderon | 60 | 2019 | Yes |
Sarah E. Kemp | 52 | 2019 | Yes |
Soo-Keong Koh | 68 | 2008 | Yes |
Sunggyu Lee, Ph.D. | 67 | 2004 | Yes |
G. Patrick Lynch | 52 | 2004 | No |
Ramani Narayan, Ph.D. | 70 | 2004 | No |
Richard J. Nigon | 71 | 2010 | Yes |
Konstantin von Falkenhausen | 52 | 2012 | Yes |
The Board of Directors recommends a vote “FOR” each of these nominees.
COMMITTEE COMPOSITION
The Board of Directors maintains a standing Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. Below are available at www.proxyvote.com.our current directors and their Board committee memberships.
Director | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee |
Nancy E. Calderon | ● | ||
Barbara D. Colwell | ● | ● | |
Sarah E. Kemp | ● | ||
Soo-Keong Koh | ● | ||
Sunggyu Lee, Ph.D. | ● | ||
G. Patrick Lynch | |||
Ramani Narayan, Ph.D. | |||
Richard J. Nigon | ● | ● | ● |
Konstantin von Falkenhausen | ● | ● |
KEY QUALIFICATIONS
The following are some key qualifications, skills, and experiences of our Board of Directors.
· | Leadership/Management | · | Financial Expertise | · | International Experience | ||
· | Prior Board Experience | · | Government Expertise | · | Bioplastics Industry Expertise |
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EXECUTIVE COMPENSATION PHILOSOPHY
Our guiding compensation philosophy is to maintain an executive compensation program that allows us to attract, retain, motivate and reward qualified and talented executives who will enable us to grow our business, achieve our annual, long-term and strategic goals and drive long-term stockholder value.
The following core principles provide a framework for our executive compensation program:
· | Align interests of our executives with stockholder interests; |
· | Integrate compensation with our business plans and strategic goals; |
· | Link amount of compensation to both company and individual performance; and |
· | Provide fair and competitive compensation opportunities that attract and retain executives. |
EXECUTIVE COMPENSATION BEST PRACTICES
Our compensation practices include many best practices that support our executive compensation objectives and principles and benefit our stockholders.
What we do: | What we don’t do: | |||
· | Emphasize pay for performance | · | No guaranteed salary increases or bonuses | |
· | Structure our executive compensation so a significant portion of pay is at risk | · | No repricing of stock options unless approved by stockholders | |
· | Structure our executive compensation so a significant portion is paid in equity | · | No pledging of NTIC securities, unless certain criteria are met | |
· | Maintain competitive pay packages | · | No hedging of NTIC securities | |
· | Maintain robust clawback policy | · | No excessive perquisites | |
· | Hold an annual say-on-pay vote | · | No tax gross-ups |
HOW WE PAY
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Our executive compensation program consists of the following principal elements:
· | Base salary – a fixed amount, paid in cash and reviewed annually and, if appropriate, adjusted. |
· | Annual incentive – a variable, short-term element that is typically payable in cash and is based on a corporate profitability goal and individual performance goals. |
· | Long-term incentive – a variable, long-term element that is provided in stock options. |
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2019 EXECUTIVE COMPENSATION ACTIONS
2019 compensation actions and incentive plan outcomes based on performance are summarized below:
Element | Key Fiscal 2019 Actions |
Base Salary | Our executives received 10% increases over their 2018 base salaries. |
Annual Incentive | Our executive officers received annual bonuses based primarily on Adjusted EBITOI (earnings before interest, taxes, and other income, as adjusted to take into account amounts paid under bonus plan and other adjustments), in amounts representing 43% of their base salaries. A portion of the annual incentive earned for fiscal 2019 was paid in the form of stock option grants made at the beginning of fiscal 2019. |
Long-Term Incentive | Our executive officers received stock option grants on September 1, 2018, which vested in full on September 1, 2019. A portion of the fiscal 2019 stock option grant was intended as partial payout of the fiscal 2019 annual bonus program. |
Health and Welfare Benefits | No significant changes were made. |
Retirement Plans | No significant changes were made. |
Perquisites | No significant changes were made. |
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board of Directors is providing our stockholders with an advisory vote on our executive compensation, commonly known as a “say-on-pay” vote. We last submitted a say-on-pay proposal to our shareholders at our 2018 Annual Meeting of Stockholders held on January 18, 2019. At that meeting, 99% of the votes cast by our stockholders were in favor of our say-on-pay vote.
The Board of Directors recommends a vote “FOR” the approval of our say-on-pay proposal.
FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION
Every six years, NTIC is required to hold an advisory vote on the frequency of future say-on-pay votes. Since our last frequency of say-on-pay vote was held at our 2014 Annual Meeting of Stockholders, NTIC is submitting a frequency of say-on-pay proposal at the 2020 Annual Meeting of Stockholders. Stockholders may indicate whether they prefer that we hold a say-on-pay vote every one year, two years or three years, or they may abstain from this vote.
The Board of Directors recommends that the shareholders vote for a frequency of every “ONE YEAR” for future say-on-pay votes.
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Although stockholder ratification is not required, the appointment of Baker Tilly Virchow Krause, LLP as NTIC’s independent registered public accounting firm for fiscal 2020 is being submitted for ratification at the 2020 Annual Meeting of Stockholders as a matter of good corporate governance.
The Board of Directors recommends a vote “FOR” the ratification of Baker Tilly Virchow Krause, LLP as NTIC’s independent registered public accounting firm.
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2021 ANNUAL MEETING OF STOCKHOLDERS
We anticipate that our 2021 Annual Meeting of Stockholders will be held on or about Friday, January 15, 2021.
The following are important dates in connection with our 2021 Annual Meeting of Stockholders.
Stockholder Action | Submission Deadline |
Proposal Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934 | No later than August 4, 2020 |
Nomination of a Candidate Pursuant to our Bylaws | Between September 19, 2020 and October 19, 2020 |
Proposal of Other Business for Consideration Pursuant to our Bylaws | Between September 19, 2020 and October 19, 2020 |
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4201 Woodland Road, Circle Pines, Minnesota 55014
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
January 12, 201817, 2020
____________________________________
The Board of Directors of Northern Technologies International Corporation is soliciting your proxy for use at the 20182020 Annual Meeting of Stockholders to be held on Friday, January 12, 2018.17, 2020. The Board of Directors expects to make available to our stockholders beginning on or about November 28, 2017December 2, 2019 the Notice of Annual Meeting of Stockholders, this proxy statement and a form of proxy on the Internet or has sentwill mail these materials to stockholders of NTIC upon their request.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
________________
Date, Time, Place and Purposes of Meeting
The Annual Meeting of Stockholders of Northern Technologies International Corporation (sometimes referred to as “NTIC,” “we,” “our” or “us” in this proxy statement) will be held on Friday, January 12, 2018,17, 2020, at 2:11:00 p.m.a.m., Central Standard Time, at the principal executive offices of Northern Technologies International Corporation located at 4201 Woodland Road, Circle Pines, Minnesota 55014, for the purposes set forth in the Notice of Annual Meeting of Stockholders.
Who Can Vote
Stockholders of record at the close of business on November 17, 201720, 2019 will be entitled to notice of and to vote at the meeting or any adjournment of the meeting. As of that date, there were 4,537,4089,090,413 shares of our common stock outstanding. Each share of our common stock is entitled to one vote on each matter to be voted on at the Annual Meeting. Stockholders are not entitled to cumulate voting rights.
How You Can Vote
Your vote is important. Whether you hold shares directly as a stockholder of record or beneficially in “street name” (through a broker, bank or other nominee), you may vote your shares without attending the Annual Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker, bank or other nominee.
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If you are a registered stockholder whose shares are registered in your name, you may vote your shares in person at the meeting or by one of the three following methods:
· | Vote by Internet, by going to the website address |
· | Vote by Telephone, by dialing 1-800-690-6903 and following the instructions for telephone voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card. |
· | Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in the envelope provided if you received a paper copy of these proxy materials. |
If you vote by Internet or telephone, please do not mail your proxy card.
If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a separate voting instruction form with this proxy statement or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone.
The deadline for voting by telephone or by using the Internet is 11:59 p.m., Eastern Standard Time (10:59 p.m., Central Standard Time), on the day before the date of the Annual Meeting or any adjournments thereof. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the information your bank, broker, or other holder of record provided to you for more information on your options for voting.
If you return your signed proxy card or use Internet or telephone voting before the Annual Meeting, the named proxies will vote your shares as you direct. You have three choices on each matter to be voted on.
For Proposal One—Election of Directors, you may:
· | VoteFOR all |
· | WITHHOLD your vote from all |
· | WITHHOLD your vote from one or more of the |
For Proposal Two—Three—Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation, Proposal Three—Ratificationyou may:
· | Vote for a frequency of everyONE YEAR, |
· | Vote for a frequency of everyTWO YEARS, |
· | Vote for a frequency of everyTHREE YEARSor |
· | ABSTAIN from voting on the proposal. |
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For each of Selection of Independent Registered Public Accounting Firm and Proposal Four—Approval of Amendment to our Restated Certificate of Incorporation,the other proposals, you may:
· | VoteFOR the proposal, |
· | VoteAGAINST the proposal or |
· | ABSTAIN from voting on the proposal. |
If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to vote your shares, the proxies will vote your sharesFOR all seveneight of the nominees for election to the Board of Directors in Proposal One—Election of Directors, for a frequency of everyFORONE YEAR on Proposal Two—Three—Advisory Vote on the Frequency of Future Advisory Votes on Executive CompensationFOR Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm andFOR Proposal Four—Approvaleach of Amendment to our Restated Certificate of Incorporation.the other proposals.
How Does the Board Recommend that You Vote
The Board of Directors unanimously recommends that you vote:
· | FOR all |
· | FOR Proposal Two—Advisory Vote on Executive Compensation; |
· | For a frequency of every |
· | FOR Proposal Four— |
How You May Change Your Vote or Revoke Your Proxy
If you are a stockholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted by one of the following methods:
· | Submitting another proper proxy with a more recent date than that of the proxy first given by following the Internet or telephone voting instructions or completing, signing, dating and returning a proxy card to us; |
· | Sending written notice of your revocation to our Corporate Secretary; or |
· | Attending the Annual Meeting and voting by ballot. |
Quorum Requirement
The presence at the Annual Meeting, in person or by proxy, of the holders of a majority (2,268,705(4,545,207 shares) of the outstanding shares of our common stock as of the record date will constitute a quorum for the transaction of business at the Annual Meeting. In general, shares of our common stock represented by proxies marked “For,” “Against,” “Abstain” or “Withheld” are counted in determining whether a quorum is present. In addition, a “broker non-vote” is counted in determining whether a quorum is present. A “broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer, and the broker has no discretionary authority to vote on behalf of such customer on such matter.
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Vote Required
Proposal One—Election of Directors will be decided by the affirmative vote of a plurality of shares of our common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. A “plurality” for Proposal One means the individuals who receive the greatest number of votes cast “For” are elected as directors.
Proposal Two—Advisory Vote on Executive Compensation will be decided by the affirmative vote of a majority of shares of our common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. Although this is a non-binding, advisory vote, the Compensation Committee and Board of Directors expect to take into account the outcome of the vote when considering future executive compensation decisions.
Proposal Three—Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation will be decided by the affirmative vote of a plurality of shares of our common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. A “plurality” for Proposal Three means the frequency that receives the greatest number of votes cast will be considered the preference of our stockholders. Although this is a non-binding, advisory vote, the Board of Directors expects to take into account the outcome of the vote when setting the frequency of our advisory votes on executive compensation.
