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170 Southport Drive
Morrisville, North Carolina 27560
(919) 468-0399
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2016
To the Shareholders of Charles & Colvard, Ltd.:
Notice is Hereby Given
that the Annual Meeting of Shareholders of Charles & Colvard, Ltd. will be held at the principal executive offices of Charles & Colvard, Ltd. located at 170 Southport Drive, Morrisville, North Carolina 27560, on1. | To elect five nominees described in the proxy statement to the Board of Directors; |
To ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending |
3. | To vote, on an advisory (nonbinding) basis, to approve executive compensation; and |
4. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
The Board of Directors has fixed the close of business on March 31, 2016September 20, 2022 as the record date for the determination of shareholders entitled to vote at the meeting. Accordingly, only shareholders who are holders of record at the close of business on that date are entitled to notice of and to vote at the meeting.
By order of the Board of Directors, | |
Neal I. Goldman | |
September 30, 2022
We are providing access to our proxy materials over the Internet pursuant to the Securities and Exchange Commission’s “notice and access” rules. On or about September 30, 2022, we expect to mail to our shareholders a Notice Regarding theof Internet Availability of Proxy Materials for the
Whether or not you expect to Shareholdersattend the meeting in person, please submit voting instructions for your shares promptly using the directions on your Notice, or, if you elected to receive printed proxy materials by mail, your proxy card, to vote by one of the following methods: 1) over the Internet at www.voteproxy.com or 2) if you elected to receive printed proxy materials by mail, by marking, dating, and signing your proxy card and returning it in the accompanying postage-paid envelope. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are availableheld of record by a broker, bank, or other nominee and you wish to vote at http://www.charlesandcolvard.com/investor-relations/proxy-notice.the meeting, you must obtain a proxy issued in your name from that record holder.
170 Southport Drive
Morrisville, North Carolina 27560
(919) 468-0399
PROXY STATEMENT
This proxy statement is furnished to the shareholders of Charles & Colvard, Ltd. in connection with the solicitation of proxies by our Board of Directors (the “Board”) for use at our company’s 20162022 Annual Meeting of Shareholders (the “Annual Meeting”) and all adjournments thereof. The Annual Meeting will be held at the principal executive offices of Charles & Colvard, Ltd. located at 170 Southport Drive, Morrisville, North Carolina 27560, on Wednesday, May 18, 2016Thursday, November 17, 2022 at 10:00 a.m., Eastern Daylight Savings Time, to conduct the following business and such other business as may be properly brought before the meeting: (1) to elect five nominees described in this proxy statement to the Board of Directors; (2) to approve an amendment to the Charles & Colvard, Ltd. 2008 Stock Incentive Plan, as amended (the “2008 Plan”), to increase the number of shares authorized for issuance under the plan by 1,500,000 shares; (3) to re-approve the material terms of the performance goals included in the 2008 Plan; (4) to ratify the appointment of BDO USA, LLP (“BDO”) as our independent registered public accounting firm for the fiscal year ending December 31, 2016;June 30, 2023; and (5)(3) to vote, on an advisory (nonbinding) basis, to approve executive compensation.
The Board of Directors recommends that you vote (1) FOR the election of the director nominees listed in this proxy statement, (2) FOR the approval of an amendment to the 2008 Plan to increase the number of shares authorized for issuance under the plan by 1,500,000 shares, (3) FOR re-approval of the material terms of the performance goals included in the 2008 Plan, (4) FOR ratification of the appointment of BDO as our independent registered public accounting firm for the fiscal year ending December 31, 2016,June 30, 2023, and (5)(3) FOR the approval of executive compensation.
Notice of Internet Availability of Proxy Materials
Pursuant to the “notice and access” rules of the Securities and Exchange Commission (the “SEC”), we are furnishing proxy statement andmaterials to our shareholders via the accompanying proxy card are first being delivered to shareholdersInternet. Beginning on or about April 20, 2016.
Internet distribution of our proxy materials is designed to expedite receipt by shareholders, lower the cost of the Annual Meeting, and conserve natural resources. If, however, you would prefer to receive printed proxy materials, please follow the instructions included in the Notice.
Voting Securities
Our common stock, no par value per share, is our company’s only outstanding voting security. The Board of Directors has fixed the close of business on March 31, 2016September 20, 2022 as the record date for the determination of shareholders entitled to vote at the Annual Meeting. Accordingly, each holder of record of common stock as of the record date is entitled to one vote for each share of common stock held. Shareholders do not have cumulative voting rights. As of March 31, 2016,September 20, 2022, there were 21,504,73530,389,643 shares of common stock outstanding.
Quorum and Vote Required
The holders of a majority of the shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, constitute a quorum for purposes of voting on a particular matter and conducting business at the Annual Meeting. Votes “for” and “against,” abstentions, shares that are withheld as to voting with respect to one or more of the director nominees, and shares held by a broker, as nominee, that are voted at the discretion of the broker on any matter will be considered to be present for purposes of determining whether a quorum exists. If a quorum is present at the beginning of the Annual Meeting, the shareholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.
Brokers who are members of the New York Stock Exchange (the “NYSE”) and who hold shares of our common stock in street name for beneficial owners have authority to vote on certain items when they have not received instructions from beneficial owners. Under the rules of the NYSE, the proposal to ratify the appointment of the independent registered public accounting firm is considered a “discretionary” item. This means that brokers may vote in their discretion on this matter on behalf of beneficial owners who have not furnished voting instructions. In contrast, certain items are considered “non-discretionary,” and a “broker non-vote” occurs when brokers do not receive voting instructions from beneficial owners with respect to such items. The proposal to elect directors the proposal to approve an amendment to the 2008 Plan to increase the number of shares authorized for issuance under the plan by 1,500,000 shares, the proposal to re-approve the material terms of the performance goals included in the 2008 Plan, and the proposal to approve executive compensation are “non-discretionary” items. Therefore, brokers that have not received voting instructions from beneficial owners with respect to these proposals may not vote in their discretion on behalf of such beneficial owners.
Under North Carolina law and our Bylaws, and assuming the existence of a quorum, directors are elected by a plurality of the votes cast by the shares of common stock present in person or by proxy and entitled to vote in the election of directors. Shares that are withheld as to voting with respect to a director nominee and shares held of record by a broker, as nominee, that are not voted will not be counted for purposes of electing directors.
Under our Bylaws, the proposals to approve an amendment to the 2008 Plan to increase the number of shares authorized for issuance under the plan by 1,500,000 shares, to re-approve the material terms of the performance goals included in the 2008 Plan, andproposal to ratify the appointment of BDO as the independent registered public accounting firm for the fiscal year ending December 31, 2016June 30, 2023 will be approved if the number of shares voted in favor of each respectivethe proposal exceeds the number of shares voted against the proposal. Abstentions and broker non-votes will not count asbe counted for purposes of determining whether the proposal has received sufficient votes cast and will not affect the outcome of these proposals.
With respect to the advisory (nonbinding) vote to approve executive compensation, such proposal will be approved if the votes cast for approval exceed the votes cast against approval for such proposal. Because your votesthe vote to approve executive compensation areis advisory, your vote will not be binding upon the Board of Directors, your vote will not overrule any decision by the Board of Directors, and your vote will not create or imply any additional fiduciary duties on the Board of Directors or any of its members. However, the Compensation Committee of the Board of Directors will take into account the outcome of the votes when considering future executive compensation arrangements. Abstentions and broker non-votes will not be counted for purposes of determining whether the proposal has received sufficient votes for approval.
Under North Carolina law, our shareholders are not entitled to appraisal rights with respect to any of the proposals in this proxy statement.
Voting Procedures
You may vote shares by proxy or in person using one of Proxies
● | Voting by Internet. You can vote over the Internet by following the directions on your Notice to access the website address at www.voteproxy.com. The deadline for voting over the Internet is Wednesday, November 16, 2022 at 11:59 p.m. Eastern Time. |
● | Voting by Mail. If you requested printed proxy materials, you can vote by completing and returning your signed proxy card. To vote using your proxy card, please mark, date, and sign the card and return it by mail in the accompanying postage-paid envelope. You should mail your signed proxy card sufficiently in advance for it to be received by Wednesday, November 16, 2022. |
● | Voting in Person. You can vote in person at the meeting if you are the record owner of the shares to be voted. You can also vote in person at the meeting if you present a properly signed proxy that authorizes you to vote shares on behalf of the record owner. If a broker, bank, or other nominee holds your shares, to vote in person at the meeting you must present a letter or other proxy appointment, signed on behalf of the broker or nominee, granting you authority to vote the shares. |
You can revoke your proxy and change your vote by (1) attending the meeting and voting in person; (2) delivering written notice of revocation of your proxy to the Corporate Secretary at any time before voting is closed; (3) timely submitting new voting instructions over the Internet as described above; or (4) if you requested printed proxy materials, timely submitting a signed proxy card bearing a later date.
If you timely submit your proxy over the Internet or by proxy card as described above and entitled to votehave not revoked it, your shares will be voted if the proxy card is properly signed and received by our Corporate Secretary prior to the Annual Meeting. Where a choice is specified on any proxy card as to the vote on any matter to come before the Annual Meeting, the proxy will be votedor withheld from voting in accordance with such specification. Where no choice is specified, the voting instructions you gave. If you timely submit your proxy as described above without giving voting instructions, your shares will be voted “for” the election of the persons nominated to serve as the directors of our company and named in this proxy statement, “for” the proposal to approve an amendment to the 2008 Plan to increase the number of shares authorized for issuance under the plan by 1,500,000 shares, “for” the proposal to re-approve the material terms of the performance goals included in the 2008 Plan, “for” the proposal to ratify the appointment of BDO as our independent registered public accounting firm for the fiscal year ending December 31, 2016,June 30, 2023, “for” the approval of executive compensation, and in such manner as the proxies named onappointed for the enclosed proxy cardAnnual Meeting in their discretion determine upon such other business as may properly come before the Annual Meeting or any adjournment thereof. Any shareholder giving a proxy has the right to revoke it at any time before it is voted by giving written notice to our Corporate Secretary, by attending the Annual Meeting and giving notice of his or her intention to vote in person, or by executing and delivering to us a proxy bearing a later date.
Expenses of Solicitation
We will bear the entire cost of the solicitation of proxies from our shareholders. Following the mailing of this proxy statement and the accompanying proxy card, our directors, officers, and employees may solicit proxies on behalf of our company in person, by telephone, or by other electronic means. We may reimburse persons holding shares for others in their names or in those of their nominees for their reasonable expenses in sending proxy materials to their principals and obtaining their proxies.
