☐
Confidential, for
use of the Commission Only (as permitted by Rule
14a-6(e)(2)).
☑ Definitive
Proxy Statement.
☐
Definitive
Additional Materials.
☐
Soliciting
Material Pursuant to Sec. 240.14a-11(c) or Sec.
240.14a-12.
COMMAND CENTER,
INC.
(Name of
Registrant as Specified in its Charter)
(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
☑ No fee
required.
☐
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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☐ Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
It is
our pleasure to invite you to the Annual Meeting of Shareholders of
Command Center, Inc., to be held at Woolley’s Classic Suites,
16450 E. 40th Circle, Aurora,
Colorado80011 on Thursday, November 17, 2016, at 10 a.m.
(Mountain Standard Time).
The
matters to be acted on during the meeting are described in the
accompanying Proxy Statement. Subsequent to the formal meeting and
its items of business at the Annual Meeting, I will discuss the
significant developments occurring within the Company over the past
year and share with you our plans for the future. You will have an
opportunity to ask questions and express your views to the
management of the Company. Members of the Board of Directors will
also be present.
On or
about October 13, 2016, we will begin mailing the Proxy Statement,
2015 Annual Report on Form 10-K and voting
instructions.
Whether
or not you are able to attend the Annual Meeting in person, it is
important that your shares be represented. Please vote your shares
using the Internet or telephone or by requesting a printed copy of
the proxy materials and completing and returning by mail the proxy
card you will receive in response to your request. Instructions on
each of these voting methods are outlined in the enclosed Proxy
Statement. Please vote as soon as possible.
I look
forward to seeing each of you at the shareholders
meeting.
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the Annual Meeting of
Shareholders, we urge you to vote and submit your proxy over the
Internet (see below for instructions) or mail so that a quorum may
be represented at the meeting. Any person giving a proxy has the
power to revoke it at any time, and stockholders who are present at
the meeting may withdraw their proxies and vote in person. If you
hold your shares through an account with a brokerage firm, bank or
other nominee, please follow the instructions you receive from them
to vote your shares.
The
Annual Meeting of Shareholders, or the Annual Meeting, of Command
Center, Inc., a Washington corporation, will be held at
Woolley’s Classic Suites, 16450 E. 40th Circle, Aurora,
Colorado80011, on Thursday, November 17, 2016, at 10 a.m.
(Mountain Standard Time) for the following purposes:
1.
to elect seven
directors to serve until the next annual meeting of shareholders,
or until their respective successors are elected and
qualified;
2.
to ratify the
selection of PMB Helin Donovan, LLP as the Company’s
independent auditors for the fiscal year ending December 30,2016;
3.
to approve, on a
non-binding advisory vote, the compensation paid to the
Company’s Named Executive Officers as disclosed in the
attached 2016 Proxy Statement (commonly known as
“Say-on-Pay”);
4.
to ratify and
approve the Company’s 2016 Stock Incentive Plan;
and
5.
to transact such
other business as may properly come before the
meeting.
Only
shareholders of record at the close of business on October 7, 2016,
will be entitled to notice of, and to vote at, the annual meeting
and any adjournments thereof. Interested parties are encouraged to
visit the Company’s website at www.commandonline.com for additional
information. Information on our
website does not form any part of the material for solicitation of
proxies.
Whether or not you plan to attend the meeting in person, please
vote as promptly as possible using the internet or by requesting a
printed copy of the proxy materials and completing and returning by
mail the proxy card you will receive in response to your request.
This is important for the purpose of ensuring a quorum at the
meeting. Any person giving a proxy has the power to revoke it at
any time, and stockholders who are present at the meeting may
withdraw their proxies and vote in person. If you hold your shares
through an account with a brokerage firm, bank or other nominee,
please follow the instructions you receive from them to vote your
shares.
1
VOTING
AT THE ANNUAL MEETING
General. The close of business on October 7, 2016, has been
fixed as the record date for determination of the shareholders
entitled to notice of, and right to vote at the Annual Meeting, or
the Record Date. As of the Record Date, there were issued and
outstanding 60,633,248 shares of common stock entitled to vote. A
majority of such shares will constitute a quorum for the
transaction of business at the Annual Meeting. The holders of
record on the Record Date of the shares entitled to be voted at the
Annual Meeting are entitled to cast one vote per share on each
matter submitted to a vote at the Annual Meeting. All action
proposed herein may be taken upon a favorable vote of the holders
of a majority of such shares of common stock represented at the
Annual Meeting, provided a quorum is present at the meeting in
person or by proxy.
Internet Availability of Proxy Materials and Voting. On or
about October 13, 2016, we will mail the proxy materials to all of
our shareholders. The Proxy Statement contains instructions about
how to access our proxy materials and vote online or by telephone.
If you previously chose to receive our proxy materials
electronically, you will continue to receive access to these
materials via e-mail unless you elect otherwise.
Voting. Even if you plan to attend the 2016 Annual Meeting
in person on November 17, 2016, please vote as soon as
possible.
2
VOTING
MATTERS AND BOARD RECOMMENDATIONS
Shareholders
are being asked to vote on the following matters at the Annual
Meeting:
Proposal
Recommendation
PROPOSAL 1: Election of Directors
Election
of seven director nominees Steven Bathgate, Richard Finlay, R. Rimmy Malhotra,
Frederick J. Sandford, John Schneller, JD Smith and John Stewart.
The Board believes that each of the nominees’ knowledge,
skills, and abilities will positively contribute to the function of
the Board as a whole. Accordingly, your proxy holder will vote your
shares FOR the election of the Board’s nominees unless you
instruct otherwise.
FOR Each Nominee
PROPOSAL 2: Ratification of the Appointment of Independent
Registered Accounting Firm
PMB
Helin Donovan has been appointed as the Company’s independent
registered public accounting firm. The Audit Committee and the
Board believe that retention of the firm is in the best interests
of the Company and its shareholders. Accordingly, your proxy holder
will vote your shares FOR the ratification of the appointment of
PMB Helin Donovan as our independent registered public accounting
firm unless you instruct otherwise.
FOR
PROPOSAL 3: Advisory Approval of Executive
Compensation
The
Say-on-Pay Proposal, to approve, on an advisory basis, the
compensation paid to our Named Executive Officers for the year
ended December 25, 2015. The Company has designed its compensation
programs to reward and motivate employees to continue to enhance
shareholder value of the Company. The Compensation Committee and
the Board of Directors take shareholder views seriously and will
take into account the advisory vote in future executive
compensation decisions. Accordingly, your proxy holder will vote
your shares FOR the approval of the executive compensation paid to
our Named Executive Officers unless you instruct
otherwise.
FOR
PROPOSAL 4: Approval of 2016 Stock Incentive Plan
The
2016 Stock Incentive Plan replaces the expired 2008 Employee Stock
Purchase Plan and the 2008 Stock Incentive Plan. The Company
believes that the 2016 Stock Incentive Plan is in the best
interests of the Company and its shareholders to motivate and
reward employees, officers, directors and consultants. Accordingly,
your proxy holder will vote your shares FOR the approval of the
2016 Stock Incentive Plan unless you instruct
otherwise.
FOR
GENERAL
INFORMATION
Record Date.
Shareholders of record at the close of business on October 7, 2016,
are entitled to vote at the Annual Meeting. On October 7, 2016 the
Company had 60,633,248 shares of common stock issued and
outstanding. Each share of common stock entitles the holder thereof
to one vote.
Mailing and Forwarding of Proxy Materials. On or about October 13, 2016, we will
first mail proxy materials to our shareholders. We will arrange
with brokerage firms and other custodians, nominees and fiduciaries
to forward proxy solicitation material to the beneficial owners of
the common stock as of the record date and will reimburse such
brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses that they incur as a result of
forwarding the proxy materials. Your cooperation in promptly voting
your shares and submitting your proxy will help avoid additional
expense.
3
Shareholders of Record and Beneficial Owners. Shareholders whose
shares are registered directly in their name with Command
Center’s transfer agent, Continental Stock Transfer and Trust
Company, are considered, with respect to those shares, shareholders of record. Each
shareholder of record will receive a Proxy Statement, the 2015
Annual Report and the proxy voting card directly from the
Company.
Shareholders
whose shares are held in a brokerage account or by a bank or other
nominee, are considered the beneficial owner of those shares of
common stock. The Proxy Statement and the 2015 Annual Report will
be forwarded to beneficial owners by their respective broker, bank
or nominee who is considered, with respect to those shares, the
shareholder of record. As the beneficial owner, you have the right
to direct your broker, bank or nominee how to vote your shares by
using the voting instruction form included in the proxy
materials.
Revocation of Proxies. A shareholder who has executed and
returned a proxy may revoke it at any time before it is voted at
the Annual Meeting:
-
by timely executing
and returning, by Internet, mail, or in person at the Annual
Meeting, a proxy bearing a later date; or
-
by giving written
notice of revocation to the Secretary of the Company at 3609 S.
Wadsworth Boulevard, Suite 250, Lakewood, Colorado, 80235, prior to
the Annual Meeting; or
-
by attending the
Annual Meeting and voting in person.
A proxy
is not revoked by the death or incompetence of the maker unless,
before the authority granted thereunder is exercised, written
notice of such death or incompetence is received by the Company
from the executor or administrator of the estate or from a
fiduciary having control of the shares represented by such proxy.
Your right to revoke your proxy is not limited by or subject to
compliance with a specified formal procedure, but you should follow
one of the methods listed above so that the number of shares
represented by proxy can be recomputed. Attendance at the meeting,
in and of itself, will not constitute a revocation of a
proxy.
Inspector of Elections. Proxies and ballots will be received
and tabulated by Continental Stock Transfer & Trust Company,
our transfer agent and the inspector of elections for the Annual
Meeting.
Quorum. A quorum is
necessary to hold a valid meeting. If shareholders entitled to cast
at least a majority of all the votes entitled to be cast at the
Annual Meeting are present in person or by proxy, a quorum will
exist. Shares represented by proxies containing an abstention as to
any matter will be treated as shares that are present and entitled
to vote for purposes of determining a quorum. Similarly, shares
held by brokers or nominees for the accounts of others as to which
voting instructions have not been given for that matter and for
which the broker does not have discretionary voting authority for
that matter, or Broker Non-Votes, will be treated as shares that
are present and entitled to vote for purposes of determining a
quorum.
Effect of Abstentions, Voting Requirements, Withheld Votes and
Broker Non-Votes. Voting
for director nominees is by plurality. Each of the other three
matters at the 2016 Annual Meeting, that is, approval of the
independent registered accounting firm, “say-on-pay”,
and the 2016 Stock Incentive Plan, must be approved by the
affirmative vote of a majority of shares cast at the Annual
Meeting, assuming a quorum is present. That means that the shares
voted “for” a proposal must exceed the numbers voted
“against” that proposal. The indication of an
abstention on a proxy or the failure to vote either by proxy or in
person will be treated as neither a vote “for” nor
“against” a nominee or proposal, and will have no
effect on the outcome of the vote. The shares of a shareholder
whose ballot on any or all proposals is marked as
“abstain” will be included in the number of shares
present at the Annual Meeting for the purpose of determining the
presence of a quorum.
Broker
Non-Votes, shares held by brokers or custodians for the accounts of
others as to which voting instructions have not been given, will be
treated as shares that are present for determining a quorum, but
will not be counted for purposes of determining the number of votes
cast with respect to a proposal. If you are the beneficial owner of
shares held by a broker or other custodian, you may instruct your
broker how you would like your shares voted through the voting
instruction form included with this Proxy Statement.
If you
wish to vote the shares you own beneficially through a broker or
custodian at the Annual Meeting, you must first request and obtain
a “legal proxy” from your broker or other custodian. If
you choose not to provide instructions or a legal proxy, your
shares are referred to as “uninstructed shares.”
Brokers may exercise discretion to vote uninstructed shares as to
which instructions are not given only with respect to Proposal no.
2 regarding the ratification of the selection of the independent
registered accounting firm. Brokers
and custodians can no longer vote uninstructed shares on your
behalf in director elections, for equity compensation plans or
advisory votes on executive compensation. For your vote to be
counted, you must submit your voting instruction form to your
broker or custodian. The following table shows how abstentions and
Broker Non-Votes will be treated with respect to each voting
matter:
4
Proposal Number
Item
Votes Required for Approval
Abstentions
Uninstructed Shares / Broker Non-Votes
1
Election of
Directors
Plurality of votes
cast
Not counted
Not
counted
2
Ratification of
Independent Auditors
Majority of votes
cast
Not
counted
Discretionary
vote
3
Advisory vote on
Executive Compensation
Majority of votes
cast
Not
counted
Not
counted
4
Ratify
and Approval of 2016 Stock Incentive Plan
Majority of votes
cast
Not
counted
Not
counted
Required Vote for Proposals to Pass.
Proposal No. 1—Election of Directors: The affirmative
vote of a plurality of the votes cast is required for the election
of each of the nominees. Withheld votes or Broker Non-Votes with
respect to this proposal will have no effect on this
vote.
Proposal No. 2—Ratification of the selection of our
independent registered public accounting firm: The
affirmative vote of the holders of a majority of shares cast is
required to ratify our selection of PMB Helin Donovan as our
independent registered public accounting firm for the year ending
December 30, 2016. A properly executed proxy marked
“ABSTAIN” with respect to this proposal will not be
voted and will have no effect on this vote. Because Proposal No. 2
is a routine proposal on which a broker or other nominee is
generally empowered to vote, Broker Non-Votes likely will not
result from this proposal. Thus, if you are a beneficial owner
holding shares through a broker, bank or other holder of record and
you do not vote on this proposal, your broker may cast a vote on
your behalf for this proposal.
Proposal No. 3—Say-on-Pay: Because this proposal asks
for a non-binding, advisory vote, there is no required vote that
would constitute approval. We value the opinions expressed by our
shareholders in this advisory vote, and our Compensation Committee,
which is responsible for overseeing and administering our executive
compensation programs, will consider the outcome of the vote when
designing our compensation programs and making future compensation
decisions for our Named Executive Officers. Abstentions and Broker
Non-Votes, if any, will not have any impact on this advisory
vote.
Proposal No. 4—Approval of 2016 Stock Incentive Plan:
The affirmative vote of the holders of a majority of shares cast is
required to approve the 2016 Stock Incentive Plan. A properly
executed proxy marked “ABSTAIN” or a Broker Non-Vote
with respect to this proposal will not be voted and will have no
effect on this vote.
No Cumulative Voting. Shareholders may not cumulate votes in
the election of directors, which means that each shareholder may
vote only the number of shares he or she owns for a single director
candidate.
Discretionary Authority. If any nominee for director is unable
to serve or for good cause will not serve, or if any matters not
specified in this proxy statement come before the meeting, eligible
shares will be voted as specified by the named proxies pursuant to
discretionary authority granted in the proxy. At the time this
proxy statement was printed, the Board of Directors was not aware
of any other matters to be voted on.
Solicitation of Proxies. Proxies may be solicited by officers,
directors and regular supervisory and executive employees of the
Company, none of whom will receive any additional compensation for
their services. The Company will bear the expense of preparing,
printing and mailing this Proxy Statement and the proxies we
solicit. Proxies will be solicited by mail and may also be
solicited by directors, officers and employees in
person.
5
Executive Offices.
The principal executive office of the Company is located at 3609 S.
Wadsworth Boulevard, Suite 250, Lakewood, Colorado, 80235. The
mailing address of the principal executive office is also 3609 S.
Wadsworth Boulevard, Suite 250, Lakewood, Colorado, 80235. The
telephone number for principal executive office of the Company is
(866) 464-5844.
PROPOSAL 1 - ELECTION OF DIRECTORS
The
Board of Directors believes that the nominees’ knowledge,
skills, and abilities would positively contribute to the function
of the Board as a whole. Accordingly, your proxy holder will vote
your shares FOR the election of the Board’s nominees named
below, unless you instruct otherwise. The Board of Directors knows
of no reason why its nominees will be unable to accept election or
unwilling to serve as a director. However, if a nominee becomes
unable to accept election, the Board will either reduce the number
of directors to be elected or select a substitute nominee. If a
substitute nominee is selected, proxies will be voted in favor of
such nominee.
Under
the current Bylaws of the Company, the proposed term of office for
which each nominee will be elected is until the 2017 Annual Meeting
of Shareholders or until his successor shall have been elected and
shall have qualified.
The
affirmative vote of a plurality of votes cast is required for the
election of each of the directors.
Our
Board of Directors currently consists of seven directors, each a
nominee at this Annual Meeting:
Seven
directors will be elected at the Annual Meeting, each to serve a
one year term until the next annual meeting of shareholders, and
thereafter until each director’s successor is elected and
qualified or until his earlier resignation, removal from office or
death.
The
names of the directors who are our nominees at this Annual Meeting,
their principal occupations or employment and other qualifications,
are hereinafter set forth:
Steven Bathgate, age 62, has
over 35 years of security industry experience, particularly with
microcap companies. He was appointed to our Board of Directors in
2016. In 1995 he founded GVC Capital LLC and he is the Senior
Managing Partner of that firm. GVC Capital is an investment banking
firm located in Denver, Colorado, focusing primarily on providing
comprehensive investment banking services to undervalued microcap
companies. Prior to founding GVC Capital, Mr. Bathgate was
CEO of securities firm Cohig & Associates in Denver from 1985
to 1995 and was previously Managing Partner, Equity Trading, at
Wall Street West. He currently is also a director for Global
Healthcare REIT and Bluebook International, Inc. Mr. Bathgate
received a Bachelor of Science in Finance from the University of
Colorado, Leeds School of Business.
6
Richard Finlay, age 56,
was appointed to our Board of Directors on July 9, 2015. Mr. Finlay
is currently Chief Financial Officer at BNBuilders, Inc. (BNB), a
construction company focused on life science, biotech, lab
research, health care, education and commercial markets with
offices in Seattle and San Diego. Prior to joining BNB, Mr. Finlay
spent 4 years in non-profit leadership as CFO at Eastside Catholic
School and in Guatemala for Ecofiltro, a social enterprise
manufacturing and distributing water filters. Prior to his work in
Central America, Mr. Finlay served in senior leadership positions
(either CEO or CFO) with a veterinary hospital group, a boat
manufacturer, a fitness / nutrition focused company and an
innovative early stage health care company. Additional experience
includes more than 15 years’ experience in business
development, finance and accounting with a Fortune 500 company as
well as small and mid-size regional companies. He is a 1984
graduate of the University of Washington earning a Bachelor of Arts
in Business Administration.
R. Rimmy Malhotra, age 40, was
appointed to our Board of Directors on April 6, 2016. From 2013 to
the present, Mr. Malhotra has served as the Managing Member and
Portfolio Manager for the Nicoya Fund LP, a private investment
partnership. Previously, from 2008-2013 he served as portfolio
manager of the Gratio Values Fund, a mutual fund registered under
the Investment Act of 1940. Prior to this, he was an Investment
Analyst at a New York based hedge fund. He earned an MBA in Finance
from The Wharton School and a Master’s degree in
International Relations from the University of Pennsylvania where
he was a Lauder Fellow. Mr. Malhotra holds undergraduate degrees in
Computer Science and Economics from Johns Hopkins
University.
