UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Schedule 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant ☐
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| ☐ Confidential for use of the Commission only (as permitted by Rule 14a-6(e)(2)) |
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☐ Definitive Additional Materials | |
☐ Soliciting Material Pursuant to §240.14a-11(c) of §240.14a-12 |
Orbital Energy Group, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Not applicable
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☐ | Fee paid previously with preliminary materials | |
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☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
August 22,June 2, 2022
Dear Stockholders:Fellow Shareholders,
Orbital Energy Group continues to make steady progress executing on our strategy to become a premier provider of infrastructure services to the electric power, telecommunications, and renewable industries. 2021 was a year of transformation, positioning the company for significant revenue growth and a move to profitability in 2022. We entered this year with a record backlog and expect revenues to increase upwards toward 500% for the full year of 2022 compared to last year. We also expect to achieve positive adjusted EBITDA for 2022 for the first time in the company’s history.
Our transformation in 2021 is largely attributed to completing several accretive strategic acquisitions to enhance our electric power operations and establish our position in the telecommunication industry. Additionally, we reorganized Orbital Solar to become a viable service provider to the utility scale solar industry. At the same time, we moved our legacy Orbital Gas System businesses in both the United Kingdom and in Houston to discontinued operations. In May of this year, we sold the U.K. operation and are pursuing the same path for Orbital Gas Systems in Houston.
Orbital Energy Group is now positioned for profitable revenue growth and increasing shareholder value, organized under three operating segments: electric power, telecommunications, and renewables.
Our electric power segment was significantly enhanced by acquiring Front Line Power Construction (FLP), in November of last year. FLP, located in Rosharon, Texas, was founded in 2010, and is a proven provider of electric distribution and substation services to investor-owned electric utility customers. Our electric power segment is now well suited to leverage the favorable, long term market drivers, specifically, increasing demand from grid modernization, storm hardening, the interconnection of renewable energy, and the electrification of our nation, more specifically electric transportation.
Our telecommunication segment was established with the acquisition of Gibson Technical Services (GTS), last spring. GTS, located outside of Atlanta, Georgia, was founded in 1990 and provides engineering, design, construction, and maintenance services to broadband and wireless customers in the telecommunications, healthcare, and entertainment industries. Subsequent to the GTS acquisition, we acquired two synergistic ‘tuck-in’ acquisitions, IMMCO and Full Moon Telecommunications, to expand our service offerings to our telecommunications customers. During the year, we were awarded several significant projects which, in total, comprise our building an 11,000-mile fiber network to rural communities over a five-state area. The rollout of the 5G spectrum, enhancement of 4G/LTE networks and the federal and state funded programs to bring fiber to rural Americans is expected to provide significant growth opportunities for our telecommunication segment for years to come.
Finally, our renewable segment, which began with a small strategic acquisition in April of 2020, transformed during 2021, with the primary objective of strengthening the capabilities of Orbital Solar Services to be a viable service provider to the utility scale solar industry. As a result, we were awarded two, 100MW+ solar programs in the second half of last year, that are now under construction with a pipeline of project opportunities, in excess of a billion dollars, to pursue and evaluate going forward. The renewable industry is driven by federal and state mandates to move the nation to a zero-carbon emission footprint and away from fossil fuel energy generation over the next several decades. Orbital Solar Services is now fully capable of leveraging the opportunity to engineer, procure, and construct utility solar programs across the nation as the country transitions to a renewable generation future.
Orbital Energy Group is building a successful infrastructure services platform, with strong, multi-year market drivers across all of the industries we serve. However, we would not be successful without our dedicated, hard-working, highly skilled employees, who represent the OEG brand each and every day, often working in challenging conditions, while providing service excellence to our customers. I thank each of you for your contributions as well as your family members that support your commitment to our craft.
As a fellow shareholder, I recognize that our share price is below expectations and we need to optimize our capital structure, with a portion of our debt due at the end of the year. However, I am confident, as we continue to successfully execute our strategy and deliver improving financial results, that we will have the opportunity to restructure our debt to more favorable terms and generate improved shareholder value going forward.
In closing, the infrastructure company I envisioned building when joining the company two- and one-half years ago is materializing, as we made the necessary acquisitions and internal organizational restructuring last year to create a solid foundation to build from. Our priorities at Orbital Energy Group are clear: enhance shareholder value by increasing profitable revenues through safe and solid execution by our skilled workforce, while building our backlog of business, in a robust end market environment in the industries we serve.
I thank our investors for their continued confidence in the management team and look forward to a successful 2022 and beyond.
Respectfully,
/s/ Jim O'Neil
Jim O’Neil
TO BE SUPPLIED
Notice of Annual Meeting of Stockholders
July 21, 2022
To: The Stockholders of Orbital Energy Group, Inc.
We will hold a 2022 Annual Meeting of Stockholders at 9:00 am CST on Thursday, July 21, 2022, at Orbital Energy Group, Inc., 1924 Aldine Western, Houston, Texas 77038 (the “Annual Meeting”) for the following purposes:
1. | Election of eight directors to hold office until the 2023 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified; |
2. | Ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022; |
3. | Advisory approval of the Company’s executive compensation (Say-on-Pay); |
4. | To approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the number of shares for issuance by 5,000,000 shares; |
5. | To approve the conversion of the Company’s domicile state from Colorado to Texas which conversion shall include changing the corporate name from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc. and |
6. | To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
Our board of directors recommends that you vote FOR the election of each of the directors and Proposals 2, 3, 4 and 5.
These items of business are more fully described in the proxy statement accompanying this notice. The board of directors has fixed the close of business on May 27, 2022, as the Record Date for the determination of stockholders entitled to receive notice of, and to vote at, the Annual Meeting of Stockholders. For a period of at least ten days prior to the Annual Meeting, a complete list of stockholders entitled to vote at the Annual Meeting will be open to examination by any stockholder during ordinary business hours at the offices of the Company, 1924 Aldine Western, Houston, Texas 77038.
Your vote is especially important. All stockholders are cordially invited to attend the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials (the “Notice”) you received in the mail, the section entitled General Information about the Annual Meeting beginning on page 1 of the proxy statement or, if you requested to receive printed proxy materials, your enclosed proxy card.
To assure your representation at the Annual Meeting of Stockholders, we ask that you vote as promptly as possible.
Your stock will be voted in accordance with the instructions you provide in your proxy. You may revoke your proxy at any time before it is voted by signing and returning a proxy bearing a later date for the same shares, by filing with the Secretary of the Company a written revocation bearing a later date or by attending and voting in person at the Annual Meeting.
By Order of the Board of Directors | |
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James F. O’Neil, CEO |
Proxy Statement
Introduction
This proxy statement is furnished in connection with the solicitation of proxies by the board of directors of Orbital Energy Group, Inc. (the “Company", “we”, “us”, “OEG”) for use at the Annual Meeting of Stockholders to be held at 9:00 am CST on Thursday, July 21, 2022, at the Orbital Energy Group, Inc. offices located at 1924 Aldine Western, Houston, Texas 77038 and for any postponements or adjournments thereof. Please vote your shares of Orbital Energy Group common stock. Your vote at the Annual Meeting is important to us. Whether or not you plan to attend the Annual Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials (the “Notice”) you received in the mail, the section entitled General Information about the Annual Meeting beginning below in this proxy statement or, if you requested to receive printed proxy materials, your enclosed proxy card. The proxy statement and the accompanying materials are being made available to the stockholders on or about June 2, 2022. This solicitation of proxies is made on behalf of our board of directors.
WE URGE YOU TO VOTE AS SOON AS POSSIBLE, EVEN IF YOU ARE CURRENTLY INTENDING TO ATTEND THE MEETING. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON, BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF YOU ARE UNABLE TO ATTEND THE MEETING. IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE MEETING IN PERSON OR BY PROXY. IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD (WHICH WILL BE MADE AVAILABLE TO YOU SEPARATELY) OR PROVIDE VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET. |
General Information about the Annual Meeting
Q: Why am I receiving these materials?
A: Our board of directors has made these materials available to you on the internet or, upon your request, delivered printed proxy materials to you in connection with the solicitation of proxies for use at the Orbital Energy Group Annual Meeting of Stockholders, which will take place at 9:00 am CST on Thursday, July 21, 2022, at Orbital Energy Group, Inc., 1924 Aldine Western, Houston, Texas 77038. As a stockholder, you are invited to attend the Annual Meeting and you are requested to vote on the items of business described in this proxy statement.
Q: What information is contained in this proxy statement?
A: The information in this proxy statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the compensation award process of our directors and most highly paid executive officers, a description of an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan to increase the Overall Share Limit by 5,000,000 shares, ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022, conversion of the Company’s domicile state from Colorado to Texas, change of the corporate name from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc., corporate governance and information on our board of directors and certain other required information.
Q: Why did I receive a notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?
A: In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials, including this proxy statement and our 2021 Annual Report on Form 10-K and 10-K/A and our most recent Form 10-Q, to our stockholders by providing access to such documents on the internet instead of mailing printed copies. Most stockholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice, which was mailed to most of our stockholders, will instruct you as to how you may access and review all the proxy materials on the internet. The Notice also instructs you as to how you may submit your proxy on the internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions in the Notice for requesting such materials.
Q: I share an address with another stockholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
A: We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the Notice and, if applicable, the proxy materials and the Annual Report to Stockholders to multiple stockholders who share the same address unless we received contrary instructions from one or more of the stockholders. This procedure reduces environmental impact as well as our printing costs, mailing costs and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written request, we will promptly deliver a separate copy of the Notice and, if applicable, the proxy materials and the 2021 Annual Report on Form 10-K and 10-K/A and the most recent Form 10-Q to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the Notice and, if applicable, these proxy materials or the 2021 Annual Report on Form 10-K and 10-K/A and the most recent Form 10-Q, stockholders may telephone, write or email us as follows: (832) 467‑1420, Orbital Energy Group, Inc., 1924 Aldine Western, Houston, Texas 77038; Investors@OrbitalEnergyGroup.com.
Stockholders who hold shares in street name (as described below) may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.
Q: How do I get electronic access to the proxy materials?
A: The Notice will provide you with instructions regarding how to:
View our proxy materials for the Annual Meeting on our website, www.OrbitalEnergyGroup.com and
Instruct us to send our future proxy materials to you electronically by email.
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact on the environment of printing and mailing these materials. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
Q: Is the Annual Meeting going to be webcast?
A: For your convenience, we are pleased to offer a live webcast of our Annual Meeting on the Investor Relations section of our website at www.OrbitalEnergyGroup.com.
Q: Can I participate in the question-and-answer portion of the Annual Meeting without attending the Annual Meeting?
A: No. The live webcast will be only visual and audio; there will be no opportunity to participate in the question-and-answer portion of the Annual Meeting unless you are present at the meeting.
Q: What items of business will be voted on at the 2022 Annual Meeting?
A: The items of business scheduled to be voted on at the Annual Meeting are:
● | Election of eight directors to hold office until the 2023 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified; |
● | Ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022; |
● | Advisory approval of the Company’s executive compensation (Say-on-Pay); |
● | To approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the number of shares for issuance by 5,000,000 shares; |
● | To approve the conversion of the Company’s domicile state from Colorado to Texas which conversion shall include changing the corporate name from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc. and |
● | To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
Q: How can I vote my shares in person at the Annual Meeting?
A: Shares held in your name as the stockholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in street name may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from the broker, bank, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described herein so that your vote will be counted if you later decide not to attend the meeting.
Q: How shall I sign my name on the proxy card?
A: The following general rules for signing proxy cards may be of assistance to you and avoid the time and expense to Orbital Energy Group in validating your vote if you fail to sign your proxy card properly.
Individual Accounts: Sign your name exactly as it appears in the registration on the proxy card.
Joint Accounts: Either party may sign, but the name of the party signing should conform exactly to a name shown in the registration on the proxy card.
All Other Accounts: The capacity of the individual signing the proxy card should be indicated unless it is reflected in the form of registration.
Q: How can I vote my shares without attending the Annual Meeting?
A: Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by proxy. You can vote by proxy over the internet by following the instructions provided in the Notice or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card. If you hold shares beneficially in street name, you may also vote by proxy over the internet by following the instructions provided in the Notice or, if you requested to receive printed proxy materials, you can also vote by telephone or mail by following the voting instruction card provided to you by your broker, bank, trustee or nominee.
Q: May I change my vote?
A: You may change your vote at any time prior to the taking of the vote at the Annual Meeting. If you are the stockholder of record, you may change your vote by: (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) providing a written notice of revocation to Orbital Energy Group’s Corporate Secretary at Orbital Energy Group, Inc., 1924 Aldine Western, Houston, Texas 77038 prior to your shares being voted or (3) attending the Annual Meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request. For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, bank, trustee or nominee following the instructions they provided or, if you have obtained a legal proxy from your broker, bank, trustee or nominee giving you the right to vote your shares, by attending the Annual Meeting and voting in person.
Q: Is my vote confidential?
A: Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Orbital Energy Group or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the votes and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide on their proxy card written comments, which are then forwarded to Orbital Energy Group management.
Q: How many shares must be present or represented to conduct business at the Annual Meeting?
A: The presence at the Annual Meeting, in person or by proxy, of the holders of one third of the aggregate voting power of the common stock outstanding on the Record Date will constitute a quorum. Each share of common stock is entitled to one vote. As of the Record Date for this Annual Meeting, approximately 86,876,540 shares of common stock were outstanding and entitled to vote at the Annual Meeting. Both abstentions and broker non-votes (described below) are counted for the purpose of determining the presence of a quorum. Unless otherwise indicated, all references herein to percentages of outstanding shares of stock are based on such numbers of shares outstanding. Shares entitled to vote are referred to hereafter as “Voting Shares.”
Q: What shares can I vote?
A: Each share of Orbital Energy Group common stock issued and outstanding as of the close of business on the Record Date for the Annual Meeting is entitled to be voted on all items being voted on at the Annual Meeting. You may vote all shares owned by you as of the Record Date, including: (1) shares held directly in your name as the stockholder of record and (2) shares held for you as the beneficial owner in street name through a broker, bank, trustee or other nominee.
Q: How many votes am I entitled to per share?
A: Each holder of shares of common stock is entitled to one vote for each share held as of the Record Date.
Q: What is the Record Date?
A: Record Date, in the context of voting at the Annual Meeting, is the date on which our stock ledger is closed for the purpose of determining which stockholders officially own voting shares in order to be entitled to vote at the Annual Meeting. The Record Date for the 2022 Annual Meeting of Stockholders is May 27, 2022.
Q: How may I vote?
A: Regarding the election of directors, you may vote “FOR” all or some of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees.
A: Regarding the following proposals, you may vote “FOR” or “AGAINST” or “ABSTAIN”:
● | Ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022; |
● | Advisory approval of the Company’s executive compensation (Say-on-Pay); |
● | To approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the number of shares for issuance by 5,000,000 shares; |
● | To approve the conversion of the Company’s domicile state from Colorado to Texas which conversion shall include changing the corporate name from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc |
Q: If I check the box for “ABSTAIN” or “WITHHOLD,” what happens to my vote?
A: If you check the box for “ABSTAIN” or “WITHHOLD,” your vote will not be counted in favor of the matter on which you voted; however, it will be counted for the purpose of determining the presence of a quorum.
Q: What vote is required to approve each item?
A: Election of directors
The affirmative vote “FOR” of a simple majority of the votes cast at the Annual Meeting is required for the election of each director. A properly executed proxy marked "WITHHOLD" with respect to the election of one or more directors will not be voted with respect to the director or directors indicated or the other items to be voted on; however, it will be counted for purposes of determining whether there is a quorum. Voting Shares represented by properly executed proxies for which no instruction is given will be voted “FOR” election of the nominee for director.
A: Ratification of Grant Thornton LLP as our independent registered public accounting firm.
The affirmative vote “FOR” of a simple majority of the votes cast at the Annual Meeting is required for the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2022. A properly executed proxy marked “ABSTAIN” regarding this issue will not be voted with respect to the item to be voted on; although, it will be counted for purposes of determining whether there is a quorum. Voting Shares represented by properly executed proxies for which no instruction is given will be voted “FOR” these issues.
A: Advisory vote on the approval of the Company’s executive compensation (Say-on-Pay).
While we intend to carefully consider the voting results of this proposal, in accord with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the final vote is advisory in nature, therefore, not binding on us, our board or the Compensation Committee. Our executive compensation will be approved, on an advisory basis, if the votes cast by stockholders in favor of advisory approval exceed those votes cast in opposition of advisory approval.
A: To approve the conversion of the Company’s domicile state from Colorado to Texas.
The affirmative vote “FOR” of a simple majority of the votes cast at the Annual Meeting is required to approve the conversion of the Company’s domicile state from Colorado to Texas. A properly executed proxy marked "WITHHOLD" with respect to this proposal will not be voted with respect to approval of this proposal; however, it will be counted for purposes of determining whether there is a quorum. Voting Shares represented by properly executed proxies for which no instruction is given will be voted “FOR” approval of the conversion of the Company’s domicile state from Colorado to Texas.
A: To approve the change of the corporate name from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc.
The affirmative vote “FOR” of a simple majority of the votes cast at the Annual Meeting is required to approve the company name change. A properly executed proxy marked "WITHHOLD" with respect to this proposal will not be voted with respect to approval of this proposal; however, it will be counted for purposes of determining whether there is a quorum. Voting Shares represented by properly executed proxies for which no instruction is given will be voted “FOR” approval of the company name change.
A: To approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the Overall Share Limit by 5,000,000 shares.
The affirmative vote “FOR” of a simple majority of the votes cast at the Annual Meeting is required to approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the Overall Share Limit. A properly executed proxy marked "WITHHOLD" with respect to this proposal will not be voted with respect to approval of this proposal; however, it will be counted for purposes of determining whether there is a quorum. Voting Shares represented by properly executed proxies for which no instruction is given will be voted “FOR” approval of an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the Overall Share Limit.
Q: Why am I asked to approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the Overall Share Limit to 5,000,000?
A: Nasdaq Stock Market Listing Rule 5635(c) requires shareholder approval prior to the issuance of securities when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement is made or materially amended, pursuant to which stock may be acquired by officers, directors, employees, or consultants.
We had two previous equity incentive plans, 2008 Equity Incentive Plan and the Company’s 2009 Equity Incentive Plan (Executive), which have both expired.
Q: What is the purpose of the Orbital Energy Group 2020 Incentive Award Plan and what is in it?
A: Orbital Energy Group is requesting its stockholders to approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan (the “Plan”) by increasing the Overall Share Limit from 5,000,000 to 10,000,000 shares of which 1,476,450 have been granted. The Overall Share Limit is the total number of shares reserved and available for grant and issuance pursuant to the Plan. By the terms of the Plan, the Company shall reserve and keep available a sufficient number of shares as shall be required to satisfy the requirements of all outstanding awards granted under the Plan. This increase will become effective upon stockholder approval.
The purpose of the Orbital Energy Group 2020 Incentive Award Plan is to enhance our ability to attract, retain and motivate persons who make (or are expected to make) important contributions to Orbital Energy Group by providing these individuals with equity ownership opportunities. Equity awards are intended to motivate high levels of performance and align the interests of our directors, employees and consultants with those of our stockholders by giving directors, employees and consultants the perspective of an owner with an equity stake in Orbital Energy Group and providing a means of recognizing their contributions to the success of the Company. Our board of directors and management believe that equity awards are necessary to remain competitive in the Company’s industry and are essential to recruiting and retaining the highly qualified employees who help Orbital Energy Group meet its goals.
Q: What is the effect of the proposal to ratify the Audit Committee’s appointment of Grant Thornton LLP as our independent registered public accounting firm?
A: Selection of our independent registered public accounting firm is not required to be submitted to a vote of stockholders. The Sarbanes-Oxley Act of 2002 requires the Audit Committee of our board of directors to be responsible for the appointment, compensation and oversight of the audit work of the independent registered public accounting firm. However, the board of directors has elected to submit the selection of Grant Thornton LLP as our independent registered public accounting firm to stockholders for ratification as a matter of corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain Grant Thornton LLP and may retain that firm or another firm without resubmitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, at its discretion, appoint a different independent registered public accounting firm at any time during the year.
Q: What is the reason for and the effect of the proposal to approve the conversion of the Company’s domicile state from Colorado to Texas?
A: The primary reason that the Board has approved and recommended the Conversion is because the corporate executive offices and core of operations are located in Houston, Texas and the corporate laws of the State of Texas are more conducive to our method of operation. The principal effects of the Conversion will be that:
● | The corporate name will change from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc. |
● | The affairs of the Company will cease to be governed by the Colorado Corporations and Associations Act (the “CCAA”) and its existing articles of incorporation and bylaws (the "Colorado Articles" and the "Colorado Bylaws") will become subject to the Texas Business Organizations Code (the “TBOC”). |
● | The resulting Texas corporation (“Orbital Infrastructure Group, Inc.”) will be the same entity of the Company as currently incorporated in Colorado (“Orbital Energy Group, Inc.”), will possess all of the properties of Orbital Energy Group, Inc., will continue with all of the debts, liabilities and obligations of Orbital Energy Group, Inc. and will continue with the same officers and directors of Orbital Energy Group, Inc. immediately prior to the Conversion, as more fully described below. |
● | When the conversion becomes effective, all of the issued and outstanding shares of common stock of Orbital Energy Group, Inc. will be automatically converted into issued and outstanding shares of common stock of Orbital Infrastructure Group, Inc., on a one for one basis, without any action on the part of our shareholders. The Conversion will have no effect on the trading of our stock on the Nasdaq Capital Market tier of The Nasdaq Stock Market under the new symbol “OIG”. Orbital Infrastructure Group, Inc. will continue to file periodic reports and other documents as and to the extent required by the rules and regulations of the SEC. Shares of our common stock that are freely tradeable prior to the Conversion will continue to be freely tradeable as shares of Orbital Infrastructure Group, Inc. common stock, and shares of our common stock that are subject to restrictions prior to the Conversion will continue to be subject to the same restrictions as shares of Orbital Infrastructure Group, Inc. common stock. The Conversion will not change the respective positions of Orbital Energy Group or our shareholders under federal securities laws. |
● | Upon effectiveness of the conversion, all of our employee benefit and incentive plans will become Orbital Infrastructure Group, Inc. plans, and each option, restricted stock unit, equity award or other right issued under such plans will automatically be converted into an option, restricted stock unit, equity award or right to purchase or receive the same number of shares of Orbital Infrastructure Group, Inc. common stock, at the same price per share, upon the same terms and subject to the same conditions as before the Conversion. In addition, our employment contracts and other employee benefit arrangements also will be continued by Orbital Infrastructure Group, Inc. upon the same terms and subject to the same conditions in effect at the time of the Conversion. |
Q: Is cumulative voting permitted for the election of directors?
A: No. You may not cumulate your votes for the election of directors.
Q: What is cumulative voting?
A: A system of voting in which each voter is given as many votes as there are positions to be filled and allowed to cast those votes for one candidate or distribute them in any way among the candidates.
Q: What happens if additional matters are presented at the Annual Meeting?
A: Other than:
● | Election of eight directors to hold office until the 2023 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified; |
● | Ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022; |
● | Advisory approval of the Company’s executive compensation (Say-on-Pay); |
● | To approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the number of shares for issuance by 5,000,000 shares; |
● | To approve the conversion of the Company’s domicile state from Colorado to Texas which conversion shall include changing the corporate name from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc. and |
● | To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
As described in this proxy statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you submit a signed proxy, the persons named as proxy will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting.
Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A: Many Orbital Energy Group stockholders hold their shares as a beneficial owner through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held as a stockholder of record and those owned beneficially.
Stockholder of Record
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the stockholder of record, and the Notice was sent directly to you by Orbital Energy Group. As the stockholder of record, you have the right to grant your voting proxy directly to Orbital Energy Group or to vote in person at the Annual Meeting. If you requested to receive printed proxy materials, Orbital Energy Group has enclosed or sent a proxy card for you to use. You may also vote on the internet or by telephone, as described in the Notice and below under the heading “How can I vote my shares without attending the Annual Meeting?”
Beneficial Owner
If your shares are held in an account at a brokerage firm, bank, broker-dealer, trust or other similar organization, like most of our stockholders, you are considered the beneficial owner of shares held in street name, and the Notice was forwarded to you by that organization. As the beneficial owner, you have the right to direct your broker, bank, trustee or nominee how to vote your shares and you are also invited to attend the Annual Meeting.
Since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, bank, trustee or nominee that holds your shares giving you the right to vote the shares at the meeting. If you do not wish to vote in person or you will not be attending the Annual Meeting, you may vote by proxy. You may vote by proxy over the internet or by telephone, as described in the Notice and below under the heading “How can I vote my shares without attending the Annual Meeting?”
If you hold your shares in "street name” through a broker or other nominee, your broker or nominee may not be permitted to exercise voting discretion with respect to non-routine matters to be acted upon which includes Proposals 1, 2, 3, 4, and 5. Thus, if you do not give your broker or nominee specific instructions, your shares may not be voted on those matters and will not be counted in determining the number of shares necessary for approval. Shares represented by such "broker non-votes" will, however, be counted in determining whether there is a quorum.
Q: Who will bear the cost of soliciting votes for the Annual Meeting?
A: Orbital Energy Group will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. If you choose to access the proxy materials and/or vote over the internet, you are responsible for internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities.
Q: Where can I find the voting results of the Annual Meeting?
A: We intend to announce preliminary voting results at the Annual Meeting and to disclose the vote results on Form 8-K as well as on our website at www.OrbitalEnergyGroup.com as soon as possible after the Annual Meeting.
Election of Directors
Issued and outstanding shares of our Common Stock are entitled to one vote per share for each Director for a one-year term or until a successor has been elected and qualified or the Director’s earlier resignation or removal. Cumulative voting is not permitted.
Unless stated to be voted otherwise, each proxy will be voted for the election of the nominees named. The nominees have consented to serve as director if elected. If any nominee becomes unavailable for election before the Annual Meeting of Stockholders, the board of directors may name a substitute nominee and proxies will be voted for such substitute nominee unless an instruction to the contrary is written on the proxy card.
Information about Director Nominees
Board of Directors Independence
The board of directors has determined that each of the director nominees standing for election has no relationship that, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Additionally, several of the director nominees standing for election are “independent directors” as defined by Rule 5605(a)(2) of The Nasdaq Stock Market (“Nasdaq”). In determining the independence of our directors, the board of directors has adopted independence standards that mirror exactly the criteria specified by applicable laws and regulations of the SEC and the Rules of The Nasdaq Stock Market. In determining the independence of our directors, the board of directors considered all transactions in which Orbital Energy Group and any director had any interest, including those discussed below under Related Party Transactions.
Paul D. White Retired from the Board
Paul D. White, has elected to retire from our board of directors when his term expires and will not stand for reelection at the Company’s annual meeting in 2022.
