The Company’s Proxy Statement and Proxy Card accompany this Notice.
We appreciate your support and continued confidence.
You have the right to receive notice of and to vote at the Annual Meeting if you were a stockholder of record at the close of business on July 30, 2017.April 21, 2020. Please complete, sign, date and return your proxy card to us in the enclosed, postage-prepaid envelope at your earliest convenience, even if you plan to attend the Annual Meeting. If you prefer, you can authorize your proxy through the Internet or by telephone as described in the Proxy Statement and on the enclosed proxy card.
You are receiving these proxy materials because you owned shares of common stock of our company, Issuer Direct Corporation (the “Company”), at the close of business on July 30, 2017,April 21, 2020, and, therefore, are eligible to vote at the Company’s Annual Meeting of Stockholders to be held virtually on Thursday, September 28, 2017,Wednesday, June 17, 2020, at 9:12:00 a.m.p.m. EDT at the Company's office at 500 Perimeter Park Drive, Suite D, Morrisville, NC 27560 (the “Annual Meeting”). Our Board of Directors (the “Board”) is soliciting your proxy to vote at the Annual Meeting.
2.
A proposal to approve the Second Amendment to Issuer Direct Corporation’s 2014 Equity Incentive Plan to increase the total number of shares of common stock authorized for issuance under such plan by 200,000;
ii) 3.
To ratify the appointment by the Audit Committee of the Board of Directors of Cherry Bekaert LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017; and2020;
4.
iii) To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.
The Board does not know of any matters to be presented at our Annual Meeting other than those described in this Proxy Statement. However, if any other matters properly come before the meeting or any adjournment thereof, it is the intention of the persons named in the enclosed proxy to vote the shares represented by them in accordance with their best judgment.
Where►WHY IS THIS YEAR’S ANNUAL MEETING BEING HELD IN A VIRTUAL-ONLY FORMAT?
Our preference is to have held an in-person annual meeting of shareholders. However, due to public health concerns resulting from the coronavirus (COVID-19), and whenthe related protocols that federal, state, and local governments have implemented, our Board of Directors has determined to hold our annual meeting solely by means of remote communication via webcast. This is often referred to as a “virtual annual meeting.” The webcast will allow all shareholders to join the meeting, be held?regardless of location. Our decision to hold the annual meeting in a virtual format relates only to the 2020 Annual Meeting at this time, however the Board of Directors may decide to continue this format or introduce it as an option for subsequent meetings of the shareholders.
The Annual Meeting►HOW CAN I PARTICIPATE IN THE ANNUAL MEETING?
You can join the annual meeting by accessing the meeting URL at https://www.issuerdirect.com/virtual-event/isdr and entering in your shareholder information provided on your ballot or proxy information previously mailed to you.
Online access will be held atavailable prior to the Company's office at 500 Perimeter Park Drive, Suite D, Morrisville, NC 27560 on September 28, 2017 at 9:00 a.m., localmeeting for you to obtain your information and to vote your shares should you not have done so previously. We encourage you to access the meeting webcast prior to the start time.
How can I obtain directions toRules for the meeting?virtual meeting will be no different than if it was in person, professional conduct is appreciated and all Q&A sessions will be conducted at the appropriate time during the meeting.
For directions to the location of our Annual Meeting, please visit our proxy website at https://www.iproxydirect.com/ISDR►.HOW CAN I ASK QUESTIONS DURING THE ANNUAL MEETING?
Who is soliciting my proxy?You can submit questions in writing to the virtual meeting website during the annual meeting in the Q&A tab on the virtual platform. You must first join the meeting as described above in “How can I participate in the annual meeting?” no questions will be taken in any other manner the day of the meeting.
► WHO IS SOLICITING MY PROXY?
Our Board is soliciting your proxy to vote at our Annual Meeting. By completing and returning a proxy card, you are authorizing the proxy holder to vote your shares at our Annual meetingMeeting as you have instructed.
How many votes may
► HOW MANY VOTES MAY I cast?CAST?
Each holder of common stock is entitled to one vote, in personvirtually or by proxy, for each share of our common stock held of record on the record date.
How many votes can be cast by all stockholders?► HOW MANY VOTES CAN BE CAST BY ALL STOCKHOLDERS?
Our common stock is the only class of security entitled to vote at our Annual Meeting. As of the record date, we had 2,954,0923,772,700 shares of common stock outstanding, each of which is entitled to one vote.
How many shares must be present to hold the meeting?► HOW MANY SHARES MUSTS BE PRESENT TO HOLD THE MEETING?
Our bylaws provide that thirty-three and one-third (33.3%) of the total number of shares of common stock outstanding constitutes a quorum and must be virtually present or have voted prior to the Annual Meeting to conduct a meeting of our stockholders.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?► WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD AND AS A BENEFICIAL OWNER?
If your shares are registered directly in your name with our transfer agent, Direct Transfer LLC, you are considered, with respect to those shares, the “stockholder of record.” Proxy Materials have been directly sent to you by us.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of shares held in “street name.” Proxy Materials have been forwarded to you by your broker, bank, or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank, or nominee how to vote your shares by following their instructions which are included with this proxy, if applicable.
Can my shares be voted if► CAN MY SHARES BE VOTED IF I do not return the proxy card and do not attend the meeting in person?DO NOT RETURN THE PROXY CARD AND DO NOT ATTEND THE MEETING IN PERSON?
If you hold shares in street name and you do not provide voting instructions to your broker, bank, or nominee, your shares will not be voted on any proposal for which your broker does not have discretionary authority to vote (a “broker non-vote”). Brokers generally have discretionary authority to vote shares held in street name on “routine” matters but not on “non-routine” matters. Proposals to ratify the appointment of the independent auditor are generally considered “routine” matters. Proposals to elect directors are “non-routine” matters.
If you do not vote the shares held in your name, your shares will not be voted. However, the Company may vote your shares if you have returned a blank or incomplete proxy card.
How does the Board of Directors recommend that► HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I vote?VOTE?
Our Board of Directors recommends that you vote FOR each of the director nominees set forth in this proxy statement, FOR theproposal to approvethe Second Amendment to Issuer Direct Corporation’s 2014 Equity Incentive Plan to increase the total number of shares of common stock authorized for issuance under such plan by 200,000and FOR the ratification of the appointment of Cherry Bekaert LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.2020.
How do► HOW DO I vote?VOTE?
You may vote using any of the following methods:
In personVirtually at the Annual meeting:Meeting:
You may vote in person at the Annual meeting,Meeting either by virtually attending the meeting yourself or authorizing a representative to virtually attend the meeting on your behalf. You may also execute a proper proxy designating that person.behalf by providing them your virtual Annual Meeting code. If you are a street holder of shares, you must obtain a proxy from your broker, bank, or nominee naming you as the proxy holder and present it to the inspectorsinspector of election with your ballot when you vote at the Annual meeting.Meeting.
Other ways to vote:
You may also vote by telephone or online as instructed in our Proxy,proxy, or by returning a proxy card or voting instruction form sent to you in response to your request for printed proxy materials.
MAIL: | | MAIL:Please mark, sign, date, and return this Proxy Cardproxy card promptly using the enclosed envelope. |
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FAX: | | FAX:Complete the reverse portion of this Proxy Cardproxy card and Faxfax to 202-521-3464.(202) 521-3464. |
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INTERNET: | | INTERNET:https://www.iproxydirect.com/ISDRisdr |
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PHONE: | | 1-866-752-VOTEPHONE:866.752.VOTE (8683) |
Once► ONCE I deliver my proxy, canDELIVER MY PROXY, CAN I revoke or change my vote?REVOKE OR CHANGE MY VOTE?
Yes. You may revoke or change your proxy at any time before it is voted by giving a written revocation notice to our corporate secretary, by delivering a new revised proxy no later than the end of the day prior to the annual meeting,Annual Meeting, or by voting in personvirtually at the meeting.
Who pays for soliciting proxies?► WHO PAYS FOR SOLICITING PROXIES?
We are paying for all costs of soliciting proxies. Our directors, officers, and employees may request the return of proxies by mail, telephone, internet, telefax, telegram, or personal interview. We are also requesting that banks, brokerage houses, and other nominees or fiduciaries forward the soliciting material to their principals and that they obtain authorization for the execution of proxies. We will reimburse them for their expenses.
Could other matters be considered and voted upon at the meeting?► COULD OTHER MATTERS BE CONSIDERED AND VOTED UPON AT THE MEETING?
Our Board does not expect to bring any other matter before the Annual Meeting and is not aware of any other matter that may be considered at the meeting. However, if any other matter does properly come before the meeting, the proxy holders will vote the proxies as the Board may recommend.
What happens if the meeting is postponed or adjourned?► WHAT HAPPENS IF THE MEETING IS POSTPONED OR ADJOURNED?
Your proxy will still be good and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy at any time until it is voted.
How Can► HOW CAN I Contact Issuer Direct to Request Materials or Information Referred to in these Questions and Answers?CONTACT ISSUER DIRECT TO REQUEST MATERIALS
By mail addressed to: Issuer Direct Corporation, 500 Perimeter Park Drive,1 Glenwood Ave, Suite D, Morrisville,1001, Raleigh NC 27560,27603 Attn: Chairman of the Board. By Phone,phone, call 919.481.4000 or 888.752.VOTE,866.752.VOTE (8683), by fax, 212.521.3464202.521.3464, or by email proxy@iproxydirect.comat proxy@iproxydirect.com.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESSDelivery of Documents to Security Holders Sharing an Address
We will only deliver one set of materials to multiple stockholders sharing an address, unless we have received contrary instructions from one or more of the stockholders. Also, we will promptly deliver a separate copy of these materials and future stockholder communication documents to any stockholder at a shared address to which a single copy of these materials werewas delivered, or deliver a single copy of these materials and future stockholder communication documents to any stockholder or stockholders sharing an address to which multiple copies are now delivered, upon written request to us at our address noted above. Stockholders may also address future requests regarding delivery of proxy materials and/or annual reports by contacting us at the address noted above.
PROPOSAL 1
Proposal 1–Election of Directors
ELECTION OF THE FIVEFOUR DIRECTORS TO SERVE UNTIL THE NEXT ANNUAL MEETING OR UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED
Nominees for DirectorNOMINEES FOR DIRECTOR
At our Annual Meeting, of Stockholders, stockholders will elect fivefour directors, each to serve a term of one year or until his or her successor is elected and qualified. Our Board of Directors is currently comprised of fourfive directors. Our Board of Directors is not divided into classes of directors, meaning all of our directors are voted on every year at our Annual Meeting of Stockholders.
ThreeAll of the director nominees Messrs. Balbirnie, Everett and Galleher, currently serve as members of our Board. The other two director nominees, Messrs. Frank and Nowlan, have never served as members of our Board and will be seeking election for the first time.
Mr. Andre M. Boisvert,Eric Frank, who is currently Chairmana member of the Board of Directors as well as the Chairman of the CompensationTechnology Oversight Committee and member of the AuditCompensation Committee, will not stand for re-election at the Annual Meeting. Mr. Boisvert,Frank, who has served as a member of our Board for over fivethree years, has decided not to stand for re-election for personal reasons. due to other business commitments, and not the result of any disagreement with us, our Board of Directors, or our management. The Board does not intend to replace Mr. Frank in the immediate future.
Unless otherwise instructed on the proxy card, each of the persons named as proxies on the proxy card intends to vote the shares represented thereby in favor of the fivefour nominees listed under “Certain Information Concerning Director Nominees” below.
All nominees have consented to being named in this Proxy Statement and to serve if elected. If, however, any nominee should become unable or unwilling to serve, the persons named as proxies on the proxy card will vote the shares represented by the proxy for another person duly nominated by our Board.
Certain Information Concerning Director NomineesCERTAIN INFORMATION CONCERNING DIRECTOR NOMINEES
Certain information concerning the nominees for election as directors is set forth below. This information was furnished to us by the nominees. No family relationship exists between any of our directors or executive officers.
The fivefour directors have been nominated for election to the Board of Directors at the Annual Meeting to be held on September 28, 2017.June 17, 2020.