Proposal Three—Four—Ratification of Selection of Independent Registered Public Accounting Firm will be decided by the affirmative vote of a majority of shares of our common stock present in person or represented by proxy and entitled to vote at the Annual Meeting.
Proposal Four—Approval of Amendment to our Restated Certificate of Incorporation will be decided by the affirmative vote of a majority of shares of our common stock outstanding as of the record date for the Annual Meeting.
If your shares are held in “street name” and you do not indicate how you wish to vote, your broker is permitted to exercise its discretion to vote your shares only on certain “routine” matters. Proposal One—Election of Directors, Proposal Two—Advisory Vote on Executive Compensation and Proposal Four— ApprovalThree—Advisory Vote on the Frequency of Amendment to our Restated Certificate of IncorporationFuture Advisory Votes on Executive Compensation are not “routine” matters. Accordingly, if you do not direct your broker how to vote, your broker may not exercise discretion and may not vote your shares on either of these three proposals. This is called a “broker non-vote” and although your shares will be considered to be represented by proxy at the meeting, they will not be considered to be shares “entitled to vote” or “votes cast” at the meeting and will not be counted as having been voted on the applicable proposal. Proposal Three—Four—Ratification of Selection of Independent Registered Public Accounting Firm is a “routine” matter, and, as such, your broker is permitted to exercise its discretion to vote your shares for or against the proposalproposals in the absence of your instruction. Proxies marked “Withheld” on Proposal One—Election of Directors or “Abstain” on Proposal Two—Advisory Vote on Executive Compensation, Proposal Three—Ratification of Section of Independent Registered Public Accounting Firm or Proposal Four—Approval of Amendment to our Restated Certificate of Incorporation will be counted in determining the total number of shares “entitled to vote” on such proposal and will have the effect of a vote “Against” a director or a proposal.
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Proposal | Votes Required | Effect of Votes | Effect of Non-Votes | |||
Proposal One: Election of Directors | Plurality of the votes cast. This means that the eight nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. | Votes withheld will have no effect. | Broker non-votes will have no effect. | |||
Proposal Two: Advisory Vote on Executive Compensation | Affirmative vote of the holders of a majority in voting power of the shares of common stock present in person or by proxy and entitled to vote thereon. | Abstentions will have the effect of a vote against the proposal. | Broker non-votes will have no effect. | |||
Proposal Three: Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation | Plurality of the votes cast. This means that the frequency receiving the highest number of affirmative votes will be considered the preference of our stockholders. | Votes withheld will have no effect. | Broker non-votes will have no effect. | |||
Proposal Four: Ratification of Appointment of Independent Registered Public Accounting Firm | Affirmative vote of the holders of a majority in voting power of the shares of common stock present in person or by proxy and entitled to vote thereon. | Abstentions will have the effect of a vote against the proposal. | We do not expect any broker non-votes on this proposal. |
Other Business
Our management does not intend to present other items of business and knows of no items of business that are likely to be brought before the Annual Meeting, except those described in this proxy statement. However, if any other matters should properly come before the Annual Meeting, the persons named inon the enclosed proxy card will have discretionary authority to vote such proxy in accordance with their best judgment on the matters.
Procedures at the Annual Meeting
The presiding officer at the Annual Meeting will determine how business at the meeting will be conducted. Only matters brought before the Annual Meeting in accordance with our Bylaws will be considered.
Only a natural person present at the Annual Meeting who is either one of our stockholders, or is acting on behalf of one of our stockholders, may make a motion or second a motion. A person acting on behalf of a stockholder must present a written statement executed by the stockholder or the duly-authorized representative of the stockholder on whose behalf the person purports to act.
Householding of Annual Meeting Materials
Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements, annual reports and the Notice of Internet Availability of Proxy Materials. This means that only one copy of this proxy statement, our Annual Report to Stockholders or the Notice of Internet Availability of Proxy Materials may have been sent to multiple stockholders in each household. We will promptly deliver a separate copy of any of these documents to any stockholder upon written or oral request to our Stockholder Information Department, Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014, telephone: (763) 225-6637. Any stockholder who wants to receive separate copies of this proxy statement, our Annual Report to Stockholders or the Notice of Internet Availability of Proxy Materials in the future, or any stockholder who is receiving multiple copies and would like to receive only one copy per household, should contact the stockholder’s bank, broker or other nominee record holder, or the stockholder may contact us at the above address and phonetelephone number.
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Proxy Solicitation Costs
The cost of soliciting proxies, including the preparation, assembly, electronic availability and mailing of proxies and soliciting material, as well as the cost of making available or forwarding this material to the beneficial owners of our common stock will be borne by NTIC. Our directors, officers and regular employees may, without compensation other than their regular compensation, solicit proxies by telephone, e-mail, facsimile or personal conversation. We may reimburse brokerage firms and others for expenses in making available or forwarding solicitation materials to the beneficial owners of our common stock.
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PROPOSAL ONE—ELECTION OF DIRECTORS
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Number of Directors
Our Bylaws provide that the Board of Directors will consist of at least one member or such other number as may be determined by the Board of Directors from time to time or by the stockholders at an annual meeting. The Board of Directors has fixed the number of directors at seven.eight, effective as of the date of the Annual Meeting.
Nominees for Director
The Board of Directors has nominated the following seveneight individuals to serve as our directors until the next annual meeting of stockholders or until their successors are elected and qualified. All of the nominees named below are current members of the Board of Directors.
· | · G. Patrick Lynch | |
· Sarah E. Kemp | · Ramani Narayan, Ph.D. | |
· Soo-Keong Koh | · Richard J. Nigon | |
· Sunggyu Lee, Ph.D. | · Konstantin von Falkenhausen | |
Barbara D. Colwell, a current director, is not standing for re-election at the Annual Meeting. Ms. Colwell will continue to serve as a director of our company until the Annual Meeting. The Board of Directors thanks Ms. Colwell for her many years of service to the Board.
Proxies can only be voted for the number of persons named as nominees in this proxy statement, which is seven.eight.
If prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve. The Board of Directors has no reason to believe that any of the nominees will be unable to serve.
Information about Current Directors and Board Nominees
The following table sets forth as of November 25, 201720, 2019 the name, age and principal occupation of each current director and each individual who has been nominated by the Board of Directors to serve as a director of our company, as well as how long each individual has served as a director of NTIC.
Name | Age | Principal Occupation | Director Since | Age | Principal Occupation | Director Since | |||
Nancy E. Calderon(1) | 60 | Former Partner of KPMG LLP | 2019 | ||||||
Barbara D. Colwell(1)(2) | 72 | Director of NTIC and Certain Other Companies and Organizations | 2013 | 74 | Director of NTIC and Certain Other Companies and Organizations | 2013 | |||
Sarah E. Kemp(2) | 52 | Executive Director of Merck | 2019 | ||||||
Soo-Keong Koh(2) | 66 | Managing Director of EcoSave Pte Ltd. | 2008 | 68 | Managing Director of EcoSave Pte Ltd. | 2008 | |||
Sunggyu Lee, Ph.D.(3) | 65 | Russ Ohio Research Scholar in Syngas Utilization and Professor of Chemical and Biomolecular Engineering at Ohio University | 2004 | 67 | Russ Ohio Research Scholar in Syngas Utilization and Professor of Chemical and Biomolecular Engineering at Ohio University | 2004 | |||
G. Patrick Lynch | 50 | President and Chief Executive Officer of NTIC | 2004 | 52 | President and Chief Executive Officer of NTIC | 2004 | |||
Ramani Narayan, Ph.D. | 68 | Distinguished Professor in the Department of Chemical Engineering & Materials Science at Michigan State University | 2004 | ||||||
Richard J. Nigon(1)(2)(3) | 69 | Senior Vice President of Cedar Point Capital, Inc. | 2010 | ||||||
Konstantin von Falkenhausen(1)(3) | 50 | Partner of B Capital Partners AG | 2012 |
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Name | Age | Principal Occupation | Director Since | |||
Ramani Narayan, Ph.D. | 70 | Distinguished Professor in Department of Chemical Engineering & Materials Science at Michigan State University | 2004 | |||
Richard J. Nigon(1)(2)(3) | 71 | Senior Vice President of Cedar Point Capital, Inc. | 2010 | |||
Konstantin von Falkenhausen(1)(3) | 52 | Partner of B Capital Partners AG | 2012 |
_________________________
(1) | Member of the Audit Committee |
(2) | Member of the Nominating and Corporate Governance Committee |
(3) | Member of the Compensation Committee |
Additional Information about Current Directors and Board Nominees
The following paragraphs provide information about each current director and nominee for director, including all positions he or she holds, his or her principal occupation and business experience for the past five years, and the names of other publicly-held companies of which the director or nominee currently serves as a director or has served as a director during the past five years. We believe that all of our directors and nominees display personal and professional integrity; satisfactory levels of education and/or business experience; broad-based business acumen; an appropriate level of understanding of our business and its industry and other industries relevant to our business; the ability and willingness to devote adequate time to the work of the Board of Directors and its committees; a fit of skills and personality with those of our other directors that helps build a board that is effective, collegial and responsive to the needs of our company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and background; and the ability to represent the interests of all of our stockholders. The information presented below regarding each director and nominee also sets forth specific experience, qualifications, attributes and skills that led the Board of Directors to the conclusion that such individual should serve as a director in light of our business and structure.
Nancy E. Calderon has been a director of NTIC since October 2019. Ms. Calderon is a CPA and has over 33 years of experience with KPMG LLP until her retirement on September 30, 2019. Until her retirement, Nancy served as Global Lead Partner for a Fortune 50 Technology company, a position she held since July 2012, senior partner of KPMG’s Board Leadership Center from its inception in 2015, and as a director of KPMG’s Global Delivery Center in India and its related holding companies since September 2011. Previously, she was KPMG’s Americas Chief Administrative Officer and U.S. National Partner in Charge, Operations from July 2008 to June 2012. Ms. Calderon has sat on a number of KPMG committees, including the Americas Region Management Committee, Enterprise Risk Management, Privacy, Pension Steering and Investment, Social Media and Knowledge Management. She currently serves as a director of multiple organizations, including the Women Corporate Directors Foundation, the Greater New York YMCA, the NY Women’s Forum, and The University Club. We believe Ms. Calderon’s qualifications to sit on the Board of Directors include her extensive financial accounting experience with KPMG and her current and prior experience on boards of directors, including, in particular, her experience serving on the audit committees of KPMG’s Global Delivery Center, Women Corporate Directors Foundation and the New York YMCA. Ms. Calderon received a Bachelor of Science from UC Berkeley’s Haas Business School and a Master of Science from Golden Gate University.
Barbara D. Colwell has been a director of NTIC since November 2013. Ms. Colwell is not standing for re-election as a director at the Annual Meeting. Ms. Colwell is a member of the board of directors or advisory board of several non-profit organizations and private and mutual companies, including most notably, the Publishers Clearing House, LLC,Triumph Oil & Gas Operating Company, LLC, IPTAR (Institute for Psychoanalytic Training and Research), the Belizean Grove and POBA: where the arts live.Mutual Trust Life Insurance. We believe Ms. Colwell’s qualifications to sit on the Board of Directors include her current and prior experience on the boards of directors of other organizations and companies and, in particular, her experience serving on the audit committee, governance committee and compensation committee of Publishers Clearing House, LLC, as well as her former experience serving on the audit committee and compensation committee of Mutual Trust Financial Group.