Frederick J. Sandford, age 55, was appointed as our
President and Chief Executive Officer on February 22, 2013, and was
first elected as a director at the Company’s 2013
shareholders meeting. Mr. Sandford has over 30 years of leadership
experience as CEO, President, or General Manager, guiding
businesses in various stages, including startups, turnarounds and
wind downs. He has led companies in diverse industries, including
technology, industrial fabrication, security services, waste
management and retail. Prior to joining our company, he served as
an independent consultant to Silicon Valley venture capitalists.
From 2003-2005, he led the restructuring of The Environmental
Trust, a land mitigation organization with 80 holdings, resulting
in significant asset protection. Mr. Sandford was awarded a full
fellowship and earned his MBA from Cornell University while serving
as the CEO of Student Agencies, America’s oldest student-run
company. He earned a BA in Psychology from the University of
Massachusetts at Amherst. He is a former U.S. Navy
SEAL.
John Schneller, age 50, was appointed to our Board of
Directors on June 23, 2008. Mr. Schneller is a Partner at the
investment banking firm of Scura Paley & Company LLC. Prior to
joining Scura Paley Mr. Schneller was the Chief Financial Officer
of iMedicor, Inc., an enterprise healthcare software company. Prior
to iMedicor Mr. Schneller served from 2002 to 2007 as an investment
analyst at Knott Partners, a multi-billion dollar, value-based, New
York hedge fund. Mr. Schneller's area of expertise was analysis and
investing in micro-to-mid-cap securities with emphasis in the
fields of intellectual property, technology, content distribution,
nanotechnology, healthcare, non-bank financials, business services,
insurance companies, packaging and retail. Mr. Schneller received
his Bachelor of Arts in History from the University of
Massachusetts at Amherst, MA, a Master's in Public Administration
from Suffolk University in Boston and a Master's in Business
Administration from the Johnson Graduate School of Management at
Cornell University in Ithaca, NY.
JD Smith, age 46, has
been a member of our Board of Directors since December 10, 2012.
Mr. Smith has worked in real estate investment, construction and
development since 1982. Currently, Mr. Smith is the owner of Real
Estate Investment Consultants, LLC, a turnkey investment service
firm serving all sectors of real estate and investment and
development businesses. He also serves on the Board of Directors of
iMedicor, Inc., a publicly-held New York based company and provider
of comprehensive healthcare communications solutions. From 2008
until 2012 he was Director of Development for CP Financial, a
venture capital firm based in Scottsdale, Arizona. From 1993 until
2008 he developed over two dozen projects in the Phoenix Metro
Area, acting through his companies JD Investments, Inc., The High
Sonoran Group, Inc., and JD Smith Development, LLC. In 1990 he
formed his first operating company to buy and maintain residential
rental properties and obtained his real estate license. In 1993 he
graduated from Arizona State University with a Bachelor’s of
Science degree in Real Estate.
7
John Stewart, age 60, has been a member of our Board of
Directors since November of 2013 and was elected as Chairman in
December 2014. He has been the President of Glacial Holdings, Inc.
and Glacial Holdings LLC, private multi-family residential and
commercial real estate holding companies, and of Glacial Holdings
Property Management, Inc., a private property management company
since 1992. Through a number of private entities, Mr. Stewart is an
investor in various business enterprises. During the past nine
years, he has served as the chair of the Advisory Board of the Bank
of North Dakota, a director of Corridor Investors, LLC, the Minot
Family YMCA and Kalix, and as a trustee of the Oppen Family
Guidance Institute. Mr. Stewart was employed as a Certified Public
Accountant by the accounting firms of Arthur Andersen & Co.
(from 1978 to 1980) and Brady, Martz & Associates P.C. (from
1980 to 1997). Mr. Stewart has been a member of the Board of
Trustees of Investors Real Estate Trust (NYSE – IRET) since
2004.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
ALL
During
the fiscal year ended December 25, 2015, the Board of Directors was
composed of four outside directors and Frederick J. Sandford,
President and Chief Executive Officer of the Company. R. Rimmy
Malhotra and Steven Bathgate were appointed as directors in 2016,
expanding the Board from five to seven directors.
Each
director is expected to devote sufficient time, energy and
attention to ensure diligent performance of his duties and to
attend all Board, committee and shareholders’ meetings.
Meetings and actions of the Board include regular meetings, special
meetings and actions by unanimous written consent.
During
2015, our Board held six meetings and acted by unanimous written
consent on four additional occasions. Each member attended at least
75% of the meetings of the Board and committees on which he served
during his or her term of office. Directors are expected to attend
the Company’s meetings of stockholders, absent unusual
circumstances.
Committees of the Board of Directors
The Board of Directors has established three standing committees to
facilitate and assist the Board in the execution of its
responsibilities. The committees are the Audit Committee, the
Compensation Committee, and the Nominating and Governance
Committee. The composition and function of each of our committees
complies with the rules of the Securities and Exchange Commission
that are currently applicable to us and we intend to comply with
additional exchange listing requirements to the extent that they
become applicable to us in the future. The Board has also adopted a
charter for the Audit Committee, Compensation Committee and
Nominating and Governance Committee. Charters for each
committee are available on the Company’s website at
www.commandonline.com in the “Investors” section. The
charter of each committee is also available in print to any
shareholder who requests it. The table below shows current
membership for each of the standing Board committees. The current
makeup of each committee is as follows:
8
Audit Committee
Compensation Committee
Nominating and Governance Committee
John
Stewart (Chair)
John
Schneller (Chair)
JD
Smith (Chair)
John
Schneller
JD
Smith
John
Schneller
JD
Smith
John
Stewart
John
Stewart
The
Committees are described below.
Audit
Committee. The Audit Committee is comprised of
three independent directors. John Stewart (Chairman), John
Schneller and J.D. Smith currently serve on the Audit Committee.
The Audit Committee held four formal meetings in 2015, and reviewed
our quarterly filings and our annual filing and audit. Additional
discussions among committee members and meetings were held to
discuss the audit process and the preparation and review of the
consolidated financial statements.
Our Board of Directors has determined that Mr. Stewart
qualifies as an audit committee “financial expert” as
defined under the Securities Exchange Act of 1934 and the
applicable rules of the NASDAQ Capital Market. All members of the
Audit Committee are financially literate pursuant to the NASDAQ
Marketplace Rules.
The Audit Committee’s responsibilities include:
●
appointing,
determining funding for, evaluating, and replacing of, and
assessing the independence of our independent registered public
accounting firm;
●
reviewing
and discussing with management and the independent registered
public accounting firm our annual and quarterly financial
statements and related disclosures;
●
pre-approving
auditing and permissible non-audit services, and the terms of such
services, to be provided by our independent registered public
accounting firm;
●
coordinating
the oversight and reviewing the adequacy of our internal controls
over financial reporting;
●
establishing
policies and procedures for the receipt and retention of accounting
related complaints and concerns;
●
preparing
the audit committee report required by Securities and Exchange
Commission rules to be included in our annual proxy statement;
and
●
monitoring compliance with our Code of
Ethics.
For the
fiscal year ending December 25, 2015, the audit of our financial
statements was reviewed by the Board of Directors and the Audit
Committee. The Company’s auditors also held a teleconference
with the Audit Committee. During the telephone conference, the
Audit Committee reviewed and discussed with the auditors, among
other things:
●
the status of any
significant issues arising during the quarterly reviews and annual
audit of the Company’s financial statements;
●
the Company’s
annual audit plan for 2015 and the internal and external staffing
resources necessary to carry out the Company’s audit
plans;
●
the Company’s
significant accounting policies and estimates;
●
the Company’s
progress toward documenting internal controls pursuant to Section
404 of the Sarbanes-Oxley Act of 2002;
The Audit Committee will pre-approve all audit and non-audit
services provided by the independent registered public accounting
firm prior to the engagement of the independent accountants with
respect to such services. Prior to appointment of the Audit
Committee, the Board approved such services. The Company’s
independent accountants may be engaged to provide non-audit
services only after the Audit Committee has first considered the
proposed engagement and has determined in each instance that the
proposed services are not prohibited by applicable regulations, and
that the accountants’ independence will not be materially
impaired as a result of having provided such services. In making
this determination, the Audit Committee takes into consideration
whether a reasonable investor, knowing all relevant facts and
circumstances would conclude that the accountants’ exercise
of objective and impartial judgment on all issues encompassed
within the accountants’ engagement would be materially
impaired. The Audit Committee may delegate its approval authority
to pre-approve services provided by the independent accountants to
one or more of the members of the Audit Committee, provided that
any such approvals are presented to the Audit Committee at its next
scheduled meeting.
9
Compensation Committee. John Schneller (Chairman), J.D. Smith
and John Stewart currently serve on the Compensation
Committee. The Compensation Committee met on six occasions in
2015. The Compensation Committee is comprised of three
non-employee directors. The non-employee directors have been
determined by the Board to be independent pursuant to Rule 10A-3 of
the Exchange Act and the NASDAQ Marketplace Rules.
The Compensation Committee oversees our executive compensation
program, establishes our compensation philosophy and policies, and
administers our compensation plans. The Compensation
Committee generally reviews the compensation programs applicable to
executive officers on an annual basis. In setting
compensation levels for a particular executive, the Committee takes
into consideration the proposed compensation package as a whole and
each element individually, as well as the executive's past and
expected future contributions to our business.
The Committee has the authority to engage its own independent
advisors to assist in carrying out its responsibilities. No
such advisors are currently engaged. The Compensation Committee did not use an advisor
to assist it in determining executive compensation for our 2015
fiscal year. Executive management of the Company is
actively involved in determining appropriate compensation and
making recommendations to the Compensation Committee for its
consideration.
Nominating
and Governance Committee. The
Nominating and Governance Committee is comprised of three
independent directors. J.D. Smith (Chairman), John Schneller
and John Stewart currently serve on the Nominating and Corporate
Governance Committee. The Nominating and Corporate Governance
Committee met on three occasions in 2015.
The
Nominating and Governance Committee Charter grants such Committee
the authority to determine the skills and qualifications required
of directors and to develop criteria to be considered in selecting
potential candidates for Board membership. Neither the Committee
nor the Board has established any minimum qualifications for
nominees, but the Board does consider the composition of the Board
as a whole, the requisite characteristics (including independence,
diversity, experience in industry, finance, administration and
operations) of each candidate, and the skills and expertise of its
current members, while taking into account the overall operating
efficiency of the Board and its committees.
The Nominating and Governance Committee’s responsibilities
include, but are not limited to:
●
developing
and recommending to the Board criteria for Board and committee
membership;
●
establishing
procedures for identifying and evaluating director candidates
including nominees recommended by shareholders;
●
identifying
individuals qualified to become Board members;
●
recommending
to the Board the persons to be nominated for election as directors
and to each of the Board’s committees; and
●
overseeing
the evaluation of the effectiveness of the organization of the
Board, including its committees, and the Board’s
performance.
Director Nominations
The
Board of Directors nominates directors for election at each annual
meeting of stockholders and appoints new directors to fill
vacancies when they arise. The Nominating and Governance Committee
has the responsibility to identify, evaluate, recruit and recommend
qualified candidates to the Board of Directors for nomination or
election.
10
One of
the Board of Directors’ objectives in evaluating director
nominations is to ensure that its membership is composed of
experienced and dedicated individuals with a diversity of
backgrounds, perspectives and skills. The Nominating and Governance
Committee will select nominees for director based on their
character, judgment, diversity of experience, business acumen, and
ability to act on behalf of all stockholders. We do not have a
formal diversity policy. However, the Nominating and Governance
Committee endeavors to have a Board representing diverse viewpoints
as well as diverse expertise at policy-making levels in many areas,
including business, accounting and finance, marketing and sales,
legal, government affairs, regulatory affairs, business
development, technology and in other areas that are
relevant to our activities.
The
Nominating and Governance Committee believes that nominees for
director should have experience, such as those mentioned above,
that may be useful to Command Center and the Board of Directors,
high personal and professional ethics and the willingness and
ability to devote sufficient time to carry out effectively their
duties as directors. The Nominating and Governance Committee
believes it appropriate for at least one, and, preferably,
multiple, members of the Board of Directors to meet the criteria
for an “audit committee financial expert” as defined by
rules of the SEC, and for a majority of the members of the Board of
Directors to meet the definition of “independent
director” as defined by the NASDAQ Listing Rules. The
Nominating and Governance Committee also believes it appropriate
for key members of our management to participate as members of the
Board of Directors. Prior to each annual meeting of stockholders,
the Nominating and Governance Committee identifies nominees first
by evaluating the current directors whose terms will expire at the
annual meeting and who are willing to continue in service. These
candidates are evaluated based on the criteria described above,
including as demonstrated by the candidate’s prior service as
a director, and the needs of the Board of Directors with respect to
the particular talents and experience of its directors. In the
event that a director does not wish to continue in service, the
Nominating and Governance Committee determines not to re-nominate
the director, a vacancy is created on the Board of Directors as a
result of a resignation, an increase in the size of the Board or
other event, the Committee will consider various candidates for
Board membership, including those suggested by the Committee
members, by other Board members, by any executive search firm
engaged by the Committee or by stockholders.
A
stockholder who wishes to suggest a prospective nominee for the
Board of Directors should notify Command Center’s Secretary,
or any member of the Committee, in writing and include any
supporting material the stockholder considers appropriate.
Information to be in the notice includes the name and contact
information for the candidate, the name and contact information of
the person making the nomination, and other information about the
nominee that must be disclosed in proxy solicitations under Section
14 of the Securities Exchange Act of 1934 and the related rules and
regulations under that Section.
Stockholder
nominations must be made in accordance with the procedures outlined
in, and must include the information required by, our Bylaws and
must be addressed to: Secretary, Command Center, Inc., 3609 S.
Wadsworth, Suite 250, Lakewood, CO80235. You can obtain a copy of
our Bylaws by writing to the Secretary at this
address.
Stockholder Communications with the Board of Directors
If you
wish to communicate with the Board of Directors, you may send your
communication in writing to: Secretary, Command Center, Inc., 3609
S. Wadsworth, Suite 250, Lakewood, CO80235. Please include your
name and address in the written communication and indicate whether
you are a stockholder of Command Center. The Secretary will review
any communication received from a stockholder, and all material
communications from stockholders will be forwarded to the
appropriate director or directors or Committee of the Board of
Directors based on the subject matter.
Board Leadership Structure
We have
separate individuals serving as Chairman of the Board of Directors
and our Principal Executive Officer. Mr. Sandford began serving as
our Chief Executive Officer on February 22, 2013. The Board
appointed Mr. Stewart to serve as the Chairman in December 2014. As
Chief Executive Officer, Mr. Sandford manages the day-to-day
affairs of the Company.
11
The
principal role of the Chairman of the Board is to manage and to
provide leadership to the Board of Directors of the Company. The
Chairman is accountable to the Board and acts as a direct liaison
between the Board and the management of the Company, through the
Chief Executive Officer. The Chairman acts as the communicator for
Board decisions where appropriate.
The
Chairman is selected by the Board annually from among its members
and serves for a period of one year or until his successor is
elected. Understanding that separation of the roles of Chairman and
CEO is an important element of strong corporate governance, the
Board is committed to appointing a Chairman who is not also
CEO.
Furthermore,
the Board believes that the Chairman should be independent from
management and free from any interest and any business or other
relationships which could interfere with the Chairman’s
independent judgment other than interests resulting from being a
shareholder and Director of the Company. Consequently, the Chairman
should be independent, based upon the standards for determining
independence as adopted by the Board in the Corporate Governance
Guidelines.
The
duties and responsibilities of the Chairman include the
following:
–
To act
as a liaison between management and the Board;
–
To
provide independent advice and counsel to the CEO;
–
To
keep abreast generally of the activities of the Company and its
management;
–
To
ensure that the Directors are properly informed and that sufficient
information is provided to the Directors;
–
In
concert with the CEO, to develop and set the agendas for meetings
of the Board;
–
To act
as chair at meetings of the Board;
–
To
recommend an annual schedule of the date, time and location of
Board and Committee meetings;
–
To sit
on other Committees of the Board where appropriate as determined by
the Board;
–
To
call special meetings of the Board if and when
necessary;
–
In
concert with the CEO, to determine the date, time and location of
the annual meeting of shareholders and to develop the agenda for
the meeting;
–
To
recommend to the Board, after consultation with the Directors and
management, the appointment of members of the Committees of the
Board;
–
To
assess and make recommendations to the Board annually regarding the
effectiveness of the Board as a whole, the Committees of the Board
and individual Directors;
–
To
ensure that regularly, upon completion of the ordinary business of
a meeting of the Board, the Directors hold discussions without
management present; and
The
Board believes that this structure is currently serving our Company
well, and intends to maintain it where appropriate and practicable
in the future. We have had varying board leadership models over our
history. In past years, one person filled the positions of Chairman
and Chief Executive Officer. More recently, beginning in December
2014, we have separated these positions. The Board believes that
the right structure should be based on the needs and circumstances
of our Company, the Board and our stockholders, and we believe
having an independent director lead the Board best serves these
interests.
12
The Board’s Role in Risk Oversight
The
Board has a comprehensive enterprise risk management process in
which management is responsible for managing the Company's risks.
The Board and its committees provide review and oversight in
connection with these efforts. The Board recognizes that it is
neither possible nor prudent to eliminate all risk. Purposeful and
appropriate risk taking is essential for the Company to be
competitive and to achieve its strategic objectives.
The
Board implements its risk oversight function both as a whole and
through committees, which play a significant role in carrying out
risk oversight. The risk oversight responsibility is enabled by
management reporting processes that are designed to provide
visibility to the Board about the identification, assessment and
management of critical risks and management’s risk mitigation
strategies. These areas of focus include competitive, economic,
operational, financial, legal, regulatory, compliance, safety,
environmental and political risks. While the Audit Committee is
responsible for oversight of management’s risk management
policies, oversight responsibility for particular areas of risk is
allocated among the Board committees according to the
committee’s area of responsibility as reflected in the
committee charters.
In
particular:
●
The full Board
oversees strategic, financial and execution risks and exposures
associated with the annual plan and other current matters that may
present material risk to the Company’s operations, plans,
prospects or reputation, in addition to acquisitions and executive
management succession planning.
●
The Audit Committee
oversees risks associated with financial matters, particularly
financial reporting, tax, accounting, disclosure, internal control
over financial reporting, financial policies, credit and liquidity
matters and compliance with legal and regulatory matters including
environmental matters.