Attending the Annual Meeting
Our company’s shareholders who held shares of our common stock as of the close of business on September 20, 2022 may attend the Annual Meeting. For any questions regarding attending the Annual Meeting, including directions to the Annual Meeting, or our policies in place at the time of the meeting, please contact the Corporate Secretary at (919) 468-0399.
Householding
Some banks, brokers and similar institutions may participate in the practice of “householding” Notices or other proxy materials. This means that only one copy of our Notice or other proxy materials may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of the Notice or other proxy materials to you if you write to us at the following address or call us at the following phone number:
Charles & Colvard, Ltd.
Attention: Corporate Secretary
170 Southport Drive
Morrisville, North Carolina 27560
Phone: Call (919) 468-0399 and ask to speak to the Corporate Secretary.
To receive separate copies of the Notice or other proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or similar institution or you may contact us at the above address or telephone number.
PROPOSAL 1
ELECTION OF DIRECTORS
Our business and affairs are managed under the direction of the Board of Directors, as provided by North Carolina law and our Bylaws. The Board of Directors establishes corporate policies and strategies and supervises the implementation and execution of those policies and strategies by our officers and employees. The directors are kept informed of our operations at meetings of the Board of Directors, through reports and analyses prepared by our management, and in discussions with our management.
Our Bylaws currently provide that the Board of Directors shall consist of not less than five nor more than 10 members and that at any time that it consists of nine or more members, the terms shall be staggered. The five persons named below have been recommended by our Nominating and Governance Committee and approved by the Board of Directors to be nominated as candidates to serve on the Board of Directors until the 20172023 Annual Meeting of Shareholders or until his or her successor is elected and qualified, or until his or her death, resignation, removal, or disqualification or until there is a decrease in the number of directors. The age and a brief biographical description of each director nominee are set forth below. The information appearing below and certain information regarding beneficial ownership of securities by such nominees contained in this proxy statement has been furnished to us by the nominees. Each nominee for director has indicated that he or she is willing and able to serve as a director if elected. However, if any nominee should become unable to serve or for good cause will not serve, the proxies named onappointed for the enclosed proxy cardAnnual Meeting will vote for such other nominees and substitute nominees as designated by the Board of Directors. One of our current directors, George R. Cattermole, has chosen not to stand for re-election at the Annual Meeting.
Nominees for Election as Directors
Name | Age | Position(s) with Charles & Colvard, Ltd. | Director Since | |||
Neal I. Goldman | June 2014 | |||||
Anne M. Butler | Director | June 2012 | ||||
Director | ||||||
Director, President and Chief Executive Officer | ||||||
Ollin B. Sykes | Director | May 2008 |
Neal I. Goldman has served as a director of our company since June 2014, and as Executive Chairman of the Board of Directors from January 2015 until August 2017, and as Chairman of the Board of Directors since January 2015.August 2017. Mr. Goldman has served as President of Goldman Capital Management, Inc., an investment advisory firm, since he founded the firm in 1985. Prior to that, Mr. Goldman was an analyst and portfolio manager at Shearson/American Express Inc. Mr. Goldman served on the Board of Directors of Blyth, Inc. (NYSE: BTH), a multi-channel company focused on the direct-to-consumer market, and includes in its portfolio two direct sales companies, PartyLite Gifts, Inc. (“PartyLite”), and ViSalus. Since ViSalus Sciences, from 1991 to August 2014. From August 2012 through November 2020, Mr. Goldman has served on the Board of Imageware Systems, Inc. (OTCQB: IWSY), a leading company in the emerging market for biometrically enabled software-based identity management solutions. In August 2018, he was appointed to the Board of Directors of iPass Inc. (Nasdaq:IPAS), a leading provider of global mobile connectivity, and served until that company was acquired in February 2019. Mr. Goldman has also served on the Board of Directors of Deep Down Inc. (OTCQB: DPDW), an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services, since April 2019 and Milestone Scientific Inc. (NYSE American: MLSS), a biomedical technology research and development company, since April 2019. Our Board of Directors has determined that Mr. Goldman’s extensive experience with the investment advisory industry, including his service as President of Goldman Capital Management, Inc., qualifies him to serve on the Board of Directors.Directors
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Jaqui LividiniBenedetta Casamento has served as a director of our company since May 2017. Since August 2015.2017, Ms. LividiniCasamento has served as a Business Consultant specializing in finance, business operations, and financial planning and analysis. Since May 2022, Ms. Casamento has served on the Board of Directors of Milestone Scientific Inc. (NYSE: MLSS), a biomedical technology research and development company for diagnostic and therapeutic injection technologies and devices. Ms. Casamento previously served as Chairman and President of Allyke, Inc., an artificial intelligence company creating digital imagery insights for retail and other industries, from June 2016 to August 2017. From December 2014 to April 2016, she served as Chief Executive Officer of Calypso St. Barth, a luxury boutique retailer of women’s apparel and Founding Partneraccessories. Prior to her role as CEO at Calypso St. Barth, Ms. Casamento served as a consultant to private equity firms with portfolio interests in retail and fashion from July 2012 to December 2014. Ms. Casamento previously served as Executive Vice President, Finance & Operations of Lividini & Co.The Talbots, Inc. (“Talbots”), a brand strategy company that specializesspecialty retailer and direct marketer of women’s apparel, accessories, and shoes, from March 2009 to July 2012. Prior to joining Talbots, Ms. Casamento served in brand development and marketplace positioning, engagement marketing, and retail strategy, since May 2005. Previously,various leadership roles within Liz Claiborne Inc. from February 1999 to November 2008, culminating in her position as President of Liz Claiborne Brands. Ms. Lividini served as Senior Vice President Fashion Merchandising & CommunicationsCasamento started her career at Saks Fifth Avenue from May 1999 to August 2004. Ms. Lividini also serves as Chairman of theAvenue. Our Board of Women In Need, Inc., a non-profit organization that provides housing, programs, and critical services to New York City’s homeless mothers and their children, and serves on the Board of Trustees of the Fashion Institute of Technology, an internationally recognized college for fashion, design, art, communications, and business. Our BoardDirectors has determined that Ms. Lividini’s years of brand marketingCasamento’s extensive fashion and retail experience, as well as her background in the fashion, retail,accounting and luxury industries qualifyfinance, qualifies her to serve on the Board of Directors.Directors
Suzanne T. Miglucci has servedDon O’Connell was appointed as our President and Chief Executive Officer since December 2015 and as a director of our company on June 1, 2020. Mr. O’Connell previously served as our Chief Operating Officer and Senior Vice President, Supply Chain & Distribution, since August 2015.May 23, 2017, and our Senior Vice President, Supply Chain & Distribution from March 2016 to May 2017. Prior to joining us, Ms. Miglucciour company, Mr. O’Connell served as Chief Marketing Officer of ChannelAdvisor Corporation (“ChannelAdvisor”), an e-commerce software-as-a-service solution provider,Executive Vice President Operations & Global Jewelry Business Solutions at OFT Investment & Management Group, a fine jewelry solutions and services group, from JuneFebruary 2012 to November 2015, where she oversaw marketing, product management, client services, and business operations.March 2016. Prior to joining ChannelAdvisor, Ms. Miglucci servedhis employment with OFT Investment Management Group, Mr. O’Connell spent seven years with the Richline Group, LLC, a wholly owned subsidiary of Berkshire Hathaway, as Senior Director, GlobalVice President, Operations & Procurement, Solution Marketing, at SAP, a worldwide leader of Enterprise Resource Planning solutions, from November 2010 to March 2012.both Foreign & Domestic. Prior to her timethat, he was Vice President, Operations at SAP, Ms. Miglucci servedAurafin’s gem group division in Taramac, FL and La Paz, Bolivia as a Strategic Marketing Consultant for Miglucci on Marketing, LLC, a marketing consultant company, from January 2010 to November 2010. Ms. Miglucci has also held executive positions at SciQuest, Inc., MicroMass Communications, and Arsenal Digital Solutions. well as Vice President, Manufacturing & Contracting with OCON Enterprise. Our Board of Directors has determined that Ms. Miglucci’sMr. O’Connell’s extensive marketingoperations and distribution background working with publicgemstone and private technologyfine jewelry companies particularly with global footprints, qualify herqualifies him to serve on the Board of Directors.
Ollin B. Sykes has served as a director of our company since May 2008. Since 1984, he has served as the President of Sykes & Company, P.A., a regional accounting firm specializing in accounting, tax, and financial advisory services. Mr. Sykes earned his Bachelor of Science degree in accounting at Mars Hill College and is a Certified Public Accountant, a Certified Information Technology Professional, and a Certified Management Accountant. Mr. Sykes served as a director of Hampton Roads Bankshares, Inc. (NASDAQ:(Nasdaq: HMPR), a financial holding company operating in North Carolina, Maryland eastern shore, and Virginia, from December 2008 until December 31, 2010. He currently servesalso served as a director of Bank of Hampton Roads, a wholly owned subsidiary of Hampton Roads Bankshares, Inc. from January 2011 to June 2016. Our Board of Directors has determined that Mr. Sykes’s background in accounting and finance and his accounting certifications qualify him to serve on the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.
Board Diversity
The Board believes that it is important to consider diversity of race, ethnicity, gender, sexual orientation, religion, age, education, cultural background and professional experiences in evaluating board candidates in order to provide practical insights and diverse perspectives. The Board Diversity Matrix, below, provides the diversity statistics for our Board.
Board Diversity Matrix (As of September 20, 2022) | ||||
Total Number of Directors | 5 | |||
Female | Male | Non-Binary | Did Not Disclose Gender | |
Part I: Gender Identity | ||||
Directors | 2 | 3 | 0 | 0 |
Part II: Demographic Background | ||||
White | 2 | 3 | 0 | 0 |
CORPORATE GOVERNANCE MATTERS
Independent Directors
In accordance with the listing rules of The NASDAQNasdaq Stock Market LLC (“NASDAQ”Nasdaq”), our Board of Directors must consist of a majority of “independent directors,” as determined in accordance with NASDAQNasdaq Rule 5605(a)(2). The Board of Directors has determined that current directors Ms. Butler, Mr. Cattermole,Ms. Casamento, Mr. Goldman, Ms. Lividini and Mr. Sykes are independent directors in accordance with applicable NASDAQNasdaq listing rules. Ms. Miglucci was determined to be independent until she was appointed as our President and Chief Executive Officer, effective December 1, 2015, on November 11, 2015. Additionally, ourThe Board determined that David B. Barr, who resigned from our Board on March 31, 2015, qualified as an independent director during the time in which he served and H. Marvin Beasley, who resigned from our Board on December 1, 2015, qualified as an independent director until he was appointed as our President and Chief Executive Officer on March 17, 2015. The Boardof Directors performed a review to determine the independence of its members and made a subjective determination as to each member that no transactions, relationships, or arrangements exist that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director of our company. In making these determinations, the Board of Directors reviewed the information provided by the directors with regard to each individual’s business and personal activities as they may relate to us and our management.