The names of the nominees and certain information about them as of August 8, 2017April 28, 2020 are set forth below:
| Nominee | | Age | | Position | | Director Since | Age | Position | Director Since |
| William H. Everett | | 66 | | Director, Chairman of the Audit Committee, Member of Compensation Committee & Strategic Advisory Committee | | 2013 | 69 | Director, Chairman of the Board, Member of Audit Committee & Strategic Advisory Committee | 2013 |
| Brian R. Balbirnie | | 48 | Director, President and Chief Executive Officer | 2007 |
| J. Patrick Galleher | | 43 | | Director, Chairman of the Strategic Advisory Committee | | 2014 | 47 | Director, Chairman of Compensation Committee and Strategic Advisory Committee | 2014 |
| Brian R. Balbirnie | | 45 | | Director, Chief Executive Officer | | 2007 | |
| Eric Frank | | 52 | | Director Nominee | | -- | |
| Michael Nowlan | | 58 | | Director Nominee | | -- | 61 | Director, Chairman of Audit Committee | 2017 |
| William H. Everett | | |
Age 69 Director Since 2013 ● Chairman of the Board ● Member of the Audit Committee ● Member of the Strategic Advisory Committee | | Professional Background and QualificationsMr. Everett joined the Board of Directors of Issuer Direct Corporation on October 2, 2013. Mr. Everett has had more than thirty years of management experience and currently serves as a director of Hakisa SAS in Strasbourg France. In addition, Mr. Everett served on the Board of NeoNova Network Services until it was acquired in July 2013. In April 2010, Mr. Everett retired as Executive Vice President and CFO of Tekelec, a publicly traded telecom equipment supplier. Since that time, he has served as a corporate director and provided consulting services to public company and private equity clients. From 2011 through 2015, he served as an Executive in Residence and a member of the Board of Advisors at the Poole College of Management at NC State University. He has significant experience as both a Chief Financial Officer and a general manager working with a variety of multi-national technology companies over his career, including Epsilon Data Management, Chemfab Inc., Eastman Software and Steleus SAS. He was the Co-founder and President of Maps a la Carte, an internet mapping and spatial data company, which was acquired by Demand Media Inc. Mr. Everett received his BA in Political Science from Middlebury College and his MBA from the University of New Hampshire. He also practiced as Certified Public Accountant with Price Waterhouse for seven years before joining Epsilon Data Management. |
William H. Everett ñ Director, Chairman of the Audit Committee, Member of the Compensation Committee & Strategic Advisory Committee| Brian R. Balbirnie | | |
Age 48 Director Since 2007 ● President and Chief Executive Officer | | Professional Background and Qualifications Mr. Balbirnie is a member of the Board and our President and Chief Executive Officer. Mr. Balbirnie established Issuer Direct in 2006 with a vision of creating a technology driven back-office compliance platform that would reduce costs as well as increase the efficiencies of the most complex tasks, today the company calls it Platform id. Mr. Balbirnie is responsible for the strategic leadership of the company and oversees day-to-day operations. Under Mr. Balbirnie’s direction, the Company has grown and in 2018 worked with approximately 4,000 customers. Mr. Balbirnie is an entrepreneur with more than 20 years of experience in emerging industries. Prior to Issuer Direct, Mr. Balbirnie was the founder and managing partner of Catapult Company, a compliance and consulting practice focused on the Sarbanes Oxley Act. During 2002 and 2003, Mr. Balbirnie also served as the Vice President and Chief Financial Officer of Mobile Reach International, Inc., a publicly traded company, and as the President and Chief Technology Officer of IVUE Corporation, a private company. Prior to and with Catapult, Mr. Balbirnie also advised several companies on their public market strategies, merger & acquisitions as well as their financial reporting requirements. |
Mr. Everett joined the Board of Directors of Issuer Direct Corporation on October 2, 2013. Mr. Everett has had more than thirty years of management experience and currently serves as a director of Hakisa SAS in Strasbourg France. In addition, Mr. Everett served on the Board of NeoNova Network Services until it was acquired in July 2013. In April 2010, Mr. Everett retired as Executive Vice President and CFO of Tekelec, a publicly traded telecom equipment supplier. Since that time, he has served as a corporate director and provided consulting services to public company and private equity clients. From 2011 through 2015, he served as an Executive in Residence and a member of the Board of Advisors at the Poole College of Management at NC State University. He has significant experience as both a Chief Financial Officer and a general manager working with a variety of multi-national technology companies over his career, including Epsilon Data Management, Chemfab Inc., Eastman Software and Steleus SAS. He was the Co-founder and President of Maps a la Carte, an internet mapping and spatial data company, which was acquired by Demand Media Inc. | J. Patrick Galleher | | |
Age 47 Director Since 2014 ● Chairman of the Compensation Committee ● Chairman of the Strategic Advisory Committee | | Professional Background and Qualifications Mr. Galleher joined the Board of Directors of Issuer Direct Corporation on March 11, 2014. Mr. Galleher is a Managing Partner for Boxwood Partners, a merchant bank in Richmond, Virginia, where he leads transactions for Boxwood’s M&A advisory services and private equity group. In this capacity, he has led sell-side, buyout and capital raising transactions. Prior to joining Boxwood, Mr. Galleher was CEO of WILink plc (WLK: LSE), a global financial communications business with operations in the U.S., Canada, U.K., Continental Europe, and Sweden. In 2006, as CEO, he successfully led the company through a public-to-private transaction and sale to SVIP, a NYC-based private equity group.Mr. Galleher holds a B.S. in Business Administration from the University of Richmond and a degree from the London Business School as well as attending the Centre for Creative Leadership in Belgium. He is a board member and founder of the Virginia Chapter of Young President’s Organization (YPO) and the Midlothian Athletic Club. He formerly served as chairman of the board for sweetFrog and Shockoe Commerce Group, both of which are private companies.
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| Michael Nowlan | | |
Age 61 Director Since 2017 ● Chairman of the Audit Committee | | Professional Background and Qualifications Mr. Nowlan joined the Board of Directors of Issuer Direct Corporation on September 28, 2017. Mr. Nowlan currently provides executive consulting services to private companies. Mr. Nowlan was Chief Executive Officer of Primus Telecommunications Canada Inc. (and its related US operating companies Primus Telecommunications Inc. and Lingo Inc.) from late 2013 to 2016. Primus was a private company whose principal business was re-selling of residential and commercial telecommunications services within Canada and the United States. Mr. Nowlan supervised the sale of the Primus assets after it filed for CCAA creditor protection in Canada and related recognition under Chapter 15 of the US Bankruptcy Code in January 2016 as a result of liquidity challenges due to competitive margin pressures and over-leverage. Mr. Nowlan led Marketwired, a leading newswire service, from 2001 to 2013 as President and Chief Executive Officer. Under his leadership, Marketwired executed several successful strategic acquisitions. He transitioned the business to a SaaS business model and set the strategy for the company to embrace the emerging technology trends in the communication industry. Prior to joining Marketwired in 1999 as its Chief Financial Officer, Mr. Nowlan had wide financial management experience including starting his career in 1982 at PricewaterhouseCoopers where he remained until 1988. Mr. Nowlan is a member of the Institute of Corporate Directors with the ICD.D Certification and a CPA-CA since 1984. Mr. Nowlan has a Bachelor of Commerce degree from Queen’s University. |
J. Patrick Galleher ñ Director, Chairman of the Strategic Advisory Committee
Mr. Galleher joined the Board of Directors of Issuer Direct Corporation on March 11, 2014. Mr. Galleher is the Managing Partner for Boxwood Partners, LLC, an investment bank in Richmond, Virginia, where he leads transactions for Boxwood’s merger and acquisition advisory services and a Managing Director for Boxwood Capital Partners, LLC, its affiliated private investment firm also located in Richmond, Virginia. He has led many transactions across several industries including the sale of NSC Technologies, CoPak Solutions, Dorsey Wright & Associates, a capital raise for Digital Risk, the buy-outs of sweetFrog Yogurt, Yoga Direct, Yoga Accessories, Everything Yoga and Red Rock Products. Mr. Galleher serves as Chairman of sweetFrog Enterprises and Shockoe Commerce Group both portfolio companies of Boxwood’s. Mr. Galleher holds a B.S. in Business Administration from the University of Richmond and a degree from the London Business School as well as attending the Centre for Creative Leadership in Belgium.
Brian R. Balbirnie ñ Director, Chief Executive Officer
Mr. Balbirnie is a member of the Board and Chief Executive Officer. Mr. Balbirnie established Issuer Direct in 2006 with a vision of creating a technology driven back-office compliance platform that would reduce costs as well as increase the efficiencies of the most complex tasks, today the company calls it Platform id.. Mr. Balbirnie is responsible for the strategic leadership of the company and oversees day-to-day operations. Under Mr. Balbirnie’s direction, the Company has grown to serve over 2,000 public companies since 2006. Mr. Balbirnie is an entrepreneur with more than 20 years of experience in emerging industries. Prior to Issuer Direct, Mr. Balbirnie was the founder and managing partner of Catapult Company, a compliance and consulting practice focused on the Sarbanes Oxley Act. Mr. Balbirnie also has served in ëC’ level capacities for various companies both public and private. Prior to and with Catapult, Mr. Balbirnie also advised several companies on their public market strategies, Merger & Acquisitions as well as their financial reporting requirements.
Eric Frank ñ Director Nominee
Mr. Frank is a senior executive and accomplished leader, known as a trusted advisor to many data and analytics companies in the financial, commercial real estate and agriculture sectors. Mr. Frank has built and sold companies and has served as an operational leader responsible for over 8,000 employees and contractors in multi-billion-dollar revenue businesses. Since September 2012, Mr. Frank has served as the President of Internet Technology & Acceleration LLC as an executive advisor to private companies and private equity sponsors, specifically in the B2B information space. In this capacity, he has provided oversight of companies such as AGDATA, Trepp and EDR. From September 2014 until March 2017, Mr. Frank served as Managing Director of DMGI/DMGT PLC, overseeing their portfolio of US CRE information companies. Mr. Frank was at Thomson Reuters,a leading news and information company,from 2006 through 2012, most recently as President, managing a $2.3 billion investment advisory division that was a combination of the Thomson Financial and Reuters which he led and helped shape into four operating units, (Investment Management & Sell-Side Research, Investment Banking, Wealth Management, and Corporate Services). Mr. Frank began his career at Morgan Guaranty, helping create the award winning ADR.com portal, which he later sold to Thomson Financial. He also currently serves on the board of directors of WeConvene, Social Market Analytics and RANE (Risk Assistance Network & Exchange). Mr. Frank earned a Bachelor of General Studies from the University of Michigan.
Michael Nowlan ñ Director Nominee
Mr. Nowlan is an entrepreneurial business executive with over thirty-five years’ experience across several different industries. Mr. Nowlan currently provides executive consulting services to private companies. Mr. Nowlan was Chief Executive Officer of Primus Telecommunications Canada Inc. (and its related US operating companies Primus Telecommunications Inc. and Lingo Inc.) from late 2013 to 2016. Primus was a private company whose principal business was re-selling of residential and commercial telecommunications services within Canada and the United States Mr. Nowlan supervised the sale of the Primus assets after it filed for CCAA creditor protection in Canada and related recognition under Chapter 15 of the US Bankruptcy Code in January 2016 as a result of liquidity challenges due to competitive margin pressures and over-leverage. Mr. Nowlan led Marketwired, a leading newswire service, from 2001 to 2013 as President and Chief Executive Officer, taking the company from a small information distribution business operating only within Canada to a global business with approximately $100 million in revenue across North and South America, Europe, and the Far East. Under his leadership, Marketwired executed several successful strategic acquisitions. He transitioned the business to a SaaS business model and set the strategy for the company to embrace the emerging technology trends in the communication industry. Prior to joining Marketwired in 1999 as its Chief Financial Officer, Mr. Nowlan had wide financial management experience including starting his career in 1982 at PriceWaterhouseCoopers where he remained until 1988. Mr. Nowlan is a member of the Institute of Corporate Directors with the ICD.D Certification, a CPA-CA since 1984. Mr. Nowlan has a Bachelor of Commerce degree from Queen’s University.
Board and Committee MembershipBOARD AND COMMITTEE MEMBERSHIP
The table below provides committee membership of each Board member as of July 30, 2017. The Board expects to appoint Mr. Nowlan as a member of the Audit Committee and Mr. Frank as a member of the Compensation Committee. The Board has determined that both Messrs. Messrs. Franck and Nowlan qualify as independent under Section 303A.02 of the NYSE American rules and Section 10A(m) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).April 28, 2020.
| Board Member | | Audit Committee | | | Compensation Committee | | | Strategic Advisory Committee | | | Technology Oversight Committee | |
| Independent Directors | | | | | | | | | |
Andre M. Boisvert *(1)
| | |
| William H. Everett * | | X | | | | | | X | | | | |
| J. Patrick Galleher * | | | | | C | | | C | | | | |
William H. EverettEric Frank * | | C(1) | | | | | X | | | X | | | C | |
J. Patrick GalleherMichael Nowlan * | | C | | | | | | | | | | C | |
| Internal Director | | | | | | | | | | | | |
| Brian R Balbirnie | | | | | | | | | | | | |
C= Committee Chairman X = Committee Member * = Independent
(1)
As previously indicated,noted above, Mr. BoisvertEric Frank will not be standingstand for re-election at thisthe Annual Meeting.
Consideration of Stockholder Nominees for DirectorCONSIDERATION OF STOCKHOLDER NOMINEES FOR DIRECTOR
Pursuant to our bylaws, stockholders who wish to nominate persons for election to the Board of Directors at the 20182021 Annual Meeting must be a stockholder of record, both when they give us notice and at the 20182021 Annual Meeting, must be entitled to vote at the 20182021 Annual Meeting, and must comply with the notice provisions in our bylaws. A stockholder’s notice must be delivered to our Corporate Secretary not less than 9075 nor more than 120105 days before the anniversary date of the immediately preceding annual meeting.Annual Meeting. For our 20182021 Annual Meeting, the notice must be delivered between May 31, 2018March 4, 2021 and June 30, 2018.April 3, 2021. However, if our 20182021 Annual Meeting is not within 30 days of September 28, 2018,June 17, 2021, the notice must be delivered no later than the close of business on the 10th10th day following the earlier of the day on which the first public announcement of the date of the 20182021 Annual Meeting was made or the day the notice of the 2018 Annual Meeting is mailed.120 days prior to such meeting. The public announcement of an adjournment or postponement of the 20182021 Annual Meeting will not trigger a new time period (or extend any time period) for the giving of a stockholder notice as described in this proxy statement. The stockholder’s notice must be updated and supplemented as set forth in our bylawsbylaws.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF FIVE (5) DIRECTORS, UNTIL THE NEXT ANNUAL MEETING OR UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED. | The Board of Directors recommends a vote "FOR" the election of four (4) directors, until the next Annual Meeting or until their successors are duly elected and qualified. |
Corporate Governance
CORPORATE GOVERNANCE
Our Directors will serve until our next annual meetingAnnual Meeting of shareholdersstockholders or until their resignation or removal.