Following is a brief description of the business experiences, ages as of December 31, 2022, and positions and offices with the Company for each of the director nominees.
William J. Clough, Esq. Executive Chairman of the board of directors and Chief Legal Officer of the Company and its wholly owned subsidiaries, age 71. Mr. Clough has served on the board of directors since 2006 and was reelected at the 2021 Annual Meeting of Stockholders to serve a one-year term.
A seasoned executive and entrepreneur, Mr. Clough joined the company’s Board in 2006 and was subsequently appointed chief executive officer in 2008. In his role as CEO, a position he held until 2019 with the appointment of Jim O’Neil, he led the establishment of the company’s Energy division, formed its Energy operations in North America, and guided the company to its largest Energy contract award in its history while concurrently managing the company’s Power & Electro-Mechanical division to greater than average electronics industry growth rates in recent years. As CEO, he directed company’s capital markets strategy, including leading several equity offerings to institutional investors and spearheaded the company’s uplist to the Nasdaq Capital Market in 2012.
Mr. Clough previously founded and operated a multi-state, multi-office law firm for 14 years. He received a Juris Doctorate, Cum Laude, from the University of California’s Hastings College of Law in 1990. He is a former law enforcement officer and U.S. Federal Air Marshal. Mr. Clough serves on the board of directors of privately-held Virtual Power Systems, creator of Software Defined Power®, in which Orbital Energy Group holds a minority equity investment.
James F. O’Neil III, Vice Chairman of the board of directors and Chief Executive Officer of the Company and its wholly owned subsidiaries, age 64. Mr. O’Neil was appointed to the Board of Directors in July 2019 and reelected at the 2021 Annual Meeting of Stockholders to serve a one-year term.
James (Jim) O'Neil joined Orbital Energy Group as vice chairman in July 2019 and was subsequently appointed chief executive officer in October 2019. He is a veteran executive of the power industry and has been instrumental in formulating and is overseeing execution on Orbital Energy Group’s transformation plan that reshapes the company into a diversified energy services platform.
Mr. O’Neil was previously chief operating officer, chief executive officer and president of Quanta Services, Inc. (Quanta) from 2008 to 2016, an infrastructure solutions provider for the electric power, oil and natural gas, telecommunications and renewable industries. During this period, he grew the company into a Fortune 500 enterprise with $7+ billion in annual revenue at its peak through a combination of both organic growth and many strategic acquisitions.
Mr. O’Neil joined Quanta in 1999 and over his tenure was responsible for various initiatives including the company’s growth strategy, internal audit, and merger and acquisition initiatives. He began his career at Halliburton Company in 1980 where he held various positions, lastly as Director, Global Deepwater Development.
Mr. O’Neil holds a B.S. in Civil Engineering from Tulane University.
C. Stephen Cochennet, Director, age 65
Mr. Cochennet was elected to serve as a director at the 2018 Annual Meeting and continues to serve on the board of directors as an independent director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market. Mr. Cochennet was reelected at the 2021 Annual Meeting of Stockholders to serve a one-year term.
Mr. Cochennet, as an independent director, serves on the nominating committee along with Messrs. Lambrecht, Addison, Williams, Ms. Thornton and Ms. Tucker. Mr. Cochennet is also a member of our Audit Committee, Compensation Committee and Investment Committee.
Mr. Cochennet has served as CEO/President, of Kansas Resource Development Company, a private oil and gas exploration company since 2011. From 2011 through 2015 he was also the CEO and president of Guardian 8 Corporation. From 2005 to 2010 Mr. Cochennet was the Chairman, President, and Chief Executive Officer of EnerJex Resources, Inc., a publicly traded SEC registered Oil and Gas Company. Prior to joining EnerJex, Mr. Cochennet was President of CSC Group, LLC in which he supported several Fortune 500 corporations, international companies, and natural gas/electric utilities as well as various startup organizations. The services provided included strategic planning, capital formation, corporate development, executive networking and transaction structuring. From 1985 to 2002, he held several executive positions with UtiliCorp United Inc. (Aquila) in Kansas City, Missouri. His responsibilities included finance, administration, operations, human resources, corporate development, natural gas/energy marketing, and managing several new startup operations. Prior to his experience at Aquila Mr. Cochennet served 6 years with the Federal Reserve System managing problem and failed banking institutions primarily within the oil and gas markets.
Mr. Cochennet graduated from the University of Nebraska with a B.A. in Finance and Economics.
Corey A. Lambrecht, Director, age 53
Mr. Lambrecht was elected to serve as a director at the 2007 Annual Meeting of Stockholders and continues to serve on the board of directors as an independent director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market. Mr. Lambrecht was reelected at the 2021 Annual Meeting to serve a one-year term.
Mr. Lambrecht, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Addison, Williams, Ms. Thornton and Ms. Tucker. Mr. Lambrecht is also Chairman of our Compensation Committee and Investment Committee and a member of our Audit Committee.
Mr. Lambrecht is a 20+ year public company executive with broad experience in strategic acquisitions, corporate turnarounds, new business development, pioneering consumer products, corporate licensing, and interactive technology services. In addition, Mr. Lambrecht has held public company executive roles with responsibilities including day-to-day business operations, management, raising capital, board of directors' communication and investor relations. Mr. Lambrecht holds a certificate as a Certified Director from the UCLA Anderson Graduate School of Management Accredited Directors program.
Mr. Lambrecht, as an independent director, serves as one of six independent directors on the nominating committee along with Messrs. Cochennet, Williams, Ms. Thornton and Ms. Tucker. Mr. Lambrecht is also Chairman of our Compensation Committee.
Mr. Lambrecht is a director of ORHub, a SaaS company as well as a strategic consultant for American Rebel Holdings, Inc. He served as Director of Sales for Leveraged Marketing Associates, the worldwide leader in licensed brand extension strategies. While Executive Vice President for Smith & Wesson Holding Corporation, he was responsible for Smith & Wesson Licensing, Advanced Technologies and Interactive Marketing divisions. Previously, Mr. Lambrecht served as an independent director of Guardian 8 Holdings. He was the former President of A For Effort, an interactive database marketing company specializing in online content (advergaming) for clients such as the National Hockey League. Mr. Lambrecht's prior experience also includes Pre-IPO founder for Premium Cigars International and VP Sales/Marketing for ProductExpress.com.
Sarah Tucker, Director, age 77
Sarah Tucker was appointed to the Board of Directors in October 2019, and was elected at the 2020 Annual Meeting to serve a one-year term as an Independent Director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market. Ms. Tucker was reelected at the 2021 Annual Meeting to serve a one-year term. Ms. Tucker, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Lambrecht, Williams, Addison and Ms. Thornton.
Sarah Tucker is a veteran executive for the business strategy/development, risk management, planning, engineering, procurement and construction of oil and gas projects globally. She has led projects with budgets from $5 million to over $3 billion in refining, petrochemicals, power, and offshore (both shallow and deep-water) for oil and liquified natural gas in Angola, Brazil, China, India, Italy, Korea, Mexico, Nigeria, Oman, Qatar, Spain, the United Kingdom and the United States.
She has served as an operations executive and managing director for major engineering, construction and petrochemical technology companies including Kellogg, KBR, Kellogg-Mitsubishi Development Company, Raytheon Engineers and Constructors, Kvaerner Engineering and Construction of Norway and Silvertech of United Kingdom, a Process Control and High Integrity Safety System Solutions.
Sarah headed the Pollution Prevention Task Force Committee with eight Oil Companies' representatives participating and contributing to the Study for "Refinery Crude Unit Pollution Prevention Project" which is now an American Petroleum Institute DC Publication number 31101.
Over the past several years, she has worked closely with Mexican national oil company PEMEX to establish the country’s first deep water project valued at $14 billion.
According to her personal and professional philosophy, Sarah believes in developing strong relationships and respecting diverse cultures. As part of her philosophy, she led in 1992 a program to author a 51-page report which became the American Petroleum Institute publication, Environmental Design Considerations for Petroleum Refining Crude Processing Units.
Her parallel and subsequent effort with the World Bank was successful in striking a balance between the interests of indigenous people and major oil companies allowing projects to proceed in Africa. The publication became an influential guide for doing business in the developing world.
Paul T. Addison, Director, age 75
Paul T. Addison was appointed to the Board of Directors in June 2021, as an Independent Director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market. Mr. Addison was reelected at the 2021 Annual Meeting to serve a one-year term. Mr. Addison, as an independent director, serves as chairman of the Audit Committee and serves on the nominating committee along with Messrs. Cochennet, Lambrecht, Williams, Ms. Thornton and Ms. Tucker.
Paul T. Addison earned a B. A. in political science and economics from Howard University in 1969 and a M.B.A. from Harvard University in 1972.
He began his career as a loan specialist for The Economic Development Administration of the US Department of Commerce in 1972 providing loan assistance for companies that agreed to expand operations in areas of high unemployment before moving to New York in 1974 to join a Chase Manhattan subsidiary as Vice President and Treasurer that provided financing and startup capital for minority small business enterprises (a MESBIC). In 1978, he joined Citibank/Citicorp as a banker in the firm’s energy and utilities department rising to the level of a senior credit officer and Managing Director.
In this capacity, he managed the bank’s significant exposure to a large segment of the gas and electric utility industry. He also provided financial advice to the firm’s clients and on numerous occasions provided testimony before state and federal regulatory commissions. He also developed financing structures which allowed a number of utilities to rate base large nuclear projects without which a number of utilities would have suffered significant losses. This was a particular issue during the last significant construction cycle for the industry.
He also approved and structured a number of large energy project financings for the firm.
Mr. Addison continued his work in the utility industry when he joined Solomon Smith Barney (Citigroup) in 1997 as a Managing Director in the electric and gas utility space until his retirement from the firm in 2002.
Upon retirement from Citigroup, Mr. Addison became an independent director of First Energy Corporation of Akron, Ohio, serving until his mandatory retirement in 2019. In his capacity as independent director, he served as Chair of the Finance Committee, and member of the Audit Committee as a designated financial expert. He was heavily involved in numerous financings over his term on the board and significantly participated in the company’s $4.7 billion acquisition of Allegheny Energy in 2010.
Mr. Addison is also a Trustee of the Maimonides Medical Center in Brooklyn New York, where he resides. Maimonides is the largest nonprofit hospital in Brooklyn with revenues approaching $1.5 billion and serves an extremely diverse population where over 60 languages are spoken. In his capacity as Trustee, Mr. Addison serves as Chair of the Budget and Finance Committee, member of the Legal and Audit Committee, member of the Quality and Safety Committee, and member of the Executive Committee. Mr. Addison also has served as the hospital’s representative on their self-insurance malpractice company, Hospital Insurance Company (HIC). Mr. Addison also served as Chair of the Audit Committee of HIC’s parent, the Federation of Jewish Philanthropies (FOJP), until its dissolution in 2019.
Jerry Sue Thornton, Director, age 74
Dr. Thornton was appointed to the Board of Directors in July 2021, as an Independent Director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market and was reelected at the 2021 Annual Meeting to serve a one-year term. Dr. Thornton, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Lambrecht, Williams, Addison, and Ms. Tucker.
Dr. Jerry Sue Thornton earned her B.A. and M. A. in Communications from Murray State University (Kentucky) and Ph.D. in Higher Education Leadership/Administration from The University of Texas (Austin). She earned a post-doctorate certificate from Harvard University.
Dr. Thornton is President of DreamCatcher Education Consulting providing professional development, coaching and mentoring for newly appointed presidents of colleges. She is President Emeritus of the Cuyahoga Community College District serving from 1992 to 2013 which is headquartered in Cleveland, Ohio. The College serves over 30,000 students on four campuses with a budget over $300 million. She brings over 45 years of experience in leading and managing higher education institutions in Chicago, Minnesota and Ohio with a focus on workforce training and professional education.
She also has extensive corporate board service beginning in 1992 with National City Bank/Corporation, Office Max, American Greetings and Bridgestreet Worldwide, Inc. until those companies had a change of control. She later served on the Boards of American Family Insurance, Applied Industrial Technologies, Inc., Republic Powdered Metals, (RPM, Inc.) and First Energy. She is currently serving on the Boards of Barnes and Noble Education (BNED) and Parkwood LLC (an Ohio financial planning company).
Gaining extensive business experience through her board director services of public and private companies, she has been a member of compensation, nominating and governance and audit committees. From manufacturing through distribution; industrial through commercial; financial through merchandizing and energy, Dr. Thornton has amassed over 29 years of business experience. During that tenure, she has served on Special Committees of the Board of Directors involved in acquisition.
Dr. Thornton brings to the Board of Directors broad leadership and business skills as well as an extensive background in workforce/talent acquisition, development and evaluation/assessment.
La Forrest V. Williams, Director, age 71
Mr. Williams was appointed to the Board of Directors in July 2021, as an Independent Director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market and was reelected at the 2021 Annual Meeting to serve a one-year term. Mr. Williams, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Lambrecht, Addison, Ms. Thornton and Ms. Tucker.
Mr. Williams is a veteran executive of the communications, computer and information assurance business of the Department of Defense and Intelligence community. He served in the civilian Defense Intelligence Senior Executive Service and the United States Air Force senior officer corps as a communication/computer intelligence and information assurance strategist for more than 40 years. His activity in information assurance became a nexus with the vulnerabilities of the energy grid.
His accomplishments include serving as a leader in the original merging of communications and computer systems technology into one management structure for the United States Air Force. His energy focus evolved through his engagement in studying cybersecurity threats to our energy grid during his career at the National Security Agency. Mr. Williams has a history of leadership positions which includes, Chief Information Officer (CIO) of the National Security Agency (NSA), Director of Information Assurance for the U.S. European Command and Director of Legislative Affairs for the National Security Agency. Mr. Williams' experience includes leading a military Communications Group of more than 500 technicians and staff, supporting Nellis Air Force Base Nevada networks. He has installed, managed, upgraded and secured communication cable and space networks worldwide; to include the United States, Europe and South Pacific.
Mr. Williams holds a B.S. degree in Business Administration from San Jose State University and an M.S. Degree in Technology of Management Information Systems from the American University, Washington D.C. He has served at the forefront in the Information Age and was an early leader at NSA in advocating concern about the vulnerability of our nation's energy grid. His advocacy led to the formation of customer assistance teams that he established to advise on the survivability of energy systems of national security concern. He later joined the National War College faculty in 2010 to teach National Security Strategy as a visiting Professor until 2013.
He is a proven results-oriented leader with broad experience as an Air Force Colonel and three years of Board of Director experience with The Government Employees Benefit Association for federal employees. In his spare time, he is a volunteer Docent at the Smithsonian Institute in Washington D.C. and gives tours through the National Museum of American History.
All eight directors are nominated for election to a one-year term on the Board of Directors.
Vote Required
If a quorum is present, approval of this proposal requires the affirmative vote of a majority of the outstanding shares of the Company’s common stock entitled to vote on this proposal at the Annual Meeting. Because matters considered “routine” by the applicable regulations, such as ratification of auditors, are under consideration at the Annual Meeting, abstentions and broker non-votes will be counted towards a quorum, but these abstentions, broker non-votes, and any other outstanding shares that are not voted will have the effect of a vote “AGAINST” the proposal.
The Board of Directors recommends that Stockholders vote “FOR” election of the nominees for director named above.
Ratification of the Appointment of Grant Thornton LLP
as the Company’s Independent Registered Public Accounting Firm
for the Year Ending December 31, 2022
The Audit Committee has selected Grant Thornton LLP to serve as independent registered public accounting firm for the fiscal year ending December 31, 2022. The board is submitting the appointment of the independent registered public accounting firm to the stockholders for ratification at the Annual Meeting.
Representatives of Grant Thornton LLP are expected to be available by teleconference at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Shareholder ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm is not required by the Company’s Restated Articles of Incorporation, bylaws or otherwise; however, the board of directors is submitting the selection of Grant Thornton LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will review its future selection of an independent registered public accounting firm considering that vote result. Your ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022, does not preclude us from terminating our engagement of Grant Thornton LLP and retaining a new independent registered public accounting firm, if we determine that such an action would be in the best interests of the Company and its stockholders.
Vote Required
If a quorum is present, approval of this proposal requires the affirmative vote of a majority of the outstanding shares of the Company’s common stock entitled to vote on this proposal at the Annual Meeting. Because matters considered “routine” by the applicable regulations, such as ratification of auditors, are under consideration at the Annual Meeting, abstentions and broker non-votes will be counted towards a quorum, but these abstentions, broker non-votes, and any other outstanding shares that are not voted will have the effect of a vote “AGAINST” the proposal.
The Board of Directors recommends a vote “FOR” the ratification of the appointment of Grant Thornton LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2022.
Advisory Approval of the Company’s Executive Compensation
(Say-on-Pay)
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and related SEC regulations require that, at least once every three years, we provide our stockholders with the opportunity to express their views on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. We held this vote, which is often referred to as the Say-on-Pay vote, at our annual meeting of stockholders held in 2019. At the meeting, our stockholders voted to hold the frequency of our Say-on-Pay vote on an annual basis. Our board of directors agreed to support the stockholder decision; therefore, the Company will hold future non-binding advisory votes on the compensation of our named executive officers every year, at least until the next required vote of frequency of stockholder votes on the compensation of our named executive officers. Such Say-on-Frequency vote must occur no later than the annual or other meetings of stockholders held in the sixth calendar year after the immediately preceding Say-on-Frequency vote which was the 2019 Annual Meeting of Stockholders. The Company could hold a Say-on-Frequency vote more frequently than every six years if it elects to do so.
The compensation of our named executive officers for the past three fiscal years is set forth in the Elements of Executive Compensation Section. The Compensation Discussion and Analysis, or CD&A Section, describes our executive compensation policies and practices and analyzes the compensation received by our named executive officers in fiscal year 2021. As described in the CD&A, our executive compensation philosophy is to reward performance and motivate collective achievement of strategic objectives that will contribute to our company’s success. Our board of directors believes the compensation programs for our named executive officers effectively meet the primary objectives of attracting and retaining highly qualified executives, motivating our executives to achieve our business objectives, rewarding our executives appropriately for their individual and collective contributions and aligning our executives’ interests with the long-term interests of our stockholders, and our board believes our programs are reasonable when compared to compensation at similar companies.
The vote on this resolution is not intended to address any specific element of executive compensation. Instead, the vote relates to the executive compensation of our named executive officers, as set forth in this proxy statement pursuant to the rules of the SEC. This vote provides stockholders with the opportunity to endorse or not endorse the compensation of our named executive officers, but is advisory and not binding on our company or our board of directors.
This vote will not be binding on the board of directors or the Compensation Committee and may not be construed as overruling a decision by the board or the Compensation Committee or create or imply any additional fiduciary duty on the board. It will also not affect any compensation paid or awarded to any executive. The approval or disapproval of this proposal by stockholders will not require the board of directors or the Compensation Committee to take any action regarding the Company’s executive compensation practices. The final decision on the compensation and benefits of the Company’s executive officers and on whether, and if so, how to address shareholder disapproval remains with the board and the Compensation Committee. Although the Say-on-Pay resolution is non-binding, the board of directors will review and consider the voting results when making future executive compensation decisions.
The board of directors welcomes and invites stockholder opinions, comments and recommendations relating to executive compensation and will consider all stockholder comments when making executive compensation awards. Stockholders may communicate with the board of directors by writing to the Company at Orbital Energy Group, 1924 Aldine Western, Houston, Texas 77038 or phone (832) 467‑1420. Stockholders who would like their submission directed to a member of the board may so specify and the communication will be forwarded as appropriate.
Vote Required
If a quorum is present, approval of this proposal requires the affirmative vote of a majority of the outstanding shares of the Company’s common stock entitled to vote on this proposal at the Annual Meeting. Because matters considered “routine” by the applicable regulations, such as ratification of auditors, are under consideration at the Annual Meeting, abstentions and broker non-votes will be counted towards a quorum, but these abstentions, broker non-votes, and any other outstanding shares that are not voted will have the effect of a vote “AGAINST” the proposal.
The Board of Directors recommends a vote “FOR” Advisory Approval of the Company’s Executive Compensation (Say-on-Pay) as disclosed in the compensation tables in the Proxy Statement.
To Approve an Amendment to Paragraph 11.27 of the
Orbital Energy Group 2020 Incentive Award Plan
by Increasing the Overall Share Limit by 5,000,000 Shares
In this Proposal, Orbital Energy Group is requesting its stockholders to approve an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan (the “Plan”) by increasing the Overall Share Limit from 5,000,000 to 10,000,000 shares. The Overall Share Limit is the total number of shares reserved and available for grant and issuance pursuant to the Plan, as adopted by the Stockholders. Currently, the Overall Share Limit is five million (5,000,000) shares of which equity awards for 1,547,941 shares have been granted. By the terms of the Plan, the Company shall reserve and keep available a sufficient number of shares as shall be required to satisfy the requirements of all outstanding awards granted under the Plan. This increase will become effective upon stockholder approval.
A Brief Description of the Plan
The purpose of the Plan is to enhance our ability to attract, retain and motivate persons who make (or are expected to make) important contributions to Orbital Energy Group by providing these individuals with equity ownership opportunities. We believe that the Plan is essential to the Company’s success. Equity awards are intended to motivate high levels of performance and align the interests of our directors, employees and consultants with those of our stockholders by giving directors, employees and consultants the perspective of an owner with an equity stake in the Company and providing a means of recognizing their contributions to the success of Orbital Energy Group. Our board of directors and management believe that equity awards are necessary to remain competitive in its industry and are essential to recruiting and retaining the highly qualified employees who help Orbital Energy Group meet its goals.
The Plan Share Limit
In determining whether to approve the amendment to paragraph 11.27 of the Plan by increasing the Overall Share Limit by 5,000,000 shares, our board of directors considered, among other factors, the following:
Both of our prior equity incentive plans have expired.
Share Limit means the total number of shares reserved and available for grant and issuance pursuant to this Plan. As of the date of the proxy statement, the Share Limit is five million (5,000,000) shares of which equity awards for 1,547,941 shares have been granted. By the terms of the Plan, the Company shall reserve and keep available a sufficient number of shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan.
Share Limit may not be increased without stockholder approval.
A primary purpose of the Share Reserve under the Plan is to provide Orbital Energy Group with appropriate capacity to issue equity compensation in anticipation of future acquisitions. In determining the size of the Share Reserve under the Plan, our board of directors will consider the substantial changes to the capitalization structure of the Company that has occurred as a result of completed acquisitions as well as future anticipated acquisitions.
Orbital Energy Group expects the proposed aggregate Share Reserve under the Plan to provide enough shares for awards for at least the next year, assuming we continue to grant awards consistent with our current practices, and further dependent on the price of our shares and hiring activity during the next few years, forfeitures of outstanding awards, and future circumstances, which may require Orbital Energy Group to change its current equity grant practices. Orbital Energy Group cannot predict its future equity grant practices, the future price of our shares or future hiring activity with any degree of certainty at this time, and the share reserve under the Plan could last for a shorter or longer time.
In light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to Orbital Energy Group’s ability to continue to attract and retain employees in the extremely competitive labor markets in which it competes, our board of directors believes it has approved a recommendation for the stockholders to approve an amendment to paragraph 11.27 of the Plan by increasing the Overall Share Limit by 5,000,000 shares that is reasonable and appropriate at this time. The Orbital Energy Group board of directors does not intend to create a subcommittee to evaluate the risk and benefits for issuing shares under the Plan.
A copy of paragraph 11.27 of the Plan is attached to this proxy statement as Annex A.A.
Vote Required
If a quorum is present, approval of this proposal requires the affirmative vote of a majority of the outstanding shares of the Company’s common stock entitled to vote on this proposal at the Annual Meeting. Because matters considered “routine” by the applicable regulations, such as ratification of auditors, are under consideration at the Annual Meeting, abstentions and broker non-votes will be counted towards a quorum, but these abstentions, broker non-votes, and any other outstanding shares that are not voted will have the effect of a vote “AGAINST” the proposal.
The Board of Directors recommends a vote “FOR” approval of an amendment to paragraph 11.27 of the Orbital Energy Group 2020 Incentive Award Plan by increasing the Overall Share Limit by 5,000,000 shares.
Summary of the Orbital Energy Group 2020 Incentive Award Plan
This section summarizes certain principal features of the Orbital Energy Group 2020 Incentive Award Plan (the “Plan”).
Eligibility and Administration
Orbital Energy Group’s employees, consultants and directors, and employees and consultants of Orbital Energy Group’s subsidiaries, will be eligible to receive awards under the Plan.
The Plan is administered by the Orbital Energy Group board of directors, which may delegate its duties and responsibilities to one or more committees of Orbital Energy Group’s directors and/or officers referred to collectively as the plan administrator, subject to limitations imposed under the Plan, Section 16 of the Exchange Act, stock exchange rules and other applicable laws. The plan administrator has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreement and to adopt, amend and repeal rules for the administration of the Plan as it deems advisable. The plan administrator will also have the authority to determine which eligible service providers receive awards, grant awards and set the terms and conditions of all awards under the Plan, including vesting provisions, subject to the conditions and limitations in the Plan.
Lapsed or Terminated Shares
If all or any part of an Award expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award, the unused Shares covered by the Award will not become or again be available for Award grants under the Plan.
Awards
The Plan provides for the grant of stock options, including ISOs and nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards. Certain awards under the Plan may constitute or provide for payment of “nonqualified deferred compensation” under Section 409A of the Code. All awards under the Plan will be set forth in the award agreement, which will detail the terms and conditions of awards, including any applicable vesting and payment terms and post termination exercise limitations. All Awards shall be subject to a minimum vesting of one year from the Grant Date.
Certain Transactions
In connection with certain corporate transactions and events affecting the common stock of Orbital Energy Group, including a change in control, or change in any applicable laws or accounting principles, the plan administrator has broad discretion to take action under the Plan to prevent the dilution or enlargement of intended benefits, facilitate the transaction or event or give effect to the change in applicable laws or accounting principles. This includes providing for the assumption or substitution of awards by a successor entity, adjusting the number and type of shares subject to outstanding awards and/or with respect to which awards may be granted under the Plan.
Provisions of the Plan Relating to Director Compensation
The Plan provides that the plan administrator may establish compensation for non-employee directors from time to time subject to the Plan’s limitations. The plan administrator will from time to time determine the terms, conditions and amounts of all non-employee director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that, the sum of any cash compensation or other compensation and the grant date fair value of any equity awards granted under the Plan as compensation for services as a non-employee director during any fiscal year may not exceed $250,000 per year of a non-employee director’s service as a non-employee director. The non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving the non-employee Director.
Plan Amendment and Termination
The Orbital Energy Group board of directors may amend or terminate the Plan at any time; however, an amendment that increases the number of shares available under the Plan requires stockholder approval. The Plan will remain in effect until the fifth anniversary of the date the Orbital Energy Group board of directors adopted the Plan, unless earlier terminated by the board of directors.