Meetings of the Board of Directors
Pursuant to our Corporate Governance Standards, all directors are expected to attend meetings of the Board of Directors and their assigned committees. The Board of Directors meets on a regularly scheduled and as needed basis and met 1722 times during the year ended December 31, 2015.fiscal 2022. Each incumbent director attended 75% or more of the aggregate of the number of meetings of the Board of Directors held during the period that the individual was a director and the number of meetings of committees on which that director served that were held during the period of that director’s service. We also expect all directors to attend each annual meeting of shareholders. FourFive directors, comprising all but one of the nominees for election at the 20152021 Annual Meeting of Shareholders, attended the 20152021 Annual Meeting of Shareholders.
Board Leadership Structure
Currently, Ms. MiglucciMr. O’Connell serves as our Chief Executive Officer and Mr. Goldman serves as our Executive Chairman.Chairman of the Board of Directors. The Executive Chairman is not an employee of our company. The Board of Directors has determined that it is in the best interest of our company for our Executive Chairman to be an independent director at this time. The Board of Directors believes that having an independent Executive Chairman furthers the Board’sBoard of Directors’ goal of providing effective, independent leadership and oversight of our company. The Executive Chairman’s responsibilities include establishing Board meeting agendas in collaboration with our Chief Executive Officer and presiding at meetings of the Board of Directors and shareholders. The Executive Chairman is also tasked with working closely with senior management of our company regarding business strategy and the effective achievement of objectives and strategy following presentation to and approval by the Board.Board of Directors. The Chief Executive Officer has general supervision, direction, and control of the business and affairs of our company in the ordinary course of its business.
To ensure free and open discussion and communication among the non-management directors, such directors meet regularly in executive session in conjunction with regularly scheduled meetings of the Board.Board of Directors. The director who presides at these meetings is chosen by the independent directors. Executive sessions of the independent directors are to occur at least four times a year.
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Board’s Role in Risk Oversight
We operate in a complex environment and are subject to a number of significant risks. The Board of Directors works with our senior management to manage the various risks we face. The role of the Board of Directors is one of oversight of our risk management processes and procedures; the role of our management is to implement those processes and procedures on a daily basis and to identify, manage, and mitigate the risks that we face. As part of its oversight role, the Board of Directors regularly discusses, both with and without management present, our risk profile and how our business strategy effectively manages and leverages the risks that we face.
To facilitate its oversight of our company, the Board of Directors has delegated certain functions (including the oversight of risks related to these functions) to Board committees. The Audit Committee reviews and discusses with management our major financial risk exposures and the steps management has taken to monitor and control such exposures, the Compensation Committee evaluates the risks presented by our compensation programs and analyzes these risks when making compensation decisions, and the Nominating and Governance Committee evaluates whether the composition of the Board of Directors is appropriate to respond to the risks that we face. The roles of these committees are discussed in more detail below.
Although the Board of Directors has delegated certain functions to various committees, each of these committees regularly reports to and solicits input from the full Board of Directors regarding its activities. These discussions enable the Board of Directors to monitor our risk exposure and evaluate our risk mitigation efforts.
Anti-Hedging Policy
Our insider trading policy prohibits all directors, officers, and employees of our company, their family members, and any agents, consultants, or other outsiders who are designated as insiders for purposes of the policy from trading in any interest or position relating to the future price of our company’s securities, such as a put, call, or short sale. In addition, the policy prohibits engaging in hedging or monetization transactions with respect to company securities, including zero-cost collars, forward sale contracts or any other similar instruments.
Standing Committees of the Board of Directors
The Board of Directors has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee as standing committees of the Board.Board of Directors. Each of these committees is governed by a formal written charter approved by the Board of Directors, copies of which are available on our website at www.charlesandcolvard.com.https://ir.charlesandcolvard.com/governance/corporate-governance. Each committee is composed solely of independent directors. The following is a brief description of the responsibilities of each of these standing committees and their composition.
Audit Committee
The Audit Committee
represents and assists the Board of Directors in its general oversight of our company’s accounting and financial reporting processes, audits of the financial statements, and internal control and audit functions. The Audit Committee has the authority to, among other things, (i) appoint an independent registered public accounting firm to serve as our external auditor; (ii) review and discuss with such auditor the scope, timing, and results of its audit; (iii) review and discuss with management and the independent registered public accounting firm our internal control over financial reporting and related reports; (iv) review and approve in advance all “related person” transactions, as that term is defined in Item 404 of Regulation S-K; and (v) review our annual financial statements and approve their inclusion in our Annual Report on Form 10-K. The Audit Committee, which heldThe Board of Directors has determined that each of the members of the Audit Committee is an independent director in accordance with applicable NASDAQNasdaq listing rules and the additional independence rules for audit committee members promulgated by the Securities and Exchange Commission (the “SEC”).SEC. Each member is able to read and understand fundamental financial statements, including our company’s balance sheet, income statement of operations, and cash flow statement. The Board of Directors has determined that Ms. Casamento, Ms. Butler, Mr. SykesGoldman, and Mr. GoldmanSykes are “audit committee financial experts” as defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC.
Compensation Committee
The Compensation Committee
carries out the overall responsibility of the Board of Directors relating to executive compensation, evaluation, and development. The Compensation Committee has the authority to, among other things, (i) review and approve the corporate goals and objectives with respect to the compensation of our Chief Executive Officer and set the Chief Executive Officer’s annual compensation, including salary, bonus, incentive compensation, and equity compensation; (ii) review and approve the evaluation process and compensation structure for our officers and approve their annual compensation, including salary, bonus, incentive compensation, and equity compensation, and any special or supplemental benefits; (iii) review, approve and when appropriate, recommend to the Board of Directors for approval, incentive and equity compensation plans, which includes the ability to adopt, amend and terminate such plans; and (iv) evaluate and make recommendations to the Board of Directors concerning the compensation for directors, including if applicable, equity-based compensation. Each of the members of the Compensation Committee is an independent director in accordance withThe Compensation Committee did not engage anhas the authority under its charter to retain outside consultants or advisors as it deems necessary or advisable to assist in carrying out its responsibilities. For fiscal 2022, the Compensation Committee engaged the services of Mercer (US) Inc. (“Mercer”) as its independent outside compensation consultant andduring fiscal 2022 to assist the company in executive compensation guidance.
Other than advising the compensation committee, neither Mercer nor any of its affiliates maintain any other direct or indirect business relationships with us or any of our subsidiaries. The work performed by Mercer in fiscal 2022 did not consult withraise any conflicts of interest. During fiscal 2022, Mercer provided no services to us other than regarding executive officer in setting 2015 director compensation.
In setting 2015 executive compensation,addition to the above, the Compensation Committee did not engage an outside compensation consultant, but received input from the Chief Executive Officer in setting base salaries for executive officers and input fromwith regard to the Chief Executive Officer and Chief Financial Officer regarding a structure and potential payout amounts under the Charles & Colvard, Ltd. 2015 Senior Management Equity Incentive2022 Program (the “2015 Program”)(as defined below) for executive officers.
Nominating and Governance Committee
The Nominating and Governance Committee is responsible for, among other things, (i) screening and recommending qualified candidates for election and appointment to the Board;Board of Directors; (ii) recommending to the Board of Directors from time to time an appropriate organizational structure (including size and composition) for the Board;Board of Directors; (iii) monitoring the independence of the Board of Directors and ensuring that the requisite number of directors serving on committees of the Board of Directors meet applicable independence requirements and assisting the Board of Directors in making related determinations; (iv) reviewing from time to time the appropriate qualifications, skills, and characteristics required of directors; (v) developing procedures to receive and evaluate Board of Directors nominations received from shareholders and other third parties; (vi) periodically reviewing and reassessing the adequacy of our company’s corporate governance; conflicts of interest; and business ethics policies, principles, codes of conduct, and guidelines; and formulating and recommending any proposed changes to the Board;Board of Directors; and (vii) conducting an annual review of the effectiveness of the Board of Directors and its committees and presenting its assessment to the full Board.Board of Directors. Each of the members of the Nominating and Governance Committee is an independent director in accordance with NASDAQNasdaq listing rules. The Nominating and Governance Committee, which held ninetwo meetings in 2015,fiscal 2022, is currently composed of Ms. Butler (Chairperson), Ms. Casamento and Mr. Cattermole, Mr. Goldman, and Ms. Lividini. Mr. Cattermole has chosen not to stand for re-election and will no longer serve on the Nominating and Governance Committee after the Annual Meeting.
Director Nominations
Our Bylaws contain provisions that address the process by which a shareholder may nominate an individual to stand for election to the Board of Directors at our Annual Meeting of Shareholders. These provisions state that nominations for election as a director must be made in writing and be delivered to or mailed and received at our principal executive office between July 2, 2023 and August 1, 2023, which is not more than 90 calendar days and not fewer than 60 days and not more than 90calendar days prior to the one year anniversary of the date of the notice date with respect toNotice of Annual Meeting of Shareholders for the previous year’simmediately preceding annual meeting of shareholders.meeting. In the case of a special meeting, no annual meeting was held in the previous year, or an annual meeting that is called for a date that is not within 30 days before or 60 days after the anniversary date of the immediately preceding annual meeting, notice must be received no earlier than 90 days prior to such annual meeting or special meeting and no later than 60 days prior to such annual meeting or special meeting, or the close of business on the tenth10th day following the day on which notice of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. The Chief Executive OfficerCorporate Secretary will provide the Nominating and Governance Committee with a copy of any such notification received by us from a shareholder purporting to nominate a candidate for election as a director. Any shareholder wishing to submit a nomination for a director of our company should send the nomination to the Chief Executive Officer,Corporate Secretary, Charles & Colvard, Ltd., 170 Southport Drive, Morrisville, North Carolina 27560.
