By Order of the Board of Directors,/s/ Gordon G. Pratt | | Gordon G. Pratt | |  | | | D. Kyle Cerminara | | | Chairman of the Board | |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 29, 2015:AUGUST 23, 2022: The
This Notice and the accompanying Proxy Statement are first being distributed or made available, as the case may be, on or about June [*], 2022, and the Company’s Proxy Statement for the 20152022 Annual Meeting of Stockholders and the Company’s Annual Report on Form 10-K for the year ended December 31, 20142021 are available at http://www.proxyvote.com. 1511 N. Westshore Blvd, Suite 870, Tampa, FL 33607
TABLE OF CONTENTS 1347 PROPERTY INSURANCE HOLDINGS,
FG FINANCIAL GROUP, INC. 1511 N. Westshore Blvd, Suite 870
Tampa, FL 33607
PROXY STATEMENT FOR 20152022 ANNUAL MEETING OF STOCKHOLDERS This Proxy Statement is furnished in connection with the solicitation of the accompanying proxies on behalf of the Board of Directors of 1347 Property Insurance Holdings,FG Financial Group, Inc. (the “Company”“Company”, “we”“we”, “our” or “us”“us”) for use at the Company’s 20152022 Annual Meeting of Stockholders (the “Annual Meeting”“Annual Meeting”) to be held on May 29, 2015August 23, 2022 at 10:00 a.m., local time, at the Tampa Marriott Westshore, 1001 N. Westshore Boulevard, Tampa, FL 33607,Itasca Country Club, Lyons Room, 400 E Orchard St, Itasca, Illinois 60143, and any adjournments or postponements of the Annual Meeting. QUESTIONS & ANSWERS ABOUT THE ANNUAL MEETING Why am I receiving these materials? At the Annual Meeting, stockholdersholders of our common stock will act upon the matters described in the noticeNotice of meeting contained inMeeting accompanying this Proxy Statement, including the election of directors. You are receiving this Proxy Statement and the related form of proxy because you held shares of our common stock at the close of business on the Record Date (as defined below), and the Board of Directors of the Company (the “Board of Directors” or “Board”) is soliciting your proxy to vote at the Annual Meeting. You are invited to attend the Annual Meeting to vote on the proposals for which you may vote, as described in this Proxy Statement. However, you do not need to attend the meeting to vote your shares. Instead, you may vote your shares as described in further detail below under the heading “How“How do I vote?” below. When werewill these materials be mailed? The Company began mailingnotice, this Proxy Statement, and the proxy card for stockholders of record were distributed or made available, as the case may be, beginning on or about April 30, 2015.June [*], 2022, and the Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 are available at www.proxyvote.com.
Who is entitled to vote? Stockholders of record at the close of business on April 1, 2015June 27, 2022 (the “Record Date”“Record Date”), are entitled to vote in person or by proxy at the Annual Meeting. As of the Record Date, [*] shares of our common stock were outstanding. Each stockholder is entitled to one vote for each share of common stock held on the Record Date. Stockholders do not have cumulative voting rights in the election of directors. For ten days prior to the Annual Meeting during normal business hours, a complete list of all stockholders on the Record Dateof record will be available for examination by any stockholder, atfor any purpose germane to the Annual Meeting, by contacting the Company’s offices locatedCorporate Secretary at 1511 N. Westshore Blvd., Suite 870 Tampa, FL 33607.(847) 791-6817 for information regarding providing proof of eligibility to view the list. The list of stockholders will also be available at the Annual Meeting.
Who can attend the Annual Meeting? All stockholders as of the Record Date, or individuals holding their duly appointed proxies, may attend the Annual Meeting. Appointing a proxy in response to our solicitation will not affect a stockholder’s right to attend the Annual Meeting and to vote in person. Please note that if you hold your shares in “street name” (in other words, through a broker, bank, or other institution)nominee), you will need to bring a proxy, executed in your favor, from the holder of record (the broker, bank or other institution)nominee) to gain admittance to the Annual Meeting. What is the difference between a stockholder of record and a beneficial owner? If your shares are registered directly in your name with our transfer agent, VStock Transfer, LLC, then you are a “stockholder of record.” This Notice of Meeting and Proxy StatementThe accompanying proxy card has been provided directly to you by the Company. You may vote by ballot at the meetingAnnual Meeting or vote by proxy. To vote by proxy, complete, sign, date and return the enclosed proxy card or follow the instructions on the proxy card for voting by telephone or Internet. If your shares are held for you inby a brokerage,broker, bank or other institutional accountnominee (that is, held in “street name”“street name”), then you are not a stockholder of record. Rather, the institutionbroker, bank or other nominee is the stockholder of record, and you are the “beneficial owner” of the shares. The accompanying Notice of Meeting and this Proxy Statement havevoting instruction card has been forwarded to you by that institution.the broker, bank or other nominee. If you complete and properly sign the accompanying proxyvoting instruction card and return it in the enclosedappropriate envelope, or follow the instructions on the proxyvoting instruction card for voting by telephone or Internet, the institutionbroker, bank or other nominee will cause your shares to be voted in accordance with your instructions. If you are a beneficial owner of shares and wish to vote in person at the Annual Meeting, then you must obtain a proxy, executed in your favor, from the holder of record (the institution)broker, bank or other nominee).
What constitutes a quorum? A majority of the 6,358,125[*] shares of common stock outstanding on the Record Date must be represented, in person or by proxy, to provide a quorum at the Annual Meeting. If you vote, your shares will be part of the quorum. Shares represented by a properly executed proxy card can either bethat is marked “ABSTAIN” or returned without voting instructions and arewill be counted as present for the purpose of determining whether the quorum requirement is satisfied. Also, in those instances where shares are held of record by brokersa broker, bank or other nominee who have returned a proxy but are prohibitedhas not received voting instructions from exercisingthe beneficial owner of the shares and votes on matters without discretionary authority on certain matters for beneficial owners who have not given voting instructionsto do so (“broker non-votes”non-votes”), those shares will be counted as present for quorum purposes. However, although broker non-votes and abstentions are considered as present for purposes of establishing a quorum, but shallwe believe broker non-votes and abstentions will not be considered as votes cast for or against a proposal or director nominee, except that broker non-votes and abstentions will count as otherwise described herein.votes against Proposals 2. Once a share is represented at the Annual Meeting, it will be deemed present for quorum purposes throughout the Annual Meeting.Meeting (including any postponement or adjournment thereof unless a new record date is or must be set for such postponement or adjournment). What is the purpose of the meeting? The principal purposes of the Annual Meeting are to (i) elect two directorsthe six director nominees named in this Proxy Statement to the Company’s Board of Directors, each to approve certain issuances of shares of the Company’s common stock upon the exercise of outstanding warrants issued to 1347 Advisors LLC, to approveserve for a term as described in this Proxy Statement, (ii) adopt an amendment to our Third Amended and Restated Certificate of Incorporation to increase the numberauthorizing a new class of shares of commonpreferred stock, $0.001 par value per share, that the Company is authorized to issue from 10,000,000 to 20,000,000 shares, to approve the Company’s Amended and Restated 2014 Equity Incentive Plan, to(iii) ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2015,2022, (iv) consider and act upon a non-binding, advisory resolution to approve the compensation of our named executive officers, and (v) transact such other business as may properly come before the meeting or any postponement or adjournment thereof. How do I vote? If you are a holder of record, you can vote either in person at the Annual Meeting or by proxy without attending the Annual Meeting. We urge you to vote by proxy even if you plan to attend the Annual Meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting. If you attend the meeting and vote in person, you may vote at the meetingyour previously submitted proxy will be revoked and your proxy will not be counted. You can vote by proxy byusing any of the following methods: Voting by Telephone or Internet.If you are a holder of record, you may vote by proxy by using either the telephone or Internet methods of voting. Proxies submitted by telephone or through the Internet must be received by 11:59 pm ET on May 28, 2015.
| ● | Voting by Telephone or Internet. If you are a holder of record, you may vote by proxy by using either the telephone or Internet methods of voting. Proxies submitted by telephone or through the Internet must be received by 11:59 p.m., Eastern Time, on August 22, 2022. Please see the proxy card for instructions on how to access the telephone and Internet voting systems. | | | | | ● | Voting by Proxy Card. Each stockholder of record may vote by completing, signing, dating and promptly returning the accompanying proxy card in the self-addressed stamped envelope provided. When you return a properly executed proxy card, for instructions on how to access the telephone and Internet voting systems.Voting by Proxy Card.Each stockholder who receives stockholder materials by mail may vote by proxy by using the accompanying proxy card. When you return a proxy card that is properly signed and completed, the shares represented by your proxy will be voted as you specify on the proxy card. Your proxy card must be received prior to the Annual Meeting to be counted.
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The proxies named in the enclosed form of proxy and their substitutes will vote the shares represented by the enclosed form of proxy, if the proxy appears to be valid on its face, and, where a choice is specified by means of the ballot on the form of proxy, will vote in accordance with each specification so made. If you hold your shares in “street name,” you must either direct the broker, bank, broker or other record holder of your sharesnominee as to how to vote your shares, or obtain a proxy from the broker, bank, broker or other record holder,nominee, executed in your favor, to vote at the meeting. Please refer to the voter instruction cards usedprovided by your broker, bank, broker, or other record holdernominee for specific instructions on methods of voting, including by telephone or using the Internet.
What does it mean if I receive more than one proxy card? You will receive separate proxy cards when you own shares in different ways. For example, you may own shares individually, as a joint tenant, in an individual retirement account, in trust or in one or more brokerage accounts. You should complete, sign, date and return each proxy card you receive or follow the telephone or Internet voting instructions on each card. The instructions on each proxy card may differ. Be sure to follow the instructions on each card. Can I change my vote or instruction? Yes. The accompanying proxy is solicited from the holdersIf you are a stockholder of record, you may revoke your proxy or change your vote, regardless whether previously submitted by mail or via the Internet or by telephone, by (i) delivering a signed written notice stating that you revoke your proxy to the attention of the common stock on behalf of the Board of DirectorsCorporate Secretary of the Company, at 360 Central Avenue, Suite 800, St. Petersburg, FL 33701, that bears a later date than the date of the proxy you want to revoke and is revocable at any time by giving written notice of revocationreceived prior to the CompanyAnnual Meeting, (ii) submitting a valid, later-dated proxy via the Internet or by telephone before 11:59 p.m., Eastern Time, on August 22, 2022, or by mail that is received prior to the Annual Meeting, or by executing and delivering a later-dated proxy by mail prior to(iii) attending the Annual Meeting. Furthermore,Meeting (or, if the stockholders of record who are presentAnnual Meeting is postponed or adjourned, attending the postponed or adjourned meeting) and voting in person, which automatically will cancel any proxy previously given, or revoking your proxy in person, but your attendance alone at the Annual Meeting maywill not revoke their proxies andany proxy previously given. If you hold your shares in “street name” through a broker, bank, or other nominee, you must contact your broker, bank or other nominee to change your vote through new voting instructions or, if you wish to change your vote in person.person at the Annual Meeting, obtain a written legal proxy from the bank, broker or other nominee to vote your shares. What happens if I submit a proxy card and do not give specific voting instructions?
If you are a stockholder of record and sign and return the proxy card without indicating your voting instructions, your shares will be voted in accordance with the recommendations of the Board of Directors. With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion. As of the filing date of this proxy statement went to print,Proxy Statement, we did not know of any other matter to be raised at the Annual Meeting. If you are a beneficial owner and you sign and return your proxy card without indicating your instructions, then, under applicable rules, the broker or other organization that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” maters. If the broker or other organization that holds your shares does not receive instructions from you on how to vote your shares, on a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.”
Which voting matters are considered routine or non-routine?
The ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2015 (Proposal 5) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected in connection with Proposal 5.
Each of the other proposals are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore broker non-votes may exist in connection with Proposals 1 through 4.
What happens if I do not submit a proxy card and do not vote by telephone or Internet?Internet or do not submit voting instructions to my broker, bank or other nominee? If you are a stockholder of record and you neither designate a proxy nor attend the Annual Meeting, your shares will not be represented at the meeting. If you are thea beneficial owner of shares held in street name,and do not provide voting instructions to your bank, broker or other nominee, then, under applicable rules, the broker, bank or other nominee that holds your shares in “street name” may generally vote in its discretion on routine“routine” matters but cannot vote on “non-routine” maters. If the broker, bank, or other nominee that holds your shares does not receive instructions from you on how to vote your shares on a “non-routine matter”, the broker, bank or other nominee will inform the inspector of election for the Annual Meeting that it does not have the authority to vote on the matter with respect to your shares. This is generally referred to as a “broker non-vote.”
Which voting matters are considered “routine” or “non-routine”? We believe that Proposal 1 regarding the election of directors, Proposals 2 authorizing a new class of preferred stock and Proposal 4 regarding the non-binding, advisory resolution to approve the compensation of our named executive officers are considered “non-routine” matters under applicable rules. TheTherefore, a broker, bank or other nominee cannot vote on such proposals without voting instructions from the beneficial owners, and there may be broker non-votes in connection with Proposals 1, 2, and 4. We believe that Proposal 3 concerning the ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022, is considered a “routine” matter under applicable rules. Therefore, a broker, bank or other nominee may notgenerally vote on these matters, considered non-routine.and there will be no broker non-votes in connection with Proposal 3. What are the Board’s recommendations?
The Board recommends a vote:
| | 1.3 | “FOR” the election of each of the two nominees to the Company’s Board of Directors. | | | 2. | “FOR” the approval of certain issuances of shares of the Company’s common stock upon exercise of outstanding warrants issued to 1347 Advisors LLC. | | 3. | “FOR” the approval of an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.001 per share from 10,000,000 to 20,000,000. | | 4. | “FOR” the approval of our Amended and Restated 2014 Equity Incentive Plan. | | 5. | “FOR” the ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2015. |
What vote is required to approve each item? How will abstentions and broker non-votes be counted? As to theProposal 1, election of directors, a stockholderholder of common stock may vote “FOR” the election of each of the nominees proposed by the Board, or to “WITHHOLD” authority to vote for one or more of the nominees being proposed.proposed nominees. The election of a director requires the affirmative vote of a plurality of the votes properly cast by the holders of shares of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors provided that a quorum is represented at the meeting.Annual Meeting. A “plurality” means that the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to be elected at the meeting. As to Proposal 1, (election of directors), proxies marked “WITHHOLD” and broker non-votes will have no effect.impact on the election of directors. With respect to Proposal 2 (approvalto authorize a new class of the issuancespreferred stock and reduce its par value, a holder of common stock upon exercisemay vote “FOR” or “AGAINST” the proposal or “ABSTAIN” from voting on the proposal. Approval of the proposal requires the affirmative vote of holders the majority of the outstanding warrants),common stock. As to Proposal 2, proxies marked “ABSTAIN” and broker non-votes will have the effect of a stockholdervote “AGAINST” the proposal. With respect to Proposal 3, ratification of BDO USA, LLP as our independent registered public accounting firm, a holder of common stock may vote “FOR” or “AGAINST” ratification or “ABSTAIN” from voting on the proposal. ApprovalRatification requires an affirmative vote of theholders of a majority of the votes properly cast byat the holders of shares of our common stock. Brokers who hold shares in street name for customers who are the beneficial owners of such shares may not give a proxy to vote those shares on Proposal 2 absent specific instructions from their customers.Annual Meeting. Proxies marked “ABSTAIN” and broker non-votes shallwill not be considered as votes cast for or against Proposal 23 and will have no effect on the outcome of the proposal. With respect to Proposal 3 (approval of the increase to the authorized shares of common stock), a stockholder may vote “FOR” or “AGAINST” approval or “ABSTAIN” from voting on the proposal. Approval of the amendment to our Third Amended and Restated Certificate of Incorporation to increase the number of shares of our common stock authorized for issuance from 10,000,000 shares to 20,000,000 shares requires the affirmative vote of the holders of at least 66 2/3% of the voting power of all the outstanding shares of stock of the Company entitled to vote generally in the election of Directors at the Annual Meeting. Brokers who hold shares in street name for customers who are the beneficial owners of such shares may not give a proxy to vote those shares on Proposal 3 absent specific instructions from their customers. Proxies marked “ABSTAIN” and broker non-votes as to Proposal 3 will have the effect of a vote AGAINST approval.
With respect to Proposal 4, (approvaladvisory approval of the Amended and Restated 2014 Equity Incentive Plan),compensation of our named executive officers, a stockholderholder of common stock may vote “FOR” or “AGAINST” approval or “ABSTAIN” from voting on the proposal. Approval requires an affirmative vote of theholders of a majority of the votes properly cast byat the holders of shares of our common stock. Brokers who hold shares in street name for customers who are the beneficial owners of such shares may not give a proxy to vote those shares on Proposal 4 absent specific instructions from their customers.Annual Meeting. Proxies marked “ABSTAIN” and broker non-votes shallwill not be considered as votes cast for or against Proposal 4 and will have no effect on the outcome of the proposal. With respect to Proposal 5 (ratification
What are the Board’s voting recommendations? The Board recommends a vote “FOR”: | 1. | election of each of the six director nominees named in this Proxy Statement to the Board of Directors, each to serve for a term as described in the Proxy Statement; | | | | | 2. | adoption of an amendment to the Company’s Certificate of Incorporation to authorize a new class of preferred stock; | | | | | 3. | ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022; | | | | | 4. | approval, on an advisory, non-binding basis, of the compensation of our named executive officers. |
As of BDO USA, LLP), a stockholder maythe date of this Proxy Statement, it is expected that Fundamental Global GP, LLC (“FG”) and its affiliates, including Ballantyne Strong, Inc. (“BTN”) and certain of our directors, will vote “FOR” or “AGAINST” ratification or “ABSTAIN” from voting onapproval of Proposals 1, 2, 3, and 4. FG, through its affiliates, is the proposal. Ratification requires an affirmative votebeneficial owner of 3,532,765 shares of common stock as of the majorityRecord Date, which includes 1,638,409 shares owned by BTN and represents approximately 54.1% of the votes properly cast by the holders ofCompany’s outstanding shares of our common stock. Proxies marked “ABSTAIN”D. Kyle Cerminara, Chairman of our Board, serves as Chief Executive Officer, Founder and broker non-votes shall not be considered as votes cast for or against Proposal 5Partner of FG, and will have no effect on the outcomeChairman of the proposal. With respect to other matters that may properly come before the meeting, if any, unless otherwise required by law, our Third Amended and Restated Certificateboard of Incorporation, our Second Amended and Restated By-Laws or the rulesdirectors of NASDAQ, such matters may be approved by the affirmative vote of the majority of the votes properly cast for and against such matter by the holders of shares of our common stock.BTN.
How will votes be counted?
Broadridge Investor Communication Services will count the vote and will serve as the inspector of the election at the Annual Meeting.
Who is paying for the preparation and mailing of the proxy materials and how will solicitations be made? The Company will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf by the Company’s directors, officers or employees in person or by mail, telephone, facsimile or electronic transmission. We do not compensate them for soliciting proxies. We have requested brokerage houses and other custodians, nominees and fiduciaries to forward soliciting material to beneficial owners and have agreed to reimburse those institutions for their out-of-pocket expenses. How can I contact the members of the Board?
Stockholders may communicate with the full Board or individual directors by submitting such communications in writing to 1347 Property Insurance Holdings, Inc., Attn: Board of Directors (or the individual director(s)), 1511 N. Westshore Blvd., Suite 870, Tampa, FL 33607. Such communications will be delivered directly to the director(s).
PROPOSAL 1: 1 — ELECTION OF DIRECTORS The Company’s Board of Directors is divided into three classes, withcurrently consists of six directors, each class being elected toserving a three-yearone-year term. The
Based upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Joshua S. Horowitz and Douglas N. Raucy as Class I Directors to serve until the 2015 Annual Meeting or until their successors are duly elected and qualified. Hassan R. Baqar, Mr. Raucy, and Mr. Horowitz currently serve as Class I Directors. Mr. Baqar, a Class I Director since October 2012, will not be standing for re-election at the Annual Meeting. Gordon G. Pratt and Leo Christopher Saenger III are Class II Directors serving terms ending at the 2016 Annual Meeting.D. Kyle Cerminara, Richard E. Govignon, Jr., Rita Hayes, E. Gray Payne, Larry G. Swets, Jr., and Scott D. Wollney are Class III Directors serving terms endingto stand for election at the 2017 Annual Meeting.Meeting, with each director holding office for a term of one year and until his or her successor has been duly elected and qualified or until his or her earlier death, retirement, resignation, or removal.
The Board of Directors knows of no reason that Mr. Horowitz or Mr. Raucy might be unavailable to serve as the Class I Directors, and each has expressed an intention to serve, if elected. If Mr. Horowitz or Mr. Raucy is unable to serve, the shares represented by all valid proxies will be voted “FOR” the election of such substitute nominee as the Board of Directors may recommend. There are no arrangements or understandings between any of the persons nominated to be a Class I Director and any other person pursuant to which any of such nominees was selected.
Required Vote The election of a director requires the affirmative vote of a plurality of the votes properly cast by the holders of shares of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors provided that a quorum is represented at the meeting.Annual Meeting. A “plurality” means that the individuals who receive the largest number of votes are elected as directors, up to the maximum number of directors to be elected at the meeting. Therefore, proxies marked “WITHHOLD” and “broker non-votes” will have no impact on the election of directors. Properly executed proxies submitted pursuant to this solicitation will be voted “FOR”“FOR” the election of Mr. Horowitz and Mr. Raucy as Class I Directors,the directors marked on the proxy, unless specified otherwise. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”“FOR” THE ELECTION OF MR. HOROWITZD. KYLE CERMINARA, RICHARD E. GOVIGNON, JR., RITA HAYES, E. GRAY PAYNE, LARRY G. SWETS, JR., AND MR. RAUCYSCOTT D. WOLLNEY, AS CLASS I DIRECTORS. DIRECTORS
Directors and Director Nominee Standing for Election (Class I)Election: Douglas N. Raucy, age 58, has served as our President and Chief Executive Officer and as a member of our Board of Directors since its inception in October 2012. He has served in the same positions at both of our wholly-owned subsidiary companies, Maison Insurance Company and at Maison Managers Inc. since their inception in October 2012. Prior to joining our company, Mr. Raucy served as the Chief Executive Officer and President and as a member
Set forth below is information about each of the Company’s directors and executive officers, including ages as of March 31, 2022. | Name | | Age | | Position | | Directors: | | | | | | D. Kyle Cerminara | | 44 | | Chairman of the Board of Directors | | Larry G. Swets, Jr. | | 47 | | Chief Executive Officer and Director | | Richard E. Govignon, Jr. | | 45 | | Director | | Rita Hayes | | 79 | | Director | | E. Gray Payne | | 74 | | Director | | Scott D. Wollney | | 53 | | Director | | | | | | | Executive Officers: | | | | | | Hassan R. Baqar | | 44 | | Executive Vice President and Chief Financial Officer |
The Board currently consists of Directorssix directors, each serving for a term of Access Home Holdings LLC, Access Home Insurance Companyone year and Access Home Managers LLC from August 2011 to October 2012. He also served as the Chief Executive Officeruntil his or her successor has been duly elected and President and as a member of the Board of Directors of Prepared Holdings LLC, Prepared Insurance Company and Prepared Managers LLC. From January 2001 to August 2008, he served as the Chief Operating Officer of the Institute of Business and Home Safety (IBHS), a property mitigation firm that focuses on disaster-resistance property research and education. Mr. Raucy’s prior executive experience also includes positions held duringqualified or until his 20 year tenure at Allstate Insurance Company, including his role as the Director and Founder of the National Catastrophe Team and National Catastrophe Center from 1995 through 2001, where he led the Allstate Insurance Company efforts for every major national catastrophe. He previously served as a member of the advisory board for Marshall Swift/Boech and a consultant to the Ocean Research & Resources Advisory Panel, a U.S. federal advisory committee studying the effects of the ocean on global weather patterns. Mr. Raucy obtained a bachelor’s degree from Utah State University. We believe Mr. Raucy’s business and management experience make him a qualified and valuable member of our Board of Directors.or her earlier death, retirement, resignation, or removal. Joshua S. HorowitzD. Kyle Cerminara, age 37, was appointed to our Board of Directors on December 27, 2016; he became Chairman of our Board of Directors on May 11, 2018; and he served as our Principal Executive Officer from March 2020 to June 2020. Mr. Cerminara has over 20 years’ experience as an institutional investor, asset manager, director, chief executive, and founder and operator of multiple financial services and technology businesses. Mr. Cerminara co-founded Fundamental Global in April 2015. He2012, which is the Company’s largest stockholder, and serves as its Chief Executive Officer.