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Sarah E. Kemphas been a director of NTIC since October 2019. Ms. Kemp is Executive Director for Merck, a global biopharmaceutical company. Effective July 8, 2019, Ms. Kemp joined Merck’s Policy, Communications and Population Health organization in the role of Executive Director, China Policy Strategy and Human Health Commercial International Strategic Policy Initiatives. In this role, Ms. Kemp is responsible for supporting the MSD China team in their strategic policy shaping initiatives, defining and leading global above-country engagement in support of MSD China, and leading critical policy shaping initiatives in support of the entire ex-US market set. Before joining Merck, Ms. Kemp was the Deputy Under Secretary (DUS), the highest career position for the International Trade Administration (ITA) at the Department of Commerce in Washington, D.C. In this role, she oversaw ITA’s $485 million annual budget and 2,100 trade and investment professionals based in 108 US cites and 76 markets around the world. For over 27 years, Ms. Kemp has served in various positions with increasing responsibility at the U.S. Department of Commerce, including: Deputy Director General, Global Markets, U.S. and Foreign Commercial Service, from August 2017 to January 2018; Senior Commerce Department Official, Commercial Counselor, at the U.S. Embassy in Beijing, China from August 2014 to March 2017; Senior Commerce Department Official, Commercial Counselor, at the U.S. Embassy in Hanoi, Vietnam from August 2011 to July 2014; and Deputy Senior Commercial Officer at the U.S. Embassy in Beijing, China from June 2008 to July 2011. Ms. Kemp served on the board of directors of the Concordia International School in Hanoi, Vietnam, an international day school offering preschool through high school education, from 2012 to 2014. Ms. Kemp was a Co-Chair of Women Corporate Directors in Vietnam from 2011 to 2014 and in Beijing from 2009 to 2011. We believe Ms. Kemp’s qualifications to sit on the Board of Directors include her extensive knowledge and experience in international commerce, particularly with regard to Asia Pacific and Greater China, her prior board experience, and her depth of experience in international and public affairs. Ms. Kemp received a Bachelor of Arts from Hamilton College, a Masters of Public Administration from the School of International and Public Affairs at Columbia University, and a Masters of Business Administration from the Chinese University of Hong Kong.
Soo-Keong Kohhas been a director of NTIC since May 2008. Mr. Koh is the Managing Director of Ecosave Pte Ltd., a company whose business is focused on environmental biotech and energy conservation technologies, a position he has held since April 2007. From January 1986 to April 2007, Mr. Koh served as Chief Executive Officer and President of Toll Asia Pte Ltd formerly SembCorp Logistics Ltd (SembLog), a Singapore public listed company, which was acquired by Toll in May 2006. Mr. Koh has over 20 years of experience in the logistics industry. Mr. Koh holds a Bachelor of Engineering, a Master of Business Administration and a Postgraduate Diploma in Business Law from the University of Singapore (now known as the National University of Singapore). We believe Mr. Koh’s qualifications to sit on the Board of Directors include his experience on other public company boards of directors and his significant executive experience with companies including those focused on environmental awareness, which has become a focus of NTIC during the past several years, especially in light of NTIC’s Natur-Tec®Natur-Tec® bioplastics business. Mr. Koh’s previous board of director experience is helpful in guiding NTIC with respect to corporate governance matters, particularly in his role as Chair of the Nominating and Corporate Governance Committee. Additionally, Mr. Koh has specific executive experience with companies located in Asia, which is where several of NTIC’s joint ventures and NTIC’s Chinese subsidiary are located.
Sunggyu Lee, Ph.D. was electedhas been a director of NTIC insince January 2004. Dr. Lee is a Russ Ohio Research Scholar in Syngas Utilization and Professor of Chemical and Biomolecular Engineering, Ohio University, Athens, Ohio. Previously, he held positions of Professor of Chemical and Biologic Engineering, Missouri University of Science and Technology, Rolla, Missouri from 2005 to 2010, C.W. LaPierre Professor and Chairman of Chemical Engineering at University of Missouri-Columbia from 1997 to 2005, and Robert Iredell Professor and Head of Chemical Engineering Department at the University of Akron, Akron, Ohio from 1988 to 1996. He has authored 12 books and over 550 archival publications and received 35 U.S. patents in a variety of chemical and polymer processes and products. He is currently serving as Editor of Encyclopedia of Chemical Processing, Taylor & Francis, New York, New York and also as Book Series Editor of Green Chemistry and Chemical Engineering, CRC Press, Boca Raton, Florida. Throughout his career, he has served as consultant and technical advisor to a number of national and international companies in the fields of polymers, petrochemicals and energy. He received his Ph.D. from Case Western Reserve University, Cleveland, Ohio in 1980. We believe Dr. Lee’s qualifications to sit on the Board of Directors include his significant technical and industrial expertise with chemical and polymer processes and products. Such expertise is particularly helpful with respect to assessing and operating NTIC’s Natur-Tec®Natur-Tec® bioplastics business.
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G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief Executive Officer since January 2006 and was appointed a director of NTIC in February 2004. Mr. Lynch served as President of North American Operations of NTIC from May 2004 to July 2005. Prior to May 2004, Mr. Lynch held various positions with NTIC, including Vice President of Strategic Planning, Corporate Secretary and Project Manager. Mr. Lynch is also an officer and director of Inter Alia Holding Company, which is a significant stockholder of NTIC. Prior to joining NTIC, Mr. Lynch held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan, and programming project management for BMW AG in Munich, Germany. Mr. Lynch received a Master of Business Administration degree from the University of Michigan Ross School of Business. We believe Mr. Lynch’s qualifications to sit on the Board of Directors include his depth of knowledge of our company and its day-to-day operations in light of his position as Chief Executive Officer of NTIC, as well as his affiliation with a significant stockholder of NTIC, which the Board of Directors believes generally helps align management’s interests with those of our stockholders.
Ramani Narayan, Ph.D. has been a director of NTIC since November 2004. He is a Distinguished Professor at Michigan State University in the Department of Chemical Engineering & Materials Science, where he has 105200+ refereed publications in leading journals to his credit, 1819 patents, edited three books and one expert dossier in the area of bio-based polymeric materials. His research encompasses design and engineering of sustainable, biobased products, biodegradable plastics and polymers, biofiber reinforced composites, reactive extrusion polymerization and processing, studies in plastic end-of-life options like biodegradation and composting. He conducts carbon footprint calculations for plastics and products. He also performs LCA (Life Cycle Assessment) for reporting a product’s environmental footprint. He serves as Scientific Chair and board member of the Biodegradable Products Institute (BPI), North America. He servesserved on the Technical Advisory Board of Tate & Lyle. He served on the Board of Directors of ASTM International, an international standardsstandard setting organization and currently chairswas the founding Chair of the committee on Environmentally Degradable Plastics and Biobased Products (D20.96) and the Plastics Terminology Committee (D20.92). Dr. Narayan is also the technical expert for the United States on ISO (International Standards Organization) TC 61 on Plastics—specifically for Terminology, Biobased and Biodegradable Plastics. He has won numerous awards, including the Named MSU University Distinguished Professor in 2007; the Governors University Award for commercialization excellence; Michigan State University Distinguished Faculty Award, 2006, 2005 Withrow Distinguished Scholar award, Fulbright Distinguished Lectureship Chair in Science & Technology Management & Commercialization (University of Lisbon; Portugal); First recipient of the William N. Findley Award, The James Hammer Memorial Lifetime Achievement Award, and Research and Commercialization Award sponsored by ICI Americas, Inc. & the National Corn Growers Association. We believe Dr. Narayan’s qualifications to sit on the Board of Directors include his significant technical expertise in the bioplastics area which has been helpful to NTIC’s management in assessing and operating NTIC’s Natur-Tec®Natur-Tec® bioplastics business.
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Richard J. Nigonhas been a director of NTIC since February 2010 and non-executive Chairman of the Board since November 2012. Mr. Nigon is the Senior Vice President of Cedar Point Capital, Inc., a private company that raises capital for early stage companies. From February 2001 until May 2007, Mr. Nigon was a Director of Equity Corporate Finance for Miller Johnson Steichen Kinnard (MJSK), a privately held investment firm. In December 2006, MJSK was acquired by Stifel Nicolaus, and Mr. Nigon was a Managing Director of Private Placements at Stifel Nicolaus. From February 2000 to February 2001, Mr. Nigon served as the Chief Financial Officer of Dantis, Inc., a web hosting company. Prior to joining Dantis, Mr. Nigon was employed by Ernst & Young, LLP from 1970 to 2000, where he served as a partner from 1981 to 2000. While at Ernst & Young, Mr. Nigon served as the Director of Ernst & Young’s Twin Cities Entrepreneurial Services Group and was the coordinating partner on several publicly-traded companies in the consumer retailing and manufacturing sectors. Mr. Nigon also currently serves as President of NorthStar Education Finance, Inc., a non-profit organization formed to foster, aid, encourage and assist the pursuit of higher education. In addition to NTIC, Mr. Nigon also serves on the board of directors of Tactile Systems Technology, Inc. and as chairperson of its audit committee, on the board of directors of Celcuity Inc. and as chairperson of its audit committee and serves on the board of directors of a number of privately-held companies. Mr. Nigon previously served on the board of directors of Virtual Radiologic Corporation and Vascular Solutions, Inc. until its acquisition by Teleflex Incorporated in February 2017. Through his 30 years of service at Ernst & Young, LLP, Mr. Nigon brings to NTIC’s Board of Directors, and in particular the Audit Committee, extensive public accounting and auditing experience. The Board of Directors believes Mr. Nigon’s strong background in financial controls and reporting, financial management, financial analysis and Securities and Exchange CommissionSEC reporting requirements is critical to the Board’s oversight responsibilities. In addition, Mr. Nigon’shis strategic planning expertise and other experiences gained through his management and leadership roles at private investment firms that have invested in early stage companies, is helpful to the Board of Directors in assessing and operating NTIC’s newer businesses.
Konstantin von Falkenhausen has been a director of NTIC since November 2012. Mr. von Falkenhausen is currently a Partner of B Capital Partners AG, an independent investment advisory boutique focused on infrastructure, public private partnerships and clean energy. In this capacity, since April 2018, Mr. von Falkenhausen has been a Director of the general partner of the B Capital Energy Transition Infrastructure Fund SICAV-SIF, an investment fund registered with the Luxembourg financial authorities CSSF. From February 2004 to March 2008, Mr. von Falkenhausen served as a Partner of capiton AG, a private equity firm. From March 2003 to February 2004, he served as interim Chief Financial Officer of Neon Products GmbH, a privately held neon lighting company. From May 1999 to February 2003, Mr. von Falkenhausen served as an investment manager of West Private Equity Ltd. and an investment director of its German affiliate West Private Capital GmbH. Prior to May 1999, Mr. von Falkenhausen served in several positions with BankBoston Robertson Stephens International Ltd., an investment banking firm. Mr. von Falkenhausen is a citizen of Germany. He has a Master’s degree in economics (lic. oec) from the University of Fribourg (Switzerland) and a Masters of Business Administration from the University of Chicago. We believe Mr. von Falkenhausen’s qualifications to sit on the Board of Directors include his experience with several private investment and equity firms that have invested in early stage companies, which the Board of Directors believes is helpful in assessing and operating NTIC’s newer businesses, and his financial expertise, which the Board of Directors believes is helpful in analyzing NTIC’s financial performance.