Foreign Participants and Transferability
The plan administrator may modify awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures to address differences in laws, rules, regulations or customs of such foreign jurisdictions. Except as the plan administrator may determine or provide in an award agreement, awards under the Plan are generally non-transferrable, except by will or the laws of descent and distribution or, subject to the plan administrator’s consent, pursuant to a domestic relations order, and are generally exercisable only by the participant. With regard to tax withholding obligations arising in connection with awards under the Plan, and exercise price obligations arising in connection with the exercise of stock options under the Plan, the plan administrator may, in its discretion, accept cash, wire transfer or check, shares of common stock of Orbital Energy Group that meet specified conditions, a promissory note, a “market sell order,” such other consideration as the plan administrator deems suitable or any combination of the foregoing.
Internal Revenue Code
Income Tax Effects for the Company. The Company generally will be entitled to a tax deduction in connection with an award under the 2020 Incentive Plan in an amount equal to the ordinary income realized by a participant at the time the participant recognizes such income (for example, upon the exercise of an NSO). As described herein, Code Section 162(m) may limit the deductibility of awards granted under the 2020 Incentive Plan.
Internal Revenue Code Section 162(m) Considerations. Code Section 162(m) generally disallows a tax deduction to public companies for compensation in excess of $1,000,000 paid to a company's principal executive officer and each of the other three most highly compensated officers (other than the principal financial officer) ("Covered Employees") in any one fiscal year. Stock options and stock appreciation rights are exempt from this limitation if (a) the exercise price is at least 100% of the fair market value of the underlying stock on the date the option or stock appreciate right is granted and (b) the plan under which the options are granted is approved by the shareholders and contains a limit on the number of options or stock appreciation rights granted to any' one individual under the plan during a specific period. Various other rules apply with regard to compensation committee independence and the procedures that must be followed by the committee in connection with performance-based awards that may be fully deducted under Code Section 162(m). Among other requirements, stock awards such as restricted stock and stock units, and performance cash awards such that vest contingent upon the achievement of performance goals, the material terms of which have been approved by the shareholders, in order to be exempt from this limitation. The 2020 Incentive Plan includes certain fiscal year limits, as described above, on the number of shares or total dollars that may be granted to an individual under options, stock appreciation rights, restricted stock, stock units and performance-based cash awards in order to comply with the Code Section 162(m) requirements. The above description is subject to proposed changes in Section 162(m) that would eliminate the exception from the general rule for performance-based compensation. If that proposed statutory' change is enacted, we would not expect to be able to deduct compensation in excess of $1 million paid during a single year to a Covered Employee.
Internal Revenue Code Section 409A. Code Section 409A governs that the federal income taxation of certain types of nonqualified deferred compensation arrangements. A violation of Code Section 409A generally results in an acceleration of the recognition of income of amounts intended to be deferred and the imposition of a federal excise tax of 20% on the employee over and above the income tax owned plus possible penalties and interest. The types of arrangements covered by Code Section 409A are broad and may apply to certain awards available under the 2020 Incentive Plan (such as stock units). The intent is for the 2020 Incentive Plan, including any awards available thereunder, to comply with the requirements of Code 409A to the extent applicable. As required by Code Section 409A, certain nonqualified deferred compensation payments to specific employees may be delayed to the seventh month after such employee's separation from service.
Securities Laws
The Plan is intended to conform to all provisions of the Securities Act of 1933, as amended, and the Exchange Act, and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. The Plan will be administered, and options will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.
To Approve the Conversion of the Company's Domicile State
from Colorado to Texas, Which Conversion Shall Include
Changing the Corporate Name
from Orbital Energy Group, Inc. to Orbital Infrastructure Group, Inc.
For the reasons discussed below, the Board has unanimously approved and declared it is advisable and in the best interests of Orbital Energy Group, Inc. and its shareholders to convert the domicile state of Orbital Energy Group, Inc. from the State of Colorado to the State of Texas (the “Conversion”), which includes adopting a new Texas Certificate of Formation (the “Texas Certificate”) and bylaws (the “Texas Bylaws”).
Summary
The principal effects of the Conversion will be that:
● | The corporate name will change from Orbital Energy Group, Inc. (the "Colorado Entity") to Orbital Infrastructure Group, Inc. (the "Texas Entity") AND the par value of our common stock will change from $0.001 to $0.0001. |
● | The affairs of the Colorado Entity will cease to be governed by the Colorado Corporations and Associations Act (the “CCAA”) and its existing articles of incorporation and bylaws (the “Colorado Articles” and the “Colorado Bylaws," respectively) and will become subject to the Texas Business Organizations Code (the “TBOC”). |
● | The Texas Entity (the resulting Texas corporation) will be the same entity as the Colorado Entity (currently incorporated in Colorado), will possess all of the properties, rights and privileges of the Colorado Entity, will continue with all of the debts, liabilities and obligations of the Colorado Entity and will continue with the same officers and directors of the Colorado Entity immediately prior to the Conversion, as more fully described below. |
● | When the Conversion becomes effective, all of the issued and outstanding shares of common stock of the Colorado Entity will be automatically converted into issued and outstanding shares of common stock of the Texas Entity, without any further action on the part of our shareholders. The Conversion will have no effect on the trading of our stock on the Nasdaq Capital Market tier of The Nasdaq Stock Market under the new symbol “OIG.” The Texas Entity will continue to file periodic reports and other documents as and to the extent required by the rules and regulations of the Securities and Exchange Commission (the “SEC”). Shares of our common stock that are freely tradeable prior to the Conversion will continue to be freely tradeable as shares of the Texas Entity common stock, and shares of our common stock that are subject to restrictions prior to the Conversion will continue to be subject to the same restrictions as shares of the Texas Entity common stock. The Conversion will not change the respective status of the Colorado Entity or our shareholders under federal securities laws. |
● | Upon effectiveness of the Conversion, all of our employee benefit and incentive plans will become plans of the Texas Entity, and each option, restricted stock unit, equity award or other right issued under such plans will automatically be converted into an option, restricted stock unit, equity award or right to purchase or receive the same number of shares of the Texas Entity common stock, at the same price per share, upon the same terms and subject to the same conditions as before the Conversion. In addition, our employment contracts and other employee benefit arrangements also will be continued by the Texas Entity upon the same terms and subject to the same conditions in effect at the time of the Conversion. |
Reasons for the Conversion
The primary reason for the Conversion is that the corporate executive offices and core of operations are located in Houston, Texas[, the Colorado Entity has no present nexus within the State of Colorado] and the corporate laws of the State of Texas are more developed. As a result of the corporate tax structure and reasonable annual franchise fee (or “margin” tax) of Texas, many major corporations have incorporated in Texas or have changed their corporate domiciles to Texas in a manner similar to the Conversion. The Texas judiciary has become particularly familiar with corporate law matters and a substantial body of court decisions has developed construing the corporate laws of Texas, thus providing clarity and predictability with respect to corporate legal and governance affairs. The Board believes any benefits provided to the Texas Entity by Texas law directly benefit our shareholders.
The Board is not proposing the Conversion to prevent a change in control of the Colorado Entity and is not aware of any present attempt by any person to acquire control of the Colorado Entity or to obtain representation on the Board.
Plan of Conversion and Adoption of Texas Certificate of Formation and Bylaws
To accomplish the Conversion, the Board has adopted a plan of conversion substantially in the form appended to this proxy statement as Annex B (the “Plan of Conversion”). The Plan of Conversion provides that we will convert into a Texas corporation and will thereafter be subject to all of the provisions of the TBOC, the Texas Certificate and the Texas Bylaws.
Assuming that our shareholders approve this proposal, we will cause the Conversion to be effected as soon as practicable thereafter by filing with the Secretary of State of the State of Colorado a Statement of Conversion substantially in the form appended to this proxy statement as Annex C (the “Colorado Statement of Conversion”) and will file with the Secretary of State of the State of Texas (i) a Certificate of Conversion substantially in the form appended to this proxy statement as Annex D (the “Texas Certificate of Conversion”); and (ii) the Texas Certificate, which will govern the Texas Entity as a Texas corporation, substantially in the form appended to this proxy statement as Annex E. In addition, assuming that our shareholders approve this proposal, the Board has adopted the Texas Bylaws, substantially in the form appended to this proxy statement as Annex F, and we will enter into a new indemnification agreement with each director and executive officer of the Texas Entity based upon provisions of the TBOC, substantially in the form appended to this proxy statement as Annex G (the “Texas Indemnification Agreement”). Approval of this proposal by our shareholders will constitute approval of the Plan of Conversion, the Colorado Statement of Conversion, the Texas Certificate of Conversion, the Texas Certificate, the Texas Bylaws and the Texas Indemnification Agreement. Shareholders should also note that approval of the Conversion will also constitute approval of the Colorado Entity’s equity and other employee benefit and incentive plans continuing as plans of the Texas Entity.
Notwithstanding the foregoing, the Conversion may be delayed by the Board or the Plan of Conversion may be terminated and abandoned by action of the Board at any time prior to the effective time of the Conversion, whether before or after approval by our shareholders, if the Board determines for any reason that such delay or termination would be in the best interests of the Colorado Entity and our shareholders. If the Conversion is approved by our shareholders, the Conversion would become effective upon the filing (and acceptance thereof by the Secretary of State of Colorado and the Secretary of State of Texas, as applicable) of the Colorado Statement of Conversion, the Texas Certificate of Conversion and the Texas Certificate.
No Change in Business, Management or Members of the Board Membersof Directors
The Conversion will not (i) result in any change in the Colorado Entity’s business, management, employees, fiscal year, assets, liabilities or federal tax identification number; (ii) cause the principal executive offices or other facilities of the Colorado Entity to be moved; or (iii) result in any relocation of management or other employees. The mailing address of the principal offices and the telephone number of the Texas Entity will be the same as the Colorado Entity’s current address and telephone number.
The individuals serving as directors of the Colorado Entity as of immediately prior to the Conversion will continue to be the directors of the Texas Entity immediately following the Conversion, and will continue to serve for their respective terms. The individuals serving as executive officers of the Colorado Entity as of immediately prior to the Conversion will continue to serve as executive officers of the Texas Entity as of immediately following the Conversion, without a change in their title or responsibilities. In addition, the Conversion will not affect any of the Colorado Entity’s contracts with third parties. However, the Texas Entity will be deemed to be the Colorado Entity’s successor with respect to the Colorado Entity’s current contracts and agreements and will succeed to all of the Colorado Entity’s rights and obligations under these contracts and agreements.
Immediately following the Conversion, the Texas Entity Common Stock will continue to be traded on the Nasdaq Capital Market, but under the new tickerstock symbol, “OIG.”
Federal Income Tax Consequences of the Conversion
The discussion of U.S. federal income tax consequences set forth below is for general information only and does not purport to be a complete discussion or analysis of all potential tax consequences that may apply to a shareholder. The discussion does not deal with all of the tax considerations that may be relevant to particular shareholders, such as shareholders who are dealers in securities, foreign persons, tax exempt entities or shareholders who received their stock in the Colorado Entity in connection with stock option or stock purchase plans or in other compensatory transactions. In addition, this discussion does not address any state, local or foreign tax considerations nor does it address any federal estate, gift, employment, excise or other non-income tax considerations. This discussion also does not address the tax consequences of transactions effected prior to or after the Conversion (whether or not such transactions are in connection with the Conversion) including, without limitation, the exercise of options, warrants or similar rights to purchase the Colorado Entity’s stock. The following discussion is based upon provisions of the Internal Revenue Code (the “Code”), regulations, administrative rulings and judicial decisions presently in effect, all of which are subject to change (possibly with retroactive effect) or to different interpretations. Shareholders are urged to consult their tax advisors to determine the particular tax consequences of the Conversion, including the applicability and effect of federal, state, local, foreign and other tax laws.
The Conversion provided for in the Plan of Conversion is intended to be a tax-free reorganization under Section 368(a) of the Code. Assuming the Conversion qualifies as a tax-free reorganization, no gain or loss should be recognized to the holders of our capital stock as a result of consummation of the Conversion. Shareholders should have the same basis in the Texas Entity common stock received pursuant to the Conversion as they had in the shares of the Colorado Entity common stock held immediately prior to the time the Conversion is consummated. The holding period with respect to the Texas Entity common stock should include the period during which corresponding shares of the Colorado Entity common stock were held, provided the latter was held as a capital asset at the time of consummation of the Conversion.
Accounting Treatment
We expect that the Conversion will have no effect from an accounting perspective because there is no change in the entity as a result of the Conversion. As such, the financial statements of the Colorado Entity previously filed with the SEC will remain the financial statements of the Texas Entity following the Conversion.
Dissenters’ Rights
Under the Colorado Business Corporation Act, as amended (the “CBCA”) and the Colorado Corporations and Associations Act, as amended (the "CCAA"), shareholders are not entitled to dissenters’ rights in connection with a Conversion if the shares held by the shareholder are listed on a national securities exchange registered under the federal Securities Exchange Act of 1934, as amended, (the "Act") or if the common stock of the company are held of record by more than two thousand shareholders. Because the Colorado Entity’s common stock is currently listed on the Nasdaq Global Market, shareholders will therefore not be entitled to dissenters’ rights in connection with the Conversion.
Comparison of Shareholder Rights Before and After the Conversion
Although the Texas Certificate and the Texas Bylaws are substantially similar to provisions from the current Colorado Articles and the Colorado Bylaws, they also include certain provisions that are different from the provisions contained in the Colorado Articles and the Colorado Bylaws. The following discussion briefly summarizes some of the changes resulting from the Conversion and the significant differences between the CBCA, CCAA and the Colorado Articles and the Colorado Bylaws and the TBOC, the Texas Certificate and the Texas Bylaws.
Authorized Capital Stock | |
Colorado | Texas |
The Colorado Articles authorize 335,000,000 shares of capital stock, par value $0.001 per share, comprised of 325,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As of immediately prior to the Conversion, approximately 95,948,031 shares of the Colorado Entity Common Stock and no shares of preferred stock of the Colorado Entity will be outstanding. | Other than changing the par value from $0.001 to $0.0001 and the corporate name from the Colorado Entity to the Texas Entity, there are no changes. The number of outstanding shares will not change. |
Blank Check Preferred | |
Colorado | Texas |
Under the CCAA, if the articles of incorporation so provide, a corporation may issue one or more classes of stock or one or more series of stock within any class, with such preferences, limitations and relative rights as determined by the board of directors without shareholder approval (“Blank Check Preferred Stock”).
The Colorado Articles authorize 10,000,000 shares of preferred stock. As of immediately prior to the conversion, the authorized preferred stock will constitute undesignated Blank Check Preferred Stock. | The Texas Entity will authorize 10,000,000 shares of undesignated Blank Check Preferred Stock. The TBOC provides authority similar to the CCAA. |
Business Combinations Statute | |
Colorado | Texas |
The board of directors must recommend the plan of conversion, plan of merger, or plan of exchange to the shareholders unless the board of directors determines that, because of conflict of interest or other special circumstances, it should make no recommendation and communicates the basis for its determination to the shareholders with the plan and the shareholders entitled to vote on the plan of conversion, plan of merger, or plan of exchange must approve the plan. CCAA 7-111-103 | Under Texas law, any merger with a third party requires approval by 2/3 of the outstanding shares of the Texas corporation unless a different threshold, not less than a majority, is specified in the certificate of formation. TBOC Section 21.954(a) The proposed Texas Certificate modifies the statutory vote requirement and requires the approval of such transactions by affirmative vote of the holders of only a majority of the outstanding shares entitled to vote thereon, unless any class or series of shares is entitled to vote as a class thereon, in which event the vote required shall be the affirmative vote of the holders of a majority of the outstanding shares within each class or series of shares entitled to vote thereon as a class and at least a majority of the outstanding shares otherwise entitled to vote thereon. |
Sales, Leases, Exchanges or Other Dispositions | |
Colorado | Texas |
A corporation may, as authorized by its bylaws or by the board of directors sell, lease, exchange, or otherwise dispose of any or all of its property whether or not in the usual and regular course of business with approval by the shareholders of the transaction. CCAA 7-112-101. | Generally, the sale, lease, exchange or other disposition of all, or substantially all, of the property and assets of a Texas corporation requires the approval of the holders of at least 2/3 of the outstanding shares of the corporation entitled to vote. No such approval is required, however, if the transaction is made in the usual and regular course of the corporation’s business. Under Texas law, the transfer of substantially all of a corporation’s assets in such a manner that the corporation continues directly or indirectly to engage in one or more businesses is deemed to be in the usual and regular course of its business.
The proposed Texas Certificate overrides the default statutory vote requirement and requires the approval of such transactions by affirmative vote of the holders of a majority of the outstanding shares entitled to vote thereon. |
Shareholder Consent to Action Without a Meeting | |
Colorado | Texas |
The CCAA provides that, unless the articles of incorporation require such action be taken at a shareholder meeting or expressly authorize that such action can be taken by less than unanimous written consent, any action required or permitted to be taken at a shareholder meeting may be taken without a meeting if all of the shareholders entitled to vote consent to such action in writing. The CCAA provides that, unless the articles of incorporation require such action be taken at a shareholder meeting or expressly authorize that such action can be taken by less than unanimous written consent, any action required or permitted to be taken at a shareholder meeting may be taken without a meeting if all of the shareholders entitled to vote consent to such action in writing. | Under Texas law, the certificate of formation may authorize the owners or members of the entity to take action without holding a meeting, providing notice, or taking a vote if owners or members of the entity having at least the minimum number of votes that would be necessary to take the action that is the subject of the consent at a meeting, in which each owner or member entitled to vote on the action is present and votes, sign a written consent or consents stating the action taken.
The proposed Texas Certificate allows action by one or more written consents if such consent or consents are signed by the holders having not less than the minimum number of votes that would be necessary to take such action, as described above.
Such action must include the date each shareholder signed the consent and the date of signing of the latest dated consent satisfying the minimum number of shareholders necessary to approve the action that is the subject of the consent. The described must not be later than the 60th day after the date of the signing of the earliest dated consent of the shareholders signing the consent. If a consent does not contain the date that a shareholder, the date that date that the shareholder signed the consent is considered to be the date that the consent is received by the filing entity. The entity shall promptly notify shareholder who did not sign a consent described above of the action that is the subject of the consent. |
Special Meetings of Shareholders | |
Colorado | Texas |
Under the CCAA, a special meeting of shareholders shall be held if: (i) called by the board of directors or any person authorized by the bylaws or a resolution of the board of directors to call such a meeting; or (ii) if the corporation receives one or more written demands for a special meeting, stating the purpose or purposes for which it is to be held, signed and dated by the holders of shares representing at least 10% of all of the votes entitled to be cast on any issue proposed to be considered at the special meeting. The Colorado Bylaws provide that a special meeting of the Colorado Entity’s shareholders may be called by the Board, by the Colorado Entity’s Chief Executive Officer or at the request of the holders of not less than 10% of the shares of the Colorado Entity Common Stock entitled to vote at the special meeting. | Under Texas law, shareholders are guaranteed the right to call special meetings. Unless otherwise specified in the corporation’s certificate of formation, holders of not less than 10% of all of the shares entitled to vote at the proposed meeting have the right to call a special shareholders’ meeting. The certificate of formation may allow for special meetings to be called by a number of shares greater than or less than 10%, but it may not set the required number of shares above 50%. The president, board of directors, or any other person authorized to call special meetings by the certificate of formation or bylaws of the corporation may also call special shareholders’ meetings.
The proposed Texas Certificate and the Texas Bylaws require 35% of all of the shares entitled to vote at the proposed meeting to call a special shareholders meeting. |
Anti-Takeover Statutes | |
Colorado | Texas |
The CCAA does not contain provisions designed to deter takeovers of public companies, such as a “fair price” statute, “business combination” statute, “control share acquisition” statute or “cash-out” statute. However, a company’s articles of incorporation may include such provisions.
The Colorado Articles are silent on this issue | The TBOC is silent on this issue.[1] |
Procedure for Filling Vacant Directorships | |
Colorado | Texas |
Unless otherwise provided in the articles of incorporation, if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors: (a) The shareholders may fill the vacancy; (b) The board of directors may fill the vacancy; or (c) If the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.
CCAA 7-108-110. | Under Texas law, any vacancy occurring in the board of directors may, unless otherwise authorized by a corporation’s certificate of formation, fill a vacancy or a newly created vacancy in a director position only: (i) by the affirmative vote of the majority of the directors then in office, even if less than a quorum, (ii) by the sole remaining director, or (iii) by the affirmative vote of the shareholders.
A directorship to be filled because of an increase in the number of directors may be filled by the shareholders or by the board of directors for a term of office continuing only until the next election of one or more directors by the shareholders. The board of directors may not fill more than two such directorships during the period between any two successive annual meetings of shareholders.
The proposed Texas Bylaws require the affirmative vote of the majority of directors then in office, even if less than a quorum, to fill any vacancy in the board of directors. |
Proxy | |
Colorado | Texas |
A shareholder may vote the shareholder’s shares in person or by proxy by signing an appointment form, either personally or by the shareholder’s attorney-in-fact or by an electronic transmission to the person who will be the holder of the proxy. CCAA 7-107-203. | Under Texas law, a shareholder may authorize another person or persons to act for such shareholder by proxy. A proxy is only valid for 11 months from its date unless otherwise provided in the proxy. |
Charter/Articles Amendments | |
Colorado | Texas |
Under the CCAA, amendments to the articles of incorporation, other than ministerial amendments authorized by the board of directors without shareholder action, may be proposed by the board of directors or by the holders of shares representing at least 10% of all of the shares entitled to vote upon the amendment. The board of directors must recommend the amendment to the shareholders unless the amendment is proposed by the shareholders or the board of directors determines that because of a conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the amendment.
The Colorado Articles provide that the Colorado Entity reserves the right to amend or repeal any provision contained in the Colorado Articles in any manner permitted under the CCAA. Under the Colorado Articles all rights and powers conferred upon directors and shareholders are granted subject to the reservation. | Under Texas law, an amendment to the certificate of formation requires the approval of the holders of at least 2/3 of the outstanding shares of the corporation, unless a different threshold, not less than a majority, is specified in the Texas Certificate.
The proposed Texas Certificate alters the default statutory approval requirements and requires an amendment to the certificate of formation to be approved by holders of a majority of the outstanding shares entitled to vote thereon, unless any class or series of shares is entitled to vote as a class thereon, in which event the vote required shall be the affirmative vote of the holders of a majority of the outstanding shares within each class or series of shares entitled to vote thereon as a class and at least a majority of the outstanding shares otherwise entitled to vote thereon. |
Bylaw Amendments | |
Colorado | Texas |
Under the CCAA, shareholders may amend the corporation’s bylaws. Unless otherwise specified in the corporation’s articles of incorporation or bylaws, directors also are permitted to amend the bylaws, other than bylaws establishing greater quorums or voting requirements for shareholders or directors. Directors may not amend the bylaws to change the quorum or voting requirements for shareholders, and directors may amend the bylaws to change the quorum or voting requirements for directors only if such provision was originally adopted by the directors or if such provision specifies that it may be amended by the directors.
The Colorado Bylaws provide that the Colorado Bylaws may at any time and from time to time be amended, supplemented, or repealed by the Board or the shareholders | Generally, under Texas law, the board of directors may amend, repeal or adopt a corporation’s bylaws. However, a corporation’s certificate of formation may reserve this power exclusively to a majority of the shareholders. Similarly, the shareholders, in amending, repealing or adopting a particular bylaw, may expressly provide that the board of directors may not amend, readopt or repeal that bylaw. Texas case law permits the corporation to increase the required threshold of shareholders necessary to amend the Texas Bylaws.
The proposed Texas Certificate allows amendments to the Texas Bylaws by the vote of at least 2/3 of the members of the board of directors or by 2/3 of the holders of the outstanding shares entitled to vote, provided that any amendment to the Bylaw Anti-takeover Provisions requires approval by either (i) a majority of the continuing and unaffiliated directors and holders of a majority of the Texas Entity’s outstanding shares; or (ii) a majority of all of the Texas Entity’s directors and holders of at least 66 and 2/3% of the Texas Entity’s outstanding shares not held by the “affiliated shareholder.” |
Removal of Director | |
Colorado | Texas |
Under the CCAA, one or more directors may be removed from office by the shareholders with or without cause, unless a corporation’s articles of incorporation provide that directors may be removed only for cause, and only if the number of votes cast in favor of removal exceeds the number of votes cast against removal.
The Colorado Articles do not prohibit shareholders from removing a director without cause. The Colorado Bylaws provide that shareholders may remove directors from office with or without cause at a shareholder meeting duly called for such purpose, only if the number of votes cast in favor of removal exceeds the number of votes cast against such removal. | Under Texas law, subject to the exceptions discussed below or as otherwise provided by the certificate of formation or bylaws of a corporation, the shareholders may remove a director, with or without cause, by a vote of the holders of a majority of the shares entitled to vote at an election of the directors.
If the corporation’s directors serve staggered terms, a director may not be removed, except for cause unless the certificate of formation provides otherwise.
The proposed Texas Bylaws are consistent with the TBOC regarding mechanics for removal of directors. |
Number of Directors | |
Colorado | Texas |
Under the CCAA, the number of directors must be specified in the corporation’s bylaws.
The Colorado Articles provide that the number of directors may be stated in or fixed in accordance with the Colorado Bylaws. The Colorado Bylaws provide that the number of directors of the Colorado Entity shall be fixed from time to time by the Board, but no decrease shall have the effect of shortening the term of any incumbent director. | The TBOC provides that, after specifying the initial number of directors in the certificate of formation, the number of directors will be set by or in the manner provided in the certificate of formation or the bylaws.
The proposed Texas Bylaws provide that the size of the board will be determined by the board of directors. |
Director Term of Office | |
Colorado | Texas |
The CCAA permits (but does not require) classifications of a corporation’s board of directors.
The Colorado Bylaws provide that the Colorado Entity's directors be elected annually. All directors hold office until the next annual meeting of shareholders following their election or until their successors are elected and qualified, or until their earlier death, resignation or removal. | The TBOC does not specify a term of office for the directors; however, the proposed Texas Bylaws provide that the number of directors of the corporation shall be set from time to time by resolution of the Board of Directors, but in no instance shall there be less than one director. Each director shall hold office until the next annual meeting of shareholders or until his or her successor shall have been elected and qualified. Directors need not be residents of the State of Texas or shareholders of the corporation. |
Board of Directors Vacancies | |
Colorado | Texas |
Under the CCAA, unless otherwise provided in the articles of incorporation, any vacancy on the board of directors, including a vacancy resulting from an increase in the number of directors, may be filled by the shareholders or the board of directors, except that if the directors remaining in office constitute fewer than a quorum, the board of directors may fill the vacancy by the affirmative vote of a majority of the remaining directors.