Mr. Cerminara is a member of the board of directors of a number of companies focused in the reinsurance, investment management, technology and communication sectors, including BK Technologies Corporation (NYSE American: BKTI), a provider of two-way radio communications equipment, since July 2015; Ballantyne Strong Inc. (NYSE American: BTN), since February 2015; and Firefly Systems Inc., a venture-backed digital advertising company, since August 2020. Mr. Cerminara is President since February 2021 and will serve as a director of FG New America Acquisition II Corp., a special purpose acquisition company currently in the process of completing its initial public offering which is focused on searching for a target business in the financial services and insurance industries, and he is also the chairperson of the board of directors of FG Acquisition Corp., a Canadian special purpose acquisition company focused on searching for a target company in the financial services sector. In addition, Mr. Cerminara has served as a member of the Board of Directors of 1347 Capital Corporation,Senior Advisor to FG Merger Corp. (NASDAQ: FGMC), a publicly-heldspecial purpose acquisition company, formed for the purpose of entering into a business combination with a company operating in the insurance industry (NASDAQ: TFSC), since July 2014. Since January 2012,February 2022. From April 2021 to December 2021, Mr. Horowitz hasCerminara served as managinga director of Palm Ventures LLC,Aldel Financial Inc. (NYSE: ADF), a family office private investment firm. Palm Ventures LLC and its affiliates invest inspecial purpose acquisition company co-sponsored by Fundamental Global, which merged with Hagerty (NYSE: HGTY), a wide range of public and private companies.leading specialty insurance provider focused on the global automotive enthusiast market. From October 2011July 2020 to December 2011,July 2021, Mr. Horowitz worked as an independent consultant. From September 2010 to September 2011, Mr. HorowitzCerminara served as Director and President of Research of Inverlochy Capital Ltd.FG New America Acquisition Corp. (NYSE: FGNA), a private asset management company. From April 2009 to April 2010, Mr. Horowitz served as managing director of Sapinda GmbH, a private investment holding company. From March 2004 to October 2008, Mr. Horowitz served as Director of Research for Berggruen Holdings,special purpose acquisition company, which merged with OppFi Inc. (NYSE: OPFI), a family office with over $2 billion in assets under management globally. In these positions,leading financial technology platform that powers banks to help everyday consumers gain access to credit. Mr. Horowitz has analyzed and managed investments in a number of companies, with an emphasis on insurance and financial firms. Mr. Horowitz is a director of Lincoln General Insurance Company, a private insurance company, and Democracy at Work, a 501(c)(3) non-profit organization. Mr. Horowitz obtained a Bachelor of Science degree in Management from Binghamton University. In March 2015, Mr. Horowitz successfully completed the Business of Insurance Certificate Program at St. John’s University. We believe Mr. Horowitz’s qualifications to serve on our Board of Directors include his executive management experience, his experience with the analysis and management of investments in companies in the insurance sector, and his service on the board of a private insurance company. Directors Continuing in Office
Directors whose present terms continue until 2016 (Class II):
Gordon G. Pratt, age 53,Cerminara has served as the Chairman of our BoardBallantyne Strong, Inc. since May 2015 and previously served as its Chief Executive Officer from November 2015 through April 2020. Mr. Cerminara was the Chairman of Directors sinceBK Technologies Corporation from March 2017 until April 2020. He served on the board of directors of GreenFirst Forest Products Inc. (TSXV: GFP) (formerly Itasca Capital Ltd.), a public company focused on investments in the forest products industry, from June 2016 to October 2021 and was appointed Chairman from June 2018 to June 2021; Limbach Holdings, Inc. (NASDAQ: LMB), a company which provides building infrastructure services, from March 2019 to March 2020; Iteris, Inc. (NASDAQ: ITI), a publicly-traded, applied informatics company, from August 2016 to November 2013. Since2017; Magnetek, Inc., a publicly-traded manufacturer, in 2015; and blueharbor bank, a community bank, from October 2013 to January 2020. He served as a Trustee and President of StrongVest ETF Trust, which was an open-end management investment company, from July 2016 to March 2004,2021. Previously, Mr. Pratt has been Managing MemberCerminara served as the Co-Chief Investment Officer of FundCWA Asset Management Group, LLC, (“FMG”), a privately-held investmentposition he held from January 2013 to December 2020.
Prior to these roles, Mr. Cerminara was a Portfolio Manager at Sigma Capital Management, an independent financial adviser, from 2011 to 2012, a Director and holding company. From June 2004Sector Head of the Financials Industry at Highside Capital Management from 2009 to April 2006, he served as the Senior2011, and a Portfolio Manager and Director at CR Intrinsic Investors from 2007 to 2009. Before joining CR Intrinsic Investors, Mr. Cerminara was a Vice President, Corporate DevelopmentAssociate Portfolio Manager and Analyst at T. Rowe Price (NASDAQ: TROW) from 2001 to 2007, where he was named amongst Institutional Investor’s Best of the Willis GroupBuy Side Analysts in New YorkNovember 2006, and London, prioran Analyst at Legg Mason from 2000 to which2001. Mr. Cerminara received an MBA degree from the Darden Graduate School of Business at the University of Virginia and a B.S. in Finance and Accounting from the Smith School of Business at the University of Maryland, where he was an equity holder and Managing Director of Hales Capital Advisors LLC and the Managing Partner of Distribution Partners Investment Capital L.P., a private equity fund focused on the insurance industry. Mr. Pratt currently serves as a Director, President, and Chief Executive Officer of 1347 Capital Corporation (NASDAQ: TFSC) and currently serves as Chairman of the Board of 1347 Capital LLC, a private investment advisory firm and as Chairman of the Board of Directors (and on the audit and compensation committees) of Atlas Financial Holdings, Inc. (NASDAQ: AFH). He previously served as Vice Chairman of the board of United Insurance Holdings Corp. (NASDAQ: UIHC) and as Vice Chairman of the board of privately-held Avalon Risk Management Insurance Agency LLC. Mr. Pratt also served as a member of the Board of Directors of United Property & Casualty Insurance CompanyOmicron Delta Kappa, an NCAA Academic All American and as ChairmanCo-Captain of the boardsmen’s varsity tennis team. He also completed a China Executive Residency at the Cheung Kong Graduate School of directors for FMG Acquisition Corp. (OTC: FMGQ) and of privately-held Risk Enterprise Management Limited. Before joining Hales,Business in Beijing, China. Mr. Pratt was a Senior Vice President and a member ofCerminara holds the management committee of Conning & Company, where he helped to raise and invest capital for three Conning Private Equity funds. He began his career at The Chase Manhattan Bank, N.A. in New York. Mr. Pratt obtained a bachelor’s degree from Cornell University and a Master of Management degree from Northwestern University. Chartered Financial Analyst (CFA) designation. We believe Mr. Pratt’s qualificationsCerminara is qualified to serve on our Board as he contributes his perspective as one of Directors include more than 25 years’the Company’s largest stockholders. He also offers to the Board valuable insights obtained through his management and operational experience and extensive experience in insurance companythe financial statementindustry, including investing, capital allocation, finance and financial analysis and assessment and his experience serving as chairman or vice chairman on the boards of directors of other publicly-traded and privately held insurance enterprises.public companies. Leo Christopher Saenger, IIILarry G. Swets, Jr., age 47, has served as a member of our Board of Directors since November 2013. Since February 2005, Mr. Saenger has2013 and served as President of Reliant Star Capital, Inc., which he founded in 2005our Chairman from March 2017 to focus on small and middle market private equity transactions. Based in New York, Reliant Star Capital, Inc. has consummated investments in industries ranging from computer peripherals to healthcare products and energy distribution. Prior to starting Reliant Star Capital, Inc., Mr. Saenger was a Partner at One Equity Partners, or OEP, a $5 billion private equity fund of J.P. Morgan, where he led investments in a variety of industries including healthcare, business services, aviation services and specialty insurance and completed dozens of acquisitions and add-on acquisitions for portfolio companies. During his approximately 10 years with OEP, Mr. Saenger took a leave of absence from April 2000 to February 2001 to work directly under Jamie Dimon, who was the newly-appointed CEO of Bank One, prior to its acquisition by JP Morgan Chase. At Bank One, Mr. Saenger led a five person “skunk works” team that worked on a variety of high-level banking strategic initiatives including technology reviews of various departments, competitive benchmarking, acquisition target analysis, and market research. Mr. Saenger started his career with Continental Illinois Venture Corp., the private equity branch of Continental Bank. He currently serves as a member of the Board of Directors (and on the audit committee) of Aphena Pharma Holdings and as a member of the Board of Directors of the Scarsdale Golf Club, which is a non-profit organization. Mr. Saenger is also a Trustee on the board of trustees of the St. Pius X Church, which is a non-profit organization. Mr. Saenger obtained a bachelor’s degree in finance and economics from the University of Notre Dame where he graduated cum laude and a Master of Business Administration with a double major in finance and entrepreneurial management from the University of Pennsylvania Wharton School of Business. We believe Mr. Saenger’s qualifications to serve on our Board of Directors include his approximately 20 years of management and investment experience leading Reliant Star Capital, Inc. and his experience serving on other boards and board committees across a broad range of industries.
Directors whose present terms continue until 2017 (Class III):
Larry G. Swets, Jr., age 40, has served as a member of our Board of Directors since November 2013. Since June 2010,May 2018. Mr. Swets has served as the President andour Chief Executive Officer of Kingswaysince November 2020 after serving as our interim Chief Executive Officer from June 2020 to November 2020, through a consulting agreement with Itasca Financial Services, Inc. (“KFSI”) (NYSE: KFS), and prior to that, served as Executive Vice President of Corporate Development for that entity from January 2010 to July 2010. In September 2013, LLC.
Mr. Swets joined the Boardhas over 25 years of Directors of KFSI. Mr. Swets also currently serves as a Director of Atlas Financial Holdings, Inc.experience within financial services encompassing both non-executive and as Chairman of the Board of Directors of 1347 Capital Corp. (NASDAQ: TFSC). From June 2007 through March 2012, Mr. Swets was a director of United Insurance Holdings Corp., a property and casualty insurance company. From June 2007 through September 2008, Mr. Swets was the CFO, Secretary, Treasurer and Executive Vice-President of FMG Acquisition Corp., a private holding company. In 2005,executive roles. Mr. Swets founded Itasca Financial LLC, an advisory and investment firm, specializingin 2005 and has served as its managing member since inception. Mr. Swets is founder and President of Itasca Golf Managers, Inc., a management services and advisory firm focused on the real estate and hospitality industries since August 2018. Mr. Swets has also served as Chief Executive Officer of FG New America Acquisition II Corp., a special purpose acquisition company in the process of going public and focused on merging with a company in the InsureTech, FinTech, broader financial services and insurance sectors since February 2021. Mr. Swets is a member of the board of directors of GreenFirst Forest Products Inc. (TSXV: GFP), a public company focused on investments in the forest products industry where hesince June 2016, Harbor Custom Development, Inc. (Nasdaq: HCDI) since February 2020, Ballantyne Strong, Inc. (NYSE American: BTN) since October 2021, Alexian Brothers Foundation since March 2018, and Unbounded Media Corporation since June 2019. Mr. Swets also serves as Managing Director untilChief Executive Officer and a member of the board of directors of FG Acquisition Corp (TSX:FGAA.V) since October 2021, and chairman of the board of directors of FG Merger Corp (Nasdaq: FGMCU) since February 2022, two special purpose acquisition companies seeking to complete acquisitions. Previously, Mr. Swets served as a director and Chief Executive Officer of FG New America Acquisition Corp. (NYSE: FGNA), a special purpose acquisition company which merged with OppFi Inc. (NYSE: OPFI), a leading financial technology platform that powers banks to help everyday consumers gain access to credit, from July 2020 to July 2021. Mr. Swets served as Senior Advisor to Aldel Financial Inc. (NYSE: ADF), a special purpose acquisition company which merged with Hagerty, Inc. (NYSE: HGTY), a leading specialty insurance provider focused on the global automotive enthusiast market, from April 2021 to December 2021. Mr. Swets also served as Chief Executive Officer of GreenFirst Forest Products Inc. (TSXV: GFP) (formerly Itasca Capital Ltd.) from June 2016 to June 2021, Chief Executive Officer of Kingsway Financial Services Inc. (NYSE: KFS) from July 2010 to September 2018, including as its President from July 2010 to March 2017. He served as Chief Executive Officer and director of 1347 Capital Corp., a special purpose acquisition company which merged with Limbach Holdings, Inc. (Nasdaq: LMB), from April 2014 to July 2016. Mr. Swets also previously served as a member of the board of directors of Limbach Holdings, Inc. (Nasdaq: LMB) from July 2016 to August 2021, Kingsway Financial Services Inc. (NYSE: KFS) from September 2013 to December 2018, Atlas Financial Holdings, Inc. (Nasdaq: AFH) from December 2010 to January 2010. 2018, FMG Acquisition Corp. (Nasdaq: FMGQ) from May 2007 to September 2008, United Insurance Holdings Corp. from 2008 to March 2012; and Risk Enterprise Management Ltd. from November 2007 to May 2012. Mr. Swets served as director of Insurance Income Strategies Ltd. from October 2017 to December 2021. Prior to his work atfounding Itasca Financial LLC, Mr. Swets served as an insurance company executive and advisor, including the role of Directordirector of Investmentsinvestments and Fixed Income Portfolio Managerfixed income portfolio manager for Lumbermens Mutual Casualty Company, formerly known as Kemper Insurance.Insurance Companies. Mr. Swets obtainedbegan his career in insurance as an intern in the Kemper Scholar program in 1994. Mr. Swets earned a bachelor’s degreeMaster’s Degree in Finance from DePaul University in 1999 and a Bachelor’s Degree from Valparaiso University andin 1997. He is a Master’s degree in finance from DePaul University. He alsomember of the Young Presidents’ Organization and holds the Chartered Financial Analyst designation(CFA) designation. Dr. Richard E. Govignon, Jr. was elected to our Board of Directors on December 15, 2021. Dr. Govignon has been a Partner of Dnerus Financial, a family asset management company, since June 2021. Dr. Govignon has experience as a corporate director/trustee in both the U.S. and Canada and has been an investor in numerous businesses and partnerships across a wide range of industries. Dr. Govignon is a member of the board of directors of GreenFirst Forest Products, Inc. (TSXV: GFP) (formerly Itasca Capital Ltd.), a public company focused on investments in the forest products industry, since January 2019. Dr. Govignon is also a member of the board of directors of B-Scada, Inc. (OTC: SCDA), a company that is in the business of developing software and hardware products. Previously, Dr. Govignon served as a Trustee of the StrongVest ETF Trust from 2017 to 2019. Dr. Govignon has worked in the healthcare and pharmaceutical industry in various management and pharmacy positions for over 20 years, most recently with CVS Health Corporation since 2019 (and from 2013-2017), and previously with ACME Markets Inc (2017-2019) and Rite Aid Corporation (2000-2013). Dr. Govignon received a Doctor of Pharmacy from the CFA Institute.University of the Sciences in Philadelphia and a Bachelor of Science in Pharmacy from the University of the Sciences in Philadelphia. We believe Mr. Swet’s qualificationsDr. Govignon’s managerial experience and his experience in investing and financial analysis make him qualified to serve on our Board of Directors include his more than ten years of executive management and leadership experience in the insurance industry. Directors. Scott D. Wollney, age 46,
Rita Hayes was appointed to our Board of Directors on January 11, 2019. Ms. Hayes has been Chair of Hayes International Advisors, LLC since 2013, where she counsels industry and institutional leaders on a range of economic, political and regulatory matters. She served as an expert for the International Chamber of Commerce’s World Business Summit in 2008. Ms. Hayes served as Deputy U.S. Trade Representative and Ambassador to the World Trade Organization (WTO), a post to which she was nominated by President Bill Clinton and unanimously confirmed by the U.S. Senate, from November 1997 through August 2001, during which time she served as Acting U.S. Trade Representative from January through March 2001. From 2001 through December 2006, she held the position of Deputy Director General of the World Intellectual Property Organization (WIPO) to which she was approved by the 184 Member States. At the conclusion of her appointment at WIPO, she served as Senior Advisor in Hogan & Hartson LLP’s Geneva, Switzerland office. Confirmed by the U.S. Senate in 1996, Ms. Hayes served from 1996 to 1997 as U.S. Chief Textile Negotiator in the Office of the U.S. Trade Representative (USTR) in Washington, D.C. From 1983 to 1992, Ms. Hayes served as Chief of Staff for two members of the U.S. Congress. Ms. Hayes received a Bachelor of Arts from the University of Georgia, an honorary degree as Doctor of Humane Letters from the College of Charleston and an honorary degree as Doctorate of Outstanding Public Service from the University of South Carolina. We believe Ms. Hayes’ extensive record of public and private service uniquely qualifies her to serve on our Board of Directors.
E. Gray Payne was elected to our Board of Directors on May 31, 2018. General Payne served as Senior Vice President of The Columbia Group (“TCG”) from September 2010 to September 2017, where he was responsible for managing the Marine Corps Programs Division (since September 2010) and the Navy Programs Division (since October 2013). TCG is a federal consulting firm working with the Department of Defense, the Department of Homeland Security, the National Oceanic and Atmospheric Administration, and private clients. TCG consults in the areas of logistics, acquisitions, program management, information technology, training, marine architecture and engineering, and command and control systems. Since December 2011, General Payne has also provided consulting services to and served on the Advisory Council of Marstel-Day, LLC, located in Fredericksburg, Virginia, which consults in the areas of conservation, environmental compliance, and encroachment. Prior to September 2010, General Payne was on active duty with the Marine Corps for 10 years, retiring as a Major General. His three commands as a General Officer included the Marine Corps Mobilization Command, the Marine Corps Logistics Command, and the 4th Marine Logistics Group. Prior to March 2001, he worked with a number of companies in various capacities, including as a management consultant, Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer. General Payne currently serves on the Board of Directors of BK Technologies Corporation (NYSE American: BKTI), a provider of communications equipment, since January 2017. He is a prior chairman of the Board of the Marine Corps Association and Foundation and currently serves as a Director on the Boards of VetCV (since December 2017) and the National Wildlife Refuge Association (since June 2018). He received a B.S. in Economics from North Carolina State University and a M.S. in Strategic Studies from U.S. Army War College. A member of the National Association of Corporate Directors, he has also earned the Professional Director designation from the American College of Corporate Directors. We believe General Payne’s 40 years of service in the Marine Corps, as well as over 25 years of experience in the private sector in the areas of financial management, operational improvement and strategic planning, qualify him to serve on our Board of Directors.