Board Recommendation
The Board of Directors unanimously recommends a voteFOR the election of all of the seveneight nominees named above.
If prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve. The Board of Directors has no reason to believe that any of the nominees will be unable to serve.
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PROPOSAL TWO—ADVISORY VOTE ON EXECUTIVE COMPENSATION
________________
Introduction
The Board of Directors is providing stockholders with an advisory vote on executive compensation pursuant to the Dodd-Frank Wall Street Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934.1934, as amended. This advisory vote, commonly known as a “say-on-pay” vote, is a non-binding vote on the compensation paid to our named executive officers as set forth in the “Executive Compensation” section of this proxy statement beginning on page 34.41. At the 20172019 Annual Meeting of Stockholders held on January 13, 2017,18, 2019, 99% of the votes cast by our stockholders were in favor of our say-on-pay vote. The Compensation Committee generally believes that such results affirmed stockholder support of our approach to executive compensation.
Our executive compensation program is generally designed to attract, retain, motivate and reward highly qualified and talented executive officers. The underlying core principleprinciples of our executive compensation program is to link pay to performance and align the interests of our executives with those of our stockholders by providing compensation opportunities that are tied directly to the achievement of financial and other performance goals and long-term stock price performance. are:
· | To align the interests of our executives with those of our stockholders; |
· | Integrate compensation with our business plans and strategic goals; |
· | Link amount of compensation to both company and individual performance goals; and |
· | Provide fair and competitive compensation opportunities that attract and retain executives. |
The “Executive Compensation” section of this proxy statement, which begins on page 34,41, describes our executive compensation program and the executive compensation decisions made by the Compensation Committee and Board of Directors for fiscal 20172019 in more detail. Important considerations include:
· | A significant portion of the compensation paid or awarded to our named executive officers in fiscal |
· | Equity-based compensation granted to our named executive officers |
· | Our executive officers receive only modest perquisites and have modest severance and change-in-control arrangements. |
· | We have adopted a clawback policy. |
· | We do not provide any tax “gross-up” payments. |
We believe that our executive compensation program and related decisions link pay to performance. For example, our fiscal 20172019 total net sales increased over 20%8.4% to $39,569,123$55,750,137 during fiscal 20172019 compared to fiscal 2016, and2018; however, our net income attributable to NTIC increaseddecreased to $3,422,126,$5,209,622, or $0.75$0.55 per diluted common share, for fiscal 20172019 compared to $(867,514)$6,701,366, or $(0.19)$0.72 per diluted common share, as adjusted to reflect our two-for-one stock split effected on June 28, 2019, for fiscal 2016. Accordingly,2018. The total compensation for our named executive officers for fiscal 20172019 increased approximately 30%1% compared to fiscal 2016.2018.
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Accordingly, the Board of Directors recommends that our stockholders vote in favor of the say-on-pay vote as set forth in the following resolution:
RESOLVED, that our stockholders approve, on an advisory basis, the compensation paid to our named executive officers, as disclosed in this proxy statement.
Stockholders are not ultimately voting to approve or disapprove the recommendation of the Board of Directors. As this is an advisory vote, the outcome of the vote is not binding on us with respect to future executive compensation decisions, including those relating to our named executive officers, or otherwise. The Compensation Committee and Board of Directors expect to take into account the outcome of this advisory vote when considering future executive compensation decisions.
In accordancePursuant to Proposal Three—Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation, and assuming our stockholders agree with the result of the advisory vote on the frequency of theBoard’s recommendation for an annual say-on-pay vote, which was conducted at our 2014 Annual Meeting of Stockholders, the Board of Directors has determined that we will conduct an executive compensation advisory vote on an annual basis. Accordingly, after this Annual Meeting, the next say-on-pay vote willis anticipated to occur at our next Annual Meeting of Stockholders anticipated to be held in January 2019. We anticipate that the next say-on-frequency vote will occur at our 20202021 Annual Meeting of Stockholders.
Board Recommendation
The Board of Directors unanimously recommends a voteFOR approval, on an advisory basis, of the compensation paid to our named executive officers, as disclosed in this proxy statement.
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PROPOSAL THREE—ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
_________________
Background
The Board of Directors is providing our stockholders with an advisory vote on the frequency of future advisory votes on executive compensation, or say-on-pay votes, such as that provided for in Proposal Two—Advisory Vote on Executive Compensation. This non-binding advisory vote is required to be conducted every six years under Section 14A of the Securities Exchange Act of 1934, as amended, pursuant to the Dodd-Frank Act. Our last frequency of say-on-pay vote was held at our 2014 Annual Meeting of Stockholders, at which stockholders voted in favor of an annual say-on-pay vote. The next required advisory vote on the frequency of future stockholder advisory votes on executive compensation will occur no later than the 2026 Annual Meeting of Stockholders.
Stockholders may indicate whether they prefer that we hold a say-on-pay vote every one year, two years, or three years, or they may abstain from this vote.
Reasons for an Annual Say-on-Pay Vote Recommendation
After careful consideration, the Board of Directors, upon recommendation of the Compensation Committee, has determined that holding a say-on-pay vote on an annual basis continues to be the best approach for NTIC and our stockholders and recommends that stockholders vote for future advisory votes on executive compensation to occur every one year. While our executive compensation program is designed to promote a long-term connection between pay and performance, the Board of Directors recognizes that executive compensation decisions are made annually and that an annual say-on-pay vote:
· | Aligns with our annual review of core elements of our executive compensation program; |
· | Allows stockholders to provide timely, direct input on our executive compensation philosophy, policies, and practices as disclosed in our proxy statement each year; and |
· | Is consistent with our practice of seeking input and engaging in dialogue with our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices. |
Stockholders are not voting to approve or disapprove the Board of Directors’ recommendation. Instead, stockholders may indicate their preference regarding the frequency of future say-on-pay votes by selecting every one year, two years or three years. Stockholders that do not have a preference regarding the frequency of future say-on-pay votes may abstain from voting on the proposal.
The option of every one year, two years or three years that receives the highest number of votes cast by our stockholders will reflect the frequency for future say-on-pay votes that has been selected by our stockholders. As this is an advisory vote, the outcome of the vote is not binding on us, and the Compensation Committee and the Board of Directors may decide that it is in the best interests of NTIC and our stockholders to hold a say-on-pay vote more or less frequently than the preference receiving the highest number of votes of our stockholders. However, the Compensation Committee and the Board of Directors value the opinions expressed by our stockholders in their vote on this proposal and expect to take into account the outcome of this vote when considering the frequency of future advisory votes on executive compensation.
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Board Recommendation
The Board of Directors unanimously recommends that our stockholders vote for a frequency of everyONE YEAR, on an advisory basis, for future advisory votes on executive compensation, or say-on-pay votes.
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PROPOSAL THREE—FOUR—RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
_________________
Selection of Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors selects our independent registered public accounting firm. In this regard, the Audit Committee evaluates the qualifications, performance and independence of our independent registered public accounting firm and determines whether to re-engage our current independent registered public accounting firm. As part of its evaluation, the Audit Committee considers, among other factors, the quality and efficiency of the services provided by the firm, including the performance, technical expertise, and industry knowledge of the lead audit partner and the audit team assigned to our account; the overall strength and reputation of the firm; its global capabilities relative to our business; and its knowledge of our operations. Upon consideration of these and other factors, the Audit Committee has selected Baker Tilly Virchow Krause, LLP to serve as our independent registered public accounting firm for the fiscal year ending August 31, 2018.2020. Baker Tilly Virchow Krause, LLP has served as our independent registered public accounting firm since 2004.
Although it is not required to do so, the Board of Directors is asking our stockholders to ratify the Audit Committee’s selection of Baker Tilly Virchow Krause, LLP.LLP as a matter of good corporate governance. If our stockholders do not ratify the selection of Baker Tilly Virchow Krause, LLP, another independent registered public accounting firm will be considered by the Audit Committee. Even if the selection is ratified by our stockholders, the Audit Committee in its discretion may change the appointment at any time during the year, if it determines that such a change would be in the best interests of NTIC and our stockholders.
Representatives of Baker Tilly Virchow Krause, LLP will be present at the Annual Meeting to respond to appropriate questions. They also will have the opportunity to make a statement if they wish to do so.
Audit, Audit-Related, Tax and Other Fees
The following table presents the aggregate fees billed to us by Baker Tilly Virchow Krause, LLP for the fiscal years ended August 31, 20172019 and August 31, 2016.2018.
Aggregate Amount Billed by Baker Tilly Virchow Krause, LLP ($) | Aggregate Amount Billed by Baker Tilly Virchow Krause, LLP ($) | |||||||||||||||
Fiscal 2017 | Fiscal 2016 | Fiscal 2019 | Fiscal 2018 | |||||||||||||
Audit Fees(1) | $ | 326,404 | $ | 305,997 | $ | 478,522 | $ | 493,832 | ||||||||
Audit-Related Fees | — | — | 6,000 | — | ||||||||||||
Tax Fees | — | — | — | — | ||||||||||||
All Other Fees | — | — | — | — |
______________________________________________
(1) | These fees consisted of the audit of our annual financial statements by year, review of financial statements included in our quarterly reports on Form 10-Q and other services normally provided in connection with statutory and regulatory filings or engagements. |
(2) | Audit-related fees represent fees for services relating to registration statement filings. |
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Audit Committee Pre-Approval Policies and Procedures
All services rendered by Baker Tilly Virchow Krause, LLP to NTIC were permissible under applicable laws and regulations and all services provided to NTIC, other than de minimis non-audit services allowed under applicable law, were approved in advance by the Audit Committee. The Audit Committee has not adopted any formal pre-approval policies and procedures.
Board Recommendation
The Board of Directors unanimously recommends that stockholders voteFOR ratification of the selection of Baker Tilly Virchow Krause, LLP, as our independent registered public accounting firm for the fiscal year ending August 31, 2018.2020.
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PROPOSAL FOUR—APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OFINCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
________________
Our Restated Certificate of Incorporation currently authorizes the issuance of 10,000,000 shares of common stock, par value $0.02 per share. On November 15, 2017, the Board of Directors unanimously adopted a resolution approving, and recommending that our stockholders approve, an amendment to Article IV of our Restated Certificate of Incorporation to increase the total number of shares of common stock that we are authorized to issue to 15,000,000, and also to increase the total number of shares of capital stock that we are authorized to issue to reflect such increase in our authorized common stock.
The Board of Directors believes that it is advisable and it is in the best interests of our company and our stockholders to increase the total number of authorized shares of common stock in order to give us greater flexibility in considering and planning for potential future corporate needs.
As of November 17, 2017, there were 4,537,408 shares of our common stock outstanding. In addition, 542,639 shares of common stock have been reserved for future issuance under our equity compensation plans. Accordingly, 4,919,953 of the 10,000,000 of common stock currently authorized remain available for issuance or reserved for issuance.
Text of the Proposed Amendment
We propose to amend Article IV of our Restated Certification of Incorporation so that it would state in its entirety as follows:
“The Corporation shall have the authority to issue Fifteen Million Ten Thousand (15,010,000) shares of stock divided into Fifteen Million (15,000,000) shares of Two Cent ($.02) par value common stock and Ten Thousand (10,000) shares of no par value preferred stock.”