The Colorado Articles do not alter the procedures specified in the CCAA. The Colorado Bylaws provide that any vacancy on the Board may be filled by a majority of the remaining directors in office or by the shareholders at the next annual meeting or at a special meeting called for that purpose. | The TBOC does not specify a procedure to fill a vacancy on the Board of Directors; however, the proposed Texas Bylaws provide that any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the shareholders or the Board of Directors. If the directors remaining in office constitute less than a quorum of the Board, the directors may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. |
Cumulative Voting; Vote Required for the Election of Directors | |
Colorado | Texas |
Under the CCAA, shareholders have the right to cumulate their votes in the election of directors unless otherwise provided in the articles of incorporation. In addition, the CCAA provides that, absent a provision to the contrary in a corporation’s articles of incorporation, the election of directors will be by a plurality vote of the shareholders entitled to vote.
The Colorado Articles expressly prohibit cumulative voting for the election of directors. The Colorado Articles do not alter the default plurality voting standard for the election of directors and the Colorado Bylaws specifically adopt a plurality voting standard for the election of the Colorado Entity’s directors. | The TBOC provides that a shareholder does not have the right to cumulate the shareholder's vote in the election of directors, unless expressly authorized by a corporation’s certificate of formation. The proposed Texas Certificate does not authorize cumulative voting and instead expressly prohibits cumulative voting. |
Shareholders Rights to Examine Books and Records | |
Colorado | Texas |
Under the CCAA, any record or beneficial shareholder of a corporation may, upon five days’ written demand, inspect certain records, including shareholder actions, minutes of shareholder meetings, communications with shareholders and recent financial statements. In addition, upon five days’ written demand, any such shareholder may inspect the list of shareholders and certain other corporate records, including minutes of the meetings of the board of directors of the corporation, if the shareholder either (i) has been a shareholder for at least three months; or (ii) is a holder of at least 5% of all outstanding shares of any class of shares when the demand is made, provided that the demand is made in good faith for a proper purpose reasonably related to such person’s interests as a shareholder.
Neither the Colorado Articles nor the Colorado Bylaws contains a provision regarding examination rights. | Under Texas law, a shareholder may, upon written demand stating a proper purpose, inspect the books and records of a corporation if such shareholder holds at least 5% of the outstanding shares of stock of the corporation or has been a holder of shares for at least six months prior to such demand. |
Dividends, Distributions and Repurchases of Shares | |
Colorado | Texas |
Unlike the Delaware General Corporate Law ("DGCL"), the CCAA does not utilize the concept of par value of shares or contain statutory definitions of capital, surplus and the like. The CCAA permits a corporation to declare and pay cash or in-kind property dividends or to repurchase shares unless, after giving effect to the transaction: (i) the corporation would not be able to pay its debts as they become due in the usual course of business; or (ii) the corporation’s total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
The Colorado Articles permit the Board to declare and pay dividends upon the Colorado Entity Common Stock out of any funds legally available therefor at such times and in such amounts as the Board shall determine, subject to preferential dividend rights, if any, of the holders of the Colorado Entity's preferred stock. | Under Texas law, a distribution is defined as a transfer of cash or other property (except a corporation’s own shares or rights to acquire its shares), or an issuance of debt, by a corporation to its shareholders in the form of: (i) a dividend on any class or series of the corporation’s outstanding shares; (ii) a purchase or redemption, directly or indirectly, of its shares; or (iii) a payment in liquidation of all or a portion of its assets. Under Texas law, a corporation may not make a distribution if such distribution violates its certificate of formation or, unless the corporation is in receivership, if it either renders the corporation unable to pay its debts as they become due in the course of its business or affairs, or exceeds, depending on the type of distribution, either the net assets or the surplus of the corporation. The proposed Texas Bylaws provide that dividends may be declared as provided by law.
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Stock Redemption and Repurchase | |
Colorado | Texas |
The CCAA permits a corporation to declare and pay cash or in-kind property dividends or to repurchase shares unless, after giving effect to the transaction: (i) the corporation would not be able to pay its debts as they become due in the usual course of business; or (ii) the corporation’s total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
The Colorado Articles permit the Board to declare and pay dividends upon the Colorado Entity Common Stock out of any funds legally available therefor at such times and in such amounts as the Board shall determine, subject to preferential dividend rights, if any, of the holders of the Colorado Entity’s preferred stock. | As noted above, under Texas law, the purchase or redemption by a corporation of its shares constitutes a distribution. Accordingly, any such purchase or redemption is subject to the restrictions on distributions discussed above. |
Transactions with Officers and Directors | |
Colorado | Texas |
The CCAA contains a provision regarding interested transactions between a corporation and its directors (and not officers of a corporation).
Neither the Colorado Articles nor the Colorado Bylaws modify the CCAA provisions with respect to transactions with directors. | The TBOC is silent on this issue; however, Texas case law imposes fiduciary duties where officers and directors have a duty of loyalty and such officers and directors may not usurp corporate opportunities. Moreover, the Texas Entity’s Code of Ethics provides: our Insiders and their Family Members must not profit, directly or indirectly, due to their position in the Texas Entity to the detriment, or at the expense, of the Texas Entity or any business associate. No insider shall take for his or her own advantage any corporate opportunity for profit, which he or she learns about in his or her position with the Texas Entity. |
Limitation of Liability of Directors | |
Colorado | Texas |
The CCAA permits a corporation to include a provision in its articles of incorporation eliminating the liability of a director to the corporation or its shareholders for monetary damages for breach of the director’s fiduciary duty in certain cases. Under the CCAA, a provision eliminating the liability of a director to the corporation or its shareholders for monetary liability for breach of the director’s fiduciary duty in certain cases must be contained in the corporation’s articles of incorporation. In addition, a director may not be exculpated from liability: (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) arising from transactions relating to certain unlawful distributions; or (iv) for any transaction from which the director derived an improper personal benefit.
The Colorado Articles exculpates directors of the Colorado Entity from personal liability for all monetary damages for breach of fiduciary duty as a director to the fullest extent allowed under the CCAA, except that the Colorado Articles do not eliminate or limit the liability of the Colorado Entity’s directors for monetary damages otherwise existing for: (i) any breach of the director’s duty of loyalty to the Colorado Entity’s or to its shareholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) certain acts specified in the CCAA relating to any unlawful distribution; or (iv) any transaction from which the director directly or indirectly derived any improper personal benefit. | Texas law permits a corporation to eliminate in its certificate of formation all monetary liability of a director to the corporation or its shareholders for conduct in the performance of such director’s duties.
Texas law does not, however, permit any limitation of the liability of a director for: (i) a breach of the duty of loyalty to the corporation or its shareholders; (ii) an act or omission not in good faith that constitutes a breach of duty of the person to the corporation or involves intentional misconduct or a knowing violation of law; (iii) a transaction from which the director obtains an improper benefit; or (iv) a violation of applicable statutes which expressly provide for the liability of a director.
The proposed Texas Certificate eliminates the monetary liability of a director to the fullest extent permitted by applicable law. |
Indemnification of Directors and Officers | |
Colorado | Texas |
The CCAA provisions regarding indemnification rights are substantially similar to the provisions contained in the DGCL, except as noted below. In addition to the limitations of the DGCL, the CCAA prohibits a corporation from indemnifying a director, officer, employee or agent of a corporation (each, an “Indemnitee”) adjudged liable of receiving an improper personal benefit. The CCAA also allows a corporation to indemnify an Indemnitee who is not a director to a greater extent than specified in the CCAA, if not inconsistent with public policy. However, a corporation may only indemnify a director as specified in the CCAA. The CCAA requires a corporation to provide its shareholders with written notice of any indemnification payments or expense advancements paid to a director on or before the notice of the next shareholders meeting after making such payments. Under the CCAA, the specified “Standard of Conduct” requires that an Indemnitee acted (i) in good faith; (ii) in a manner the Indemnitee reasonably believed to be, in the case of conduct in the Indemnitee’s official capacity, in the best interests of the corporation, and, for all other conduct, at least not opposed to the best interests of the corporation; and (iii) with respect to any criminal action or proceeding, with no reasonable cause to believe the Indemnitee’s conduct was unlawful. The Colorado Articles require the Colorado Entity to indemnify any person who is or was a director of the Colorado Entity to the fullest extent allowed by the laws of Colorado, or while serving as a director or officer, also served at the request of the Colorado Entity as a director, officer, partner, trustee, employee, fiduciary or agent of another entity or employee benefit plan. The Colorado Articles also require the Colorado Entity to indemnify any person who is or was an officer, employee or agent of the Colorado Entity to the fullest extent allowed by the laws of Colorado or to a greater extent if consistent with law and if provided in the Colorado Bylaws, by resolution of the Colorado Entity’s shareholders or directors or in a contract. Additionally, the Colorado Bylaws provide that the Colorado Entity may indemnify a director, officer or agent or former director, officer or agent against liability in the proceeding if such person acted with the required Standard of Conduct. Further, the Colorado Bylaws provide that the Colorado Entity must indemnify a director or former director for reasonable expenses if such person is successful in the defense of any proceeding to which such person was a party because such person was or is a director. | Texas law permits a corporation to indemnify a director or former director, against judgments and expenses reasonably and actually incurred by the person in connection with a proceeding if the person: (i) acted in good faith, (ii) reasonably believed, in the case of conduct in the person’s official capacity, that the person’s conduct was in the corporation’s best interests, and otherwise, that the person’s conduct was not opposed to the corporation’s best interests, and (iii) in the case of a criminal proceeding, did not have a reasonable cause to believe the person’s conduct was unlawful.
If, however, the person is found liable to the corporation, or is found liable on the basis he received an improper personal benefit, then indemnification under Texas law is limited to the reimbursement of reasonable expenses actually incurred and no indemnification will be available if the person is found liable for: (i) willful or intentional misconduct in the performance of the person’s duty to the corporation; (ii) breach of the person’s duty of loyalty owed to the enterprise; or (iii) an act or omission not committed in good faith that constitutes a breach of a duty owed by the person to the corporation.
The proposed Texas Bylaws provide for indemnification of directors and officers (including advancement of expenses) to the fullest extent permitted by applicable law. |
Procedure for Indemnification | |
Colorado | Texas |
Colorado statutes do not provide a specific procedure for indemnification. | Texas law provides that a determination that indemnification is appropriate must be made: (i) by a majority vote of the directors who, at the time of the vote, are disinterested and independent, regardless of whether such directors constitute a quorum; (ii) by a majority vote of a special committee of the board of directors if the committee is designated by a majority vote of the directors who at the time of the vote are disinterested and independent and is composed solely of one or more directors who are disinterested and independent; (iii) by special legal counsel selected by majority vote under (i) or (ii) above; (iv) by the shareholders in a vote that excludes those shares held by directors who, at the time of the vote, are not disinterested and independent; or (v) by a unanimous vote of the shareholders of the corporation. |
Advancement of Indemnification Expenses | |
Colorado | Texas |
Under the CCAA, a corporation may advance reasonable expenses to the Indemnitee in advance of the final disposition of a proceeding upon (i) a written affirmation of the Indemnitee’s good faith belief that the Indemnitee met the specified Standard of Conduct; and (ii) a written undertaking by or on behalf of the Indemnitee to repay such amount to the corporation if it is ultimately determined that the Indemnitee did not meet the specified Standard of Conduct. The Colorado Bylaws provide that reasonable expenses (including attorneys’ fees) incurred in defending an action, suit or proceeding may be paid by the Colorado Entity to any Indemnitee in advance of the final disposition of such action, suit or proceeding upon receipt of (i) a written affirmation of such Indemnitee’s good faith belief that he or she has met the Standard of Conduct; (ii) a written undertaking to repay such advances if it is ultimately determined that he or she did not meet the prescribed Standard of Conduct; and (iii) a determination is made by the Colorado Entity that the facts as then known to the Colorado Entity would not prohibit indemnification. | Texas law permits a corporation to indemnify a director or former director, against judgments and expenses reasonably and actually incurred by the person in connection with a proceeding if the person: (i) acted in good faith; (ii) reasonably believed, in the case of conduct in the person’s official capacity, that the person’s conduct was in the corporation’s best interests, and otherwise, that the person’s conduct was not opposed to the corporation’s best interests; and (iii) in the case of a criminal proceeding, did not have a reasonable cause to believe the person’s conduct was unlawful. If, however, the person is found liable to the corporation, or is found liable on the basis he received an improper personal benefit, then indemnification under Texas law is limited to the reimbursement of reasonable expenses actually incurred and no indemnification will be available if the person is found liable for: (i) willful or intentional misconduct in the performance of the person’s duty to the corporation; (ii) breach of the person’s duty of loyalty owed to the enterprise; or (iii) an act or omission not committed in good faith that constitutes a breach of a duty owed by the person to the corporation. The proposed Texas Bylaws provide for indemnification of directors and officers (including advancement of expenses) to the fullest extent permitted by applicable law. |
Mandatory Indemnification | |
Colorado | Texas |
Unless limited by its articles of incorporation, a corporation shall indemnify an individual who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the individual was a party because the individual is or was a director, against reasonable expenses incurred by the individual in connection with the proceeding. CCAA 7-109-103. | Under Texas law, indemnification by the corporation for reasonable expenses actually incurred is mandatory only if the director is wholly successful on the merits or otherwise, in the defense of the proceeding. |
Insurance | |
Colorado | Texas |
A corporation may purchase and maintain insurance on behalf of a person who is or was a director, officer, employee, fiduciary, or agent of the corporation, or who, while a director, officer, employee, fiduciary, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, agent, associate, employee, fiduciary, manager, member, partner, promoter, or trustee of, or in any other capacity with, another person or an employee benefit plan, against liability asserted against or incurred by the person in that capacity or arising from the person’s status as a director, officer, employee, fiduciary, or agent, whether or not the corporation would have power to indemnify the person against the same liability. CCAA 7-109-108. | Texas law is substantially the same as the Colorado statute on this issue. |
Persons Covered | |
Colorado | Texas |
The persons covered by indemnification and insurance shall include a person who is or was a director, officer, employee, fiduciary, or agent of the corporation, or who, while a director, officer, employee, fiduciary, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, agent, associate, employee, fiduciary, manager, member, partner, promoter, or trustee of, or in any other capacity with, another person or an employee benefit plan, CCAA 7-109-108. | Texas law expressly and separately addresses the indemnification of officers, employees and agents. The corporation may indemnify and advance expenses to an officer, employee or agent as provided by the corporation’s governing documents, general or specific action of the board of directors, resolution of the shareholders, contract, or common law. The corporation must indemnify an officer to the same extent as a director. The procedure for indemnification under Texas law summarized above need not be followed for officers, employees or agents. |
Standard of Care | |
Colorado | Texas |
A director is liable, as a director, to the corporation or to its shareholders for money damages for any act, omission to act, or decision only if the party asserting liability establishes in a proceeding that the challenged act, omission, or decision:
(a) Was not in good faith;
(b) Was one that the director did not rationally believe to be in the best interests of the corporation;
(c) Was one as to which the director was at least grossly negligent, unless the articles of incorporation change the standard of liability to knowing misconduct, knowing violation of law, or negligence;
(d) Was one as to which the director failed to make or cause to be made appropriate inquiry, when particular facts or circumstances of significant concern came to the attention of the director that would have alerted a reasonably attentive director to the need for inquiry;
(e) Consisted of or resulted from a sustained or systematic failure by the director to exercise oversight of the business and affairs of the corporation;
(f) Was a breach of the director’s duty of loyalty to the corporation, including by directly or indirectly receiving an improper personal benefit; or
(g) Consisted of or resulted from an unlawful distribution.
CCAA 7-108-402. | Texas law imposes duties of loyalty, care and obedience on directors of Texas corporations, but will generally not, absent fraud, impose liability upon a non-interested director unless the action challenged is outside of the expressed purpose of the corporation or inconsistent with an express limitation on authority.
Directors of a Texas corporation owe fiduciary duties only to the corporation. |
Shareholder Rights Plans | |
Colorado | Texas |
Colorado statutes has no statute relating to this issue. | Texas law statutorily approves shareholder rights plans. |
Considerations of Directors | |
Colorado | Texas |
Unless otherwise provided in the bylaws, the board of directors may fix the compensation of directors. CCAA 7-108-111. | Texas corporate law includes statutory approval of directors considering both the long-term and short-term interests of the corporation and the shareholders. |
Shareholder Actions | |
Colorado | Texas |
(1) No action shall be commenced by a shareholder in the right of a domestic or foreign corporation by a shareholder unless the plaintiff was a shareholder of the corporation at the time of the transaction of which the plaintiff complains.
(2) In any action in the right of any domestic or foreign corporation by a shareholder, upon final judgment and a finding that the action was commenced without reasonable cause, shall require the plaintiff to pay to the defendants the costs and reasonable expenses directly attributable to the defense of such action.
(3) In any action in the right of any domestic or foreign corporation by a shareholder holding less than five percent of the outstanding shares of any class, unless the shares so held have a market value in excess of $25,000, the corporation in whose right such action is commenced shall be entitled, at any time before final judgment, to require the plaintiff to give security for the costs and reasonable expenses which may be directly attributable to and incurred by it in the defense of such action or may be incurred by other parties named as defendant for which it may become legally liable, but not including fees of attorneys. CCAA 7-107-402. | Texas generally requires that lawsuits against directors be brought derivatively by the corporation only after making demand on the corporation’s board setting out the contours of the demand. A proceeding may not be commenced until the 91st day after the written demand was filed with the corporation. Texas law may, in certain circumstances, such as in a proceeding determining liability of directors, allow for a jury trial. |
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Dissenters’ Rights of Appraisal; Appraisal Rights | |
Colorado Texas | |
Under the CCAA, a properly dissenting shareholder is entitled to receive the appraised value of the shares owned by the shareholder when the corporation votes to: (i) sell, lease or exchange all or substantially all of its property and assets other than in the regular course of the corporation’s business; (ii) merge or consolidate with another corporation; (iii) participate in a share exchange; or (iv) convert into another entity, subject to certain exceptions, including, in certain circumstances, with respect to a company listed on a national securities exchange or that has more than 2,000 shareholders. Dissenters’ rights under the CCAA are available to both record holders and beneficial holders.
Neither the Colorado Articles nor the Colorado Bylaws modify the CCAA provisions relating to dissenters’ rights. CCAA 7-113-102. | Except for the limited classes of mergers, consolidations, sales and asset dispositions for which no shareholder approval is required under Texas law, shareholders of Texas corporations with voting rights have dissenters’ rights in the event of a merger, consolidation, conversion, sale, lease, exchange or other disposition of all, or substantially all, the property and assets of the corporation. However, a shareholder of a Texas corporation has no dissenters’ rights with respect to any plan or merger or conversion in which there is a single surviving or new domestic or foreign corporation, or with respect to any plan of exchange if: (1) the ownership interest, or a depository receipt in respect of the ownership interest, held by the owner is part of a class or series of ownership interests, or depository receipts in respect of ownership interests, that are, on the record date set for purposes of determining which owners are entitled to vote on the plan of merger, conversion, or exchange, as appropriate: (A) listed on a national securities exchange (the Texas Entity currently meets this condition by virtue of its listing on the NASDAQ market); or (B) held of record by at least 2,000 owners; (2) the owner is not required by the terms of the plan of merger, conversion, or exchange, as appropriate, to accept for the owner’s ownership interest any consideration that is different from the consideration to be provided to any other holder of an ownership interest of the same class or series as the ownership interest held by the owner, other than cash instead of fractional shares or interests the owner would otherwise be entitled to receive; and (3) the owner is not required by the terms of the plan of merger, conversion, or exchange, as appropriate, to accept for the owner’s ownership interest any consideration other than: (A) ownership interests, or depository receipts in respect of ownership interests, of another entity of the same general organizational type that, immediately after the effective date of the merger, conversion, or exchange, as appropriate, will be part of a class or series of ownership interests, or depository receipts in respect of ownership interests, which are: (i) listed on a national securities exchange or authorized for listing on the exchange on official notice of issuance; and (ii) held of record by at least 2,000 owners; (B) cash instead of fractional ownership interests the owner would otherwise be entitled to receive; or (C) any combination of the ownership interests and cash above. |
Forum Selection | |
Colorado | Texas |
(1) The articles of incorporation or the bylaws may require that any or all internal corporate claims must be brought exclusively in any specified court of this state and, if so specified, in any additional courts in this state or in any other jurisdiction with which the corporation has a reasonable relationship.
(2) No provision of the articles of incorporation or the bylaws may prohibit bringing an internal corporate claim in the courts of this state or require the claims to be determined by arbitration.
CCAA 7-102-108. | Texas law does not have an authorizing statutory provision similar to the forum selection provision in the Colorado statutes.
The proposed Texas Bylaws that contain references to the TBOC and Texas law and provide that the exclusive forum shall be the United States District Court for the Southern District of Texas, or if that court lacks jurisdiction, state district courts of Harris County, Texas |
Franchise Tax | |
Colorado | Texas |
There is no franchise tax. | Texas has no corporate income tax; however, Texas does impose a franchise tax on taxable entities doing business in the state. A taxable entity’s Franchise tax liability is calculated by (I) first, determining the entity’s “margin,” which equals the lowest of (a) 70% of its total revenue, (b) its total revenue minus $1 million, (c) its total revenue minus COGS, or (d) its total revenue minus certain compensation expenses, and (II) second, determining the entity’s “taxable margin” by multiplying its “margin” by an apportionment percentage equal to its gross receipts only from its business in Texas divided by its gross receipts from its business everywhere, and (III) last, multiplying the entity’s “taxable margin” by a tax rate of 0.75% (unless it is primarily engaged in retail or wholesale trade, in which case the tax rate is 0.375%). The discussion of the Texas franchise tax set forth above is for general information only and does not purport to be a complete discussion or analysis of all potential franchise tax consequences that may apply to the Texas Entity. For a more detailed description explanation, see the Texas Comptroller’s office website. |
The foregoing summary does not purport to be a complete statement of the respective rights of holders of our common stock and the Texas Entity common stock, and is qualified in its entirety by reference to the CCAA and the TBOC, respectively, and to the Colorado Articles and the Colorado Bylaws and to the Texas Certificate and the Texas Bylaws, respectively.
Required Vote
If a quorum is present, approval of this proposal requires the affirmative vote of a majority of the outstanding shares of the Colorado Entity���sEntity’s common stock entitled to vote on this proposal at the Annual Meeting. Because matters considered “routine” by the applicable regulations, such as ratification of auditors, are under consideration at the Annual Meeting, abstentions and broker non-votes will be counted towards a quorum, but these abstentions, broker non-votes, and any other outstanding shares that are not voted will have the effect of a vote “AGAINST” the proposal.
The Board of Directors recommends a vote “FOR” approval of the conversion of the Colorado Entity’s domicile state from the State of Colorado to the State of Texas.
Other Business
Management does not presently know of any matter that may be presented for action at this Annual Meeting other than as set forth herein. However, if any other matters properly come before this Annual Meeting, it is the intention of the persons named in the proxies solicited by management to exercise their discretionary authority to vote the shares represented by all effective proxies on such matters in accordance with their best judgment or as instructed by the shareholder.
Orbital Energy Group, Inc. and its subsidiaries (Nasdaq: OEG), formerly known as CUI Global Inc., are collectively referred to as ‘‘Orbital Energy Group,’’ the “Company,” or “OEG.” Orbital Energy Group is a Colorado corporation organizedincorporated on April 21, 1998, with its principal place of business located at 1924 Aldine Western, Houston, Texas 77038, phone (832) 467-1420. The Company is a diversified infrastructure services company serving customers in the electric power, telecommunications, and renewable markets. Our website address is www.OrbitalEnergyGroup.com. Information contained in our website is not incorporated by reference into this prospectus supplement and should not be considered to be a part of this prospectus supplement. You should not rely on our website or any such information in making your decision whether or not to purchase our common stock.
In the fourth quarter of 2021, the Company's continuing operations were reclassified into three reportable segments, which include the Electric Power segment, the Telecommunications segment, and the Renewables segment. The Company’s corporate overhead activities are included in the “Other” segment category. Orbital Energy Group has continuing operations in two countries, including the United States and India.
In December 2021, the Company substantially reduced operations of its Integrated Energy Infrastructure Solutions and Services segment comprised of Orbital Gas Systems, North America, and Orbital Gas Systems, Ltd. (Orbital-UK). The Company considered these two subsidiaries discontinued operations in December 2021.
Electric Power Segment
Front Line Power Construction, LLC, and Subsidiary (Eclipse Foundation Group, Inc.) and Orbital Power, Inc.
The Electric Power segment consists of Front Line Power Construction, LLC based in Houston, Texas, Orbital Power, Inc. based in Dallas, Texas, and Eclipse Foundation Group based in Gonzales, Louisiana. The segment provides comprehensive network solutions to customers in the electric power industry. Services performed by Front Line Power and Orbital Power, Inc. generally include the design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities as well as emergency restoration services.. Eclipse Foundation Group, which began operations in January 2021, is a drilled shaft foundation construction company that specializes in providing services to the electric transmission and substation, industrial, telecommunication and disaster restoration market sectors, with expertise performing services in water, marsh and rock terrains.
Telecommunications Segment
Gibson Technical Services, LLC and Subsidiaries (IMMCO, Inc. and Full Moon Telecom, LLC)
The Telecommunications segment consists of Gibson Technical Services (GTS) along with its subsidiaries IMMCO, Inc., based in Atlanta, Georgia and Full Moon Telecom, LLC based in Florida. GTS provides engineering, design, construction, and maintenance services to the broadband and wireless telecommunication industries and was acquired by the Company effective April 13, 2021. IMMCO, Inc. provides enterprise solutions to the cable and telecommunication industries and was acquired by the Company effective July 28, 2021. Full Moon Telecom, LLC provides telecommunication services including an extensive array of wireless service capabilities and was acquired by the Company effective October 22, 2021.
Renewables Segment
Orbital Solar Services, LLC.
Orbital Solar Services, LLC (OSS), based in Raleigh, North Carolina, makes up the Renewables segment. OSS provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility-scale solar construction.
Discontinued Operations
On December 28, 2021, the Orbital Energy Group, Inc. Board of Directors approved management’s recommendation for certain restructuring and costs reduction actions to strategically reposition the Company’s business to focus on a strategy to build an infrastructure services company serving the electric power, telecommunications and renewable markets by authorizing divestment of two (2) Orbital Gas subsidiaries, Orbital Gas Systems, North America, Inc. (“OGSNA”) and Orbital Gas Systems, Ltd. (“Orbital UK”). These two subsidiaries provide proprietary gas measurement and sampling technologies and integration of process control and measuring/sampling systems.