●
The Compensation
Committee oversees risks and rewards associated with the
Company’s attraction and retention of talent, management
development, executive management succession plans, and
compensation philosophy and programs, including a periodic review
of such compensation programs to ensure that they do not encourage
excessive risk-taking.
●
The Nominating and
Governance Committee oversees risks associated with company
governance, director succession planning, and the structure and
performance of the Board and its committees.
The
Company believes that its leadership structure, discussed in detail
above, supports the risk oversight function of the Board. Strong
directors chair the various committees involved in risk oversight,
there is open communication between management and directors, and
all directors are involved in the risk oversight
function.
Director Compensation
The
following table summarized the cash, equity awards, and all other
compensation earned by each of our non-employee directors during
the year ended December 25, 2015. Mr. Sandford and Mr.
Wilson’s compensation is disclosed in the Summary Executive
Compensation table below.
Name
Fees Earned ($)
Stock Awards ($)
(1)
All Other Compensation
($) (2)
Total ($)
John
Stewart
38,250
9,800
4,282
52,332
Richard
Finlay
12,500
9,800
370
22,670
John
Schneller
33,000
9,800
2,332
45,132
J.D.
Smith
33,000
9,800
4,234
47,034
(1)
Represents the
aggregate grant date fair value of stock awards granted during the
fiscal year ended December 25, 2015 as computed in accordance with
FASB ASC Topic 718, Compensation — Stock Compensation. The
grant date fair value of shares awarded to each non-employee
director in 2015 (20,000 shares each) were calculated using the
closing price of our stock on the grant date in accordance with
GAAP. These
amounts do not represent the actual amounts paid to or realized by
the directors during the fiscal year ended December 25,2015.
(2)
All other
compensation includes reimbursement for expenses, including travel
expense.
13
Narrative to Director Compensation Table
The
Compensation Committee recommends and the Board of Directors
determines the compensation for the Company’s directors,
based on industry standards and the Company’s financial
situation. At all relevant times prior to July 9, 2015, we paid
each of our independent directors the base amount of $25,000 as an
annual retainer, paid on a quarterly basis, together with an award
of 20,000 shares of the Company’s common stock. In addition,
we paid a fee of $5,000 per annum, paid quarterly, if the
independent director was chairman of a committee. Our employee
directors receive no additional compensation for attendance at
Board meetings or meetings of Board committees. Non-employee
directors are also reimbursed for any expenses they may incur in
attending meetings.
Effective
as of July 9, 2015, director compensation was modified to increase
the annual retainer for the Chairman of the Board to $30,000 and to
increase the annual payment to the chair of the Audit Committee to
$6,500. The annual payment for the chairman of each the
Compensation Committee and the Nominating and Governance Committee
remains at $5,000. Non-chairman members of each board committee are
also awarded compensation, $3,500 annually for Audit Committee
members and $2,500 annually for members of other committees. The
award of 20,000 shares of the Company’s common stock and
expense reimbursement remain unchanged.
Related Person Transactions Policy and Procedures
As set
forth in the written charter of the Audit Committee, any related
person transaction involving a Company director or executive
officer must be reviewed and approved by the Audit Committee. Any
member of the Audit Committee who is a related person with respect
to a transaction under review may not participate in the
deliberations or vote on the approval or ratification of the
transaction. Related persons include any director or executive
officer, certain shareholders and any of their “immediate
family members” (as defined by SEC regulations). In addition,
the Board of Directors determines on an annual basis which
directors meet the definition of independent director under the
Nasdaq Listing Rules and reviews any director relationship that
would potentially interfere with his or her exercise of independent
judgment in carrying out the responsibilities of a
director.
Certain Relationships and Related Party Transactions
In the
two most recently completed fiscal years, there have been no
reportable related party transactions between the Company and any
executive officer, director or affiliate.
From time to time, our Audit Committee will review and report to
our Board of Directors on any related party transaction. In
considering related party transactions, the members of our Audit
Committee are guided by their fiduciary duties to our shareholders.
Our Audit Committee does not currently have any written or oral
policies or procedures regarding the review, approval and
ratification of transactions with related parties.
Indebtedness of Management
No
director or executive officer or nominee for director, or any
member of the immediate family of such has been indebted to the
Company during the past year.
Officer and Director Legal Proceedings
There
are no legal proceedings involving officers or directors of the
Company.
14
Director Independence
The Board affirmatively determines the independence of each
director and nominee for election as a director in accordance with
certain criteria, which include all elements of independence set
forth in the related Securities and Exchange Commission Rules and
Regulations and the NASDAQ Marketplace Rules. As part of the
Nominating and Governance Committee meetings and as they feel
necessary or appropriate at full board meetings, the independent
directors meet in executive session without management or any
non-independent directors present.
Based on these standards and information provided in the Director
and Officer Questionnaire, and by unanimous vote at a meeting held
on September 29, 2016, the Board determined that Steven Bathgate,
Richard Finlay, R. Rimmy Malhotra, John Schneller, JD Smith and
John Stewart as non-employee directors, are independent and have no
material relationship with the Company, except as directors and as
shareholders of the Company.
In making their determinations, the Board found no transactions,
relationships or arrangements which might impair the independence
of the respective directors.
In addition, based on Securities and Exchange Commission Rules and
Regulations and NASDAQ Marketplace Rules, the Board affirmatively
determined that Frederick J. Sandford is not independent because he
is our President and Chief Executive Officer.
Indemnification
The
Company’s Bylaws address indemnification of Directors and
Officers. Washington law provides that Washington corporations may
include within their Articles of Incorporation provisions
eliminating or limiting the personal liability of their directors
and officers in shareholder actions brought to obtain damages for
alleged breaches of fiduciary duties, as long as the alleged acts
or omissions did not involve intentional misconduct, fraud, a
knowing violation of law or payment of dividends in violation of
the Washington statutes. Washington law also allows Washington
corporations to include in their Articles of Incorporation or
Bylaws provisions to the effect that expenses of officers and
directors incurred in defending a civil or criminal action must be
paid by the corporation as they are incurred, subject to an
undertaking on behalf of the officer or director that he or she
will repay such expenses if it is ultimately determined by a court
of competent jurisdiction that such officer or director is not
entitled to be indemnified by the corporation because such officer
or director did not act in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the
corporation. The Company’s Articles of Incorporation provide
that a director or officer is not personally liable to the Company
or its shareholders for damages for any breach of fiduciary duty as
a director or officer, except for liability for (i) acts or
omissions which involve intentional misconduct, fraud or a knowing
violation of law, or (ii) the payment of distribution in violation
of Washington Business Corporation Act.
Code of Ethics
In
October 2015, the Board of Directors adopted the Standards of
Ethics and Business Conduct. The Code of Ethics applicable to all
directors, officers and employees of the Company. The Code of
Ethics is available on our website at www.commandonline.com and in print to
any shareholder upon request.
PROPOSAL 2-RATIFICATION OF SELECTION OF PMB HELIN
DONOVAN, LLP
AS OUR INDEPENDENT AUDITOR
The
Audit Committee of the Board of Directors has selected PMB Helin
Donovan, LLP as the independent registered public accounting firm
to audit the Company’s consolidated financial statements for
the fiscal year ending December 30, 2016. Shareholder ratification
of the selection of PMB Helin Donovan as the Company’s
independent auditors is not required by the Bylaws or otherwise.
However, Management is submitting the selection of PMB Helin
Donovan to the shareholders for ratification as a matter of
corporate practice. If the shareholders fail to ratify the
selection, Management will reconsider whether or not to retain that
firm. Even if the selection is ratified, Management, in its
discretion, may direct the appointment of a different independent
accounting firm at any time during the year if the Audit Committee
determines that such a change would be in the best interests of the
Company and its shareholders.
15
PMB
Helin Donovan is experienced in the field of accounting and is well
qualified to act in the capacity of auditors. A representative of PMB Helin
Donovan will be present at the Annual Meeting to respond to
appropriate questions by shareholders and will have the opportunity
to make a statement if desired.
Ratification of the
appointment of PMB Helin Donovan, LLP requires the affirmative vote
of a majority of the shares present and voting at the 2016 Annual
Meeting in person or by proxy. Unless marked to the contrary,
proxies received will be voted “FOR” ratification of
the appointment. A properly executed proxy marked
“ABSTAIN” with respect to this proposal will not be
voted, although it will be counted for purposes of determining the
number of shares of common stock entitled to vote. Accordingly, an
abstention will have the effect of a negative vote. Because this
Proposal is a routine proposal on which a broker or other nominee
is generally empowered to vote, broker “non-votes”
likely will not result from this Proposal. Thus, if you are a
beneficial owner holding shares through a broker, bank or other
holder of record and you do not vote on this Proposal, your broker
may cast a vote on your behalf for this Proposal. In the event
ratification is not obtained, the Audit Committee and the Board
will review its future selection of our independent registered
public accounting firm but will not be required to select a
different independent registered public accounting
firm.
Principal Accountant Fees and Services. The following table
summarizes the fees that PMB Helin Donovan charged us for the
listed services during 2015 and 2014. We expect that PMB will serve
as our auditors for fiscal year 2016.
(1)
Audit fees consist of fees billed for professional services
provided in connection with the audit of the Company’s
consolidated financial statements and reviews of our quarterly
consolidated financial statements.
(2)
Audit-related
fees consist of assurance and related services that include, but
are not limited to, internal control reviews, attest services not
required by statute or regulation and consultation concerning
financial accounting and reporting standards, and not reported
under “Audit fees.”
(3)
Tax
fees consist of the aggregate fees billed for professional services
for tax compliance, tax advice, and tax planning. These
services include preparation of federal income tax
returns.
(4)
All
other fees consist of fees billed for products and services other
than the services reported above.
The
Audit Committee reviews and approves audit and permissible
non-audit services performed by the Company’s independent
auditors, as well as the fees charged for such services. In its
review of non-audit service fees and the appointment of its
independent auditors as the Company’s independent
accountants, the Audit Committee considers whether the provision of
such services is compatible with maintaining its auditors'
independence. All of the services provided and fees charged by its
independent auditors in 2015 and 2014 were pre-approved by the
Audit Committee.
16
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATON
OF PMB HELIN DONOVAN, LLP AS OUR INDEPENDENT AUDITOR FOR FISCAL
YEAR 2016
Audit Committee Report
This report shall not be deemed to be incorporated by reference by
any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and shall not otherwise be deemed
filed under such acts.
Management
has the primary responsibility for the Company’s internal
controls and financial reporting process. The independent
registered public accounting firm is responsible for performing an
independent audit of the Company’s consolidated financial
statements in accordance with the standards of the Public Company
Accounting and Oversight Board and issuing an opinion thereon. The
Audit Committee’s responsibility is to monitor and oversee
these processes. As part of its ongoing activities, the Audit
Committee has:
●
reviewed and
discussed with management and the independent registered public
accounting firm the Company’s audited consolidated financial
statements for the fiscal year ended December 25,2015;
●
met
with the Company’s Chief Executive Officer, Chief Financial
Officer, and the independent registered public accounting firm to
discuss the scope and the results of the audits and the overall
quality of the Company’s financial reporting and internal
controls;
●
discussed with the
independent registered public accountants the matters required to
be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended;
●
received the
written disclosures and the letter from the independent registered
public accounting firm required by applicable requirements of the
Public Company Accounting and Oversight Board regarding the
independent registered public accounting firm’s
communications with the Audit Committee concerning independence as
currently in effect, and discussed with the independent registered
public accounting firm its independence from the Company;
and
●
pre-approved all
audit, audit related and other services to be provided by the
independent registered public accounting firm.
Based
on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in the
Company’s annual report on Form 10-K for the fiscal year
ended December 25, 2015, for filing with the Securities and
Exchange Commission.
In
addition, the Audit Committee appointed PMB Helin Donovan, LLP as
the Company’s independent registered public accounting firm
for the year ending December 30, 2016, and any interim
periods, subject to the ratification of this appointment by the
shareholders.
Audit Committee
John
Stewart, Chairman
John
Schneller
JD
Smith
PROPOSAL 3 - ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION
We are
providing shareholders with the opportunity to cast an advisory
vote on executive compensation as described below. Pursuant to
Section 14A of the Securities Exchange Act of 1934, as amended,
shareholders are entitled to an advisory (non-binding) vote on
compensation programs for our Named Executive Officers (sometimes
referred to as “say-on-pay”). Accordingly, we are asking shareholders to
approve, on an advisory basis, the compensation of our named
executive officers disclosed in the section entitled
“Executive Compensation” below. We believe that
it is appropriate to seek the views of shareholders on the design
and effectiveness of the Company’s executive compensation
program.
17
As
described below in the section entitled “Executive
Compensation” of this proxy statement, our compensation
program is designed to support our business goals and promote
short- and long-term profitable growth of the Company and align
compensation with the long-term interests of our
shareholders.
The
Board is asking shareholders to read the section entitled
“Executive Compensation” of this proxy statement, which
describes in more detail how our executive compensation policies
and procedures operate and are designed to achieve our compensation
objectives, as well as the Summary Compensation Table and other
related compensation tables and narratives, which provide detailed
information on the compensation of our Named Executive Officers.
The Board believes that the policies and procedures articulated in
“Compensation Discussion and Analysis” are effective in
achieving our goals and that the compensation of our listed
officers reported in this proxy statement has supported and
contributed to the company’s recent and long-term
success.
The
Board is asking shareholders to support this proposal based on the
disclosure set forth in these sections of this proxy statement,
which, among other things,
●
provides
a total compensation package that is competitive with other
companies in the temporary staffing industry, yet is consistent
with our focus on profitability; and
●
emphasizes
incentive and equity compensation for our executive team in order
to promote long-term incentives to increase shareholder value and
align the interests of our officers with those of our
shareholders.
Approval
of this proposal requires the affirmative vote of a majority of the
shares present at the meeting, in person or represented by proxy,
and entitled to vote. Because the vote is advisory, it will not be
binding upon the Board of Directors, and the Compensation Committee
or the Board of Directors will not be required to take any action
as a result of the outcome of the vote on this proposal. The
Compensation Committee and the Board of Directors will carefully
assess the voting results, and if those results reflect any broadly
held issues or concerns, the Board of Directors will consult
directly with shareholders to better understand their
views.
The
frequency of holding “say-on-pay” advisory votes was
determined to be on a yearly basis by the decision of the
shareholders during the Company’s 2013 Annual Shareholders
Meeting.
Because
this proposal asks for a non-binding, advisory vote, there is no
required vote that would constitute approval. We value the opinions
expressed by our shareholders in this advisory vote, and our
Compensation Committee, which is responsible for overseeing and
administering our executive compensation programs, will consider
the outcome of the vote when designing our compensation programs
and making future compensation decisions for our Named Executive
Officers. Abstentions and broker “non-votes,” if any,
will not have any impact on this advisory vote.
The
Board of Directors is asking shareholders to cast a non-binding,
advisory vote FOR the
following resolution:
“RESOLVED,
the shareholders of Command Center, Inc. approve on an advisory
basis, the compensation paid to our Named Executive Officers as
disclosed pursuant to the compensation disclosure rules of the SEC,
including the compensation tables and accompanying narrative
disclosure included in this Proxy Statement.”
18
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE
COMPENSATION PAID TO OUR NAMED EXECUTIVE
OFFICERS.
Executive Officers
The
following table sets forth the names and ages of all executive
officers of the Company as of December 25, 2015, all positions held
by such persons; term of office(1) and the period
during which he has served as such; and any arrangement or
understanding between him and any other person(s) pursuant to which
he was elected as an officer:
Name of Officer
Age
Position
Period of Service
Frederick J.
Sandford
55
Chief
Executive Officer, President
2/22/13 -
present
Ronald
L. Junck
68
Executive Vice
President, Secretary, General Counsel
10/10/06 -
present
Jeff
Wilson
62
Chief
Financial Officer
9/02/14 –
9/01/16
Colette C.
Pieper
62
Chief
Financial Officer
9/02/16 -
present
(1)
Executive
officers serve at the pleasure of the Board of Directors. Unless
otherwise set forth in any Executive Employment Agreement (as
discussed above), the term of office for each executive officer is
generally for a period of one year or until his or her successor is
duly appointed.
Executive Officer Biographies
Frederick J. Sandford, age 55, Chief Executive officer, President
and Director. For Mr.
Sandford’s biography, please refer to the section
“Director Biographies and Qualifications” on p.
8.
Colette C. Pieper, age 62, was appointed as our Chief
Financial Officer on September 2, 2016. Before joining Command
Center, Mrs. Pieper served as CFO from 2012 to 2016 for Life
Partners Holdings, Inc., a company engaged in the secondary market
for life insurance. From 2006 to 2012, she was an Executive
Director and Accounting/Financial Director for USAA, an insurance
and financial services provider to members of the military and
their families. Previously, from 2003 to 2005 she was Vice
President and CFO of Clarke American Checks, Inc. and from 2000 to
2003, she was Vice President and CFO of an affiliated company,
Checks In The Mail. Mrs. Pieper holds a Bachelor of Science degree
in Accounting from Trinity University and a Master in Professional
Accounting degree from the University of Texas. She is licensed by
the State of Texas as a Certified Public Accountant and by the
American Institute of CPAs as a Chartered Global Management
Accountant.
Ronald L. Junck, 68, has been our Executive Vice President,
Secretary and General Counsel since November 2006. From 1974 until
1998, Mr. Junck practiced law in Phoenix, Arizona, specializing in
business law and commercial transactions, representing a wide
variety of business organizations in their corporate and business
affairs, as well as in court. He has lectured extensively at
colleges and universities on various aspects of business law. From
1998 through 2001, Mr. Junck served as Executive Vice President and
General Counsel of Labor Ready, Inc., and for several years served
as a director of that company. In 2001, Mr. Junck returned to the
private practice of law. Mr. Junck served as a member of our Board
of Directors from November 2005 until November 2007. Mr. Junck
received a Bachelor of Science in Mechanical Engineering from the
University of Illinois in 1971 and a Juris Doctorate from
Valparaiso University in 1974. He is admitted to practice before
all of the state and federal courts in the State of Arizona, the
United States Court of Appeals for the Ninth Circuit and the U.S.
Court of Federal Claims.
Jeff Wilson, age 55, served as our Chief Financial
Officer from September 2, 2014 to September 1, 2016 and was also a
director of Command Center, Inc., from September 2010 until July
2015. Before joining the Company as an officer,
Mr. Wilson served as Chief Financial Officer of Acumatica Inc., a
privately held cloud-based ERP provider based in Kirkland,
Washington. Prior to joining Acumatica, from April 2006, Mr. Wilson
served as the Chief Financial Officer of Microvision, Inc., a
publicly-traded technology company based in Redmond, Washington.
Prior to this appointment, he had served as Microvision's
Controller and Principal Accounting Officer since August 1999.