Our directors are elected at the annual meetingAnnual Meeting of shareholders,stockholders, with vacancies filled by the Board of Directors, and serve until their successors are elected and qualified, or their earlier resignation or removal. Officers are appointed by the Board of Directors and serve at the discretion of the Board of Directors or until their earlier resignation or removal. AnyUnder the General Corporation Law of the State of Delaware, any action which is required canto be taken or may be taken at any Annualannual or special meeting of stockholders of the corporation which may also be taken without a meeting, without prior notice and without a vote, if consent in writing setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office, its principle place of business, or an officer or agent of the corporation having custody of the book in which the proceedings of meetings are recorded.
Indemnification of Directors and OfficersINDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides, in general, that a corporation incorporated under the laws of the State of Delaware, as we are, may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than a derivative action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. In the case of a derivative action, a Delaware corporation may indemnify any such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or any other court in which such action was brought determines such person is fairly and reasonably entitled to indemnity for such expenses.
Our certificate of incorporation and bylaws provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the General Corporation Law of the State of Delaware, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification.
We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the General Corporation Law of the State of Delaware would permit indemnification.
Directors’ and Officers’ Liability InsuranceDIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
We have directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers.
Code of EthicsCODE OF ETHICS
We have adopted a code of ethics that applies to our officers, directors and employees, including our principal executive officer and principal accounting officer, which is posted on our website at www.issuerdirect.com.www.issuerdirect.com.
Director IndependenceDIRECTOR INDEPENDENCE
The Board has determined that Messrs. Everett, andFrank, Galleher as current directors, and Messrs. Frank and Nowlan as director nominees, satisfy the requirement for independence set out in Section 303A.02 of the NYSE American rules and Section 10A(m) of the Exchange Act (collectively, the “Independence Rules”), and that each of these directors has no material relationship with us (other than being a director and/or a stockholder). In making its independence determinations, the Board of Directors sought to identify and analyze all of the facts and circumstances relating to any relationship between a director, his immediate family or affiliates and our company and our affiliates and did not rely on categorical standards other than those contained in the NYSE American rule referenced above.
above. As noted above, Mr. Eric Frank will not stand for re-election at the Annual Meeting.
Board CommitteesBOARD COMMITTEES
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Strategic Advisory Committee, each of which has the composition and responsibilities described below.
| Audit Committee | | |
Members: ● Michael Nowlan (Chairman) ● William H. Everett Meetings in 2019: 4
| | Our Audit Committee was implemented on October 23, 2013 and is currently comprised of Messrs. Everett and Nowlan, each of whom our Board has determined to be financially literate and qualify as an independent director under the Independence Rules. On March 2, 2018, Mr. Nowlan replaced Mr. Everett as the chairman of our Audit Committee. Mr. Everett remained as a member of the Audit Committee. Both Messrs. Nowlan and Everett qualify as a financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K. Responsibilities The Audit Committee’s duties are to recommend to our Board of Directors the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles. The Audit Committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the independent public accountants, including their recommendations to improve the system of accounting and internal controls. During the year ended December 31, 2019, our Audit Committee held four meetings.
|
| Compensation Committee | | |
Members: ● J. Patrick Galleher (Chairman) ● Eric Frank Meetings in 2019: 4 | | Our Compensation Committee was implemented on October 23, 2013 and is currently comprised of Messrs. Frank and Galleher, each of whom our Board has determined to qualify as an independent director under the Independence Rules. Mr. Galleher is the chairman of our Compensation Committee. As noted above, Mr. Eric Frank will not stand for re-election at the Annual Meeting and will be replaced by Mr. Everett, on our Compensation Committee. Responsibilities The Compensation Committee reviews and approves our salary and benefits policies, including compensation of executive officers and directors. The Compensation Committee also administers our stock compensation plans and recommends and approves grants of stock compensation under such plans. During the year ended December 31, 2019, our Compensation Committee held four meetings. |
| Strategic Advisory Committee | | |
Members: ● J. Patrick Galleher (Chairman) ● William H. Everett Meetings in 2019: 6 | | Our Strategic Advisory Committee was implemented on January 25, 2016 and is currently comprised of Messrs. Everett and Galleher. Mr. Galleher is the chairman of our Strategic Advisory Committee. Responsibilities The Strategic Advisory Committee assists our Board of Directors and management in evaluating areas such as joint ventures, partnerships, strategic acquisitions and mergers and acquisitions. During the year ended December 31, 2019, our Strategic Advisory Committee held six meetings. |
Our Audit
The Board of Directors has also established a Technology Oversight Committee, was implemented on October 23, 2013 and iswhich currently comprisedconsists solely of Messrs. Boisvert and Everett, eachEric Frank. As a result of whom our Board has determined to be financially literate and qualify as an independent director under the Independence Rules. As previously indicated, Mr. Boisvert willFrank not be standing for re-election at this Annual Meeting.
Mr. Everett is the chairman of our Audit Committee and qualifies as a financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K. Subsequent to the 2017 Annual Meeting, the Board expects to replace Mr. Boisvert on the Audit Committee with Mr. Nowlan, who our Board has also determined to be financially literate and qualify as an independent director under the Independence Rules.
The Audit Committee’s duties are to recommend to our Board of Directors the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles. The Audit Committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the independent public accountants, including their recommendations to improve the system of accounting and internal controls. During the year ended December 31, 2016, our Audit Committee met four times.
Compensation Committee
Our Compensation Committee was implemented on October 23, 2013 and is currently comprised of Messrs. Boisvert and Everett, each of whom our Board has determined to qualify as an independent director under the Independence Rules. Mr. Boisvert is currently the chairman of our Compensation Committee. As previously indicated, Mr. Boisvert will not be standing for re-election at this Annual Meeting.
Subsequent to the 2017 Annual Meeting, the Board intends to appoint Messrs. Frank and Galleher to the Compensation Committee, with Mr. Everett stepping off the Compensation Committee. Additionally, the Compensation Committee intends to appoint Mr. Galleher as the new chairman of our Compensation Committee. Our Board has determined Messrs. Frank and Galleher are independent directors under the Independence Rules.
The Compensation Committee reviews and approves our salary and benefits policies, including compensation of executive officers and directors. The Compensation Committee also administers our stock option plans and recommends and approves grants of stock options under such plans. During the year ended December 31, 2016, our Compensation Committee held two meetings.
Strategic Advisory Committee
Our Strategic Advisory Committee was implemented on January 25, 2016 and is currently comprised on Messrs. Everett and Galleher. Mr. Galleher is the chairman of our Strategic Advisory Committee. The Strategic Advisory Committee assists our Board of Directors and management in evaluating areas such as joint ventures, partnerships, strategic acquisitions and mergers and acquisitions.
Technology Oversight Committee
As we continue our transition to delivering more services under the “Software as a Services” (SaaS) business model, the Board is in the process of implementing a Technology Oversight Committee. Mr. Boisvert will serve as the chairman of the Technology Oversight Committee. Subsequent to the 2017 Annual Meeting, Mr. Frank will replace Mr. Boisvert as the chairman of the committee.
The Technology Oversight Committee’s main charter will be to insure that our R&D function is building secure, quality and scalable application software within the time frame, specifications and budget contained in our plan of record.
Since the Company’s application software is being delivered under the SaaS model,dissolve the Technology Oversight Committee will work closely with our SaaS operations function in order to insure that we are meeting our obligations underand the SLA (Service Level Agreements) with our clients.
The Technology Oversight Committee will be expected to interact with R&D and SaaS operations personnel on a regular basis. It will in turn update ourentire Board of Directors at each ofwill address any issues which would otherwise be delegated to the quarterly Board meetings and/or during special Board meeting(s) should the need arise.Technology Oversight Committee.
Meetings and AttendanceMEETINGS AND ATTENDANCE
During the year ended December 31, 2016,2019, the Board of Directors held thirteeneight meetings and the respective committees held fourteen total meetings, and each director attended all of (i) Board meetings held during the period for which he was a director and (ii) committee meetings held during the period for which he was a committee member. We do not have a policy requiring director attendance at stockholder meetings, but members of our Board of Directors are encouraged to attend.
Communications with the Board of DirectorsCOMMUNICATIONS WITH THE BOARD OF DIRECTORS
A stockholder who wishes to communicate with our Board of Directors, any committee of our Board of Directors, the non-management directors or any particular director, may do so by writing to such director or directors in care of the Secretary, c/o Issuer Direct Corporation, 500 Perimeter Park Drive, 1 Glenwood Avenue, Suite D, Morrisville,1001, Raleigh, NC 27560.27603. Our secretary will forward such communication to the full Board of Directors, to the appropriate committee or to any individual director or directors to whom the communication is addressed, unless the communication is unrelated to the duties and responsibilities of our Board of Directors (such as spam, junk mail and mass mailings, ordinary course disputes over fees or services, personal employee complaints, business inquiries, new product or service suggestions, resumes and other forms of jobinquiries,job inquiries, surveys, business solicitations or advertisements) or is unduly hostile, threatening, illegal, or harassing, in which case our secretary has the authority to discard the communication or take appropriate legal action regarding the communication.
The following table shows amounts earned by each officer in the years ended December 31, 2014, 2015, and 2016:NON-EMPLOYEE DIRECTOR COMPENSATION ARRANGEMENT
Name and Principal Position | | Year | | | Salary | | | Deferred Compensation | | | Bonus | | | Stock Awards | | | Option/ Warrant Awards | | | All Other Compensation | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Brian R. Balbirnie | | 2016 | | | $ | 185,000 | | | $ | - | | | $ | 93,883
| | | $ | - | | | $ | - | | | $ | - | | | $ | 278,883 | |
| Chief Executive Officer | | 2015 | | | $ | 185,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 185,000 | |
| | | 2014 | | | $ | 180,345 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 180,345 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Steven Knerr | | 2016 | | | $ | 151,000 | | | $ | - | | | $ | 59,601 | | | $ | - | | | $ | - | | | $ | - | | | $ | 210,601 | |
Chief Financial Officer(1) | | 2015 | | | $
| 139,037
| | | $
| -
| | | $
| -
| | | $
| 84,800
| | | $
| 57,900
| | | $
| -
| | | $
| 281,777
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Wesley Pollard | | 2014 | | | $ | 155,345 | | | $ | - | | | $ | 9,939 | | | $ | - | | | $ | - | | | $ | - | | | $ | 165,284 | |
Chief Financial Officer(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) As disclosed inEffective as of January 20, 2020, our Board, upon the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 19, 2015, the Company entered into an Executive Employment Agreement with Steven Knerr to serve as the Company’s Chief Financial Officer. As disclosed in the Current Report on Form 8-K filed with the SEC on March 26, 2015, Mr. Pollard resigned his position as the Company’s Chief Financial Officer on May 8, 2015.
Non-Employee Director Compensation Arrangement
Beginning on the daterecommendation of our 2017 Annual Meeting, our Compensation Committee, has determined to compensate our non-employee directors as set forth below.
Initial Equity Grant. Each non-employee director appointed to our Board and not by a vote of the stockholders at an annual meeting is automatically granted an initial grant of (i) options to purchase 8,000 shares of common stock with an exercise price based on the fair market value of our stock on the date of grant and (ii) 2,0006,000 restricted stock units (“RSUs”(the “RSUs”) on the date of his or her appointment to our Board (with such amount pro-rated based on the number of days between the date of such director’s appointment and the date of our first annual meeting of stockholders following the date of grant (or to the extent that we have not determined the date of the next annual meeting of stockholders on or before the date of grant, June 15 following the date of grant)). Both the options and theThe RSU’s will fully vest on the date of our first annual meeting of stockholders following the date of grant or immediately prior to the consummation of a change of control event. If an individual is appointed as a non-employee director at an annual meeting of stockholders, he or she will be granted an annual equity grant, as described below, in lieu of the initial equity grant. None of the nominees for the Board contained in this Proxy Statement would be entitled to this initial equity grant.
Annual Equity Grant. On the date of each annual meeting of stockholders, each non-employee director who is serving on our Board on the date of such annual meeting or who is elected by the shareholdersstockholders at such annual meeting will be automatically granted (i) options to purchase 8,000 shares of common stock with an exercise price based on the fair market value of our stock on the date of grant and (ii) 2,0006,000 restricted stock units. Both the options andunits (the “RSUs”). The RSUs will fully vest on the earlier of (i) the date of the following year’s annual meeting of stockholders (but only for a non-employee director who ceases to be a member of our Board at such annual meeting as a result of not standing for re-election or not being re-elected) and, (ii) the date that is one year following the date of grant.grant, or (iii) immediately prior to the consummation of a change of control event. Each of the nominees for the Board contained in this Proxy Statement would be entitled to this equity grant if elected by the stockholders.