Scott D. Wollney was appointed to our Board of Directors on March 30, 2015. Since December 2010, Mr. Wollney has served as the President, and Chief Executive Officer and a directorDirector of Atlas Financial Holdings, Inc. (“Atlas”) (OTC: AFHIF), a NASDAQ-listedspecialty commercial automobile insurance company.business, which became subject to a liquidation order in the State of Illinois in August 2020, as previously disclosed by Atlas. From July 2009 until December 2010, Mr. Wollney was President and Chief Executive Officer of Kingsway America Inc. (“KAI”).(KAI), a property and casualty holding company and subsidiary of Kingsway Financial Services Inc. From May 2008 to March 2009, he was the President and Chief Executive Officer of Lincoln General Insurance Company (a subsidiary of KAI), a property and casualty insurance company. From January 1998 to May 2008, he was President ofMr. Wollney co-founded Avalon Risk Management, Inc., an insurance broker.broker, in 1998, and served as its President, from 2002 to 2008. Mr. Wollney has more than 2426 years of experience in property and casualty insurance. During his tenure in the industry, Mr. Wollney has held executive positions at both insurance companies, as well as brokerage operations. Mr. Wollney is a MBA graduate of Northwestern University’s Kellogg School of Management with a concentration in finance and management strategy and holds a Bachelor of Arts degree from the University of Illinois. We believe Mr. Wollney’s qualifications to serve on our Board of Directors include his direct operating experience with respect to numerous disciplines which are critical to the insurance business. CORPORATE GOVERNANCE Board Diversity | Board Diversity Matrix as of May 25, 2022 | | Total Number of Directors | | 6 | | | | | Female | | | Male | | | Non-Binary | | | Did not Disclose Gender | | | Directors | | | 1 | | | | 5 | | | | – | | | | – | | | Demographic Information: | | | – | | | | – | | | | – | | | | – | | | African American or Black | | | – | | | | – | | | | – | | | | – | | | Alaskan or Native American | | | – | | | | – | | | | – | | | | – | | | Asian | | | – | | | | – | | | | – | | | | – | | | Hispanic or Latinx | | | – | | | | – | | | | – | | | | – | | | Native Hawaiian or Pacific Islander | | | – | | | | – | | | | – | | | | – | | | White | | | 1 | | | | 5 | | | | – | | | | – | | | Two or More Races or Ethnicities | | | – | | | | – | | | | – | | | | – | | | LGBTQ+ | | | – | | | | | | | | | | | | | | | Persons with Disabilities | | | 1 | | | | | | | | | | | | | |
We recognize the value of diversity at the Board level and believe that our Board currently comprises an appropriate mix of background, diversity and expertise. In particular, we currently have a female director, and our directors, overall, have significant experience in a variety of industries and sectors, including, among others, the insurance industry, the financial industry, military operations and political and diplomatic operations. Although we have no formal separate written policy, our Nominating and Corporate Governance Committee is required under its charter to recommend nominees that ensure sufficient diversity of backgrounds on our Board. We believe that the diversity of our directors enriches our Board by encouraging fresh perspectives and bringing new and valuable insights to the Board. Board Meetings and Independence During the year ended December 31, 2014,2021, the Board of Directors held six formalnine meetings. During 2014,In 2021, no director attended lessfewer than 75% of the total number of (i) meetings held by the Board of Directors during the period for which he or she was a director and applicable committee meetings.(ii) meetings held by all committees of the Board of Directors on which he or she served (during the period that the director served). Independent members of our Board of Directors also meet in executive session without management present. Board members
“Controlled Company” Status As discussed under “Security Ownership of Certain Beneficial Owners and Management,” FG and affiliated entities beneficially own approximately [*]% of our common stock as of the Record Date. As a result, we are encouraged, buta “controlled company,” or a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company, under The Nasdaq Stock Market (“Nasdaq”) rules. “Controlled companies” may elect not required to attendcomply with certain Nasdaq corporate governance requirements, including regarding independence of their directors and board committees. Currently, we have not elected to take advantage of these exemptions and are subject to the Annual Meeting.same governance standards as companies that are not “controlled companies.” Director Independence The Board has determined that four of its members are “independent directors” as defined under the applicable rules of the NASDAQ Stock MarketNasdaq and the Securities and Exchange Commission.Commission (the “SEC”). The four independent directors currently serving on the Board are Gordon G. Pratt, Leo Christopher Saenger, III,Rita Hayes, E. Gray Payne, Scott D. Wollney and Joshua S. Horowitz.Richard E. Govignon, Jr. In making its determination of independence, the Board of Directors considered questionnaires completed by each directordirectors and all ordinary courseany relationships and transactions between the Company and all entities with which the director is employed. In the case of Mr. Pratt,directors are involved. Nasdaq’s listing rules require that the Board also considered his role as managing member of FMG and sole managerDirectors be comprised of FEA Pratt Family Holdings LLC, entities which own an approximate 9.5% beneficial ownership interest in the Company.a majority of independent directors. Board Leadership Structure Mr. Cerminara serves as Chairman of the Board of Directors, and Risk OversightMr. Swets is the Company’s principal executive officer. The Chairman of the Board typically presides at all meetings of the Board. The Chairman’s role also includes providing feedback on the direction and performance of the Company, setting the agenda of meetings of the Board of Directors and leading the Board of Directors in anticipating and responding to changes in our business. Our Board of Directors doeshas not haveestablished a policy on whether the same person should serve as both the Chief Executive Officerprincipal executive officer of the Company and the Chairman of the Board or, if the roles are separate, whether the Chairman should be selected from the non-employee directors or should be an employee. Our Board believes that it should have the flexibility to periodically determine the leadership structure that it believes is best for the Company. Currently,Given the positionsspecific characteristics and circumstances of the Company, the Board believes that its current leadership structure will enhance and facilitate the implementation of the Company’s business strategy, including effective monitoring and objective evaluation of the Chief Executive Officer’s performance. Mr. Cerminara has been closely involved in developing the Company’s business strategy following the sale of our three insurance subsidiaries to FedNat Holding Company (“FedNat”) and has extensive management experience, including having served as Chairman of the Board since May 2018. The Board believes that these qualities uniquely qualify Mr. Cerminara to lead and facilitate informed Board discussions about the Company’s policies and operations and enable him to communicate effectively with the Board on strategic developments and other critical matters facing the Company, while also providing oversight of the Chief Executive Officer. As Chief Executive Officer, are separated. The Chief Executive Officer currently serves asMr. Swets is also responsible for developing the only member of management on the Board.Company’s business strategy and managing its day-to-day leadership and performance. The ChairmanBoard has not appointed a lead independent director at this time. Currently, the Board consists of six directors, four of whom are independent. All independent directors serve on one or more committees of the Board, typically presides at all meetingsare able to closely monitor the activities of the Company and meet in executive sessions without management present to discuss the Company’s business strategy and operations. Given the active involvement of all of the independent directors in the Company’s matters, the Board andhas determined that a lead independent director is elected to servenot necessary at this time. Additionally, because the Company’s Chairman is appointed annually by the directors. The Chairman’s role also includes providing feedback onCompany’s non-management directors, such directors are able to evaluate the directionleadership and performance of the Company, setting the agenda of meetings of the Board of Directors and leading the Board of Directors in anticipating and responding to changes in our business.Chairman each year. Risk Oversight Our Board is actively involved in oversight of risks that could affect the Company. This oversight is conducted primarily through the three standing committees of the Board, as disclosed in the descriptions of each of the committees herein, and in the charters of each of the committees, but the full Board has retained responsibility for general oversightoverall supervision of risk management efforts as they relate to the key business risks we face. Management identifies, assesses and manages the risks most critical to our operations and routinely advises our Board regarding those matters. Areas of material risk may include operational, financial, legal and regulatory, human capital, information technology and security, and strategic and reputational risks. In addition, in connection with the COVID-19 coronavirus outbreak, the Board and management have focused on our efforts to mitigate associated financial and human capital management risk exposures. Our Board satisfies thisits oversight responsibility through full reports by each committee chair regarding the applicable committee’s considerations and actions, as well as through regular reports directly from officersmembers of management responsible for oversight of particular risks within the Company. The Audit Committee considers and discusses financial risk exposures. The Compensation and Management Resources Committee assesses and monitors whether any of the Company’s compensation policies and programs have the potential to encourage excessive risk-taking. The Nominating and Corporate Governance Committee monitors the effectiveness of the Company’s corporate governance policies and the selection of prospective board members and their qualifications. In addition, General Payne, as the chair of the Nominating and Corporate Governance Committee, takes an active role in corporate governance matters. The Board believes that the leadership structure described above facilitates the Board’s oversight of risks because it allows the Board, working through its committees, to participate actively in the oversight of management actions. The Board believes that its role in risk oversight does not affect the Board’s leadership structure. Like all businesses, we also face threats to our cybersecurity, as we are reliant upon information systems and the internet to conduct our business activities. In light of the pervasive and increasing threat from cyberattacks, the Audit Committee, with input from management, assesses the Company’s cybersecurity and other information technology risks and threats and the measures implemented by the Company to mitigate and prevent cyberattacks, and the Board receives periodic reports on the Company’s cybersecurity program. Hedging and Pledging Policy Under the Company’s Insider Trading Policy, all directors, officers and employees of the Company and its subsidiaries are prohibited from engaging in any hedging transactions involving Company securities or equity securities of any subsidiaries of the Company, holding Company securities in a margin account or pledging Company securities as collateral. Policy Concerning Director Attendance at Annual Stockholders’ Meetings There is no formal policy as to Director attendance at annual stockholders’ meetings. Ms. Hayes, as well as Messrs. Cerminara, Payne, Swets, Wollney, and Govignon, attended the 2021 Annual Stockholders’ Meeting held on December 15, 2021. Code of Ethics We have adopted a code of ethics applicable to all officers, employees and directors of the Company.Company, including our principal executive officer, principal financial officer, principal accounting officer and controller. Our code of ethics has been posted on our corporate website:www.1347pih.comwww.fgfinancial.comunder the heading “Governance Documents”.Documents.” Board Committees and Committee Member Independence Our Board of Directors has established an Audit Committee, a Compensation and Management Resources Committee, and a Nominating and Corporate Governance Committee. The composition of each committee as of April 30, 2015the date of this Proxy Statement is outlined in the table and footnote below. Our Board of Directors utilizes the NASDAQNasdaq rules and independence standards in determining whether its members are independent. | | | Audit Committee | | | Compensation &
and Management Resources Committee | | | Nominating &and Corporate
Governance Committee | | Gordon G. PrattScott D. Wollney | | | C | | | | X | | X | | X | | Leo Christopher Saenger, IIIE. Gray Payne | | | X | | X | | C | | | | C | | | Rita Hayes | | | | | | | | | | | X | | Scott D. WollneyRichard E. Govignon, Jr. | | | X | | | | | Joshua S. Horowitz | | | | X | | X |
C – Indicates committee chair. The following is a summary of the respective responsibilities of each of the Board’s standing committees.Audit Committee, the Compensation and Management Resources Committee, and the Nominating and Corporate Governance Committee. The Board of Directors has approved and adopted a written charter for each of the committees listed, copies of which are posted on the Company’s website atwww.1347pih.comwww.fgfinancial.com in, under the heading “Governance Documents” section.Documents.” The Board of Directors may also establish from time to time any other committees that it deems necessary or desirable. Members serve on these committees until their resignation or until otherwise determined by the Board of Directors. Audit Committee. The Audit Committee was appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities with respect to the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the external auditor’s qualifications, independence, and performance, and the performance of the Company’s internal audit function. The Audit Committee’s primary duties and responsibilities are to: | | ·● | Oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. | | | · | | | ● | Identify and monitor the management of the principal risks that could impact the financial reporting of the Company. | | | · | | | ● | Monitor the integrity of the Company’s financial reporting process and system of internal controls regarding financial reporting and accounting appropriateness and compliance. | | | · | Recommend | | ● | Provide oversight of the appointment of and monitor thequalifications, independence and performance of the Company’s external auditors and the appointed actuary. | | | · | | | ● | Provide an avenue of communication among the external auditors, the appointed actuary, management and the Board. | | | · | | | ● | Review the annual audited and quarterly financial statements with management and the external auditors. |
The Audit Committee is also responsible for discussing policies with respect to risk assessment and risk management, including regularly reviewing the Company’s cybersecurity and other information technology risks, controls and procedures and the Company’s plans to mitigate cybersecurity risks and respond to data breaches. Audit committee members shallmust meet the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the independence requirements of the NASDAQNasdaq listing standards and all other applicable rules and regulations. The Board of Directors has determined that each of Mr. Pratt and Mr. Saenger is an “audit committee financial expert” as that term is defined in Securities and Exchange Commission Regulations. Each member of the Audit Committee is independent and satisfies the applicable requirements for Audit Committee membership under Rule 10A-3 under the NASDAQExchange Act and the Nasdaq rules. The Board of Directors has determined that Mr. Wollney is the “audit committee financial expert,” as that term is defined in SEC regulations. The Audit Committee held five meetings during the year ended December 31, 2021. Compensation and Management Resources Committee. The primary purpose of the Compensation &and Management Resources Committee, (the “Compensation Committee”) is to assist the Board of Directors in discharging its responsibilities with respect to compensation of the Company’s seniorexecutive officers and subsidiary presidents and to provide recommendations to the Board in connection with directors’ compensation. The Compensation Committee’s primary duties and responsibilities are to: | ● | Develop guidelines for and determine the compensation and performance of the executive officers of the Company (in the case of the Chief Executive Officer’s compensation, without the Chief Executive Officer being present). | | | | | ● | Recommend to the Board incentive and equity-based plans and administer such plans, oversee compliance with the requirements under the Nasdaq listing standards that stockholders of the Company approve equity incentive plans (with limited exceptions under such standards), and approve grants of equity and equity-based awards. | | | | | ● | Review any recommendations from the Chief Executive Officer with respect to compensation for the other executive officers, including benefits and perquisites, incentive compensation plans and equity-based plans for recommendation to the Board. | | | | | ● | Oversee risks relating to the Company’s compensation policies, practices and procedures. | | | | | ● | Review and discuss with management the proxy disclosures regarding executive compensation required to be included in the Company’s proxy statement and periodic reports with the SEC, each in accordance with applicable rules and regulations of the SEC and other authority. | | | | | ● | Evaluate the results of the stockholder advisory vote on executive compensation when held. | | | | | ● | Review director compensation levels and practices, and recommend, from time to time, changes in such compensation levels and practices to Board with equity ownership in the Company encouraged. |
The Compensation Committee receives input and recommendations from the Company’s executive officers. Neitherofficers (except with respect to such executive officer’s own compensation) but is not bound by such recommendations. These recommendations are generally based on each executive officer’s individual performance as well as his knowledge of each executive officer’s job responsibilities, seniority, expected contributions and his understanding of the competitive market for such executives. In connection with the hiring of Mr. Swets as our CEO, the Compensation Committee nor management has engaged a compensation consultant as of April 30, 2015.in 2020, to provide advice and comparable pay structures for chief executive officers at publicly held companies with similar characteristics to the Company. Each Compensation Committee member is independent and satisfies the applicable requirements for Compensation Committee membership under the NASDAQ rules.Nasdaq rules and is a “non-employee director” as defined in Rule 16b-3 under the Exchange Act. The Compensation Committee held six meetings during the year ended December 31, 2021. Nominating and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee (the “Nominating Committee”) is to identify, evaluate and recommend individuals qualified to become members of the Board of Directors, consistent with criteria approved by the Board of Directors, select, or recommend that the Board select the director nominees to stand for election at each annual or special meeting of stockholders of the Company in which directors will be elected or to fill vacancies on the Board, develop and recommend to the Board a set of corporate governance principles applicable to the Company, oversee the annual performance evaluation of the Board and its committees and management, and otherwise take a leadership role in shaping and providing oversight of the corporate governance of the Company, including recommending directors eligible to serve on all committees of the Board. to: | ● | Identify, evaluate and recommend individuals qualified to become members of the Board of Directors, consistent with criteria approved by the Board of Directors. | | | | | ● | Select, or recommend that the Board select the director nominees to stand for election at each annual or special meeting of stockholders of the Company in which directors will be elected or to fill vacancies on the Board. | | | | | ● | Develop and recommend to the Board a set of corporate governance principles applicable to the Company, as the Committee deems appropriate. | | | | | ● | Oversee the annual performance evaluation of the Board and its committees and management. | | | | | ● | Otherwise take a leadership role in shaping and providing oversight of the corporate governance of the Company, including recommending directors eligible to serve on all committees of the Board. |
Each Nominating Committee member is independent and satisfiesunder the applicable requirements forNasdaq rules. The Nominating Committee membership underheld one meeting during the NASDAQ rules.year ended December 31, 2021. Although the Nominating Committee has not formulated any specific minimum qualifications that the committee believes must be met by a director-nominee that the committee recommends to the Board, the factors it will take into account will include judgement, skill, diversity, experiences with businesses and other organizations of comparable size and scope, the interplay of the candidate’s experience with the experience of other directors, and the extent to which the candidate would be a desirable addition to the Board of Directors and any committees of the Board. Each of the proposed directorThe Nominating Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees was recommended by independentand may also seek referrals from other members of the Board, management, stockholders and other sources. Evaluations of Directors.candidates generally involve a review of background materials, internal discussions and interviews with selected candidates, as appropriate. Upon selection of a qualified candidate, the Nominating Committee recommends the candidate for consideration by the full Board. The Nominating Committee will consider recommendations for directorships submitted by stockholders. Any suchStockholders wishing to propose director nominee recommendations must be addressedcandidates for consideration by the Nominating Committee may do so by writing to the Corporate Secretary of the Company 1511 N. Westshore Blvd., Suite 870, Tampa, FL 33606, and include appropriate biographicalproviding the information concerning each proposed nominee.the nominee and his or her proponent(s) as required by the Company’s By-Laws. The secretary will forward recommendationsBy-Laws set forth further requirements for stockholders wishing to nominate director candidates for consideration at a stockholders’ meeting including, among other things, that a stockholder must give timely written notice of such a nomination to the Nominating Committee and those candidatesCorporate Secretary of the Company. Candidates recommended by stockholders will be given the same consideration as all other candidates. Each recommendation should set forth the candidate’s name, age, business address, business telephone number, residence address, and principal occupation or employment as well the submitting stockholder’s name, address and telephone number and number of shares held. The committee may require the recommended candidate to furnish additional information. A stockholder wishingStockholder Communications with the Board
Stockholders may communicate with the full Board or individual directors by submitting such communications in writing to nominate an individual for electionFG Financial Group, Inc., Attn: Corporate Secretary, 360 Central Ave., Suite 800, St. Petersburg, FL 33701. The Company’s management will forward such correspondence, as appropriate. Complaints or concerns relating to our financial reporting, accounting, internal accounting controls or auditing will be referred to the Board of Directors at the Annual Meeting, rather than recommend a candidate to the Nominating Committee, must comply with the advance notice requirements set forth in Article I, Section 4Chairman of our bylaws. See “Stockholder Proposals for Presentation at the 2016 Annual Meeting” for further information.Audit Committee. Director Compensation
The Board determines the form and amount of non-employeeDIRECTOR COMPENSATION
Under our director compensation after its review of recommendations made by the Compensation Committee. Non-employee directors receive suchprogram, we provide compensation as determined by a majority of the Board.to our non-employee directors. Directors who are employees of the Company do not receive compensation for their service as directors. The director compensation program in effect as of July 27, 2021 was adopted to remain competitive in attracting and retaining qualified board members and to better align director compensation to other public companies of comparable size to the Company. The terms of the program were as follows: During
| ● | Each non-employee director receives an annual cash retainer of $50,000, paid in quarterly installments; | | | | | ● | The Chairman of the Board receives an additional annual cash retainer of $75,000, paid in quarterly installments; | | | | | ● | The Chairman of the Reinsurance and Risk Committee receives an additional cash retainer of $75,000, paid in quarterly installments; | | | | | ● | The Chairman of the Audit Committee receives an additional cash retainer of $15,000, paid in quarterly installments; | | | | | ● | The Chairman of the Compensation Committee as well as the Chairman of the Nominating Committee each receives an additional cash retainer of $5,000, paid in quarterly installments; | | | | | ● | Each of the members of the Audit, Compensation, and Nominating Committees (excluding the Chairman of each of those committees), receives an additional cash retainer of $2,000, paid in quarterly installments; | | | | | ● | Each non-employee director receives an annual grant of restricted stock units (“RSUs”) with a value of $50,000; and | | | | | ● | Each non-employee director will receive reimbursement of reasonable out-of-pocket expenses for attending board and committee meetings. |
RSUs granted to our directors vest in five equal annual installments, beginning with the year ended December 31, 2014,first anniversary of the grant date, provided that, if the director makes him or herself available and consents to be nominated by the Company compensated non-employee directors withfor continued service as a combination of cash payments as well as one-time grants of options to purchase the Company’s common stock. The cash payments include a yearly fee of $50,000 (paid in four equal quarterly installments) to each memberdirector of the Board then serving, as well as $25,000 paid to Mr. Pratt, for his additional responsibilities as Chairman ofCompany, but is not nominated by the Board and $15,000 paid to Mr. Saenger, for his additional responsibilitieselection by stockholders, other than for good reason as Chairmandetermined by the Board in its discretion, then the next 20% tranche of the Audit Committee. Director option grantsRSUs shall vest immediately and have an exercise price equal to the market closing price of our common stock as of the director’s last date of issuance, and expire four years fromservice as a director of the date of issuance. Company.
The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) provides that the aggregate grant date fair value of all awards granted to any single non-employee director during any single calendar year (determined as of the option awards, which has been provided in the following table, has been calculated on the date ofapplicable grant using the Black-Scholes valuation model. Assumptions used in the calculation of these amounts are described in Note 10date(s) under applicable financial accounting rules), taken together with any cash fees paid to the Company’s audited financial statements found innon-employee director during the Company’s Annual Report on Form 10-K for thesame calendar year, ended December 31, 2014.may not exceed $200,000. The following table sets forth information with respect to compensation earned by each of our non-employee directors for the year ended December 31, 2014.2021. Mr. Swets, who served as a director for all of 2021, did not receive any compensation for his service as a director, as he concurrently served as Chief Executive Officer of the Company. For more information, see “Compensation of Executive Officers—Summary Compensation Table.” | Non-Employee Director | | Fees Earned or
Paid in Cash ($) | | Stock Option
Awards ($) | | All Other
Compensation ($) | | Total ($) | | Hassan Baqar | | | 50,000 | | | | 19,009 | | | | — | | | | 69,009 | | | Gordon G. Pratt | | | 75,000 | | | | 19,009 | | | | — | | | | 94,009 | | | Leo Christopher Saenger, III | | | 65,000 | | | | 19,009 | | | | — | | | | 84,009 | | | Larry G. Swets, Jr. | | | 50,000 | | | | 19,009 | | | | — | | | | 69,009 | | | Scott D. Wollney(2) | | | — | | | | — | | | | — | | | | — | | | Joshua S. Horowitz(2) | | | — | | | | — | | | | — | | | | — | |
| Non-Employee Director | | Fees Earned or Paid
in Cash ($)(4) | | | Stock
Awards ($)(5) | | | Total ($) | | | D. Kyle Cerminara | | | 125,000 | | | | 50,000 | | | | 175,000 | | | Lewis M. Johnson(1) | | | 31,250 | | | | – | | | | 12,500 | | | Rita Hayes | | | 52,000 | | | | 50,000 | | | | 102,000 | | | Richard E. Govignon, Jr.(2) | | | – | | | | 37,500 | | | | 89,500 | | | E. Gray Payne | | | 62,000 | | | | 50,000 | | | | 112,000 | | | Scott D. Wollney | | | 56,000 | | | | 50,000 | | | | 106,000 | | | Dennis A. Wong(3) | | | 65,000 | | | | 50,000 | | | | 115,000 | |
| 1. | On March 12, 2021, Mr. Johnson resigned from the Company’s Board of Directors. | | | | 2. | Mr. Govignon was elected to the Board on December 15, 2021. | | | | 3. | Mr. Wong served as a director of the Company and the chairman of our audit committee until December 15, 2021. | | | | 4. | In addition to their director compensation, non-employee directors are reimbursed for travel and other reasonable out-of-pocket expenses related to their attendance at boardBoard or committee meetings.meetings, or for other travel on behalf of the Company. These expenses have not been included in the table above. | 2. | | | 5. | Stock awards represent the aggregate grant date fair value of 14,492 RSUs granted to each non-employee director on December 17, 2021, except for Mr. Wollney and Mr. Horowitz were appointedGovignon, who was elected to the board on December 15, 2021, and was instead granted 10,869 RSUs having a value of $37,500, representing his pro-rata share of the 2021 grant to non-employee directors. The aggregate grant date fair value for the RSUs has been presented in the table above in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The RSUs were valued using the closing price of Directorsthe Company’s common shares on Nasdaq on the grant date. The RSUs vest in Marchfive equal annual installments, beginning one year from the date of grant, provided that, if the director makes themselves available and April 2015, respectively, and thus did not receive any compensation fromconsents to be nominated by the Company for continued service as a director of the year ended December 31, 2014.Company, but is not nominated by the Board for election by stockholders, other than for good reason as determined by the Board in its discretion, then the next 20% tranche of RSUs shall vest as of the director’s last date of service as a director of the Company. |
The aggregate numbernumbers of stock awards issued during 2014 and option awards outstanding for each director as of December 31, 2014 for each non-employee director was2021 were as follows: | | | Stock Option Awards (Number of Shares) | | Non-Employee Director | | Outstanding on
January 1, 2014 | | Granted
During 2014 | | Outstanding on
December 31, 2014 | | Hassan Baqar | | | — | | | | 17,745 | | | | 17,745 | | | Gordon G. Pratt | | | — | | | | 17,745 | | | | 17,745 | | | Leo Christopher Saenger, III | | | — | | | | 17,745 | | | | 17,745 | | | Larry G. Swets, Jr. | | | — | | | | 17,745 | | | | 17,745 | | | Scott D. Wollney(1) | | | — | | | | — | | | | — | | | Joshua S. Horowitz(1) | | | — | | | | — | | | | — | |
1. | ● | Mr. Cerminara – 29,716 RSUs. | | ● | Ms. Hayes – 29,335 RSUs. | | ● | Mr. Govignon – 10,869 RSUs. | | ● | General Payne – 28,383 RSUs. | | ● | Mr. Swets – 8,253 RSUs (excludes a stock option granted to Mr. Swets for his service as the Company’s CEO; see “Compensation of Executive Officers”). | | ● | Mr. Wollney and – 28,383 RSUs. | | ● | Mr. Horowitz were appointedWong – 29,716 RSUs. As Mr. Wong made himself available to serve on the Board but was not nominated to do so at the Company’s 2021 Annual Stockholders’ Meeting, the Board accelerated the vesting of Directors in March and April 2015, respectively, and thus did not receive any compensation from the CompanyMr. Wong’s RSUs such that all of Mr. Wong’s outstanding RSUs vested on January 1, 2022. This included 14,492 RSUs granted to Mr. Wong on December 17, 2021, as well as an additional 15,224 RSUs previously granted to Mr. Wong for the year ended December 31, 2014.his service on our Board. |
2021 Grants of Restricted Stock Units On December 17, 2021, the Compensation Committee granted 14,492 RSUs with a value of $50,000 to five of the Company’s six non-employee directors. Mr. Govignon, who was elected to the board on December 15, 2021, was granted 10,869 RSUs having a value of $37,500, representing his pro-rata share of the 2021 grant to non-employee directors. The RSUs vest in five equal annual installments, subject to the director’s continued service on the Board, beginning with the first anniversary of the grant date. The award agreements for each of the RSU grants made during 2021 discussed above also provide that if a director makes herself or himself available and consents to be nominated by the Company for continued service as a director of the Company, but is not nominated by the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the next 20% tranche of RSUs shall vest as of the director’s last date of service as a director of the Company. The Board’s practice has been to accelerate vesting of all of a director’s RSUs, upon the director’s termination of service. Accordingly, as Mr. Wong was not reelected to the Board, the Board accelerated the vesting of Mr. Wong’s RSUs such that all of Mr. Wong’s outstanding RSUs vested on January 1, 2022.
PROPOSAL 2:
APPROVAL OF THE ISSUANCE OF CERTAIN SHARES OF OUR COMMON STOCK IN EXCESS OF
20% OF OUR OUTSTANDING SHARES UPON EXERCISE OF WARRANTS ISSUED TO 1347
ADVISORS LLC IN ACCORDANCE WITH NASDAQ LISTING RULES
Terms of the MSA Transaction
On February 24, 2015, the Company entered into an Agreement to Buyout and Release dated February 24, 2015 (the “Buyout Agreement”) with 1347 Advisors LLC (“Advisors”), a subsidiary of KFSI, to terminate the Management Services Agreement (the “MSA”) between the Company and Advisors dated February 11, 2014, under which Advisors agreed to provide certain services to the Company, including forecasting, analysis of capital structure and reinsurance programs, consultation in future restructuring or capital raising transactions, and consultation in corporate development initiatives.
In connection with the Buyout Agreement and in consideration for Advisors agreeing to voluntarily terminate the MSA effective February 24, 2015 pursuant to the Buyout Agreement, the Company: (i) paid Advisors $2,000,000 in cash, (ii) issued to Advisors 120,000 shares of the Company’s Series B Preferred Shares having a liquidation amount per share equal to $25.00, (iii) issued to Advisors a seven-year warrant (the “MSA Warrant”) to purchase up to 1,500,000 shares of the Company’s common stock at an exercise price of $15.00 per share, and (iv) entered into a Performance Shares Grant Agreement dated February 24, 2015 with Advisors, whereby Advisors will be entitled to receive 100,000 shares of the common stock from the Company if at any time the last sales price of the common stock equals or exceeds $10.00 per share for any 20 trading days within any 30-trading day period (collectively, the “Transaction”). The Transaction closed on February 24, 2015.
Why the Company Needs Stockholder Approval
Since our common stock is listed on NASDAQ, we are subject to the NASDAQ’s rules and regulations. NASDAQ Listing Rule 5635(b) requires us to obtain stockholder approval prior to certain issuances with respect to common stock or securities convertible into common stock which could result in a change of control of the Company. This rule is referred to as the “NASDAQ Change of Control Rule.” Generally, NASDAQ interpretations provide that a change of control would occur when, as a result of the issuance, an investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of common stock or voting power and such ownership or voting power would be the largest ownership position. Subject to certain conditions described below, the MSA Warrant entitles the holder to purchase up to 1,500,000 shares of the Company’s common stock at an exercise price of $15.00 per share (the “MSA Warrant Shares”). Currently, certain affiliates of Advisors own 1,075,000 shares, or approximately 16.9%, of the outstanding shares of our common stock. The issuance of the MSA Warrant Shares could result in Advisors, together with certain of its affiliates, acquiring more than 20% of our shares of common stock as a group and such ownership could be the largest aggregate ownership position of our outstanding common stock. In order to comply with the NASDAQ Change of Control Rule, we are seeking stockholder approval for the potential issuance of our common stock in excess of the NASDAQ limitations.