Directors and Executive Officers
Our bylaws permit the number of directors to be fixed by resolution of the board of directors, but to be no less than one. The board of directors has set the maximum number of members to no more than twelve members. Directors are elected by a majority of the votes cast by the stockholders and serve a one-year term or until their successors have been elected and qualified or their earlier resignation or removal. During 2021 the board of directors appointed three additional directors (Paul T. Addison, Jerry Sue Thornton, La Forrest V. Williams) who qualify as “independent director” as defined by applicable rules promulgated by the Securities and Exchange Commission and within the meaning of Rule 5605(a)(2) of the Nasdaq Stock Market.
The board of directors has five standing committees: Audit Committee, Disclosure Committee, Compensation Committee, Investment Committee and Nominating Committee, each of which has a written charter and/or statement of policy approved by our board. Our board currently appoints the members of each committee. Copies of the current committee charters and/or statement of policy for each committee are posted on our website at www.OrbitalEnergyGroup.com. During 2021, two directors missed one board meeting each. In each of those instances, the board members were informed of the meeting agenda and results. All directors attended, either in person or electronically, all of the meetings held by the committees on which such director served.
The following are executive officers and directors of the Company with their ages as of December 31, 2021, and a list of the members of our five standing committees: Audit Committee, Compensation Committee, Disclosure Committee. Investment Committee, and Nominating Committee.
Name | Age | Position |
James F. O'Neil III (3) | 63 | Director (Vice Chairman), Chief Executive Officer |
William J. Clough (2) | 70 | Director (Executive Chairman), Chief Legal Officer |
C. Stephen Cochennet (1) | 65 | Director |
Paul D. White (7) | 61 | Director |
Corey A. Lambrecht (1) | 52 | Director |
Sarah Tucker (1) | 76 | Director |
Paul T. Addison (1)(4) | 74 | Director |
Jerry Sue Thornton (1)(5) | 74 | Director |
LaForrest Williams (1)(6) | 70 | Director |
Nick Grindstaff (8) | 59 | Chief Financial Officer |
Audit Committee:
Paul T. Addison Committee Chairman (1)
Corey A. Lambrecht, Member (1)
C. Stephen Cochennet, Committee Member (1)
Compensation Committee
Cory A. Lambrecht, Chairman (1)
C. Stephen Cochennet, Committee Member (1)
Disclosure Committee
The Disclosure Committee consists of our Principal Officers, the individual or representative of the third-party firm primarily charged with investor/public relations, the Audit Committee Chairman and outside SEC counsel.
Investment Committee
Nick Grindstaff, Chairman
Cory A. Lambrecht, Committee Member (1)
C. Stephen Cochennet, Committee Member (1)
Nominating Committee
The Nominating Committee consists of the independent directors of the board of directors.
Notes
(1) | "Independent director" within the meaning of Rule 5605(a)(2) of The Nasdaq Capital Market. |
(2) | Mr. Clough stepped down as Chief Executive Officer effective October 1, 2019. |
(3) | Mr. O’Neil was appointed Chief Executive Officer effective October 1, 2019. |
(4) | Mr. Addison was appointed as a director June 3, 2021. |
(5) | Dr. Thornton was appointed to the board of directors August 1, 2021. |
(6) | Mr. Williams was appointed to the board of directors August 1, 2021. |
(7) | Mr. White chose to retire from the Board and will not stand for re-election at the 2022 Annual Meeting. |
(8) | Effective November 16, 2021, Nicholas M. Grindstaff was appointed to the position of Chief Financial Officer. |
Nicholas M. Grindstaff served as Vice President – Finance since May 2011 and Treasurer since October 1999 for Quanta Services, Inc. (“Quanta”), a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric and gas utility, communications, pipeline and energy industries primarily in the United States, Canada and Australia. Mr. Grindstaff holds a Master of Science degree in accounting.
As an executive officer at Quanta, he was responsible for numerous capital raises across various markets, managing acquisitions, financial planning and analysis, internal and SOX control compliance, procurement, working capital allocation, treasury operations as well as numerous other strategic initiatives.
Environmental, Social and Governance (ESG)
Orbital Energy Group’s Mission:
Orbital Energy Group is dedicated to maximizing shareholder value through greenfield development and the acquisition of, and investment in successful, entrepreneurial led companies, to profitably grow revenues by providing end-to-end solutions to customers, primarily in the renewable, electric power, and telecommunications infrastructure markets. OEG is committed to the safety of all of its employees and leading the expansion of environmental and social initiatives through ethnic diversification and equality of our workforce and people development within the communities we serve.
We are committed to:
● | The health and safety of our personnel. |
● | Delivering quality differentiated solutions to energy infrastructure |
● | Diversity, equity and inclusion across our skilled workforce. |
● | Building stockholder value. |
OEG is committed to the health and well-being of our employees:
● | Orbital Energy Group regularly reviews its medical benefits plan offering against a peer group of more than one thousand participants to determine an average benchmark comparison for its employee medical plan benefit offering. This review has shown that OEG offers at least one plan that is richer than the peer group average, one plan that is lower priced than the peer group average for singles and families and at least one plan with an overall value better than the peer group for singles and families. |
● | The Company has a 401(k) retirement savings plan that allows employees to contribute to the plan after they have completed 60 days of service and are 18 years of age which is more generous than a third of other plans in our industry and size. In addition, the Company matches the employee's contribution up to 6% of total compensation. |
OEG is committed to delivering quality differentiated solutions to energy infrastructure customers by:
● | Creating a meaningful workplace, with motivated employees, which are dedicated to providing superior performance. |
● | Providing end-to-end solutions, including the design, engineering, construction, and maintenance infrastructure services. |
OEG is committed to building a diverse, equitable, and inclusive skilled workforce:
● | In 2021, we appointed a Chief Diversity Officer (CDO) to oversee |
● | Recruiting and appointing qualified |
● | Investing in training and career development for underrepresented and underserved |
OEG is committed to building stockholder value:
● | In Fall 2019, we appointed James O’Neil as CEO to transform the company into an infrastructure service provider to the electric power transmission and distribution, telecommunications, and renewable industries. |
● |
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● | In 2020 acquired what is now Orbital Solar Services providing EPC solutions for the utility-scale solar industry. |
● | In 2021 acquired Gibson Technical Services providing solutions for the telecommunications industry. |
● | In 2022 Gibson Technical Services acquired Immco, Full Moon Telecom, Coax Fiber Solutions, V-Tac communications and PON Communications. |
● | In 2022 acquired Front Line Power Constructure, an electric power infrastructure construction provider. |
● | In 2020 and 2021, developed greenfield operations serving power and utilities with transmission, distribution, substation, foundation, and emergency response capabilities. |
● | Enhanced independent directors of the board with industry veterans. |
Corporate Governance and Board of Directors Matters
We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our integrity in the marketplace. We have adopted a Corporate Code of Ethics and Business Conduct, including our Whistleblower Policy, for employees, directors and officers (including our principal executive officer and principal financial and accounting officer). We have also adopted the following governance guides: Charter of the Audit Committee, Charter of the Compensation Committee, Investment Committee Charter, Policy for Director Independence, Nominating Committee Charter, Whistleblower Policy, Disclosure Controls and Procedures and Corporate Social Responsibility Policy, all of which, in conjunction with our Articles of Incorporation and bylaws, form the framework for our corporate governance. These corporate governance documents are available on our website at www.OrbitalEnergyGroup.com.
Board Diversity
Although Orbital Energy Group does not presently have a formal Board Diversity Policy, we believe in diversity and value the benefits that diversity can bring to our board of directors. Diversity promotes the inclusion of different perspectives and ideas, mitigates against group think and ensures that the Company has the opportunity to benefit from all available talent. The promotion of a diverse Board makes prudent business sense and makes for better corporate governance. Of our nine board members, two are female, and four are minorities.
The Company seeks to maintain a Board comprised of talented and dedicated directors with a diverse mix of expertise, experience, skills and backgrounds. The skills and backgrounds collectively represented on the Board should reflect the diverse nature of the business environment in which the Company operates. For purposes of Board composition, diversity includes, but is not limited to, business experience, geography, age, gender, ethnicity and aboriginal status. In particular, the Board should include an appropriate number of female directors.
The Company is committed to a merit-based system for Board composition within a diverse and inclusive culture which solicits multiple perspectives and views and is free of conscious or unconscious bias and discrimination. When assessing Board composition or identifying suitable candidates for appointment or re-election to the Board, the Company will consider candidates on merit against objective criteria having due regard to the benefits of diversity and the needs of the Board.
Board Diversity Matrix
Board Diversity Matrix for Orbital Energy Group, Inc. As of 5/18/2022 | ||||
Total Number of Directors | 9 | |||
Part I: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender |
Directors | 2 | 7 | 0 | 9 |
Part II: Demographic Background | ||||
African American or Black | 1 | 3 | 0 | 0 |
Alaskan Native or American Indian | 0 | 0 | 0 | 0 |
Asian | 0 | 0 | 0 | 0 |
Hispanic or Latinx | 0 | 0 | 0 | 0 |
Native Hawaiian or Pacific Islander | 0 | 1 | 0 | 0 |
White | 0 | 3 | 0 | 0 |
Two or More Races or Ethnicities | 0 | 0 | 0 | 0 |
LGBTQ+ | 0 | |||
Did Not Disclose Demographic Background | 9 |
Companywide Diversity
At Orbital Energy Group, diversity, equity, and inclusion is the foundation for our success. This foundation is critical to our mission to foster an inclusive culture that encourages and supports the diverse voices of all our employees. Diverse companies are more innovative and better positioned to succeed. More importantly, diversity creates an environment that respects the uniqueness of an employee’s characteristics, experiences, and perspectives.
Orbital Energy Group and its employees are committed to systematically change energy infrastructure in North America by opening up significant opportunities for people of color entrepreneurs and people of color led or owned companies. Further, OEG commits to diversifying the energy industry by increasing the opportunities and quality of life for underrepresented and underserved people throughout North America.
In March 2021, the board of directors authorized the appointment of a Chief Diversity Officer (CDO), charged with the responsibility to create a strategy and lead execution of company-wide programs to support diversity, equity and inclusion (DE&I) ensuring an end-to-end inclusive recruiting, screening, hiring, onboarding and employee experience with action and to ensures compliance with employment, benefits, insurance, safety, regulatory laws and requirements. This responsibility provides for the enhancement of DE&I in our current recruitment and retention programs and ensure that employees have a comfortable place to work and learn, regardless of their race, gender, age, ethnicity, socioeconomic status, sexual orientation, or disability.
Our Corporate Governance Practices
We have always believed in strong and effective corporate governance procedures and practices. In that spirit, we have summarized several of our corporate governance practices below.
The Board of Director’s Role in Risk Oversight
The board of directors and its committees have an important role in the Company’s risk oversight, management and assessment process. The board regularly reviews with management, the Company’s financial and business strategies, which include a discussion of relevant material risks as appropriate. The board discusses with the Company’s outside general counsel, as appropriate, its risk oversight and assessment as well as any material risks to the Company. In addition, the board delegates risk management responsibilities to the Audit Committee and Compensation Committee, which are each comprised of only independent directors.
The Audit Committee, as part of its charter, oversees the Company’s risk oversight, management and assessment of the Company and oversees and assesses the risks associated with the corporate governance and ethics of the Company. Risk considerations are a material aspect of the Compensation Committee. The Compensation Committee is responsible for overseeing the management of risks relating to executive compensation. In addition, the Compensation Committee also, as appropriate, assesses the risks relating to the Company’s overall compensation programs.
The Investment Committee is responsible for overseeing and advising on possible investment opportunities as well as to administer and operate the Company’s investment portfolio. This includes aligning investment policies and strategies with the Company’s short and long-term goals, as well as setting benchmarks to evaluate long-term objectives and continual evaluation of the investment strategies.
While the Audit Committee and Compensation Committee oversee the management of the risk areas identified above, the entire board is regularly informed through committee reports about such risks. This enables the board and its committees to coordinate the risk management, assessment and oversight roles.
Adopting Governance Guidelines
Our board of directors has adopted a set of corporate governance guidelines to establish a framework within which it will conduct its business and to guide management in its running of our Company. The governance guidelines can be found on our website at www.OrbitalEnergyGroup.com and are summarized below.
Providing Transparency
We believe that it is important that stockholders understand our governance practices. To help ensure transparency of our practices, we have posted information regarding our corporate governance procedures on our website at www.OrbitalEnergyGroup.com.
Communications with the Board of Directors
Stockholders may communicate with the board of directors by writing to the Company at Orbital Energy Group, 1924 Aldine Western, Houston, Texas 77038 or phone (832) 467‑1420. Stockholders who would like their submission directed to a member of the board may so specify and the communication will be forwarded as appropriate.
Monitoring Board Effectiveness
It is important that our board of directors and its committees are performing effectively and in the best interest of the Company and its stockholders. The board of directors and each committee are responsible for annually assessing their effectiveness in fulfilling their obligations.
Conducting Formal Independent Director Sessions
On a regular basis, many times at the conclusion of regularly scheduled board meetings, the independent directors are encouraged to meet privately, without our management or any non-independent directors.
Hiring Outside Advisors
The board and each of its committees may retain outside advisors and consultants of their choosing at company expense, without management's consent.
Avoiding Conflicts of Interest
We expect our directors, executives and employees to conduct themselves with the highest degree of integrity, ethics and honesty. Our credibility and reputation depend upon the good judgment, ethical standards and personal integrity of each director, executive and employee. To provide assurances to the Company and its stockholders, we have implemented standards of business conduct which provide clear conflict of interest guidelines to our employees and directors, as well as an explanation of reporting and investigatory procedures.
Corporate Social Responsibility
Our board adopted a companywide Corporate Social Responsibility Policy (CSR). As a responsible member of society, we believe that the long-term future of our business is best served by respecting the interests of our employees, customers, contractors, suppliers and the wider global community. We look for opportunities to reduce our impact on the environment and to contribute to the wellbeing of those less fortunate than ourselves. Our CSR policy sets out the principles we follow with a view to supporting our CSR ethos. Demonstrating our commitment to Corporate Social Responsibility is an objective toward which we aim to align our business values, purpose and strategy with the social and economic needs of our stockholders, while embedding responsible and ethical business policies and practices into everything we do. The CSR is available for review in the governance section of our website: www.OrbitalEnergyGroup.com.
Accuracy of All Public Disclosure
It is the Company's policy that all public disclosure made by the Company should be accurate, complete, and present fairly, in all material respects, the Company's financial condition and results of operations, and be made on a timely basis as required by applicable laws and securities exchange requirements. To oversee this policy, a Disclosure Committee Charter has been adopted by the Chief Executive Officer and Chief Financial Officer and ratified by our Audit Committee. A copy of this document is posted on our website at www.OrbitalEnergyGroup.com or a copy is available by making a written request to the Company at Orbital Energy Group, Inc., 1924 Aldine Western, Houston, Texas 77038, phone (832) 467‑1420.
Standards of Business Conduct
The board of directors has adopted a Corporate Code of Ethics and Business Conduct, including our Whistleblower Policy, for all employees and directors, including the Company's principal executive and senior financial officers. The Code of Ethics and Business Conduct can be viewed on our website at www.OrbitalEnergyGroup.com.
You can obtain a copy of these documents on our website at www.OrbitalEnergyGroup.com or by making a written request to the Company at Orbital Energy Group, Inc., 1924 Aldine Western, Houston, Texas 77038, phone (832) 467‑1420. We will disclose any amendments to the Code of Ethics and Business Conduct or waiver of a provision on our website.
Internal Auditor
The board of directors adopted a Charter of Internal Audit that authorizes and outlines the function of an Internal Audit as an independent and objective assurance activity that is guided by a philosophy of adding value to improve the operations of Orbital Energy Group. A copy of this charter is posted on our website, www.OrbitalEnergyGroup.com. It is designed to assist Orbital Energy Group in accomplishing objectives by bringing a systematic and disciplined approach to evaluate and improve the design and operating effectiveness of Orbital Energy Group’s governance, risk management, and internal control over financial reporting.
Ensuring Independent Registered Public Accounting Firm Independence
We have taken several steps to ensure the continued independence of our independent registered public accounting firm. That firm reports directly to the Audit Committee, which also has the ability to pre-approve or reject any non-audit services proposed to be conducted by our independent registered public accounting firm. For further information on independent registered public accounting firm independence see the section hereafter entitled Audit Committee.
Whistleblower Policy
In furtherance of our governance transparency and ethical standards, we adopted a comprehensive Whistleblower Policy that encourages employees to report to proper authorities incorrect financial reporting, unlawful activity, activities that are not in line with Orbital Energy Group Code of Ethics and Business Conduct or activities, which otherwise amount to serious improper conduct. Our Whistleblower Policy is posted on our website at www.OrbitalEnergyGroup.com.
Committees of the Board of Directors
Our board of directors has the following standing committees: Audit Committee, Nominating Committee, Compensation Committee, Investment Committee and Disclosure Committee. Each of the committees operates under a written charter adopted by the board of directors. All committee charters are available on our website at www.OrbitalEnergyGroup.com.
Audit Committee
The Audit Committee is established pursuant to the Sarbanes-Oxley Act of 2002 for the purposes of overseeing the Company’s accounts and financial reporting processes and audits of our financial statements. The Audit Committee reviews the financial information that will be provided to the stockholders and others, the systems of internal controls established by management and the board of directors and the independence and performance of the Company’s audit process. The Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm, review of financial reporting, internal company processes of business/financial risk and applicable legal, ethical and regulatory requirements. During 2021, the Audit Committee held four formal meetings. The Audit Committee reviews the financial information that will be provided to the stockholders and others, the systems of internal controls established by management and the board and the independence and performance of the Company’s audit process. You may review the full text of our Audit Committee Charter, that includes our Audit Committee’s pre-approval policies and procedures, on our website, www.OrbitalEnergyGroup.com, under the link, governance.
At December 31, 2021, the Audit Committee is comprised of Paul T. Addison, Chairman, C. Stephen Cochennet, and Corey A. Lambrecht. Messrs. Addison, Cochennet, and Lambrecht are independent in accordance with Rule 10A-3 under the Securities Exchange Act of 1934 and Rule 5605(a)(2) of The Nasdaq Stock Market.
Audit Committee Report
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUTE SOLICITING MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY OTHER COMPANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES THIS REPORT BY REFERENCE THEREIN.
Audit Committee Report
The Audit Committee reviews the financial information that will be provided to the stockholders and others, the systems of internal controls established by management and the board and the independence and performance of the Company’s audit process.
The Audit Committee has:
reviewed and discussed with management the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K and the most recent Quarterly Report on Form 10-Q;
discussed with Grant Thornton LLP., the Company’s independent registered public accounting firm, the matters required to be discussed by General Auditing Standard 1301: Communications with Audit Committees as adopted by the Public Company Accounting Oversight Board; and
received the written disclosures and letter from Grant Thornton LLP as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with Grant Thornton LLP its independence from Orbital Energy Group.
Based on these reviews and discussions, the Audit Committee has recommended that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The Audit Committee has also considered whether the amount and nature of non-audit services provided by Grant Thornton LLP is compatible with the auditor’s independence and determined that it is compatible.
Submitted by: Audit Committee by:
Paul T. Addison
Corey A. Lambrecht
C. Stephen Cochennet
Nominating Committee
The nominating committee consists of all of the members of the board of directors who are ‘‘independent directors’’ within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market. The nominating committee is responsible for the evaluation of nominees for election as director, the nomination of director candidates for election by the stockholders and evaluation of sitting directors.
The board of directors has developed a formal policy for the identification and evaluation of nominees, Charter of the Nominating Committee of the Board of Directors, which can be reviewed on our website at www.OrbitalEnergyGroup.com. In general, when the board of directors determines that expansion of the board of directors or replacement of a director is necessary or appropriate, the nominating committee will review, through candidate interviews with members of the board of directors and management, consultation with the candidate's associates and through other means, a candidate's honesty, integrity, reputation in and commitment to the community, judgment, personality and thinking style, willingness to invest in the Company, residence, willingness to devote the necessary time, potential conflicts of interest, independence, understanding of financial statements and issues, and the willingness and ability to engage in meaningful and constructive discussion regarding Company issues. The committee reviews any special expertise, for example, which qualifies a person as an audit committee financial expert, membership or influence in a geographic or business target market, or other relevant business experience. To date the Company has not paid any fee to any third party to identify or evaluate, or to assist it in identifying or evaluating, potential director candidates.
The nominating committee considers director candidates nominated by stockholders during such times as the Company is actively considering obtaining new directors. Candidates recommended by stockholders will be evaluated based on the same criteria described above. Stockholders desiring to suggest a candidate for consideration should send a letter to the Company's secretary and include: (a) a statement that the writer is a stockholder (providing evidence if the person's shares are held in street name) and is proposing a candidate for consideration; (b) the name and contact information for the candidate; (c) a statement of the candidate's business and educational experience; (d) information regarding the candidate's qualifications to be director, including but not limited to an evaluation of the factors discussed above which the board of directors would consider in evaluating a candidate; (e) information regarding any relationship or understanding between the proposing stockholder and the candidate; (f) information regarding potential conflicts of interest and (g) a statement that the candidate is willing to be considered and willing to serve as director if nominated and elected. Because of the small size of the Company and the limited need to seek additional directors, there is no assurance that all stockholder-proposed candidates will be fully considered, that all candidates will be considered equally or that the proponent of any candidate or the proposed candidate will be contacted by the Company or the board of directors and no undertaking to do so is implied by the willingness to consider candidates proposed by stockholders.
Disclosure Committee
We have formed a Disclosure Committee, which has been adopted by our CEO and CFO (‘‘Principal Officers’’) and ratified by our Audit Committee. The Disclosure Committee assists our Principal Officers in fulfilling their responsibility for oversight of the accuracy, completeness and timeliness of our public disclosures including, but not limited to our SEC filings, press releases, correspondence disseminated to security holders, presentations to analysts and release of financial information or earnings guidance to security holders or the investment community. The Disclosure Committee consists of our Principal Officers, the individual or representative of the firm primarily charged with investor/public relations, the Audit Committee Chairman and outside SEC counsel. Our CEO is Chairman of the committee. Our Principal Officers may replace or add new members from time to time. Our Principal Officers have the option to assume all the responsibilities of this committee or designate a committee member, who shall be a person with expertise in SEC rules and regulations with respect to disclosure, who shall have the power, acting together with our Senior Officers, to review and approve disclosure statements when time or other circumstances do not permit the full committee to meet. You may review the full text of our Disclosure Committee Charter on our website, www.OrbitalEnergyGroup.com, under the link, governance.
Generally, the committee serves as a central point to which material information should be directed and a resource for people who have questions regarding materiality and the requirement to disclose. In discharging its duties, the committee has full access to all Company books, records, facilities and personnel, including the board of directors, Audit Committee, independent public accountants and outside counsel.
Investment Committee
The purpose of the investment committee is to administer and to operate the portfolio. The members of the investment committee are fiduciaries of the portfolio, with responsibility for overseeing investment policies, general policies, guidelines, investment performance and related risk management. Committee members will fulfill their duties solely on behalf of the company’s mission. In addition to aligning investment policies and strategies with the company’s short- and long-term goals, investment committees must set benchmarks to evaluate long-term objectives and continually evaluate their strategies to keep pace with market fluctuations and changes.
The Investment Committee shall also provide initial oversight and analysis of potential acquisition targets being considered by Management. In that capacity, Investment Committee members may, among other things, participate in reviewing initial due diligence; visit prospective acquisition targets; participate in strategy and other discussions with Management; and, where appropriate, more. You may review the full text of our Investment Committee Charter on our website, www.OrbitalEnergyGroup.com, under the link, governance.
At December 31, 2021, the Investment Committee is comprised of C. Stephen Cochennet, Corey A. Lambrecht, Chairman, and Nicholas M. Grindstaff, CFO.
Compensation Committee
The Compensation Committee discharges the board of director’s responsibilities relating to general compensation policies and practices and to compensation of our executives. In discharging its responsibilities, the Compensation Committee establishes principles and procedures in order to ensure to the board of directors and the stockholders that the compensation practices of the Company are appropriately designed and implemented to attract, retain and reward high quality executives and are in accordance with all applicable legal and regulatory requirements. In this context, the Compensation Committee’s authority, duties and responsibilities are:
To annually review the Company’s philosophy regarding executive compensation.
To periodically review market and industry data to assess the Company’s competitive position, and to retain any compensation consultant to be used to assist in the evaluation of directors’ and executive officers’ compensation.
To establish and approve the Company goals and objectives, and associated measurement metrics relevant to compensation of the Company’s executive officers.
To establish and approve incentive levels and targets relevant to compensation of the executive officers.
To annually review and make recommendations to the board of directors to approve, for all principal executives and officers, the base and incentive compensation, taking into consideration the judgment and recommendation of the Chief Executive Officer for the compensation of the principal executives and officers.
To separately review, determine and approve the Chief Executive Officer’s applicable compensation levels based on the Committee’s evaluation of the Chief Executive Officer’s performance considering the Company’s and the individual goals and objectives.
To review for any related party employee situations, to ensure appropriate controls are implemented surrounding compensation changes, bonuses and performance reviews of the related party employee, and to participate in such controls as appropriate.
To periodically review and make recommendations to the board of directors with respect to the compensation of directors, including board of directors and committee retainers, meeting fees, equity-based compensation and such other forms of compensation as the Compensation Committee may consider appropriate.
To administer and annually review the Company’s incentive compensation plans and equity-based plans.
To review and make recommendations to the board of directors regarding any executive employment agreement, any proposed severance arrangements or change in control and similar agreement/provisions, and any amendments, supplements or waivers to the foregoing agreement, and any perquisites, special or supplemental benefits.
To review and discuss with management, the Compensation Discussion and Analysis (CD&A) and determine the Committee’s recommendation for the CD&A’s inclusion in the Company’s annual report filed with the SEC on Form 10-K and proxy statement on Schedule 14A.
The Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.
The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the Committee. The Company must provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the Committee.
The Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration the following factors:
(i) | the provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser; |
(ii) | the amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser; |
(iii) | the policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest; |
(iv) | any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Committee; |
(v) | any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and |
(vi) | any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Company. |
The Committee is not required to implement or act consistently with the advice or recommendations of the compensation consultant, legal counsel or other adviser to the Committee.
Compensation Committee Charter
Our Compensation Committee Charter is posted on our website at www.OrbitalEnergyGroup.com.
Compensation Committee Members
The Compensation Committee of the board of directors is appointed by the board of directors to discharge the board of director’s responsibilities with respect to all forms of compensation of the Company’s executive officers, to administer the Company’s equity incentive plans and to produce an annual report on executive compensation for use in the Company’s Form 10-K and the proxy statement on Schedule 14A. At December 31, 2021, the Compensation Committee consists of two independent members of the board of directors, Messrs. Corey A. Lambrecht, and C. Stephen Cochennet, both of whom are ���‘‘‘independent directors’’ within the meaning of Rule 5605(a) (2) of the Nasdaq Stock Market.