Monthly Cash Payment. Each During 2020, each non-employee director will receive a monthly cash retainer of $3,000 for service on our Board. Additionally, theBoard and our Chairman of our Board will receive an additional monthly cash retainer of $1,500.
2016 Non-Employee Director Compensation Table
2019 NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
The following table shows amounts earned by each non-employee director in fiscal 2016:2019:
| Director | Fees Earned or Paid in Cash | | | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | |
| | | | | | | | |
Andre M. Boisvert(1)
| $31,500 | $- | $- | $- | $- | $- | $31,500 |
William H. Everett(3) | $30,000 | $127,500 | $- | $- | $- | $- | $157,500 |
David Sandberg(2)
| $17,333 | $- | $- | $- | $- | $- | $26,000 |
J. Patrick Galleher(3) | $27,000 | $127,500 | $- | $- | $-
| $- | $154,500 |
| Director | Fees Earned or Paid in Cash | | | Non-Equity Incentive Plan Compensation | Change in Pension Value and Non-qualified Deferred Compensation Earnings | | |
| | | | | | | |
| William H. Everett | $54,000(1) | $67,620(2) | - | - | - | - | $121,620 |
Eric Frank (3) | $36,000 | 67,620(2) | - | - | - | - | $103,620 |
| J. Patrick Galleher | $36,000 | $67,620(2) | - | - | - | - | $103,620 |
| Michael Nowlan | $36,000 | $67,620(2) | - | - | - | - | $103,620 |
_____________________
(1) | As previously indicated, Mr. Boisvert will not be standing for re-election at the 2017 Annual Meeting. |
(1)
In addition to the $3,000 per month paid to all members of the Board, this amount includes an additional $1,500 per month for Mr. Everett’s service as the Chairman of our Board.
(2) | Mr. Sandberg resigned as a member of our Board of Directors on August 18, 2016. |
(2)
The amounts shown in this column represent the grant date fair value of the awards determined in accordance with ASC 718. RSUs are valued based on the closing price of Issuer Direct’s ordinary shares on the date of grant, which was $11.27. On June 13, 2019, each non-employee director was granted 6,000 restricted stock units with a vesting date of June 13, 2020.
(3) | As reported on Form 4 filed on January 25, 2016, stock awards relate to 25,000 restricted stock units which vests as follows: (i) 33 1/3% on the first anniversary of the date of grant; (ii) 33 1/3% on the second anniversary of the date of grant and (iii) the remaining 33 1/3% on the third anniversary of the date of grant pursuant to the terms and conditions of the restricted stock unit agreement.
|
(3)
As noted above, Mr. Frank will not stand for re-election at the Annual Meeting.
Security Ownership of Beneficial Owners and Management
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 7, 2017,April 28, 2020, regarding the beneficial ownership of our common stock by (i) each person or entity who, to our knowledge, beneficially owns more than 5% of our common stock; (ii) each executive officer and named officer; (iii) each director; and (iv) all of our officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, each of the stockholders named in the table has sole voting and investment power with respect to the shares of our common stock beneficially owned. Except as otherwise indicated, the address of each of the stockholders listed below is: c/o Issuer Direct Corporation, 500 Perimeter Park Drive,1 Glenwood Ave, Suite D, Morrisville, North Carolina 27560.1001, Raleigh NC 27603.
| | | |
| | | |
| Name of Beneficial Owner | | |
| | | |
Brian R. Balbirnie (2)(3) | 622,672(6) | 21.06% |
Steven Knerr (2) | 34,792(7) | 1.17% |
Andre M. Boisvert (3) | 40,000 | 1.35% |
William H. Everett (3) | 65,400(8) | 2.17% |
J. Patrick Galleher (3) | 61,000(9) | 2.03% |
James Michael (4) | 251,100 | 8.50% |
| All officers, directors, and management as a group (6 persons) | 1,074,964 | 34.80% |
| | | |
| Other beneficial holders: | | |
Red Oak Partners, LLC(5) | 331,770 | 11.23% |
| Yorkmont Capital Partners, LP | 284,765 | 9.72% |
| Name of Beneficial Owner | Number of Shares Owned (1) | |
| | | |
Brian R. Balbirnie(2)(3) | 620,329(6) | 16.44% |
Steven Knerr(2) | 45,000(7) | 1.18% |
William H. Everett(3) | 51,228(8) | 1.35% |
Eric Frank(3) (4) | 26,000(8) | 0.69% |
J. Patrick Galleher(3) | 53,000(8) | 1.40% |
Michael Nowlan(3) | 26,000(8) | 0.69% |
James Michael(5) | 230,550(9) | 6.11% |
| All officers, directors, and management as a group (7 persons) | 1,052,107 | 27.03% |
| | | |
| Other Beneficial Owners | | |
| Polar Asset Management Partners | 327,397 | 8.68% |
| Yorkmont Capital Partners, LP | 250,000 | 6.63% |
| Forager Capital Management, LLC | 230,543 | 6.11% |
| Richard H. Witmer | 190,454 | 5.05% |
____________________
(1) | Applicable percentage of ownership is based on a total of 3,089,302 shares of common stock, which consist of 2,954,092 shares of common stock outstanding on August 7, 2017, plus shares that are beneficially owned as of that date. Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission and means voting or investment power with respect to securities. Shares of our common stock issuable upon restricted stock units and the exercise of stock options exercisable currently or within 60 days of August 7, 2017 are deemed outstanding and to be beneficially owned by the person holding such option for purposes of computing such person’s percentage ownership, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. |
(1)
Applicable percentage of ownership is based on a total of 3,892,450 shares of common stock, which consist of 3,772,700 shares of common stock outstanding on April 28, 2020, plus shares that are beneficially owned as of that date. Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission and means voting or investment power with respect to securities. Shares of our common stock issuable upon restricted stock units and the exercise of stock options exercisable currently or within 60 days of April 28, 2020 are deemed outstanding and to be beneficially owned by the person holding such option for purposes of computing such person’s percentage ownership, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
(2) | Officer. |
|
(3) | Director. As previously indicated, Mr. Boisvert will not be standing for re-election at this Annual Meeting. |
|
(4) | Management. |
| |
(5) | Consists of (i) 133,648 shares of Common Stock held by The Red Oak Fund, L.P., (ii) 58,756 shares of Common Stock held by The Red Oak Long Fund, L.P. and (iii) 139,366 shares of Common Stock held by Pinnacle Capital Partners, LLC. Red Oak Partners, LLC (“Red Oak Partners”) is the general partner of each of these funds and David Sandberg, a member of our Board Directors from August 2013 through August 2016, is the managing member of Red Oak Partners and, therefore, may be deemed to share voting and dispositive power over the shares held by Red Oak Partners. The address for these entities is 1969 SW 17th St., Boca Raton, Florida 33486, Attn: David Sandberg. |
|
(6) | Includes 1,666 restricted stock units and options issued to spouse to purchase 418 shares of common stock that are currently exercisable or exercisable within 60 days of August 7, 2017. |
|
(7) | Includes options to purchase 24,792 shares of common stock that are currently exercisable or exercisable within 60 days of August 7, 2017. |
|
(8) | Includes 16,667 restricted stock units and options to purchase 40,000 shares of common stock that are currently exercisable or exercisable within 60 days of August 7, 2017. |
|
(9) | Includes 16,667 restricted stock units and options to purchase 35,000 shares of common stock that are currently exercisable or exercisable within 60 days of August 7, 2017. |
(4)
As noted above, Mr. Frank will not stand for re-election at the Annual Meeting.
(6)
Includes options issued to spouse to purchase 500 shares of common stock that are currently exercisable or exercisable within 60 days of April 28, 2020.
(7)
Includes options to purchase 30,000 shares of common stock that are currently exercisable or exercisable within 60 days of April 28, 2020.
(8)
Includes 6,000 restricted stock units which vest on June 13, 2020 and options to purchase 16,000 shares of common stock that are currently exercisable or exercisable within 60 days of April 28, 2020.
(9)
Includes options to purchase 1,250 shares of common stock that are currently exercisable or exercisable within 60 days of April 28, 2020.
Executive Compensation
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis DISCUSSION AND ANALYSIS
We formed a Compensation Committee on October 23, 2013. Prior to that date, all compensation decisions for our named executive officers were made by our Board of Directors.
The Compensation Committee of our Board of Directors will review at least annually and determine (or recommend to the Board of Directors as the case may be) the executive compensation for Mr. Balbirnie and any other named executive officers, including approving any grants of stock options or other equity incentive awards in accordance with the philosophy and components described in this Proxy Statement. To date, neither the Board of Directors nor the Compensation Committee has retained the services of a compensation consultant. The Compensation Committee does not intend to retain such services for 20172020 but may decide to do so in the future.
SUMMARY COMPENSATIONTABLE
The following table shows amounts earned by each officer in the years ended December 31, 2019 and 2018:
| | | | | | Non-equity incentive plan compensation | Change in Pension Value and Nonqualified deferred compensation earnings | | |
Principal Position | | | | | | | | | |
| | | | | | | | | | |
| Brian R. Balbirnie | 2019 | 200,000 | — | — | — | — | — | — | 200,000 |
| (Chief Executive Officer) | 2018 | 200,000 | 18,000 | — | — | — | — | — | 218,000 |
| Steven Knerr | 2019 | 165,000 | — | 66,050 | — | — | — | — | 231,050 |
| (Chief Financial Officer) | 2018 | 165,000 | 11,550 | — | — | — | — | — | 176,550 |
We currently have employment agreements with Brian Balbirnie and Steven Knerr. The terms are summarized below:
BrianBRIAN R. Balbirnie Employment AgreementBALBIRNIE EMPLOYMENT AGREEMENT
On April 30, 2014, Issuer Direct Corporation (the “Company”) entered into an Executive Employment Agreement (the “Balbirnie Agreement”) with Brian R. Balbirnie to serve as the Company’s President and Chief Executive Officer. Mr. Balbirnie had served as the Company’s most senior executive officer since 2006 without a formal employment agreement. The Balbirnie Agreement will continue until terminated pursuant to its terms as described below.
On May 1, 2017, the Company and Mr. Balbirnie agreed to amend the Balbirnie Agreement as follows: (i) to increase Mr. Balbirnie’s annual base salary from $185,000 to $200,000 and (ii) to decrease Mr. Balbirnie’s eligibility to receive an annual cash bonus from 45% to 40% of his annual base salary upon the achievement of reasonable target objectives and performance goals. However, for fiscal years 2019 and 2020, our Board has decided to increase Mr. Balbirnie’s bonus potential to the previous 45% level. The revised base salary will be reviewed annually by the Company’s Board of Directors for increase as part of its annual compensation review. The cash bonus goals will continue to be determined by the Board in consultation with Mr. Balbirnie on or before the end of the first quarter of the fiscal year to which the bonus relates. In addition, Mr. Balbirnie is eligible to receive such additional bonus or incentive compensation as the Board may establish from time to time in its sole discretion.
Pursuant to the Balbirnie Agreement, if Mr. Balbirnie’s employment is terminated upon his disability, by Mr. Balbirnie for good reason (as such term is defined in Balbirnie Agreement), or by us without cause (as such term is defined in Balbirnie Agreement), Mr. Balbirnie will be entitled to receive, in addition to other unpaid amounts owed to him (e.g., for base salary, accrued personal time and business expenses): (i) to the then base salary for a period of twelve months (in accordance with the Company’s general payroll policy) commencing on the first payroll period following the fifteenth day after termination of employment and (ii) substantially similar coverage under the Company’s then-current medical, health and vision insurance coverage for a period of twelve months. Additionally, if Mr. Balbirnie’s employment is terminated for disability, the vesting of any option grants will continue to vest pursuant to the schedule and terms previously established during the twelve-month severance period. Subsequent to the twelve-month severance period the vesting of any option grants will immediately cease. If Mr. Balbirnie’s employment is terminated without cause, vesting of any option grants will immediately cease upon termination except as described below relating to a Corporate Transaction.
If the Company terminates Mr. Balbirnie’s employment for cause or employment terminates as a result of Mr. Balbirnie’s resignation or death, Mr. Balbirnie will only be entitled to unpaid amounts owed to him and the vesting of any option grants will immediately cease.
Mr. Balbirnie has no specific right to terminate the employment agreement or right to any severance payments or other benefits solely as a result of a Corporate Transaction (as defined in the Company’s 20102014 Equity Incentive Plan). However, if within twelve months following a corporate transaction, Mr. Balbirnie terminates his employment for good reason or the Company terminates his employment without cause, the severance period discussed above will be increased from twelve to eighteen months and any then unvested options held by Mr. Balbirnie will immediately vest and become exercisable for a period equal to the earlier of (i) six months from termination or (ii) the expiration of such option grant pursuant to its original terms.
The Balbirnie Agreement also contains certain noncompetition,non-competition, no solicitation, confidentiality, and assignment of inventions requirements for Mr. Balbirnie.