Before joining Microvision, Mr. Wilson served from 1991 to 1999 in
various accounting positions for Siemens Medical Systems, Inc., a
developer and manufacturer of medical imaging equipment. Prior to
1991, Mr. Wilson served as a manager with the accounting firm Price
Waterhouse (now PricewaterhouseCoopers). Mr. Wilson is a certified
public accountant and holds a B.S. in Accounting from Oklahoma
State University.
19
EXECUTIVE COMPENSATION
Named Executive Officers
This
proxy statement contains information about the compensation paid to
our Named Executive Officers during our fiscal year ended December25, 2015, or fiscal year 2015. In accordance with the rules and
regulations of the Securities and Exchange Commission for smaller
reporting companies, we determined that the following officers were
our Named Executive Officers:
●
Frederick J.
Sandford, Chief Executive Officer;
●
Jeff
Wilson, Chief Financial Officer;
●
Ronald
L. Junck, Executive Vice President, Secretary and General
Counsel;
Overview of Compensation Program
We compete with many other temporary staffing companies in seeking
to attract and retain a skilled work force. Our compensation
philosophy is to offer our employees, including our executive
officers, compensation that is competitive and that meets our goals
of attracting, retaining and motivating highly skilled employees,
but that is also consistent with our financial goals of cost
containment and long-term profitability. Utilizing this philosophy,
our executive compensation policies are designed to:
●
provide
a total compensation package that is competitive with other
companies in the temporary staffing industry, yet is consistent
with our focus on profitability; and
●
emphasize
incentive and equity compensation for our executive team in order
to promote long-term incentives to increase shareholder value and
align the interests of our officers with those of our
shareholders.
General Philosophy and Objectives
In general, our objectives in structuring compensation programs for
our NEOs is to attract, retain, incentivize, and reward talented
executives who can contribute to our growth and success and thereby
build value for our shareholders over the long term. In the
past, we have focused on cash compensation in the form of base
salary as the primary element of our compensation program for
NEOs.
In past years, we did not have any executive compensation policies
in place, and our Board of Directors was responsible for annually
evaluating individual executive performance. In 2008, the
Board appointed the Compensation Committee and adopted the
Compensation Committee Charter. Subsequently, our Compensation
Committee has reviewed and approved all of our executive
compensation packages, and determined the appropriate level of each
compensation component for each NEO based upon available
compensation data. Our Compensation Committee has also relied on
its members’ business judgment and collective experience in
our industry. Although it did not benchmark our executive
compensation program and practices, our Compensation Committee
believes that our executive compensation levels have historically
been at or below compensation levels for comparable executives in
other companies of similar size and stage of development in similar
industries and locations.
Past Say-on-Pay Vote
The
Compensation Committee considered the fact that a majority of the
votes represented at the most recent annual meeting held in 2014
that could be cast were cast FOR the Say-on-Pay proposal, as set
forth in the 2013 proxy statement. Given the shareholders’
(non-binding) approval of the Say-on-Pay Vote in 2014, the
Compensation Committee determined to continue to apply the same
general approach with respect to compensation policies and
decisions for fiscal year 2015, with slight modifications as deemed
necessary by the Committee to further the Company’s overall
compensation philosophy.
The
Compensation Committee will continue to consider the results of the
annual Say-on-Pay votes in their future compensation policies and
decisions. A more detailed analysis of our executive compensation
decisions and policies in 2014 and 2015 is set forth
below.
20
Summary Compensation Table
The
following table provides a summary of information about
compensation expensed or accrued by us during the fiscal years
ended December 25, 2015, and December 26, 2014 for (a) our Chief
Executive Officer, (b) our Chief Financial Officers, and (c) the
two other executive officers other than our CEO and CFO serving at
the end of such fiscal years; collectively, the Named Executive
Officers or NEOs. Columns required by SEC rules are omitted where
there is no amount to report.
Name and Principal Position
Year
Salary (S)
Bonus ($)
Stock
Awards ($)
(1)
Option
Awards ($)
(2)
All
Other Compensation ($)
(3)
Total ($)
Frederick J.
Sandford,(4)
2015
253923
-
-
-
138
254061
President,
Chief Executive Officer and Director
2014
203379
387774
-
113259
69
704481
Jeff Wilson,
(5)
2015
200000
-
-
-
138
200138
Chief
Financial Officer
2014
63187
159957
67000
247230
46
537420
Ronald
L. Junck,
2015
185000
-
-
-
762
185762
Executive
Vice President, General Counsel, Secretary
2014
185000
193887
-
-
381
379268
Ralph
E. Peterson, (6),
former Chief Financial Officer and
Director
2015
12,500(7)
-
9,800(7)
-
-
22,300(7)
2014
25000
-
14600
14400
8027
54070
(1)
Represents the
aggregate grant date fair value of stock awards granted during the
fiscal year ended December 25, 2015 as computed in accordance with
FASB ASC Topic 718, Compensation — Stock Compensation. The
grant date fair value of shares awarded to each non-employee
director in 2015 (20,000 shares each) were calculated using the
closing price of our stock on the grant date in accordance with
GAAP. These amounts do not represent the actual amounts paid to or
realized by the officers during the fiscal year ended December 25,2015.
(2)
Represents the
aggregate grant date fair value of stock option awards granted
during the fiscal year ended December 25, 2015, as computed in
accordance with FASB ASC Topic 718, Compensation — Stock
Compensation. The fair value of each stock option award is
estimated for the fiscal year ended December 25, 2015, on the date
of grant using the Black-Scholes option valuation model. A
discussion of the assumptions used in calculating the amounts in
this column may be found in Note 8 to our audited consolidated
financial statements for the year ended December 25, 2015, included
in our Annual Report on Form 10-K filed with the SEC. These amounts
do not represent the actual amounts paid to or realized by the
officers during the fiscal year ended December 25,2015.
(3)
Includes payments
from company sponsored life insurance.
(4)
Frederick J.
Sandford was appointed Chief Executive Officer and Director on
February 22, 2013. His 2015 annual salary was $275,000, effective
July 1, 2015. From July 1, 2014 to June 30, 2015 his
annual salary was $235,000. Prior to July, 1, 2014, his initial
base salary was $175,000.
(5)
Jeff Wilson was
appointed Chief Financial Officer on September 2, 2014. His 2015
annual salary was $200,000. Mr. Wilson’s tenure as CFO and as
an employee of the company ended when his contract expired on
September 1, 2016. If not previously exercised, his option awards
that were vested on September 1, 2016 will all terminate on
December 2, 2016, 90 days following the expiration of his
employment. His unvested options all expired on September 1,2016.
(6)
On August 1, 2013,
Ralph E. Peterson was then appointed non-employee Principal
Accounting Officer on an interim basis. He resigned as Principal
Accounting Officer upon the appointment of Jeff Wilson, effective
September 2, 2014. Starting September 2, 2016, Mrs. Pieper is our
Chief Financial Officer.
(7)
Mr. Peterson earned
his fiscal year 2014 compensation for his services as Director
Emeritus, an honorary position awarded to him in 2014 upon his
resignation as Principal Accounting Officer.
21
Narrative to Summary Compensation Table
Elements of Our Compensation Program
The
three primary components of our executive compensation program are:
(i) base salary, (ii) incentive compensation in the form of cash
bonuses, and (iii) equity based compensation.
Base Salary: The compensation received by our NEOs includes
a base salary. Base salaries for our executives are established
based on the scope of their responsibilities and individual
experience. Subject to any applicable employment agreements, base
salaries will be reviewed annually, and adjusted from time to time
to realign salaries with market levels after taking into account
individual responsibilities, performance and
experience.
Annual Bonus: In addition to base salaries, NEO compensation
may include annual bonuses based on satisfactory achievement of
performance objectives established by the Compensation Committee
prior to or at the beginning of each fiscal year. The Compensation
Committee’s objectives for 2014 were based on positive cash
flow for the Company. The executive bonus pool for 2014 was
calculated by taking EBITDA, less a floor, multiplied by 35%. This
pool is then distributed to the executive officers based upon their
position. Similarly, the executive bonus plan for 2015 also bases
the amount of the bonus pool on the EBITDA above $5 million,
multiplied by 35%. In 2015 we did not achieve the
required EBITDA level and no executive bonuses were
awarded.
Equity and Other Compensation: We offer between $20,000 and
$100,000 of Company paid life insurance to most employees,
including officers depending on position within the Company. Prior
to the expiration of the 2008 Stock Incentive Plan in January 2016,
we also offered stock options and common share grants to employees
and officers under our 2008 Stock Incentive Plan. There were no
stock options granted to the NEO’s in 2015.
Perquisites and Other Personal Benefits: From a
philosophical standpoint, we do not provide NEOs with perquisites
and personal benefits that are not available to all employees. We
make available standard health benefits packages including medical,
dental and vision coverage, for the same premium contributions as
offered to all full time employees of the Company. We believe that
the compensation potential available from its three main components
of compensation detailed herein are sufficiently attractive that
the reliance on other forms of exclusive perquisites and benefits
are not necessary to enable the Company to attract and retain
superior employees for key positions.
In addition, employment agreements with our executive officers may
in the future provide for certain retirement benefits and potential
payments upon termination of employment for a variety of reasons,
including a change in control of our Company. See Summary of
Employment Agreements below.
Summary of Executive Employment Agreements
On
October 13, 2015, we entered into an executive employment agreement
with Frederick Sandford. The key terms of the agreement
are as follows: (i) A base salary of $275,000, with an annual bonus
opportunity under the terms and conditions of the Executive Bonus
Plan. There is no guarantee of any annual bonus. (ii) If there is a
change in control (as defined in the agreement), Mr. Sandford will
continue to receive his Base Salary and Annual Bonus for 24 months
after termination, together with vesting of all options granted.
(iii) In the event of termination without cause (as defined in the
agreement), Mr. Sandford would continue to receive his Base Salary
for the longer of: 18 months following termination or the remainder
of the then current term of the agreement. (iv) Noncompetition and
confidentiality provisions are applicable under the agreement. (v)
The effective date of the agreement is October 13, 2015, and
continues for three years unless sooner terminated. Automatic
extensions apply in certain events.
Effective
September 2, 2016, we entered into an employment agreement with
Colette Pieper. The key terms of the agreement are as
follows: (i) A base salary of $185,000, increasing to $200,000 on
January 1, 2017. (ii) The agreement provides for a maximum bonus
opportunity of $20,000 for the remainder of fiscal 2016 and
thereafter with an annual bonus opportunity under the terms and
conditions of the Executive Bonus Plan as approved by the
Compensation Committee. There is no guarantee of any annual bonus.
(iii) We will pay certain relocation expenses, travel and expense
reimbursement, professional membership expenses, education
expenses, and vacation. (iv) We will make an initial grant of
unvested options to acquire 500,000 shares of common stock. The
options will vest in four equal annual installments of 125,000
options, effective beginning on a future date to be determined
following approval of the stock incentive plan by the shareholders.
(v) If there is a change in control (as defined in the agreement),
Mrs. Pieper will continue to receive her Base Salary and Annual
Bonus for 12 months after termination, together with vesting of all
options granted pursuant to the agreement. In the event of
termination without cause (as defined in the agreement), she would
continue to receive her Base Salary for the longer of: 12 months
following termination or the remainder of the then current
agreement. (vi) Noncompetition and confidentiality provisions are
applicable under the agreement. (vii) The effective date of the
agreement is September 2, 2016 and continues for one year unless
sooner terminated. Automatic extensions apply in certain
events.
22
There
are no present or anticipated executive employment agreement with
Ronald Junck, Executive Vice President and General Counsel. Ronald
Junck receives a base salary of $185,000 per year,
effective September 2011, plus performance based compensation as
set by the Board.
Pursuant
to the Executive Employment Agreement with our former Chief
Financial Officer, Jeff Wilson, that expired on September 1, 2016,
Mr. Wilson was entitled to base salary of $200,000, with an annual
bonus opportunity under the terms and conditions of the Executive
Bonus Plan. There was no guarantee of any annual bonus.
Noncompetition and confidentiality provisions are applicable under
the agreement.
Potential Payments upon Termination
The
employment agreements we entered into with Mr. Sandford and Mrs.
Pieper, respectively, provide for potential payments upon
termination or a change of control. If there is a change in
control, Mr. Sandford will continue to receive his Base Salary and
Annual Bonus for 24 months after termination, together with vesting
of all options granted. In the event of termination without cause
(as defined in the agreement), Mr. Sandford will continue to
receive his Base Salary for the longer of: 18 months following
termination or the remainder of the then current term of the
agreement. In case of death or disability of Mr. Sandford or Mrs.
Pieper, he or she or their respective estates will continue to
receive 6 months of his or her Base Salary and all stock options
will vest. If there is a change in control, Colette Pieper will
continue to receive her Base Salary and Annual Bonus for 12 months
after termination, together with vesting of all options granted
pursuant to the agreement. In the event of termination without
cause (as defined in the agreement), Mrs. Pieper will continue to
receive her Base Salary for the longer of: 12 months following
termination or the remainder of the then current
agreement.
The following table was prepared as though each of Messrs.
Sandford, Wilson and Junck had been terminated on December 25,2015, the last day of our last completed fiscal year, without
cause, as that term is defined in the agreements with our Company.
More detailed information about the payment of benefits, including
duration, is contained in the discussion above. All such payments
and benefits would be provided by our Company. The assumptions and
valuations are noted in the footnotes.
Name
Salary Continuation ($)
Bonus ($)
Frederick J.
Sandford, President and Chief Executive Officer
412,500
412,500(1)
Jeff Wilson, former
Chief Financial Officer
200,000
0
Ronald Junck,
General Counsel
0
0
(1)
For purposes of
this table, the annual bonus amount is assumed to be equal to 100%
of base salary.
(2)
Mr. Wilson’s
tenure as Chief Financial Officer and as an employee of the Company
expired on September 2, 2016. The amounts listed are amounts that
would have been payable at the most recent fiscal year end.
Currently, the amounts listed would become zero.
23
Potential Payments upon Change of Control
The following table was prepared as though each of Messrs.
Sandford, Wilson and Junck had been terminated on December 25,2015, the last day of our last completed fiscal year, upon change
of control, as that term is defined in the agreements with our
Company. More detailed information about the payment of benefits,
including duration, is contained in the discussion above. All such
payments and benefits would be provided by our Company. The
assumptions and valuations are noted in the footnotes.
Name
Salary Continuation ($)
Bonus ($)
Frederick J.
Sandford, President and Chief Executive Officer
550,000
550,000(1)
Jeff Wilson, former
Chief Financial Officer
200,000
151,250(2)
Ronald Junck,
General Counsel
0
0
(1)
For purposes of
this table, the annual bonus amount is assumed to be equal to 100%
of base salary.
(2)
For purposes of
this table, the bonus amount is assumed to be equal to 55% of the
President and CEO’s annual bonus stated above for the
applicable time period. Mr. Wilson’s tenure as Chief
Financial Officer and as an employee of the Company expired on
September 1, 2016. The amounts listed are amounts that would have
been payable at the most recent fiscal year end. Currently, the
amounts listed would become zero.
Retirement Benefits
We do
not have any qualified or non-qualified defined benefit
plans.
Non-qualified Deferred Compensation
We do
not have any non-qualified defined contribution plans or other
deferred compensation plans.
Grants of Plan-Based Awards
During
2015 we granted 647,000 shares of restricted common stock to
employees. The shares vest on October 31, 2016 if the grantee is
still then employed by our company. We also granted 300,000 stock
options to employees. The options were granted with an exercise
price of the fair market on the date of grant, seven-year life and
vesting over four years from the date of grant. In our employment
agreement with Colette Pieper, we promised to award to her options
to acquire 500,000 shares at a future date, following approval of
our stock incentive plan by the shareholders.
During
2014 we granted 785,000 shares of restricted common stock to
employees. The shares vest one year from the date of grants if the
grantee is still employed by our company. In 2015, 589,000 of these
shares vested and the remaining 196,000 shares were forfeited. We
also granted 1,280,000 stock options to employees, officers and
directors. The options were granted with an exercise price of the
fair market on the date of grant, seven-year life and vesting over
three to four years from the date of grant.
The
information specified concerning the outstanding stock options of
the named executive officers during the fiscal year ended December25, 2015, is provided in the following table:
24
Outstanding Equity Awards at Fiscal Year-End
Name
Grant Date
Number of securities underlying unexercised options
exercisable
Number of securities underlying unexercised options
unexercisable
Mr.
Wilson’s exercisable options expire on December 2, 2016, 90
days following the last day of employment. His unexercisable
options terminated on September 1, 2016.
(2)
In our employment
agreement with Colette Pieper, we promised to award to her options
to acquire 500,000 shares at a future date, following approval of
our stock incentive plan by the shareholders.
During
our fiscal year ended December 25, 2015, Ronald Junck exercised
options for 250,000 shares awarded on May 6, 2010 at the exercise
price of $0.17. Options awarded to Ralph Peterson on May 6, 2010
for 250,000 shares at the exercise price of $0.17 were exercised
and redeemed by the Company. There were no other options exercised
by our NEOs. All stock awards were
valued based on the market price of our common stock at the dates
of issuance or the date the services were earned. The fair value of
each option award is estimated on the date of grant using the
Black-Scholes option-pricing model. Expected volatility is based on
historical annualized volatility of our stock.
PROPOSAL 4 - RATIFICATION AND APPROVAL OF
THE
2016 STOCK INCENTIVE PLAN
The
principal features of the proposed 2016 Stock Incentive Plan, or
the 2016 Plan, are summarized below. This summary does not contain
all information about the 2016 Plan, a copy of which is included as
Appendix B. The summary below is qualified in its entirety by
reference to the text of the 2016 Plan. Capitalized terms not
defined herein have the meanings ascribed to such terms in the plan
document.
Introduction
Our
shareholders adopted two equity compensation plans in January 2009,
the 2008 Employee Stock Purchase Plan and the 2008 Stock Incentive
Plan. The 2008 Employee Stock Purchase Plan expired in 2014. The
2008 Stock Incentive Plan expired in January 2016. Outstanding
awards under the 2008 Stock Incentive Plan continue to remain in
effect according to the terms of the plan and the award documents.
No Awards were granted under the 2008 Employee Stock Purchase Plan.
No further Awards can be granted under either plan. The 2016 Stock
Incentive Plan will replace the 2008 Stock Incentive Plan, is expected
to meet NASDAQ requirements for equity plans, as well as adopt new
regulatory and tax considerations. The 2008 Employee Stock Purchase Plan was
never utilized and is not being replaced.
General
The
2016 Plan will be administered by our Compensation Committee,
unless otherwise determined by the Board. The Board or a Committee
may delegate the administration of the 2016 Plan, subject to
certain limits described therein. References to the
“Committee” are to our Compensation Committee or other
delegate, as applicable.
The
Board of Directors has authorized 6,000,000 shares of our common
stock for issuance under the 2016 Plan through fiscal year 2026.
The 2016 Plan became effective September 29, 2016 when it was
adopted by our Board of Directors and no Awards have yet been
granted.