Purpose of the Proposed Amendment
The Board of Directors believes that additional authorized shares of common stock would provide us with the necessary flexibility to issue shares in the future for various corporate purposes and enable us to take timely advantage of market conditions and opportunities without the delay and expense associated with convening a special stockholders’ meeting for such purpose, except as otherwise required by law and the rules of the NASDAQ Stock Market. These corporate purposes, include, but are not limited to, future stock splits and stock dividends; capital-raising or financing transactions; potential strategic transactions, including mergers, acquisitions, and other business combinations; grants and awards under equity compensation plans; and other general corporate purpose transactions.
In the past, we have used authorized but unissued shares in connection with equity financings and for issuance pursuant to equity compensation plans. Although the Board of Directors has discussed from time to time a possible stock split effected in the form of a share dividend, the Board of Directors has not approved such a split. The increase in the number of authorized shares would allow for a sufficient authorized but unissued share amount to accommodate a future stock split effected in the form of a share dividend if the Board of Directors determines to proceed with such a split. Other than shares of our common stock that have been reserved for future issuance under our equity compensation plans and these discussions regarding a possible future stock split effected in the form of a share dividend, we currently do not have any plans, commitments, arrangements, understandings or agreements to issue any currently authorized and unissued shares of our common stock, or any of the additional shares of common stock that would be authorized by the proposed amendment.
All of the additional shares resulting from the increase in our authorized common stock would be of the same class with the same dividend, voting, liquidation and similar rights as the shares of common stock presently outstanding. The shares would be unreserved and available for issuance. No further authorization for the issuance of common stock by stockholder vote is required under our existing Restated Certificate of Incorporation, and none would be required prior to the issuance of the additional shares of common stock by NTIC. Stockholders have no preemptive rights to acquire any shares issued by NTIC under its existing Restated Certificate of Incorporation, and stockholders would not acquire any such rights with respect to any additional shares under the proposed amendment to its Restated Certificate of Incorporation.
Potential Effects of the Proposed Amendment
The Board of Directors is required to make any determination to issue shares of our common stock based on its judgment regarding the best interests of our company and our stockholders. Future issuances of shares of our common stock or securities convertible into shares of our common stock could have a dilutive effect on our earnings per share, book value per share and the voting interest and power of our current stockholders since holders of our common stock are not entitled to preemptive rights. In addition, although we have not proposed the increase in the total number of authorized shares of common stock with the intent of using the additional shares to prevent or discourage any actual or threatened takeover of our company, under certain circumstances, such shares could have an anti-takeover effect. The additional shares could be issued to dilute the stock ownership or voting rights of persons seeking to obtain control of our company or could be issued to persons allied with the Board of Directors or management and thereby having the effect of making it more difficult to remove directors or members of management by diluting the stock ownership or voting rights of persons seeking to effect such a removal. The additional shares also could be issued in private placements and without stockholder approval or further action by our stockholders, subject to applicable law or the rules of any stock exchange on which our common stock is then listed. Accordingly, if the proposed amendment is approved, the additional shares of authorized common stock may render more difficult or discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our common stock, or the replacement or removal of our Board of Directors or management.
SEC rules require disclosure of charter and bylaw provisions that could have an anti-takeover effect. The following other provisions of our Restated Certificate of Incorporation and Amended and Restated Bylaws may have the anti-takeover effect of preventing, discouraging or delaying any change in the control of our company:
Timing of the Proposed Amendment
If the proposed amendment to increase the number of authorized shares of our common stock is approved by our stockholders, it will become effective immediately upon the filing of a Certificate of Amendment to our Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which we expect to file promptly after the Annual Meeting. If the proposed amendment is not approved by our stockholders, the number of authorized shares of common stock will remain unchanged.
Board Recommendation
The Board of Directors unanimously recommends a voteFOR the approval of the amendment to our Restated Certificate of Incorporation to increase the total number of authorized shares of common stock from 10,000,000 to 15,000,000.
STOCK OWNERSHIP
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Beneficial Ownership of Significant Stockholders and Management
The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of November 15, 2017,20, 2019, the record date for the Annual Meeting, for:
· | each person known by us to beneficially own more than five percent of the outstanding shares of our common stock; |
· | each of our directors; |
· | each of the executive officers named in the Summary Compensation Table included later in this proxy statement under “Executive Compensation” and |
· | all of our current directors and executive officers as a group. |
The number of shares beneficially owned by a person includes shares subject to options held by that person that are currently exercisable or that become exercisable within 60 days of November 15, 2017.20, 2019. Percentage calculations assume, for each person and group, that all shares that may be acquired by such person or group pursuant to options currently exercisable or that become exercisable within 60 days of November 15, 201720, 2019 are outstanding for the purpose of computing the percentage of common stock owned by such person or group. However, such unissued shares of common stock described above are not deemed to be outstanding for calculating the percentage of common stock owned by any other person.
Except as otherwise indicated, the persons in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and subject to the information contained in the notes to the table. Share data set forth in the table below and the footnotes thereto have been adjusted to reflect our two-for-one stock split effected on June 28, 2019.
Title of Class | Name and Address of Beneficial Owner(1) | Amount and | Percent of Class | Name and Address of Beneficial Owner(1) | Amount and | Percent of Class | |||||||||||
Directors and Officers: | Directors and Officers: | ||||||||||||||||
Common Stock | Barbara D. Colwell | 16,500 | * | Nancy E. Calderon | 0 | * | |||||||||||
Common Stock | Soo-Keong Koh | 32,666 | * | Barbara D. Colwell | 46,546 | * | |||||||||||
Common Stock | Sunggyu Lee, Ph.D. | 4,000 | * | Sarah E. Kemp | 0 | * | |||||||||||
Common Stock | G. Patrick Lynch(3) | 675,718 | 14.8% | Soo-Keong Koh | 78,878 | * | |||||||||||
Common Stock | Ramani Narayan, Ph.D. | 35,500 | * | Sunggyu Lee, Ph.D. | 8,000 | * | |||||||||||
Common Stock | Richard J. Nigon | 39,300 | * | G. Patrick Lynch(3) | 1,402,404 | 15.2% | |||||||||||
Common Stock | Konstantin von Falkenhausen | 19,600 | * | Ramani Narayan, Ph.D. | 84,546 | * | |||||||||||
Common Stock | Matthew C. Wolsfeld | 94,446 | 2.1% | Richard J. Nigon | 97,256 | 1.1% | |||||||||||
Common Stock | All current directors and executive officers as a group (8 persons)(4) | 917,730 | 19.5% | Konstantin von Falkenhausen | 52,746 | * | |||||||||||
Common Stock | Matthew C. Wolsfeld | 226,761 | 2.5% | ||||||||||||||
Common Stock | All current directors and executive officers as a group (10 persons)(4) | 1,997,137 | 20.9% | ||||||||||||||
Significant Beneficial Owners: | Significant Beneficial Owners: | ||||||||||||||||
Common Stock | Inter Alia Holding Company(5) 23205 Mercantile Road Beachwood, Ohio 44122 | 601,668 | 13.3% | Inter Alia Holding Company(5) 23205 Mercantile Road Beachwood, Ohio 44122 | 1,203,334 | 13.2% | |||||||||||
Common Stock | Rutabaga Capital Management(6) 64 Broad Street, 3rd Floor Boston, Massachusetts 02109 | 283,206 | 6.2% | Perritt Capital Management, Inc. and Perritt Funds, Inc.(6) 300 South Wacker Drive, Suite 2880 Chicago, Illinois 60606 | 524,980 | 5.8% | |||||||||||
Common Stock | Perritt Capital Management, Inc. and Perritt Funds, Inc.(7) 300 South Wacker Drive, Suite 2880 Chicago, Illinois 60606 | 259,500 | 5.7% |
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___________________* Represents beneficial ownership of less than one percent.
* | Represents beneficial ownership of less than one percent. |
(1) | The business address for each of the directors and officers of NTIC is c/o Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014. |
(2) | Includes for the persons listed below the following shares of common stock subject to options held by such persons that are currently exercisable or become exercisable within 60 days of November |
25 |
Securities Authorized for Issuance Under Equity Compensation Plans The following table summarizes outstanding options and other awards under NTIC’s equity compensation plans as of August 31, 2019. NTIC’s equity compensation plans as of August 31, 2019 were the Northern Technologies International Corporation 2019 Stock Incentive Plan, the Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan and the Northern Technologies International Corporation Employee Stock Purchase Plan. Except for automatic annual grants of $50,000 in options to purchase shares of NTIC common stock to NTIC’s directors in consideration for their services as directors of NTIC, an automatic annual grant of $10,000 in options to purchase shares of NTIC common stock to NTIC’s Chairman of the Board in consideration for his services as Chairman on the first day of each fiscal year and automatic initial pro rata grants of $50,000 in options to purchase shares of NTIC common stock to NTIC’s new directors in consideration for their services as directors of NTIC, options and other awards granted in the future under the Northern Technologies International Corporation 2019 Stock Incentive Plan are within the discretion of the Board of Directors and the Compensation Committee of the Board of Directors and therefore cannot be ascertained at this time. Share and per share data set forth in the table below and the footnotes thereto have been adjusted to reflect our two-for-one stock split effected on June 28, 2019.
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CORPORATE GOVERNANCE ________________
Corporate Governance Guidelines
The Board of Directors has adopted Corporate Governance Guidelines. A copy of these Corporate Governance Guidelines can be found on the “Investor Relations—Corporate Governance” section of our corporate websitewww.ntic.com. Among the topics addressed in our Corporate Governance Guidelines are:
Board Leadership Structure
Under our Corporate Governance Guidelines, the office of Chairman of the Board and Chief Executive Officer may or may not be held by one person. The Board of Directors believes it is best not to have a fixed policy on this issue and that it should be free to make this determination based on what it believes is best under the circumstances. However, the Board of Directors strongly endorses the concept of an independent director being in a position of leadership. Under our Corporate Governance Guidelines, if at any time the Chief Executive Officer and Chairman of the Board positions are held by the same person, the Board of Directors will elect an independent director as a lead independent director.
G. Patrick Lynch currently serves as our President and Chief Executive Officer, and Richard J. Nigon serves as our non-executive Chairman of the Board. Because the Chief Executive Officer and Chairman of the Board positions currently are not held by the same person, we do not have a lead independent director. We currently believe this leadership structure is in the best interests of our company and our stockholders and strikes the appropriate balance between the Chief Executive Officer’s responsibility for the strategic direction, day-to-day-leadership and performance of our company and the Chairman’s responsibility to provide oversight of our company’s corporate governance and guidance to our Chief Executive Officer and to set the agenda for and preside over Board of Directors meetings.
At each regular Board of Directors meeting, our independent directors meet in executive session with no company management
Director Independence
The Board of Directors has affirmatively determined that
In making these affirmative determinations that such individuals are “independent directors,” the Board of Directors reviewed and discussed information provided by the directors and by NTIC with regard to each director’s business and personal activities as they may relate to NTIC and NTIC’s management.
Board Meetings and Attendance
The Board of Directors met four times during the fiscal year ended August 31,
Board Committees
The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, each of which has the composition and responsibilities described below. The Board of Directors, from time to time, may establish other committees to facilitate the management of our company and may change the composition and responsibilities of our existing committees. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee operates under a written charter adopted by the Board of Directors, which can be found on the “Investor Relations—Corporate Governance” section of our corporate websitewww.ntic.com.
The following table summarizes the current membership of each of our three Board committees.