Steven Knerr Employment AgreementSTEVEN KNERR EMPLOYMENT AGREEMENT
On November 19, 2015, the Company entered into an Executive Employment Agreement (the “Knerr Agreement”) with Steven Knerr to serve as the Company’s Chief Financial Officer. Mr. Knerr had served as the Company’s Controller since August 22, 2013 and as its interim Chief Financial Officer and interim Principal Financial Officer since May 8, 2015. The Knerr Agreement will continue until terminated pursuant to its terms as described below.
On May 1, 2017, the Company and Mr. Knerr agreed to amend the Knerr Agreement as follows: (i) to increase Mr. Knerr’s annual base salary from $151,000 to $165,000 and (ii) to decrease Mr. Knerr’s eligibility to receive an annual cash bonus from 35% to 30% of his annual base salary upon the achievement of reasonable target objectives and performance goals. However, for fiscal years 2019 and 2020, our Board has decided to increase Mr. Knerr’s bonus potential to the previous 35% level. The revised base salary will be reviewed annually by the Company’s Board of Directors for increase as part of its annual compensation review. The cash bonus goals will continue to be determined by the Board in consultation with Mr. Knerr on or before the end of the first quarter of the fiscal year to which the bonus relates. In addition, Mr. Knerr is eligible to receive such additional bonus or incentive compensation as the Board may establish from time to time in its sole discretion.
Also, Mr. Knerr was granted an incentive stock option to purchase 10,000 shares of the Company’s common stock at an exercise price of $6.80 (the “Stock Option”) pursuant to the Incentive Stock Option Grant and Agreement dated as of the Effective Date (the “ISO Agreement”). The Stock Option shall vest over a four-year period, at a rate of 25% of the total Stock Option on the first anniversary of the Effective Date and the remaining 75% vesting ratably at the end of each calendar quarter for the subsequent three years after the first anniversary of the Effective Date, provided Mr. Knerr is employed on all such dates by the Company or one of its affiliates. In the event of a Corporate Transaction (as defined in the Company’s 2014 Equity Incentive Plan), any unvested portion of the Stock Option shall be immediately vested.
Pursuant to the Knerr Agreement, if Mr. Knerr’s employment is terminated upon his disability, by Mr. Knerr for good reason (as such term is defined in Knerr Agreement), or by us without cause (as such term is defined in Knerr Agreement), Mr. Knerr will be entitled to receive, in addition to other unpaid amounts owed to him (e.g., for base salary, accrued personal time and business expenses): (i) to the then base salary for a period of six months (in accordance with the Company’s general payroll policy) commencing on the first payroll period following the fifteenth day after termination of employment and (ii) substantially similar coverage under the Company’s then-current medical, health and vision insurance coverage for a period of six months. Additionally, if Mr. Knerr’s employment is terminated for disability, the vesting of any option grants will continue to vest pursuant to the schedule and terms previously established during the six-month severance period. Subsequent to the six-month severance period the vesting of any option grants will immediately cease. If Mr. Knerr’s employment is terminated without cause, vesting of any option grants will immediately cease upon termination except as described below relating to a Corporate Transaction.
If the Company terminates Mr. Knerr’s employment for cause or employment terminates as a result of Mr. Knerr’s resignation or death, Mr. Knerr will only be entitled to unpaid amounts owed to him and the vesting of any option grants will immediately cease.
Mr. Knerr has no specific right to terminate the employment agreement or right to any severance payments or other benefits solely as a result of a Corporate Transaction (as defined in the Company’s 2014 Equity Incentive Plan).
The Knerr Agreement also contains certain noncompetition,non-competition, no solicitation, confidentiality, and assignment of inventions requirements for Mr. KnerrKnerr.
Philosophy of CompensationPHILOSOPHY OF COMPENSATION
The goals of our compensation policy are to ensure that executive compensation rewards management for helping us achieve our financial goals (increased sales, profitability, etc.), meet our product development milestones,milestone and align management’s overall goals and objectives with those of our stockholders. To achieve these goals, our Compensation Committee and Board of Directors aim to achieve the following:
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provide competitive compensation packages that enable us to attract and retain superior management personnel;
| ► | provide competitive compensation packages that enable us to attract and retain superior management personnel; |
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relate compensation to the Company’s overall performance, the individual officer’s performance and our assessment of the officer’s future potential;
| ► | relate compensation to the Company’s overall performance, the individual officer’s performance and our assessment of the officer’s future potential; |
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reward our officers fairly for their role in our achievements; and
| ► | reward our officers fairly for their role in our achievements; and |
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align executive’s objectives with the objectives of stockholders, including through the grant of equity awards.
| ► | align executive’s objectives with the objectives of stockholders, including through the grant of equity awards. |
We have determined that in order to best meet these objectives, our executive compensation program should balance fixed and bonus compensation, as well as cash and equity compensation, as discussed below. Historically, there has been no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation for our executive officers.
Components of CompensationCOMPONENTS OF COMPENSATION
The four principal components of our compensation program for our named executive officers are base salary, personal benefits (such as health and dental insurance), cash bonuses and or equity based grants. As noted below, cash bonuses and equity grants are not necessarily earned or granted every year.
Base Salary. The primary component of compensation for our named executive officers is base salary. Base salary levels for our named executive officers have historically been determined based upon an evaluation of a number of factors, including the individual officer’s level of responsibility and our overall performance. The Compensation Committee intends to review each named executive officer’s base salary on an annual basis and adjust such salaries as deemed appropriate.
Cash Bonus. Prior to 2016, we paid nominal cash bonuses to named executive officers. For the year ended December 31, 2016,2019, Mr. Balbirnie and Mr. Knerr earned bonuses of $93,883 and $59,601, respectively, for achieving target objectives and performance goals determined by the Board. These bonuses were paid during 2017.did not earn any bonuses.
We intend to consider the amount of cash bonus that each of our named executive officers should be entitled to receive in connection with our annual compensation review, taking into account each executive’s total compensation package, and any more formal data we obtain regarding the compensation levels of similarly situated executives. We will also consider in connection with such review whether to designate certain financial or operational metrics or other objective or subjective criteria in determining the final amounts of such awards.
Equity Based Grants. An additional principal component of our compensation policy for named executive officers consists of grants of stock options and other equity awards. Prior to 2015, all equity incentive awards were made either (i) in accordance with negotiated terms at levels deemed necessary to attract or retain the executive at the time of such negotiations and determined taking into account the recipient’s overall compensation package and the goal of aligning such executive’s interest with that of our stockholders, or (ii) at the discretion of the Board of Directors without reference to any formal targets or objectives, when deemed appropriate in connection with extraordinary efforts or results or necessary in order to retain the executive in light of the executive’s overall compensation package.
On April 1, 2015, the Compensation Committee granted Mr. Knerr 10,000 restricted stock units, half of which vested on April 1, 2016 and the other half on April 1, 2017. Additionally, the Compensation Committee granted Mr. Knerr an incentive stock option to purchase 10,000 shares of our common stock, as further described above under the heading "Steven Knerr Employment Agreement". Agreement." On February 28, 2019, Mr. Knerr was also granted 5,000 restricted stock units which vested on February 28, 2020.
Other than the grantgrants to Mr. Knerr, the Compensation Committee has not made any equity awards to the named executive officers since its inceptionininception in October 2013 but may do so in 2017.2020. Our Compensation Committee and our Board of Directors intends to consider during our annual compensation review whether to grant equity incentive awards to our named executive officers, and the terms of any such awards, including whether to set any performance targets or other objective or subjective criteria related to the final grant or vesting of such awards. The Compensation Committee will also retain the flexibility to make additional grants throughout the year if deemed necessary or appropriate in order to retain our named executive officers or reward extraordinary efforts or achievements.
Neither the Compensation Committee nor the Board of Directors has approved any additional equity based grants for our named executive officer during the fiscal year 2016. 2019, other than the grant noted above to Mr. Knerr.
Compensation of Named Executive OfficersCOMPENSATION OF NAMED EXECUTIVE OFFICERS
Compensation of Chief Executive Officer. During the twelve months ended December 31, 2016,2019, Mr. Balbirnie’s total compensation was $278,883.$200,000. Mr. Balbirnie’s total compensation was comprised of salary payments from January 1, 20162019 through December 31, 20162019 of $185,000 and earned bonus of $93,883, which was paid on April 14, 2017. $200,000.
20162019 Bonus Plan. On December 15, 2015, theFebruary 28, 2019, our Board, based on recommendations from our Compensation Committee, of the Board of Directors implemented a 20162019 cash bonus plan for Mr. Balbirnie based on the following criteria:
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Cash bonus target was 45% of annualized base salary of $185,000.
| ► | Cash bonus target was 45% of annualized base salary of $200,000. |
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Cash bonus plan was based on the achievement of target financial results during the 2016 fiscal year.
| ► | Cash bonus plan was based (i) 80% upon the achievement of target financial numbers during the fiscal year 2019 and (ii) 20% based upon the achievement of certain management objectives during the fiscal year 2019 as determined by the Board. |
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Cash bonus target scaling was based upon achievement of 90% of the target financial numbers, payout is 50% of target and scales to 100% at 100% of the target numbers. At 120% of the achievement of the financial numbers, payout is 120%. The payout is a maximum of 120% of target bonus.
| ► | Bonus targets for solely the target financial numbers would have been scaled as follows: (i) below 90% of target results in no bonus paid; (ii) 90% of target results in 50% of bonuses paid; (iii) 100% of target results in 100% of bonuses paid; (iv) 120% and greater of target results in 120% of bonuses paid. The payout is a maximum of 120% of target bonus. |
Based on these criteria and as noted above, Mr. Balbirnie receiveddid not receive a cash bonus of $93,883 for the year ended December 31, 2016 which was paid on April 14, 2017.2019.
20172020 Bonus Plan. On May 1, 2017,January 20, 2020, the Compensation Committee of the Board, of Directorsbased on recommendations from the Compensation Committee, implemented a 20162020 cash bonus plan for Mr. Balbirnie based on the following criteria:
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Cash bonus target was 40% of annualized base salary of $200,000.
| ► | Cash bonus target is 45% of annualized base salary of $200,000. |
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Cash bonus plan will be based (i) 50% upon the achievement of target financial numbers during the fiscal year 2017 and (ii) 50% based upon the achievement of certain management objectives determined by the Board| ► | Cash bonus plan is based entirely upon the achievement of target financial numbers during the fiscal year 2020. . |
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Bonus targets for solely the target financial numbers will be| ► | Bonus targets for solely the target financial numbers were scaled as follows: (i) below 90% of target results in no bonus paid; (ii) 90% of target results in 50% of bonuses paid; (iii) 100% of target results in 100% of bonuses paid; (iv) 120% and greater of target results in 120% of bonuses paid. The payout is a maximum of 120% of target bonus. |
Compensation of Chief Financial Officer.For the twelve months ended December 31, 2016,2019, Mr. Knerr’s total compensation was $210,601.$231,050. Mr. Knerr’s total compensation was comprised of salary payments from January 1, 20162019 through December 31, 2016 totaling $151,000 and earned bonus2019 of $59,601,$165,000, as well as, $66,050 for the grant-date fair value of 5,000 restricted stock units, which was paidvested on April 14, 2017.February 28, 2020.
20162019 Bonus Plan. On December 15, 2015, the February 28, 2019, our Board, based on recommendations from our Compensation Committee, of the Board of Directors implemented a 2016 cash bonus plan for Mr. Knerr based on the following criteria:
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Cash bonus target was 35% of annualized base salary of $151,000.
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Cash bonus plan was based on the achievement of target financial results during the 2016 fiscal year.
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Cash bonus target scaling was based upon achievement of 90% of the target financial numbers, payout is 50% of target and scales to 100% at 100% of the target numbers. At 120% of the achievement of the financial numbers, payout is 120%. The payout is a maximum of 120% of target bonus.
Based on these criteria and as noted above, Mr. Knerr received a cash bonus of $59,601 for the year ended December 31, 2016 which was paid on April 14, 2017.
2017 Bonus Plan. On May 1, 2017, the Compensation Committee of the Board of Directors implemented a 20172019 cash bonus plan for Mr. Knerr based on the following criteria:
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Cash bonus target was 30% of annualized base salary of $165,000.
| ► | Cash bonus target was 35% of annualized base salary of $165,000. |
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Cash bonus plan will be based (i) 50% upon the achievement of target financial numbers during the fiscal year 2017 and (ii) 50%| ► | Cash bonus plan was based (i) 80% upon the achievement of target financial numbers during the fiscal year 2019 and (ii) 20% based upon the achievement of certain management objectives during the fiscal year 2019 as determined by the Board. |
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Bonus targets for solely the target financial numbers will| ► | Bonus targets for solely the target financial numbers would be scaled as follows: (i) below 90% of target results in no bonus paid; (ii) 90% of target results in 50% of bonuses paid; (iii) 100% of target results in 100% of bonuses paid; (iv) 120% and greater of target results in 120% of bonuses paid. The payout is a maximum of 120% of target bonus. |
Impact of Tax LawsBased on these criteria and as noted above, Mr. Knerr did not received a cash bonus for the year ended December 31, 2019.