25
Purpose of the 2016 Stock Incentive Plan
The
2016 Plan is a stock-based incentive bonus program, and its purpose
is to motivate and reward eligible officers, directors, employees,
and consultants for good performance by allowing the issuance of
stock options and common stock. Our employees, directors, executive
officers, and consultants are eligible to receive benefits under
the 2016 Plan in order to afford these individuals the opportunity
to acquire a proprietary interest in the Company; and to enable us
to enlist and retain the best available talent for the conduct of
our business.
Summary of Board Recommendation
Our
Board recommends that you vote FOR this proposal to ratify and
approve our 2016 Incentive Stock Plan. As described in more detail
below, approval of this proposal will accomplish the
following:
●
Authorize for
issuance up to 6.0 million shares for Awards over the 10 year life
of the plan;
●
Permit
the Compensation Committee to grant awards that are intended to
qualify as tax-deductible under Section 162(m);
●
Provide that the
2016 Plan becomes our sole equity compensation plan for future
awards;
●
Replace the
expired 2008 Stock Incentive
Plan previously adopted by shareholders on January 20,2009;
●
Set
award limitations; and
●
Adopt
strong governance features.
Your
Board of Directors, the Compensation Committee and Management all
believe that the effective use of performance-based long-term
incentive compensation, including equity awards, has been and will
continue to be integral to our success. We believe that equity and
other performance-based awards incentivize employees, officers and
directors to maximize our growth, profitability and overall
success, as well as align their interests with the interests of our
shareholders to create long-term, sustainable shareholder value. As
a result, we request that shareholders approve this proposal and
adopt the 2016 Plan.
Key Features of 2016 Plan
After
considering each of the factors discussed below, the 2016 Plan was
approved by our Board on September 29, 2016, subject to the
approval of our shareholders. Key concepts of the 2016 Plan include
the following:
What the 2016 Plan
Provides
What the 2016 Plan
Prohibits
Maximum Ten-Year Term. The term of
stock options may not exceed ten years.
Clawback. All awards to executive
officers are subject to recoupment by the Company.
Administration by Independent
Directors. The 2016 Plan is administered by a committee of
the Board of Directors whose members satisfy the independence
standards of NASDAQ, the disinterested administration requirements
of Rule 16b-3 under the Securities Exchange Act of 1934, and the
“outside director” requirement of
Section 162(m).
No Discounted Stock Options. Stock
options may not be granted with an exercise price less than the
grant date fair market value.
No Repricing of Stock Options. Any
action that may constitute a repricing of stock options is
prohibited.
No Automatic Acceleration in Connection with a
Change in Control.
No Reload Grants. Reload grants, or the
granting of stock options conditioned upon the delivery of shares
to satisfy the exercise price and/or tax withholding obligation
under another employee stock option, are not
permitted.
No Tax Gross-Ups.
No Evergreen Provision. No
“evergreen” feature pursuant to which shares authorized
for issuance can be automatically replenished.
No Automatic Grants.
Non-Transferability. Awards generally
may not be transferred, except by will or the laws of descent and
distribution.
26
Shares Available for
Issuance; Plan Limitations. If this proposal is approved by
shareholders, the aggregate number of shares of Command Center
common stock for which awards may be granted under the 2016 Plan
may not exceed 6.0 million shares. In addition, all shares of
common stock subject to outstanding awards under the 2016 Plan that
expire or lapse or are forfeited, surrendered, cancelled,
terminated, settled in cash in lieu of common stock or are issued
and thereafter reacquired by the Company shall again be available
for awards under the 2016 Plan.
The
2016 Plan contains the following share limitations, subject to the
other terms and conditions set forth therein:
●
no
participant may receive awards of stock options exceeding 1.0
million shares in any calendar year;
●
no
participant may receive awards of performance shares (in each case
intended to qualify as a Section 162(m) performance-based award)
exceeding 1.0 million shares in any calendar year;
●
no
outside director may receive awards exceeding 200,000 shares in any
calendar year;
●
no
more than 4.0 million shares in the aggregate may be subject to
incentive stock options granted under the 2016 Plan.
The
limits on the numbers of shares described above and the number of
shares subject to any award under the 2016 Plan are subject to
proportional adjustment, to reflect certain stock changes, such as
stock dividends and stock splits. The following shares of common
stock shall not be treated as having been issued under the 2016
Plan: (1) shares tendered by a participant or retained by the
Company as full or partial payment to the Company for the purchase
price of an Award or to satisfy tax withholding obligations in
connection with an award, (2) shares covered by an Award that
is settled in cash; or (3) shares issued pursuant to
substitute awards issued in connection with a merger or
acquisition.
Eligibility. Awards may be made to any employee, officer or
director (including outside directors) of the Company, as well as
to certain consultants, agents, advisors and independent
contractors. As of September 29, 2016, approximately 215 employees,
officers and directors were eligible to receive awards under the
2016 Plan. The number of consultants, agents, advisors and
independent contractors, if any, that are eligible to receive
awards under the 2016 Plan as of September 29, 2016 is not
determinable.
Administration. The
2016 Plan will be administered by our Compensation Committee,
unless otherwise determined by the Board. The Board or a Committee
may delegate the administration of the 2016 Plan, subject to
certain limits described therein. References to the
“Committee” are to our Compensation Committee or other
delegate, as applicable.
Types of Awards
Stock Options. The Committee may grant either incentive
stock options, which comply with Section 422 of the Internal
Revenue Code, or nonqualified stock options. The Committee sets
option exercise prices and terms, except that the exercise price of
a stock option generally may be no less than 100% of the fair
market value of the shares on the date of grant (for these
purposes, fair market value means the average of the high and low
per share trading prices, or the average of the opening and closing
prices, or the closing price, if so determined by the Committee,
for Command Center stock on the OTCQB during regular session
trading for a single trading day). At the time of grant, the
Committee in its sole discretion will determine when stock options
are exercisable and when they expire, except that the term of a
stock option cannot exceed ten years.
27
Shares, Performance Shares,
and Other Awards. The Committee may grant awards of stock or
performance stock or other stock-based awards. Typically, a grant
of stock is at nominal or no cost. Such awards may be contingent on
continued service or the attainment of certain performance goals.
Participants are considered the owners of the stock and will,
therefore, be entitled to receive the dividends and to vote the
shares. Employee taxability is deferred until full vesting
occurs.
Section 162(m)
Awards. The Committee may intend that certain of the awards
described above qualify as “performance-based
compensation” for purposes of Section 162(m). Such
awards may be conditioned upon the attainment of performance goals
that are based on one or more of the following: adjusted operating
cash flow; profits (including, but not limited to, profit growth,
net operating profit or economic profit); profit-related return
ratios; return measures (including, but not limited to, return on
assets, capital, equity or sales); cash flow (including, but not
limited to, operating cash flow, free cash flow or cash flow return
on capital); earnings (including, but not limited to, net earnings,
earnings per share, or earnings before or after taxes); net sales
growth; net income (before or after taxes, interest, depreciation
and/or amortization); gross or operating margins; productivity
ratios; share price (including, but not limited to, growth measures
and total shareholder return); expense targets; margins; operating
efficiency; customer satisfaction; and working capital targets. Any
of these performance criteria may be applied to Command Center as a
whole or to individual business units. Any performance criteria may
include or exclude items deemed by the Committee not to be
reflective of the Company’s operating performance, including
but not limited to outside factors, accounting principles or
extraordinary items determined under generally accepted accounting
principles.
While
the Committee views preserving tax deductibility as an important
objective, it believes the primary purpose of the Company’s
compensation program is to support its strategy and the long-term
interests of its shareholders. As such, the Committee may authorize
awards under the 2016 Plan that are not tax-deductible under
Section 162(m).
Pricing of
Options. Under the
2016 Plan, exercise price of a particular option shall be such
price as is fixed by the Committee. However, the exercise price for
options and rights granted under the Plan will not be less than the
Fair Market value of the Common Stock. Fair Market Value is as
defined in Article 2 of the 2016 Plan.
Repricing.
In no case (except due to an adjustment to reflect a stock split or
similar event or any repricing that may be approved by
stockholders) will any adjustment be made to a stock option under
the 2016 Plan (by amendment, cancellation and re-grant, exchange or
other means) that would constitute a re-pricing of the per share
exercise price of an Award.
Payment for Option Exercise
Price. Payment of the
option exercise price may be in cash, check, wired funds or
"cashless" option exercises.
Vesting and Forfeitability. Under the 2016 Plan, the vesting of
any Award is determined by the Compensation Committee.
Clawback Policy. The
Board of Directors may require reimbursement of any Award granted
under the 2016 Plan to an executive officer (designated as such by
the Board of Directors) where (1) the payment was predicated
upon achieving certain financial results that were subsequently the
subject of a substantial restatement of Company financial
statements filed with the SEC; (2) the Board of Directors
determines the executive engaged in intentional misconduct that
caused or substantially caused the need for the substantial
restatement; and (3) a lower payment would have been made to
the executive based upon the restated financial results. In such
cases, the Company will, to the extent practicable, seek to recover
from the individual executive the amount by which the individual
executive’s incentive payments for the relevant period
exceeded the lower payment that would have been made based on the
restated financial results.
Amendment and Termination of the 2016 Plan. The Board of Directors or the
Committee may amend the 2016 Plan, except that if any applicable
law, regulation or NASDAQ rule requires shareholder approval with
respect to an amendment, then to the extent required, shareholder
approval will be obtained. Shareholder approval will also be
obtained for any amendment that would delete or limit the scope of
the 2016 Plan provisions prohibiting repricing of options and any
amendment that would increase the number of shares available for
issuance under the 2016 Plan. The 2016 Plan currently would
terminate on September 28, 2026, unless sooner terminated by the
Board.
28
Non-Transferability of Awards. Awards granted under the 2016 Plan
generally will not be transferable, except by will or by the laws
of descent and distribution or a Qualified Domestic Relations
Order, applicable securities laws, and may only be exercised,
during the lifetime of a Participant, by such
Participant.
Vote Necessary to Ratify and Approve the 2016 Plan.
The
affirmative vote of the holders of a majority of the shares of our
common stock represented and voting at the Annual Meeting is
required to ratify and approve the 2016 Plan. Unless marked to the
contrary, proxies received will be voted FOR ratification and
approval.
THE BOARD OF DIRECTORS RECOMMENDS
YOU VOTE “FOR” THE
RATIFICATION OF OUR 2016 STOCK INCENTIVE PLAN.
Securities Authorized for Issuance under Equity Compensation
Plans
We had
two equity compensation plans, namely the Command Center, Inc. 2008 Employee Stock
Incentive Plan, and the Command Center, Inc. 2008 Employee Stock
Purchase Plan, that were approved by shareholders. The
following table provides information as of December 25, 2015,
regarding these plans under which equity securities of the Company
have been authorized for issuance:
Equity Compensation Plan Information
Plan
Category
Number of securities to be issued upon exercise of outstanding
options and rights
Weighted average exercise price of outstanding options, warrants
and rights
Number of securities remaining available for future
issuance
Equity compensation
plans approved by security holders (1)
4,455,000
$0.45
-0-
Equity compensation
plans approved by security holders (2)
-
-
-
Equity compensation
plans not approved by security holders
-
-
-
Total
4,455,000
0.45
-0-
(1)
Consists of
6,400,000 shares issuable under the Command Center, Inc. 2008 Stock
Incentive Plan. This Plan was adopted by our Board of Directors on
October 24, 2008, and approved by our shareholders at the 2009
Annual Meeting of Shareholders on January 20, 2009. This Plan
expired as to the issuance of new options and stock rights on
January 28, 2016.
(2)
Consists of
1,000,000 shares issuable under the Command Center, Inc. Employee
Stock Purchase Plan. This Plan was adopted by our Board of
Directors on October 24, 2008, and approved by our shareholders at
the 2009 Annual Meeting of Shareholders on January 20, 2009. The
Employee Stock Purchase Plan was never utilized and has now expired
without issuance of shares.
OTHER
MATTERS
As of
the date of this proxy statement, the Board of Directors is not
aware of any additional matters that will be presented for action
at the Annual Meeting other than those described above. Should
other business properly be brought before the Annual Meeting, it is
intended that the accompanying proxy will be voted thereon in the
discretion of the persons named as proxies.
29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The
following tables summarizes (a) the ownership of any non-management
person known to us to own more than five percent of any class of
our voting common stock, and (b) the number and percentage of our
shares of common stock held by each director, each of the named
executive officers and directors and officers as a group.
Percentages of ownership have been calculated based upon 60,633,248
shares of common stock issued and outstanding as of October 7,2016:
Security Ownership of Non-Management Owners
Name and Address of Beneficial Owner (1) (2)
Title of Class
Amount and Nature of Beneficial Ownership (2)
Percent of Class
Glenn
Welstad (3)
Common
Stock
2,500,000
4.1
%
Jerry
Smith (4)
Common
Stock
5,625,073
9.3
%
Merle
Rydesky (5)
Common
Stock
7,235,000
11.9
%
(1)
The
address of the non-management owners is: care of Command
Center, Inc., 3609 S Wadsworth Blvd, Suite 250 Lakewood, CO80235.
(2)
Beneficial
ownership is calculated in accordance with Rule 13-d-3(d)(1) of the
Exchange Act, and includes shares held outright, shares held by
entity(s) controlled by NEOs and/or Directors, and shares issuable
upon exercise of options or warrants which are exercisable on or
within 60 days of March 3, 2015.
(3)
The
number of shares comprising Mr. Welstad’s beneficial
ownership is based upon his verbal representations to the
Company.
(4)
The
number of shares comprising Mr. Smith’s beneficial ownership
is based upon the written representations of his legal
counsel.
(5)
The
number of shares comprising Dr. Rydesky’s beneficial
ownership is based upon the written representations of his legal
counsel.
30
Security Ownership of
Management
Amount of Beneficial Ownership
Percentage of Shares Beneficially Owned
Name
of Beneficial Owner (1) (2)
Nature of Beneficial Ownership
Shares Owned
Shares – Rights to Acquire
Total
Frederick Sandford
(3)
Chief Executive
Officer and Director
195,000
1,200,000
1,395,000
2.3%
Jeff Wilson
(4)
Former Chief
Financial Officer
105,000
233,500
338,500
*%
Ronald Junck
(5)
Exec. VP and
General Counsel
1,460,225
-
1,460,225
2.4%
Richard M.
Finlay
Director
10,200
-
10,200
*%
John Schneller
(6)
Director
275,000
80,000
355,000
*%
J.D. Smith
(7)
Director
196,000
72,500
268,500
*%
John Stewart
(8)
Director
543,900
62,500
606,400
1.0%
R. Rimmy Malhotra
(9)
Director
1,286,947
-
1,286,947
2.1%
Steven Bathgate
(10)
Director
1,149,710
-
1,149,710
1.9%
All
Officers and Directors as a Group
5,221,982
1,648,500
6,870,482
11.3%
*
Indicates ownership of less than 1.0%.
(1)
The address of the NEOs and Directors is: care of
Command Center, Inc., 3609 S Wadsworth Blvd, Suite 250, Lakewood,
CO80235.
(2)
Beneficial ownership is calculated in accordance
with Rule 13-d-3(d)(1) of the Exchange Act, and includes shares
held outright, shares held by entity(s) controlled by NEOs and/or
Directors, and shares issuable upon exercise of options or warrants
which are exercisable on or within 60 days of October 7,2016.
(3)
Includes vested options to acquire 1,125,000
shares at $0.20, terminating February 22, 2023 and 75,000 shares at
$0.67, terminating October 31, 2021. Does not include unvested
options to purchase 600,000 shares.
(4)
Includes vested options to acquire 125,000 shares
at $0.70, 30,000 shares at $0.73 and 78,500 shares at $0.41, all
terminating on December 2, 2016. All unvested options expired on
September 1, 2016.
(5)
Includes 1,353,148 shares held directly and
107,077 shares held indirectly through Inland Empire TSS, LLC. Mr.
Junck is a co-owner of Inland Empire.
(6)
Includes vested options to acquire 40,000 shares
at $0.41, terminating May 10, 2017 and 40,000 shares at $0.73,
terminating December 11, 2021. Does not include unvested options to
purchase 30,000 shares.
(7)
Includes vested options to acquire 72,500 shares
at $0.73, terminating December 11, 2021. Does not include unvested
options to purchase 72,500 shares.
(8)
Includes 40,000 shares held directly, and 503,900
held indirectly. Includes vested options to acquire 62,500 shares
at $0.73, terminating December 11, 2021. Does not include unvested
options to purchase 62,500 shares.
(9)
All shares are owned indirectly through Nicoya
Fund. The shares are directly owned by the Nicoya Fund LLC, a
Delaware limited liability company. This reporting person is the
managing member and a co-owner of Nicoya Capital LLC, which is the
managing member and owner of the Nicoya Fund.
(10)
Includes 154,710 shares directly owned and
995,000 indirectly owned including 800,000 by Mr. Bathgate’s
spouse, 95,000 by the Bathgate Family Partnership and 100,000 by
Viva Co., LLC.
As of
December 25, 2015, there are no arrangements among our beneficial
owners known to management which may result in a change in control
of our Company.
Section
16(a) of the Securities and Exchange Act of 1934, as amended,
requires our officers, directors, and beneficial owners of more
than 10% any of our equity securities to timely file certain
reports regarding ownership of and transactions in our securities
with the Securities and Exchange Commission. Copies of the required
filings must also be furnished to us. Section 16(a) compliance was
required during the fiscal year ended December 25, 2015. Based
solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to us pursuant to Rule 16a-3(e) under the Exchange Act,
we believe that, during 2015, the filing requirements under Section
16(a) of the Exchange Act were satisfied except for the following
instances. Mr. Finlay failed to file a Form 3 upon his appointment
as our director, however, his ownership is reflected on
subsequently filed Form 4s. Mr. Finlay filed one Form 4 pertaining
to one transaction late by 15 days. Mr. Stewart filed one Form 4
late by 109 days pertaining to three transactions and by 1 day
pertaining to one transaction. Barbara and Merle Rydesky,
10%-stockholders and independent parties from us, each filed a Form
3 late by two years.
31
SHAREHOLDER PROPOSALS, HOUSEHOLDING AND OTHER
MATTERS
Shareholder Proposals
There
are no shareholder proposals for the 2016 Annual Meeting. The
Company’s next annual meeting is expected to be held in May
of 2017. A Shareholder who desires to have a qualified proposal
considered for inclusion in the proxy statement for that meeting
must notify the Secretary of the terms and content of the proposal
no later than March 6, 2017 at 3609 S.