When submitting a nomination to us for consideration by the Nominating and Governance Committee, a shareholder must provide the following minimum information for each director nominee: (i) the name, age, business address, and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of our company that are beneficially owned by such person, (iv) a description of all arrangements or understandings between the shareholder (or the beneficial owner, if any, on whose behalf such nomination is made) and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the shareholder, (v) any other information relating to such person that is required to be disclosed in solicitations of proxies for elections, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act, of 1934, as amended (the “Exchange Act”), (including, without limitation, such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected), and (vi) such additional information relating to such person as is deemed sufficient by the Board of Directors to establish that the person meets all minimum qualification standards or other criteria to serve as a director as may have been established by the Board of Directors or applicable law or listing standard. The shareholder also must provide the name and address,
It is the policy of our company and the Nominating and Governance Committee to evaluate suggestions concerning possible candidates for election to the Board of Directors submitted to us, including those submitted by members of the Board members,of Directors, shareholders, and third parties. Criteria used by the Nominating and Governance Committee in its evaluation of all candidates for nomination are set forth in our Corporate Governance Standards and include, but are not limited to (i) judgment, character, expertise, skills, and knowledge useful to the oversight of our business; (ii) diversity of viewpoints, backgrounds, ages, experiences, and other demographics; (iii) business or other relevant experience; and (iv) the extent to which the interplay of the candidate’s expertise, skills, knowledge, and experience with that of other members of the Board membersof Directors will build a Board of Directors that is effective, collegial, and responsive to the needs of our company. After this evaluation process is concluded, the Nominating and Governance Committee recommends nominees to the Board of Directors for further consideration and approval.
No fees have been paid to any third party to identify or evaluate or assist in identifying or evaluating potential nominees. The Nominating and Governance Committee recommended Ms. Lividini and Ms. Miglucci as prospective candidates for nomination to the Board.
Shareholder Communication with the Board
As set forth in our Corporate Governance Standards, it is the policy of our company and the Board of Directors to encourage free and open communication between shareholders and the Board.Board of Directors. Any shareholder wishing to communicate with the Board of Directors should send any communication to the Corporate Secretary, Charles & Colvard, Ltd., 170 Southport Drive, Morrisville, North Carolina 27560. Any such communication must be in writing and must state the number of shares beneficially owned by the shareholder making the communication. Our Corporate Secretary will generally forward such communication to the full Board of Directors or to any individual director or directors to whom the communication is directed unless the communication is unduly hostile, threatening, illegal, or similarly inappropriate, in which case the Corporate Secretary has the authority to discard the communication or take appropriate legal action regarding the communication. This process is intended to provide shareholders one means of communicating with directors and is not intended to be exclusive.
Codes of Conduct
The Board of Directors has adopted two separate codes of conduct: a Code of Ethics for Senior Financial Officers that applies to persons holding the offices of the Chief Executive Officer, Chief Financial Officer, Treasurer, and Principal Accounting Officer of our company, and a Code of Business Conduct and Ethics that applies to all of our officers, directors, employees, agents, and representatives (including consultants, advisors, and independent contractors). Each code is available on our website at www.charlesandcolvard.com.https://ir.charlesandcolvard.com/governance/corporate-governance. We intend to satisfy the disclosure requirement regarding any material amendment to a provision of either code that applies to the Chief Executive Officer, Chief Financial Officer, Treasurer, and Principal Accounting Officer by posting such information on our website. Any amendments or waivers of either code for any executive officer or director must be approved by the Board of Directors and will be publicly disclosed either by posting such amendment or waiver, along with the reasons for the waiver, on our website at www.charlesandcolvard.com or https://ir.charlesandcolvard.com/governance/corporate-governance, by filing a Form 8-K with the SEC, alongor by issuing a press release in accordance with the reasons for the waiver, if applicable.
CERTAIN TRANSACTIONS
Since July 1, 2020, we werehave not been a participant in or a party to any related person transactions requiring disclosure under the SEC’s rules.
AUDIT COMMITTEE REPORT
The Audit Committee is responsible for overseeing our overall financial reporting process. In fulfilling its responsibilities for the financial statements for fiscal year 2015,2022, the Audit Committee:
reviewed and discussed the audited financial statements for the fiscal year ended |
discussed with BDO USA, LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board |
received the written disclosures and the letter from BDO USA, LLP required by applicable requirements of the |
Based on the Audit Committee’s review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015June 30, 2022 for filing with the SEC.
This Report is submitted by the Audit Committee.
Ms. Benedetta Casamento, Chairperson
Ms. Anne M. Butler
Mr. Neal I. Goldman
Mr. Ollin B. Sykes Chairperson
INFORMATION CONCERNING EXECUTIVE OFFICERS
Certain information regarding our executive officers is set forth below. Executive officers are appointed by the Board of Directors to hold office until their successors are duly appointed and qualified, or until their resignation, retirement, death, removal, or disqualification. The information appearing below and certain information regarding beneficial ownership of securities by certain executive officers contained in this proxy statement has been furnished to us by the executive officers. Information regarding Ms. MiglucciMr. O’Connell is included in the director nominee profiles set forth above.
Name | Age | Title | Executive Officer Since | |||
President and Chief Executive Officer | ||||||
Kyle S. Macemore hasClint J. Pete was appointed as our Chief Financial Officer on May 23, 2017. Mr. Pete previously served as our Senior Vice President,Interim Chief Financial Officer from December 2016 to May 2017 and Treasurer since August 2013.as our Corporate Controller from June 2016 to December 2016. Prior to joining our company, Mr. MacemorePete most recently served as Chief Financial Officer and Vice PresidentDirector of Business Planning for Oracle Corporation, a cloud application company, from June 2013 to May 2016. Prior to his employment with Oracle Corporation, Mr. Pete served as Business Unit Controller, Global Signaling Solutions of Tekelec, a telecommunications company, from January 2012May 2011 to AugustMay 2013. At Tekelec, Mr. MacemorePete also previously served as Vice President Finance and Investor Relations from May 2010 to January 2012, Director Financial Planning and Analysis from June 2007 to May 2010, Controller Signaling and Communications Software from April 2006 to June 2007, and Controller Communications Software from November 2005 to April 2006.Global Revenue Controller. Prior to his employment with Tekelec, Mr. MacemorePete served as Vice President of Finance and Controllers at Qualex Inc., a Kodak company. Before joining Qualex Inc., Mr. Pete held various financialmanagement positions at IBM Corporation, including Chief Financial Officer of its Americas Storage Division.Ernst & Young, LLP, an international public accounting firm. Mr. MacemorePete holds a Bachelor of Science degree in Business Administration and a Master of Accounting from the University of North Carolina at Chapel Hill and a Master of Business Administration degree in Accounting and Finance from the DukeTexas Tech University Fuqua School of Business.
EXECUTIVE COMPENSATION
The following tables and narrative discussion summarize the compensation we paid for services in all capacities rendered to us during the fiscal years ended December 31, 2015June 30, 2022 and 20142021 by our principal executive officer and all other “named executive officers” during fiscal 2015.
Summary Compensation Table
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | |||||||||||||||||||
Suzanne T. Miglucci | 2015 | $ | 22,413 | (3) | $ | 75,000 | (4) | $ | - | $ | 226,711 | (5) | $ | - | $ | 324,124 | ||||||||||
President and Chief Executive Officer (2) | ||||||||||||||||||||||||||
H. Marvin Beasley | 2015 | 266,084 | (7) | - | 121,000 | 110,625 | (8) | 95,362 | (9) | 593,071 | ||||||||||||||||
Former President and Chief Executive Officer (6) | ||||||||||||||||||||||||||
Randall N. McCullough | 2015 | 92,270 | - | - | - | 299,787 | (11) | 392,057 | ||||||||||||||||||
Former President and Chief Executive Officer (10) | 2014 | 335,000 | - | - | - | 17,745 | (12) | 352,745 | ||||||||||||||||||
Kyle S. Macemore | 2015 | 265,192 | (13) | - | 89,460 | (14) | 34,070 | 15,938 | (15) | 404,660 | ||||||||||||||||
Senior Vice President and Chief Financial Officer | 2014 | 250,000 | - | - | 148,150 | 14,631 | (16) | 412,781 | ||||||||||||||||||
Steven M. Larkin | 2015 | 300,000 | - | 85,200 | (14) | 34,070 | 19,221 | (18) | 438,491 | |||||||||||||||||
Chief Revenue Officer (17) | 2014 | 300,000 | - | - | - | 18,031 | (19) | 318,031 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||
Don O’Connell | 2022 | $ | 346,673 | $ | 91,163 | (2) | $ | 531,205 | (3) | $ | - | $ | 175,959 | (4) | $ | 36,214 | (5) | $ | 1,181,214 | ||||||||||||
President and Chief Executive Officer | 2021 | 335,000 | - | 70,103 | (6) | - | - | (7) | 38,962 | (8) | 444,065 | ||||||||||||||||||||
Clint J. Pete | 2022 | 263,074 | - | 241,501 | (9) | - | 87,980 | (10) | 16,672 | (11) | 609,227 | ||||||||||||||||||||
Chief Financial Officer and Treasurer | 2021 | 254,322 | - | 35,051 | (12) | - | - | (13) | 12,704 | (14) | 302,077 |
(1) | The amounts shown in these columns reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, Compensation – Stock Compensation (“ASC Topic 718”), of the restricted stock awards or option awards, as applicable, granted to each of our named executive officers. The assumptions made in determining these values are set forth in Note |
(2) | Reflects the cash component of a |
(3) | Reflects the equity portion of |
the 2018 Plan, including $144,611 in phantom stock settled only in cash granted under the 2022 Program. Pursuant to ASC Topic 718, the aggregate grant date fair value of | |
(4) | Reflects the cash portion of the performance-based |
(5) | Includes $22,673 of housing allowance, $8,406 of 401(k) employer matching contributions, and $5,135 of long-term disability insurance and life insurance premiums. |
(6) | Reflects the equity portion of the performance-based award granted to Mr. |
(7) | No cash bonus was paid in connection with the performance-based award granted to Mr. O’Connell under the 2020 Program (as defined below). |
Includes |
(9) | Reflects the equity portion of the performance-based award granted to Mr. Pete under the 2022 Program and the 2021 Program, including $72,306 in phantom stock settled only in cash granted under the 2022 Program. Pursuant to ASC Topic 718, the aggregate grant date fair value of the equity portion of this award was $308,642, including $95,805 in phantom stock settled only in cash, assuming that the highest level of performance conditions had been achieved. As a result of the executive team’s level of performance in fiscal 2022 measured against the company and individual performance goals set forth in the 2022 Program, on September 5, 2022 the Compensation Committee determined a 75% achievement level of the company’s shared financial goals, resulting in the cancellation and forfeiture by the company’s executive team of certain of the awards granted under the 2022 Program. As a result of this decision, this amount would be reduced by $51,647, including $18,076 in phantom stock settled only in cash. |
(10) | Reflects the cash portion of the performance-based award granted to Mr. Pete under the 2021 Program. |
(11) | Includes |
(12) | Reflects the equity portion of the performance-based award granted to Mr. |
(13) | No cash bonus was paid in connection with the performance-based award granted to Mr. Pete under the 2020 Program (as defined below). |
(14) | Includes |
Agreements Involving Named Executive Officers
Don O’Connell
In connection with Suzanne Miglucci’sDon O’Connell’s appointment as Chief Operating Officer and Senior Vice President, and Chief Executive Officer,Supply Chain, we entered into an employment agreement with Ms. Miglucci,Mr. O’Connell, effective as of December 1, 2015,May 23, 2017, with a term of one year that renewsrenewed automatically on an annual basis. Under the terms of the employment agreement, Ms. MiglucciMr. O’Connell received a signing bonus of $75,000 in December 2015 and will receive an initial annual base salary of $335,000. Ms. Miglucci$275,000. In addition, Mr. O’Connell received, on the effective date of the employment agreement, a stock option to purchase 100,000 shares of our common stock. The award vested over a three-year period, with 25% of the option award vesting six months after the grant date and an additional 25% of the option award vesting on each of the following three anniversaries of the grant date. Mr. O’Connell was also will be entitled to receive such benefits as are made available to our other similarly-situated executive employees, including, but not limited to, life, medical, and disability insurance, as well as retirement benefits.