Deductibility2020 Bonus Plan. On January 20, 2020, the Compensation Committee of Executive Compensation. Generally, under U.S. law,the Board implemented a company may not deduct compensation of more than $1,000,000 that is paid to an individual employed by the company who,2020 cash bonus plan for Mr. Knerr based on the last dayfollowing criteria:
| ► | Cash bonus target is 35% of annualized base salary of $165,000. |
| ► | Cash bonus plan is based entirely upon the achievement of target financial numbers during the fiscal year 2020. |
| ► | Bonus targets for solely the target financial numbers will be scaled as follows: (i) below 90% of target results in no bonus paid; (ii) 90% of target results in 50% of bonuses paid; (iii) 100% of target results in 100% of bonuses paid; (iv) 120% and greater of target results in 120% of bonuses paid. The payout is a maximum of 120% of target bonus. |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding equity awards that have been previously awarded to each of the taxable year, either is the company’s principalnamed executive officer or an individual who is among the three highest compensated officers for the taxable year (other than the principal executive officer or the principal financial officer). The $1,000,000 limitation on deductions does not apply to certain typesand which remained outstanding as of compensation, including qualified performance-based compensation, and only applies to compensation paid by a publicly-traded corporation (and not compensation paid by non-corporate entities). Because the compensation deducted in the U.S. for each individual to whom this rule applies has historically been less than $1,000,000 per year, we do not believe that the $1,000,000 limitation will affect us in the near future. If the deductibility of executive compensation becomes a significant issue, our compensation plans and policies may be modified to maximize deductibility if our Compensation Committee and we determine that such action is in our best interests.December 31, 2019.
Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option exercise price ($) | | Number of Shares or Units of Stock that have not Vested (#) | Market Value of Shares of Units That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) |
| | | | | | | | | |
| Brian R. Balbirnie | — | — | — | — | — | — | — | — |
| Steven Knerr | 10,000 | — | 6.80 | | — | —— | — | — |
| | 20,000 | — | 7.76 | | — | — | — | — |
| | — | — | — | — | 5,000 | 58,450 | — | — |
Issuer Direct Corporation 2014 Equity Incentive Plan
Risk Considerations inOn March 31, 2014, our Board adopted the Issuer Direct Corporation 2014 Equity Incentive Plan (the “2014 Plan”), which provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants, to be granted from time to time as determined by our Board or its designees. Our stockholders approved the 2014 Plan on May 23, 2014. The 2014 Plan was amended as of June 10, 2016 to increase the number of shares of our common stock authorized under the plan. As of April 28, 2020, the number of shares available for issuance under the 2014 Plan are 38,583 as compared to 23,500 as of December 31, 2019 as a result of certain employees leaving the Company and the shares becoming available for reissuance under the 2014 Plan. The 2014 Plan will expire by its terms on March 31, 2024. For description of the 2014 Plan, see “Proposal 2: Amendment to 2014 Equity Incentive Plan.”
Equity Compensation ProgramsPlan Information
The following table provides certain information as of December 31, 2019, with respect to our equity compensation plans under which our equity securities are authorized for issuance:
Plan Category | Number of securities to be issued upon exercise of outstanding options (a) | Weighted- average exercise price of Outstanding options (b) | Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
| | | | |
| Equity compensation plan approved by security holders | 127,563(1) | $12.63 | 23,500 |
| Equity compensation plan not approved by security holders | - | $- | - |
| Total | 127,563(1) | $12.63 | 23,500 |
(1) 20,313 of this number represents stock options outstanding which were granted under the Issuer Direct Corporation 2010 Equity Incentive Plan, which has terminated pursuant to its terms.
RISK CONSIDERATIONS IN OUR COMPENSATION PROGRAMS
Our Compensation Committee believes that risks arising from our policies and practices for compensating employees are not reasonably likely to have a material adverse effect on us and do not encourage risk taking that is reasonably likely to have a material adverse effect on us. Our Compensation Committee believes that the structure of our executive compensation program mitigates risks by avoiding any named executive officer placing undue emphasis on any particular performance metric at the expense of other aspects of our business.
Compensation Committee ReportCOMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the members of management of the Company and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
| The Compensation Committee:
| |
| /s/ Andre M. Boisvert | |
| Andre M. Boisvert (Chairman) | |
| | |
| /s/ William H. Everett | |
| William H. Everett | |
The Compensation Committee
J. Patrick Galleher (Chairman)
Proposal 2–Amendment to 2014 Equity Incentive Plan
APPROVAL TO ADOPT THE SECOND AMENDMENT TO THE ISSUER DIRECT CORPORATION’S 2014 EQUITY INCENTIVE PLAN TO INCREASE THE TOTAL NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE UNDER SUCH PLAN BY 200,000
General
The Board has approved an amendment to the Issuer Direct Corporation 2014 Equity Incentive Plan, as amended (the “2014 Plan”), to increase the number of shares of common stock available for issuance thereunder by 200,000 shares. The proposed amendment is attached hereto as Exhibit A.
The amendment to the 2014 Plan is intended to ensure that we can continue to provide an incentive to our employees, directors and consultants by enabling them to share in our future growth. If approved by the stockholders, all of the additional shares will be available for grant as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or as nonqualified stock options, restricted stock awards, stock appreciation rights, or other kinds of equity based compensation available under the 2014 Plan. If the stockholders do not approve the amendment, no shares will be added to the number of shares available for issuance under the 2014 Plan.
Background
The 2014 Plan was adopted on March 31, 2014, and approved by the stockholders of the Company at an annual meeting of the Company’s stockholders on May 23, 2014 and subsequently amended on June 10, 2016 by a vote of the Company’s stockholders to increase the number of shares reserved under the plan from 200,000 to 400,000. The purposes of the 2014 Plan are to create incentives which are designed to motivate eligible employees, directors, and consultants to put forth maximum effort toward the success and growth of the Company, and to enable the Company to attract and retain experienced individuals who by their position, ability and diligence are able to make important contributions to the Company’s success.
The Plan currently authorizes for issuance a maximum of only 400,000 shares. As of April 28, 2020, we had 38,583 shares available for issuance under future awards under the 2014 Plan. We use equity-based incentive compensation as a component of our pay-for-performance philosophy. Our Board believes we must increase the number of shares available for issuance under the 2014 in light of our compensation strategy.
The increase represents approximately 5% of the total number of outstanding shares of common stock as of April 28, 2020. After giving effect to such increase, the 152,480 shares of common stock subject to outstanding equity awards and the 238,583 shares available for issuance pursuant to future awards will represent an aggregate of 391,063 shares, or approximately 9% of our 3,772,700 total issued and outstanding shares of common stock plus the 391,063 shares subject to outstanding equity awards and available for future award issuances.
Summary of the Key Terms of the 2014 Plan
The following is a brief description of the 2014 Plan. A copy of the 2014 Plan is attached as Annex A to our 2014 Proxy Statement filed with the Securities and Exchange Commission on April 2, 2016, and the following description is qualified in its entirety by reference to the 2014 Plan.
Purpose. The purpose of the 2014 Plan is to enable the Company and its subsidiaries and affiliates to remain competitive and innovative in our ability to attract, motivate, reward, and retain the services of key employees, key contractors, and outside directors. The 2014 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, performance awards and other awards which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of common stock, or a combination of cash and shares of common stock. The 2014 Plan is expected to provide flexibility to our compensation methods in order to adapt the compensation of employees, contractors, and outside directors to a changing business environment, after giving due consideration to competitive conditions and the impact of U.S. tax laws.
Effective Date and Expiration. The 2014 Plan became effective on March 31, 2014, subject to and conditioned upon stockholder approval of the 2014 Plan, and will terminate on March 31, 2024. No award may be made under the 2014 Plan after its expiration date, but awards made prior thereto may extend beyond that date.
Authorization. Subject to certain adjustments, the maximum number of shares of our common stock that may be delivered pursuant to awards under the 2014 Plan is currently 400,000 shares (after giving effect to all amendments), 100% of which may be delivered pursuant to incentive stock options. If the amendment is approved, the maximum number of shares which may be delivered will increase to 600,000; provided, however, 361,417 shares will have already been issued under the 2014 Plan such that only an additional 238,583 shares may be issued in the future. Subject to certain adjustments, the maximum number of the shares of common stock with respect to which stock options, restricted stock, or restricted stock units may be granted to any officer of the Company subject to Section 16 of the Securities Exchange Act of 1934 or a “covered employee” as defined in Section 162(m)(3) of the Code during any calendar year is 50,000 shares. In addition, to the extent Section 162(m) of the Code applies to awards granted under the 2014 Plan and we intend to comply with Section 162(m) of the Code, no participant may receive in any calendar year performance-based awards with an aggregate value of more than $5,000,000 (based on the fair market value of shares of the common stock at the time of the grant of the performance-based award).
Assuming this proposal is approved, the board of directors expects that the amended number of shares reserved under the 2014 Plan should satisfy the Company’s needs to attract, motivate, reward, and retain the services of key employees, key contractors, and outside directors for the next three to four years absent a significant corporate event, including the hiring or loss of a key management employee.
Shares to be issued may be made available from authorized but unissued shares of common stock. During the term of the 2014 Plan, we will at all times reserve and keep enough shares available to satisfy the requirements of the 2014 Plan. If an award under the 2014 Plan is cancelled, forfeited, or expires, in whole or in part, the shares subject to such forfeited, expired, or cancelled award may again be awarded under the 2014 Plan. In the event that previously acquired shares are delivered to us in full or partial payment of the option price for the exercise of a stock option granted under the 2014 Plan, the number of shares available for future awards under the 2014 Plan shall be reduced only by the net number of shares issued upon the exercise of the stock option or settlement of an award. Awards that may be satisfied either by the issuance of common stock or by cash or other consideration shall be counted against the maximum number of shares that may be issued under the 2014 Plan only during the period that the award is outstanding or to the extent the award is ultimately satisfied by the issuance of shares. Only shares forfeited back to the Company; shares cancelled on account of termination, expiration, or lapse of an award; shares surrendered in payment of the option price of an option; or shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of a stock option shall again be available for grant of incentive stock options under the 2014 Plan, but shall not increase the maximum number of shares described above as the maximum number of shares that may be delivered pursuant to incentive stock options.
Administration. The 2014 Plan may be administered by the board of directors or a committee of the board of directors consisting of two or more members. The compensation committee or Board of Directors will determine the persons to whom awards are to be made; determine the type, size, and terms of awards; interpret the 2014 Plan; establish and revise rules and regulations relating to the 2014 Plan; and make any other determinations that it believes necessary for the administration of the 2014 Plan.
Eligibility. Employees (including any employee who is also a director or an officer), contractors, and outside directors of the Company whose judgment, initiative and efforts contributed to or may be expected to contribute to the successful performance of the Company are eligible to participate in the 2014 Plan. As of April 28, 2020, there were approximately 85 employees, directors, and contractors who would be eligible for awards under the 2014 Plan.
Stock Options. For persons subject to U.S. income tax, the compensation committee or Board of Directors may grant either incentive stock options (“ISOs”) qualifying under Section 422 of the Code or nonqualified stock options, provided that only employees of the Company and its subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs. Stock options may not be granted with an option price less than 100% of the fair market value of a share of common stock on the date the stock option is granted. If an ISO is granted to an employee who owns or is deemed to own more than 10% of the combined voting power of all classes of stock of the Company (or any parent or subsidiary), the option price shall be at least 110% of the fair market value of a share of common stock on the date of grant. The compensation committee or Board of Directors will determine the terms of each stock option at the time of grant, including without limitation, the methods by or forms in which shares will be delivered to participants. The maximum term of each option, the times at which each option will be exercisable, and provisions requiring forfeiture of unexercised options at or following termination of employment or service generally are fixed by the compensation committee or Board of Directors, except that the compensation committee or Board of Directors may not grant stock options with a term exceeding ten years.
Restricted Stock and Restricted Stock Units. The compensation committee or Board of Directors is authorized to grant restricted stock and restricted stock units. Restricted stock consists of shares of common stock that may not be sold, transferred, pledged, hypothecated, encumbered, or otherwise disposed of, and that may be forfeited in the event of certain terminations of employment or service, prior to the end of a restricted period as specified by the compensation committee or Board of Directors. Restricted stock units are the right to receive shares of common stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the compensation committee or Board of Directors, which include substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. The compensation committee or Board of Directors determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units will be made, the number of shares or units to be granted, the price to be paid, if any, the time or times within which the shares covered by such grants will be subject to forfeiture, the time or times at which the restrictions will terminate, and all other terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with us, the passage of time, or other restrictions and conditions. The value of the restricted stock units may be paid in shares, cash, or a combination of both, as determined by the compensation committee or Board of Directors.
Performance Awards. The compensation committee or Board of Directors may grant performance awards payable in shares of common stock or other consideration at the end of a specified performance period. Payment will be contingent upon achieving pre-established performance goals (as discussed below) by the end of the performance period. The compensation committee or Board of Directors will determine the length of the performance period, the maximum payment value of an award, and the minimum performance goals required before payment will be made, so long as such provisions are not inconsistent with the terms of the 2014 Plan, and to the extent an award is subject to Section 409A of the Code, are in compliance with the applicable requirements of Section 409A of the Code and any applicable regulations or guidance.
Other Awards. The compensation committee or Board of Directors may grant other forms of awards payable in cash or shares if the compensation committee or Board of Directors determines that such other form of award is consistent with the purpose and restrictions of the 2014 Plan. The terms and conditions of such other form of award shall be specified by the grant. Such other awards may be granted for no cash consideration, for such minimum consideration as may be required by applicable law, or for such other consideration as may be specified by the grant.