Committee Meetings
Our Compensation Committee meets formally and informally as often as necessary to perform its duties and responsibilities. The Compensation Committee held three formal meetings during fiscal 2021. On an as requested basis, our Compensation Committee receives and reviews materials prepared by management, consultants or committee members, in advance of each meeting. Depending on the agenda for the meeting, these materials may include, among other factors:
minutes and materials from the previous meeting(s);
reports on year-to-date Company financial performance versus budget;
reports on progress and levels of performance of individual and Company performance objectives;
reports on the Company’s financial and stock performance versus a peer group of companies;
reports from the Committee’s compensation consultant regarding market and industry data relevant to executive officer compensation;
reports and executive compensation summary worksheets, which set forth for each executive officer: current total compensation and incentive compensation target percentages, equity ownership and general partner ownership interest and current and projected value of each and all such compensation elements, including distributions and dividends therefrom, over a five-year period.
Compensation Committee Interlocks and Insider Participation
The current members of the compensation committee are Messrs. Lambrecht and Cochennet with Mr. Lambrecht serving as chair. Our board of directors has determined that all members of the compensation committee qualify as “independent” under Nasdaq Rules. There are no interlocking relationships between any of our executive officers and compensation committee members, on the one hand, and the executive officers and compensation committee members of any other companies, on the other hand, nor have any such interlocking relationships existed in the past.
Compensation Committee Report
We have reviewed and discussed the Compensation Discussion and Analysis with management and based on our review and discussion with management, we have recommended to the board of directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the proxy statement on Schedule 14A for the 2021 Annual Meeting of Stockholders.
Submitted by: | Compensation Committee by: |
Corey A. Lambrecht, Chairman | |
C. Stephen Cochennet, Committee Member |
Compensation Discussion and Analysis
General Philosophy
Our compensation philosophy is based on the premise of attracting, retaining and motivating exceptional leaders, setting high goals, working toward the common objectives of meeting the expectations of customers and stockholders and rewarding outstanding performance. Following this philosophy, in determining executive compensation, we consider all relevant factors, such as the competition for talent, our desire to link pay with performance, the use of equity to align executive interests with those of our stockholders, individual contributions, teamwork and performance, each executive’s total compensation package and internal pay equity. We strive to accomplish these objectives by compensating all employees with total compensation packages consisting of a combination of competitive base salary and incentive compensation.
Pay for Performance
At the core of our compensation philosophy is our strong belief that pay should be causally linked to performance. We believe in a pay for performance culture that places a significant portion of executive officer total compensation as contingent upon, or variable with, individual performance, Company performance and achievement of strategic goals including increasing shareholder value.
The performance based compensation for our executives may be in the form of (i) annual cash incentives to promote achievement of, and accountability for, shorter term performance plans and strategic goals and (ii) equity grants, designed to align the long-term interests of our executive officers with those of our shareholders, by creating a strong and direct link between executive compensation and shareholder return over a multiple year performance cycle. Long-term incentive equity awards are typically granted in restricted stock, stock appreciation rights or stock options. These awards generally vest over a two to four-year period. This opportunity for share ownership was to provide incentive and retain key employees and align their interests with our long-term strategic goals. At the 2020 Annual Meeting, the Stockholders approved the Plan, a copy of which is attached to the 2020 Annual Stockholder Meeting Proxy Statement as Annex A that was filed with the SEC on October 1, 2020.
Base Compensation to be Competitive within Industry
A key component of an executive’s total base salary compensation is designed to compensate executives commensurate with their respective level of experience, scope of responsibilities, sustained individual performance and future potential. The goal has been to provide for base salaries that are sufficiently competitive with other similar-sized companies, both regionally and nationally, to attract and retain talented leaders.
Management’s Role in the Compensation Setting Process
Management plays a significant role in the compensation-setting process. The most significant aspects of management’s role are:
assisting in establishing business performance goals and objectives;
evaluating employee and Company performance;
CEO and/or Executive Chairman recommending compensation levels and awards for executive officers;
implementing the board approved compensation plans; and
assistance in preparing agenda and materials for the Committee meetings.
The Chief Executive Officer, and/or Executive Chairman generally attend the Committee meetings; however, the Committee also meets in executive session when considering the compensation of executive officers. The Chief Executive Officer and/or Executive Chairman make recommendations with respect to financial and corporate goals and objectives and makes non-executive officer compensation recommendations to the Compensation Committee based on Company performance, individual performance and the peer group compensation market analysis. The Compensation Committee considers and deliberates on this information and in turn makes recommendations to the board of directors, for the board’s determination and approval of the executives’ and other members of senior management’s compensation, as necessary, including base compensation, short-term cash incentives and long-term equity incentives. For related party employee matters, appropriate personnel meet with the Compensation Committee to determine compensation and incentives and to review ongoing performance of the employee. The performance and compensation of the Chief Executive Officer, Executive Chairman and Chief Financial Officer are reviewed, evaluated and established separately by the Compensation Committee and presented to the board of directors for ratification or approval.
Setting Compensation Levels
To evaluate whether total compensation is competitive and provides appropriate rewards to attract and retain talented leaders, as discussed above, we may rely on analyses of peer companies performed by independent compensation consultants and on other industry and occupation specific survey data available. Our general benchmark is to establish both base salary and total compensation for the executive officers at or near the compensation of peer group data, recognizing that a significant portion of executive officer total compensation should be contingent upon, or variable with, achievement of individual and Company performance objectives and strategic goals, as well as being variable with stockholder value. Further, while the objective for base salary is at that of peer group data, executives’ base salaries are designed to reward core competencies and contributions to the Company and may be increased above this general benchmark based on (i) the individual’s increased contribution over the preceding year; (ii) the individual’s increased responsibilities over the preceding year; and (iii) any increase in median competitive pay levels.
Setting Performance Objectives
The Company’s business plans and strategic objectives are generally presented by management annually and as needed to the board of directors. The board engages in an active discussion concerning the financial targets, the appropriateness of the strategic objectives and the difficulty in achieving the same. In establishing the compensation plan, our Compensation Committee then utilizes the primary financial targets and strategic objectives from the adopted business plan as the primary targets for determining the executive officers’ short-term cash incentives and long-term equity incentive compensation. The Committee also establishes additional nonfinancial performance goals and objectives, the achievement of which is required for funding of a significant portion of the executive officers’ incentive compensation. In 2021, these non-financial performance goals and objectives included among other factors: the identification and procurement process to enhance and enable the growth of the Company through strategic industry specific acquisitions; management of oversight of the continued growth of power transmission and distribution operations; capitalizing on market drivers to create significant growth; increase customer relationships; oversight and taking advantage of potential financing opportunities including both dilutive (debt) and non-dilutive (equity raise); and general and administrative management responsibilities. In addition, such factors as revenue growth; market penetration; M&A activities; and investment banking transactions were and are considered in setting compensation levels.
Annual Evaluation
The Chief Executive Officer and/or Executive Chairman recommend the actual incentive award amounts for all other executives based on actual Company performance relative to the targets set as well as on individual performance and recommends the executives’ base salary levels. The Compensation Committee considers these recommendations generally following the end of each fiscal year in determining its recommendations to the board of directors for the final short-term cash incentive and long-term equity award amounts for each executive. Executive base salary levels are reviewed in accordance with their respective employment agreements. The actual incentive amounts awarded to each executive are ultimately subject to the discretion of the Compensation Committee and the board of directors.
Voting Results on Executive Compensation (Say-on-Pay) Advisory Vote
As required by Section 14A of the Exchange Act, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Compensation Committee considers the prior year shareholder advisory vote on the compensation of the Named Executive Officers as appropriate for making compensation decisions. At the annual meeting of shareholders held October 12, 2021, 85% percent of the shareholders present and voting on the proposal approved, on an advisory basis, the compensation disclosed in the Company’s proxy statement for the meeting filed with the Securities and Exchange Commission on August 10, 2021. As a result, the Compensation Committee concluded that the Company's shareholders were supportive of the Company's executive compensation philosophy, policies and programs. The Compensation Committee will continue to reach out to shareholders regarding compensation matters and will continue to review compensation philosophy, policies and programs as appropriate for changing circumstances.
Special Evaluation
Additional equity-based awards may also be granted to executives, as well as other employees, upon commencement of employment, promotions, for special performance recognition or for retention purposes, based on the recommendation of the Chief Executive Officer or Chief Financial Officer. In determining whether to recommend additional grants to an executive, the Chief Executive Officer typically considers the individual’s performance and any planned change in functional responsibility.
Elements of Executive Compensation
Total Compensation
Total compensation for our executives consists of three elements: (i) base salary; (ii) incentive cash award based on achieving specific performance targets as measured by revenues, cash flow and other objectives and (iii) equity incentive award, which is also performance based and may be paid out over a future period in the form of stock, restricted stock, stock appreciation rights, or stock purchase options. Base salaries are the value upon which both the incentive compensation percentage targets are measured against. For evaluation and comparison of overall compensation of the executives and to assist it in making its compensation decisions, the Compensation Committee reviews an executive compensation summary, which sets forth for each executive: current compensation and current equity ownership holdings as well as the projected value of each and all such compensation elements, including distributions and dividends therefrom. Also included in the summary are comparative performance numbers, specific milestones, strategic objectives, and other elements used to measure each executive's individual performance.
Base Salaries
Base salaries are designed to compensate executives commensurate with their respective level of experience, scope of responsibilities and to reward sustained individual performance and future potential. The goal has been to provide for base salaries that are sufficiently competitive with other similar-sized companies, both regionally and nationally, to attract and retain talented leaders.
Incentive Compensation
Incentive compensation is intended to align compensation with business objectives and performance and enable the Company to attract, retain and reward high quality executive officers whose contributions are critical to both the short and long-term success of the Company. The executives’ incentive awards are based upon three key performance metrics: (i) the Company’s earnings before interest, taxes, depreciation, and amortization (EBITDA); (ii) achievement of agreed-upon strategic and corporate performance goals including development of greenfield operations and acquisition opportunities; and/or (iii) existing Employment Agreement.
The strategic and corporate performance goals are not intended to be a specific agreed-upon goal, but rather a general objective. Management and the board of directors discuss these factors and set objectives that are dynamic and change periodically. In setting these periodic goals, the board of directors discusses with management the nature of the objective and management’s proposed method of achieving the goal. These goals change throughout the operational process because of changing dynamics such as economic conditions, current success of marketing, availability of materials, availability of funding and overall momentum toward achieving the goal.
Incentive Plan Compensation
Incentive awards are typically paid out in cash, restricted common stock, stock appreciation rights, restricted stock units or option awards. The incentive award targets for the executives are established at the beginning of the year, generally, as a percentage of their base salary and the actual awards are determined in the following year at a Compensation Committee meeting based on actual Company performance relative to established goals and objectives, as well as on evaluation of the executive’s relevant departmental and individual performance during the past year. In many instances the award of restricted common stock, stock appreciation rights, restricted stock units and stock options vests over a multi-year term in equal periodic tranches. The award of restricted common stock purchased through options generally, although not in every instance, vests over a multi-year term upon exercise of the option and generally has a validity of up to five years and a per share purchase price of no less than the fair market value of our common stock on the date of grant. The awards are intended to serve as a means of incentive compensation for performance.
Defined Contribution Plans
The Company has a 401(k) retirement savings plan that allows employees to contribute to the plan after they have completed 60 days of service and are 18 years of age. The Company matches the employee's contribution up to 6% of total compensation. GTS, Orbital Power, Inc., Orbital Solar Services, Front Line Power Construction, LLC, Eclipse Foundation, and Corporate made total employer contributions, net of forfeitures, of $0.6 million and $0.3 million for 2021 and 2020, respectively. In addition, in 2021 and 2020, the Company made contributions of $72 thousand and $0.1 million, respectively, associated with discontinued operations.
Involuntary Termination, Resignation for Good Reason and Change in Control
Our executives are awarded protection from involuntary termination, resignation for good reason and change in control specifically provided in their employment contracts.
Under involuntary termination without cause or resignation for good reason, the Executive Chairman, Chief Executive Officer and Chief Financial Officer each would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options, stock appreciation rights and any deferred past bonuses that have been earned but not paid. Should the executive be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage.
Perquisites
The Company does not provide for any perquisites or any other benefits for its senior executives that are not generally available to all employees.
Employment Agreements
During fiscal year 2021, the three named executive officers were employed under employment agreements. Those executive officers included:
Executive Chairman and General Counsel;
Chief Executive Officer;
Chief Financial Officer.
To see the material terms of each named executive officer’s employment agreement, please see the footnotes to the Summary Compensation Table.
Executive Salary and Bonus Performance Assessment Considerations
Bonuses for certain executive officers and employees of Orbital Energy Group and subsidiaries are calculated based on historical financial and non-financial information and accomplishments based on an ongoing review and approval by the Compensation Committee and the Chief Executive Officer. Accordingly, the Company accrues bonuses through components calculated on prior data. This review also considers ongoing performance and incentives for those officers and employees to increase their performance. As such, bonuses calculated based on fiscal 2021 data are not necessarily earned or owed to the employees as of December 31, 2021, and there is no legal right by the employees to receive such bonuses upon either termination by the Company or voluntary termination, unless they have been approved based on the subsequent review of subjective items.
William J. Clough, Esq., General Counsel and Executive Chairman, James F. O’Neil, Chief Executive Officer, and Nicholas M. Grindstaff, Chief Financial Officer, as an executive team, successfully managed the implementation of an acquisition and growth strategy to become an energy centric service company, focused on infrastructure engineering, construction and maintenance primarily in areas that contribute to improving the carbon footprint of the world as we know it today. This management team focused the company on the acquisition and greenfield development of portfolio companies that contribute to reducing the energy industry carbon footprint.
The team’s refocus of the Company’s business model considers that the existing electric grid cannot handle ‘an electrified America’ as more of our nations’ infrastructure, such as transportation, transitions to electric, the electric grid is being reconfigured as generation is shifting from predominately coal and nuclear power generation to reliance on renewables and natural gas. A significant portion of the nation’s electric grid is approaching or has exceeded its useful life and needs to be upgraded.
The management team’s 2021 efforts include:
● | Gibson Technical Services, Inc. |
Effective April 13, 2021, the Company purchased all of the capital stock of Gibson Technical Services, Inc. (“GTS”). GTS is an Atlanta-based telecommunications company providing diversified telecommunications services nationally since 1990. A more detailed description of this transaction is included on our Form 8-K filed with the Securities and Exchange Commission on April 16, 2021.
● | Immco, Inc. |
Effective July 28, 2021, Orbital Energy Group acquired all of the capital stock of IMMCO, Inc. (“IMMCO”). IMMCO is an Atlanta-based telecommunications company providing enterprise solutions to the cable and telecommunications industries since 1992 and will become a wholly owned subsidiary of Gibson Technical Services. IMMCO and its owners own 100% of the capital stock of two Indian-based companies, IMMCO Software Solutions Private Limited ("ISS"), and Saranga Geosoftware and Engineering Services Private Limited, "SGES," and together with ISS, the "India" Companies."
● | Full Moon Telecom, LLC |
Effective October 22, 2021, Orbital Energy Group and its subsidiary, Gibson Technical Services, Inc. ("GTS"), acquired all ownership interest in Full Moon Telecom, LLC (“Full Moon”). Full Moon is a Florida-based privately-owned telecommunications service provider that offers an extensive array of wireless service capabilities and experience including Layer 2/Layer 3 Transport, Radio Access Network (“RAN”) Integration, test and turn-up of Small Cell systems and Integration/Commissioning of Distributed Antenna (“DAS”) systems. Full Moon will become a wholly-owned subsidiary of GTS, expanding GTS’s service offerings to its customers. Full Moon’s additional capabilities include providing site surveys, regulatory support, project management, continuous wave testing, scanner walks, optimization/data collection and E911 data validation and testing. These additional skill sets combined with Full Moon’s RAN integration and DAS commissioning efforts have allowed for an expanded service offering and turnkey approach to ensuring the on time delivery and quality on end-to-end solutions to wireless customers.
● | Front Line Power Construction, LLC |
Effective November 17, 2021, Orbital Energy Group entered into a Membership Unit Purchase agreement, dated November 17, 2021 (the “MUPA”) to acquire all membership interests of Front Line Power Construction, LLC, a Texas limited liability company (“FLP” or “Front Line”); a Houston-based full service electrical infrastructure service company that has provided construction, maintenance, and emergency response services for customers since 2010.
Summary Compensation Table
Summary Compensation Table
The following table sets forth the compensation paid and accrued to be paid by the Company for the fiscal years 2021 and 2020 to the Company’s Chief Executive Officer, Chief Financial Officer and Executive Chairman/Chief Legal Counsel
Name and Principal Position | Year | Salary (dollars) | Stock Awards (dollars) | Option Awards (dollars) | Non-equity Incentive Plan Compensation (dollars) | All Other Compensation (dollars) | Total (dollars) | ||||||||||||||||||||||
William J. Clough, Executive Chairman/ Chief Legal Officer/former CEO/ Director (1) | 2021 | $ | 831,442 | (2) | $ | — | (2) | $ | 3,203,800 | (2) | $ | 531,250 | (2) | $ | 18,669 | $ | 4,585,160 | ||||||||||||
2020 | 759,363 | (2) | 21,887 | (2) | 288,085 | (2) | 300,000 | (2) | 27,768 | 1,397,103 | |||||||||||||||||||
Daniel N. Ford, Executive Vice President (3) | 2021 | 581,442 | (4) | — | (4) | 2,652,034 | (4) | 265,625 | (4) | 36,761 | 3,535,863 | ||||||||||||||||||
2020 | 512,346 | (4) | 18,904 | (4) | 224,066 | (4) | 150,000 | (4) | 43,121 | 948,437 | |||||||||||||||||||
James F. O'Neil, CEO/Vice Chairman/Director (5) | 2021 | 800,000 | (6) | — | (6) | 5,695,644 | (6) | — | (60 | 41,271 | 6,536,915 | ||||||||||||||||||
2020 | 753,563 | (6) | 8,937 | (6) | 120,036 | (6) | — | (60 | 47,797 | 930,333 |
Footnotes:
1. | Mr. Clough joined the Company on September 1, 2005. Effective September 13, 2007, Mr. Clough was appointed CEO/President of Orbital Energy Group and Chief Executive Officer of all wholly owned subsidiaries of the Company. Effective October 1, 2019, Mr. Clough stepped down as Chief Executive Officer and was appointed Executive Chairman and Chief Legal Officer. | |
2. | Mr. Clough is employed under a three-year employment contract with the Company, which became effective May 14, 2019. Said contract provides, in relevant part, for salary in year 1 of | |
3. | Mr. Ford joined the Company May 15, 2008, and served as Chief Financial Officer until November 15, 2021, when he was appointed Executive Vice President. |
4. | Mr. Ford is employed under a three-year employment contract with the Company, which became effective May 14, 2019. Said contract provides, in relevant part, for salary in year 1 of $500,000, year 2 of $550,000 and year 3 of $600,000. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Mr. Ford has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. In the event of involuntary termination or resignation for good reason, the agreement provides for ordinary benefits provided to employees of the Company. In the event of involuntary termination or resignation for good reason, the agreement entitles Mr. Ford to a severance package that equates to 2.0 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. | |
5. | Mr. O'Neil was appointed Director July 9, 2019, and was appointed Vice Chairman and Chief Executive Officer effective October 1, 2019. | |
6. | Mr. O'Neil is employed under a three-year employment contract with the Company, which became effective October 1, 2019. Said contract provides, in relevant part, for salary in year 1 of $750 thousand, year 2 of $800 thousand and year 3 of $850 thousand. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Mr. O’Neil has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. The agreement provides for up to $9,999 of annual premium life insurance expenses along with the ordinary benefits provided to employees of the Company. In the event of involuntary termination or resignation for good reason, the agreement entitles Mr. O'Neil to a severance package that equates to 2.5 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. Effective April 1, 2022, Mr. O’Neil’s employment contract was renewed for an additional two years with a base salary of $800,0000 per annum. | |
7. | As of December 31, 2021, Mr. Ford held 112,598 outstanding options. As of December 31, 2021, Mr. Clough, Mr. Ford and Mr. O'Neil held 1,350,000, 1,095,000, and 1,787,500 cash settled stock appreciation rights, respectively. | |
8. | All other compensation includes health care, insurance and 401(k) matching benefits. |
Nicholas M. Grindstaff was appointed Chief Financial Officer November 16, 2021. Mr. Grindstaff is employed under a three year employment agreement with the Company. Mr. Grindstaff’s Annual Base Salary is $650,000 per annum, payable in periodic installments in accordance with the Company’s customary payroll practices. Mr. Grindstaff’s Annual Base Salary shall be reviewed at least annually by the Compensation Committee, and the Compensation Committee may, but shall not be required to, increase the Annual Base Salary; providing, however, the Annual Base Salary shall be increased a minimum of 3% annually to cover “cost-of-living” adjustments. Mr. Grindstaff shall be entitled to receive a minimum annual bonus payment of one hundred percent (100%) of his Annual Base Salary (“Target Bonus”) during the employment term. Said bonus shall be based on performance objectives, goals, and milestones agreed to by the Executive, OEG’s CEO, and the Compensation Committee. Executive shall have the ability to earn a larger bonus based on performance criteria and the reasonable judgment and discretion of the Compensation Committee. He shall have the right to have any bonuses paid in the form of restricted stock units or other equity incentive arrangements provided for under the Equity Incentive Plan.
The following table summarizes potential payments upon termination of employment to each of the named executive officers employed on the last day of our most recently completed fiscal year. The amounts set forth in the table are based on the assumption that the triggering event occurred on the last business day of our last completed fiscal year.
Involuntary | ||||||||||
Termination or | ||||||||||
Resignation for | Termination | |||||||||
Good Reason | upon Disability | |||||||||
Name | Benefit | |||||||||
Salary and bonus continuation | $ | 3,718,750 | (1) | $ | 318,750 | (1) | ||||
William J. Clough, Executive Chairman/ Chief Legal Officer/ former CEO/Director | Benefits | 28,003 | (1) | 28,003 | (1) | |||||
Salary and bonus continuation | 2,100,000 | (2) | 225,000 | (2) | ||||||
Daniel N. Ford, Chief Financial Officer | Benefits | 29,042 | (2) | 29,042 | (2) | |||||
Salary and bonus continuation | 350,000 | (3) | 300,000 | (3) | ||||||
James F. O'Neil, CEO/ Director | Benefits | 37,906 | (3) | 37,906 | (3) |
1. | Mr. Clough's employment contract with the Company entitles Mr. Clough to a severance package of 2.5 times the sum of his annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. Under involuntary termination without cause or resignation for good reason, Mr. Clough would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should Mr. Clough be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage. | |
2. | Mr. Ford's employment contract with the Company entitles Mr. Ford to a severance package of 2.0 times the sum of his annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. Under involuntary termination without cause or resignation for good reason, Mr. Ford would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should Mr. Ford be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage. | |
3. | Mr. O'Neil's employment contract with the Company entitles Mr. O'Neil to a severance package of 2.5 times the sum of his annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. Under involuntary termination without cause or resignation for good reason, Mr. O'Neil would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should Mr. O'Neil be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage. |
The employment contract of Nicholas M. Grindstaff, appointed our Chief Financial Officer November 16, 2021, upon involuntary termination or resignation for good reason, entitles Mr. Grindstaff to (i) 2.5 times the sum of his annual base salary and target bonus, paid in a single lump sum cash payment, (ii) up to eighteen (18) months of medical coverage under the Company’s medical plans for Mr. Grindstaff and his spouse, provided, however, that in order to receive such continued coverage, Mr. Grindstaff would be required to pay the applicable premiums directly to the plan provider, and the Company would reimburse Mr. Grindstaff an amount equal to the monthly COBRA premium payment, less applicable tax withholdings, (iii) any amounts earned, accrued or owing, but not yet paid as of the termination date, payable in a lump sum, (iv) all unvested RSU’s, issued to Mr. Grindstaff would immediately vest in full, and be exercisable at any time prior to such instruments stated expiration date, and (v) any deferred past bonuses that have been earned, but not paid shall be payable in a lump sum on or before the sixtieth (60th) day following the termination date.
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth the outstanding equity awards at December 31, 2021, to each of the named executive officers:
Name | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration | Payout Value of Unexercised In-the-Money Options/SARs at Fiscal Year- End ($) | |||||||||
Daniel N. Ford (1) | 12,598 | 4.56 | 4/16/2022 | — | |||||||||
Daniel N. Ford (2) | 100,000 | 6.25 | 6/24/2023 | — | |||||||||
William J. Clough (3) | 450,000 | 1.00 | 6/1/2026 | 535,500 | |||||||||
Daniel N. Ford (3) | 350,000 | 1.00 | 6/1/2026 | 416,500 | |||||||||
James F. O'Neil (3) | 187,500 | 1.00 | 6/1/2026 | 223,125 | |||||||||
William J. Clough (4) | 900,000 | 2.89 | 4/23/2024 | — | |||||||||
Daniel N. Ford (4) | 745,000 | 2.89 | 4/23/2024 | — | |||||||||
James F. O'Neil (4) | 1,600,000 | 2.89 | 4/23/2024 | — |
Footnotes:
1. | Effective April 16, 2012, Mr. Ford received bonus options to purchase 12,598 common shares within ten years from date of issuance, at a price of $4.56 per share that vested over 4 years: 25% at year one and thereafter in equal monthly installments. | |
2. | Effective June 24, 2013, Mr. Ford received bonus options to purchase 100,000 common shares within ten years from date of issuance, at a price of $6.25 per share that vested one third per year over 3 years. | |
3. | Effective June 1, 2020, Mr. Clough, Mr. Ford and Mr. O'Neil received 450,000, 350,000 and 187,500 cash-settled stock appreciation rights, respectively, within 6 years from the date of issuance, at a price of $1.00 per share that vest in equal monthly installments over 2 years. | |
4. | Effective April 23, 2021, Mr. Clough, Mr. Ford, and Mr. O'Neil received 900,000, 745,000 and 1,600,000 cash-settled stock appreciation rights, respectively, within 3 years from the date of issuance, at a price of $2.89 per share that vests in equal monthly installments over 3 years. |
Exchange of Cash Settled Stock Appreciation Rights (“SAR”) for Restricted Stock Units (“RSU”)
As of April 13, 2022, the following named executive officers exchanged the cash value of previously issued cash settled SAR’s for RSU’s as summarized below:
NEO | SAR's Value | RSU's | Vested | Unvested | ||||||||||||
James F. O'Neil | $ | 2,122,078.14 | 1,035,161 | 373,055 | 662,106 | |||||||||||
William J. Clough | $ | 1,752,023.83 | 854,734 | 457,224 | 397,510 | |||||||||||
Daniel N. Ford (1) | $ | 1,413,959.64 | 689,736 | 362,324 | 327,412 |
(1)Mr. Ford was our former Chief Financial Officer.