In connection with Mr. O’Connell’s appointment as President and Chief Executive Officer, we entered into an amended and restated employment agreement with Mr. O’Connell, effective as of June 1, 2020, which superseded Mr. O’Connell’s prior employment agreement, as amended. The amended and restated employment agreement has a term of one year that renews automatically on an annual basis. Under its terms, Mr. O’Connell receives an initial annual base salary of $335,000. Mr. O’Connell is also entitled to receive such benefits as are made available to our other similarly-situated executive employees, including, but not limited to, life, medical, and disability insurance, as well as retirement benefits.
In addition, Ms. MiglucciMr. O’Connell received, on the effective date of the amended and restated employment agreement, a stock option to purchase 300,000350,000 shares of our common stock. The award will vestvests over a two-year period, with 50% of the option award vesting on the grant date and an additional 25% of the option award vesting on each of the following two anniversaries of the grant date provided Ms. MiglucciMr. O’Connell remains continuously employed with us through each anniversary. Mr. O’Connell is also entitled to a monthly housing allowance of up to $1,700 per month as long as his primary residence remains outside of North Carolina and an annual aggregate amount of $15,000 per year for the costs of travel to such primary residence.
Pursuant to the employment agreement, if Ms. Miglucci’sMr. O’Connell’s employment is terminated by us without cause (as defined in the employment agreement) Ms. Miglucci, by Mr. O’Connell for good reason (as defined in the employment agreement), or if the term of the employment agreement expires following our notice of non-renewal, Mr. O’Connell will continue to receive herhis base salary at the time of termination for a period of one year from such termination, (the “Termination Compensation”), so long as shehe complies with certain covenants in the employment agreement. If we experienceWe also agreed to accelerate the vesting of all outstanding unvested equity awards held by Mr. O’Connell upon the occurrence of a change of control or termination without cause that occurs within six months immediately prior to a change of control (as defined in the employment agreement), Ms. Miglucci may voluntarily terminate her employment for good reason (as definedso long as he complies with certain covenants in the employment agreement) within six months after such change of control and be entitled to the Termination Compensation.agreement. During herMr. O’Connell’s employment with us and for a period of one year following termination of herhis employment, Ms. MiglucciMr. O’Connell is prohibited from competing with us or attempting to solicit our customers or employees.
Clint J. Pete
In connection with H. Marvin Beasley’sClint Pete’s appointment as PresidentChief Financial Officer and Chief Executive Officer,Treasurer, we entered into an employment agreement with Mr. Beasley,Pete, effective as of March 17, 2015. The employment agreement hadMay 23, 2017, with a term of one year and renewedthat renews automatically on an annual basis. Under the terms of histhe employment agreement, Mr. BeasleyPete received an initial annual base salary of $335,000.$240,000. On April 9, 2020, Mr. BeasleyPete’s employment agreement was amended to increase his base salary to $254,616. Mr. Pete is also entitled to receive such benefits as are made available to our other similarly-situated executive employees, including, but not limited to, life, medical, and disability insurance, as well as retirement benefits.
In addition, Mr. Beasley was granted,Pete received, on the effective date of histhe employment agreement, a stock option to purchase 150,000100,000 shares of our common stock. The award was set to vest over a two-year period, with 33% of the option award vesting on the grant date and an additional 33% of the option award vesting on each of the following two anniversaries of the grant date provided Mr. Beasley remained continuously employed with us and/or served on the Board through each anniversary. Mr. Beasley was also granted, on the effective date of his employment agreement, an award of 100,000 shares of restricted stock. The restricted stock grant was set to vest on March 17, 2016, contingent upon the overall degree of achievement of specified performance goals.
Pursuant to the employment agreement, if we experience a bonus opportunitychange of control (as defined in 2013 under our company’s Corporate Incentive Plan of up to 75% of his base salary.the employment agreement), and Mr. Macemore also has the right to receive such benefits as are made available to our other similarly-situated executive employees, including, but not limited to, life, medical, and disability insurance, as well as retirement benefits.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($)(2) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)(2) | |||||||||||||||||||||
Suzanne T. Miglucci | 8/18/2015 | - | 30,991 | $ | 1.21 | 8/18/2025 | ||||||||||||||||||||||||
12/1/2015 | 150,000 | 150,000 | 1.21 | 12/1/2025 | ||||||||||||||||||||||||||
H. Marvin Beasley | 3/17/2015 | 100,000 | - | 1.20 | 3/1/2016 | |||||||||||||||||||||||||
Randall N. McCullough | 11/5/2010 | 100,000 | - | 2.13 | 3/17/2017 | |||||||||||||||||||||||||
3/7/2011 | 10,567 | - | 3.46 | 3/17/2017 | ||||||||||||||||||||||||||
11/5/2011 | 100,000 | - | 2.68 | 3/17/2017 | ||||||||||||||||||||||||||
3/5/2012 | 11,216 | - | 4.48 | 3/17/2017 | ||||||||||||||||||||||||||
4/16/2013 | 6,594 | - | 3.81 | 3/17/2017 | ||||||||||||||||||||||||||
Steve M. Larkin | 5/6/2013 | 75,000 | 25,000 | 4.04 | 5/6/2023 | |||||||||||||||||||||||||
5/6/2013 | 25,000 | (3) | $ | 28,000 | ||||||||||||||||||||||||||
5/6/2015 | 75,000 | (4) | $ | 84,000 | ||||||||||||||||||||||||||
9/9/2015 | 12,500 | 37,500 | 1.23 | 9/9/2025 | ||||||||||||||||||||||||||
Kyle S. Macemore | 8/5/2013 | 60,000 | 20,000 | 6.04 | 8/5/2023 | |||||||||||||||||||||||||
8/5/2013 | 20,000 | (5) | 22,400 | |||||||||||||||||||||||||||
8/25/2014 | 50,000 | 50,000 | 2.21 | 8/25/2024 | ||||||||||||||||||||||||||
5/6/2015 | 75,000 | (4) | $ | 84,000 | ||||||||||||||||||||||||||
9/9/2015 | 12,500 | 37,500 | 1.23 | 9/9/2025 |
Termination and Change of Control Arrangements
As discussed above in “Agreements Involving Named Executive Officers,” we have entered into agreements with certain of our named executive officers that provide for payments and benefits under specified circumstances to such named executive officers upon termination of employment and/or if we experience a change of control. In addition, the Charles & Colvard, Ltd. 2008 Stock Incentive Plan, providesas amended (the “2008 Plan”), and the Charles & Colvard, Ltd. 2018 Equity Incentive Plan (the “2018 Plan”) provide for adjustments to or accelerated vesting of equity awards under specified circumstances, as described below.
The 2008 Plan provides that, in the event of a change of control of our company (as defined in the 2008 Plan), the Compensation Committee (taking into account any Internal Revenue Code Section 409A considerations) has sole discretion to determine the effect, if any, on an award, including, but not limited to, the vesting, earning, and/or exercisability of an award. The Compensation Committee’s discretion includes, but is not limited to, the determination that an award will vest, be earned, or become exercisable in whole or in part (and discretion to determine that exercise of an award must occur, if at all, within time period(s) specified by the Compensation Committee, after which time period(s) the award will, unless the Compensation Committee determines otherwise, terminate), will be assumed or substituted for another award, will be cancelled without the payment of consideration, will be cancelled in exchange for a cash payment or other consideration, and/or that other actions (or no action) will be taken with respect to the award. The Compensation Committee also has discretion to determine that acceleration or any other effect of a change of control on an award will be subject to both the occurrence of a change of control event and termination of employment or service of the participant. Any such determination of the Compensation Committee may be, but is not required to be, stated in an individual award agreement.
The 2018 Plan provides that in the event of a participant’s termination of continuous service without cause (as defined in the 2018 Plan) or for good reason (as defined in the 2018 Plan) during the six-month period following a change in control (as defined in the 2018 Plan), notwithstanding any provision of the 2018 Plan or any applicable award agreement to the contrary, all outstanding awards will become 100% vested (or in the case of restricted stock or restricted stock units, the restricted period will expire). In addition, in the event of a change in control, the Compensation Committee may in its discretion and Value of Vesting Equity Table
Name and Principal Position | Year | Realized Salary ($) | Realized Bonus ($) | Realized Stock Awards ($)(1) | Realized Option Awards ($)(1) | All Other Compensation ($) | Total ($) | |||||||||||||||||||
Suzanne T. Miglucci | 2015 | $ | 22,413 | (3) | $ | 75,000 | (4) | $ | - | $ | - | $ | - | $ | 97,413 | |||||||||||
President and Chief Executive Officer (2) | ||||||||||||||||||||||||||
H. Marvin Beasley | 2015 | 266,084 | (6) | - | 153,805 | (7) | 1,000 | (8) | 95,362 | (9) | 516,251 | |||||||||||||||
Former President and Chief Executive Officer (5) | ||||||||||||||||||||||||||
Randall N. McCullough | 2015 | 92,270 | - | 40,800 | - | 299,787 | (11) | 432,857 | ||||||||||||||||||
Former President and Chief Executive Officer (10) | 2014 | 335,000 | - | 68,340 | 1,215 | 17,745 | (12) | 422,300 | ||||||||||||||||||
Kyle S. Macemore | 2015 | 265,192 | (13) | - | 33,200 | - | 15,938 | (14) | 314,330 | |||||||||||||||||
Senior Vice President and Chief Financial Officer | 2014 | 250,000 | - | 135,200 | - | 14,631 | (15) | 399,831 | ||||||||||||||||||
Steven M. Larkin | 2015 | 300,000 | - | 35,500 | - | 19,221 | (17) | 354,721 | ||||||||||||||||||
Chief Revenue Officer(16) | 2014 | 300,000 | - | 50,750 | - | 18,031 | (18) | 368,781 |
Fiscal 2022 Senior Management Equity Incentive Program
On March 4, 2016,September 15, 2021, the Compensation Committee approved the Charles & Colvard, Ltd. 2016Fiscal 2022 Senior Management Equity Incentive Program (the “2016“2022 Program”) that will be effective for fiscal 2016, with effect as of July 1, 2021. The 2022 Program supersedes and will supersede and replacereplaces all prior long-termmanagement incentive plans or programs.