Vesting, Forfeiture, Assignment. The compensation committee or Board of Directors, in its sole discretion, may determine that an award will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its date of grant, or until the occurrence of one or more specified events, subject in any case to the terms of the 2014 Plan. If the compensation committee or Board of Directors imposes conditions upon vesting, then subsequent to the date of grant, the compensation committee or Board of Directors may, in its sole discretion, accelerate the date on which all or any portion of the award may be vested.
The compensation committee or Board of Directors may impose on any award at the time of grant or thereafter, such additional terms and conditions as the compensation committee or Board of Directors determines, including, without limitation, terms requiring forfeiture of awards in the event of a participant’s termination of service. The compensation committee or Board of Directors will specify the circumstances on which performance awards may be forfeited in the event of a termination of service by a participant prior to the end of a performance period or settlement of awards. Except as otherwise determined by the compensation committee or Board of Directors, restricted stock will be forfeited upon a participant’s termination of service during the applicable restriction period. Awards granted under the 2014 Plan generally are not assignable or transferable except by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.
Amendment or Discontinuance of the 2014 Plan. The board of directors may at any time and from time to time, without the consent of the participants, alter, amend, revise, suspend, or discontinue the 2014 Plan in whole or in part, except, that no amendment for which stockholder approval is required either: (i) by any securities exchange or inter-dealer quotation system on which the common stock is listed or traded, or (ii) in order for the 2014 Plan and incentives awarded under the 2014 Plan to continue to comply with Sections 162(m), 421, and 422 of the Code, including any successors to such Sections, or other applicable law, shall be effective unless such amendment is approved by the requisite vote of our stockholders entitled to vote thereon. Any amendments made shall, to the extent deemed necessary or advisable by the compensation committee or Board of Directors, be applicable to any outstanding awards theretofore granted under the 2014 Plan, notwithstanding any contrary provisions contained in any award agreement. In the event of any such amendment to the 2014 Plan, the holder of any award outstanding under the 2014 Plan shall, upon request of the compensation committee or Board of Directors and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the compensation committee or Board of Directors to any award agreement relating thereto. Notwithstanding anything contained in the 2014 Plan to the contrary, unless required by law, no action regarding amendment or discontinuance shall adversely affect any rights of participants or obligations of the Company to participants with respect to any awards granted under the 2014 Plan without the consent of the affected participant.
U.S. Federal Income Tax Consequences
The following is a brief summary of certain U.S. federal income tax consequences relating to the transactions described under the 2014 Plan as set forth below. This summary does not purport to address all aspects of U.S. federal income taxation and does not describe state, local, or foreign tax consequences. This discussion is based upon provisions of the Code and the treasury regulations issued thereunder, and judicial and administrative interpretations under the Code and treasury regulations, all as in effect as of the date hereof, and all of which are subject to change (possibly on a retroactive basis) or different interpretation.
Law Affecting Deferred Compensation. In 2004, Section 409A was added to the Code to regulate all types of deferred compensation. If the requirements of Section 409A of the Code are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus an interest charge at the underpayment rate plus 1% and a 20% penalty tax. Certain performance awards, stock options, restricted stock units, and certain types of restricted stock are subject to Section 409A of the Code.
Incentive Stock Options. A participant will not recognize income at the time an ISO is granted. When a participant exercises an ISO, a participant also generally will not be required to recognize income (either as ordinary income or capital gain). However, to the extent that the fair market value (determined as of the date of grant) of the shares with respect to which the participant’s ISOs are exercisable for the first time during any year exceeds $100,000, the ISOs for the shares over $100,000 will be treated as nonqualified stock options, and not ISOs, for federal tax purposes, and the participant will recognize income as if the ISOs were nonqualified stock options. In addition to the foregoing, if the fair market value of the shares received upon exercise of an ISO exceeds the exercise price, then the excess may be deemed a tax preference adjustment for purposes of the federal alternative minimum tax calculation. The federal alternative minimum tax may produce significant tax repercussions depending upon the participant’s particular tax status.
The tax treatment of any shares acquired by exercise of an ISO will depend upon whether the participant disposes of his or her shares prior to two years after the date the ISO was granted or one year after the shares were transferred to the participant (referred to as the “Holding Period”). If a participant disposes of shares acquired by exercise of an ISO after the expiration of the Holding Period, any amount received in excess of the participant’s tax basis for such shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as short-term or long-term capital loss, depending upon how long the participant has held the shares.
If the participant disposes of shares acquired by exercise of an ISO prior to the expiration of the Holding Period, the disposition will be considered a “disqualifying disposition.” If the amount received for the shares is greater than the fair market value of the shares on the exercise date, then the difference between the ISO’s exercise price and the fair market value of the shares at the time of exercise will be treated as ordinary income for the tax year in which the “disqualifying disposition” occurs. The participant’s basis in the shares will be increased by an amount equal to the amount treated as ordinary income due to such “disqualifying disposition.” In addition, the amount received in such “disqualifying disposition” over the participant’s increased basis in the shares will be treated as capital gain. However, if the price received for shares acquired by exercise of an ISO is less than the fair market value of the shares on the exercise date and the disposition is a transaction in which the participant sustains a loss which otherwise would be recognizable under the Code, then the amount of ordinary income that the participant will recognize is the excess, if any, of the amount realized on the “disqualifying disposition” over the basis of the shares.
Nonqualified Stock Options. A participant generally will not recognize income at the time a nonqualified stock option is granted. When a participant exercises a nonqualified stock option, the difference between the option price and any higher market value of the shares of common stock on the date of exercise will be treated as compensation taxable as ordinary income to the participant. The participant’s tax basis for the shares acquired under a nonqualified stock option will be equal to the option price paid for such shares, plus any amounts included in the participant’s income as compensation. When a participant disposes of shares acquired by exercise of a nonqualified stock option, any amount received in excess of the participant’s tax basis for such shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as short-term or long-term capital loss, depending upon how long the participant has held the shares.
Special Rule if Option Price is Paid for in Shares. If a participant pays the option price of a nonqualified stock option with previously-owned shares of our common stock and the transaction is not a disqualifying disposition of shares previously acquired under an ISO, the shares received equal to the number of shares surrendered are treated as having been received in a tax-free exchange. The participant’s tax basis and holding period for these shares received will be equal to the participant’s tax basis and holding period for the shares surrendered. The shares received in excess of the number of shares surrendered will be treated as compensation taxable as ordinary income to the participant to the extent of such shares’ fair market value. The participant’s tax basis in such shares will be equal to their fair market value on the date of exercise, and the participant’s holding period for such shares will begin on the date of exercise.
If the use of previously acquired shares to pay the exercise price of a nonqualified stock option constitutes a disqualifying disposition of shares previously acquired under an ISO, the participant will have ordinary income as a result of the disqualifying disposition in an amount equal to the excess of the fair market value of the shares surrendered, determined at the time such shares were originally acquired on exercise of the ISO, over the aggregate option price paid for such shares. As discussed above, a disqualifying disposition of shares previously acquired under an ISO occurs when the participant disposes of such shares before the end of the Holding Period. The other tax results from paying the exercise price with previously-owned shares are as described above, except that the participant’s tax basis in the shares that are treated as having been received in a tax-free exchange will be increased by the amount of ordinary income recognized by the participant as a result of the disqualifying disposition.
Restricted Stock. A participant who receives a grant of restricted stock generally will recognize as ordinary income the excess, if any, of the fair market value of the shares granted as restricted stock at such time as the shares are no longer subject to forfeiture or restrictions, over the amount paid, if any, by the participant for such shares. However, a participant who receives restricted stock may make an election under Section 83(b) of the Code within 30 days of the date of transfer of the shares to recognize ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the restrictions on such shares) over the purchase price, if any, of such shares. If a participant does not make an election under Section 83(b) of the Code, then the participant will recognize as ordinary income any dividends received with respect to such shares. At the time of the sale of such shares, any gain or loss realized by the participant will be treated as either short-term or long-term capital gain (or loss) depending on the holding period. For purposes of determining any gain or loss realized, the participant’s tax basis will be the amount previously taxable as ordinary income, plus the purchase price paid by the participant, if any, for such shares.
Other Awards. In the case of an award of restricted stock units, performance awards, dividend equivalent rights, or other stock or cash awards, the recipient will generally recognize ordinary income in an amount equal to any cash received and the fair market value of any shares received on the date of payment or delivery, provided that the award is exempt from or complies with Section 409A of the Code. In that taxable year, we will receive a U.S. federal income tax deduction in an amount equal to the ordinary income which the participant has recognized.
U.S. Federal Tax Withholding. Any ordinary income realized by a participant upon the exercise of an award under the 2014 Plan is subject to withholding of U.S. federal, state, and local income tax and to withholding of the participant’s share of tax under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act. To satisfy federal income tax withholding requirements, we will have the right to require that, as a condition to delivery of any certificate for shares of common stock or the registration of the shares in the participant’s name, the participant remit to us an amount sufficient to satisfy the withholding requirements. Alternatively, we may withhold a portion of the shares (valued at fair market value) that otherwise would be issued to the participant to satisfy all or part of the withholding tax obligations or may, if we consent in writing, accept delivery of shares with an aggregate fair market value that equals or exceeds the required tax withholding payment. Withholding does not represent an increase in the participant’s total income tax obligation, since it is fully credited toward his or her tax liability for the year. Additionally, withholding does not affect the participant’s tax basis in the shares. Compensation income realized and tax withheld will be reflected on Forms W-2 supplied by us to employees by January 31 of the succeeding year. Deferred compensation that is subject to Section 409A of the Code will be subject to certain federal income tax withholding and reporting requirements.
Tax Consequences to the Company. To the extent that a participant recognizes ordinary income in the circumstances described above, we will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code, and is not disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m) of the Code.
Million Dollar Deduction Limit and Other Tax Matters. We may not deduct compensation of more than $1,000,000 that is paid to an individual who, on the last day of the taxable year, is either our principal executive officer or an individual who is among the three highest compensated officers for the taxable year (other than the principal executive officer or the principal financial officer). The limitation on deductions does not apply to certain types of compensation, including qualified performance-based compensation, and only applies to compensation paid by a publicly-traded corporation (and not compensation paid by non-corporate entities). To the extent that we determine that Section 162(m) of the Code will apply to any awards granted pursuant to the 2014, we intend that such awards will be constructed so as to constitute qualified performance-based compensation and, as such, will be exempt from the $1,000,000 limitation on deductible compensation.
If an individual’s rights under the 2014 Plan are accelerated as a result of a change in control and the individual is a “disqualified individual” under Section 280G of the Code, the value of any such accelerated rights received by such individual may be included in determining whether or not such individual has received an “excess parachute payment” under Section 280G of the Code, which could result in (i) the imposition of a 20% federal excise tax (in addition to federal income tax) payable by the individual on the value of such accelerated rights; and (ii) the loss by us of a compensation deduction.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVALTO ADOPT THE SECOND AMENDMENT TO THE ISSUER DIRECT CORPORATION’S 2014 EQUITY INCENTIVE PLAN TO INCREASE THE TOTAL NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE UNDER SUCH PLAN BY 200,000
Proposal 3–Ratification of Auditors
RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed the firm of Cherry Bekaert LLP, independent registered public accounting firm, to audit and report on our financial statements for the year ending December 31, 2017.2020. We have engaged Cherry Bekaert LLP as our independent registered public accounting firm since June 2010. We expect that a representative of Cherry Bekaert LLP will be present at the Annual Meeting of Stockholders to answer questions of stockholders and will have the opportunity, if desired, to make a statement.
For the years ended December 31, 20162019 and 2015,2018, Cherry Bekaert LLP, billed us the fees set forth below, including expenses, in connection with services rendered by that firm to us.
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| Audit fees | $111,500 | $122,687 |
| Tax fees | $--- | $--- |
| All other fees | $--- | $2,000 |
| Total fees | $111,500 | $124,687 |
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| Audit fees | $128,100 | $121,475 |
| Audit related fees | 83,100 | 35,300 |
| Tax fees | --- | --- |
| All other fees | --- | --- |
| Total fees | $211,200 | $156,775 |
Audit Fees.Audit fees include fees for services renderedbilled for the auditsannual audit of our annualthe Company’s financial statements and quarterly reviews for the fiscal years ended December 31, 2019 and 2018, and for services normally provided by Cherry Bekaert LLP in connection with routine statutory and regulatory filings or engagements.
Audit-Related Fees.Audit-related fees include fees billed for assurance and related services that are reasonably related to the performance of the annual audit or reviews of the interimCompany’s financial statements includedand are not reported under “Audit Fees.” During our fiscal year ended December 31, 2019, Cherry Bekaert LLP billed the Company $83,100 for audit-related services related to certain assets acquired by us during 2019. During our fiscal year ended December 31, 2018, Cherry Bekaert LLP billed the Company $21,000 for services related to a consent for the use of its audit opinion in quarterly reports. This categorythe Company’s filing of a Registration Statement on Form S-3 that incorporated by reference the Company’s audited financial statements for the fiscal years ended December 31, 2017 and 2016 and also includesbilled the Company $14,300 for other audit-related services related to a business acquired by us during 2018.