The RSU’s were issued at an exchange value of $2.05 per RSU. One third of the RSU’s vest immediately and the remainder vest in two equal annual instalments.
Effective November 16, 2021, Nicholas M. Grindstaff, our Chief Financial Officer, was issued 141,946 fully vested RSUs valued at $650,000 at the time of grant.
For 2021, each of our directors received the following compensation pursuant to our director compensation plan:
Non-employee directors earned/received annual compensation of $100,000.
• | The $100,000 annual compensation for non-employee directors is issued in the form of $50,000 cash compensation and $50,000 common stock calculated by using the Nasdaq Stock Market closing price per share on the date of issuance. In addition, the chairman and member of the Investment Committee received $44,500 and $37,500, respectively of additional cash compensation for their services. | |
• | At the election of each director, all or any portion of the cash compensation may be converted to stock purchase options calculated by using the strike price of ten percent (10%) above the Nasdaq Stock Market closing price per share on the date of grant. | |
• | At the election of each director, all or any portion of the cash compensation may be converted to stock calculated by using the Nasdaq Stock Market closing price per share on the date of conversion. |
The following table sets forth the compensation of the non-employee directors for the fiscal year ended December 31, 2021:
Fees | Non- | |||||||||||||||||||||||||||
earned | Equity | Nonqualified | ||||||||||||||||||||||||||
or | Incentive | Deferred | ||||||||||||||||||||||||||
paid in | Stock | Option | Plan | Compensation | All Other | |||||||||||||||||||||||
Cash | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
Paul Addison, Director | $ | 28,851 | $ | 28,842 | $ | — | $ | — | $ | — | $ | — | $ | 57,693 | ||||||||||||||
C. Stephen Cochennet, Director (1) | 146,006 | 159,194 | — | — | — | — | 305,200 | |||||||||||||||||||||
Corey A. Lambrecht, Director (2) | 172,006 | 159,194 | — | — | — | — | 331,200 | |||||||||||||||||||||
Sean P. Rooney, Director | 75,006 | 146,694 | — | — | — | — | 221,700 | |||||||||||||||||||||
Jerry Sue Thornton, Director | 20,837 | 20,830 | — | — | — | — | 41,667 | |||||||||||||||||||||
Sarah Tucker, Director | 87,506 | 159,194 | — | — | — | — | 246,700 | |||||||||||||||||||||
La Forrest Williams, Director | 20,837 | 20,830 | — | — | — | — | 41,667 |
Footnotes:
(1) Includes $58,500 of fees in addition to regular board of director fees for additional services in connection with the Front Line Power Construction acquisition.
(2) Includes $84,500 of fees in addition to regular board of director fees for additional services in connection with the Front Line Power Construction acquisition.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial ownership of our voting shares as of December 31, 2021, by: (i) each stockholder known by us to be the beneficial owner of 5% or more of the outstanding voting shares, (ii) each of our directors and executives and (iii) all directors and executive officers as a group. Except as otherwise indicated, we believe that the beneficial owners of the voting shares listed below, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Shares of common stock issuable upon exercise of options and warrants that are currently exercisable or that will become exercisable within 60 days of December 31, 2021, have been included in the table.
No shares of preferred stock are outstanding at the date of this report.
Beneficial Interest Table
Percentages of | ||||||||
Number of | Shares | |||||||
Securities | Beneficially | |||||||
Name and Address of Beneficial Owner (1) | Owned | Owned (2) | ||||||
Paul T. Addison (3) | 8,756 | * | % | |||||
William J. Clough (4) | 319,480 | * | % | |||||
James F. O'Neil (5) | 1,200,263 | 1.47 | % | |||||
C. Stephen Cochennet (6) | 184,667 | * | % | |||||
Daniel N. Ford (7) | 220,433 | * | % | |||||
Corey A. Lambrecht (8) | 193,672 | * | % | |||||
Jerry Sue Thornton (9) | 6,709 | * | % | |||||
Sarah Tucker (10) | 94,378 | * | % | |||||
Paul D. White (11) | 50,727 | * | % | |||||
La Forrest V. Williams (12) | 2,443 | * | % | |||||
Nicholas Grindstaff (13) | - | * | % | |||||
Kurt A. Johnson, Jr. | ||||||||
15502 Bayou Oaks Drive, Danbury, Texas 77534 | 4,408,807 | 5.38 | % | |||||
Tidal Power Group LLC | ||||||||
4211 Chance Lane, Rosharon, Texas 77583 | 7,213,211 | 8.81 | % | |||||
Officers, Directors, Executives as Group | 2,281,528 | 2.79 | % |
Footnotes:
1. | Except as otherwise indicated, the address of each beneficial owner is c/o Orbital Energy Group, Inc., 1924 Aldine Western, Houston, Texas 77038. |
2. | Calculated on the basis of 81,906,676 shares of common stock outstanding at December 31, 2021, except that shares of common stock underlying options exercisable within 60 days and issued within 60 days of the date hereof are deemed to be outstanding for purposes of calculating the beneficial ownership of securities of such holder of options and shares. A * denotes less than 1 percent beneficially owned. |
3. | Mr. Addison is a director. |
4. | Mr. Clough is a Director, Executive Chairman and Chief Legal Officer of Orbital Energy Group, Inc. |
5. | Mr. O'Neil is a director, and Chief Executive Officer of Orbital Energy Group, Inc. |
6. | Mr. Cochennet is a director. |
7. | Mr. Ford’s shares include vested options to purchase common shares. Mr. Ford is the former Chief Financial Officer of Orbital Energy Group, Inc. |
8. | Mr. Lambrecht’s shares include vested options to purchase 13,300 common shares. Mr. Lambrecht is a director. |
9. | Ms. Thornton is a director. |
10. | Ms. Tucker is a director. |
11. | Mr. White’s shares include vested options to purchase 7,500 common shares. Mr. White is a director who is retiring from the board of directors and will not stand for re-election as a director. |
12. | Mr. Williams is a director. |
13. | November 16, 2021, Nicholas M. Grindstaff, our Chief Financial Officer, was issued 141,946 fully vested RSUs valued at $650,000 at the time of grant. |
No shares are held in margin accounts or pledged or otherwise available to a lender as security by executive officers and directors.
We relied upon Section 4(a)(2) of the Securities Act of 1933 as the basis for an exemption from registration for the issuance of the above securities.
The Board of Directors is responsible for the review and approval of all related party transactions. Although the Board does not have written policies and procedures with respect to the review of related party transactions, we intend that any such transactions will be reviewed by the Board of Directors or one of its committees, which will consider all relevant facts and circumstances and will consider, among other factors:
the material terms of the transaction;
the nature of the relationship between the Company and the related party;
the significance of the transaction to the Company; and
whether or not the transaction would be likely to impair (or create the appearance of impairing) the judgment of a director or executive officer to act in the best interest of the Company.
“Related party” includes directors, nominees, executive officers, holders of 5% or more of any class of the company’s voting securities, and any “immediate family member” of any of these persons.
Except as set forth herein, no related party of the Company, including, but not limited to, any director, officer, nominee for director, immediate family member of a director or officer, immediate family member of any nominee for director, security holder that beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to its outstanding shares, or immediate family member of any such security holder, since the beginning of fiscal year 2021, has any material interest, direct or indirect, in any transaction or in any presently proposed transaction with the Company where the amount involved exceeds $120,000 which has or will materially affect the Company.
Chief Legal Officer and Executive Chairman of the Board of Directors, William J. Clough’s son, Nicholas J. Clough, serves as Operations Director for Orbital Energy Group. Additional Information on Nicholas Clough’s compensation is included in Note 11 Related Party Transactions, to the Consolidated Financial Statements under Part II, Item 8, ‘‘Financial Statements and Supplementary Data’’ of our Form 10-K filed with the SEC on March 31, 2022.
On November 17, 2021, the Company entered into two unsecured promissory notes, one with Kurt A. Johnson, Jr., for $34,256,000 and the second for $51,384,000 with Tidal Power Group LLC. These promissory notes bear an interest rate of 6% per annum and were due on May 17, 2022. On December 10, 2021, Kurt A. Johnson, Jr. received an additional unsecured promissory note in the principal sum of $1,090,000 also with a 6% per annum interest rate in exchange for a reduction of shares issued to Kurt of 400,000.
In March 2022, the Company reached an agreement with Kurt Johnson and Tidal Power to extend the maturity dates for $52 million of promissory notes from the original maturity dated of May 16, 2022 until May 31, 2023. The remaining balance of $35 million remained due in May 2022. The Company also agreed to reduce the restriction period under the Tidal lockup letter from two years to one year and to the extent that if the value of the shares previously issued to Tidal Power were less than $4.00 per share upon expiration of the restriction period, the Company has agreed to pay additional consideration to Tidal Power so that the value of Tidal Power’s shares are equal to no less than $28,852,844. For the Johnson lockup letter, the Company agreed to pay additional consideration to Mr. Johnson upon expiration of the restriction period so that the value of his stock consideration is no less than $17,635,228, which is equal to $4.00 per common share. Any shortfall would be made up by issuing Mr. Johnson additional common shares.
On April 29, 2022, the Company reached an agreement with the Front Line Power Construction, LLC Sellers to pay $20 million of the $35 million due May 16, 2022 by May 6, 2022 and to extend the remaining $15 million to a due date of December 31, 2022. The Company made the $20 million payment.
The Company’s Front Line Power Construction, LLC subsidiary has an operating lease for a facility with Danbury Property Company, LLC in Rosharon, Texas with a based rental of $10,500 per month. Danbury Property Company, LLC is owned by Kurt Johnson and Tidal Power, which are greater than 5%shareholders of Orbital Energy Group, Inc.
The Company’s Front Line Construction, LLC subsidiary has an operating lease for a facility with Manvel Property Management in Rosharon, Texas with a base rent of $4,000 per month. Tidal Power, a greater than 5% shareholder of Orbital Energy Group, Inc. has an ownership interest in Manvel Property Management.
The Company’s Front Line Power Construction, LLC subsidiary has an operating lease for a facility with Oak Property Group in Rosharon, Texas with a base rent of $2,000 per month. Tidal Power, a greater than 5% shareholder of Orbital Energy Group, Inc. has an ownership interest in Oak Property Group.
Kurt Johnson, has an employment contract with the Company’s Front Line Power Construction, LLC subsidiary with a base compensation ranging up to $250,000 per year.
Director and Executive Officer Compensation
Please see "Summary Compensation Table" and "Director Compensation" for information regarding compensation of directors and executive officers.
Employment Agreements
We have entered into employment agreements with our executive officers. For more information regarding the agreements, see " Summary Compensation Table” and the footnote narrative thereto and “Outstanding Equity Awards at Fiscal Year End.”
Director and Officer Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us to indemnify each director and executive officer to the fullest extent permitted by Colorado law, including indemnification of expenses such as attorneys' fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person's services as a director or executive officer.
Legal Proceedings
No director, officer or affiliate of Orbital Energy Group, Inc., any owner of record or beneficially of more than five percent of any class of voting securities of Orbital Energy Group, Inc. or any associate of any such director, officer, affiliate of Orbital Energy Group, Inc. or security holder is a party adverse to Orbital Energy Group, Inc. or any of its subsidiaries or has a material interest adverse to Orbital Energy Group, Inc. or any of its subsidiaries.
Principal Accountant Fees and Services
Fees or controlled billings for services billed by the Company’s principal accountant, Grant Thornton LLP, were as follows:
For the Years Ended December 31, | ||||||||
(In thousands) | 2021 | 2020 | ||||||
Audit fees (1) | $ | 1,064 | $ | 725 | ||||
Tax fees and other fees (2) | 242 | 106 | ||||||
Total Fees | $ | 1,306 | $ | 831 |
(1) | Includes fees for audit of the Company's consolidated financial statements, review of the related quarterly financial statements, and services that are normally provided by our independent registered public accounting firm in connection with the statutory and regulatory filings, including reviews of documents filed with the SEC. |
(2) | Includes fees for tax planning and tax compliance/preparation fees for professional services rendered by our independent registered public accounting firm to certain subsidiaries of the Company. |
In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, the Audit Committee has adopted an informal approval policy that it believes will result in an effective and efficient procedure to pre-approve services performed by the independent registered public accounting firm.
Representatives of Grant Thornton LLP are expected to be available by teleconference at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Expenses of Issuance and Distribution
The following table sets forth an estimate of the various expenses, which will be incurred in connection with the issuance and distribution of this proxy statement. OEG will be responsible for these expenses:
Printing and Distribution Expenses | $ | 10,000 | ||
Legal Fees and Expenses | 40,000 | |||
Accounting Fees and Expenses | 25,000 | |||
Miscellaneous expenses | 5,000 | |||
Total | $ | 70,000 |
Where You Can Find Additional Information
The Company will provide to each person to whom a proxy statement is delivered:
a copy of any or all the information that has been incorporated by reference in the proxy statement, but not delivered with the proxy statement;
we will provide this information upon written or oral request;
we will provide this information at no cost to the requester.
Contact us at: Orbital Gas Systems, North America, Inc., 1924 Aldine Western, Houston, Texas 77038; phone us at (832) 467‑1420; email us at Investors@OrbitalEnergyGroup.com or view copies online at www.OrbitalEnergyGroup.com.
You may read and copy all or any portion of the proxy statement or any other information, which we filed at the SEC's public reference rooms in Washington, D.C., New York City and Chicago, Illinois. The address for the SEC's public reference room in Washington, D.C. is U.S. Securities and Exchange Commission, 100 "F" Street, N.E., Washington, DC 20549. You may request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to you free of charge at the SEC's web site at http://www.sec.gov and our Company website at www.OrbitalEnergyGroup.com.
Shareholder Proposals for the 2023 Annual Meeting of Stockholders
Under the Security and Exchange Commission’s proxy rules, shareholder proposals that meet certain conditions may be included in our proxy statement and form of proxy for a particular annual meeting. Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to Orbital Energy Group’s Corporate Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2023 Annual Meeting of Stockholders, the Corporate Secretary of Orbital Energy Group must receive the written proposal at our principal executive offices no later than May 27, 2023; provided, however, that in the event that we hold our 2023 Annual Meeting of stockholders more than 60 days before or after the one-year anniversary date of the 2022 Annual Meeting, we will disclose the new deadline by which stockholders proposals must be received in a Form 8-K or under Item 5 of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably calculated to inform stockholders. In addition, stockholder proposals must otherwise comply with the requirements of our bylaws and Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
Orbital Energy Group Global, Inc.
Attn: Corporate Secretary
1924 Aldine Western
Houston, Texas 77038
Our receipt of any such proposal from a qualified shareholder in a timely manner will not guarantee its inclusion in our proxy materials or its presentation at the 2023 Annual Meeting because there are other requirements in the proxy rules and our bylaws.
Annual Report
A COPY OF OUR ANNUAL REPORT TO STOCKHOLDERS WHICH INCLUDES OUR ANNUAL REPORT ON FORM 10-K, 10-K/A, OUR MOST RECENT QUARTERLY FORM 10-Q AND THIS PROXY STATEMENT ARE AVAILABLE TO YOU ON THE INTERNET OR, UPON YOUR REQUEST, WILL BE PROMPTLY MAILED TO YOU, PROVIDED YOU ARE A STOCKHOLDER ENTITLED TO VOTE AT THE ANNUAL MEETING. THE NOTICE, WHICH WAS MAILED TO YOU, INSTRUCTS YOU AS TO HOW YOU MAY ACCESS AND REVIEW ALL OF THE PROXY MATERIALS ON THE INTERNET. IF YOU WOULD LIKE TO RECEIVE A PAPER OR EMAIL COPY OF OUR PROXY MATERIALS, YOU SHOULD FOLLOW THE INSTRUCTIONS FOR REQUESTING SUCH MATERIALS IN THE NOTICE.
Annex A (“Excerpt from Orbital Energy Group 2020 Incentive Award Plan”)
EXCERPT from
ORBITAL ENERGY GROUP
2020 INCENTIVE AWARD PLAN
(as amended October 12, 2021)
11.27 “Overall Share Limit” means the total number of Shares reserved and available for grant and issuance pursuant to this Plan, as of the date of adoption of the Plan by the Stockholders, is Five Million (5,000,000) Shares. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan.
This number of Overall Share Limit shares was increased by 5,000,000 by the shareholders at their Annual Stockholders Meeting held on October 12, 2021.
Annex B (“Plan of Conversion”)
Plan of Conversion of
Orbital Energy Group, Inc., a Colorado corporation,
into
Orbital Infrastructure Group, Inc., a Texas corporation
This PLAN OF CONVERSION (this “Plan”), dated as of April __, 2022, is hereby adopted by Orbital Energy Group, Inc., a Colorado corporation (“Orbital Energy Group, Inc.”), in order to set forth the terms, conditions and procedures governing the conversion of Orbital Energy Group, Inc., a Colorado Corporation, into Orbital Infrastructure Group, Inc., a Texas corporation (“Orbital Infrastructure Group, Inc.”) pursuant to Section 7-111-101.5 of the Colorado Business Corporation Act, as amended (the “CBCA”), Sections 7-90-201 and 7-90-202 of the Colorado Corporations and Associations Act, as amended (the “CCAA”) and the Texas Business Organizations Code (the “TBOC”) Title 1, Chapter 10, Subchapter C.
WHEREAS, the Orbital Energy Group, Inc. Board of Directors has approved the Conversion (as defined below) and submitted this Plan to the shareholders of Orbital Energy Group, Inc. for approval, and the shareholders have approved this Plan.
NOW, THEREFORE, Orbital Energy Group, Inc. does hereby adopt this Plan to effectuate the conversion of Orbital Energy Group, Inc. into Orbital Infrastructure Group, Inc., a Texas corporation, as follows:
1. Conversion. Upon and subject to the terms and conditions of this Plan and pursuant to the relevant provisions of the CBCA, CCAA and the TBOC, including, without limitation, Section 7-111-101.5 of the CBCA, Sections 7-90-201 and 7-90-202 of the CCAA and the TBOC, Title 1, Chapter 10, Subchapter C, Orbital Energy Group, Inc. shall convert (referred to herein as the “Conversion”) into a Texas corporation named “Orbital Infrastructure Group, Inc.” (referred to herein as “Orbital Infrastructure Group, Inc.”) at the Effective Time (as defined in Section 3 below). Orbital Infrastructure Group, Inc. shall thereafter be subject to all of the provisions of the TBOC.
Orbital Energy Group, Inc. was initially formed as a Colorado for profit corporation on April 21, 1998, and maintains its principle corporate executive offices at 1924 Aldine Western, Houston, Texas 77038-1204. This location shall continue as the corporate executive offices following the intended Conversion. The existence of Orbital Infrastructure Group, Inc. shall be deemed to have commenced on the date Orbital Energy Group, Inc. commenced its existence in Colorado. Following the Conversion, Orbital Energy Group, Inc. will no longer conduct any business activity in Colorado.
2. Effect of Conversion. Following the Conversion, Orbital Infrastructure Group, Inc. shall, for all purposes of the laws of the State of Texas and Colorado, be deemed to be the same entity as Orbital Energy Group, Inc. Upon the Effective Time, all of the rights, privileges and powers of Orbital Energy Group, Inc., and all property, real, personal and mixed, and all debts due to Orbital Energy Group, Inc., as well as all other things and causes of action belonging to Orbital Energy Group, Inc., shall remain vested in Orbital Infrastructure Group, Inc. and shall be the property of Orbital Infrastructure Group, Inc. and the title to any real property vested by deed or otherwise in Orbital Energy Group, Inc. shall not revert or be in any way impaired, but all rights of creditors and all liens upon any property of Orbital Energy Group, Inc. shall be preserved unimpaired, and all debts, liabilities and duties of Orbital Energy Group, Inc. shall remain attached to Orbital Infrastructure Group, Inc. and may be enforced against it to the same extent as if said debts, liabilities and duties had originally been incurred or contracted by it in its capacity as a Texas corporation.
The rights, privileges, powers and interests in property of Orbital Energy Group, Inc., as well as the debts, liabilities and duties of Orbital Energy Group, Inc., shall be deemed, as a consequence of the Conversion, to have been transferred to Orbital Infrastructure Group, Inc. for any purpose of the laws of the State of Texas. The Conversion shall not be deemed to affect any obligations or liabilities of Orbital Energy Group, Inc. incurred prior to the Effective Time or the personal liability of any person incurred prior thereto. Orbital Energy Group, Inc. shall not be required to wind up its affairs or pay its liabilities and distribute its assets and the Conversion shall not be deemed to constitute a dissolution of Orbital Energy Group, Inc. and shall constitute a continuation of the existence of Orbital Energy Group, Inc. in the form of Orbital Infrastructure Group, Inc., a Texas corporation. Orbital Infrastructure Group, Inc. is the same entity as Orbital Energy Group, Inc.
3. Effective Time. Provided that this Plan has not been terminated or deferred pursuant to Section 14 hereof, the Conversion shall be effected as soon as practicable after the shareholders of Orbital Energy Group, Inc. have approved this Plan. Subject to the foregoing, unless another date and time is specified, the Conversion shall be effective upon (a) the filing with the Secretary of State of the State of Colorado of a duly executed Statement of Conversion meeting the requirements of Section 7-90-201.7 of the CCAA substantially in the form of Exhibit A hereto (the “Colorado Statement of Conversion”) and (b) the filing with the Secretary of State of the State of Texas of (i) a duly executed Certificate of Conversion meeting the requirements of TBOC, Title 1, Chapter 10, Subchapter C in substantially the form of Exhibit B hereto (the “Texas Certificate of Conversion”), and (ii) a duly executed Certificate of Formation of Orbital Infrastructure Group, Inc. in the form specified below (the “Effective Time”).
4. Governance and Other Matters Related to Orbital Infrastructure Group, Inc.
a. Certificate of Formation. At the Effective Time, the Certificate of Formation of Orbital Infrastructure Group, Inc. shall be as set forth in substantially the form of Exhibit C attached hereto (the “Certificate of Formation”) and shall be filed with the Secretary of State of Texas.
b. Bylaws. At the Effective Time, the Bylaws of Orbital Infrastructure Group, Inc. shall be as set forth in substantially the form of Exhibit D attached hereto (the “Bylaws”), and shall be adopted as such by the Board of Directors of Orbital Infrastructure Group, Inc. Thereafter, the Bylaws may be amended by the Board of Directors or stockholders of Orbital Infrastructure Group, Inc. as provided in the Bylaws and, as applicable, the Certificate of Formation.
c. Directors and Officers. The members of the Board of Directors and the officers of Orbital Energy Group, Inc. immediately prior to the Effective Time shall continue in office following the Effective Time as directors and officers of Orbital Infrastructure Group, Inc., respectively, until the expiration of their respective terms of office and until their successors have been duly elected and have qualified, or until their earlier death, resignation or removal.
5. Effect of the Conversion on the Common Stock of Orbital Energy Group, Inc.. Subject to the terms and conditions of this Plan, at the Effective Time, automatically by virtue of the Conversion and without any further action on the part of Orbital Energy Group, Inc., Orbital Infrastructure Group, Inc. or any shareholder or stockholder thereof, respectively, each share of common stock, par value $.001 per share, of Orbital Energy Group, Inc. (the “Orbital Energy Group, Inc. Common Stock”), shall convert into one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of Orbital Infrastructure Group, Inc. (the “Orbital Infrastructure Group, Inc. Common Stock”).
6. Effect of the Conversion on Outstanding Warrants or Other Rights of Orbital Energy Group, Inc. Subject to the terms and conditions of this Plan, at the Effective Time, automatically by virtue of the Conversion and without any further action on the part of Orbital Energy Group, Inc., Orbital Infrastructure Group, Inc. or any shareholder or stockholder thereof, respectively, each warrant or other right, of Orbital Energy Group, Inc. (the “Orbital Energy Group, Inc. Warrant or Other Right”), shall convert into an equivalent warrant or other right to acquire, upon the same terms and conditions (including the exercise price per share applicable to each such warrant or other right) as were in effect immediately prior to the Effective Time, the same number of shares of Orbital Infrastructure Group, Inc.
7. Stock Certificates. From and after the Effective Time, all of the outstanding certificates that prior to that time represented shares of Orbital Energy Group, Inc. Common Stock shall be deemed for all purposes to evidence ownership of and to represent the shares of Orbital Infrastructure Group, Inc. Common Stock into which the shares represented by such certificates have been converted as provided herein. The registered owner on the books and records of Orbital Infrastructure Group, Inc. or its transfer agent of any such outstanding stock certificate shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to Orbital Infrastructure Group, Inc. or its transfer agent, have and be entitled to exercise any voting and other rights with respect to and to receive any dividend and other distributions upon the shares of Orbital Infrastructure Group, Inc. evidenced by such outstanding certificate as provided herein.
8. Employee Benefit and Compensation Plans. At the Effective Time, each employee benefit plan, incentive compensation plan, equity incentive plan, stock purchase plan, restricted stock unit agreement, cash-settled performance unit, stock option agreement, stock appreciation rights agreement and other similar plans and agreements to which Orbital Energy Group, Inc. is then a party shall be automatically assumed by, and continue to be the plan of, Orbital Infrastructure Group, Inc., without further action by Orbital Energy Group, Inc. or Orbital Infrastructure Group, Inc. or any other party thereto. To the extent any employee benefit plan, incentive compensation plan, equity incentive plan, restricted stock unit, cash-settled performance unit, stock option agreement, stock appreciation rights agreement or other similar plan provides for the issuance or purchase of, or otherwise relates to, Orbital Energy Group, Inc. Common Stock, after the Effective Time, such plan or agreement shall be deemed to provide for the issuance or purchase of, or otherwise relate to, the Orbital Infrastructure Group, Inc. Common Stock.
9. Outstanding Awards. At the Effective Time, all outstanding stock options, purchase rights, restricted stock awards, restricted stock units, stock appreciation rights agreement and other stock awards relating to the Orbital Energy Group, Inc. Common Stock shall, by virtue of the Conversion and without any further action on the part of Orbital Energy Group, Inc., Orbital Infrastructure Group, Inc. or the holder thereof, continue on the same terms and conditions and be assumed by Orbital Infrastructure Group, Inc., provided that all such awards shall be deemed to provide for the issuance or purchase of, or otherwise relate to, the Orbital Infrastructure Group, Inc. Common Stock.
10. Filings, Licenses, Permits, Titled Property, Etc. As necessary, following the Effective Time, Orbital Infrastructure Group, Inc. shall apply for new qualifications to conduct business (including as a foreign corporation), licenses, permits and similar authorizations on its behalf and in its own name in connection with the Conversion and to reflect the fact that it is a Texas corporation. As required or appropriate, following the Effective Time, all real, personal or intangible property of Orbital Energy Group, Inc. which was titled or registered in the name of Orbital Energy Group, Inc. shall be re-titled or re-registered, as applicable, in the name of Orbital Infrastructure Group, Inc. by appropriate filings and/or notices to the appropriate parties (including, without limitation, any applicable governmental agencies).