If this proposal is adopted, we would be able to issue the MSA Warrant Shares in excess of the NASDAQ limitations. The issuance of such shares could result in significant dilution to our stockholders, and afford them a smaller percentage interest in the voting power, liquidation value and aggregate book value of the Company. Additionally, the sale or any resale into the public markets of the MSA Warrant Shares could cause the market price of our common stock to decline.
Under the terms of the MSA Warrant, the Company will not issue any MSA Warrant Shares to the extent that after giving effect to such issuance of MSA Warrant Shares any holder of the Warrant, together with its affiliates, beneficially own or control the right to vote in excess of 19.9% of the Company’s total shares of common stock outstanding after giving effect to such issuance, unless and until the Company obtains stockholder approval permitting such issuance in accordance with the applicable rules of the NASDAQ Stock Market.
If stockholder approval is not obtained, pursuant to the terms of the MSA Warrant, the Company is required to cause the Registration Rights Agreement, dated February 28, 2014, by and between KAI and the Company (the “Registration Rights Agreement”) to be amended to provide that (i) the holder of the MSA Warrant is granted a demand registration right thereunder with respect to the resale by the holder of the MSA Warrant, which demand registration may, at the option of holder, be for the Company to file a shelf registration statement that permits the resale of the MSA Warrant from time to time thereunder, (ii) the Company is required to include the MSA Warrant in any shelf registration statement that the Company files after the date of such amendment and (iii) if the holder of MSA Warrant exercises its demand registration right under such amended Registration Rights Agreement with respect to the MSA Warrant, the Holder shall pay all expenses (including the Company’s expenses) relating to the registration of such MSA Warrant.
Required Vote
Approval requires an affirmative vote of the majority of the votes properly cast by the holders of shares of our common stock. Brokers who hold shares in street name for customers who are the beneficial owners of such shares may not give a proxy to vote those shares on Proposal 2 absent specific instructions from their customers. Proxies marked “ABSTAIN” and broker non-votes shall not be considered as votes cast for or against Proposal 2 and will have no effect on the outcome of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF THE ISSUANCE OF CERTAIN SHARES OF OUR COMMON STOCK IN EXCESS OF 20% OF OUR OUTSTANDING SHARES UPON EXERCISE OF WARRANTS ISSUED TO 1347 ADVISORS LLC IN ACCORDANCE WITH NASDAQ LISTING RULES.
PROPOSAL 3:
2 — AMENDMENT TO OUR CHARTER TO INCREASE THE NUMBERCERTIFICATE OF
AUTHORIZED SHARES INCORPORATION AUTHORIZING NEW CLASS OF OUR COMMONPREFERRED STOCK The Board approved, subject
We are proposing to stockholder approval, an amendment toamend the Company’s ThirdFourth Amended and Restated Certificate of Incorporation, as corrected and amended (the “Charter”“Certificate of Incorporation”), to increase the number ofauthorize 99,000,000 shares of our commona new class of “blank check” preferred stock authorized for issuance from 10,000,000 shares to 20,000,000 shares, which would increase(the “Preferred Stock”). If the total number of authorized shares ofproposal is adopted, the Company’s capital stock from 11,000,000 to 21,000,000. To accomplish the increase in authorized shares of common stock, the Board proposes that the first paragraph of Article IV of the Company’s Charter be amended to read in its entirety as follows (the “Amendment”): “The total number of shares of Company authorized capital stock which the Corporation shall have authority to issue is Twenty-One Million (21,000,000)will be 200,000,000, comprised of 100,000,000 shares of which (i) Twenty Million (20,000,000) shares shall be a class designated as common stock, par value $0.001 per shareof which [*] are outstanding, as of the Record Date; 1,000,000 shares of 8.00% Cumulative Preferred Stock, Series A, of which 894,580 shares are outstanding, as of the Record Date; and 99,000,000 authorized and unissued shares of Preferred Stock. The text of the proposed certificate of amendment to the Certificate of Incorporation (the “Common Stock”“Charter Amendment”), and (ii) One Million (1,000,000) shares shall be a class designated is attached to this Proxy Statement as preferred stock, par value $25.00 per share (the “Preferred Stock”)Appendix A.”
The Board of Directors has approved the Charter Amendment. If this proposalthe proposed amendment is approved by the proposedCompany’s stockholders, the Charter Amendment will become effective upon the filing of the Certificate of Amendment with and the acceptance for record of the Certificate of Amendment by, the Secretary of State of the State of Delaware, which filing will take place as soon as reasonably practicableis expected to occur promptly following the Annual Meeting. No change will be madestockholder vote. General Our Board of Directors has approved, subject to the other provisionsstockholder approval, an amendment to our Certificate of the Company’s Charter on the basis of this proposal. The Company’s Charter currently authorizes the issuance of 11,000,000Incorporation to authorize 99,000,000 shares of capital stock, 10,000,000 shares of which are designated common stock,Preferred Stock, par value $0.001 per share. If the amendment is approved, and the Preferred Stock authorized, it may be issued, from time to time, as authorized by the Board in one or more series, in such numbers of shares, with such designations, powers, including voting powers, full or limited, or no voting powers, preferences, and relative, participating, optional, or other special rights, qualifications, limitations, and restrictions as the Board determines. The powers, preferences, and relative, participating, optional, or other special rights of each series of Preferred Stock, and any qualifications, limitations, or restrictions of a series may differ from those of any other series.
Our Board has determined that the amendment proposal is in the best interests of the Company and recommends approval by stockholders. Purpose and Effects of the Increase in Authorized Preferred Stock Our Board approved the proposed amendment to provide maximum flexibility with respect to future financing transactions. Preferred stock is commonly authorized by publicly traded companies and is sometimes used as a preferred means of raising capital. In some circumstances, companies, including ours, have been required to issue senior classes of securities to raise capital, with the terms of those securities being negotiated and tailored to meet the needs of both investors and issuing companies. Such senior securities often include liquidation preferences and dividend rights, conversion privileges and other rights not found in common stock. However, the $25.00 par value of the authorized Cumulative Preferred Stock would prevent us from selling it at a price less than $25.00 per share, reducing its usefulness. If the proposal is adopted, and 1,000,000our Certificate of Incorporation is amended, our Board would be able to issue the additional shares of which are designated asauthorized preferred stock par value $25.00 per share. Ofwith such designations, preferences and relative, participating, optional, conversion or other special rights (if any) of such series and the 10,000,000qualifications, limitations or restrictions (if any) thereof, as the Board may in the future establish by resolution or resolutions and by filing a certificate pursuant to the Delaware General Corporation Law (a “Preferred Stock Designation”), from time to time, providing for the issuance of such Preferred Stock. No vote of the holders of our common stock or Preferred Stock, unless otherwise expressly provided in the Certificate of Incorporation or in a Preferred Stock Designation creating any series of Preferred Stock or, to the extent the Company chooses to comply with any limiting rules of any securities exchange or quotation system on which shares of our common stock currently authorized foror Preferred Stock are then listed or traded, will be a prerequisite to the issuance under our Charter, as of March 31, 2015, we had 6,358,125 sharesany series of common stock issued andPreferred Stock. Adoption of the proposed amendment will not alter or modify the rights, preferences, privileges or restrictions of outstanding 2,625,397 reserved for issuance and 1,016,478 shares of our common stock available for issuance for general corporate purposes. We believe increasingor Cumulative Preferred Stock, Series A. Anti-Takeover Effects Although the shares of our authorized common stock strengthens the Company’s flexibility to respond to future business and financial needs,proposed amendment is consistent with prudent financial managementnot motivated by anti-takeover concerns and is aligned with best practices. The proposed Amendment will not affectconsidered by the authorization of the preferred stock. We believe thatBoard to be an anti-takeover measure, the availability of additional authorized but unissued shares of common stock will enable us to promptly and appropriately respond to future business opportunities. These opportunities may include, but are not limited to, capital raising transactions, financing and acquisition transactions, strategic investments, stock dividends, stock splits and other general corporate purposes that have not yet been identified. The Company has no present plans, arrangements, commitments or understandings with respect to the issuance of any of the additional shares of common stock that would be authorized by adoption of the Amendment. If the Amendment is not approved, our ability to issue additional shares of common stock for such purposes, if any, will be limited by the overall pool of shares currently remaining available for future issuance under our Charter.
For the foregoing reasons, we seek stockholder approval to increase our authorized common stock from 10,000,000 to 20,000,000 and make the corresponding change in the aggregate number of shares of all classes of stock which we have authority to issue to 21,000,000.
If our stockholders approve the Amendment, our Board may cause the issuance of additional shares of common stock without further vote of our stockholders, except as may be required in particular cases by our organizational documents, applicable laws or regulations, or the rules of NASDAQ. The additional shares of common stock authorized in the Amendment will have the same rights and privileges as the shares of common stock presently issued and outstanding and will not be entitled to preemptive rights nor will existing stockholders have any preemptive rights to acquire any of those shares when issued. In addition, if our Board causes the Company to issue additional shares of common stock or securities convertible into or exercisable for common stock, such issuance could have a dilutive effect on the equity, earnings and voting interests of existing stockholders. The increase in the number of authorized shares of common stock alsoPreferred Stock could discourageenable the Board to issue shares defensively in response to a takeover attempt or hinder efforts by other parties to obtainmake an attempt to gain control of the Company thereby having an anti-takeover effect, although thismore difficult or time-consuming. For example, Preferred Stock could be issued to purchasers who might side with management in opposing a takeover bid which the Board determines is not the intent of our Board in proposing the Amendment. The Amendment is not being proposed in response to any known threat to acquire control of the Company.
Required Vote
Approval of the Amendment to our Charter to increase the number of shares of our common stock authorized for issuance from 10,000,000 shares to 20,000,000 shares requires the affirmative vote of the holders of at least 66 2/3% of the voting power of all the outstanding shares of stock of the Company entitled to vote generally in the election of Directors at the Annual Meeting. Brokers who hold shares in street name for customers who are the beneficial owners of such shares may not give a proxy to vote those shares on Proposal 3 absent specific instructions from their customers. Proxies marked “ABSTAIN” and broker non-votes as to Proposal 3 will have the effect of a vote AGAINST approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF THE AMENDMENT TO OUR CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK.
PROPOSAL 4:
APPROVAL OF THE COMPANY’S AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
Summary of Plan Amendment and Restatement
Effective April 15, 2015, the Board of Directors adopted amendments and approved a restatement of the Company’s 2014 Equity Incentive Plan (the “Plan”), subject to the approval of our stockholders, in order to implement certain changes relating to permitted award types under the Plan. At the Annual Meeting, our stockholders will be asked to approve the Company’s Amended and Restated 2014 Equity Incentive Plan.
Proposed Changes to the Plan Under the Amended and Restated Plan
Stock options are the only awards currently available under the Plan. The Board of Directors believes that it is in the best interests of the Company and its stockholders, to add additional award types tothus diluting the Plan to increase its flexibility to offer stockownership and cash based incentives to employees and directors to give them a stake in our future growth, to incent sustainable long-term performance that builds stockholder value and to encourage continued, committed service. The amended and restated Plan, if approved, would add the following award types:
Restricted Stock and Restricted Stock Units (RSUs). RSUs represent the right to receive a specified number of shares of our common stock (or cash) at a future specified date or after vesting in accordance with the termsvoting rights of the grants and/or uponperson seeking to obtain control of the attainment ofCompany. In certain performance criteria specifiedcircumstances, issuing Preferred Stock without further action by the Compensation Committee. Awardsstockholders may delay or prevent a change of restricted stock are subject to a vesting condition specified by the Compensation Committee in an award agreement. During such vesting period, shares may be subject to forfeiture and restriction on sale. Following the endcontrol of the vesting period, shares are no longer subject to forfeiture but as determined by the Compensation Committee at the time of grant,Company, may continue to be subject to a restriction on transferdiscourage bids for a specified period of time, or in the case of RSUs, delayed settlement.
Performance Shares. A performance share is a grant of shares, settlement of which is contingent on the achievement of performance or other objectives during a specified period as determined by the Compensation Committee.
Performance Cash Awards and Other Stock-Based Awards. The Compensation Committee may grant awards denominated in cash that may be performance-based or that may be earned under our annual bonus plan or under other incentive or bonus plans. In addition to the types of awards described in above, the Compensation Committee may grant other incentives payable in cash or in common stock under the Plan as it deems appropriate and subject to such other terms and conditions as it deems appropriate.
Performance Criteria. The performance criteria for an award will be measured for achievement or satisfaction during the performance period chosen by the Compensation Committee, including, but not limited to any of the following: revenue; revenue growth; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating income; pre- or after-tax income; net operating profit after taxes; economic value added (or an equivalent metric); ratio of operating earnings to capital spending; cash flow (before or after dividends); cash-flow per share (before or after dividends); net earnings; net sales; sales growth; share price performance; return on assets or net assets; return on equity; return on capital (including return on total capital or return on invested capital); cash flow return on investment; total shareholder return; improvement in or attainment of expense levels; and improvement in or attainment of working capital levels.
Awards of Restricted Stock Units to Certain Officers Subject to Stockholder Approval
The Board of Directors has approved, subject to stockholder approval of the amended and restated Plan, the following awards of RSUs which each represent the right to receive one share of our common stock upon satisfaction of certain conditions: 12,500 to Douglas N. Raucy, President and Chief Executive Officer, 4,000 to John S. Hill, Vice President and Chief Financial Officer and 4,000 to Dean Stroud, Vice President and Chief Underwriting Officer. Under the RSUs, 50% of the shares will be issued upon the date that the last sales price of the Company’s common stock equals or exceeds $10.00 per share and 50% ofPreferred Stock at a premium over the shares will be issued upon the date that the last salesmarket price of the Company’s common stock equals or exceeds $12.00 per share.
Other Material FeaturesPreferred Stock, and may adversely affect the market price of the Plan
The following iscommon stock or Preferred Stock. Thus, increasing the authorized Preferred Stock could render more difficult and less likely a summaryhostile merger, tender offer, or proxy contest, assumption of the amended and restated Plan, which is qualified in its entiretycontrol by reference to the amended and restated Plan, a copyholder of which is attached as Appendix A.
Purpose. The purposes of the Plan are (i) to align the interestsa large block of the Company’s stockholdersstock, and the recipients of awards under the Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining officers and other employees; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.
Eligible Participants. Participants in the Plan consist of directors and such officers and other employees of the Company and its subsidiaries as the Compensation Committee in its sole discretion may select from time to time.
Stock Options.The Compensation Committee may, in its discretion, grant stock options to purchase sharespossible removal of the Company’s common stockincumbent management. We are not aware of any proposed attempt to such eligible persons as may be selected bytake over the Compensation Committee. The numberCompany or of sharesany attempt to acquire a large block of our stock.
No Appraisal Rights Under the Delaware General Corporation Law, the Company’s common stock subjectstockholders are not entitled to each stock option granted pursuant to the Plan shall be determined by the Compensation Committee in its sole discretion. The exercise price of each stock option granted pursuant to Plan shall bear a strike price at or above fair market value, which is the closing transaction price of the Company’s common stock as reported on the NASDAQ stock market on the date as of which such value is being determined, but in no event less than tangible book value per share. Shares Available. A total of 177,456 stock options for shares of our common stock were awarded upon the closing of our IPO to our directors and officers. Subject to adjustment as provided in the Plan, a total of 177,456 additional shares of our common stock are available for future grants of stock options, performance shares, restricted stock or RSUs.
Agreement. Each award under the Plan shall be evidenced by an agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an agreement is executed by the Company and, to the extent required by the Company, either executed by the recipient or accepted by the recipient by electronic means approved by the Company within the time period specified by the Company.
Administration. The Plan shall be administered by the Compensation Committee. The Compensation Committee shall, subject to the terms of the Plan, select eligible persons for participation in the Plan and determine the form, amount and timing of each award to such persons and the number of stock options, the exercise price associated with the award, the time and conditions of exercise or settlement of the award and all other terms and conditions of the award, including, without limitation, the form of the agreement evidencing the award. The Compensation Committee shall, subject to the terms of the Plan, interpret the Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of the Plan and may impose, incidental to the grant of an award, conditionsappraisal rights with respect to the award, such as limiting competitive employment or other activities.proposed amendment.
Procedure for Implementing the New Class of Preferred Stock If the proposal to authorize a new class of Preferred Stock is adopted, our Board intends to implement the proposal by filing the Charter Amendment and Termination. The Board may amendwith the Plan as it shall deem advisable; provided, however, that no amendment to the Plan shall be effective without the approvalSecretary of State of the Company’s stockholders if stockholder approval is required by applicable law, rule or regulation, including Section 162(m)State of the Internal Revenue Code (the “Code”) or any rule of the NASDAQ Stock Market; provided further, that no amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder. The Plan shall terminateDelaware as of the date on which all of the shares available thereunder have become subject to awards granted under the Plan unless the Plan is terminated earliercontemplated by the Boardproposed form of Directors. Termination”Certificate of the Plan shall not affect the terms or conditions of any award granted prior to termination. Tax Consequences
The following provides only a general description of the application of U.S. federal income tax laws to certain awards under the Plan. This discussion is intended for the information of our stockholders considering how to vote at the Annual Meeting and notAmendment,” attached as tax guidance to participants in the Plan, as the consequences may vary with the types of awards made, the identity of the recipients and the method of payment or settlement. Different tax rules may apply, including in the case of variations in transactions that are permitted under the Plan (such as payment of the exercise price of an option by surrender of previously acquired shares of common stock)Appendix A. This summary does not address in any detail the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local or foreign tax laws.
We generally will be entitled to withhold any required taxes in connection with the exercise or payment of any award, and may require the participant to pay such taxes as a condition to the exercise or payment of an award.
Stock Options. A recipient generally will not realize any taxable income upon the grant of nonqualified stock options (“NQSO”) under the Plan. Upon exercise of an NQSO, the participant will realize ordinary income in an amount generally measured by the excess, if any, of the fair market value of the shares on the date of exercise over the stock option exercise price. We will generally be entitled to a deduction in the same amount as the ordinary income realized by the participant. Upon the sale of shares acquired upon exercise of an NQSO, the participant will realize short-term or long-term capital gain or loss, depending upon the length of time the shares are held. Such gain or loss will be measured by the difference between the sale price of the shares and the fair market value on the date of exercise. The stock options are not intended to qualify as incentive stock options, within the meaning of Section 422 of the Code.
Restricted Stock and Performance Shares. A recipient of restricted stock or performance shares generally will be subject to tax at ordinary income rates on the fair market value of the common stock at the time the shares have been delivered and are no longer subject to forfeiture. A recipient who so elects under Section 83(b) of the Code within 30 days of the grant date will have ordinary taxable income on the date of the grant equal to the fair market value of the shares as if the shares were unrestricted or the shares were earned and could be sold immediately. If the shares subject to such election are forfeited, the recipient will not be entitled to any deduction, refund or loss for tax purposes with respect to the forfeited shares.
Required Vote Upon sale of the restricted shares or performance shares after the forfeiture period has expired, the recipient will have a long-term or short-term capital gain or loss dependent upon the time period over which the recipient has held the shares following the expiration of the restriction period. If the recipient timely elects under Section 83(b) to be taxed as of the date of the grant, the holding period commences on the grant date, rather than from the end of the restriction period, and the tax basis will be equal to the fair market value of the shares on the grant date as if the shares were unrestricted and could be sold immediately. The Company will generally be entitled to a deduction for compensation paid to a participant in the amount of ordinary income recognized by the participant.
RSUs. A recipient of units will generally be subject to tax at ordinary income rates on the fair market value of any shares of common stock issued or cash paid pursuant to such an award, and the Company will generally be entitled to a deduction equal to the amount of the ordinary income realized by the recipient, at the time of receipt. The capital gain or loss holding period for any common stock distributed under an award will begin when the recipient recognizes ordinary income in respect of that distribution.
Approval of the Plan for Purposesproposal to authorize the new class of Section 162(m)Preferred Stock requires the affirmative vote of the Code The Plan is designed to enable us to achieve tax-deductibility for certain incentive awards granted under it. Under Section 162(m) of the Code, in order for compensation in excess of $1 million paid in any year to certain executive officers to be tax deductible, the compensation must qualify as “performance-based.” Generally, these executive officers are the CEO and the three other named executive officers other than the CFO who are named in the summary compensation table of our proxy statement each year. One element of such qualification is that stockholders approve the material terms of the performance measures for stock-based awards at least every five years.
By approving the amended and restated Plan, stockholders will also be approving, as required by Section 162(m), the material terms of the performance measures for performance-based awards under the Plan and will allow us to grant equity-based compensation that is exempt from the $1 million limit on tax-deductible compensation. The performance measures are described above under the heading “Proposed Changes to the Plan Under the Amended and Restated Plan–Performance Criteria.”