The 20162022 Program provides a long-terman incentive opportunity for ourthe company’s executive officers and senior vice presidents (the “2016“FY2022 Eligible Employees”) through grantsthe grant of an award expressed in “Units” where each Unit shall consist of (i) a restricted stock awards withaward representing 65% of the Unit (the “FY2022 Restricted Stock Component”), to be granted to FY2022 Eligible Employees upon approval of the 2022 Program, and (ii) a cash bonus award representing 35% of the Unit (the “FY2022 Cash Component”), to be paid to FY2022 Eligible Employees on the payroll date following the FY2022 Vesting Date (as defined below) subject to achievement of performance goals.
The value of the FY2022 Restricted Stock Component of a Unit shall be set on the grant date of the Unit under the 2022 Program. The value of the FY2022 Cash Component of a Unit shall be calculated on the FY2022 Vesting Date of the Unit as the product of 0.35 multiplied by the closing price of one share of the company’s common stock on the FY2022 Vesting Date (the “FY2022 Vesting FMV”).
For example, if an award is expressed as 100 Units and all performance goals are achieved at the 100% level (as more fully described below), all 100 Units would fully vest. The FY2022 Restricted Stock Component of the 100 Units would equate to 65 fully vested shares of the company’s common stock. Assuming the FY2022 Vesting FMV is $2.00, the FY2022 Cash Component would equate to $70.00 (100 Units multiplied by 0.35 multiplied by $2.00).
For the avoidance of doubt, the FY2022 Cash Component of a Unit does not represent any security interest in the company, and does not in any way represent an ownership interest in the company, nor does it give a FY2022 Eligible Employee any rights as a shareholder of the company.
Units granted under the 2022 Program have both performance and service measures. Achievement of a 2016FY2022 Eligible Employee’s performance measures willshall be measured by the Compensation Committee as follows: (i) 50%(1) 65% of each restricted stock award willUnit shall be based on the achievement of shared company goals regarding revenue, EBITDA and departmental budgetsa Revenue Measure (the “Company Measures”“FY2022 Revenue Measure”), and (ii) 50%; (2) 20% of each restricted stock award willUnit shall be based on the achievement of individual performance goalsan EBITDA Measure (the “Personal“FY2022 EBITDA Measure” and, together with the Revenue Measure, the “FY2022 Company Measures”); and (3) 15% of each Unit shall be based on the achievement of Personal Measures (the “FY2022 Personal Measures”), bothall for the period from JanuaryJuly 1, 2016 to December 31, 2016. We2021 through June 30, 2022 (the “FY2022 Performance Measurement Period”).
If the company does not achieve 90% of the FY2022 Revenue Measure, the FY2022 Restricted Stock Component of each Unit shall be forfeited and the FY2022 Cash Component of each Unit shall not be paid. The company must achieve 100%at least 90% of the Company MeasuresFY2022 Revenue Measure in order for 50% vestingthe portion of the restricted stock award. ForUnit attributed to the remaining 50% vestingFY2022 EBITDA Measure and FY2022 Personal Measures to be vested/paid, as applicable. Achievement on a sliding scale from 90% to 125% of the restricted stock award, a 2016FY2022 Revenue Measure shall result in payment ranging from 75% to 150% of the portion of the Unit attributed to the FY2022 Revenue Measure. FY2022 Eligible EmployeeEmployees may achieve from 0% to 100% of the FY2022 EBITDA Measure and his or her FY2022 Personal Measures,Measures. The FY2022 Restricted Stock Component and 50%FY2022 Cash Component of the amount of his or her restricted stock award willeach Unit shall be reduced proportionately by any performance that is measured below 100% accordingly. If certain EBITDA or revenue thresholds are not achieved, 100% of the restricted stock awards will be forfeited. The FY2022 Personal Measures and FY2022 Company Measures are determined by the Compensation Committee and may be modified by the Compensation Committee during, and after the end of, the FY2022 Performance Measurement Period, subject to reflect certain typesthe terms of events as permitted by the 20082018 Plan. In addition, a 2016FY2022 Eligible Employee must remain in continuous service until March 4, 2017July 31, 2022 (the “FY2022 Vesting Date”) for restrictions to fully lapse.
Under the 20162022 Program, the Compensation Committee has granted the Chief Executive Officer 150,000 shares of restricted stock,target Units, the Chief Financial Officer and Chief Revenue Officer 75,000 shares of restricted stock,target Units, and each Senior Vice President 35,000 shares of restricted stock.50,000 target Units. The 20162022 Program also provides the Compensation Committee discretion to make additional equity compensation awards above the targettargeted award level in recognition of extraordinary performance. All awardsThe FY2022 Restricted Stock Component of all Units granted pursuant to the 20162022 Program areis issued under and pursuant to the 20082018 Plan and subject to the terms of ourthe company’s standard performance-based restricted stock award agreement.
On September 5, 2022, the Compensation Committee reviewed corporate performance for fiscal 2022 and determined the achievement levels of the performance goals under the 2022 Program. As a result of the executive team’s level of performance measured against the company and individual performance goals set forth in the 2022 Program, the Compensation Committee determined a 75% achievement level of the company’s shared financial goals, resulting in a total of 112,500 Units awarded to Mr. O’Connell and 56,250 Units awarded to Mr. Pete under the 2022 Program.
Fiscal 2021 Senior Management Equity Incentive Program
On July 31, 2020, the Compensation Committee approved the Charles & Colvard, Ltd. Fiscal 2021 Senior Management Equity Incentive Program (the “2021 Program”), with effect as of July 1, 2020. The 2021 Program superseded and replaced all prior management incentive plans or programs.
The 2021 Program provided an incentive opportunity for our executive officers and vice presidents (the “FY2021 Eligible Employees”) through the grant of an award, with both performance and service measures (the “FY2021 Award”), consisting of (i) a restricted stock award representing 65% of the FY2021 Award’s value (the “FY2021 Restricted Stock Component”) and (ii) a cash bonus award representing 35% of the FY2021 Award’s value (the “FY2021 Cash Component”) subject to achievement of performance goals. The value of FY2021 Awards is expressed in “Share Equivalents,” which is the number of shares of restricted stock that would be granted pursuant to each FY2021 Award if the Restricted Stock Component equaled 100% of the FY2021 Award.
Achievement of a FY2021 Eligible Employee’s performance measures was measured by the Compensation Committee as follows: (i) 65% of each FY2021 Award was based on the achievement of a shared company goal regarding revenue (the “FY2021 Revenue Measure”), (ii) 15% of each FY2021 Award was based on the achievement of a shared company goal regarding EBITDA (the “FY2021 EBITDA Measure,” and, together with the FY2021 Revenue Measure, the “FY2021 Company Measures”) and (iii) 20% of each FY2021 Award was based on the achievement of individual performance goals (the “FY2021 Personal Measures”), all for the period from July 1, 2020 to June 30, 2021 (the “FY2021 Performance Measurement Period”). If we did not achieve 80% of the FY2021 Revenue Measure, the FY2021 Restricted Stock Component of each FY2021 Award would be forfeited and the FY2021 Cash Component of each FY2021 Award would not be paid. We must have achieved at least 80% of the FY2021 Revenue Measure and a positive FY2021 EBITDA Measure in order for the portion of the FY2021 Award attributed to the FY2021 EBITDA Measure and FY2021 Personal Measures to be vested/paid, as applicable, at the discretion of the Compensation Committee. Achievement on a sliding scale from 90% to 125% of the FY2021 Revenue Measure would result in payment ranging from 75% and 140% of the portion of the FY2021 Award attributed to the FY2021 Revenue Measure. FY2021 Eligible Employees could achieve from 0% to 100% of the FY2021 EBITDA Measure and his or her FY2021 Personal Measures. The FY2021 Restricted Stock Component and FY2021 Cash Component of each FY2021 Award would be reduced proportionately by any performance that is measured below 100% accordingly. The FY2021 Personal Measures and FY2021 Company Measures would be determined by the Compensation Committee and could be modified by the Compensation Committee during, and after the end of, the FY2021 Performance Measurement Period, subject to the terms of the 2018 Plan. In addition, a FY2021 Eligible Employee must have remained in continuous service until July 31, 2021 for restrictions to fully lapse on the FY2021 Restricted Stock Component and for the FY2021 Cash Component to be paid.
Under the 2021 Program, the Chief Executive Officer was granted 150,000 Share Equivalents and the Chief Financial Officer was granted 75,000 Share Equivalents, which equaled 100% achievement of the FY2021 Award. The FY 2021 Restricted Stock Component of all FY2021 Awards granted pursuant to the 2021 Program was issued under and pursuant to the 2018 Plan and subject to the terms of the company’s standard performance-based restricted stock award agreement.
On August 13, 2021, the Compensation Committee reviewed corporate performance for the fiscal year ended June 30, 2021 and determined that the company achieved 125% of the FY2021 Revenue Measure and 100% of the FY2021 EBITDA Measure and each named executive officer achieved 100% of his FY2021 Personal Measures. This resulted in the Chief Executive Officer being eligible for an additional 39,000 Share Equivalents and the Chief Financial Officer being eligible for an additional 19,500 Share Equivalents. As a result of the executive team’s level of performance measured against the company and individual performance goals set forth in the 2021 Program, the Compensation Committee exercised its discretion, as permitted by the 2021 Program, to modify the cash portion of the award payable to (i) Mr. O’Connell, the company’s President and Chief Executive Officer, by increasing it from $48,098 to $175,959 and (ii) Mr. Pete, the company’s Chief Financial Officer, by increasing it from $24,049 to $87,980. The cash portions of the award were paid to the participants in August 2021. Also, as a result of the executive team’s level of performance measured against the company and individual performance goals set forth in the 2021 Program, the Compensation Committee further exercised its discretion, as permitted by the 2021 Program, on August 13, 2021 to modify the equity portion of the award and granted incremental restricted stock awards as follows to (i) Mr. O’Connell 25,350 shares of common stock and (ii) Mr. Pete 12,675 shares of common stock. By their terms, restrictions on the incremental stock awards lapsed on the grant date and were fully vested to the participants.
Award Pursuant to the 2018 Equity Incentive Plan
On September 13, 2021, the Compensation Committee granted Mr. O’Connell a discretionary award in the value of 50,000 share equivalents to be distributed in the proportion of 65% cash component, and 35% common stock component for extraordinary individual and company performance during the 2021 fiscal year. The award was granted under the 2018 Plan. The value of the share equivalents was set on the grant date of the award, and the award vested immediately upon grant. As a result, Mr. O’Connell vested in 17,500 shares of common stock and cash totaling $91,162.50 on September 13, 2021.