Audit Committee Responsibilities. The Audit Committee provides assistance to the Board of Directors in fulfilling its responsibilities for oversight, for quality and integrity of the accounting, auditing, reporting practices, systems of internal accounting and financial controls, the annual independent audit of our financial statements, and the legal compliance and ethics programs of NTIC as established by management. The Audit Committee’s primary responsibilities include:
The Audit Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities. Composition. The current members of the Audit Committee are Ms. Calderon, Ms. Colwell, Mr. Nigon and Mr. von Falkenhausen. Mr. Nigon is the chair of the Audit Committee. Each current member of the Audit Committee qualifies as “independent” for purposes of membership on audit committees pursuant to the Listing Rules of the Nasdaq Stock Market and the rules and regulations of the SEC and is “financially literate” as required by the Listing Rules of the Nasdaq Stock Market. In addition, the Board of Directors has determined that Ms. Calderon and Mr. Nigon qualify as “audit committee financial experts” as defined by the rules and regulations of the SEC and meet the qualifications of “financial sophistication” under the Listing Rules of the Nasdaq Stock Market as a result of their extensive financial backgrounds and various financial positions they have held throughout their respective careers. Stockholders should understand that these designations related to our Audit Committee members’ experience and understanding with respect to certain accounting and auditing matters do not impose upon any of them any duties, obligations or liabilities that are greater than those generally imposed on a member of the Audit Committee or of the Board of Directors. Meetings. The Audit Committee met four times during fiscal 2019 and once in executive session with Baker Tilly Virchow Krause, LLP, our independent registered public accounting firm. Audit Committee Report. This report is furnished by the Audit Committee of the Board of Directors with respect to NTIC’s financial statements for the fiscal year ended August 31, 2019. One of the purposes of the Audit Committee is to oversee NTIC’s accounting and financial reporting processes and the audit of NTIC’s annual financial statements. NTIC’s management is responsible for the preparation and presentation of complete and accurate financial statements. NTIC’s independent registered public accounting firm, Baker Tilly Virchow Krause, LLP, is responsible for performing an independent audit of NTIC’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for issuing a report on their audit. In performing its oversight role, the Audit Committee has reviewed and discussed NTIC’s audited financial statements for the fiscal year ended August 31, 2019 with NTIC’s management. Management represented to the Audit Committee that NTIC’s financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has discussed with Baker Tilly Virchow Krause, LLP, NTIC’s independent registered public accounting firm, the matters required to be discussed under Public Company Accounting Oversight Board standards. The Audit Committee has received the written disclosures and the letter from Baker Tilly Virchow Krause, LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Baker Tilly Virchow Krause, LLP’s communications with the Audit Committee concerning independence. The Audit Committee has discussed with Baker Tilly Virchow Krause, LLP its independence and concluded that the independent registered public accounting firm is independent from NTIC and NTIC’s management.
Based on the review and discussions of the Audit Committee described above, in reliance on the unqualified opinion of Baker Tilly Virchow Krause, LLP regarding NTIC’s audited financial statements, and subject to the limitations on the role and responsibilities of the Audit Committee discussed above and in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors that NTIC’s audited financial statements for the fiscal year ended August 31, 2019 be included in its Annual Report on Form 10-K for the fiscal year ended August 31, 2019 for filing with the Securities and Exchange Commission. This report is dated as of October 22, 2019. Audit Committee
Richard J. Nigon, Chair Nancy E. Calderon Barbara D. Colwell Konstantin von Falkenhausen
Other Information. Additional information regarding the Audit Committee and our independent registered public accounting firm is disclosed under the “Proposal
Compensation Committee
Responsibilities. The Compensation Committee provides assistance to the Board of Directors in fulfilling its oversight responsibility relating to compensation of our Chief Executive Officer and other executive officers and administers our equity compensation plans. The Compensation Committee’s primary responsibilities include:
The Compensation Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so, assesses the independence of such experts and advisors from management.
Composition. The current members of the Compensation Committee are Dr. Lee, Mr. Nigon and Mr. von Falkenhausen. Mr. von Falkenhausen is the current Chair of the Compensation
Processes and Procedures for Consideration and Determination of Executive Compensation. As described in more detail above under “—Responsibilities,” the Board of Directors has delegated to the Compensation Committee the responsibility, among other things, to recommend to the Board of Directors any and all compensation payable to our executive officers, including annual salaries, incentive compensation and long-term incentive compensation, and to administer our equity and incentive compensation plans applicable to our executive officers. Decisions regarding executive compensation made by the Compensation Committee are not considered final and are subject to final review and approval by the entire Board of Directors. Under the terms of its formal written charter, the Compensation Committee has the power and authority, tothe extent permitted by our Bylaws and applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee. The Compensation Committee has not generally delegated any of its duties and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole.
Our President and Chief Executive Officer and our Chief Financial Officer assist the Compensation Committee in gathering compensation related data regarding our executive officers and making recommendations to the Compensation Committee regarding the form and amount of compensation to be paid to each executive officer. In making final recommendations to the Board of Directors regarding compensation to be paid to our executive officers, the Compensation Committee considers the recommendations of our President and Chief Executive Officer and our Chief Financial Officer, but also considers other factors, such as its own views as to the form and amount of compensation to be paid, the achievement by the company of pre-established performance objectives, the general performance of the company and the individual officers, the performance of the company’s stock price and other factors that may be relevant. Neither management nor the Compensation Committee engaged a compensation consultant.
Final deliberations and decisions by the Compensation Committee regarding its recommendations to the Board of Directors of the form and amount of compensation to be paid to our executive officers are made by the Compensation Committee, without the presence of any executive officer of our company. In making final decisions regarding compensation to be paid to our executive officers, the Board of Directors considers the same factors and gives considerable weight to the recommendations of the Compensation Committee.
Meetings. The Compensation Committee met three times during fiscal
Nominating and Corporate Governance Committee
Responsibilities. The primary responsibilities of the Nominating and Corporate Governance Committee include:
The Nominating and Corporate Governance Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.
Composition. The current members of the Nominating and Corporate Governance Committee are Ms. Colwell, Ms. Kemp, Mr. Koh
Processes and Procedures for Consideration and Determination of Director Compensation. As mentioned above under “—Responsibilities,” the Board of Directors has delegated to the Nominating and Corporate Governance Committee the responsibility, among other things, to review and make recommendations to the Board of Directors concerning compensation for non-employee members of the Board of Directors, including but not limited to retainers, meeting fees, committee chair and member retainers and equity compensation. Decisions regarding director compensation made by the Nominating and Corporate Governance Committee are not considered final and are subject to final review and approval by the entire Board of Directors. Under the terms of its formal written charter, the Nominating and Corporate Governance Committee has the power and authority, tothe extent permitted by our Bylaws and applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of theNominating and Corporate Governance
In making recommendations to the Board of Directors regarding compensation to be paid to our non-employee directors, the Nominating and Corporate Governance Committee considers fees and other compensation paid to directors of comparable public companies, the number of board and committee meetings that our directors are expected to attend, and other factors that may be relevant. In making final decisions regarding non-employee director compensation, the Board of Directors considers the same factors and the recommendation of the Nominating and Corporate Governance Committee.
Meetings. The Nominating and Corporate Governance Committee met
Director Nominations Process
Pursuant to a Director Nominations Process adopted by the Board of Directors, in selecting nominees for the Board of Directors, the Nominating and Corporate Governance Committee first determines whether the incumbent directors are qualified to serve, and wish to continue to serve, on the Board. The Nominating and Corporate Governance Committee believes that NTIC and its stockholders benefit from the continued service of qualified incumbent directors because those directors have familiarity with and insight into NTIC’s affairs that they have accumulated during their tenure with the company. Appropriate continuity of Board membership also contributes to the Board’s ability to work as a collective body. Accordingly, it is the practice of the Nominating and Corporate Governance Committee, in general, to re-nominate an incumbent director if the director wishes to continue his or her service with the Board, the director continues to satisfy the criteria for membership on the Board that the Nominating and Corporate Governance Committee generally views as relevant and considers in deciding whether to re-nominate an incumbent director or nominate a new director, the Nominating and Corporate Governance Committee believes the director continues to make important contributions to the Board, and there are no special, countervailing considerations against re-nomination of the director.
Pursuant to a Director Nominations Process adopted by the Board of Directors, in identifying and evaluating new candidates for election to the Board, the Nominating and Corporate Governance Committee solicits recommendations for nominees from persons whom the Nominating and Corporate Governance Committee believes are likely to be familiar with qualified candidates having the qualifications, skills and characteristics required for Board nominees from time to time. Such persons may include members of the Board of Directors and our senior management and advisors to our company. In addition, from time to time, if appropriate, the Nominating and Corporate Governance Committee may engage a search firm to assist it in identifying and evaluating qualified candidates. Nancy E. Calderon and Sarah E. Kemp, who both joined the Board of Directors in October 2019, were recommended by Barbara D. Colwell, who worked with Ms. Calderon and Ms. Kemp at a female corporate directors organization.
The Nominating and Corporate Governance Committee reviews and evaluates each candidate whom it believes merits serious consideration, taking into account available information concerning the candidate, any qualifications or criteria for Board membership established by the Nominating and Corporate Governance Committee, the existing composition of the Board, and other factors that it deems relevant. In conducting its review and evaluation, the Nominating and Corporate Governance Committee solicits the views of our management, other Board members, and other individuals it believes may have insight into a candidate. The Nominating and Corporate Governance Committee may designate one or more of its members and/or other Board members to interview any proposed candidate.
The Nominating and Corporate Governance Committee will consider recommendations for the nomination of directors submitted by our stockholders. For more information, see the information set forth under “Stockholder Proposals and Director Nominations for the
There are no formal requirements or minimum qualifications that a candidate must meet in order for the Nominating and Corporate Governance Committee to recommend the candidate to the Board. The Nominating and Corporate Governance Committee believes that each nominee should be evaluated based on his or her merits as an individual, taking into account the needs of our company and the Board of Directors. However, in evaluating candidates, there are a number of criteria that the Nominating and Corporate Governance Committee generally views as relevant and is likely to consider. Some of these factors include whether the candidate is an “independent director” under the Listing Rules of the
While we do not have a formal stand-alone diversity policy in considering whether to recommend any director nominee, including candidates recommended by For this year’s election, the Board of Directors
Board Oversight of Risk
The Board of Directors as a whole has responsibility for risk oversight, with more in-depth reviews of certain areas of risk being conducted by the relevant Board committees that report on their deliberations to the full Board of Directors. The oversight responsibility of the Board and its committees is enabled by management reporting processes that are designed to provide information to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. The areas of risk that we focus on include operational, financial (accounting, credit, liquidity and tax), legal, compensation, competitive, health, safety, environmental, economic, political and reputational risks.
The standing committees of the Board of Directors oversee risks associated with their respective principal areas of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of financial reporting, on our processes for the management of business and financial risk, our financial reporting obligations and for compliance with significant applicable legal, ethical and regulatory requirements. The Audit Committee, along with management, is also responsible for developing and participating in a process for review of important financial and operating topics that present potential significant risk to our company. The Compensation Committee is responsible for overseeing risks and exposures associated with our executive compensation programs and arrangements and management succession planning. The Nominating and Corporate Governance Committee oversees risks relating to our corporate governance matters, director compensation programs and director succession planning.
We recognize that a fundamental part of risk management is understanding not only the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the company. The involvement of the full Board of Directors each year in establishing our key corporate business strategies and annual fiscal budget is a key part of the Board’s assessment of management’s appetite for risk and also a determination of what constitutes an appropriate level of risk for our company.