Wadsworth Boulevard, Suite 250, Lakewood, Colorado, 80235,
Attention: Corporate Secretary. The Stockholder proponent,
or a representative who is qualified under state law, must appear
in person at the 2016 Annual Meeting of Stockholders to present the
proposal. The Company’s Bylaws outline the procedures
including notice provisions, for Shareholder nomination of
directors and other Shareholder business to be brought before
shareholders at the Annual Meeting. A copy of the pertinent Bylaw
provisions is available upon written request to 3609 S. Wadsworth Boulevard, Suite 250, Lakewood,
Colorado, 80235, Attention: Corporate
Secretary.
The notice of a shareholder proposal must include: A brief
description of the proposed business; the text of the proposal,
reasons for conducting the business at the meeting; name and
address (as they appear on our books) of the stockholder proposing
such business; the beneficial owner (if any) on whose behalf the
proposal is made; any material interest of the stockholder in such
business; any other information required by proxy proposal
submission rules of the SEC.
“Householding” of Proxy Materials
The SEC
has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for proxy statements with
respect to two or more shareholders sharing the same address by
delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience
for shareholders and cost savings for us. Under this procedure,
multiple shareholders who share the same last name and address will
receive only one copy of the annual proxy materials, unless they
notify us that they wish to continue receiving multiple copies. We
have undertaken householding to reduce our printing costs and
postage fees.
If you
wish to opt-out of householding and continue to receive multiple
copies of the proxy materials at the same address, you may do so at
any time prior to thirty days before the mailing of the notice of
availability of proxy materials, which will typically be mailed in
May of each year, by notifying us in writing at: 3609 S. Wadsworth Boulevard, Suite 250, Lakewood,
Colorado, 80235, Attention: Corporate Secretary, or by
contacting us at (866) 464-5844. You also may request additional
copies of the proxy materials by notifying us in writing at the
same address or contacting us at (866) 464-5844, and we will
undertake to deliver such additional copies promptly. If you share
an address with another shareholder and currently are receiving
multiple copies of the proxy materials, you may request
householding by notifying us at the above referenced address or
telephone number.
Form 10-K
Any shareholder of record may obtain a copy of the Company’s
Annual Report on Form 10-K for the fiscal year ended December 25,2015, or the Form 10-K, without cost, upon written request to the
Secretary of the Company at 3609 S. Wadsworth Boulevard, Suite 250,
Lakewood, Colorado, 80235, Attention: Corporate Secretary, or by
contacting us at (866) 464-5844. The Form 10-K is not part
of the proxy solicitation material for the Annual Meeting but may
be provided. Additionally, the Securities and Exchange Commission
maintains a web site that contains reports and other information at
the following address http://www.sec.gov, as well as links from the
Company’s website at www.commandonline.com. Upon request by any shareholder to the Company
Secretary at the address listed above, we will furnish a copy of
any or all exhibits to the Form 10-K for 2015.
FORWARD LOOKING STATEMENTS
This 2016 proxy statement includes statements of judgment and
forward-looking statements that involve risks and uncertainties.
These forward-looking statements are based on our current
expectations, estimates and projections about our industry, our
business, compensation, management's beliefs, and certain
assumptions made by us, all of which are subject to change.
Forward-looking statements can often be identified by words such as
"anticipates,""expects,""intends,""plans,""predicts,""believes,""seeks,""estimates,""may,""will,""should,""would,""could,""potential,""continue,""ongoing," or similar
expressions, and variations or negatives of these words and
include, but are not limited to, statements regarding projected
performance and compensation. Actual results could differ
significantly from those projected in the forward-looking
statements as a result of certain factors, including, but not
limited to, the risk factors discussed in our Form 10-K for the
year ended December 25, 2015. We assume no obligation to update the
forward-looking statements.
Whether or not you intend to be present at the 2016 Annual Meeting,
we urge you to vote your shares promptly.
As adopted by the
Board of Directors of Command Center on September 29,2016
and to be submitted
to the shareholders for approval
TABLE
OF CONTENTS
1.
Purpose.
1
2
Definitions.
1
3
Administration.
6
4
Eligibility and
Participation.
9
5
Shares
Subject to This Plan.
9
6
Option
Awards.
10
7
Stock
Appreciation Rights.
13
8
Restricted
Awards.
14
9
Performance Share
Awards.
16
10
Performance
Compensation Awards.
17
11
Use of
Proceeds from Stock.
18
12
Compliance with
Section 409A of the Code.
18
13
Securities Law
Compliance.
19
14
Adjustments Upon
Changes in Stock.
19
15
Effect
of Change in Control.
19
16
Withholding
Obligations.
20
17
Amendment,
Suspension or Discontinuance of the Plan.
20
18
Effective Date of
Plan.
21
19
Termination or
Suspension of the Plan.
21
20
Miscellaneous.
21
21
General.
22
1.
Purpose. The purpose of the Command
Center 2016 Stock Incentive Plan (the “Plan”), is to attract,
retain and motivate employees, officers, directors, consultants,
and advisors of Command Center, Inc. (the “Company”) and to align
their interests and efforts to the long-term interests of the
Company’s shareholders.
2.
Definitions. Unless otherwise indicated,
the following words when used herein shall have the following
meanings:
“Affiliate” means a
corporation or other entity that, directly or through one or more
intermediaries, controls, is controlled by or is under common
control with, the Company.
“Applicable Laws” means
the requirements related to or implicated by the administration of
the Plan under applicable state corporate law, United States
federal and state securities laws, or regulations, the Code, any
stock exchange or quotation system on which the shares of Common
Stock are listed or quoted, and the applicable laws of any foreign
country or jurisdiction where Awards are granted under the
Plan.
“Award” means any right
granted under the Plan, including, without limitation, an Incentive
Stock Option, a Non-qualified Stock Option, a Stock Appreciation
Right, a Restricted Award, a Performance Share Award or a
Performance Compensation Award.
“Award Agreement” means,
with respect to each Award, the written or electronic agreement
between the Company and the Participant setting forth the terms,
conditions, limitations, and restrictions of the Award, which shall
be in substantially a form (which need not be the same for each
Participant) that the Committee has from time to time approved, and
will comply with and be subject to the terms and conditions of this
Plan. Any reference herein to a “written” agreement or
document shall include any agreement or document delivered
electronically or posted on the Company’s
intranet.
“Beneficial Owner” has the
meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is
used in Section 13(d)(3) of the Exchange Act), such
“person” shall be deemed to have beneficial ownership
of all securities that such “person” has the right to
acquire by conversion or exercise of other securities, whether such
right is currently exercisable or is exercisable only after the
passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding
meaning.
“Board” shall mean the
Board of Directors of the Company, as constituted at any
time.
“Cause” means: The
Committee, in its absolute discretion, shall determine the effect
of all matters and questions relating to whether a Participant has
been discharged for Cause.
(a)
With respect to an
Employee, Key Advisor or Consultant, Cause shall have the meaning
ascribed thereto in any effective employment or service agreement
between the Company and the Grantee, or if no such agreement is in
effect that contains a definition of cause, then Cause shall mean a
finding by the Compensation Committee, in its sole and absolute
discretion, that the Grantee has (i) committed a felony or a crime
involving moral turpitude, (ii) committed any act of gross
negligence or fraud, (iii) failed, refused or neglected to
substantially perform his/her duties (other than by reason of a
physical or mental impairment) or to implement the directives of
the Company, (iv) materially violated any policy of the Company,
(v) materially violated state or federal securities laws, or (vi)
engaged in conduct that is materially injurious to the Company,
monetarily or otherwise.
1
(b)
With respect to any
Director, a determination by a majority of the disinterested Board
members that the Director has engaged in any of the following: (i)
malfeasance in office; (ii) gross misconduct or neglect; (iii)
false or fraudulent misrepresentation inducing the Director’s
appointment; or (iv) willful conversion of corporate
funds.
“Change in Control”
means
(a)
One Person (or more
than one Person acting as a group) acquires ownership of stock of
the Company that, together with the stock held by such person or
group, constitutes more than 50% of the total fair market value or
total voting power of the stock of the Company; provided, that, a
Change in Control shall not occur if any Person (or more than one
Person acting as a group) owns more than 50% of the total fair
market value or total voting power of the Company’s stock and
acquires additional stock;
(b)
One person (or more
than one person acting as a group) acquires (or has acquired during
the twelve-month period ending on the date of the most recent
acquisition) ownership of the Company’s stock possessing 30%
or more of the total voting power of the stock of such
corporation;
(c)
A majority of the
members of the Board are replaced during any twelve-month period by
directors whose appointment or election is not endorsed by a
majority of the Board before the date of appointment or election;
or
(d)
One person (or more
than one person acting as a group), acquires (or has acquired
during the twelve-month period ending on the date of the most
recent acquisition) assets from the Company that have a total gross
fair market value equal to or more than 40% of the total gross fair
market value of all of the assets of the Company immediately before
such acquisition(s).
“Code” means the Internal
Revenue Code of 1986, as amended from time to time, including any
regulations promulgated thereunder.
“Committee” means a
committee of one or more members of the Board appointed by the
Board to administer the Plan in accordance with Section
3.
“Common Stock” means the
Company’s Common Stock ($0.001 par value) and any share or
shares of the Company’s stock hereafter issued or issued in
substitution for such shares.
“Company” means Command
Center, Inc., a Washington corporation and shall include any entity
that is directly or indirectly controlled by the Company or any
entity, including an acquired entity, in which the Company has a
significant equity interest, as determined by the
Committee.
“Director” means a member
of the Board.
“Disability” means (i)
“Disability” as defined in any Award to which the
Participant is a party, or (ii) if the Award does not define
“Disability,” (A) permanent and total disability as
determined under the Company’s long-term disability plan
applicable to the Participant, or (B) if there is no such plan
applicable to the Participant or the Committee determines otherwise
in an applicable Award Agreement, “Disability” as
determined in accordance with non-discriminatory and uniform
standards adopted by the Committee. Notwithstanding the above, with
respect to an Incentive Stock Option, Disability shall mean
Permanent and Total Disability as defined in Section 22(e)(3) of
the Code, and, with respect to all Awards, to the extent required
by Section 409A of the Code, Disability shall mean
“disability” within the meaning of Section 409A of the
Code.
2
“Employee” means any
person who is employed by the Company, including an officer,
excluding and excepting: (i) employees whose customary employment
is less than 20 hours per week; or, (ii) employees whose customary
employment is for not more than five months in any calendar year;
or (iii) temporary workers employed on a day to day basis; or (iv)
Outside Directors. Neither service as a Director nor payment of a
Director’s fee by the Company will be sufficient to
constitute “employment” by the Company.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
“Fair Market Value” means,
as of any date, the value of a share of the Company’s Common
Stock determined as follows:
(a)
if the
Common Stock is then quoted on the Nasdaq Global Select Market, the
Nasdaq Global Market or the Nasdaq Capital Market (collectively,
the “Nasdaq
Market”) or another national securities exchange, its
closing price on the Nasdaq Market or such exchange on the date of
determination, or if there are no sales for such date, then the
last preceding business day on which there were sales, as quoted on
the Nasdaq Market or such exchange or as reported in The Wall
Street Journal on the day of determination or such other
source as the Board or the Committee deems reliable;
(b)
if the
Common Stock is publicly traded but is neither quoted on the Nasdaq
Market nor listed or admitted to trading on a national securities
exchange, the average of the closing bid and asked prices on the
date of determination, or if there are no sales for such date, then
the last preceding business day on which there were sales, as
quoted on such system or as reported in The Wall Street Journal on
the day of determination or such other source as the Board or the
Committee deems reliable; or
(c)
if none
of the foregoing is applicable, by the Board or the Committee in
good faith, and such determination shall be conclusive and binding
on all persons.
“Good Reason”
means:
(a)
If an Employee or
Consultant is a party to an employment or service agreement with
the Company and such agreement provides for a definition of Good
Reason, the definition contained therein; or
(b)
If no such
agreement exists or if such agreement does not define Good Reason,
the occurrence of one or more of the following without the
Participant’s express written consent, which circumstances
are not remedied by the Company within thirty (30) days of its
receipt of a written notice from the Participant describing the
applicable circumstances (which notice must be provided by the
Participant within ninety (90) days of the Participant’s
knowledge of the applicable circumstances): (i) any material,
adverse change in the Participant’s duties, responsibilities,
authority, title, status or reporting structure; (ii) a material
reduction in the Participant’s base salary or bonus
opportunity; or (iii) a geographical relocation of the
Participant’s principal office location by more than fifty
(50) miles.
3
“Grant Date” means the
date on which the Committee adopts a resolution, or takes other
appropriate action, expressly granting an Award to a Participant
that specifies the key terms and conditions of the Award or, if a
later date is set forth in such resolution, then such date as is
set forth in such resolution.
“Grantee” means a
Participant receiving an Award under the Plan.
“Key Advisor/Consultant”
means any non-employee person, including any consultant, advisor or
independent contractor, engaged by the Company to render services.
Advisors or Consultants shall only be eligible if they have
furnished bona fide services to the Company and such services are
not in connection with the offer or sale of securities in a
capital-raising transaction.
“Incentive Stock Option”
or “ISO” means any option granted to a Participant
under the Plan, which the Company intends at the time the option is
granted to be an Incentive Stock Option within the meaning of
Section 422 of the Code.
“Negative Discretion”
means the discretion authorized by the Plan to be applied by the
Committee to eliminate or reduce the size of a Performance
Compensation Award in accordance with Section 10.4(d) of the Plan;
provided, that, the exercise of such discretion would not cause the
Performance Compensation Award to fail to qualify as
“performance-based compensation” under Section 162(m)
of the Code.
“Non-Employee Director”
means a Director who is a “non-employee director”
within the meaning of Rule 16b-3.
“Non-qualified Stock
Option” or “NQSO” means any option granted
to a Participant under the Plan which is not an Incentive Stock
Option.
“Option” means and refers
collectively to Incentive Stock Options and Non-qualified Stock
Options.
“Optionee” means any
Participant who is granted an Option under the Plan.
“Optionee” shall also mean the personal representative
of an Optionee and any other person who acquires the right to
exercise an Option by bequest or inheritance or who holds an
outstanding Option.
“Option Exercise Price”
means the price at which a share of Common Stock may be purchased
upon the exercise of an Option.
“Outside Director” means a
Director who is an “outside director” within the
meaning of Section 162(m) of the Code and Treasury Regulations
Section 1.162-27(e)(3) or any successor to such statute and
regulation.
“Participant” means any
eligible person to whom an Award under this Plan is granted or, if
applicable, such other person who holds an outstanding Award,
including a guardian, or legal representative.
“Performance Factors”
means the factors selected by the Committee, which may include, but
are not limited to, the following criteria to determine whether the
performance goals established by the Committee and applicable to
Awards have been satisfied:
(a)
profits
(including, but not limited to, profit growth, net operating profit
or economic profit);
(b)
profit-related
return ratios;
(c)
return
measures (including, but not limited to, return on assets, capital,
equity or sales);
4
(d)
cash
flow (including, but not limited to, operating cash flow, free cash
flow or cash flow return on capital);
(e)
earnings
(including, but not limited to, net earnings, earnings per share,
or earnings before or after taxes);
(f)
net
sales growth;
(g)
net
income (before or after taxes, interest, depreciation and/or
amortization);
(h)
gross
or operating margins;
(i)
productivity
ratios;
(j)
share
price (including, but not limited to, growth measures and total
shareholder return);
(k)
expense
targets;
(l)
margins;
(m)
operating
efficiency;
(n)
customer
satisfaction; and
(o)
working
capital targets.
The Committee also
has the authority to provide for accelerated vesting of any Award
based on the achievement of Performance Goals pursuant to the
Performance Criteria specified in this paragraph. To the extent
required under Section 162(m) of the Code, the Committee shall,
within the first 90 days of a Performance Period (or, if longer or
shorter, within the maximum period allowed under Section 162(m) of
the Code), define in an objective fashion the manner of calculating
the Performance Criteria it selects to use for such Performance
Period. In the event that applicable tax and/or securities laws
change to permit the Committee discretion to alter the governing
Performance Criteria without obtaining shareholder approval of such
changes, the Committee shall have sole discretion to make such
changes without obtaining shareholder approval.
“Performance Formula”
means, for a Performance Period, the one or more objective formulas
applied against the relevant Performance Goal to determine, with
regard to the Performance Compensation Award of a particular
Participant, whether all, some portion but less than all, or none
of the Performance Compensation Award has been earned for the
Performance Period.
“Performance Goals” means,
for a Performance Period, the one or more goals established by the
Committee for the Performance Period based upon the Performance
Criteria.
“Performance Period” means
the one or more periods of time, as the Committee may select, over
which the attainment of one or more Performance Goals will be
measured for the purpose of determining a Participant’s right
to and the payment of a Performance Compensation
Award.
“Permitted Transferee”
means: (a) a member of the Optionee’s immediate family
(child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships), any person
sharing the Optionee’s household (other than a tenant or
employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the
Optionee) control the management of assets, and any other entity in
which these persons (or the Optionee) own more than 50% of the
voting interests; (b) third parties designated by the Committee in
connection with a program established and approved by the Committee
pursuant to which Participants may receive a cash payment or other
consideration in consideration for the transfer of a Non-qualified
Stock Option; and (c) such other transferees as may be permitted by
the Committee in its sole discretion.
“Rule 16b-3” means Rule
16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.
5
“Securities Act”
means the Securities Act of 1933, as amended.
“Stock Appreciation Right”
means the right pursuant to an Award granted under Section 7 to
receive, upon exercise, an amount payable in cash or shares equal
to the number of shares subject to the Stock Appreciation Right
that is being exercised multiplied by the excess of (i) the Fair
Market Value of a share of Common Stock on the date the Award is
exercised, over (ii) the exercise price specified in the Stock
Appreciation Right Award Agreement.
“Ten Percent Shareholder”
means a person who owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the
Company.
“Termination”
or “Terminated” means, for purposes of this Plan, with
respect to a Participant, that the Participant has for any reason
ceased to provide services as an employee, officer, director,
consultant, independent contractor or advisor to the Company. An
employee will not be deemed to have ceased to provide services in
the case of (i) sick leave, (ii) military leave, or (iii) any other
leave of absence approved by the Committee; provided, that such
leave is for a period of not more than 90 days, unless reemployment
upon the expiration of such leave is guaranteed by contract or
statute or unless provided otherwise pursuant to formal policy
adopted from time to time by the Company and issued and promulgated
to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting
suspension of vesting of the Award while on leave from the employ
of the Company of the Company as it may deem appropriate, except
that in no event may an Award be exercised after the expiration of
the term set forth in the applicable Award Agreement. The Committee
will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the
Participant ceased to provide services (the “Termination
Date”).
3.
Administration.
3.1.
General. The Plan shall be
administered by the Compensation Committee of the Board, or, in the
Board’s sole discretion, by the Board. The Committee shall be
comprised of at least two directors, each of whom shall qualify as
Outside Director, an “independent director” as defined
under the Nasdaq Market listing standards and a Non-employee
Director as defined in Rule 16b-3. However, the fact that a
Committee member shall fail to qualify under the foregoing
requirements shall not invalidate any Award made by the Committee
which is otherwise validly made under the Plan.