Required Vote
Approval requires an affirmative voteholders of the majority of the votes properly cast by the holders of shares of ouroutstanding common stock. Brokers who hold shares in street name for customers who are the beneficial owners of such shares may not give a proxy to vote those shares on Proposal 4 absent specific instructions from their customers. Proxies marked “ABSTAIN” and broker non-votes shall not be considered as votes cast for or against Proposal 4 and will have no effect on the outcome of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL“FOR” THE PROPOSAL TO AUTHORIZE A NEW CLASS OF THE COMPANY’S AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN.PREFERRED STOCK. PROPOSAL 5: TO RATIFY THE3 — RATIFICATION OF APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 20152022
At the Annual Meeting, stockholders will be asked to ratify the appointment of BDO USA, LLP (“BDO”BDO”) as our independent registered public accounting firm for the year ending December 31, 2015.2022. The Audit Committee of our Board of Directors has recommended, and the Board of Directors has already appointed BDO as our independent registered public accounting firm for the year ending December 31, 2015.2022. BDO also served as our independent registered public accounting firm for the year ended December 31, 2014.2021 and has served as our independent registered public accounting firm since 2012. If the stockholders do not ratify the appointment of BDO, our Board willmay consider the selection of other independent registered public accounting firms for 2015,the year ending December 31, 2022, but will not be required to do so. Stockholder ratification of the appointment of BDO is not required by our Third Amended and Restated Certificate of Incorporation or our Second Amended and Restated By-Laws. However, our Board of Directors is submitting the appointment of BDO to the stockholders for ratification as a matter of good corporate practice.governance. Even if the appointment is ratified, our Board of Directors, in its discretion, may direct the appointment of a different independent registered public accounting firm for 20152022 if the Board of Directors feels that such a change would be in the best interests of the Company and its stockholders. Representatives
We expect that representatives of BDO will not be present at the Annual Meeting. In considering the reappointment of BDO as our independent registered public accounting firm, the Audit Committee considered BDO’s qualifications, experience, independence, tenure as our independent registered public accounting firm, and its related depth of understanding of our businesses, operations and systems. The Audit Committee and the Board of Directors believe that the continued retention of BDO as our independent registered public accounting firm is in the best interests of the Company and our stockholders at this time. Required Vote Ratification requires an affirmative vote of theholders of a majority of common stock voted at the votes properly cast byAnnual Meeting. A holder of common stock may vote “FOR” or “AGAINST” approval or “ABSTAIN” from voting on the holders of shares of our common stock.proposal. Proxies marked “ABSTAIN” and broker non-votes shallwill not be considered as votes cast for or against Proposal 53 and will have no effect on the outcome of the proposal. A broker, bank or other nominee may generallywho has not been furnished voting instructions from a beneficial owner will be authorized to vote on routine matters suchProposal 3, as Proposal 5, and thereforeit is a “routine” matter under applicable rules. Therefore, no broker non-votes are expected in connection with this Proposal.proposal. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”“FOR” THE RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015.2022. Principal Accountant Fees and Services The consolidated financial statements for the yearyears ended December 31, 20142021 and 20132020 have been audited by BDO, our independent registered public accounting firm. Our Audit Committee requires that management obtain the prior approval of the Audit Committee for all audit and permissible non-audit services to be provided by BDO. Fees for all services provided by BDO were pre-approved by the Audit Committee pursuant to this procedure.Committee. The following table shows the fees that we paid (or accrued)incurred for professional services rendered by BDO for 20142021 and 2013.2020. | | | Year ended December 31, | | | | 2014 | | 2013 | | Audit fees | | $ | 154,650 | | | $ | 30,825 | | | Audit-related fees | | | — | | | | — | | | Tax fees | | | — | | | | — | | | All other fees | | | 800 | | | | — | | | Total | | $ | 155,450 | | | $ | 30,825 | |
| | | Year ended December 31, | | | | | 2021 | | | 2020 | | | Audit fees(1) | | $ | 257,919 | | | $ | 180,958 | | | Audit-related fees | | | — | | | | — | | | Tax fees | | | — | | | | — | | | All other fees | | | –– | | | | — | | | Total | | $ | 257,919 | | | $ | 180,958 | |
| 1. | Includes professional fees billed for the audits of our financial statements, the review of interim condensed financial statements, as well as other professional services that are normally provided by BDO in connection with statutory and regulatory filings or engagements. These other professional services billed consist of $29,853 and $55,000 for services related to our preferred and common stock offerings for the years ended December 31, 2021 and 2020, respectively. |
AUDIT COMMITTEE REPORT
The following report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall this report be incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its general oversight of the Company’s financial reporting process. The Audit Committee conducted its oversight activities for the Company in accordance with the duties and responsibilities outlined in the Audit Committee charter. The Audit Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisers as the Audit Committee deems necessary to carry out its duties and to receive appropriate funding, as determined by the Audit Committee, from the Company for such advice and assistance. The Company’s management is responsible for the preparation, consistency, integrity and fair presentation of the financial statements, accounting and financial reporting principles, systems of internal control and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. The Company’s independent registered public accounting firm, BDO, is responsible for performing an independent audit of the Company’s financial statements. The Audit Committee hereby reports as follows: | | 1. | The Audit Committee has reviewed and discussed the audited financial statements as of and for the year ended December 31, 20142021 with management. | | | | | | 2. | The Audit Committee has discussed with BDO, the Company’s independent auditors for the year ended December 31, 2014,2021, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”PCAOB”) Auditing Standard No. 16, Communications with Audit Committees.and the Securities and Exchange Commission. | | | | | | 3. | The Audit Committee has received the written disclosures and the letter from BDO required by applicable requirements of the PCAOB regarding BDO’s communications with the Audit Committee concerning independence, and has discussed with BDO its independence. | | | | | | 4. | Based upon the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014,2021, for filing with the Securities and Exchange Commission. |
THE AUDIT COMMITTEE /s/ Leo Christopher Saenger, III, Chairman | | | | /s/ Gordon G. Pratt | | | | /s/ Scott D. Wollney | |
Scott D. Wollney, Chairman E. Gray Payne Richard E. Govignon, Jr. INFORMATION ABOUT OUR EXECUTIVE OFFICERS Below is biographical information for our executive officers who are not directors. Biographical information regarding Mr. Swets, our Chief Executive Officer and a current director of the Board, can be found in Proposal 1. Hassan R. Baqar, age 44, has served as our Corporate Secretary since May 2022, our Chief Financial Officer since August 2021 and Executive Vice President since December 2021, through Sequoia Financial LLC (“Sequoia”), an advisory firm for which Mr. Baqar is managing member. Mr. Baqar has over 20 years of experience within financial services and other industries focused on corporate development, mergers & acquisitions, capital raising, investments and real estate transactions. Mr. Baqar has served as the founder and managing member of Sequoia Financial LLC, a financial services and advisory firm, since January 2019. Mr. Baqar has also served as Chief Financial Officer of FG New America Acquisition II Corp., a special purpose acquisition company in the process of going public and focused on merging with a company in the insure-tech, fin-tech, broader financial services and insurance sectors since February 2021, as a director of FG Merger Corp., a special purpose acquisition company focused on merging with a company in the financial services sector since December 2021, as chief financial officer, secretary and director of FG Acquisition Corp, a Canadian special purpose acquisition company focused on searching for a target company in the financial services sector since October 2021, as Chief Financial Officer of Insurance Income Strategies Ltd., a former Bermuda-based reinsurance company from October 2017 to December 2021; as a director of GreenFirst Forest Products Inc. (TSXV: GFP) (formerly Itasca Capital Ltd.), a public company focused on investments in the forest products industry, from August 2019 to December 2021 and as Chief Financial Officer of GreenFirst Forest Products Inc. from June 2016 to December 2020; as a director of Fundamental Global Reinsurance Ltd., a Cayman Islands reinsurance company since June 2020, and as a director and Chief Financial Officer of Unbounded Media Corporation since June 2019. Mr. Baqar served as Chief Financial Officer of Aldel Financial Inc. (NYSE: ADF), from January 2021 to December 2021, a special purpose acquisition company, which merged with Hagerty, Inc. (NYSE: HGTY), a leading specialty insurance provider focused on the global automotive enthusiast market. From July 2020 to July 2021, Mr. Baqar served as Chief Financial Officer of FG New America Acquisition Corp. (NYSE: FGNA), a special purpose acquisition company, which merged with OppFi Inc. (NYSE: OPFI), a leading financial technology platform that powers banks to help everyday consumers gain access to credit. Previously, he served as Vice President of Kingsway Financial Services Inc. (NYSE: KFS) (“Kingsway”) from January 2014 to January 2019 and as a Vice President of Kingsway’s subsidiary Kingsway America Inc., from January 2010 to January 2019. Mr. Baqar also served as Chief Financial Officer and director of 1347 Capital Corp. from April 2014 to July 2016, a special purpose acquisition company, which merged with Limbach Holdings, Inc. (Nasdaq: LMB). Mr. Baqar served as a member of the board of directors of FG Financial Group, Inc. (Nasdaq: FGF), from October 2012 to May 2015. He also served as the Chief Financial Officer of United Insurance Holdings Corp. (NYSE: UIHC), a publicly held property and casualty insurance holding company, from August 2011 to April 2012. His previous experience also includes director of finance at Itasca Financial, LLC from 2008 to 2009 and positions held at Lumbermens Mutual Casualty Company (a Kemper Insurance company), a diversified mutual property casualty insurance provider, from June 2000 to April 2008, where he most recently served as a senior analyst. Mr. Baqar earned a master’s degree in business Administration from Northeastern Illinois University in 2009 and a bachelor’s degree in accounting and business administration from Monmouth College in 2000. He also holds a Certified Public Accountant designation.
COMPENSATION OF EXECUTIVE OFFICERS Our named executive officers for the fiscal year ended December 31, 2021 include Larry G. Swets, Jr., our President and Chief Executive Officer; Hassan R. Baqar, our Executive Vice President and Chief Financial Officer, Brian D. Bottjer, our former Senior Vice President, Chief Accounting Officer, and Secretary, and , John S. Hill, our former Executive Vice President and Chief Financial Officer. With respect to executive compensation, the Compensation Committee’s primary goal of the Compensation Committee is to retain and motivate highly skilled executives by aligning their pay with the Company’s performance and stockholder returns. Our compensation consists primarily of five components: (i) base salary, (ii) an annuala discretionary cash bonus, (iii) equity-based incentive awards, (iv) retirement benefits in the form of Company paid matching and profit sharing contributions to the Company’s 401(k) retirement plan, and (v) premiums paid by the Company on the behalf of our employees for health, dental, life and other ancillary insurance coverage. Summary Compensation Table The following table summarizedsummarizes the compensation for our named executive officers for the years shown. The Company does not have any employment agreements with its employees. SUMMARY COMPENSATION TABLE
Name and Principal Position | | Year | | | Salary ($) | | | Bonus ($)(2) | | | All Other Compensation ($) | | | Total ($) | | | Larry G. Swets, Jr.(1) | | | 2021 | | | | 550,000 | | | | 165,000 | | | | 106,248 | | | | 821,248 | | | President & Chief Executive Officer | | | 2020 | | | | 77,917 | | | | – | | | | 221,933 | | | | 299,850 | | | Hassan R Baqar(3) | | | 2021 | | | | – | | | | – | | | | 289,359 | | | | 289,359 | | | Executive Vice President and Chief Financial Officer | | | 2020 | | | | – | | | | – | | | | 194,167 | | | | 194,167 | | | Brian D. Bottjer(4) | | | 2021 | | | | 221,212 | | | | 30,000 | | | | 32,780 | | | | 283,992 | | | Former Senior Vice President, Chief Accounting Officer and Secretary | | | 2020 | | | | 200,000 | | | | – | | | | 34,587 | | | | 234,857 | | | John S. Hill(5) | | | 2021 | | | | 172,260 | | | | – | | | | 342,385 | | | | 514,645 | | | Former Executive Vice President, & Chief Financial Officer | | | 2020 | | | | 250,000 | | | | – | | | | 35,126 | | | | 285,126 | |
Name(1) | From June 17, 2020, through November 10, 2020, Mr. Swets served as the Company’s Interim Chief Executive Officer, through a consulting agreement between the Company and Principal PositionItasca Financial LLC, an advisory and investment firm for which Mr. Swets has served as managing member since inception. In consideration for his interim Chief Executive Officer services, the Company agreed to pay Itasca Financial LLC $46,000 per month. A total of $111,333 was paid to Itasca Financial LLC under the agreement, which has been included in other compensation in the table above. Effective November 10, 2020, Mr. Swets became the Company’s permanent CEO under an employment agreement between the Company and Mr. Swets. Under this agreement, Mr. Swets is entitled to an annual base salary of $550,000. Upon his appointment as CEO, the Company agreed to pay Itasca Financial, LLC $110,000 to terminate the existing consulting agreement with Itasca Financial LLC. The $110,000 termination fee has been included in other compensation in the table above. Salary, in the amount of $77,917 represents the pro-rata portion of Mr. Swets’ annual base salary of $550,000, for the period November 10, 2020, through December 31, 2020. All other compensation for 2021 represents amounts paid by the Company for 401(k) matching contributions, as well as premiums for medical, dental, life and other ancillary insurance benefits provided to Mr. Swets. Other compensation also includes the cost of one private business membership which provides networking opportunities with fellow chief executives both locally and globally. Mr. Swets did not receive any other compensation in the form of 401(k) match, insurance or private business memberships for 2020. | | | Year(2) | Cash bonuses for 2021 represent performance bonuses approved by the Compensation Committee on December 17, 2021 and paid to Messrs. Swets and Bottjer on January 15, 2022. | | | Salary
($) | | Bonus
($) | | Option
Awards
($) | | All Other
Compensation
($) | | Total ($) | Douglas N. Raucy
President(3)
| Mr. Baqar has served as a consultant to the Company since February 2019, through Sequoia Financial LLC (“Sequoia”), an advisory firm for which Mr. Baqar is managing member, at a rate of $10,833 per month, which also included a bonus of $75,000 related to the successful completion of the licensing process for the Company’s insurance subsidiary. Effective August 11, 2021, the Company entered into the Second Amended and Restated Management Services Agreement (the “MSA”) between the Company and Sequoia. The MSA provides that Mr. Baqar will act as the Company’s Chief Financial Officer and will perform services and duties as required by the Company’s Board of Directors and Chief Executive Officer, to whom he shall report. In consideration for the services, the Company has agreed to pay Sequoia $40,000 per month during the term of the MSA, included in the table as other compensation. | | | | 2014
2013
| | | | 280,000
280,000
| | | | 100,000
50,000
| | | | 86,965
—
| | | | 8,446
8,265
| | | | 475,411
338,265
| | John S. Hill(1)
VP(4)
| Effective May 26, 2022, Mr. Bottjer resigned from his positions as Senior Vice President, Chief Accounting Officer and Chief Financial OfficerSecretary of the Company. All other compensation for Mr. Bottjer represents amounts paid by the Company for 401(k) match, as well as premiums paid for medical, dental, life and other ancillary insurance benefits provided to Mr. Bottjer. |
| | | 2014
2013
| | | | 175,000
71,410
| | | | 25,000
— | | | | 12,547
— | | | | 6,618
3,007
| | | | 219,165
74,417
| | Robert G. Gantley(2)
VP and Chief Operating Officer
| | | 2014
2013
| | | | 65,064
— | | | | —
—
| | | | —
—
| | | | 27,003
—
| (3)
| | | 92,067
— | | Dean E. Stroud
VP and Chief Underwriting Officer
| | | 2014
2013
| | | | 175,000
175,000
| | | | 40,000
— | | | | 25,473
— | | | | 658
573
| | | | 241,131
175,573
20 | |
| (5) | All other compensation for 2020 represents amounts paid by the Company for 401(k) match, medical, dental, life and other ancillary insurance benefits provided to Mr. Hill, and one private business membership to encourage entertainment of business colleagues and customers, interactions with others within professional, business, and local communities and holding business meetings at a convenient offsite location. For 2021, all other compensation is as follows: 401(k) match, medical, dental, life, and other ancillary insurance benefits, $40,669; private business membership, $1,716; and severance of $300,000. Pursuant to a separation agreement and general release entered into between the Company and Mr. Hill, the Company agreed to pay severance to Mr. Hill in the amount of $300,000, of which $99,000 was paid bi-monthly from August 6, 2021, through December 31, 2021, with the remainder, or $201,000 paid, in lump-sum on January 15, 2022. |
Executive Officer Appointments and Employment Agreements Effective December 2, 2019, the Board promoted Mr. Bottjer to Senior Vice President and Controller of the Company. The employment agreement provided for an annual base salary of $250,000 to Mr. Bottjer, effective upon his appointment to Chief Accounting Officer on July 29, 2021. Pursuant to his employee agreement, Mr. Bottjer became eligible to receive an annual bonus, payable in cash and/or through awards based on the equity in the Company, and subject to the achievement of the performance criteria, as determined by the Compensation Committee. Mr. Bottjer was also eligible to participate in the Company’s benefit programs available generally to executive employees of the Company, prior to his resignation on May 26, 2022. Effective August 6, 2021, Mr. Hill retired from all positions with the Company. Pursuant to a separation agreement and general release entered into between the Company and Mr. Hill, the Company agreed to pay severance to Mr. Hill in the amount of $300,000, of which $99,000 was paid bi-monthly from August 6, 2021 through December 31, 2021, with the remainder, or $201,000 paid, in lump-sum on January 15, 2022. The Company also agreed to cover the cost of health insurance coverage for Mr. Hill through December 31, 2021. Also, on August 6, 2021, the Compensation Committee of the Board approved the immediate vesting of 17,400 RSUs previously granted to Mr. Hill. Furthermore, on August 13, 2021, the Company paid to Mr. Hill approximately $16,000, representing the balance of his unused vacation time. On June 18, 2020, the Company entered into a consulting agreement (the “Consulting Agreement”) with Itasca Financial LLC (“Itasca Financial”), an advisory and investment firm founded by Mr. Swets in 2005, pursuant to which Mr. Swets would provide the services described on behalf of Itasca Financial. The Consulting Agreement provided that Mr. Swets act as the Company’s Interim Chief Executive Officer. In consideration for the services, the Company paid Itasca Financial $111,333 during the term of the Consulting Agreement. The Consulting Agreement was terminated on November 10, 2020, with Mr. Swets’ appointment as CEO. In connection with Mr. Swets’ appointment as CEO, the Company entered into an executive employment agreement with Mr. Swets, dated and effective as of November 10, 2020 (the “Swets Agreement”). The Swets Agreement has a three-year term and is subject to automatic three-year renewals, unless either party provides 60 days’ prior written notice of his or its intention, as applicable, not to renew such term. Under the Swets Agreement, Mr. Swets is entitled to an annual base salary of $550,000 until such time as the Board determines future compensation based on Swets’ performance or other merit-based criteria. In the event that the Company terminates Mr. Swets without cause, subject to Mr. Swets’ execution of a general release of waiver and claims in favor of the Company and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of two years of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company’s applicable health and welfare plans. In the event that the parties mutually agree to terminate Mr. Swets’ employment regardless of the reason, subject to Mr. Swets’ execution of a general release and such general release’s becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of one year of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company’s applicable health and welfare plans. The Swets Agreement also provides that Mr. Swets is subject to post-termination confidentiality covenants. (1) | Mr. Hill joined the Company in 2013, thus the 2013 salary shown represents actual payments21 | |
On January 18, 2021, Company entered into an Equity Award Letter Agreement (the “Letter Agreement”) with Mr. Swets, pursuant to which the Company clarified its intention to grant an additional 370,000 stock options, restricted shares or restricted stock units pursuant to a future award (the “Future Award”), subject to the approval of an amended and/or new equity plan, among other conditions. Specifically, under the Letter Agreement, no such Future Award may be granted until there is a determination by the Compensation Committee of the specific vesting and other terms of the award, and an amended and/or new equity plan, in a form to be prepared and reviewed by the Board, has been approved by the Board and stockholders of the Company that authorizes a sufficient number of shares of common stock to make such Future Award. Mr. Swets will remain a director of the Company if he is continued to be elected by its stockholders and will forgo the compensation of board fees while serving as CEO. Mr. Baqar had served as a consultant to the Company since February 2019 through Sequoia Financial LLC (“Sequoia”), an advisory firm for which Mr. Baqar is managing member, at a rate of $10,833 per month. Effective August 6, 2021, Mr. Baqar, was appointed our Chief Financial Officer pursuant to a management services agreement between the Company and Sequoia (the “MSA”). In consideration for these services, the Company has agreed to pay Sequoia $40,000 per month during the term of the MSA. The initial term of the MSA is twelve months unless terminated earlier as described below. Unless either party to the MSA provides the other with ninety days written notice, the MSA will renew for a subsequent twelve-month period. If the MSA is terminated by Mr. Baqar for “Good Reason,” payment for the remainder of the full term will be provided in lump sum to Mr. Baqar at the time of termination. The Company may terminate the MSA for “Cause,” at any time upon fifteen days’ prior written notice. Upon termination by the Company for Cause, payment will stop immediately upon the effective date of termination. If the Agreement is terminated by either party without Cause or Good Reason prior to the end of the term, payment for the remainder of the term will be provided to Mr. Baqar subject to a maximum of three months. In addition, the Company shall pay all of Mr. Baqar’s reasonable expenses associated with the performance of the duties as Chief Financial Officer. The MSA contains a customary confidentiality provision and a six-month post-termination of the MSA restriction against both soliciting employees and independent contractors of the Company and inducing them to terminate their relationship with the Company. Cash Bonuses On January 15, 2022, the Company paid bonuses in the amount of $165,000 to Mr. Swets and $30,000 to Mr. Bottjer based upon performance in 2021. The bonuses were approved by the Compensation Committee on December 17, 2021. Retirement Benefits The Company matches the contributions of each of its employees to the Company’s 401(k) Plan. Matching contributions equal 100% of the first 3% of pay and 50% of the next 2% of pay to the extent such contributions are not in excess of the Internal Revenue Code limits on contributions to Section 401(k) plans. Under the 401(k) Plan, the Company may make additional matching contributions or other profit-sharing contributions at its discretion. There were no discretionary contributions in 2020 or 2021. 2021 Equity Incentive Plan On December 15, 2021, our stockholders approved the FG Financial Group, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan replaced the 2018 Equity Incentive Plan (the “2018 Plan”). No new awards will be granted under the 2018 Plan. The purpose of the 2021 Plan is to attract and retain directors, consultants, officers and other key employees of the Company and its subsidiaries and to provide to such persons incentives and rewards for superior performance. The 2021 Plan is administered by the Compensation Committee and has a term of ten years. All non-employee directors of the Company and employees and consultants of the Company and its subsidiaries designated by the Compensation Committee are eligible to participate in the 2021 Plan and to receive awards, including stock options (which may be incentive stock options or nonqualified stock options), stock appreciation rights (SARs), restricted shares, restricted share units and other share-based awards. The maximum number of shares that may be issued or transferred with respect to awards under the 2021 Plan is 1,500,000 shares, subject to adjustment in certain circumstances as described below. Shares issued under the 2021 Plan may include authorized but unissued shares, treasury shares, shares purchased in the open market, or a combination of the foregoing. Shares underlying awards that are settled in cash or that terminate or are forfeited, cancelled, or surrendered without the issuance of shares generally will again be available for issuance under the 2021 Plan. However, shares used to pay the exercise price of stock options, shares repurchased by the Company with stock option proceeds, and shares used to pay withholding taxes upon exercise, vesting or payment of an award, will not be added back to the share reserve under the 2021 Plan. In addition, when a SAR is exercised and settled in shares, all of the shares underlying the SAR will be counted against the share limit of the 2021 Plan, regardless of the number of shares used to settle the SAR. Shares subject to awards that are granted in assumption of, or in substitution or exchange for, outstanding awards previously granted by an entity acquired directly or indirectly by the Company will not count against the share limit above, except as may be required by the rules and regulations of any stock exchange or trading market. The 2021 Plan provides that the aggregate grant date fair value of all awards granted to any single non-employee director during any single calendar year (determined as of the applicable grant date(s) under applicable financial accounting rules), taken together with any cash fees paid to the non-employee director during the same calendar year, may not exceed $200,000. Equity Compensation Plan Information The following table sets forth, as of December 31, 2021, the number of shares of common stock underlying awards outstanding under the 2021 Plan, the 2018 Plan, and the Company’s Amended and Restated 2014 Equity Incentive Plan (“2014 Plan”), as well as the number of shares remaining available for issuance under the 2021 Plan. No more awards may be made under the 2018 Plan or the 2014 Plan. | Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | | | Weighted-average exercise price of outstanding options, warrants and rights | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2) | | | | | (a) | | | (b) | | | (c) | | | Equity compensation plans approved by security holders | | | 294,655 | | | $ | – | | | | 1,416,671 | | | Equity compensation plans not approved by security holders | | | – | | | | – | | | | – | | | Total | | | 294,655 | | | $ | – | | | | 1,416,671 | |
| 1. | Includes 3,999 common shares to be issued upon an annualized salaryvesting of $150,000 from July through November 2013restricted stock units issued under our 2014 Plan; includes 77,327 common shares to be issued upon vesting of restricted stock units and an annualized salary130,000 common shares to be issued upon vesting of $175,000 for December 2013. stock options issued under our 2018 Plan; and includes 83,329 common shares to be issued upon vesting of restricted stock units issued under our 2021 Plan. | (2)2. | Mr. Gantley joinedRepresents shares available for future issuance under the Company in 2014, thus the 2014 salary shown represents actual payments based upon an annualized salary of $175,000. | (3) | Other compensation for 2014 for Mr. Gantley includes a cash sign-on payment of $25,000.2021 Plan. |
Outstanding Equity Awards at 2021 Fiscal Year-End The following table shows the number of outstanding equity awards that are held by our named executive officers as of December 31, 2014. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END2021. Mr. Swets did not hold any equity awards as of December 31, 2020, other than those stock awards listed under the caption, “Director Compensation,” which were granted to Mr. Swets prior to his appointment as Chief Executive Officer of the Company. Messrs. Bottjer and Baqar did not hold any equity awards as of December 31, 2020 and 2021.
| | | | | | Option awards | | Name | | Number of shares of common stock underlying unexercised options (#) exercisable | | | Number of shares of common stock underlying unexercised options (#) exercisable | | Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) | | | Option exercise price ($) | | | Option Expiration Date | | | Larry G. Swets, Jr. | | | 130,000 | (1) | | – | | | – | | | $ | 3.38 | | | | 01/11/2031 | |
Name(1) | The option vests with respect to 20% of the total number of shares covered thereby on each of the first five anniversaries of the grant date, which was January 12, 2021, if Mr. Swets remains in the Company’s continuous service through each applicable vesting date, and Principal Position | | Grant Date(2) | | | Number of
Securities
Underlying
Unexercised
Options
Exercisable (#) | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) | | | Option
Exercise
Price ($)(3) | | | Option
Expiration
Datethe Company’s book value per share has increased by 15% from the previous year. | Douglas N. Raucy
President and Chief Executive Officer
| | 02/28/2014
03/31/2014
04/04/2014
| (1) | | 33,033
13,064
1,132 | | —
52,257
4,531 | | | 8.00
8.00
8.69
| | | 06/15/2015
03/31/2019
04/04/2019 | John S. Hill
VP and Chief Financial Officer
| | 03/31/2014
04/04/2014
| | | 2,155
187 | | 8,623
748 | | | 8.00
8.69
| | | 03/31/2019
04/04/2019 | Robert G. Gantley
VP and Chief Operating Officer
| | | | | —
— | | —
— | | | —
—
| | | | Dean E. Stroud
VP and Chief Underwriting Officer
| | 03/31/2014
04/04/2014
| | | 4,376
379 | | 17,506
1,518 | | | 8.00
8.69
| | | 03/31/2019
04/04/2019 |
| (1) | Concurrent with the exercise of the option granted to Mr. Raucy on February 28, 2014,On January 18, 2021, the Company will grant upentered into the “Letter Agreement with Mr. Swets, pursuant to 33,033 matching shares of restricted common stock ofwhich the Company clarified its intention to Mr. Raucy asgrant an additional 370,000 stock options, restricted shares or restricted stock units pursuant to a one-for-one match against the option shares exercised (the “Matched Shares”). The Matched Shares will vest 100% on the fifth anniversary of the date in which the Matched Shares are issued,future award subject to Mr. Raucy’s continued employment with the Company. |
| (2) | The February 28, 2014 option grant to Mr. Raucy vested 100% to Mr. Raucy on grant date. The March 31, 2014 and April 4, 2014 option grants to our named executive officers vest as follows: (i) 20% on dateapproval of grant, and (ii) 20% on each of the next four anniversaries of grant date. |
| (3) | NASDAQ closing price of our common stock on grant date.an amended and/or new equity plan, among other conditions. |
BiographicalThe following table sets forth information regarding ourconcerning the vesting of stock awards for the Company’s named executive officers is as follows. Mr. Raucy’s information can be found above underand former named executive officers during the subheading “Directors”.last completed fiscal year, other than Messrs. Bottjer and Baqar who do not hold any stock awards.