Fiscal 2020 Senior Management Equity Incentive Program
On July 9, 2019, the Compensation Committee approved the Charles & Colvard, Ltd. Fiscal 2020 Senior Management Equity Incentive Program (the “2020 Program”), with effect as of July 1, 2019. The 2020 Program superseded and replaced all prior management incentive plans or programs.
The 2020 Program provided an incentive opportunity for our executive officers and vice presidents, other than the Senior Vice President of Sales (the “FY2020 Eligible Employees”), through the grant of an award, with both performance and service measures (the “FY2020 Award”), consisting of (i) a restricted stock award representing 65% of the FY2020 Award’s value (the “FY2020 Restricted Stock Component”) and (ii) a cash bonus award representing 35% of the FY2020 Award’s value (the “FY2020 Cash Component”) subject to achievement of performance goals. The value of FY2020 Awards is expressed in “Share Equivalents,” which is the number of shares of restricted stock that would be granted pursuant to each Award if the FY2020 Restricted Stock Component equaled 100% of the FY2020 Award.
Achievement of an FY2020 Eligible Employee’s performance measures was measured by the Compensation Committee as follows: (i) 65% of each FY2020 Award was based on the achievement of a shared company goal regarding revenue (the “FY2020 Revenue Measure”), (ii) 25% of each FY2020 Award was based on the achievement of a shared company goal regarding EBITDA (the “FY2020 EBITDA Measure,” and, together with the FY2020 Revenue Measure, the “FY2020 Company Measures”) and (iii) 10% of each FY2020 Award was based on the achievement of individual performance goals (the “FY2020 Personal Measures”), all for the period from July 1, 2019 to June 30, 2020 (the “FY2020 Performance Measurement Period”). If we did not achieve 80% of the FY2020 Revenue Measure, the FY2020 Restricted Stock Component of each FY2020 Award would be forfeited and the FY2020 Cash Component of each FY2020 Award would not be paid. We must have achieved at least 90% of the FY2020 Revenue Measure in order for the portion of the FY2020 Award attributed to the FY2020 Company Measures to be vested/paid, as applicable. Achievement on a sliding scale from 90% to 120% of the FY2020 Revenue Measure would result in payment ranging from 75% and 140% of the portion of the FY2020 Award attributed to the FY2020 Revenue Measure. FY2020 Eligible Employees could achieve from 0% to 100% of his or her FY2020 Personal Measures. The FY2020 Restricted Stock Component and FY2020 Cash Component of each FY2020 Award would be reduced proportionately by any performance that is measured below 100% accordingly. The FY2020 Personal Measures and FY2020 Company Measures would be determined by the Compensation Committee and could be modified by the Compensation Committee during, and after the end of, the FY2020 Performance Measurement Period, subject to the terms of the 2018 Plan. In addition, a FY 2020 Eligible Employee must have remained in continuous service until July 31, 2020 for restrictions to fully lapse on the FY2020 Restricted Stock Component and for the FY2020 Cash Component to be paid.
Under the 2020 Program, the Compensation Committee granted the Chief Executive Officer 200,000 Share Equivalents, the Chief Financial Officer and Chief Operating Officer 100,000 Share Equivalents, and each eligible Vice President 50,000 Share Equivalents. The 2020 Program also provided the Compensation Committee discretion to make additional FY2020 Awards above the targeted award level in recognition of extraordinary performance. The FY2020 Restricted Stock Component of all FY2020 Awards granted pursuant to the 2020 Program was issued under and pursuant to the 2018 Plan and subject to the terms of the company’s standard performance-based restricted stock award agreement.
On July 31, 2020, the Compensation Committee reviewed preliminary corporate performance for the fiscal year ended June 30, 2020 and determined the achievement levels of the performance goals under the 2020 Program. The Compensation Committee determined that, because the FY2020 Revenue Measure was not achieved at the minimum 80% level, no FY2020 Awards were achieved. Therefore, the FY2020 Restricted Stock Component of each Award was forfeited and the FY2020 Cash Component of each Award was not paid.
Outstanding Equity Awards at 2022 Fiscal Year-End
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)(1) | |||||||||||||||||||||||||
Don O’Connell | 3/15/2016 | 50,000 | - | $ | 1.44 | 3/15/2026 | - | - | - | - | ||||||||||||||||||||||||
5/23/2017 | 100,000 | - | 0.88 | 5/23/2027 | - | - | - | - | ||||||||||||||||||||||||||
6/1/2020 | 350,000 | - | 0.70 | 6/1/2030 | - | - | - | - | ||||||||||||||||||||||||||
9/15/2021 | - | - | - | - | - | - | 150,000 | (2)(3) | 183,000 | (4) | ||||||||||||||||||||||||
Clint J. Pete | 8/23/2016 | 20,000 | - | 1.29 | 8/23/2026 | - | - | - | - | |||||||||||||||||||||||||
5/23/2017 | 100,000 | - | 0.88 | 5/23/2027 | - | - | - | - | ||||||||||||||||||||||||||
9/15/2021 | - | - | - | - | - | - | 75,000 | (2)(5) | 91,500 | (6) |
(1) | The market value of shares of common stock and shares of phantom stock that have not vested is based on a price of $1.22 per share (the closing price of our common stock as reported by Nasdaq on June 30, 2022). |
(2) | The restrictions on the stock award lapse on July 31, 2022, subject to achievement of performance goals and to the officer’s continued service to our company as of such date. The level of achievement of the performance goals under the 2022 Program as determined by the Compensation Committee is discussed above under the heading “Fiscal 2022 Senior Management Equity Incentive Program.” |
(3) | Includes 52,500 shares of phantom stock settled only in cash. |
(4) | Includes $64,050 in shares of phantom stock settled only in cash. |
(5) | Includes 26,250 shares of phantom stock settled only in cash. |
(6) | Includes $32,025 in shares of phantom stock settled only in cash. |
FISCAL 2022 DIRECTOR COMPENSATION
The following table and narrative discussion summarize the compensation paid to our non-employee directors during the year ended December 31, 2015.
Name | Fees Earned or Paid in Cash ($) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||||
Neal I. Goldman | $ | 70,000 | $ | 111,380 | (2) | $ | - | $ | 181,380 | |||||||
David B. Barr(3) | 21,250 | - | - | 21,250 | ||||||||||||
Anne M. Butler | 41,250 | 26,237 | - | 67,487 | ||||||||||||
George R. Cattermole | 40,000 | 26,237 | - | 66,237 | ||||||||||||
Jaqui Lividini | 4,375 | 25,439 | - | 29,814 | ||||||||||||
Ollin B. Sykes | 50,000 | 26,237 | - | 76,237 |
Name | Fees Earned | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||||
Neal I. Goldman | $ | 50,000 | $ | 21,761 | $ | - | $ | 71,761 | ||||||||
Anne M. Butler | 45,000 | 19,782 | - | 64,782 | ||||||||||||
Benedetta Casamento | 50,000 | 19,782 | - | 69,782 | ||||||||||||
Ollin B. Sykes | 40,000 | 19,782 | - | 59,782 |
(1) | The amounts shown in this column reflect the aggregate grant date fair values computed in accordance with FASB ASC Topic 718 of the option awards granted to each of our directors. The assumptions made in determining these values are set forth in Note |
Director Compensation Policy
On February 5, 2015,September 12, 2017, our Board of Directors adopted a revised director compensation policy, effective as of JanuaryOctober 1, 2015,2017, which provides that each designated non-management member of the Board of Directors will receive (i) an annual retainer of $30,000 to be paid in four quarterly installments in arrears, to be pro-rated as applicable; (ii) upon appointment to the Board of Directors to fill a vacancy, a stock option grant with a grant date value determined by the Board of Directors as appropriate considering the time remaining before re-election; and (iii) a stock option grant upon annual re-election as a director with a grant date value of $50,000, except for the Executive Chairperson, who will receive a stock option grant with a grant date value of $55,000.$55,000. Additionally, certain specific members of the Board of Directors will receive additional annual retainers, paid in four quarterly installments in arrears, pro-rated as applicable, in the following amounts: (i) the Executive Chairperson will receive $100,000,$40,000, in lieu of the $30,000 annual retainer paid to other members of the Board of Directors, (ii) the Chairperson of the Audit Committee will receive $15,000, (iii) the Chairperson of the Compensation Committee and Nominating and Governance Committee will receive $7,500 each, and (iv) Board committee members (excluding the committee chairperson and Executive Chairperson of the Board)chairperson) will receive $5,000. Directors will not receive a fee for each Board of Directors or committee meeting, whether or not such meeting is in person or telephonic. Members of the Board of Directors may only receive retainers for serving as a member (including chairperson) of two boardBoard committees.
Stock Ownership Guidelines
To further align the interests of our non-management directors with the long-term interests of our shareholders and promote our commitment to sound corporate governance, our Board of Directors adopted stock ownership guidelines for the Compensation Committee approved,non-management directors on March 24, 2020. These guidelines provide that each non-management director achieve an ownership target of the grant of a stock option to purchase 40,650number shares of our common stock in lieu of the cash payment of the remaining $50,000 of Mr. Goldman’shaving a value equal to or greater than 0.5 times such non-management director’s annual retainer for fiscal 2015 so that we could use the cash for other purposes. The stock option granted to Mr. Goldman has an exercise price of $1.23 per share and vests and becomes fully exercisable on September 1, 2016. The option grant was made pursuant to the 2008 Plan and subject to the terms of our standard director nonqualified stock option agreement.
Number of Shares Underlying Options Granted | Number of Shares Underlying Restricted Stock Awards Granted | |||||||
Suzanne T. Miglucci President and Chief Executive Officer(1) | 330,991 | 150,000 | ||||||
H. Marvin Beasley Former President and Chief Executive Officer (2) | 150,000 | 232,054 | ||||||
Randall N. McCullough Former President and Chief Executive Officer (3) | 417,629 | 170,000 | ||||||
Kyle S. Macemore Senior Vice President, Chief Financial Officer, and Treasurer | 230,000 | 230,000 | ||||||
Steven M. Larkin Chief Revenue Officer | 150,000 | 284,957 | ||||||
Neal I. Goldman | 175,437 | 22,624 | ||||||
Anne M. Butler | 36,496 | 48,881 | ||||||
George R. Cattermole | 36,496 | 318,864 | ||||||
Jaqui Lividini | 30,991 | - | ||||||
Ollin B. Sykes | 36,496 | 257,104 | ||||||
All current executive officers as a group | 710,991 | 664,957 | ||||||
All current directors who are not executive officers as a group | 315,916 | 647,473 | ||||||
All associates of directors, executive officers or nominees | - | - | ||||||
All other persons who received or are to receive 5% of plan awards | - | - | ||||||
All employees, including all current officers who are not executive officers, as a group (4) | 2,323,122 | 521,750 |
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2015June 30, 2022 with respect to compensation plans (including any individual compensation arrangements) under which our equity securities are authorized for issuance.