3.2.
Delegation. Notwithstanding the
foregoing, the Board or the Committee may delegate responsibility
for administering the Plan with respect to designated classes of
eligible persons to different committees consisting of one or more
members of the Board, subject to such limitations as the Board
deems appropriate, except with respect to benefits to directors and
to officers subject to Section 16 of the Exchange Act or
officers who are or may be Employees. The term
“Committee” shall also apply to any person or persons
to whom such authority has been granted. Members of any committee
shall serve for such term as the Board may determine, subject to
removal by the Board at any time. To the extent consistent with
Applicable Law, the Board or the Committee may authorize one or
more officers of the Company to grant Awards to designated classes
of eligible persons, within limits specifically prescribed by the
Board or the Committee; provided, however, that no such officer
shall have or obtain authority to grant Awards to himself or
herself or to any officer subject to Section 16 of the
Exchange Act.
6
3.3.
Authority. Except for the terms
and conditions explicitly set forth in the Plan, and subject to the
applicable Committee’s charter and Applicable Laws, the
Committee shall have full power and exclusive authority, subject to
such orders or resolutions not inconsistent with the provisions of
the Plan as may from time to time be adopted by the Board,
to:
(a)
select the eligible
persons to whom Awards may from time to time be granted under the
Plan;
(b)
delegate
ministerial duties to one or more of the Company’s
officers;
(c)
construe and
interpret this Plan, any Award Agreement and any other agreement or
document executed pursuant to this Plan;
(d)
prescribe, amend
and rescind rules and regulations relating to this Plan or any
Award;
(e)
determine the form
and terms and conditions, not inconsistent with the terms of the
Plan, of any Award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or
times when Awards may be exercised (which may be based on
Performance Factors or Performance Goals), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Award or the shares relating thereto,
based in each case on such factors as the Committee will
determine;
(f)
determine when
Awards are to be granted under the Plan and the applicable Grant
Date;
(g)
determine the
number of shares or other consideration subject to
Awards;
(h)
determine the Fair
Market Value in good faith, if necessary;
(i)
determine whether
Awards will be granted singly, in combination with, in tandem with,
in replacement of, or as alternatives to, other Awards under this
Plan or any other incentive or compensation plan of the
Company;
(j)
grant waivers of
Plan or Award conditions;
(k)
determine the
vesting, exercisability, payment and any other terms and conditions
of Awards;
(l)
correct any defect,
supply any omission or reconcile any inconsistency in this Plan,
any Award or any Award Agreement;
(m)
determine whether
an Award has been earned;
(n)
make decisions with
respect to outstanding Awards that may become necessary upon a
Change of Control or an event that triggers anti-dilution
adjustments;
(o)
reduce or waive any
criteria with respect to Performance Factors;
(p)
adjust Performance
Factors to take into account changes in law and accounting or tax
rules as the Committee deems necessary or appropriate to reflect
the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships provided that such
adjustments are consistent with the regulations promulgated under
Section 162(m) of the Code with respect to persons whose
compensation is subject to Section 162(m) of the Code;
and
(q)
make any other
determination and take any other action that the Committee deems
necessary or desirable for administration of the Plan.
The Committee also
may modify the purchase price or the exercise price of any
outstanding Award, provided that if the modification effects a
repricing, shareholder approval shall be required before the
repricing is effective.
3.4.
Committee Decisions Final.
Decisions, determinations and selections made by the Committee or
resolutions of the Board shall be final, conclusive, and binding on
all persons, including the Company, any Participant, any
shareholder and any eligible person. A majority of the members of
the Committee may determine its actions and fix the time and place
of its meetings. Any action required or which may be taken at a
Committee meeting may be taken without a meeting if a written
consent setting forth the action so taken is signed by all
Committee members. Such consent shall be inserted in the minute
book as if it were the minutes of a meeting of the
Committee.
7
3.5.
Indemnification. No member of
the Committee shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to
this Plan or any transaction hereunder, except for liability
arising from his or her own willful misfeasance, gross negligence
or reckless disregard of his or her duties. The Company shall
indemnify each member of the Committee for all costs and expenses,
including attorney fees actually incurred, and, to the extent
permitted by Applicable Law, any liability incurred in connection
with defending against, responding to, negotiation for the
settlement of or otherwise dealing with any claim, cause of action
or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization
to any transaction hereunder. Each person who is or shall have been
a member of the Board, or Committee, or an officer of the Company
to whom authority was delegated in accordance with this Plan, shall
be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting
from any claim, action, suit or proceeding to which he or she may
be a party or in which he or she may be involved by reason of any
action taken or failure to act under the Plan and against and from
any and all amounts paid by him or her in settlement thereof, with
the Company’s approval, or paid by him or her in satisfaction
of any judgment in any such claim, action, suit or proceeding
against him or her; provided, however, that he or she shall, in
writing, offer the Company an opportunity, at its own expense, to
handle and defend such claim, action, suit or proceeding before he
or she undertakes to handle and defend the same on his or her own
behalf, unless such loss, cost, liability or expense is a result of
his or her own willful misconduct or except as expressly provided
by statute. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such
persons may be entitled under the Company’s Articles of
Incorporation, as amended, or Bylaws, as amended, as a matter of
law, or otherwise, or of any power that the Company may have to
indemnify them or hold them harmless.
3.6.
Delayed Payment. The Committee
may stipulate in an Award Agreement, either at the time of an Award
or by subsequent amendment, that a payment or portion of a payment
of an Award be delayed in the event that Section 162(m) of the Code
(or any successor or similar provision of the Code affecting tax
deductibility) would operate to disallow a tax deduction by the
Company for all or a portion of such payment. The period of any
such delay in payment shall be until the payment or portion
thereof, is tax deductible, or such earlier date as the Committee
shall determine.
3.7.
Electronic Delivery. Any
provision of this Plan or an agreement evidencing a grant or Award
to the contrary notwithstanding, any provision in this Plan or in
an agreement evidencing the grant of an Award setting forth a
requirement for delivery of a written notice, agreement, consent,
acknowledgment, or other documentation in writing, including a
written signature, may be satisfied by electronic delivery of such
notice, agreement, consent, acknowledgment, or other documentation,
in a manner that the Committee has prescribed or that is otherwise
acceptable to the Committee, provided that evidence of the intended
recipient’s receipt of the electronic delivery is available
to the Committee and that such delivery is not prohibited by
applicable laws and regulations.
3.8.
Performance Awards. When
necessary or desirable for an Award to qualify as
“performance-based compensation” under Section 162(m)
of the Code the Committee shall include at least two persons who
are Outside Directors (as defined under Section 162(m) of the Code)
and at least two (or a majority if more than two then serve on the
Committee) such Outside Directors shall approve the grant of such
Award and timely determine (as applicable) the Performance Period,
Performance Goals and any Performance Factors upon which vesting or
settlement of any portion of such Award is to be subject. When
required by Section 162(m) of the Code, prior to settlement of any
such Award at least two (or a majority if more than two then serve
on the Committee) such Outside Directors then serving on the
Committee shall determine and certify in writing the extent to
which such Performance Goals or Factors have been timely achieved
and the extent to which the shares subject to such Award have
thereby been earned. Awards granted to Officers or Directors must
be approved by two or more Non-employee Directors (as defined in
the regulations promulgated under Section 16 of the Exchange
Act).
8
4.
Eligibility and
Participation.
4.1.
Specific Awards. An Award,
other than ISOs, may be granted to any current or prospective
Employee, Director, or Key Consultant/Advisor of the Company whom
the Committee from time to time selects. ISOs may be granted only
to Employees.
4.2.
Ten Percent Shareholders. A Ten
Percent Shareholder shall not be granted an Incentive Stock Option
unless the Option exercise price is at least 110% of the Fair
Market Value of the Common Stock at the Grant Date and the Option
is not exercisable after the expiration of five years from the
Grant Date.
5.
Shares Subject to This Plan.
5.1.
Shares Subject to Plan. The
stock to be offered under the Plan shall be shares of the
Company’s authorized Common Stock. Subject to adjustment in
accordance with Section 14, the total number of shares to be
available for the grant of Awards under this Plan cumulatively
shall not exceed six million (6,000,000) shares of Common Stock.
The maximum number of shares that may be granted as Incentive Stock
Options shall be 4,000,000 shares.
5.2.
Annual Limits. Subject to
adjustment in accordance with Section 14, no Participant will be
eligible to receive more than 1,000,000 shares in any calendar year
under this Plan pursuant to the grant of Awards. All such shares
may be made subject to Incentive Stock Options, Non-qualified Stock
Options or Stock Appreciation Rights, or any combination thereof,
but, subject to adjustment in accordance with Section 14, in
no event shall the total number of shares of Common Stock made
subject to all Options or Stock Appreciation Rights hereunder
exceed such maximum number of 6,000,000 shares of Common Stock.
Subject to adjustment in accordance with Section 14, the maximum
number of shares that may be granted to a Director in any year
shall be 200,000.
5.3.
Shares Awarded. Common Stock
which may be awarded under the Plan may be either authorized and
unissued shares or issued shares which have been reacquired by the
Company (in the open-market or in private transactions) and which
are being held as treasury shares. No fractional shares of Common
Stock shall be awarded under the Plan, and the Committee shall
determine the manner in which fractional share value shall be
treated.
5.4.
Shares Reacquired. Shares of
Common Stock covered by an Award shall not be counted as used
unless and until they are actually issued and delivered to a
Participant. Any shares of Common Stock that are subject to Awards
that expire or lapse or are forfeited, surrendered, cancelled,
terminated, settled in cash in lieu of Common Stock or are issued
and thereafter reacquired by the Company shall again be available
for Awards under the Plan, to the extent of such expiration, lapse,
forfeiture, surrender, cancellation, termination, settlement or
reacquisition of such Awards (as may be adjusted pursuant to
Sections 14). The following shares of Common Stock shall not be
treated as having been issued under the Plan: (i) shares
tendered by a Participant or retained by the Company as full or
partial payment to the Company for the purchase price of an Award
or to satisfy any minimum statutorily required taxes that the
Company is required by applicable federal, state, local or foreign
law to withhold with respect to the grant, vesting or exercise of
an Award (“Tax
Withholding Obligations”); or, (ii) shares
covered by an Award that is settled in cash; or ,
(iii) to the extent that any
Award other than an Option is forfeited, repurchased or terminated
without shares being issued pursuant to this Section
5.4, shares may again be available for issuance under
this Plan at the rate of one share for every such share returned to
the Plan.
9
5.5.
Committee Authority. The
Committee shall have the authority to grant Awards as an
alternative to or as the form of payment for grants or rights
earned or due under other compensation plans or arrangements of the
Company.
6.
Option Awards. Each Option granted
under the Plan shall be evidenced by an Award Agreement. Each
Option so granted shall be subject to the conditions set forth in
this Section 6, and to such other conditions not inconsistent with
the Plan as may be reflected in the applicable Award Agreement. All
Options shall be separately designated Incentive Stock Options or
Non-qualified Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of
each type of Option. Notwithstanding the foregoing, the Company
shall have no liability to any Participant or any other person if
an Option designated as an Incentive Stock Option fails to qualify
as such at any time or if an Option is determined to constitute
“nonqualified deferred compensation” within the meaning
of Section 409A of the Code and the terms of such Option do not
satisfy the requirements of Section 409A of the Code. The
provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the
following provisions:
6.1.
General. An option designated
by the Committee as an “Incentive Stock Option” is
intended to qualify as an “Incentive Stock Option”
within the meaning of Subsection (b) of Section 422 of the Code.
Should Section 422 of the Code, or regulations or pronouncements
thereunder, be modified during the term of this Plan, this Plan and
any outstanding options may be amended to conform to such
modification, if approved by the Board of Directors, upon
recommendation by the Committee.
6.2.
Incentive Stock Option
Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year (under this Plan
and all other plans of the Company) exceeds $100,000, the Options
or portions thereof which exceed such limit (according to the order
in which they were granted) shall be treated as Non-qualified Stock
Options.
6.3.
Exercise Price of Incentive Stock
Option. Subject to the provisions of Section 4.2 regarding
Ten Percent Shareholders, the Option Exercise Price of each
Incentive Stock Option shall be no less than 100% of the Fair
Market Value of the Common Stock subject to the Option on the Grant
Date. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an Option Exercise Price lower than that set
forth in the preceding sentence if such Option is granted pursuant
to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the
Code.
6.4.
Exercise Price of Non-qualified Stock
Option. The Option Exercise Price of each Non-qualified
Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, a Non-qualified Stock Option may be
granted with an Option Exercise Price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 409A of the Code.
10
6.5.
Consideration. The Option
Exercise Price of Common Stock acquired pursuant to an Option shall
be paid, to the extent permitted by applicable statutes and
regulations, either (a) in cash or by certified or bank check at
the time the Option is exercised or (b) in the discretion of the
Committee, upon such terms as the Committee shall approve, the
Option Exercise Price may be paid: (i) by delivery to the Company
of other Common Stock, duly endorsed for transfer to the Company,
with a Fair Market Value on the date of delivery equal to the
Option Exercise Price (or portion thereof) due for the number of
shares being acquired, or by means of attestation whereby the
Participant identifies for delivery specific shares of Common Stock
that have an aggregate Fair Market Value on the date of attestation
equal to the Option Exercise Price (or portion thereof) and
receives a number of shares of Common Stock equal to the difference
between the number of shares thereby purchased and the number of
identified attestation shares of Common Stock (a
“Stock for Stock
Exchange”); (ii) a “cashless” exercise
program established with a broker; (iii) by reduction in the number
of shares of Common Stock otherwise deliverable upon exercise of
such Option with a Fair Market Value equal to the aggregate Option
Exercise Price at the time of exercise; (iv) any combination of the
foregoing methods; or (v) in any other form of legal consideration
that may be acceptable to the Committee. Unless otherwise
specifically provided in the Option, the exercise price of Common
Stock acquired pursuant to an Option that is paid by delivery (or
attestation) to the Company of other Common Stock acquired,
directly or indirectly from the Company, shall be paid only by
shares of the Common Stock of the Company that have been held for
more than six months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting
purposes). Notwithstanding the foregoing, during any period for
which the Common Stock is publicly traded (i.e., the Common Stock
is listed on any established stock exchange or a national market
system) an exercise by a Director or Officer that involves or may
involve a direct or indirect extension of credit or arrangement of
an extension of credit by the Company, directly or indirectly, in
violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall
be prohibited with respect to any Award under this
Plan.
6.6.
Transferability of an Incentive Stock
Option. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionee only by the
Optionee. Notwithstanding the foregoing, the Optionee may, by
delivering written notice to the Company, in a form satisfactory to
the Company, designate a third party who, in the event of the death
of the Optionee, shall thereafter be entitled to exercise the
Option.
6.7.
Transferability of a Non-qualified
Stock Option. A Non-qualified Stock Option may, in the sole
discretion of the Committee, be transferable to a Permitted
Transferee, upon written approval by the Committee to the extent
provided in the Award Agreement. If the Non-qualified Stock Option
does not provide for transferability, then the Non-qualified Stock
Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the
lifetime of the Optionee only by the Optionee. Notwithstanding the
foregoing, the Optionee may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
6.8.
Disqualifying Disposition. If
Common Stock acquired upon exercise of an Incentive Stock Option is
disposed of by an Optionee prior to the expiration of either two
years from the Grant Date of such option, one year from the
transfer of shares to the Optionee pursuant to the exercise of such
option or in any other disqualifying disposition, within the
meaning of Section 422 of the Code, such Optionee shall notify the
Company in writing of the date and terms of such disposition. A
disqualifying disposition by an Optionee shall not affect the
status of any other Incentive Stock Option granted under the
Plan.
11
6.9.
Vesting. Each Option may, but
need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. The vesting
provisions of individual Options may vary. No Option may be
exercised for a fraction of a share of Common Stock. The Committee
may, but shall not be required to, provide for an acceleration of
vesting and exercisability in the terms of any Award Agreement upon
the occurrence of a specified event.
6.10.
Term of Plan. No Incentive
Stock Options shall be granted under this Plan more than 10 years
after the date that the Plan is adopted, or the Plan is approved by
the shareholders of the Company, whichever is earlier.
6.11.
Term. Subject to the provisions
of Section 4.2 regarding Ten Percent Shareholders, no Incentive
Stock Option shall be exercisable after the expiration of 10 years
from the Grant Date. The term of a Non-qualified Stock Option
granted under the Plan shall be determined by the Committee;
provided, however, no Non-qualified Stock Option shall be
exercisable after the expiration of 10 years from the Grant
Date.
6.12.
Termination of Service. Except
as provided below, an Option may only be exercised while the
Optionee is employed or engaged by the Company as an Employee,
Director, and/or Key Advisor/Consultant. Unless otherwise
determined by the Committee and set forth in an Award Agreement,
Options shall terminate on the earliest of:
(a)
If the Participant
is Terminated for any reason except for Cause or the
Participant’s death or Disability, then the Participant may
exercise such Participant’s Options only to the extent that
such Options would have been exercisable by the Participant on the
Termination Date no later than three (3) months after the
Termination Date (or such shorter time period as may be determined
by the Committee), but in any event no later than the expiration
date of the Options.
(b)
If the Participant
is Terminated because of the Participant’s death, then the
Participant’s Options may be exercised only to the extent
that such Options would have been exercisable by the Participant on
the Termination Date and must be exercised by the
Participant’s legal representative, or authorized assignee,
no later than twelve (12) months after the Termination Date, but in
any event no later than the expiration date of the
Options.
(c)
If the Participant
is Terminated because of the Participant’s Disability, then
the Participant’s Options may be exercised only to the extent
that such Options would have been exercisable by the Participant on
the Termination Date, and must be exercised by the Participant (or
the Participant’s legal representative or authorized
assignee) no later than twelve (12) months after the Termination
Date (with any exercise beyond (a) three (3) months after the
Termination Date when the Termination is for a Disability that is
not a “permanent and total disability” as defined in
Section 22(e)(3) of the Code, or (b) twelve (12) months after the
Termination Date when the Termination is for a Disability that is a
“permanent and total disability” as defined in Section
22(e)(3) of the Code, deemed to be exercise of a Non-qualified
Stock Option), but in any event no later than the expiration date
of the Options.
(d)
If the Participant
is terminated for Cause, then Participant’s Options shall
expire on such Participant’s Termination Date, or at such
later time and on such conditions as are determined by the
Committee, but in any no event later than the expiration date of
the Options.
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7.
Stock Appreciation Rights.
7.1.
General. Each Stock
Appreciation Right granted under the Plan shall be evidenced by an
Award Agreement. Each Stock Appreciation Right so granted shall be
subject to the conditions set forth in this Section 7, and to such
other conditions not inconsistent with the Plan as may be reflected
in the applicable Award Agreement. Stock Appreciation Rights may be
granted alone (“Free
Standing Rights”) or in tandem with an Option granted
under the Plan (“Related
Rights”).