| Name | | Number of shares acquired upon vesting of stock awards (#) | | | Value realized upon vesting of stock awards | | | John S. Hill(1) | | | 17,400 | | | $ | 103,530 | |
(1) Upon the retirement of our former Chief Financial Officer, John S. Hill, CPA,age 58,has served as our Vice President and Chief Financial Officer since July 2013. He has served aseffective August 6, 2021, the Vice President, Secretary, Treasurer and DirectorCompensation Committee approved the accelerated vesting of Maison InsuranceRSUs granted by the Company and has held the roles of Vice President, Treasurer and Director for Maison Managers Inc. Prior to joining our company, Mr. Hill served as an Accounting Manager at AmeriLife Group, LLC from June 2013 to July 2013on May 29, 2015, December 15, 2017, and as the founder and owner of his consulting business, Hill Consulting Services LLC from July 2009 to June 2013. From June 2010 to September 2011,August 22, 2018. Accordingly, on August 6, 2021, 17,400 unvested RSUs held by Mr. Hill served as the Chief Financial Officer of Prepared Insurance Company and prior to that, he served as the Chief Financial Officer, Controller and Treasurer of Travelers of Florida from May 1998 to June 2009. Mr. Hill also served as the Chief Financial Officer of Carolina Casualty Insurance Company from 1989 to 1997. Mr. Hill served on the Board of Governors of the Florida Automobile Joint Underwriting Association from 1999 through 2003. Mr. Hill’s executive experience includes his prior roles as a national insurance audit instructor and peer review team membervested in KPMG’s insurance practice. He also holds the designation of certified public accountant (inactive) and is a member of the American Institute of CPAs. Mr. Hill obtained a bachelor’s degree from Iowa State Universityfull, with a double major in economics and accounting. Robert G. Gantley,age 61,has served as our Vice President and Chief Operating Officer since November 2014. Mr. Gantley also serves in the positions of VP and COO with Maison Insurance Company. Additionally, Mr. Gantley was elected to the Maison Insurance Company Board of Directors in December 2014. Prior to his tenure with the Company, Mr. Gantley was President of ClaimCor, LLC; an independent insurance claim adjusting and underwriting inspection firm and served in that role for 10 months beginning in October 2013. From April 2010 to October 2013 Mr. Gantley served as the Vice President of research and development for SDII Global Corporation; a forensic engineering and earth sciences firm primarily serving the insurance industry on technical investigations, expert opinion work and other related matters. Mr. Gantley’s background and history centers on insurance claims and insurance operations at the regional and national level. Mr. Gantley was the Chief Operating Officer at Edison Insurance Company from 2005-2010 which is a Florida based homeowner insurance carrier that Mr. Gantley co-founded. Prior to Edison, Mr. Gantley was the Senior Vice President of Claims at Cypress Property and Casualty & Cypress Texas Lloyds for 3 years; a mid-size property and commercial lines carrier with business concentrations in the Florida and Texas marketplace. Prior to Cypress, Mr. Gantley held positions at Bankers Insurance Company/IMSG where Mr. Gantley worked for 6 years (1996-2002) finishing out his tenure as the Senior Vice President and Chief Operating Officer. Finally, Mr. Gantley spent his first 16 years of his insurance career at Allstate Insurance Company(1978-1994) working in a multitude of claim management jobs in many different states finishing his career with Allstate as the Territorial Claim Manager in Texas managing 560 employees.
Dean E. Stroud, age 63, has served as our Vice President of Operations and Chief Underwriting Officer and has been a member of the Board of Directors of Maison Insurance since October 2012 and a member of the Board of Directors and Secretary of Maison Managers, Inc. since February 2015. Prior to joining Maison Insurance, he was the Chief Underwriting Officer and a member of the Board of Directors of Access Home Insurance Company in Baton Rouge, Louisiana from September 2011 to October 2012, where he managed and supervised company underwriting operations. Mr. Stroud served as the Senior Underwriting Consultant of Americas Insurance Company from January 2011 to September 2011 and prior to that, served as their Chief Underwriting Officer from April 2010 to January 2011. From October 2003 to May 2009, he was the Vice President of MacNeill Group, Inc., where he directed Louisiana underwriting and claims operations as a service provider for Citizens. Mr. Stroud’s prior executive experience also includes several positions held at Audubon Insurance Company, which he joined in 1971. At Audubon Insurance Company, Mr. Stroud held the position of Senior Vice President with responsibility for companywide standard lines underwriting operations and all company branch offices. Subsequently, Mr. Stroud became President and Chief Operating Officer of Audubon Insurance Group and President of Audubon Insurance Company and Audubon Indemnity Company. He also was a director of Audubon Insurance Company and Audubon Indemnity Company. Mr. Stroud has held positions on advisory committees to the Professional Insurance Agents of Louisiana and has served on the Board of Directors of the Property Insurance Association of Louisiana. He earned a Bachelor of Arts degree from Louisiana State University in 1974.
TRANSACTIONS WITH RELATED PERSONS
Fund Management Group LLC Transaction
On January 23, 2014, Fund Management Group LLC (“FMG”), an entity of which the Company’s Chairman of the Board, Gordon G. Pratt, is a Managing Member and controlling equity holder, invested $2.0 million in the Company in exchange for 80,000 Series A Convertible Preferred Shares (“Preferred Shares”) of the Company. The Preferred Shares were non-voting and ranked senior to all classes of capital stock of the Company. The Preferred Shares did not pay any dividends.
The Preferred Shares were converted into shares of common stock and warrants on March 31, 2014, the effective date of the Company’s initial public offering (the “IPO”). The Preferred Shares were converted into (i) 312,500 common shares of the Company and (ii) warrants to purchase 312,500 shareseach RSU representing one share of the Company’s common stock. Each warrant issued to FMG entitles the holder to purchase one share of common stock at a price equal to $9.60, subject to certain adjustments under a warrant agreement. The warrants have an expiry date of March 31, 2019 and vested 100% upon issuance. The warrants may be redeemable by the Company at a price of $0.01 per warrant during any period
Potential Payments Upon Termination or Change in which the closing price of the Company’s common shares is at or above $14.00 per share for 20 consecutive trading days. The warrant holder is entitled to a 30-day notice prior to the date of such redemption.Control Employment Agreements The common stock issued to FMG has piggyback registration rights for future registrations of the Company’s common stock under the Securities Act (other than certain excluded registrations) and, upon the two-year anniversary of the IPO, FMG will also have a one-time demand registration right for such common stock, subject to certain restrictions. Kingsway Financial Services Inc., and Subsidiaries
Prior to the Company’s IPO on March 31, 2014, the Company operated as wholly owned subsidiary of KAI, a wholly-owned subsidiary of KFSI. As a result of this relationship, KAI had advanced the Company funds consisting of payments made directly to third parties on the Company’s behalf as well as allocated inter-company expenses for various shared-services and support. Approximately $2.7 million was due as of December 31, 2013 representing the cumulative amount due to KAI from the Company’s inception in October 2012 up to and including December 31, 2013. The Company began making periodic payments to KAI in January 2014 and paid down this balance in full by April 2014 with proceeds from the Company’s IPO.
On February 11, 2014, the Company entered into the Management Services Agreement (“MSA”) with 1347 Advisors, LLC (“Advisors”), a wholly owned subsidiary of KAI, pursuant to which Advisors provided certain services to the Company, including forecasting, analysis of capital structure and reinsurance programs, consultation in potential future restructuring or capital raising transactions, and consultation in potential corporate development initiatives. For the services performed, Advisors was paid a monthly fee equal to 1% of the Company’s gross written premiums, as defined in the MSA. The Company has incurred an expense of $0.3 million for the year ended December 31, 2014 under the terms of the MSA.
On February 24, 2015, the Company entered into an Agreement to Buyout and Release (the “Buyout”) with Advisors which terminated the MSA existingEmployment Agreements between the Company and Advisors. Under the termseach of Buyout, the MSA was deemed terminatedMessrs. Swets and cancelled effective February 24, 2015. In consideration of Advisors agreeing to voluntarily terminate the MSA,Bottjer provide for payments by the Company (i) madein connection with a cash paymenttermination of employment.
In the event Messrs. Swets or Bottjer is terminated by the Company without cause, then the Company will pay Messrs. Swets or Bottjer, as applicable, 24 months and 12 months, respectively, of base salary in effect at the time of the termination or the original base salary set forth in the amount of $2.0 million to Advisors; (ii) executed and delivered the Performance Shares GrantEmployment Agreement, to Advisors (described in further detail below); (iii) issued to Advisors 120,000 shares of Series B Preferred Stock ofwhichever is greater, payable by the Company (“Preferred Shares”, defined below); and (iv) executed and delivered to Advisorsover a 24-month (in the MSA Warrant to purchase 1,500,000 sharescase of Mr. Swets) or 12-month (in the case of Mr. Bottjer) period in accordance with the Company’s common stock at an exercise price of $15.00 per share. Pursuant to Proposal 2 above, the Companynormal payroll practices. If Messrs. Swets or Bottjer is seeking stockholder approval prior to the issuance of certain shares of our common stock under the MSA Warrant that result in a change of control under the NASDAQ rules. If stockholder approval is not obtained at this annual meeting of stockholders of the Company, the Company shallterminated for cause the Registration Rights Agreement, dated February 28, 2014, by and between KAI and the Company (the “Registration Rights Agreement”) to be amended to provide that (i) the holder of the MSA Warrant is granted a demand registration right thereunder with respect to the resale by the holder of the MSA Warrant, which demand registration may, at the option of holder, be for the Company to file a shelf registration statement that permits the resale of the MSA Warrant from time to time thereunder, (ii) the Company is required to include the MSA Warrant in any shelf registration statement that the Company files after the date of such amendment and (iii) if the holder of MSA Warrant exercises its demand registration right under such amended Registration Rights Agreement with respect to the MSA Warrants, the Holder shall pay all expenses (including the Company’s expenses) relating to the registration of such MSA Warrant.
The Preferred Shares have a par value of $25.00 per share and pay annual cumulative dividends at a rate of 8% per annum. Cumulative dividends shall accrue, whether or not declared by the Board and irrespective of whether there are funds legally available for the payment of dividends. Accrued dividends shall be paid in cash only when, as and if declared by the Board out of funds legally available therefor or upon a liquidation or redemption of the Preferred Shares.
The Performance Shares Grant Agreement grants Advisors 100,000 shares of the Company’s common stock issuable upon the date that the last sales price of the Company’s common stock equals or exceeds ten dollars per share for any twenty trading days within any 30-day trading period (the “Milestone Event”). Advisorsvoluntarily resigns, he will not be entitled to any dividends declaredseverance under the Employment Agreement. For purposes of their respective Employment Agreements, “cause” will exist if Messrs. Swets or paid onBottjer (i) acts dishonestly or engages in willful misconduct, (ii) breaches his fiduciary duties, (iii) intentionally fails to perform duties assigned to him, (iv) is convicted or enters a plea of guilty or nolo contendere with respect to any felony crime involving dishonesty or moral turpitude, and/or (v) breaches his obligations under the Company’s stock priorEmployment Agreement. Furthermore, “cause” will exist under Mr. Swets’ employment agreement if Mr. Swet’s refuses to follow the Milestone Event having been achieved.written direction of the Board, unless such directions are, in the reasonable written opinion of legal counsel, illegal or in violation of applicable law.
On March 31, 2014,
In connection with Mr. Hill’s retirement effective August 6, 2021, and a separation and general release entered into between the Company entered into a Transition Services Agreement (“TSA”) with KFSI. The TSA provides for temporary access to necessary services and resources duringMr. Hill, the employment agreement which previously existed between the Company is reliant on KFSI, including resources and services related to accounting and reporting, accounts payable, cash management, taxes, compliance with the Sarbanes-Oxley Act of 2002, payroll processing and benefits administration, information technology systems and support, human resource function, and external audit. The charges for the transition services are intended to allow KFSI to fully recover the costs directly associated with providing the services, plus all out-of-pocket costs and expenses. The charges of each of the transition services generally will be based on either a pre-determined flat fee or an allocation of the cost incurred by KFSI (or an affiliate or subsidiary thereof) for providing the service, including certain fees and expenses of third-party service providers. The TSA stipulates transition deadlines for all the services provided under it, by which time the Company is expected to establish its own independent functions for such services. As of December 31, 2014, $97,000Mr. Hill was due to KFSI under the terms of the TSA. During the fourth quarter of 2014, the Company began the process of bringing the necessary resources in-house in order to reduce its reliance on KFSI and the services provided under the TSA. This process was substantially completed as of December 31, 2014 and as such, services provided under the TSA ceased beginning in the first quarter of 2015.terminated. On March 26, 2014, the Company entered into a Share Grant Agreement (the “SGA”) with KAI, whereby KAI will be entitled to receive up to an aggregate of 375,000 shares of PIH common stock upon achievement of certain milestones for the Company’s stock price. Pursuant to the terms of the SGA, if at any time the last sales price of the Company’s common stock equals or exceeds: (i) $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock; (ii) $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock (in addition to the 125,000 shares of common stock earned pursuant to clause (i) herein); and (iii) $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock (in addition to the 250,000 shares of common stock earned pursuant to clauses (i) and (ii) herein). The shares of common stock granted to KAI will have a valuation equal to the last sales price of the Company’s common stock on the day prior to such grant. The Company has not issued any shares to date under the SGA.
Equity Incentive Plans As of December 31, 2021, the Company had equity grants outstanding under each of its 2021, 2018 and 2014 KFSIPlans. Each of the plans contain certain provisions concerning the vesting and termination of equity awards granted under the plans upon a termination of employment or upon a change in control. The Company’s award agreements entered into under each plan also contain provisions concerning the vesting and termination of the RSUs granted thereunder. 2021 and 2018 Plans The 2021 and 2018 Plan each generally provides for “double-trigger” vesting of equity awards in connection with a change in control of the Company, as described below. To the extent that outstanding awards granted under either Plan are assumed in connection with a change in control, then, except as otherwise provided in the applicable award agreement or in another written agreement with the participant, all outstanding awards will continue to vest and become exercisable (as applicable) based on continued service during the remaining vesting period, with performance-based awards being converted to service-based awards at the “target” level. Vesting and exercisability (as applicable) of awards that are assumed in connection with a change in control generally would be accelerated in full on a “double-trigger” basis, if, within two years after the change in control, the participant’s employment is involuntarily terminated without “cause”, or by the participant for “good reason”. Any stock options or SARs that become vested on a “double-trigger” basis generally would remain exercisable for the full duration of the term of the applicable award. To the extent outstanding awards granted under either Plan are not assumed in connection with a change in control, then such awards generally would become vested in full on a “single-trigger” basis, effective immediately prior to the change in control, with performance-based awards becoming vested at the “target” level. Any stock options or SARs that become vested on a “single-trigger” basis generally would remain exercisable for the full duration of the term of the applicable award. The Compensation Committee has discretion to determine whether any outstanding awards granted under each Plan will be assumed by the resulting entity in connection with a change in control, and the Compensation Committee has the authority to make appropriate adjustments in connection with the assumption of any awards. The Compensation Committee also has the right to cancel any outstanding awards in connection with a change in control, in exchange for a payment in cash or other property (including shares of the resulting entity) in an amount equal to the excess of the fair market value of the shares subject to the award over any exercise price related to the award, including the right to cancel any “underwater” stock options and SARs without payment therefor. For purposes of the Plans, a “change in control” generally includes (a) the acquisition of 50% or more of the company’s common stock; (b) a reorganization, merger, consolidation or similar transaction, or a sale of substantially all of the Company’s assets; or (c) the complete liquidation or dissolution of the Company. Whether a participant’s employment has been terminated for “cause” will be determined by the Company. Unless otherwise provided in the applicable award agreement or in an another written agreement with the participant, “cause”, as a reason for termination of a participant’s employment generally includes (a) an intentional act of fraud, embezzlement, theft or any other illegal or unethical act in connection with the performance of the participant’s duties to the Company or a subsidiary that the Company determines, acting in good faith, has materially injured or is highly likely to materially injure the Company, or any other terminable offense under the Company’s policies and practices; (b) intentional damage to the Company’s (or a subsidiary’s) assets; (c) conviction of (or plea of nolo contendere to) any felony or other crime involving moral turpitude; (d) improper, willful and material disclosure or use of the Company’s (or a subsidiary’s) confidential information or other willful material breach of the participant’s duty of loyalty to the Company or a subsidiary; (e) a willful, material violation of the Company’s policies and procedures as set out in its subsidiaries retained approximately 16.9%employee handbook or a material violation of the Company’s code of conduct that the Company determines, acting in good faith, has materially injured or is highly likely to materially injure the Company, monetarily or otherwise; or (f) the participant’s willful failure or refusal to follow the lawful and good faith directions of the Company or a subsidiary. For purposes of the Plans, unless otherwise provided in the applicable award agreement or in an another written agreement with the participant, “good reason” generally includes (a) the assignment to the participant of any duties that are materially inconsistent with the Participant’s duties or responsibilities as assigned by the Company or a subsidiary, or any other action by the Company or a subsidiary that results in a material diminution in of the participant’s duties or responsibilities, unless remedied by the Company promptly after receipt of notice from the participant; or (b) any material failure by the Company or a subsidiary to comply with its agreed obligations to the participant, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company promptly after receipt of notice from the Participant. The award agreements entered into under the 2021 Plan and 2018 Plan also contain provisions concerning the vesting and termination of the awards subject to the agreements. Under the 2018 Plan, except as described above with respect to a change in control, un-exercisable stock options, unless otherwise provided in the applicable award agreement, are generally forfeited automatically upon termination of employment prior to a vesting date, unless (i) the Compensation Committee, in its discretion, provides for the full or partial acceleration of vesting and exercisability of the option in connection with the termination, or (ii) the termination is due to the grantee’s death or disability, in which case the unvested options will automatically become vested and exercisable upon termination. The stock options that are exercisable at the time of termination of employment expire (a) twelve months after the termination of employment by reason of death or disability or (b) three months after the termination of employment for other reasons. Upon the termination of a grantee’s employment for cause (as defined under the 2018 Plan), all of the grantee’s vested and unvested options automatically terminate. Under each Plan, with respect to unvested restricted shares and RSUs, unless otherwise provided in the applicable award agreement, unvested restricted shares and restricted share units that have not yet vested are generally forfeited automatically in the event of the termination of the grantee’s employment for any reason prior to a vesting date, unless (i) the Compensation Committee, in its sole discretion, provides for the full or partial acceleration of vesting of the restricted shares or restricted share units, as applicable, in connection with the termination, or (ii) the termination is due to the grantee’s death or disability, in which case the unvested restricted shares or restricted share units, as applicable, will automatically become vested in full. The Compensation Committee has discretion to determine the form, amount and timing of each award granted under the 2021 Plan and all other terms and conditions of the award, including, without limitation, the form of the agreement evidencing the award. As such, future awards granted under the 2021 Plan may be subject to additional terms providing for accelerated vesting, pay outs or termination of the award upon a termination of employment or a change in control of the Company.