11. Further Assurances. If, at any time after the Effective Time, Orbital Infrastructure Group, Inc. shall determine or be advised that any deeds, bills of sale, assignments, agreements, documents or assurances or any other acts or things are necessary, desirable or proper, consistent with the terms of this Plan to vest, perfect or confirm, of record or otherwise, in Orbital Infrastructure Group, Inc. its right, title or interest in, to or under any of the rights, privileges, immunities, powers, purposes, franchises, properties or assets of Orbital Energy Group, Inc., or to otherwise carry out the purposes of this Plan, Orbital Infrastructure Group, Inc. and its proper officers and directors (or their designees), are hereby authorized to execute and deliver, in the name and on behalf of Orbital Energy Group, Inc., all such deeds, bills of sale, assignments, agreements, documents and assurances and do, in the name and on behalf of Orbital Energy Group, Inc., all such other acts and things necessary, desirable to vest, perfect or confirm, of record or otherwise, in Orbital Infrastructure Group, Inc. its right, title or interest in, to or under any of the rights, privileges, immunities, powers, purposes, franchises, properties or assets of Orbital Energy Group, Inc., or to otherwise carry out the purposes of this Plan and the Conversion.
12. Implementation and Interpretation; Termination and Amendment. This Plan shall be implemented and interpreted, prior to the Effective Time, by the Board of Directors of Orbital Energy Group, Inc. and, upon the Effective Time, by the Board of Directors of Orbital Infrastructure Group, Inc., (a) each of which shall have full power and authority to delegate and assign any matters covered hereunder to any other party(ies), including, without limitation, any officers of Orbital Energy Group, Inc. or Orbital Infrastructure Group, Inc., as the case may be, and (b) the interpretations and decisions of which shall be final, binding, and conclusive on all parties.
13. Texas Indemnification Agreements. As promptly as practicable following the Effective Time, Orbital Infrastructure Group, Inc. shall enter into an indemnification agreement with each member of the Board of Directors of Orbital Infrastructure Group, Inc. and each executive officer of Orbital Infrastructure Group, Inc. .
14. Amendment. This Plan may be amended or modified by the Board of Directors of Orbital Energy Group, Inc. at any time prior to the Effective Time, provided that an amendment made subsequent to the approval of this Plan by the shareholders of Orbital Energy Group, Inc. shall not alter or change (a) the amount or kind of shares or other securities to be received by the shareholders hereunder, (b) any term of the Certificate of Incorporation or the Bylaws, other than changes permitted to be made without stockholder approval by the TBOC, or (c) any of the terms and conditions of this Plan if such alteration or change would adversely affect the holders of any class or series of the stock of Orbital Energy Group, Inc..
15. Termination or Deferral. At any time before the Effective Time, (a) this Plan may be terminated and the Conversion may be abandoned by action of the Board of Directors of Orbital Energy Group, Inc., notwithstanding the approval of this Plan by the shareholders of Orbital Energy Group, Inc., or (b) the consummation of the Conversion may be deferred for a reasonable period of time if, in the opinion of the Board of Directors of Orbital Energy Group, Inc., such action would be in the best interest of Orbital Energy Group, Inc. and its shareholders. In the event of termination of this Plan, this Plan shall become void and of no effect and there shall be no liability on the part of Orbital Energy Group, Inc. or its Board of Directors or shareholders with respect thereto.
16. Third Party Beneficiaries. This Plan shall not confer any rights or remedies upon any person or entity other than as expressly provided herein.
17. Severability. Whenever possible, each provision of this Plan will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Plan is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Plan.
IN WITNESS WHEREOF, Orbital Energy Group, Inc., a Colorado corporation, has caused this Plan to be executed by its duly authorized representative as of the date first stated above.
Orbital Energy Group, Inc.
a Colorado corporation
By: ___________________________
William J. Clough
Executive Chairman and CLO
Attached hereto:
Exhibit A, Colorado Statement of Conversion
Exhibit B, Texas Certificate of Conversion
Exhibit C, Certificate of Formation
Exhibit D, Bylaws
Annex C (“Colorado Statement of Conversion”)
Annex D (“Texas Certificate of Conversion”)
Certificate of Conversion
Converting a Foreign Entity to a Texas Filing Entity
This Certificate of Conversion dated July __, 2022, is filed on behalf of Orbital Infrastructure Group, Inc., a Texas corporation, which Certificate of Formation, Exhibit A, was formed pursuant to a signed Plan of Conversion, Exhibit B, on or about July __, 2022, Texas file number ______.
The Plan of Conversion, a copy of which is on file at the corporate principal place of business, 1924 Aldine Western, Houston, Texas 77038-1204, includes the details of converting Orbital Energy Group, Inc., a Colorado corporation, (the “converting entity”) to Orbital Infrastructure Group, Inc., a Texas corporation, (the “converted entity”) which Plan of Conversion was approved by the shareholders of the converting entity as required by the laws of Colorado and the converting entity’s governing documents and is signed on behalf of the converting entity. The Plan of Conversion will be, on written request, furnished without cost, by Orbital Infrastructure Group, Inc. to any owner or member of the converting entity or the converted entity.
Orbital Infrastructure Group, Inc., the converted entity, affirms its liableliability for payment of Texas franchise taxes.
IN WITNESS WHEREOF, Orbital Infrastructure Group, Inc., a Texas corporation, has caused this Certificate of Conversion to be executed by its duly authorized representative as of the date first stated above.
Orbital Infrastructure Group, Inc.,
a Texas corporation
By: ___________________________
William J. Clough
Executive Chairman and CLO
Attached hereto:
Exhibit A, Certificate of Formation
Exhibit B, Plan of Conversion
Annex E (the “Certificate of Formation”)
Certificate of Formation
of
Orbital Infrastructure Group, Inc.
a Texas For-Profit Corporation
This certificate of formation (“Certificate of Formation”) is submitted for filing pursuant to the applicable provisions of the Texas Business Organizations Code.Code, as amended from time to time (the “TBOC.”)
ARTICLE I
Entity Name, Type, and Initial Mailing Address
The name of the entity is Orbital Infrastructure Group, Inc. (the "Corporation""Corporation"). The Corporation is a for-profit corporation. The initial mailing address of the Corporation is 1924 Aldine Western, Houston, Texas 77038-1204.
ARTICLE II
Registered Agent and Registered Office
The initial registered agent of the Corporation is an individual resident of the stateTexas whose name is William J. Clough. The business address of the registered agent and the registered office address is 1924 Aldine Western, Houston, Texas 77038-1204.
ARTICLE III
Corporate Address
The address of the Corporation's principal office in this state is: 1924 Aldine Western, Houston, Texas 77038-1204.
ARTICLE IV
Capital
The aggregate number of shares which the corporationCorporation shall have the authority to issue is three hundred thirty five million (335,000,000)335,000,000 shares of which a portion shall be common stock and a portion shall be preferred stock, all as described below.
1. | Common Stock. The aggregate number of common stock shares which the Corporation shall have the authority to issue is 325,000,000, each with $0.001 par value which shares shall be designated as “Common Stock.” Subject to all of the rights of the Preferred stock as expressly provided herein, by law or by the Board of Directors pursuant to this Article, the Common Stock of the Corporation shall possess all such rights and privileges as are afforded to capital stock by applicable law in the absence of any express grant of rights or privileges in this Certificate of Formation, including, but not limited to, the following rights and privileges; |
1. Common Stock. The aggregate number of common shares which the corporation shall have the authority to issue is three hundred twenty five million (325,000,000), each with $0.001 par value which shares shall be designated as “Common Stock.” Subject to all of the rights of the Preferred stock as expressly provided herein, by law or by the Board of Directors pursuant to this Article, the Common Stock of the corporation shall possess all such rights and privileges as are afforded to capital stock by applicable law in the absence of any express grant of rights or privileges in this Certificate of Formation, including, but not limited to, the following rights and privileges;
a. Dividends may be declared and set apart for payment on the Common Stock or of any assets or funds of the corporation legally available for the payment of dividends;
b. The holders of Common Stock shall have unlimited voting rights, including the right to vote for the election of directors and on all other matters requiring stockholder action. Each holder of Common Stock shall have one vote for each share of Common Stock standing in his name on the books of the corporation
a. | Dividends may be declared and set apart for payment on the Common Stock or of any assets or funds of the Corporation legally available for the payment of dividends; |
b. | The holders of Common Stock shall have unlimited voting rights, including the right to vote for the election of directors and on all other matters requiring stockholder action. Each holder of Common Stock shall have one vote for each share of Common Stock standing in the holder’s name on the books of the Corporation and entitled |
c. On the voluntary or involuntary liquidation, dissolution or winding up of the corporation, and after paying or adequately providing for the payment of all of its obligations and amounts payable in liquidation, dissolution or winding up, and subject to the rights of the holders of Preferred Stock, if any, the net assets of the corporation
c. | On the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and after paying or adequately providing for the payment of all of the Corporation’s obligations and amounts payable in liquidation, dissolution or winding up, and subject to the rights of the holders of Preferred Stock, if any, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock. |
2. Preferred Stock. The aggregate number of preferred shares which this corporation shall have the authority to issue is ten million (10,000,000) shares, each with $0.001 par value, which shares shall be designated “Preferred Stock.
2. | Preferred Stock. The aggregate number of preferred shares which this corporation shall have the authority to issue is 10,000,000 shares, each with $0.001 par value, which shares shall be designated “Preferred Stock.” Shares of Preferred Stock may be issued from time to time in one or more series as determined by the Board of Directors. The Board of Directors is hereby authorized, by resolution or resolutions, to provide from time to time, out of the unissued shares of Preferred Stock, not then allocated to any series of Preferred Stock, for a series of the Preferred Stock. Each such series shall have distinctive serial designations. Before any shares of any such series of Preferred Stock are issued, the Board of Directors shall fix and determine, and is hereby expressly empowered to fix and determine, by resolution or resolutions, the voting powers, full or limited, or no voting powers, and the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof as provided by Texas law. |
ARTICLE V
Perpetual Existence
The Corporation shall have perpetual existence.
ARTICLE VI
Formation Purpose
The Corporation is formed for the purpose of transacting any and all lawful business for whichas a for-profit corporation may be organized under the Texas Business Organizations Code.TBOC.
ARTICLE VII
Plan of Conversion
This Certificate of Formation is being filed under a plan of conversion. The name of the prior corporationentity is Orbital Energy Group, Inc., formed on April 21, 1998, pursuant to the laws of Colorado and The prior entity was located at 1924 Aldine Western, Houston, Texas 77038-1204. It was formed on April 21, 1998 as a corporation pursuant to the laws of and in the jurisdiction of Colorado.
ARTICLE VIIVIII
Special Shareholder Meetings
Special shareholders’ meetings may be called by the Executive Chairman, Chief Executive Officer, boardBoard of directors,Directors, holders of not less than 35% of all of the shares entitled to vote at the proposed meeting or such additional parties as authorized by the bylaws.
ARTICLE IX
Shareholder Action by Less than Unanimous Written Consent.Consent.
Any
For any action required or permitted by the Texas Business Organizations Code,TBOC, this Certificate of Formation, or this Corporation's Bylaws to be taken at any annual or special meeting of shareholders may be taken without a meeting, without prior notice, and without a vote, if one or more written consents setting forth the action so taken shall be signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted, constituting at least a majority of the outstanding shares entitled to vote thereon.
The last dated signing of a holder for such written consent shall not be later than the 60th day of the first dated signing by a holder for the written consent. The Corporation shall promptly notify any holder who did not sign such written consent about the action that is subject of the written consent.
Notwithstanding anything contained in this Certificate of Formation to the contrary, the affirmative vote of at least a majority of the then outstanding voting shares of the Corporation shall be required to amend, repeal, or adopt any provision inconsistent with this Article if such a resolution is submitted by the boardBoard of directorsDirectors to the shareholders for consideration.
ARTICLE X
Voting Quorum
Unless otherwise ordered by a court of competent jurisdiction, at all meetings of shareholders one-third of the shares of a voting group entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum of that voting group.
ARTICLE XI
Preemptive Rights
A shareholder of the corporation shall not be entitled to a preemptive right to purchase, subscribe for, or otherwise acquire any unissued shares of stock of the corporation, or any options or warrants to purchase, subscribe for or otherwise acquire any such unissued shares, or any shares, bonds, notes, debentures, or other securities convertible into or carrying options or warrants to purchase, subscribe for or otherwise acquire any such unissued shares.
ARTICLE XII
Cumulative Voting
The shareholders shall not be entitled to use cumulative voting in the election of directors.
ARTICLE XIII
Initial Board of Directors
The Corporation is to be managed by a board of directors (the “Board of Directors.”) The initial Board of Directors of the Corporation shall consist of the following eight named individuals, who shall serve as directors until the next annual meeting of shareholders and until their successor is elected and qualified, is as follows: James F. O’Neil, William J. Clough, Corey A. Lambrecht, C. Stephen Cochennet, Sarah Tucker, Jerry Sue Thornton, Paul T. Addison, LaForrest V. Williams. The address as to all is: 1924 Aldine Western, Houston, Texas 77038-1204.
The number of directors shall be fixed in accordance with the Bylaws, or if the Bylaws fail to fix such number, then by resolution adopted from time to time by the Board of Directors, provided that the number of directors shall not be less than one. At present the number of directors is set at no more than 12.
ARTICLE XIV
Bylaws Amendment
The Corporate Bylaws may be amended by the vote of at least two-thirds of the members of the Board of Directors or by two-thirds of the holders of the outstanding shares entitled to vote, provided that any amendment to the Bylaw Anti-takeover Provisions requires approval by either (i) a majority of the continuing and unaffiliated directors and holders of a majority of the Company’s outstanding shares or (ii) a majority of all of the Company’s directors and holders of at least 66 and 2/3% of the Company’s outstanding shares not held by the “affiliated shareholder”.
ARTICLE XV
Certificate of Formation Amendment
An amendment to the Certificate of Formation requires the approval by holders of a majority of the outstanding shares entitled to vote thereon.
ARTICLE XVI
Effectiveness of Filing
This Certificate of Formation becomes effective when it is filed by the Texas Secretary of State.
ARTICLE XVII
Director's Limited Liability
A director of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages for an act or omission in the director's capacity as a director, except to the extent the director is found liable for: (1) a breach of the director's duty of loyalty to the Corporation or its shareholders; (2) an act or omission not in good faith that constitutes a breach of duty of the director to the Corporation or an act or omission that involves intentional misconduct or a knowing violation of the law; (3) a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's duties; or (4) an act or omission for which the liability of a director is expressly provided by applicable law.
ARTICLE XVIII
Indemnification
1. | Pursuant to the terms of the TBOC, Title 1, Chapter 8, Subchapters A-C, as amended from time to time (the “Indemnification Sections”), the Corporation shall indemnify and advance expenses to a director or officer in connection with a proceeding to the fullest extent permitted or required by and in accordance with the Indemnification Sections. |
2. The Corporation may, as determined by the Board of Directors of the Corporation in a specific instance or by resolution of general application, indemnify and advance expenses to an employee, fiduciary, agent or such other nongoverning persons in connection with a proceeding to the extent permitted or required by and in accordance with the Indemnification Sections.
3. This Article XVIII shall not be deemed exclusive of any other rights to which those indemnified may be entitled under this Certificate of Formation, any bylaw, agreement, vote of shareholders or disinterested directors or otherwise. The rights provided under this Article shall continue as to a person who has ceased to be in this position which entitled him to such indemnification and shall inure to the benefit of the heirs, estate or personal representative of such a person. This Article shall not be deemed to preclude the Corporation from indemnifying other persons from similar or other expenses and liabilities as the Board of Directors of the Corporation may determine in a specific instance or by resolution of general application.
ARTICLE XIX
Directors’ Conflicting Interests Transactions
1. Conflicting Interest Transaction. As used in this section, “Conflicting Interest Transaction” means any of the following:
(a) A loan or other assistance by the Corporation to a director of the Corporation or to an entity in which a director of the Corporation is a director or officer or has a financial interest;
(b) A guaranty by the Corporation of an obligation of a director of the Corporation or of any obligation of an entity in which a director of the Corporation is a director or officer or has a financial interest; or
(c) A contract or transaction between the Corporation and a director of the Corporation or between the Corporation and an entity in which a director of the Corporation is a director or officer or has a financial interest.
Conflicting Interest Transaction shall not include any transactions which are deemed not to be Conflicting Interest Transactions under the TBOC.
2. Effect of Conflicting Interest Transaction. No Conflicting Interest Transaction shall be void or voidable or be enjoined, set aside, or give rise to an award of damages or other sanctions in a proceeding by a shareholder or by or in the right of the Corporation, solely because the Conflicting Interest Transaction involves a director of the Corporation or an entity in which a director of the Corporation is a director or officer or has a financial interest or solely because the director is present at or participates in the meeting of the Corporation’s Board of Directors or of the committee of the Board of Directors which authorizes, approves, or ratifies the conflicting interest transaction or solely because the director’s vote is counted for such purpose if:
(a) The material facts as to the director’s relationship or interest and as to the Conflicting Interest Transaction are disclosed or are known to the Board of Directors of the committee, and the Board of Directors or committee in good faith authorizes, approves, or ratifies the Conflicting Interest Transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors are less than a quorum; or
(b) The material facts as to the director’s relationship or interest and as to the conflicting interest transaction are disclosed or are known to the shareholders entitled to vote thereon, and the conflicting interest transaction is specifically authorized, approved, or ratified in good faith by a vote of the shareholders; or
(c) The Conflicting Interest Transaction is fair as to the Corporation.
3. Common or Interested Directors. Common or interested directors may be counted in determining the presences of a quorum at a meeting of the Board of Directors or of a committee which authorizes, approves or ratifies the conflicting interest transaction.
4. Notice to Shareholders. The Board of Directors of the Corporation or a committee thereof shall not authorize a loan, by the Corporation to a director of the Corporation or to an entity in which a director of the Corporation is a director or officer or has a financial interest, or a guaranty, by the Corporation of an obligation of a director of the Corporation or of an obligation of an entity in which a director of the Corporation is a director or officer or has a financial interest, as provided in paragraph (a) of section (2) of this Article until at least 10 days after written notice of the proposed authorization of the loan or guaranty has been given to the shareholders who would be entitled to vote thereon if the issue of the loan or guaranty were submitted to a vote of the shareholders.
ARTICLE XX
Distributions to Shareholders
The Corporation may pay distributions on its shares without considering the amount that would be needed if the Corporation were to be dissolved at the time of the distribution to satisfy the preferential rights upon dissolution to shareholders whose preferential rights are superior to those receiving the distributions.
ARTICLE XXI
Merger or Other Business Combination
Any merger or other business combination with a third party requires the approval of such transactions by affirmative vote of the holders of a majority of the outstanding shares entitled to vote thereon, unless any class or series of shares is entitled to vote as a class thereon, in which event the vote required shall be the affirmative vote of the holders of a majority of the outstanding shares within each class or series of shares entitled to vote thereon as a class and at least a majority of the outstanding shares otherwise entitled to vote thereon.
ARTICLE XXII
Sale, Lease, or Exchange of Corporate Assets
The sale, lease, exchange or other disposition of all, or substantially all, of the property and assets of the Corporation requires the affirmative vote of the holders of a majority of the outstanding shares entitled to vote thereon.
ARTICLE XXIII
Execution
The undersigned affirms that the person designated as registered agent has consented to the appointment. The undersigned signs this document subject to the penalties imposed by law for the submission of a materially false or fraudulent instrument and certifies under penalty of perjury that the undersigned is authorized to execute the filing instrument.
IN WITNESS WHEREOF, the below named incorporator signed this Certificate of Formation on July __, 2022.
____________________________
William J. Clough,
Executive Chairman and
Chief Legal Officer of
Orbital Energy Group, Inc., the converting entity,
Orbital Infrastructure Group, Inc., the converted entity,
And Texas Resident Agent for the converted entity.
BYLAWS
of
Orbital Infrastructure Group, Inc.
a Texas Corporation
CONTENTS | |
ARTICLE I | 6 |
OFFICES | 6 |
Section 1.1 Registered Office | 6 |
Section 1.2 Other Offices. | 6 |
ARTICLE II | 6 |
STOCKHOLDERS | 6 |
Section 2.1 Annual Meeting. | 6 |
Section 2.2 Special Meetings. | 6 |
Section 2.3 Place of Meetings. | 7 |
Section 2.4 Notice | 8 |
Section 2.5 Setting a Record Date for Stockholder Meetings | 8 |
Section 2.6 Quorum | 8 |
Section 2.7 Adjourned Meetings | 9 |
Section 2.8 Voting by Stockholders on Matters Other Than the Election of Directors | 9 |
Section 2.9 Voting by Stockholders in the Election of Directors | 9 |
(a) Resignation of Incumbent Director Who Fails to Receive a Majority Vote. | 9 |
(b) Definition of “Compelling Reason” | 9 |
(c) Acceptance or Non-Acceptance of a Director’s Resignation. | 10 |
(d) Failure of a Non-Incumbent Director to Win Election. | 10 |
(e) Filling Vacancies. | 10 |
(f) Nominees to Agree in Writing to Abide by these Bylaws. | 10 |
(g) Majority Vote Defined. | 10 |
(h) Vote Standard in Contested Elections. | 10 |
Section 2.10 Voting Rights | 10 |
(a) One Vote per Share | 10 |
(b) No Cumulative Voting | 10 |
(c) Voting by Ballot | 10 |
Section 2.11 Proxies | 11 |
Section 2.12 Action by Written Consent | 11 |
(a) General | 11 |
(b) Inspectors of Written Consent | 12 |
(c) Effectiveness of Action by Written Consent | 12 |
(d) Notice of Action by Written Consent. | 12 |
(e) Setting a Record Date for Action by Written Consent. | 12 |
Section 2.13 Stock Records | 13 |
Section 2.14 Notice of Stockholder Nominations and Other Business | 13 |
(a) Annual Meetings of Stockholders. | 13 |
(1) Nominations and Other Business. | 13 |
(2) Timely Advance Notice in Writing. | 13 |
(3) Increased Number of Directors. | 16 |
(b) Director Nominations-Special Meetings of Stockholders | 16 |
(c) General. | 17 |
(1) Procedure to be Followed. | 17 |
(2) Public Announcement. | 17 |
(3) Comply with the Exchange Act | 17 |
(d) Stockholder Access to the Corporation’s Proxy Materials. | 18 |
(1) Right of Access | 18 |
(2) Eligibility. | 18 |
(3) Process. | 19 |
(4) Other Requirements | 20 |
(5) Definitions. | 21 |
(e) Bylaw Anti-takeover Provisions Defined. | 23 |
Section 2.15 Submission of Questionnaire, Representation and Agreement. | 23 |
Section 2.16 Court Ordered Meetings. | 23 |
Section 2.17 Voting of Shares by Certain Stockholders | 24 |
Section 2.18 Waiver of Notice. | 24 |
Section 2.19 Conduct of Meetings. | 25 |
ARTICLE III | 26 |
BOARD OF DIRECTORS | 26 |
Section 3.1 General Powers | 26 |
Section 3.2 Performance of Duties | 26 |
Section 3.3 Number, Tenure and Qualifications. | 26 |
Section 3.4 Executive Chairman of the Board | 26 |
Section 3.5 Quorum, Required Vote and Adjournment. | 26 |
Section 3.6 Regular Meetings. | 26 |
Section 3.7 Special Meetings. | 27 |
Section 3.8 Notice | 27 |
Section 3.9 Manner of Acting | 27 |
Section 3.10 Informal Action by Directors or Committee Members | 27 |
Section 3.11 Participation by Electronic Means | 27 |
Section 3.12 Vacancies | 27 |
Section 3.13 Resignation | 28 |
Section 3.14 Removal. | 28 |
Section 3.15 Committees. | 28 |
Section 3.16 Limitations on Committee Powers | 28 |
Section 3.17 Committee Rules | 28 |
Section 3.18 Use of Communications Equipment in Conducting Meetings | 29 |
Section 3.19 Compensation. | 29 |
Section 3.20 Presumption of Assent. | 29 |
Section 3.21 Books and Records | 29 |
ARTICLE IV | 29 |
OFFICERS | 29 |
Section 4.1 Officers Delineated. | 29 |
Section 4.2 Election and Term of Office | 30 |
Section 4.3 Removal. | 30 |
Section 4.4 Vacancies. | 30 |
Section 4.5 Executive Chairman. | 30 |
Section 4.6 Chief Executive Officer. | 30 |
Section 4.7 Chief Financial Officer. | 30 |
Section 4.8 President. | 31 |
Section 4.9 Chief Legal Officer. | 31 |
Section 4.10 Secretary. | 31 |
Section 4.11 Treasurer. | 32 |
Section 4.12 Assistant Secretaries and Assistant Treasurers. | 32 |
Section 4.13 Other Officers, Assistant Officers and Agents. | 32 |
Section 4.14 Reservation of Authority. | 32 |
Section 4.15 Salaries. | 32 |
Section 4.16 Delegation of Authority. | 32 |
Section 4.17 Execution of Contracts. | 32 |
ARTICLE V | 32 |
WAIVER OF NOTICE | 32 |
ARTICLE VI | 32 |
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS | 32 |
Section 6.1 Coverage. | 32 |
Section 6.2 Claims. | 33 |
Section 6.3 Enforcement of Claims. | 34 |
Section 6.4 Enforceability. | 34 |
Section 6.5 Rights Not Exclusive. | 34 |
Section 6.6 Employees and Agents | 35 |
Section 6.7 Insurance. | 35 |
Section 6.8 Notices. | 35 |
ARTICLE VII | 35 |
CONTRACTS, LOANS, CHECKS AND DEPOSITS | 35 |
Section 7.1 Contracts. | 35 |
Section 7.2 Loans. | 35 |
Section 7.3 Checks, Drafts, etc. | 35 |
Section 7.4 Deposits | 35 |
ARTICLE VIII | 35 |
SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES | 35 |
Section 8.1 Regulation. | 35 |
Section 8.2 Shares Without Certificates. | 36 |
Section 8.3 Certificates for Shares. | 36 |
Section 8.4 Cancellation of Certificates. | 36 |
Section 8.5 Consideration for Shares. | 36 |
Section 8.6 Lost, Stolen or Destroyed Certificates. | 37 |
Section 8.7 Transfer of Shares. | 37 |
ARTICLE IX | 37 |
FISCAL YEAR | 37 |
ARTICLE X | 37 |
DIVIDENDS AND DISTRIBUTIONS | 37 |
ARTICLE XI |
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| 38 |
ARTICLE XII |
|
| 38 |
ARTICLE XIII |
|
| 38 |
Section 13.1 Appointment. | 38 |
Section 13.2 Authority. | 38 |
Section 13.3 Tenure and | 38 |
| 38 |
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