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | (b) Weighted- average exercise price of outstanding options, warrants, and rights | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(1) | |||||||||
Equity compensation plans approved by security holders | 2,441,077 | (2) | $ | 2.11 | 1,038,800 | (3) | ||||||
Equity compensation plans not approved by security holders | - | $ | - | - | ||||||||
Total | 2,441,077 | $ | 2.11 | 1,038,800 |
Plan Category | (a) Number of to be issued | (b) Weighted- | (c) Number of | |||||||||
Equity compensation plans approved by security holders | 1,658,803 | (2) | $ | 1.32 | 1,671,966 | (3) | ||||||
Equity compensation plans not approved by security holders | - | $ | - | - | ||||||||
Total | 1,658,803 | $ | 1.32 | 1,671,966 |
(1) | Refers to shares of our company’s common stock. |
(2) | Includes 557,592 shares issuable upon exercise of outstanding stock options under the |
(3) | Consists of shares remaining for future issuance under the |
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial ownership of common stock as of March 31, 2016September 20, 2022 by (i) each person known by us to own beneficially more than five percent of our company’s outstanding shares of common stock; (ii) each director and director nominee of our company; (iii) each named executive officer of our company; and (iv) all current directors and executive officers as a group. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, to our knowledge, each shareholder named in the table has sole voting and investment power with respect to the shares set forth opposite such shareholder’s name.
Name and Address of Beneficial Owner(1) | Number of Shares Beneficially Owned(2) | Percent of Class | ||||||
Goldman Capital Management Inc.(3) 767 Third Ave. New York, NY 10017 | 1,330,670 | 6.2 | % | |||||
Liptay Capital, LLC(4) 123 Spring Street #C Cambridge, MA 02141 | 1,297,044 | 6.0 | ||||||
Neal I. Goldman(5) | 1,370,815 | 6.4 | ||||||
Ollin B. Sykes(6) | 1,020,181 | 4.7 | ||||||
Suzanne T. Miglucci(7) | 375,991 | 1.7 | ||||||
H. Marvin Beasley | 282,054 | 1.3 | ||||||
Randall N. McCullough(8) | 609,129 | 2.8 | ||||||
Anne M. Butler(9) | 387,492 | 1.8 | ||||||
George R. Cattermole(10) | 509,202 | 2.4 | ||||||
Jaqui Lividini(11) | 30,991 | 0.1 | ||||||
Kyle S. Macemore(12) | 345,500 | 1.6 | ||||||
Steven M. Larkin(13) | 392,457 | 1.8 | ||||||
Directors and Executive Officers as a Group (7 persons)(14) | 5,323,812 | 24.8 |
Name and Address of Beneficial Owner(1) | Number of Shares Beneficially Owned(2) | Percent of Class | |||
Punch & Associates Investment Management, Inc.(3) | 1,918,070 | 6.3 | % | ||
Renaissance Technologies LLC (4) | 1,741,765 | 5.7 | |||
Ollin B. Sykes(5) | 2,643,586 | 8.7 | |||
Neal I. Goldman(6) | 1,254,922 | 4.1 | |||
Don O’Connell(7) | 951,114 | 3.1 | |||
Anne M. Butler(8) | 630,276 | 2.1 | |||
Clint J. Pete(9) | 369,328 | 1.2 | |||
Benedetta Casamento(10) | 291,271 | 1.0 | |||
Directors and Executive Officers as a Group (6 persons)(11) | 6,140,497 | 20.2 |
(1) | Unless otherwise indicated, the address of each person is 170 Southport Drive, Morrisville, North Carolina 27560. |
(2) | Based |
(3) | Based on a Schedule 13G filed on February 14, 2022 with the |
(4) | Based |
(5) | Includes (i) |
(6) | Includes |
Includes (i) |
Includes |
Includes |
(10) | Includes |
Includes (i) |
PROPOSAL 2 above, 6,000,000 shares), plus (ii) any shares of common stock subject to an award granted under the 1997 Plan or any Prior Plan, if the award is forfeited, cancelled, terminated, expires, or lapses for any reason without the issuance of shares pursuant to the award, or shares subject to an award granted under a Prior Plan which shares are forfeited to or repurchased or reacquired by us, for issuance under the 2008 Plan.
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed BDO USA, LLP, (“BDO”) as our company’s independent registered public accounting firm for the fiscal year ending December 31, 2016,June 30, 2023, subject to ratification by our shareholders. Although shareholder ratification of the appointment of BDO is not required by law, we desire to solicit such ratification as a matter of good corporate governance. If the appointment of BDO is not approved by a majority of the shares cast at the Annual Meeting, the Audit Committee willmay consider the appointment of another independent registered public accounting firm for fiscal 2016.2023 but may determine to remain with BDO. BDO has acted as our independent registered public accounting firm since December 2010. Representatives of BDO are expected to be present at the Annual Meeting and will be given the opportunity to make a statement if they desire to do so and will also be available to respond to appropriate questions.
Principal Accountant Fee Information
For the fiscal years ended December 31, 2014June 30, 2021 and 2015,2022, fees billed for services provided by BDO are as follows:
Amount of Fees | ||||||||
Type of Service | 2014 | 2015 | ||||||
Audit Fees | $ | 151,000 | $ | 136,000 | ||||
Audit-Related Fees | - | - | ||||||
Tax Fees | 17,000 | 17,000 | ||||||
All Other Fees | - | 3,000 | ||||||
Totals | $ | 168,000 | 156,000 |
Amount of Fees | ||||||||
Type of Service | 2021 | 2022 | ||||||
Audit Fees | $ | 193,000 | $ | 217,000 | ||||
Audit-Related Fees | - | - | ||||||
Tax Fees | 31,000 | 2,000 | ||||||
All Other Fees | - | - | ||||||
Totals | $ | 224,000 | $ | 219,000 |
Audit Fees.
This category includes fees billed for the fiscalAudit-Related Fees
. This category includes fees billed in the fiscalTax Fees
. This category includes fees billed in the fiscalAll Other Fees
. This category includes fees billed in the fiscalThe Board of Directors has adopted an Audit Committee Pre-Approval Policy. Pursuant to the Pre-Approval Policy, all new projects (and fees) relating to our independent registered public accounting firm either must be authorized in advance under the general pre-approval guidelines set forth in the Pre-Approval Policy or specifically approved in advance by the full Audit Committee. General pre-approval under the policy is provided for 12 months (unless the Audit Committee specifically provides for a different period), is limited to certain projects listed in the policy, and is subject to meeting a specific budget for each project, which budget is contained in the policy. Any project that falls within the scope of the general pre-approval guidelines but exceeds the budgetary limit up to $10,000 may be approved by the Chairperson of the Audit Committee or his or her designee, while all other projects must be specifically approved by the full Audit Committee. There were no new projects authorized in 2015.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF BDO USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016.JUNE 30, 2023.
PROPOSAL 5
ADVISORY (NONBINDING) APPROVAL OF EXECUTIVE COMPENSATION
Our executive compensation program is designed to attract and retain the executive talent essential to the achievement of our strategic and operational goals and the achievement of increased shareholder value. We believe that our compensation policies and procedures reward executive officers for both their performance and our company’s performance, and we believe such compensation policies and procedures create interests for our executive officers that are strongly aligned with the long-term interests of our shareholders.
As required by Section 14A of the Exchange Act, we are providing our shareholders with an advisory (nonbinding) vote to approve the compensation of our executive officers. This proposal, commonly known as a “Say-on-Pay” proposal, is designed to give you as a shareholder the opportunity to endorse or not endorse our executive compensation program through the following resolution:
“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation tables and the related narrative disclosure.”
When you cast your vote, we urge you to consider the description of our executive compensation program contained in this proxy statement, including in the compensation tables and narrative disclosure, as well as the following factors:
● | Compensation decisions for our Chief Executive Officer and other named executive officers are made by a committee of independent directors. |
● | A substantial portion of our executive officers’ compensation is in the form of equity, which aligns our executive officers’ interests with those of our shareholders and incentivizes our executive officers to create shareholder value. |
● | The Compensation Committee attempts to set challenging performance goals under our company’s equity incentive |
Because your vote is advisory, it will not be binding upon the Board of Directors, it will not overrule any decision by the Board of Directors, and it will not create or imply any additional fiduciary duties on the Board of Directors or any of its members. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE ADVISORY (NONBINDING) APPROVAL OF EXECUTIVE COMPENSATION.
OTHER MATTERS
The Board of Directors is not aware of any other matters to come before the Annual Meeting. However, if any other matters properly come before the Annual Meeting, it is the intention of the proxies named onappointed for the enclosed proxy cardAnnual Meeting to vote said proxy in accordance with their judgment in such matters.
SHAREHOLDER PROPOSALS
Under certain conditions, shareholders may request us to include a proposal for action at a forthcoming meeting of our shareholders in the proxy materials for such meeting. All shareholder proposals intended to be presented at our 20172023 Annual Meeting of Shareholders must be received by us no later than December 21, 2016June 2, 2023 for inclusion in the proxy statement and proxy card relating to such meeting.
In addition, if a shareholder desires to make a proposal from the floor during the meeting, even if such proposal is not to be included in our proxy statement, the Bylaws provide that the shareholder must deliver or mail timely written notice of the proposal to our Corporate Secretary. Notice will be considered timely if it is delivered or mailed to and received at our principal executive office between January 20, 2017July 2, 2023 and February 19, 2017,August 1, 2023, which is not more than 90 calendar days and not fewer than 60 calendar days prior to the one year anniversary of the date of the Notice of Annual Meeting of Shareholders for the immediately preceding annual meeting. In the event that no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 days or delayed by more than 60 days from the one year anniversary of the previous year’s annual meeting of shareholders, notice by a shareholder to be timely must be received no earlier than the 90th day prior to such annual meeting and not later than the 60th day prior to such annual meeting or the close of business on the tenth10th day following the day on which notice of the meeting was mailed or public disclosure of the date of the meeting was first made, whichever occurs first.
ADDITIONAL INFORMATION
Copies of our Annual Report on Form 10-K for the year ended December 31, 2015,June 30, 2022, including financial statements and schedules, are available on our website at
By Order of the Board of Directors,
Neal I. Goldman
Chairman
September 30, 2022