Amended and Restated 2014 Equity Incentive Plan Under the 2014 Plan, upon a change in control of the Company, our Board of Directors (as constituted immediately prior to such change in control) may, in its discretion, (i) require that shares of the Company resulting from such change in control, or a parent corporation thereof, be substituted for some or all of the common shares subject to an outstanding award granted under the 2014 Plan, with an appropriate and equitable adjustment as shall be determined by the Board, and/or (ii) require outstanding awards granted under the 2014 Plan, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive: (1) a cash payment in an amount equal to the aggregate number of common shares then subject to the portion of any stock option surrendered multiplied by the excess, if any, of the fair market value (as defined under the 2014 Plan) of a common share as of the date of the change in control, over the exercise price per common share subject to such stock option; (2) shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such change in control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (1) above; or (3) a combination of the payment of cash pursuant to clause (1) above and the issuance of shares pursuant to clause (2) above. A “change in control” under the 2014 Plan generally means (i) the acquisition by any individual, entity or group of beneficial ownership of 50% or more of the then outstanding common shares or the combined voting power of the then outstanding securities of the Company, with certain exceptions; (ii) the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company, unless (A) the Company’s current beneficial owners retain more than 50% of the Company’s outstanding shares and combined voting power following such transaction, (B) no new individual entity or group will beneficially own 50% or more of the Company’s outstanding shares or combined voting power following such transaction, or (C) current members of the Board will constitute at least a majority of the board following such transaction; or (iii) the consummation of a plan of complete liquidation or dissolution of the Company. The Company has RSU awards outstanding that were issued under the 2014 Plan and no outstanding stock option awards. The Company’s RSU agreements entered into with Mr. Hill and non-employee directors under the 2014 Plan generally provide that the RSUs granted thereunder remain restricted until the applicable vesting date set forth in the agreement. In the event the grantee’s employment with the Company or service on the Company’s board of directors, as applicable, is terminated due to the grantee’s death or disability (as defined under the 2014 Plan) prior to one or more of the vesting dates, all unvested RSUs will vest as of the date of death or the date the grantee is determined to be experiencing a disability. In addition, in the event the grantee’s employment with the Company or service on the Company’s board of directors, as applicable, is terminated by the Company or by the grantee for any reason other than death or disability (as defined under the 2014 Plan), all unvested RSUs granted under the agreement will be forfeited as of the date of termination. In addition to the general provisions described above, the RSU agreements entered into by the Company in connection with the share matching arrangements for the Company’s non-employee directors (other than Mr. Wollney) on December 15, 2017 contain special acceleration and termination provisions. The agreements for the non-employee directors provide that the vesting of the RSUs granted thereunder is subject to the director’s continued service on the board through the applicable vesting date, provided that if a director makes himself available and consents to be nominated by the Company for continued service but is not nominated by the Board for election by the stockholders, other than for good reason as determined by the Board in its discretion, then such director’s RSUs will vest in full as of his last date of service as a director with the Company. Retirement of CFO Upon the retirement of our former Chief Financial Officer, John S. Hill, effective August 6, 2021, the Compensation Committee approved the accelerated vesting of RSUs granted by the Company to Mr. Hill on May 29, 2015, December 15, 2017, and August 22, 2018. Accordingly, on August 6, 2021, 17,400 unvested RSUs held by Mr. Hill vested in full, with each RSU representing one share of the Company’s common shares.stock. PROPOSAL 4 — To consider and act upon a non-binding advisory resolution to approve the compensation of our Named Executive Officers In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Section 14A of the Exchange Act, we are asking our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules promulgated by the SEC. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we are asking our stockholders to vote “FOR” the following resolution at our Annual Meeting: “RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Company’s proxy statement pursuant to Item 402 of Regulation S-K, including the compensation tables and accompanying narrative disclosures.” This advisory say-on-pay vote on executive compensation is not binding on the Board or the Compensation Committee. However, the Board values the opinion of our stockholders and will consider the result of the vote when making future decisions regarding executive compensation. We design our executive compensation programs to implement our core objectives of attracting key leaders, motivating our executives to remain with the Company for long and productive careers, rewarding sustained financial and operating performance and leadership excellence and aligning the long-term interests of our executives with those of our stockholders. The Board believes that the policies and practices described in “Compensation of Executive Officers” are effective in achieving the Company’s goals. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS. Required Vote Approval requires an affirmative vote of the majority of the votes properly cast at the Annual Meeting. Proxies marked “ABSTAIN” and broker non-votes will not be considered as votes cast for or against Proposal 4 and will have no effect on the outcome of the proposal . DELINQUENT SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEREPORTS Under Section 16(a) of the Securities Exchange Act, our executive officers, directors, and persons who own greater than 10% of 1934, as amended, an officer, director, or greater-than-10% stockholderour common stock (the “Section“Section 16 Reporting Persons”Persons”) of the Company must file a Form 4 reporting the acquisition or disposition of the Company’s equity securities with the Securities and Exchange CommissionSEC no later than the end of the second business day after the day the transaction occurred unless certain exceptions apply. Transactions not reported on Form 4 must be reported on Form 5 within 45 days after the end of the Company’s fiscal year. Such persons must also file initial reports of ownership on Form 3 upon becoming an executive officer, director, or greater-than-10% stockholder. Based solely uponon our review of the copies of such forms filed by thereports and representations that no other reports were required, we believe that all but two Section 16 filing requirements applicable to our Section 16 Reporting Persons were timely complied with during 2021. The two late filings were comprised of a Form 3 and a Form 4 filed on December 17, 2021, on behalf of our then newly appointed board member, Richard E. Govignon, Jr. The late filings resulted from the Company’s inability to our knowledge no such person has failed to timely file any report required by Section 16(a) duringobtain EDGAR codes for Mr. Govignon within the year ended December 31, 2014.specified reporting deadline. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS & EXECUTIVE OFFICERSMANAGEMENT The following table sets forth certain information regarding the beneficial ownership of shares of our common stock as of April 1, 2015the Record Date, by: | | ·● | Each person (or group of affiliated persons) known by us to beneficially own more than 5% of our common stock; | | | ·● | Each of our directors director nominees, and named executive officers; and | | | ·● | All of our current directors and named executive officers as a group. |
The number and percentages of shares beneficially owned are based on 6,358,125[*] common shares outstanding as of April 1, 2015.the Record Date. Information with respect to beneficial ownership has been furnished by each director, executive officer and beneficial owner of more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SecuritiesSEC and Exchange Commission and generally requirerequires that such persons have voting or investment power with respect to the securities. In computing the number of shares beneficially owned by a person listed below and the percentage ownership of such person, shares of common stock underlying warrants, options and warrantsRSUs held by each such person that are exercisable or vest within 60 days of April 1, 2015the Record Date are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise noted below, and subject to applicable community property laws, the persons named have sole voting and investment power with respect to all shares of common stock shown as beneficially owned toby them. Except as otherwise indicated below, the address for each beneficial owner is 1347 Property Insurance Holdings,c/o FG Financial Group, Inc., 1511 N. Westshore Blvd,360 Central Ave, Suite 870, Tampa,800, St. Petersburg, FL 33607.33701. | | | Beneficially Owned | | Name and Address of Beneficial Owner | | Number of
Shares | | Percentage of
Shares | | 5% Beneficial Owners | | | | | | | | | Kingsway Financial Services, Inc.(1) 150 Pierce Road, Itasca, IL 60143 | | | 1,312,537 | | | | 19.9 | % | Legion Partners, LLC
9401 Wilshire Blvd, Suite 705, Beverly Hills, CA 90212 | | | 626,000 | | | | 9.8 | % | | | | | | | | | | | | Named Executive Officers and Directors | | | | | | | | | | Gordon G. Pratt(2) | | | 642,745 | | | | 9.6 | % | | Leo Christopher Saenger, III | | | 36,445 | | | | * | | | Hassan Raza Baqar | | | 17,745 | | | | * | | | Larry Gene Swets, Jr. | | | 17,745 | | | | * | | | Scott D. Wollney | | | 3,000 | | | | * | | | Joshua S. Horowitz(3) | | | 34,250 | | | | * | | | Douglas N. Raucy | | | 61,427 | | | | 1.0 | % | | John S. Hill | | | 4,685 | | | | * | | | Dean Stroud | | | 9,512 | | | | * | | | Robert G. Gantley | | | — | | | | * | | | Executive Officers and Directors as a Group (10 individuals) | | | 827,554 | | | | 12.1 | % |
| | | Beneficially Owned | | | Name and Address of Beneficial Owner | | Number of Shares | | | Percentage of Shares | | | 5% Beneficial Owners | | | | | | | | | Fundamental Global GP, LLC(1) 108 Gateway Blvd., Suite 204, Mooresville, NC 28117 | | | 3,532,765 | | | | 54.1 | % | Peter S. Lynch(2) 200 Seaport Blvd Zone S4A Boston, MA 02210 | | | 338,509 | | | | 5.2 | % | | | | | | | | | | | | Named Executive Officers and Directors | | | | | | | | | | Larry G. Swets, Jr., President, Chief Executive Officer and Director | | | 15,199 | | | | * | | | Hassan R. Baqar, Executive Vice President, Chief Financial Officer | | | – | | | | * | | | Brian D. Bottjer, Senior Vice President, Chief Accounting Officer and Secretary | | | – | | | | * | | | D. Kyle Cerminara, Chairman of the Board(1)(3) | | | 3,549,690 | | | | 54.4 | % | | Rita Hayes, Director | | | 8,070 | | | | * | | | E. Gray Payne, Director | | | 8,259 | | | | * | | | Scott D. Wollney, Director | | | 11,259 | | | | * | | | Richard E. Govignon, Jr., Director | | | – | | | | * | | | Current Executive Officers and Directors as a Group (8 individuals)(3) | | | 3,592,477 | | | | 55.0 | % |
* Less than 1.0% * | Less than 1.0% | | 1. | The numberFundamental Global GP, LLC (referred to in this Proxy Statement as “FG”) shares voting and dispositive power with respect to 3,532,765 shares of beneficially ownedcommon stock. Fundamental Activist Fund I, LP (“FAFI”) shares attributedvoting and dispositive power with respect to KFSI does not include warrants788,199 shares of common stock. FGI 1347 Holdings, LP (“FGIH”), of which BK Technologies, Inc., a wholly-owned subsidiary of BK Technologies Corporation (“BKTI”), is the sole limited partner, shares voting and dispositive power with respect to purchase approximately 1.26 million477,282 shares of common stock. Mr. Cerminara is a member of the Board of Directors of BKTI. Fundamental Global Partners Master Fund, LP (“FGPM”) shares voting and dispositive power with respect to 628,875 shares of common stock. Ballantyne Strong, Inc. (“BTN”) shares voting and dispositive power with respect to 1,638,409 shares of common stock. Mr. Cerminara is Chairman of the Board of BTN. Information regarding beneficial ownership of our common stock by FG and its affiliates is included herein in reliance on a Form 4 filed with the SEC on December 12, 2021. Due to his positions with FG and affiliated entities, Mr. Cerminara may be deemed to be beneficial owner of the shares of the Company’s common stock which were issueddisclosed as directly owned by FAFI, FGIH and FGPM. Due to a subsidiary of KFSI as a result of the Buyout Agreement previously discussed under the heading “Transactionshis positions with Related Persons”. The terms of this warrant are such that the CompanyBTN, FG and affiliated entities, Mr. Cerminara may not issue any shares of its common stock otherwise due upon the exercise of the warrant (the “Warrant Shares” ) to the extent that after giving effect to such issuance of Warrant Shares any holder of the warrant, together with its affiliates, beneficially own or control the right to vote in excess of 19.9% of the Company’s total shares of common stock outstanding after giving effect to such issuance, unless and until the Company obtains stockholder approval permitting such issuance. Stockholder approval for issuance of these shares in excess of 19.9% isbe deemed to be voted upon at this Annual Meeting under the previously discussed Proposal 2. Should this proposal be approved via an affirmative vote from a majoritybeneficial owner of the stockholders at this Annual Meeting, the total number of shares beneficially owned by KFSI and its affiliates will be 2,575,000 shares representing a 32.8% beneficial interest. | 2. | Mr. Pratt’s beneficial interest includes 312,500 shares of the Company’s common stock disclosed as directly owned by FMG as well as warrants to purchase 312,500 shares of the Company’s common stock owned by FEA Pratt Family Holdings LLC. On February 13, 2015, FMG transferred ownership of all 312,500 warrants it owned to FEA Pratt Family HoldingsBTN. The business address for Mr. Cerminara is c/o FG Investors GP, LLC, with the Company’s consent. Both FMG and FEA Pratt Family Holdings LLC are managed by Mr. Pratt, who also holds exclusive authority over both entities.108 Gateway Blvd., Suite 204, Mooresville, North Carolina 28114. | 3. | Mr. Horowitz’s beneficial interest includes shared voting and investment power over 31,250 | | 2. | Includes 58,800 shares of the Company’s common stock owned by Palm Global Small Cap Fund as well as 3,000 shares of the Company’s common stock held in various retirement accounts in the name of Mr. Horowitz or of his immediate family over which Mr. HorowitzLynch has sole voting and investmentdispositive power and 279,709 shares over which Mr. Lynch has shared voting and dispositive power. Information regarding beneficial ownership of our common stock by Mr. Lynch is included herein in reliance on Schedule 13G filed with the SEC on April 5, 2022. | | | | 3. | Includes 3,532,765 shares reported as beneficially owned by FG and its affiliates, of which Mr. Cerminara is deemed to have beneficial ownership by virtue of his positions with FG, as discussed in footnote 1. |
TRANSACTIONS WITH RELATED PERSONS It is the responsibility of the Audit Committee or, on a case-by-case basis, another Board committee constituted solely by independent directors, to review and oversee proposed transactions with “related persons” as defined in Item 404(a) of the SEC’s Regulation S-K. These include transactions and series of similar transactions to which we were a party or will be a party, in which | ● | the amounts involved exceeded or will exceed lessor of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years; and | | | | | ● | any of our directors, director nominees, executive officers or beneficial owners of more than 5% of any class of our voting stock, or any immediate family members thereof, had or will have a direct or indirect material interest. |
Below is a summary of our related party transactions between January 1, 2020 and May 25, 2022. Investment in Metrolina The Company had previously invested $4.0 million as a limited partner in Metrolina, which invested in real estate through a real estate investment trust wholly owned by Metrolina. The general partner of Metrolina, FGI Metrolina GP, LLC, was managed, in part, by Mr. Cerminara, the Chairman of the Board of Directors of the Company. Metrolina’s investment program was managed by FG Funds Management LLC, an affiliate of FG, which, with its affiliates, is the largest stockholder of the Company. In the fourth quarter 2021, we received approximately $5.0 million in cash from Metrolina, representing our initial investment of $4.0 million plus approximately $1.0 million in distributed earnings. As a result, our investment in Metrolina was fully liquidated as of December 31, 2021.
Joint Venture Agreement On March 31, 2020, the Company and FG entered into the limited liability company agreement of Fundamental Global Asset Management, LLC (“FGAM”), a joint venture owned 50% by each party. The purpose of FGAM is to sponsor, capitalize and provide strategic advice to investment managers in connection with the launch and/or growth of their asset management business and the investment products they sponsor. FGAM is governed by a Board of Managers consisting of four managers, two of which are appointed by each Member. The Company has appointed two of its independent directors to the FGAM Board of Managers. Certain major actions, including any decision to sponsor a new investment manager, require the prior consent of both Members. FG Special Situations Fund As of the Record Date, the Company had invested approximately $12.3 million as a limited partner in FG Special Situations Fund, LP (the “Fund” or “FGSS”), a Delaware limited partnership formed on September 2, 2020. The general partner of the Fund, and the investment advisor of the Fund are ultimately controlled by Mr. Cerminara, the Chairman of the Company’s Board of Directors. Portions of the Company’s investment into the Fund were used to sponsor the launch of special purpose acquisition companies, including FG New America Acquisition Corp. (“FGNA”), Aldel Financial, Inc. (“Aldel”), FG Merger Corp. (“FGMC”), and FG Acquisition Corp. (“FGAC”). Mr. Cerminara, and Mr. Swets, our Chief Executive Officer, are managers of the sponsor companies of the special purpose acquisition companies. Mr. Swets was the Chief Executive Officer and a director of FGNA, and Hassan R. Baqar, our Chief Financial Officer, was Chief Financial Officer of FGNA, until FGNA’s business combination with Opportunity Financial, LLC. Mr. Swets served as Senior Advisor to Aldel; Mr. Baqar served as Director and Chief Financial Officer of Aldel; and Mr. Cerminara served as a director of Aldel; until Aldel’s business combination with The Hagerty Group, LLC. Mr. Swets serves as chairman of FGMC, while Messrs. Baqar and Cerminara serve as director and senior advisor of FGMC, respectively. Mr. Swets serves as chief executive officer and director of FGAC. Mr. Baqar serves as chief financial officer, secretary and director of FGAC. Mr. Cerminara serves as chairman of FGAC. FG SPAC Partners On January 4, 2021, FG SPAC Partners, LP (“FGSP”) was formed as a Delaware limited partnership to co-sponsor newly formed SPACs with their founders or partners. The Company is the sole managing member of the general partner of FGSP and holds an approximate 46% limited partner interest in FGSP. Certain of our directors and officers also hold limited partner interests in FGSP. Mr. Swets holds a limited partner interest through Itasca Financial LLC, an advisory and investment firm for which Mr. Swets is managing member. Mr. Baqar also holds a limited partner interest through Sequoia Financial LLC, an advisory firm for which Mr. Baqar is managing member. Mr. Cerminara also holds a limited partner interest through Fundamental Global, LLC, a holding company for which Mr. Cerminara is the manager and one of the members. FGSP has invested in the sponsor securities of Aldel, FGMC and FGAC. Messrs. Swets, Baqar and Cerminara have held, or currently hold, positions at Aldel, FGMC and FGAC as discussed above. Messrs. Baqar and Cerminara each received 25,000 shares of Aldel for their services to Aldel, as directors and executive officers. Mr. Swets received 25,000 shares of Aldel for his service as Sr. Advisor to Aldel. Messrs. Swets and Baqar each received 10,000 shares of FGMC for their services to FGMC, as directors. Mr. Cerminara received 15,000 shares of FGMC for his service as Sr. Advisor to FGMC. Each of Messrs. Swets, Baqar and Cerminara has been allocated 59,792 FGAC common shares for their services to FGAC, as directors and executive officers. Investment Advisory Agreement Pursuant to the Investment Advisory Agreement, FGSC, a wholly owned subsidiary of the Company, has agreed to provide investment advisory services to FedNat, including identifying, analyzing and recommending potential investments, advising as to existing investments and investment optimization, recommending investment dispositions, and providing advice regarding macro-economic conditions. In exchange for providing the investment advisory services, FedNat has agreed to pay FGSC an annual fee of $100,000. The Investment Advisory Agreement expires on December 2, 2024. Shared Services Agreement On March 31, 2020, the Company entered into a Shared Services Agreement (the “Shared Services Agreement”) with Fundamental Global Management, LLC (“FGM”), an affiliate of FG, pursuant to which FGM provides the Company with certain services related to the day-to-day management of the Company, including assisting with regulatory compliance, evaluating the Company’s financial and operational performance, providing a management team to supplement the executive officers of the Company, and such other services consistent with those customarily performed by executive officers and employees of a public company. In exchange for these services, the Company pays FGM a fee of $456,000 per quarter (the “Shared Services Fee”), plus reimbursement of expenses incurred by FGM in connection with the performance of the Services, subject to certain limitations approved by the Company’s Board of Directors or Compensation Committee from time to time. The Shared Services Agreement has an initial term of three years, and thereafter renews automatically for successive one-year terms unless terminated in accordance with its terms. The Shared Services Agreement may be terminated by FGM or by the Company, by a vote of the Company’s independent directors, at the end of the initial or automatic renewal term upon 120 days’ notice, subject to payment by the Company of certain costs incurred by FGM to wind down the provision of services and, in the case of a termination by the Company without cause, payment of a termination fee equal to the Shared Services Fee paid for the two quarters preceding termination. For the years ended December 31, 2021 and 2020, the Company paid approximately $1.8 and $1.4 million, respectively, to FGM under the Shared Services Agreement. FGSP is receiving shares and warrants for services being provided to FG Acquisition Corp., (“FGAC”) in which FGSS is investing up to $4,000,000 for founder shares. Each of Mr. Cerminara, Swets, and Baqar will receive 59,792 FGAC common shares for their services to FGAC, as directors and executive officers. Share Repurchase Transaction On September 15, 2020, the Company entered a Share Repurchase and Cooperation Agreement (the “Share Repurchase Agreement”) with Hale Partnership Capital Management, LLC and certain of its affiliates (collectively, the “Hale Parties”), which, prior to the transaction, owned more than 18% of our outstanding common stock (the “Share Repurchase Transaction”). Pursuant to the Share Repurchase Agreement, the Company agreed to purchase (exclusive of any fees or expenses) all of the 1,130,152 shares of the Company’s common stock, owned, of record or beneficially, by the Hale Parties, in exchange for an aggregate $2,752,617 in cash and 330,231 shares of common stock of FedNat Holding Company previously owned by the Company (the “FedNat Shares”). As acknowledged by the Hale Parties in the Share Repurchase Agreement, that certain Standstill Agreement, dated December 2, 2019, by and between FedNat Holding Company and the Company, imposes certain restrictions in respect of the FedNat Shares transferred by the Company to the Hale Parties. FedNat Holding Company is not party to, or a third-party beneficiary of, the Share Repurchase Agreement. The Share Repurchase Agreement contains certain customary standstill provisions that, for a period of five years, commencing September 15, 2020 (the “Standstill Period”), prohibit, among other things, the Hale Parties from (i) making certain announcements regarding the Company’s transactions, (ii) soliciting proxies, (iii) acquiring ownership of any securities of the Company, (iv) advising, encouraging or influencing any vote or disposition of any securities of the Company, (v) selling securities of the Company resulting in any third party owning more than 4.9% of the outstanding shares of the Company’s common stock (subject to certain exceptions set forth in the Share Repurchase Agreement), (vi) taking actions to change or influence the Board of Directors of the Company, Company management or the direction of certain Company matters, and (vii) exercising certain stockholder rights. The Company and the Hale Parties further agreed that they will not disparage each other and that they will not initiate any lawsuit, claim or proceeding with respect to any claims against the Company or any of the Hale Parties, as applicable, based on facts known as of the Effective Date, in each case applicable during the Standstill Period, and to a mutual release of claims. Each of the Company and the Hale Parties has the right to terminate the Share Purchase Agreement prior to the end of the Standstill Period if (i) any of the Hale Parties, in the case of the Company, or (ii) the Company, in the case of the Hale Parties, commits a material breach of the Share Purchase Agreement, and such breach is not cured within 15 days after notice is given to the breaching party. As the total consideration paid in the Share Repurchase transaction exceeded the fair value of the treasury shares repurchased by the Company, the Company recorded a charge of approximately $0.2 million to general and administrative expense for the year ended December 31, 2020, representing the estimated fair value of the rights conveyed to the Company pursuant to the standstill provisions in the repurchase agreement. The fair value of the 1,130,152 shares of Company common stock, or approximately $5.2 million, was recorded to treasury stock. Other Transactions We have entered into indemnification agreements with each of our directors and executive officers. These agreements provide that we will, among other things, indemnify and advance expenses to our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by any such person in any action or proceeding, including any action by us arising out of such person’s services as our director or executive officer, or any other company or enterprise to which the person provides services at our request. We believe that these agreements are necessary to attract and retain qualified persons as directors and executive officers. As discussed above, FG, together with its affiliates, is the largest stockholder of the Company. Mr. Cerminara, Chairman of our Board, is Chief Executive Officer, Partner, and Manager of FG. The funds managed by FG, including the funds that directly own shares of our common stock and Series A Preferred Stock, have agreed to indemnify FG, the principals of FG, including Mr. Cerminara, or any other person designated by FG for claims arising from Mr. Cerminara’s service on our Board, provided that a fund’s indemnity obligations are secondary to any obligations we may have with respect to Mr. Cerminara’s service on our Board. OTHER MATTERS The Board of Directors does not currently know of any other matters to be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is intended that the shares represented by proxyproxies will be voted as recommended by the Board of Directors or, if no recommendation is given, in their ownthe discretion of the proxy holders using their best judgement. HOUSEHOLDING HOUSEHOLDINGThe SEC has adopted a rule concerning the delivery of annual reports and proxy statements. It permits the Company, with your permission, to send a single copy of this Proxy Statement and our 2021 Annual Report to any household at which two or more of the Company’s stockholders reside. This rule is called “householding,” and its purpose is to help reduce printing and mailing costs of proxy materials. We do not “household” proxy materials to stockholders of record. However, some banks, brokers and other nominees may be participating in the practice of “householding.”
We have adoptedwill promptly deliver, upon oral or written request, a procedure which has been approved by the SEC called householding. As permitted by the Exchange Act,separate copy of this Proxy Statement and our 2021 Annual Report to any stockholders of record having the same last name and residing at the samean address and who do not participate in electronic delivery of proxy materials will receiveto which only one copy of this Proxy Statement and our 2021 Annual Report was mailed. Requests for additional copies should be directed in writing to a stockholder’s broker, bank or other nominee holding shares of our common stock for such stockholder or to the attention of our Corporate Secretary at (847) 791-6817 or in writing at 360 Central Ave., Suite 800, St. Petersburg, FL 33701. In the future, stockholders wishing to receive separate copies of our proxy statements and annual reports in the future, and stockholders sharing an address that wish to receive a single copy of our proxy statement and annual report unless those stockholders have notified us of their desire to receiveif they are receiving multiple copies of the materials. Stockholders residing at the same address who currently receive only one copy of the proxy statement and who would like to receive an additional copy of the proxy statement for this Annual Meetingthose documents, should contact their bank, broker, or for future meetingsother nominee record holder, or may make this request by contactingcontact our Corporate Secretary at (813) 579-6213 or in writing at 1511 N. Westshore Blvd, Suite 870, Tampa, FL 33607.as described above.
STOCKHOLDER PROPOSALS FOR PRESENTATION AT THE 20162023 ANNUAL MEETING Stockholder proposals intended to be considered for inclusion in next year’s proxy statement and form of proxy for presentation at the 20162023 Annual Meeting of Stockholders must comply with Securities and Exchange CommissionAct Rule 14a-8. The deadline for submitting such proposals is January1, 2016,[*], 2023, unless the date of the 20162023 Annual Meeting is more than 30 days before or after the one-year anniversary date of the Annual Meeting, in which case proposals must be submitted a reasonable time before we print our proxy materials for the 20162023 Annual Meeting. The submission of a stockholder proposal does not guarantee that it will be included in our proxy statement. Stockholders wishing to submit proposals for the 20162023 Annual Meeting outside the process of Securities and Exchange CommissionAct Rule 14a-8 or to nominate individuals to our Board of Directors must comply with the advance notice and other provisions of Article I, Section 4 of our bylaws.By-Laws. To be timely, notice of the proposal must be received by the Secretary of the Company between January 30, 2016April 25, 2023 and February 29, 2016May 25, 2023; provided, however, that in the event the 2016date of the 2023 Annual Meeting is advanced by more than 30 days before or delayed by more than 60 days after the anniversary date of our Annual Meeting, to be timely, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the 20162023 Annual Meeting and not later than the close of business on the later of (i) the 90th day prior to the 20162023 Annual Meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made. Stockholder proposals should be addressed to 1347 Property Insurance Holdings,FG Financial Group, Inc., Secretary of the Corporation, 1511 N. Westshore Blvd,360 Central Ave., Suite 870, Tampa, Florida 33607.800., St. Petersburg, FL 33701. The specific requirements for submitting stockholder proposals are set forth in Article II,I, Section 4 of our bylaws.By-Laws. By Order of the Board of Directors, By Order of the Board of Directors/s/ D. Kyle Cerminara | | | | /s/ Gordon G. Pratt | | Gordon G. PrattD. Kyle Cerminara | | | Chairman of the Board | | | | Tampa, Florida | | April 30, 2015 | |
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, is available without charge upon written request to: FG Financial Group, Inc., Corporate Secretary, 360 Central Ave., Suite 800., St. Petersburg, FL 33701. You may also access this Annual Report, along with all our filings made electronically with the SEC, including on Forms 10-Q and 8-K, on our website at www.fgfinancial.com. AppendixAPPENDIX A
1347 PROPERTY INSURANCE HOLDINGS, INC.
CERTIFICATE OF AMENDMENT OF FOURTH AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLANCERTIFICATE OF INCORPORATION I.OFINTRODUCTION
1.1FG FINANCIAL GROUP, INC.Purposes. The purposes
(PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE) FG Financial Group, Inc., a corporation organized and existing under the General Corporation Law of the 1347 PropertyState of Delaware, does hereby certify: 1. The name of the corporation is FG Financial Group, Inc. The corporation was originally incorporated pursuant to the General Corporation Law on October 2, 2012 under the name Maison Insurance Holdings, Inc. 2014 Equity Incentive Plan (this “Plan”) are (i) to align the interests 2. Article IV of the Company’s shareholdersof Fourth Amended and Restated Certificate of Incorporation is hereby amended by amending and restating the recipientsfirst paragraph of Awards under this Plan by increasing the proprietary interestArticle IV in its entirety to read in full as follows: “The total number of shares of capital stock which the Corporation shall have authority to issue is Two Hundred Million (200,000,000) shares, of which (i) One Hundred Million (100,000,000) shares shall be designated as common stock, par value $0.001 per share (the “Common Stock”), and (ii) One Hundred Million (100,000,000) shares shall be designated as preferred stock, par value $0.001 per share (the “Preferred Stock”), of which One Million (1,000,000) shares shall be designated as 8.00% Cumulative Preferred Stock, Series A (the “Cumulative Preferred Stock”). The capital of the outstanding Cumulative Preferred Stock in excess of the aggregate par value of such recipientsshares, resulting from this change in the Company’s growth and success; (ii) to advance the interestspar value of the CompanyPreferred Stock, shall be transferred to surplus.” 3. This Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation was approved by attracting and retaining officers and other employees; and (iii) to motivate such persons to act in the long-term best interestsholders of the Company and its shareholders. 1.2Certain Definitions.