We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight for our company for a number of reasons, including: (1) general risk oversight by the full Board of Directors in connection with its role in reviewing our key business strategies and monitoring on an on-going basis the implementation of our key business strategies; (2) more detailed oversight by our standing Board committees that are currently comprised of and chaired by our independent directors, and (3) the focus of our Chairman of the Board on allocating appropriate Board agenda time for discussion regarding the implementation of our key business strategies and specifically risk management.
Code of Ethics
The Board of Directors has adopted a Code of Ethics, which applies to all of our directors, executive officers, including our Chief Executive Officer and Chief Financial Officer, and other employees, and meets the requirements of the
Policy Regarding Director Attendance at Annual Meetings of Stockholders
Although a regular Board of Directors meeting is generally held on the day of each annual meeting of stockholders, this meeting
Complaint Procedures
The Audit Committee has established procedures for the receipt, retention and treatment of complaints received by NTIC regarding accounting, internal accounting controls or auditing matters, and the submission by our employees, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters. Our personnel with such concerns are encouraged to discuss their concerns with our outside legal counsel, who in turn will be responsible for informing the Audit Committee.
Process Regarding Stockholder Communications with Board of Directors
Stockholders may communicate with the Board or any one particular director by sending correspondence, addressed to NTIC’s Corporate Secretary, Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, MN 55014 with an instruction to forward the communication to the Board or one or more particular directors. NTIC’s Corporate Secretary will promptly forward all such stockholder communications to the Board or the one or more particular directors, with the exception of any advertisements, solicitations for periodical or other subscriptions and other similar communications.
DIRECTOR COMPENSATION ________________
Summary of Cash and Other Compensation
The table below provides summary information concerning the compensation of each individual who served as a director of our company during the fiscal year ended August 31,
DIRECTOR COMPENSATION – FISCAL
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On September 1,
Non-Employee Director Compensation Program
Overview. Our non-employee directors for purposes of our director compensation program currently consist of Nancy E. Calderon, Barbara D. Colwell, Sarah E. Kemp, Soo-Keong Koh, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D., Richard J. Nigon and Konstantin von Falkenhausen. Our non-employee directors for fiscal 2019 were Barbara D. Colwell, Soo-Keong Koh, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D., Richard J. Nigon and Konstantin von Falkenhausen.
We use a combination of cash and long-term equity-based incentive compensation in the form of annual stock option grants to attract and retain qualified candidates to serve on the Board of Directors. In setting non-employee director compensation, we follow the
Cash Retainers and Meeting Fees. Each of our non-employee directors receives annual cash retainers and meeting fees. The following table sets forth the annual cash retainers paid to our non-employee directors during fiscal
Stock Options.
Each non-employee director of
Under the terms of our stock incentive plan, unless otherwise provided in a separate agreement or modified in connection with the termination of a director’s service, if a director’s service with our company terminates for any reason, the unvested portion of options then held by the director will immediately terminate and the director’s right to exercise the then vested portion will:
We refer you to note (1) to the Director Compensation Table for a summary of all option grants to our non-employee directors during the fiscal year ended August 31,
Reimbursement of Expenses. All of our directors are reimbursed for travel expenses for attending meetings and other miscellaneous out-of-pocket expenses incurred in performing their Board functions.
Consulting
We paid consulting fees to Bioplastic Polymers LLC, which is owned by Ramani Narayan, Ph.D., in the aggregate amount of
2019.
EXECUTIVE COMPENSATION ________________
Compensation
In this Compensation When reading this Compensation Review, please note that we are a “smaller reporting company” under the federal securities laws and are not required to provide a “Compensation Discussion and Analysis” of the type required by Item 402 of Regulation S-K. This Compensation Review is intended to supplement the SEC-required disclosure, which is included below this section, and it is not a Compensation Discussion and Analysis.
Executive Summary
One of our key executive compensation objectives is to link pay to performance by aligning the financial interests of our executives with those of our stockholders and by emphasizing pay for performance in our compensation programs. We believe we accomplish this objective primarily through our annual bonus plan, which compensates executives for achieving annual corporate financial goals and individual goals.
Our fiscal Total compensation for our named executive officers for fiscal
Compensation Highlights and Best Practices
Our compensation practices include many best pay practices that support our executive compensation objectives and principles and benefit our stockholders, such as the following:
Say-on-Pay Vote
At our
Executive Compensation Objectives
Our guiding compensation philosophy is to maintain an executive compensation program that allows us to attract, retain, motivate and reward qualified and talented executives that will enable us to grow our business, achieve our annual, long-term and strategic goals and drive long-term stockholder value.
The following core principles provide a framework for our executive compensation program:
How We Make Compensation Decisions
There are several elements to our executive compensation decision-making, which we believe allow us to most effectively implement our compensation philosophy. Each of these elements and their roles are described briefly below.
Role of the Compensation Committee. The Compensation Committee, which is comprised solely of independent directors, oversees our executive compensation program. Within its duties, the Compensation Committee recommends compensation for the CEO and CFO. In doing so, the Compensation Committee:
In setting or recommending executive compensation for our executives, the Compensation Committee considers the following primary factors:
The Compensation Committee also considers the recommendations of the CEO with respect to executive compensation to be paid to other executives and employees. The significance of any individual factor described above in setting executive compensation will vary from year to year and may vary among our executives. In making its final decision regarding the form and amount of compensation to be paid to our named executive officers (other than the CEO), the Compensation Committee considers and gives great weight to the recommendations of the CEO recognizing that due to his reporting and otherwise close relationship with each executive and employee, the CEO often is in a better position than the Compensation Committee to evaluate the performance of each executive (other than himself). In making its final decision regarding the form and amount of compensation to be paid to the CEO, the Compensation Committee considers the results of the CEO’s self-review and his individual annual performance review by the Compensation Committee and the recommendations of our non-employee directors. The CEO’s compensation is approved by the Board of Directors (with the CEO abstaining), upon recommendation of the Compensation Committee.
Role of Management. Management’s role is to provide current compensation information to the Compensation Committee and provide analysis and recommendations on executive compensation to the Compensation Committee based on the executive’s level of professional experience; the executive’s duties and responsibilities; individual performance; tenure; and historic corporate performance. None of our executives, including the CEO, provides input or recommendations with respect to his own compensation.
Use of Market Data. Since there are no public companies of which NTIC is aware that are substantially similar to NTIC, in terms of its business, industry and corporate profile, the Compensation Committee has not used market data to review and evaluate executive compensation in any material respect. However, the Compensation Committee has recently used a group of peer companies with a market capitalization similar to NTIC and either in a similar industry or located in Minnesota.
Elements of Our Executive Compensation Program
Our executive compensation program for the fiscal year ended August 31,
The table below provides some of the key characteristics of and purpose for each element along with some key actions taken during fiscal
We describe each key element of our executive compensation program in more detail in the following pages, along with the compensation decisions made in fiscal
Base Salary. We provide a base salary for our named executive officers, which, unlike some of the other elements of our executive compensation program, is not subject to company or individual performance risk. We recognize the need for most executives to receive at least a portion of their total compensation in the form of a guaranteed base salary that is paid in cash regularly throughout the year.
We initially fix base salaries for our executives at a level that we believe enables us to hire and retain them in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business objectives. The Compensation Committee reviews base salaries for our named executive officers each year typically in
The Compensation Committee’s recommendations to the Board of Directors regarding the base salaries of our named executive officers are based on a number of factors, including: the executive’s level of responsibility, prior experience and base salary for the prior year, the skills and experiences required by the position, length of service with our company, past individual performance, cost of living increases and other considerations the Compensation Committee deems relevant. The Compensation Committee also recognizes that in addition to the typical responsibilities and duties held by our executives, by virtue of their positions, our executives, due to the small number of our executives and employees, often possess additional responsibilities and perform additional duties that would be typically delegated to others in most organizations with additional personnel and resources.
Annualized base salary rates for fiscal
An increase of
Annual Incentive Compensation. In addition to base compensation, we provide our named executive officers the opportunity to earn annual incentive compensation based on the achievement of certain company and individual related performance goals. Our annual bonus program directly aligns the interests of our executive officers and stockholders by providing an incentive for the achievement of key corporate and individual performance measures that are critical to the success of our company and linking a significant portion of each executive’s annual compensation to the achievement of such measures.
Under the annual bonus plan for fiscal
A plan participant’s individual allocation percentage of the total amount available under the bonus plan was based on the number of plan participants, the individual’s annual base salary and the individual’s position and level of responsibility within the company. Mr. Lynch’s individual allocation percentage for fiscal
Mr. Lynch’s individual performance objectives for fiscal
Mr. Lynch received a total cash bonus of grant on September 1, 2018.
The structure and material terms of our annual bonus plan for fiscal
Long-Term Equity-Based Incentive Compensation.
Accordingly, on September 1,
The Compensation Committee’s primary objectives with respect to long-term equity-based incentive compensation are to align the interests of our executives with the long-term interests of our stockholders, promote stock ownership and create significant incentives for executive retention. Long-term equity-based incentives are intended to comprise a significant portion of each executive’s compensation package, consistent with our executive compensation objective to align the interests of our executives with the interests of our stockholders. For fiscal
The Compensation Committee uses stock options as opposed to other equity-based incentive awards since the Compensation Committee believes that options effectively incentivize executives to maximize company performance, as the value of awards is directly tied to an appreciation in the value of our common stock. Stock options also provide an effective retention mechanism because of vesting provisions. An important objective of our long-term equity-based incentive program is to strengthen the relationship between the long-term value of our common stock and the potential financial gain for our executives. Stock options provide recipients with the opportunity to purchase our common stock at a price fixed on the grant date regardless of future market price. The vesting of our stock options is time-based –
Although we do not have any stock retention or ownership guidelines, the Board of Directors encourages our executives to have a financial stake in our company in order to align the interests of our executives with the interests of our stockholders. Through the grant of stock options, we seek to align the long-term interests of our executives with the long-term interests of our stockholders by creating a strong and direct
All Other Compensation. It is generally our policy not to extend significant perquisites to our executives that are not available to our employees generally. The only significant perquisite that we provide to our executives is the personal use of a company-owned vehicle. Our executives also receive benefits, which are also received by our other employees, including participation in the Northern Technologies International Corporation 401(k) Plan and health, dental and life insurance benefits. Under the 401(k) plan, all eligible participants, including our executives, may voluntarily request that we reduce his or her pre-tax compensation by up to 10% (subject to certain special limitations) and contribute such amounts to a trust. We typically contribute an amount equal to 50% of the first 7% of the amount that each participant contributed under this plan. We do not provide pension arrangements or post-retirement health coverage for our executives or employees. We also do not provide any nonqualified defined contribution or other deferred compensation plans.