Tax Fees.Tax fees include fees for review of documents filed withprofessional services for tax compliance, tax advice and tax planning for the SEC.tax years ended December 31, 2019 and 2018. During our fiscal years ended December 31, 2019and 2018, no such fees were billed by Cherry Bekaert LLP.
All Other Fees.All other fees include fees for products and services other than those described above. During our fiscal years ended December 31, 2019 and 2018, no such fees were billed by Cherry Bekaert LLP.
The Audit Committee of the Board of Directors has considered whether the provision of services described above under "Audit-related fees" and "Other fees" is compatible with maintaining the independence of Cherry Bekaert LLP and has concluded that it is compatible.
Ratification of Selection of Independent AuditorsRATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered accounting firm retained to audit our financial statements. The Audit Committee has appointed Cherry Bekaert LLP as our independent external auditor for the year ending December 31, 2016.2020. Cherry Bekaert LLP has served as our independent registered accounting firm continuously since June 2010. The Audit Committee is responsible for the audit fee negotiations associated with the retention of Cherry Bekaert LLP. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered accounting firm. Further, in conjunction with the rotation of the auditing firm's lead engagement partner, the Audit Committee and its chairpersonChairperson has and will continue to be directly involved in the selection of Cherry Bekaert LLP 'sLLP's new lead engagement partner.partner, who was selected in 2020. The members of the Audit Committee and the Board believe that the continued retention of Cherry Bekaert LLP to serve as our independent external auditor is in the best interests of the Company and its stockholders.
Stockholder ratification of the selection of Cherry Bekaert LLP as our independent registered public accounting firm is not required but is being presented as a matter of good corporate practice. Notwithstanding stockholder ratification of the appointment of the independent registered public accounting firm, the Audit Committee, in its discretion, may direct the appointment of a new independent registered public accounting firm if the Audit Committee believes that such a change would be in our best interests and the best interests of our stockholders. The Audit Committee has not determined what action it would take if the stockholders do not ratify the appointment, but may reconsider the appointment.
Audit Committee Pre-Approval PolicyAUDIT COMMITTEE PRE-APPROVAL POLICY
The Audit Committee's policy is that all audit and non-audit services provided by its independent registered public accounting firm shall either be approved before the independent registered public accounting firm is engaged for the particular services or shall be rendered pursuant to pre-approval procedures establishedproceduresestablished by the Audit Committee. These services may include audit services and permissible audit-related services, tax services and other services. Pre-approval spending limits for audit services are established on an annual basis, detailed as to the particular service or category of services to be performed and implemented by our financial officers. Pre-approval spending limits for permissible non-audit services are established on a quarterly basis, detailed as to the particular service or category of services to be performed and implemented by our financial officers. Any audit or non-audit servicefeesservice fees that may be incurred by us during a quarter that fall outside the limits pre-approved by the Audit Committee for a particular service or category of services must be reviewed and approved by the Chairperson of the Audit Committee prior to the performance of services. On a quarterlyan annual basis, the Audit Committee reviews and itemizes all fees paid to its independent registered public accounting firm in the prior quarter (including fees approved by the Chairperson of the Audit Committee between regularly scheduled meetings and fees approved by our financial officers pursuant to the pre-approval policies described above) and further reviews and itemizes all fees expected to be paid in the upcoming quarter. The Audit Committee may revise its pre-approval spending limits and policies at any time. None of the fees paid to the independent registered public accounting firm were approved by the Audit Committee after the services were rendered pursuant to the "de minimis" exception established by the SEC for the provision of non-audit services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF
CHERRY, BEKAERT LLP. AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. | The Board of Directors recommends a vote "FOR" the ratification of the appointment of Cherry Bekaert LLP as the independent registered public accounting firm. |
REPORT OF THE AUDIT COMMITTEE
On October 23, 2013, the Company established an Audit Committee of the Board of Directors. The Audit Committee consists of two members, Messrs. Everett and Boisvert.Nowlan. All the members are independent directors under the NYSE and SEC Audit Committee structure and membership requirements. The Audit Committee has certain duties and powers as described in its written charter, a copy of which can be found on the company’s website at http://cdn.irdirect.net/IR/432/1220/Audit-Committee-Charter-Final-Exhibit-A%20(1).pdf..pdf.
The Audit Committee has reviewed and discussed the Company’s audited financial statements and related footnotes for the fiscal year ended December 31, 2016,2019, and the independent auditor’s report on those financial statements, with management and with our independent auditor, Cherry Bekaert LLP (“Cherry Bekaert”). The Audit Committee has also discussed with Cherry Bekaert the matters required to be discussed by the statement on Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board. The Audit Committee has also received the written disclosures and the letter from Cherry Bekaert required by applicable requirements of the Public Company Accounting Oversight Board regarding Cherry Bekaert’s communications with the Audit Committee concerning independence, and has discussed with Cherry Bekaert that firm’s independence.
Based on the review and the discussions referred to in the preceding paragraph, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20162019 that waswere filed with the SEC.
The Audit Committee
| The Audit Committee: | |
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| /s/ Michael Nowlan (Chairman) William H. Everett | |
| William H. Everett (Chairman) | |
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| /s/ Andre M. Boisvert | |
| Andre M. Boisvert | |
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CERTAIN RELATIONSHIPS AND Certain Relationships and Related Party Transactions and Director Independence
RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Party TransactionsNone.
As noted in this proxy statement, Mr. Boisvert will not be standing for re-election as a director at the 2017 Annual Meeting. However, in order to retain Mr. Boisvert’s experience and expertise in the software as a service industry as the Company continues its transition into that sector, the Company has agreed to enter into a consulting arrangement with Mr. Boisvert which will begin immediately after he is no longer a director, which will occur the day after the 2017 Annual Meeting and continue for four years. Mr. Boisvert will provide his services to the Company for up to twelve days per calendar quarter. In consideration, the Company has agreed to pay Mr. Boisvert as follows: (i) $40,000 within thirty days after he ceases to be a member of the Board and (ii) $31,250 per calendar quarter during the four years. Additionally, after Mr. Boisvert ceases to be a member of the Board, his two percent change of control compensation, which was previously disclosed by the Company in a Current Report on Form 8-K filed on July 12, 2012, will terminate. Mr. Boisvert has also agreed to certain non-competition and non-solicitation provisions during the four years he provides service to the Company.
Director IndependenceDIRECTOR INDEPENDENCE
As of July 30, 2017,April 28, 2020, we had threefour independent directors on our Board, Andre M. Boisvert, William H. Everett, andEric Frank, J. Patrick Galleher.Galleher and Michael Nowlan. We evaluate independence by the standards for director independence established by applicable laws, rules, and listing standards including, without limitation, the standards for independent directors established by NYSE American and the SEC. As noted above, Mr. Frank will not be standing for re-election at this Annual Meeting.
Subject to some exceptions, these standards generally provide that a director will not be independent if (a) the director is, or in the past three years has been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the Compensation Committee; or (f) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or two percent of that other company’s consolidated gross revenues.
OTHER MATTERSOther Matters
We know of no other matters to be submitted at the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed proxy card to vote the shares they represent as the Board of Directors may recommend.
ADDITIONAL INFORMATIONAdditional Information
A copy of our 20162019 Annual Report on Form 10-K is available to each stockholder in connection with this Proxy Statement. The 20162019 Annual Report on Form 10-K and Form 10-K/A is not a part of the proxy solicitation materials.
We file reports and other information with the SEC. Copies of these documents may be obtained at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. Our SEC filings are also available on the SEC’s website at http://www.sec.gov.
www.issuerdirect.com
EXHIBIT A
SECOND AMENDMENT TO
ISSUER DIRECT CORPORATION
2014 EQUITY INCENTIVE PLAN
This Second Amendment (the “Second Amendment”) to Issuer Direct Corporation 2014 Equity Incentive Plan, as amended from time to time (the “Plan”), is made effective as of June 17, 2020 (the “Amendment Effective Date”), by Issuer Direct Corporation, a Delaware corporation (“Issuer Direct”), as set forth below.
BACKGROUND
WHEREAS, Issuer Direct established the Plan, originally effective as of March 31, 2014, under which Issuer Direct is authorized to grant equity-based incentive awards to certain employees and service providers of Issuer Direct and its subsidiaries;
WHEREAS, Section 21(a) of the Plan provides that Issuer Direct’s board of directors (the “Board”) may amend the Plan subject to, in certain circumstances, the approval of the holders of at least a majority of Issuer Direct’s shares of common stock;
WHEREAS, on June 10, 2016, the stockholders of Issuer Direct voted to increase the number of shares of common stock authorized for grant under the Plan by 200,000 shares;
WHEREAS, the Board now desires to amend the Plan in the manner contemplated hereby and has obtained the approval by Issuer Direct’s shareholders at Issuer Direct’s 2020 Annual Meeting as of the Amendment Effective Date to increase the number of shares of common stock authorized for grant by an additional 200,000 shares; and
WHEREAS, capitalized terms used but not defined herein shall have the same meaning as set forth in the Plan.
NOW, THEREFORE, the Plan shall be amended as of the Amendment Effective Date as set forth below:
1. The first paragraph of Section 4 of the Plan is hereby deleted and replaced in its entirety with the following:
“The stock subject to options granted under the Plan or grants of Restricted Shares or Restricted Stock Units shall be shares of authorized but unissued or reacquired Common Stock. Subject to adjustment as provided in Section 16 below, the maximum number of shares of Common Stock of the Corporation (“Shares”) which may be issued and sold under the Plan is 600,000 Shares.”
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2. Except as set forth above, the Plan shall continue to read in its current state.
IN WITNESS WHEREOF, Issuer Direct has caused the execution of this Second Amendment by its duly authorized officer, effective as of the Amendment Effective Date.
| ISSUER DIRECT CORPORATION | |
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| By: | | |
| | Brian R. Balbirnie | |
| | Chief Executive Officer | |
ISSUER DIRECT CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF STOCKHOLDERS – THURSDAY SEPTEMBER 28, 2017,JUNE 17, 2020 AT 9:12:00 AMPM EDT | | | | | |
| CONTROL ID: | | | | | | | |
| REQUEST ID: | | | | | | | |
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The undersigned, a stockholder of Issuer Direct Corporation (the “Company”), hereby revoking any proxy heretofore given, does hereby appoint Jeffrey M. Quick proxy, with power of substitution, for and in the name of the undersigned to attend the 20162020 annual meeting of stockholders of the Company to be held at 500 Perimeter Park Drive, Suite D, Morrisville, NC 27560,virtually, on Thursday, September 28, 2017Wednesday, June 17, 2020 beginning at 9:12:00 AM,PM, local time, or at any adjournment or postponement thereof, and there to vote, as designated below. |
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| (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) |
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| VOTING INSTRUCTIONS | | | | | | |
| If you vote by phone, fax or internet, please DO NOT mail your proxy card. | | | | | | |
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| MAIL: | Please mark, sign, date, and return this Proxy Card promptly using the enclosed envelope. | | | | | |
| FAX: | Complete the reverse portion of this Proxy Card and Fax to 202-521-3464.202.521.3464. | | | | | |
| INTERNET: | https://www.iproxydirect.com/ISDRisdr | | | | | |
| PHONE: | 1-866-752-VOTE (8683)866.752.VOTE(8683) | | | | | |
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ANNUAL MEETING OF THE STOCKHOLDERS OF ISSUEROFISSUER DIRECT CORPORATION
| PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: ☒ |
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| PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS | |
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| Proposal 1 | | | FOR ALL | | AGAINST ALL | | FOR ALL EXCEPT | | | |
| To elect the three (3)four (4) directors nominated by our Board of Directors as set forth in the Proxy StatementStatement: | | ☐ | | ☐ | | | | | |
| | William H. Everett | Director, Chairman of the Board, Member of Audit Committee Member of Compensation Committee and& Strategic Advisory Committee
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| Michael Nowlan | Director, Chairman of Audit Committee | | | | | | ☐ | | | |
| Brian R. Balbirnie | Director, President and Chief Executive Officer | | | | | | ☐ | | CONTROL ID: | |
| | J. Patrick Galleher | Director, Chairman of theCompensation Committee and Strategic Advisory Committee
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| Brian R. Balbirnie | Director, Chief Executive Officer
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| Erik Frank | Director Nominee
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| Michael Nowlan
| Director Nominee
| | | | | | ☐ | | REQUEST ID: | |
| Proposal 2 | | FOR | | AGAINST | | | ABSTAIN | | | |
| | Amendment to 2014 Equity Incentive Plan; | | ☐ | | ☐ | | ☐ | | | |
Proposal 2 | 3 | | FOR | | AGAINST | | ABSTAIN | | | |
| | To ratify the appointment by the Audit Committee of the Board of Directors of Cherry Bekaert LLP as our independent registered public accounting firm for the year ending December 31, 20172020. | | ☐ | | ☐ | | ☐ | | | |
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| | | | | | MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING: ☐ |
| | | | | MARK HERE FOR ADDRESS CHANGE ◻☐ New Address (if applicable): _____________________________________________________
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IMPORTANT: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. Dated: ________________________, 20172020 |
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| | (Print Name of Stockholder and/or Joint Tenant) |
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| (Signature of Stockholder) |
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| (Second Signature if held jointly) |