“Agreement” shall mean the written or electronic agreement evidencing an Award hereunder between the Company and the recipientrequisite number of such Award.
“Award” means the grant of incentive compensation under this Plan to a participant including Stock Options, Restricted Shares, Restricted Stock Units, Performance Share Awards, Performance Cash Awards, or Other Stock or Cash Awards, in each case subject to the termsshares of the Plan.corporation in accordance with Section 228 of the General Corporation Law
“Board” shall mean
4. This Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation has been duly adopted by the Board of Directors of the Company. “Cause” shall mean a participant’s involuntary separation from employment for anycorporation in accordance with the provisions of Section 242 of the following reasons: (i) an intentional actGeneral Corporation Law
IN WITNESS WHEREOF, this Certificate of fraud, embezzlement, theft or any other illegal or unethical act in connection with the performanceAmendment of Fourth Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of the participant’s duties as an employee of the Company that the Company determines, acting in good faith, has materially injured or is highly likely to materially injure the Company, or any other terminable offense under the Company’s policies and practices; (ii) intentional damage to the Company’s assets; (iii) conviction of (or plea ofnolo contendere to) any felony or other crime involving moral turpitude; (iv) improper, willful and material disclosure or use of the Company’s confidential information or other willful material breach of the participant’s duty of loyalty to the Company; (v) a willful, material violation of the Company’s policies and procedures as set out in its employee handbook or a material violation of the Company’s code of conduct that the Company determines, acting in good faith, has materially injured or is highly likely to materially injure the Company, monetarily or otherwise; or (vi) the participant’s willful failure or refusal to follow the lawful and good faith directions of the Company, as determined in good faith by the Company.corporation on _______________, 2022. “Change in Control” shall have the meaning set forth inSection 3.8(b).
| FG FINANCIAL GROUP, INC. | | | | | By: | | | Name: | | | Title: | |
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Committee designated by the Board or a subcommittee thereof, consisting of two or more members of the Board, each of whom shall be (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act; (ii) an “outside director” within the meaning of Section 162(m) of the Code; and (iii) “independent” within the meaning of the rules of The NASDAQ Stock Market or, if the Common Shares are not listed on The NASDAQ Stock Market, within the meaning of the rules of the principal stock exchange on which the Common Shares are then traded.
“Common Share” shall mean a common share of the Company, and all rights appurtenant thereto.
“Company” shall mean 1347 Property Insurance Holdings, Inc., a Delaware corporation, or any successor thereto.
“Corporate Transaction” shall have the meaning set forth inSection 3.8(b).
“Disability” shall mean the inability of a participant to continue employment with the Company or a Subsidiary due to a long-term disability for which benefits are claimed or received under an insurance plan established by the Company or a Subsidiary.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Expiration Date” shall mean the date on which a Stock Option expires pursuant toSection 2.2(d) of this Plan.
“Fair Market Value” shall mean the closing transaction price of a Common Share as reported on The NASDAQ Stock Market on the date as of which such value is being determined or, if the Common Shares are not listed on The NASDAQ Stock Market, the closing transaction price of a Common Share on the principal national stock exchange on which the Common Shares are traded on the date as of which such value is being determined or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported;provided,however, that if the Common Shares are not listed on a national stock exchange or if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate and in compliance with Section 409A of the Code.
“Incumbent Board” shall have the meaning set forth inSection 3.8(b).
“Other Stock or Cash Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan granted under Article 6.
“Outstanding Common Shares” shall have the meaning set forth inSection 3.8(b).
“Outstanding Voting Securities” shall have the meaning set forth inSection 3.8(b).
“Performance Cash Awards” means cash incentives subject to the satisfaction ofPerformance Criteria and granted pursuant to Article 5 below.
“Performance Criteria” means business criteria within the meaning of Section 162(m) of the Code, including, but not limited to: revenue; revenue growth; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating income; pre- or after-tax income; net operating profit after taxes; economic value added (or an equivalent metric); ratio of operating earnings to capital spending; cash flow (before or after dividends); cash-flow per share (before or after dividends); net earnings; net sales; sales growth; share price performance; return on assets or net assets; return on equity; return on capital (including return on total capital or return on invested capital); cash flow return on investment; total shareholder return; improvement in or attainment of expense levels; and improvement in or attainment of working capital levels or Performance Criteria. Any criteria used may be measured, as applicable, (i) in absolute terms, (ii) in relative terms (including without limitation by the passage of time and/or against another company or companies), (iii) on a per-share basis, (iv) against the performance of the Corporation as a whole or a segment of the Corporation, (v) on a pre-tax or after-tax basis, and/or (vi) on a GAAP or non-GAAP basis. Measurement of the attainment of Performance Criteria may include or exclude, as specified by the Committee in an Award agreement, impact of charges for restructurings, discontinued operations, extraordinary items and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as identified in the financial statements, in the notes to the financial statements, in the Management’s Discussion and Analysis section of the financial statements, or in other Securities and Exchange Commission filings. However, unless the Committee determines otherwise prior to the end of the applicable time for establishing metrics for an Award, to the extent any item referenced in the preceding sentence affects any metric applicable to the Award, such item shall be automatically excluded or included in determining the extent to which the metrics have been achieved depending on which produces the higher Award (subject to any exercise of “negative discretion” by the Committee). Prior to the end of the applicable time for establishing performance goals, the Committee shall determine whether any elements shall be included in or excluded from the calculation of any Performance Goal with respect to any Participant.
“Performance Period” means the period as designated by theCommitteewhich generally shall have a minimum of one year and a maximum of five years, except that the foregoing minimum performance period shall not apply to (i) substituteAwards for grants made under a plan of an acquired business entity; and (ii) special vesting provisions in limited cases of an intervening event related to death, disability, retirement, or a Change in Control.
“Performance Shares” meansAwards subject to the satisfaction ofPerformance Criteriaand granted pursuant to Article 4 below
“Person” shall have the meaning set forth inSection 3.8(b).
“Restricted Stock” means Common Shares subject to a vesting condition specified by theCommittee in anAwardin accordance with Article 3 below.
“RSU” means a restricted stock unit providing aparticipant with the right to receive Common Shares (or cash) at a date on or after vesting in accordance with the terms of such grant and/or upon the attainment ofPerformance Criteria specified by theCommittee in theAwardin accordance with Article 3 below.
“Stock Option” shall mean an option to purchase Common Shares which is granted pursuant toArticle II.
“Subsidiary” shall mean any corporation, limited liability company, partnership, joint venture or similar entity in which the Company owns, directly or indirectly, an equity interest possessing more than 50% of the combined voting power of the total outstanding equity interests of such entity.
“Tax Date” shall have the meaning set forth inSection 3.5.
1.3Administration. This Plan shall be administered by the Committee. Awards may be awarded under this Plan to eligible persons described in Section 1.4 below. The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan and determine the form, amount and timing of each Award to such persons and the number of Stock Options, Performance Shares, Restricted Stock, RSUs, and Other Stock or Cash Awards and determine the value of any Performance Cash Award , the exercise price associated with the Award, the time and conditions of exercise or settlement of the Award and all other terms and conditions of the Award, including, without limitation, the form of the Agreement evidencing the Award. The Committee may, in its sole discretion and for any reason at any time, take action such that all or a portion of any outstanding Award shall become vested. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and may impose, incidental to the grant of an Award, conditions with respect to the Award, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties. The Committee may provide that any Awards under the Plan earn dividends or dividend equivalents and interest on such dividends or dividend equivalents; provided, however, that the Committee shall require that any dividends or dividend equivalents paid on Awards subject to Performance Criteria be held in escrow or accumulated until the applicable restrictions have lapsed, except as prohibited by Code Section 409A. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment in additional Common Shares or Common Share equivalents.
The Committee may delegate some or all of its power and authority hereunder to the Board or, subject to applicable law, to the President and Chief Executive Officer or such other executive officer of the Company as the Committee deems appropriate;provided,however, that (i) the Committee may not delegate its power and authority to the Board or the President and Chief Executive Officer or other executive officer of the Company with regard to the grant of an Award to any person who is a “covered employee” within the meaning of Section 162(m) of the Code or who, in the Committee’s judgment, is likely to be a covered employee at any time during the period an Award to such employee would be outstanding and (ii) the Committee may not delegate its power and authority to the President and Chief Executive Officer or other executive officer of the Company with regard to the selection for participation in this Plan of an officer, director or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an Award to such an officer, director or other person.
No member of the Board or Committee, and neither the President and Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board and the Committee and the President and Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Articles of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the Committee shall be either (i) acts of a majority of the members of the Committee present at any meeting at which a quorum is present or (ii) acts approved in writing by all of the members of the Committee without a meeting.
1.4Eligibility. Participants in this Plan shall consist of directors and such officers and other employees of the Company and its Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. For purposes of this Plan, references to employment by the Company shall also mean employment by a Subsidiary and all references to employment shall also mean service to the Company as an independent contractor. The Committee shall determine, in its sole discretion, the extent to which a participant shall be considered employed during any periods during which such participant is on a leave of absence.
1.5Shares Available. Subject to adjustment as provided inSection 3.7, (i) five percent (5%) of the Common Shares outstanding as of the close of the Company’s initial public offering (the “IPO”) shall be available for Stock Options granted pursuant toSection 2.2 upon the close of IPO; and (ii) an additional five percent (5%) of outstanding Common Shares as of the close of the IPO shall be available for future grants of Stock Options, Performance Shares, Restricted Stock or RSUs. Of the Common Shares available pursuant to 1.5(i), Stock Options available for grant to directors of the Company shall not exceed two percent (2%) of outstanding Common Shares as of the close of the IPO, and the remainder, which shall not be less than three percent (3%), shall be available to grant to officers and key employees.
1.6Per Person Limits. To the extent necessary for an Award to be qualified performance-based compensation under Section 162(m) of the Code and the regulations thereunder, the maximum number of Common Shares with respect to which Awards may be granted during any fiscal year of the Company to any person shall be 575,000, subject to adjustment as provided inSection 3.7.
II.STOCK OPTIONS
2.1Stock Options. Subject to the limits set forth inSections 1.5 and1.6, the Committee may, in its discretion, grant Stock Options to purchase Common Shares to such eligible persons as may be selected by the Committee. The number of Common Shares subject to each Stock Option granted pursuant hereto shall be determined by the Committee in its sole discretion.
2.2Terms Applicable to Stock Options. The Stock Options granted underSections 2.1 of this Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a)Nonqualified Options. The Stock Options are not intended to qualify as incentive stock options, within the meaning of Section 422 of the Code.
(b)Exercise Price. The exercise price of each Stock Option granted pursuant to Section 1.5(i) shall be equal to the price of the Common Shares as of the close of the IPO. The exercise price of each Stock Option granted pursuant to Section 1.5(ii) shall bear a strike price at or above Fair Market Value, but in no event less than tangible book value per share.
(c)Vesting and Exercisability.
(i)Vesting. Except for Stock Options granted to directors, each Stock Option granted pursuant to Section 1.5(i) shall vest in five equal installments. The first installment shall vest on the option grant date, with each succeeding installment vesting one (1) year from the date that the immediately preceding installment became exercisable. Stock Options shall vest pro-rata should the employee leave voluntarily, without Cause, or leaves employment due to a Disability. In the event of the death of the participant, the Stock Options shall fully vest. If a participant’s employment with the Company is terminated for Cause, all Stock Options granted under the Plan shall terminate immediately. Stock Options awarded to directors will fully vest immediately on the grant date.
(ii)Exercisability. An exercisable Stock Option, or portion thereof, may be exercised only with respect to whole Common Shares.
(d)Expiration Date. Except to the extent earlier exercised pursuant toSection 2.3(e) of the Plan, each Stock Option granted pursuant to Section 1.5(i) shall terminate at 5:00 p.m., Central time, on the fifth anniversary of the grant date, given that the holder of such Stock Option remains in employment with the Company through such expiration date;provided that if the fifth anniversary of the grant date shall occur during or within 10 business days after a period (a “Black-out Period”) in which the participant is restricted from buying or selling Common Shares under the Company’s trading policy or applicable law, such Stock Option instead shall terminate on the 10th business day after the end of the Black-out Period. If the employee leaves voluntarily, without Cause, due to a disability, or in case of death, the Stock Option will expire 90 days from the date the employment ends.
(e)Method of Exercise. A Stock Option granted pursuant to Section 1.5(i) may be exercised (i) by giving written notice to the Company specifying the number of whole Common Shares to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash or (B) in cash by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise, or such other forms as authorized by the Committee from time to time including without limitation tendering previously acquired shares or net settlement and (ii) by executing such documents as the Company may reasonably request. No Common Shares shall be issued and no certificate representing Common Shares shall be delivered until the full exercise price therefor and any withholding taxes thereon, as described inSection 3.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
(f)The Committee shall have discretion in setting terms for the Stock Option granted pursuant to Section 1.5(ii).
2.3No Repricing. Subject toSection 2.1,Section 3.7 andSection 3.8, the Committee shall not, without the approval of the shareholders of the Company, (i) reduce the exercise price of any previously granted Stock Option; (ii) cancel any previously granted Stock Option in exchange for another Stock Option with a lower exercise price; or (iii) cancel any previously granted Stock Option in exchange for cash or another Award if the exercise price of such Stock Option exceeds the Fair Market Value of a Common Share on the date of such cancellation.
III.RESTRICTED STOCK AND RSUS
3.1Restricted Stock and RSUs may be awarded or sold to participants under such terms and conditions as shall be established by the Committee. Restricted Stock and RSUs shall be subject to such restrictions as the Committee determines, including, without limitation, any of the following:
(a)a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period;
(b)a requirement that the holder forfeit (or in the case of Common Shares or RSUs sold to theparticipant, resell to theCompany at cost) such Common Shares or RSUs in the event of termination of employment during the period of restriction; and
(c)the attainment ofPerformance Criteria.
IV.PERFORMANCE SHARES
4.1The Committee shall designate the participants to whom Performance Shares are to be awarded and determine the number of shares, the length of the Performance Period and the other terms and conditions of each such Award. Each Award of Performance Shares shall entitle the participant to a payment in the form of Common Shares (or cash) upon the attainment of Performance Criteria and other terms and conditions specified by the Committee.
4.2Notwithstanding satisfaction of any Performance Criteria, the number of shares issued under a Performance Shares Award may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine. The Committee may, in its discretion, make a cash payment equal to the Fair Market Value of Common Shares otherwise required to be issued to a participant pursuant to a Performance Share Award.
V.PERFORMANCE CASH
5.1 TheCommittee shall designate theparticipants to whomPerformance Cash Awards are to be awarded and determine the amount of theAward and the terms and conditions of each suchAward. Each Performance CashAward shall entitle theparticipant to a payment in cash upon the attainment ofPerformance Criteria and other terms and conditions specified by theCommittee. For Awards intended to be performance-based compensation under Section 162(m), no participant may be granted Performance CashAwardswith respect to any twelve month Performance Period in excess of $750,000; if a cashAward is earned in excess of $750,000, the amount of theAward in excess of this amount shall be deferred to the date theparticipant ceases to be covered by Section 162(m) of the Code (or six months after that date if theparticipant ceases to be covered by Section 162(m) of the Code because ofparticipant’s separation from service (as defined in Section 409A of the Code).
5.2Notwithstanding the satisfaction of anyPerformance Criteria, the amount to be paid under a Performance CashAward may be adjusted by theCommittee on the basis of such further consideration as theCommittee in its sole discretion shall determine. TheCommittee may, in its discretion, substitute actual Common Shares for the cash payment otherwise required to be made to a participant pursuant to a Performance CashAward.
VI.OTHER STOCK OR CASH AWARDS
In addition to the incentives described in Articles 2 through 5 above, the Committee may grant other incentives payable in cash or in Common Shares under the Plan as it deems appropriate and subject to such other terms and conditions as it deems appropriate; provided an outright grant of Common Shares will not be made unless it is offered in exchange for cash compensation that has otherwise already been earned by the recipient.
VII.GENERAL
7.1Effective Date and Term of Plan. This Plan shall become effective as of the date on which the Plan was approved by the Board. This Plan shall terminate as of the date on which all of the shares available underSection 1.5 have become subject to Awards granted under this Plan unless the Plan is terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any Award granted prior to termination. Awards hereunder may be made at any time prior to the termination of this Plan.
7.2Amendments.
(a)The Board may amend this Plan as it shall deem advisable;provided,however, that no amendment to the Plan shall be effective without the approval of the Company’s shareholders if shareholder approval is required by applicable law, rule or regulation, including Section 162(m) of the Code or any rule of The NASDAQ Stock Market or any other stock exchange on which the Common Shares are then traded;providedfurther, that no amendment may materially impair the rights of a holder of an outstanding Award without the consent of such holder, except to the extent required by applicable law or regulatory requirements. Any amendment under this Section shall be subject to all necessary regulatory approvals.
(b)NotwithstandingSection 3.2(a), no amendments to the Plan or an Award agreement to:
(i)reduce the exercise price of any Stock Options, or cancel and reissue any Stock Options so as to in effect reduce the exercise price (other than pursuant toSection 3.7 or3.8 hereof);
(ii)extend the date on which a Stock Option would otherwise expire without having been exercised, or on which it would be forfeited or terminated for the benefit of insiders;
(iii)increase the fixed maximum number of Common Shares reserved for issuance under this Plan (including a change from a fixed maximum number of Common Shares to a fixed maximum percentage of Common Shares); or
(iv)revise these amending provisions set forth in thisSection 3.2;
shall be made without obtaining approval of the shareholders of the Company in accordance with the requirements of The NASDAQ Stock Market , as applicable.
(c)No amendment, suspension or discontinuance of the Plan or of any Award may contravene the requirements of The NASDAQ Stock Market or any other stock exchange on which the Common Shares are then traded, any securities commission or other regulatory body to which the Plan or the Company is now or may hereafter be subject to. Termination of the Plan shall not affect the ability of the Board to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
7.3Agreement. Each Award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions applicable to such Award. No Award shall be valid until an Agreement is executed by the Company and, to the extent required by the Company, either executed by the recipient or accepted by the recipient by electronic means approved by the Company within the time period specified by the Company. Upon such execution or execution and electronic acceptance, and delivery of the Agreement to the Company, such Award shall be effective as of the effective date set forth in the Agreement.
7.4Non-Transferability. No Award shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Committee or, to the extent expressly permitted in the Agreement relating to such Award, to the holder’s family members, a trust or entity established by the holder for estate planning purposes or a charitable organization designated by the holder, in each case, without consideration. Except to the extent permitted by the foregoing sentence or the Agreement relating to an Award, each Award may be exercised or settled during the holder’s lifetime only by the holder or the holder’s legal representative or similar person. Except as permitted by the second preceding sentence, no Award may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any Award, such Award and all rights thereunder shall immediately become null and void.
7.5Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any Common Shares or the payment of any cash pursuant to an Award made hereunder, payment by the holder of such Award of any federal, state, local or other taxes which may be required to be withheld or paid in connection with such Award. An Agreement may provide that (i) the Company shall withhold whole Common Shares which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an Award (the “Tax Date”), or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash payment to the Company; (B) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole Common Shares having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation; (C) authorizing the Company to withhold whole Common Shares which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, equal to the amount necessary to satisfy any such obligation; (D) in the case of the exercise of a Stock Option, a cash payment by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in each case to the extent permitted by the Committee. Common Shares to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate. Any fraction of a Common Share which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder.
7.6Restrictions on Shares. Each Award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the Common Shares subject to such Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing Common Shares delivered pursuant to any Award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder, or other applicable securities laws.
7.7Adjustment. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation) that causes the per share value of Common Shares to change, such as a stock dividend, stock split, reverse stock split, spinoff, rights offering or recapitalization through an extraordinary dividend, the number and class of securities available under this Plan with respect to Awards s, the terms of each outstanding Award (including the number and class of securities subject to each outstanding Award and the exercise price per share, if applicable), and the maximum number of securities with respect to which Awards may be granted during any fiscal year of the Company to any one participant shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding Awards without an increase in the aggregate exercise price, if applicable, and in accordance with Section 409A of the Code. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence shall be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of participants. In either case, the decision of the Committee regarding any such adjustment shall be final, binding and conclusive.
7.8Change in Control.
(a)Upon a Change in Control:
(i)the Board (as constituted immediately prior to such Change in Control) may in its discretion:
(A)require that shares of stock of the corporation resulting from such Change in Control, or a parent corporation thereof, be substituted for some or all of the Common Shares subject to an outstanding Award , with an appropriate and equitable adjustment to such Award as shall be determined by the Board in accordance withSection 3.7; and/or
(B)require outstanding Awards , in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (1) a cash payment in an amount equal to the aggregate number of Common Shares then subject to the portion of such Stock Option surrendered multiplied by the excess, if any, of the Fair Market Value of a Common Share as of the date of the Change in Control, over the exercise price per Common Share subject to such Stock Option; (2) shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (1) above; or (3) a combination of the payment of cash pursuant to clause (1) above and the issuance of shares pursuant to clause (2) above.
(b)A “Change in Control” means any of the following events:
(i)the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 50% or more of either (x) the then outstanding Common Shares (the “Outstanding Common Shares”) or (y) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); excluding, however, the following: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company); (B) any acquisition by the Company; (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of thisSection 3.8(b); provided further, that for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of 50% or more of the Outstanding Common Shares or 50% or more of the Outstanding Voting Securities by reason of an acquisition by the Company, and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Common Shares or any additional Outstanding Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;
(ii)the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”); excluding, however, a Corporate Transaction pursuant to which (A) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Common Shares and the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Shares and the Outstanding Voting Securities, as the case may be, (B) no Person (other than: the Company; any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 50% or more of the Outstanding Common Shares or the Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 50% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors, and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or
(iii)the consummation of a plan of complete liquidation or dissolution of the Company.
7.9No Right of Participation, Employment or Service. Unless otherwise set forth in an Award agreement, employment agreement or any other agreement between the Company and a participant, no person shall have any right to participate in this Plan. Neither this Plan nor any Award made hereunder shall confer upon any person any right to continued employment by or service with the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate the employment or service of any person at any time without liability hereunder. Further, participation in the Plan is voluntary.
7.10Rights as Shareholder. No person shall have any right as a shareholder of the Company with respect to any Common Shares or other equity security of the Company which is subject to an Award hereunder unless and until such person becomes a shareholder of record with respect to such Common Shares or equity security.
7.11Designation of Beneficiary. The Committee may permit the holder of an award to file with the Company a written designation of one or more persons as such holder’s beneficiary or beneficiaries (both primary and contingent) in the event of the holder’s death or incapacity. To the extent an Award granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such Award pursuant to procedures prescribed by the Company. Each beneficiary designation shall become effective only when filed in writing with the Company during the holder’s lifetime on a form prescribed by the Company. The spouse of a married holder domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Company of a new beneficiary designation shall cancel all previously filed beneficiary designations. If a holder fails to designate a beneficiary, or if all designated beneficiaries of a holder predecease the holder, then each outstanding Award held by such holder, to the extent vested or exercisable, shall be payable to or may be exercised by such holder’s executor, administrator, legal representative or similar person.
7.12Governing Law. This Plan, each Award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or applicable federal law, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
7.13Foreign Employees. Without amending this Plan, the Committee may grant Awards to eligible persons who are foreign nationals and/or reside outside the U.S. on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.
7.14Awards Subject to Clawback. The Awards granted under this Plan and any cash payment or Common Shares delivered pursuant to an Award are subject to forfeiture, recovery by the Company or other action pursuant to the applicable Agreement or any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
7.15Section 409A of the Code. It is intended that Awards under the Plan either be excluded from or comply with the requirements of Section 409A of the Code, and the guidance and regulations issued thereunder and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and Awards shall be structured consistent with such intent. In the event that any Award is subject to but fails to comply with Section 409A of the Code, the Committee may revise the terms of the grant to correct such noncompliance to the extent permitted under any guidance, procedure or other method promulgated by the Internal Revenue Service now or in the future or otherwise available that provides for such correction as a means to avoid or mitigate any taxes, interest or penalties that would otherwise be incurred by a participant on account of such noncompliance;provided,however, that in no event whatsoever shall the Company or any Subsidiary be liable for any additional tax, interest or penalty imposed upon or other detriment suffered by a participant under Section 409A of the Code or damages for failing to comply with Section 409A of the Code.
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