Change in Control and Post-Termination Severance Arrangements
Change in Control Arrangements. To encourage continuity, stability and retention when considering the potential disruptive impact of an actual or potential corporate transaction, we have established change in control arrangements, including provisions in our stock incentive
Under the terms of our stock incentive
In addition, we have entered into employment agreements with our named executive officers to provide certain payments and benefits in the event of a change in control, which are payable only in the event their employment is terminated in connection with the change in control (“double-trigger” provisions). These change in control protections provide consideration to executives for certain restrictive covenants that apply following termination of employment and provide continuity of management in connection with a threatened or actual change in control transaction. If an executive’s employment is terminated without “cause” or by the executive for “good reason” (as defined in the employment agreements) within 24 months following a change in control, the executive will be entitled to receive a lump sum payment equal to two times, in the case of the CEO, and one and one-half times, in the case of the CFO, his average total annual compensation for the two most recently completed fiscal years, plus a pro rata portion of the target bonus that the executive otherwise would have been eligible to receive under our bonus plan for the fiscal year during which the executive’s employment is terminated, with such pro rata portion based on the number of completed months during the fiscal year that the executive was employed with our company. These arrangements, and a quantification of the payment and benefits provided under these arrangements, are described in more detail under “—Potential Payments Upon Termination or Change in Control—Change in Control Arrangements.” Other than the immediate acceleration of equity-based awards, which we believe aligns our executives’ interests with those of our stockholders by allowing executives to participate fully in the benefits of a change in control as to all of their equity, in order for a named executive officer to receive any other payments or benefits as a result of a change in control of NTIC, there must be a termination of the executive’s employment, either by us without cause or by the executive for good reason. The termination of the executive’s employment by the executive without good reason will not give rise to additional payments or benefits either in a change in control situation or otherwise. Thus, these additional payments and benefits will not just be triggered by a change in control, but also will require a termination event not within the control of the executive, and thus are known as “double trigger” change in control arrangements. As opposed to the immediate acceleration of stock options, we believe that other change in control payments and benefits should properly be tied to termination following a change in control, given the intent that these amounts provide economic security to ease
We believe these change in control arrangements are an important part of our executive compensation program in part because they mitigate some of the risk for executives working in a smaller company where there is a meaningful risk that the company may be acquired. Change in control benefits are intended to attract and retain qualified executives who, absent these arrangements and in anticipation of a possible change in control of NTIC, might consider seeking employment alternatives to be less risky than remaining with NTIC through the transaction. We believe that relative to our company’s overall value, our potential change in control benefits are relatively small. We also believe that the form and amount of these change in control benefits are fair and reasonable to both our company and our executives. The Compensation Committee reviews our change of control arrangements periodically to ensure that they remain necessary and appropriate.
Other Severance Arrangements. Each of our named executive officers is entitled to receive severance benefits upon certain other qualifying terminations of employment, other than a change in control, pursuant to the provisions of such executive’s employment agreement. These severance arrangements are primarily intended to retain our executives and provide consideration to those executives for certain restrictive covenants that apply following termination of employment. Additionally, we entered into the employment agreements because they provide us valuable protection by subjecting the executives to restrictive covenants that prohibit the disclosure of confidential information during and following their employment and limit their ability to engage in competition with us or otherwise interfere with our business relationships following their termination of employment. For more information on our employment agreements and severance arrangements with our named executive officers, see the discussions below under “—Summary Compensation—Employment Agreements” and “—Potential Payments Upon a Termination or Change in Control.”
We believe that the form and amount of these severance benefits are fair and reasonable to both our company and our executives. The Compensation Committee reviews our severance arrangements periodically to ensure that they remain necessary and appropriate.
Hedging and Pledging Policies
Our insider trading policy prohibits NTIC directors, officers, employees, consultants and
Summary of Cash and Other Compensation
The table below provides summary information concerning all compensation awarded to, earned by or paid to named executive officers. G. Patrick Lynch, our President and Chief Executive Officer,
SUMMARY COMPENSATION TABLE – FISCAL
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Outstanding Equity Awards at Fiscal Year End
The table set forth below provides information regarding stock options for each of our named executive officers that remained outstanding at August 31,
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END—FISCAL
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Stock Incentive Plan
We have
Incentive stock options must be granted with a per share exercise price equal to at least the fair market value of a share of our common stock on the date of grant. For purposes of the plan, the fair market value of our common stock is the mean between the reported high and low sale price of our common stock, as reported by the
Except in connection with certain specified changes in our corporate structure or shares, the Board of Directors or Compensation Committee may not, without prior approval of our stockholders, seek to effect any re-pricing of any previously granted, “underwater” option or stock appreciation right by amending or modifying the terms of the underwater option or stock appreciation right to lower the exercise price, cancelling the underwater option or stock appreciation right in exchange for cash, replacement options or stock appreciation rights having a lower exercise price, or other incentive awards, or repurchasing the underwater options or stock appreciation rights and granting new incentive awards under the plan. For purposes of the plan, an option or stock appreciation right is deemed to be “underwater” at any time when the fair market value of our common stock is less than the exercise price.
We generally provide for the vesting of stock options in equal annual installments over a three-year period commencing on the one-year anniversary of the date of grant for employees and in full on the one-year anniversary of the date of grant for directors. We generally provide for option terms of ten years.
Optionees may pay the exercise price of stock options in cash, except that the Compensation Committee may allow payment to be made (in whole or in part) by (1) using a broker-assisted cashless exercise procedure pursuant to which the optionee, upon exercise of an option, irrevocably instructs a broker or dealer to sell a sufficient number of shares of our common stock or loan a sufficient amount of money to pay all or a portion of the exercise price of the option and/or any related withholding tax obligations and remit such sums to us and directs us to deliver stock certificates to be issued upon such exercise directly to such broker or dealer; or (2) using a cashless exercise procedure pursuant to which the optionee surrenders to us shares of our common stock either underlying the option or that are otherwise held by the optionee.
Under the terms of the plan, unless otherwise provided in a separate agreement or amended in connection with an optionee’s termination of employment, if a named executive officer’s employment or service with our company terminates for any reason, the unvested portion of the options held by such officer will immediately terminate, and the executive’s right to exercise the then vested portion of the options will:
As set forth in the plan, the term “cause” is as defined in any employment or other agreement or policy applicable to the named executive officer or, if no such agreement or policy exists, means (i) dishonesty, fraud, misrepresentation, embezzlement or other act of dishonesty with respect to us or any subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the overall duties, or (iv) any material breach of any employment, service, confidentiality or non-compete agreement entered into with us or any subsidiary.
Under the terms of the plan, if a participant is determined by the committee to have taken any action that would constitute “cause” or an “adverse action” during or within one year after the termination of the participant’s employment or other service with our company, all rights of the participant under the plan and any incentive award agreements
As described in more detail under “—Post-Termination Severance and Change in Control Arrangements” if there is a change in control of our company, then, under the terms of agreements evidencing options granted to our named executive officers and other employees under the plan, all outstanding options will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the executive to whom such options have been granted remains in the employ or service of us or any of our subsidiaries.
Post-Termination Severance and Change in Control Arrangements
We have entered into employment agreements with G. Patrick Lynch, NTIC’s President and Chief Executive Officer, and Matthew C. Wolsfeld, NTIC’s Chief Financial Officer and Corporate Secretary. Although each
If an executive’s employment is terminated by us without “cause” or by the executive for “good reason,” in addition to any accrued but unpaid salary and benefits through the date of termination, the executive will be entitled to a severance cash payment from us in an amount equal to two times (one and one-half times, in the case of Mr. Wolsfeld) the executive’s average total annual compensation for the two most recently completed fiscal years, plus a pro rata portion of the target bonus that the executive otherwise would have been eligible to receive under our bonus plan for the fiscal year during which the executive’s employment is terminated, with such pro rata portion based on the number of complete months during the fiscal year that the executive was employed with our company. The severance payment will be paid in several installments in the form of salary continuation in accordance with our normal payroll practices over a 24-month period (18-month period, in the case of Mr. Wolsfeld). If, however, the termination event occurs within 24 months after a change in control of our company, the severance payment will be paid in one lump sum. If the executive is eligible for and timely elects continued coverage under our group medical plan, group dental plan and/or group vision plan pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended
Under the employment agreements, “cause” is defined as (i) the executive’s material breach of any of the executive’s obligations under the employment agreement or the executive’s willful and continued failure or refusal to perform his duties, responsibilities and obligations as an executive officer of our company, for reasons other than the executive’s disability, to the satisfaction of the Board of Directors; (ii) the executive’s commission of an act of dishonesty, fraud, embezzlement, misappropriation, or intentional and deliberate injury or material breach of fiduciary duty, or material breach of the duty of loyalty related to or against us or our business, or any unlawful or criminal activity of a serious nature involving any felony, or conviction by a court of competent jurisdiction of, or pleading guilty or nolo contendere to, any felony or any crime involving moral turpitude; or (iii) the existence of any court order or settlement agreement prohibiting the executive’s continued employment with our company. “Good reason” is defined as (i) a material diminution in the executive’s authority, duties or responsibilities; (ii) a material diminution in the executive’s annual base salary; (iii) a material change in the geographic location at which we require the executive to provide services, except for travel reasonably required in the performance of the executive’s responsibilities; or (iv) any action or inaction that constitutes a material breach by us of the employment agreement. “Change in control” has the meaning assigned to such term in our stock incentive plan as in effect from time to time to the extent such change in control is a “change of control event” as defined under Code Section 409A and applicable Internal Revenue Service regulations. Under the terms of our stock incentive plan, a “change in control” means:
If a change in control of our company had occurred on August 31,
If the employment of our named executive officers was terminated as of August 31,
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Compensation Committee Interlocks and Insider Participation
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ________________
Introduction
Below under “—Description of Related Party Transactions” is a description of transactions that have occurred during the past fiscal year, or any currently proposed transactions, to which we were or are a participant and in which:
These transactions are referred to as “related party transactions.”
Procedures Regarding Approval of Related Party Transactions
As provided in our Corporate Governance Guidelines, the Audit Committee will review, approve or ratify reportable related party transactions by use of the following procedures:
Description of Related Party Transactions
Please see “Director Compensation” and “Executive Compensation” for information regarding a consulting
G. Patrick Lynch is the President and Chief Executive Officer of NTIC. Inter Alia Holding Company owns We have entered into agreements with all of our directors and executive officers under which we are required to indemnify them against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding if any of them may be made a party because he or she is or was one of our directors or executive officers. We will be obligated to pay these amounts only if the director or executive officer acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to our best interests. With respect to any criminal proceeding, we will be obligated to pay these amounts only if the director or executive officer had no reasonable cause to believe his or her conduct was unlawful. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification.
NTIC has not identified any arrangements or agreements relating to compensation provided by a third party to NTIC’s directors or director nominees in connection with their candidacy or board service as required to be disclosed pursuant to
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR
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Stockholder Proposals for
Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for inclusion in the proxy materials relating to the
Any other stockholder proposals to be presented at the
Director Nominations for
In accordance with procedures set forth in our Bylaws, NTIC stockholders may propose nominees for election to the Board of Directors only after providing timely written notice to our Corporate Secretary. To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed to and received at NTIC’s principal executive offices not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event that the annual meeting with respect to which such notice is to be tendered is not held within 30 days before or after such anniversary date, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or public disclosure was made, whichever first occurs. The notice must set forth, among other things:
Submissions must be made by mail, courier or personal delivery. E-mailed submissions will not be considered. The Nominating and Corporate Governance Committee will consider only those stockholder recommendations whose submissions comply with the procedural requirements set forth in NTIC’s Bylaws. The Nominating and Corporate Governance Committee will evaluate candidates recommended by stockholders in the same manner as those recommended by others.
COPIES OF FISCAL ________________
We have sent or made electronically available to each of our stockholders a copy of our annual report on Form 10-K (without exhibits) for the fiscal year ended August 31, _________________________
Your vote is important. Whether or not you plan to attend the Annual Meeting in person, vote your shares of NTIC common stock by the Internet or telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be voted.
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