7.2.
Grant Requirements. Any Related
Right that relates to a Non-qualified Stock Option may be granted
at the same time the Option is granted or at any time thereafter
but before the exercise or expiration of the Option. Any Related
Right that relates to an Incentive Stock Option must be granted at
the same time the Incentive Stock Option is granted.
7.3.
Term of Stock Appreciation
Rights. The term of a Stock Appreciation Right granted under
the Plan shall be determined by the Committee; provided, however,
no Stock Appreciation Right shall be exercisable later than the
tenth anniversary of the Grant Date.
7.4.
Vesting of Stock Appreciation
Rights. Each Stock Appreciation Right may, but need not,
vest and therefore become exercisable in periodic installments that
may, but need not, be equal. The Stock Appreciation Right may be
subject to such other terms and conditions on the time or times
when it may be exercised as the Committee may deem appropriate. The
vesting provisions of individual Stock Appreciation Rights may
vary. No Stock Appreciation Right may be exercised for a fraction
of a share of Common Stock. The Committee may, but shall not be
required to, provide for an acceleration of vesting and
exercisability in the terms of any Stock Appreciation Right upon
the occurrence of a specified event.
7.5.
Exercise and Payment. Upon
exercise of a Stock Appreciation Right, the holder shall be
entitled to receive from the Company an amount equal to the number
of shares of Common Stock subject to the Stock Appreciation Right
that is being exercised multiplied by the excess of (i) the Fair
Market Value of a share of Common Stock on the date the Award is
exercised, over (ii) the exercise price specified in the Stock
Appreciation Right or related Option. Payment with respect to the
exercise of a Stock Appreciation Right shall be made on the date of
exercise. Payment shall be made in the form of shares of Common
Stock (with or without restrictions as to substantial risk of
forfeiture and transferability, as determined by the Committee in
its sole discretion), cash or a combination thereof, as determined
by the Committee.
7.6.
Exercise Price. The exercise
price of a Free Standing Stock Appreciation Right shall be
determined by the Committee, but shall not be less than 100% of the
Fair Market Value of one share of Common Stock on the Grant Date of
such Stock Appreciation Right. A Related Right granted
simultaneously with or subsequent to the grant of an Option and in
conjunction therewith or in the alternative thereto shall have the
same exercise price as the related Option, shall be transferable
only upon the same terms and conditions as the related Option, and
shall be exercisable only to the same extent as the related Option;
provided, however, that a Stock Appreciation Right, by its terms,
shall be exercisable only when the Fair Market Value per share of
Common Stock subject to the Stock Appreciation Right and related
Option exceeds the exercise price per share thereof and no Stock
Appreciation Rights may be granted in tandem with an Option unless
the Committee determines that the requirements of Section 7.2 are
satisfied.
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7.7.
Reduction in the Underlying Option
Shares. Upon any exercise of a Related Right, the number of
shares of Common Stock for which any related Option shall be
exercisable shall be reduced by the number of shares for which the
Stock Appreciation Right has been exercised. The number of shares
of Common Stock for which a Related Right shall be exercisable
shall be reduced upon any exercise of any related Option by the
number of shares of Common Stock for which such Option has been
exercised.
8.
Restricted Awards.
8.1.
General. A
Restricted Award is an Award of actual shares of Common Stock
(“Restricted
Stock”) or hypothetical Common Stock units
(“Restricted Stock
Units”) having a value equal to the Fair Market Value
of an identical number of shares of Common Stock, which may, but
need not, provide that such Restricted Award may not be sold,
assigned, transferred or otherwise disposed of, pledged or
hypothecated for a loan or as security for the performance of any
obligation or for any other purpose for such period
(“Restricted
Period”) as the Committee shall
determine. Each Restricted Award granted under the Plan
shall be evidenced by an Award Agreement. Each
Restricted Award so granted shall be subject to the conditions set
forth in this Section 8, and to such other conditions not
inconsistent with the Plan as may be reflected in the applicable
Award Agreement.
8.2.
Restricted Stock and Restricted Stock
Units.
(a)
Each Participant
granted Restricted Stock shall execute and deliver to the Company
an Award Agreement with respect to the Restricted Stock setting
forth the restrictions and other terms and conditions applicable to
such Restricted Stock. If the Committee determines that the
Restricted Stock shall be held by the Company or in escrow rather
than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant
to additionally execute and deliver to the Company (A) an escrow
agreement satisfactory to the Committee, if applicable and (B) the
appropriate blank stock power with respect to the Restricted Stock
covered by such agreement. If a Participant fails to execute an
agreement evidencing an Award of Restricted Stock and, if
applicable, an escrow agreement and stock power, the Award shall be
null and void. Subject to the restrictions set forth in the Award,
the Participant generally shall have the rights and privileges of a
shareholder as to such Restricted Stock, including the right to
vote such Restricted Stock and the right to receive dividends;
provided that, any cash dividends and stock dividends with respect
to the Restricted Stock shall be withheld by the Company for the
Participant’s account. The cash dividends or stock dividends
so withheld by the Committee and attributable to any particular
share of Restricted Stock (and earnings thereon, if applicable)
shall be distributed to the Participant in cash or, at the
discretion of the Committee, in shares of Common Stock having a
Fair Market Value equal to the amount of such dividends, if
applicable, upon the release of restrictions on such share and, if
such share is forfeited, the Participant shall have no right to
such dividends.
(b)
The terms and
conditions of a grant of Restricted Stock Units shall be reflected
in an Award Agreement. No shares of Common Stock shall be issued at
the time a Restricted Stock Unit is granted, and the Company will
not be required to set aside a fund for the payment of any such
Award. A Participant shall have no voting rights with respect to
any Restricted Stock Units granted hereunder. The Committee may
also grant Restricted Stock Units with a deferral feature, whereby
settlement is deferred beyond the vesting date until the occurrence
of a future payment date or event set forth in an Award Agreement
(“Deferred Stock
Units”). At the discretion of the Committee, each
Restricted Stock Unit or Deferred Stock Unit (representing one
share of Common Stock) may be credited with cash and stock
dividends paid by the Company in respect of one share of Common
Stock (“Dividend
Equivalents”). Dividend Equivalents shall be withheld
by the Company and credited to the Participant’s account, and
interest may be credited on the amount of cash Dividend Equivalents
credited to the Participant’s account at a rate and subject
to such terms as determined by the Committee. Dividend Equivalents
credited to a Participant’s account and attributable to any
particular Restricted Stock Unit or Deferred Stock Unit (and
earnings thereon, if applicable) shall be distributed in cash or,
at the discretion of the Committee, in shares of Common Stock
having a Fair Market Value equal to the amount of such Dividend
Equivalents and earnings, if applicable, to the Participant upon
settlement of such Restricted Stock Unit or Deferred Stock Unit
and, if such Restricted Stock Unit or Deferred Stock Unit is
forfeited, the Participant shall have no right to such Dividend
Equivalents. Dividend Equivalents will be deemed re-invested in
additional Restricted Stock Units or Deferred Stock Units based on
the Fair Market Value of a share of Common Stock on the applicable
dividend payment date and rounded down to the nearest whole
share.
14
8.3.
Restrictions.
(a)
Restricted Stock
awarded to a Participant shall be subject to the following
restrictions until the expiration of the Restricted Period, and to
such other terms and conditions as may be set forth in the
applicable Award Agreement: (A) if an escrow arrangement is used,
the Participant shall not be entitled to delivery of the stock
certificate; (B) the shares shall be subject to the restrictions on
transferability set forth in the Award Agreement; (C) the shares
shall be subject to forfeiture to the extent provided in the
applicable Award Agreement; and (D) to the extent such shares are
forfeited, the stock certificates shall be returned to the Company,
and all rights of the Participant to such shares and as a
shareholder with respect to such shares shall terminate without
further obligation on the part of the Company.
(b)
Restricted Stock
Units and Deferred Stock Units awarded to any Participant shall be
subject to (A) forfeiture until the expiration of the Restricted
Period, and satisfaction of any applicable Performance Goals during
such period, to the extent provided in the applicable Award
Agreement, and to the extent such Restricted Stock Units or
Deferred Stock Units are forfeited, all rights of the Participant
to such Restricted Stock Units or Deferred Stock Units shall
terminate without further obligation on the part of the Company and
(B) such other terms and conditions as may be set forth in the
applicable Award Agreement.
(c)
The Committee shall
have the authority to remove any or all of the restrictions on the
Restricted Stock, Restricted Stock Units and Deferred Stock Units
whenever it may determine that, by reason of changes in Applicable
Laws or other changes in circumstances arising after the date the
Restricted Stock or Restricted Stock Units or Deferred Stock Units
are granted, such action is appropriate.
8.4.
Restricted Period. With respect
to Restricted Awards, the Restricted Period shall commence on the
Grant Date and end at the time or times set forth on a schedule
established by the Committee in the applicable Award
Agreement. No Restricted Award may be granted or settled for a
fraction of a share of Common Stock. The Committee may, but shall
not be required to, provide for an acceleration of vesting in the
terms of any Award Agreement upon the occurrence of a specified
event.
15
8.5.
Delivery of Restricted Stock and
Settlement of Restricted Stock Units. Upon the expiration of
the Restricted Period with respect to any shares of Restricted
Stock, the restrictions set forth in Section 8.3 and the applicable
Award Agreement shall be of no further force or effect with respect
to such shares, except as set forth in the applicable Award
Agreement. If an escrow arrangement is used, upon such expiration,
the Company shall deliver to the Participant, or his or her
beneficiary, without charge, the stock certificate evidencing the
shares of Restricted Stock which have not then been forfeited and
with respect to which the Restricted Period has expired (to the
nearest full share) and any cash dividends or stock dividends
credited to the Participant’s account with respect to such
Restricted Stock and the interest thereon, if any. Upon the
expiration of the Restricted Period with respect to any outstanding
Restricted Stock Units, or at the expiration of the deferral period
with respect to any outstanding Deferred Stock Units, the Company
shall deliver to the Participant, or his or her beneficiary,
without charge, one share of Common Stock for each such outstanding
vested Restricted Stock Unit or Deferred Stock Unit
(“Vested
Unit”) and cash equal to any Dividend Equivalents
credited with respect to each such Vested Unit in accordance with
Section 8.2(b) hereof and the interest thereon or, at the
discretion of the Committee, in shares of Common Stock having a
Fair Market Value equal to such Dividend Equivalents and the
interest thereon, if any; provided, however, that, if explicitly
provided in the applicable Award Agreement, the Committee may, in
its sole discretion, elect to pay cash or part cash and part Common
Stock in lieu of delivering only shares of Common Stock for Vested
Units. If a cash payment is made in lieu of delivering shares of
Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the
Restricted Period lapsed in the case of Restricted Stock Units, or
the delivery date in the case of Deferred Stock Units, with respect
to each Vested Unit.
8.6.
Stock Restrictions. Each
certificate representing Restricted Stock awarded under the Plan
shall bear a legend in such form as the Company deems
appropriate.
9.
Performance Share Awards.
9.1.
General. Each
Performance Share Award granted under the Plan shall be evidenced
by an Award Agreement. Each Performance Share Award so granted
shall be subject to the conditions set forth in this Section 9, and
to such other conditions not inconsistent with the Plan as may be
reflected in the applicable Award Agreement. The Committee shall
have the discretion to determine: (i) the number of shares of
Common Stock or stock-denominated units subject to a Performance
Share Award granted to any Participant; (ii) the performance period
applicable to any Award; (iii) the conditions that must be
satisfied for a Participant to earn an Award; (iv) the effect of
the Participant’s Termination; and (v) the other terms,
conditions and restrictions of the Award.
9.2.
Earning Performance Share
Awards. The number of Performance Shares earned by a
Participant will depend on the extent to which the Performance
Goals established by the Committee are attained within the
applicable Performance Period, as determined by the Committee. No
payout shall be made with respect to any Performance Share Award
except upon written certification by the Committee that the minimum
threshold Performance Goal(s) have been achieved. Performance
Periods may overlap and Participants may participate simultaneously
with respect to Performance Share Awards that are subject to
different Performance Periods and different Performance Goals and
other criteria.
9.3.
Value of Performance
Shares. Each Performance Share will have an
initial value equal to the Fair Market Value of the Common Stock on
the Grant Date. The Committee, in its sole discretion,
may pay earned Performance Shares in the form of cash, in shares of
Common Stock with an aggregate Fair Market Value equal to the value
of the earned Performance Shares at the close of the applicable
Performance Period, or in a combination thereof.
16
10.
Performance Compensation
Awards.
10.1.
General. The Committee shall
have the authority, at the time of grant of any Award described in
this Plan (other than Options and Stock Appreciation Rights granted
with an exercise price equal to or greater than the Fair Market
Value per share of Common Stock on the Grant Date), to designate
such Award as a Performance Compensation Award in order to qualify
such Award as “performance-based compensation” under
Section 162(m) of the Code. In addition, the Committee shall have
the authority to make an Award of a cash bonus to any Participant
and designate such Award as a Performance Compensation Award in
order to qualify such Award as “performance-based
compensation” under Section 162(m) of the Code.
10.2.
Eligibility. The Committee
will, in its sole discretion, designate within the first 90 days of
a Performance Period (or, if longer or shorter, within the maximum
period allowed under Section 162(m) of the Code) which Participants
will be eligible to receive Performance Compensation Awards in
respect of such Performance Period. However, designation of a
Participant eligible to receive an Award hereunder for a
Performance Period shall not in any manner entitle the Participant
to receive payment in respect of any Performance Compensation Award
for such Performance Period. The determination as to whether or not
such Participant becomes entitled to payment in respect of any
Performance Compensation Award shall be decided solely in
accordance with the provisions of this Section 10. Moreover,
designation of a Participant eligible to receive an Award hereunder
for a particular Performance Period shall not require designation
of such Participant eligible to receive an Award hereunder in any
subsequent Performance Period and designation of one person as a
Participant eligible to receive an Award hereunder shall not
require designation of any other person as a Participant eligible
to receive an Award hereunder in such period or in any other
period.
10.3.
Discretion of Committee with Respect
to Performance Compensation Awards. With regard to a
particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period
(provided any such Performance Period shall be not less than one
fiscal quarter in duration), the type(s) of Performance
Compensation Awards to be issued, the Performance Factors that will
be used to establish the Performance Goal(s), the kind(s) and/or
level(s) of the Performance Goal(s) that is (are) to apply to the
Company and the Performance Formula. Within the first 90 days of a
Performance Period (or, if longer or shorter, within the maximum
period allowed under Section 162(m) of the Code), the Committee
shall, with regard to the Performance Compensation Awards to be
issued for such Performance Period, exercise its discretion with
respect to each of the matters enumerated in the immediately
preceding sentence of this Section 10.3 and record the same in
writing.
10.4.
Payment of Performance Compensation
Awards.
(a)
Condition to Receipt of
Payment. Unless otherwise provided in the applicable Award
Agreement, a Participant must be employed by the Company on the
last day of a Performance Period to be eligible for payment in
respect of a Performance Compensation Award for such Performance
Period.
(b)
Limitation. A Participant shall
be eligible to receive payment in respect of a Performance
Compensation Award only to the extent that: (A) the Performance
Goals for such period are achieved; and (B) the Performance Formula
as applied against such Performance Goals determines that all or
some portion of such Participant’s Performance Compensation
Award has been earned for the Performance Period.
17
(c)
Certification. Following the
completion of a Performance Period, the Committee shall review and
certify in writing whether, and to what extent, the Performance
Goals for the Performance Period have been achieved and, if so,
calculate and certify in writing the amount of the Performance
Compensation Awards earned for the period based upon the
Performance Formula. The Committee shall then determine the actual
size of each Participant’s Performance Compensation Award for
the Performance Period and, in so doing, may apply Negative
Discretion in accordance with Section 10.4(d) hereof, if and when
it deems appropriate.
(d)
Use of Discretion. In
determining the actual size of an individual Performance
Compensation Award for a Performance Period, the Committee may
reduce or eliminate the amount of the Performance Compensation
Award earned under the Performance Formula in the Performance
Period through the use of Negative Discretion if, in its sole
judgment, such reduction or elimination is appropriate. The
Committee shall not have the discretion to (A) grant or provide
payment in respect of Performance Compensation Awards for a
Performance Period if the Performance Goals for such Performance
Period have not been attained or (B) increase a Performance
Compensation Award above the maximum amount payable under Section
10.4(f) of the Plan.
(e)
Timing of Award Payments.
Performance Compensation Awards granted for a Performance Period
shall be paid to Participants as soon as administratively
practicable following completion of the certifications required by
this Section 10 but in no event later than 2 1/2 months following
the end of the fiscal year during which the Performance Period is
completed.
(f)
Maximum Award Payable.
Notwithstanding any provision contained in this Plan to the
contrary, the maximum Performance Compensation Award payable to any
one Participant under the Plan for a Performance Period (excluding
any Options and Stock Appreciation Rights) is 1,000,000 shares of
Common Stock or, in the event such Performance Compensation Award
is paid in cash, the equivalent cash value thereof on the first or
last day of the Performance Period to which such Award relates, as
determined by the Committee. The maximum amount that can be paid in
any calendar year to any Participant pursuant to a cash bonus Award
described in the last sentence of Section 10.1 shall be $1,000,000.
Furthermore, any Performance Compensation Award that has been
deferred shall not (between the date as of which the Award is
deferred and the payment date) increase (A) with respect to a
Performance Compensation Award that is payable in cash, by a
measuring factor for each fiscal year greater than a reasonable
rate of interest set by the Committee or (B) with respect to a
Performance Compensation Award that is payable in shares of Common
Stock, by an amount greater than the appreciation of a share of
Common Stock from the date such Award is deferred to the payment
date.
11.
Use of Proceeds from Stock. Proceeds
from the sale of Common Stock pursuant to Awards, or upon exercise
thereof, shall constitute general funds of the
Company.
12.
Compliance with Section 409A of the
Code. Notwithstanding anything to the contrary set forth
herein, any Award granted under the Plan that is not exempt from
the requirements of Section 409A of the Code shall contain such
provisions so that such Award will comply with the requirements of
Section 409A of the Code. Such restrictions, if any, shall be
determined by the Committee and contained in the Award
Agreement.
18
13.
Securities Law Compliance. Each Award
Agreement shall provide that no shares of Common Stock shall be
purchased or sold thereunder unless and until (a) any then
applicable requirements of state or federal laws and regulatory
agencies have been fully complied with to the satisfaction of the
Company and its counsel and (b) if required to do so by the
Company, the Participant has executed and delivered to the Company
a letter of investment intent in such form and containing such
provisions as the Committee may require. The Company shall use
reasonable efforts to seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to grant Awards and to issue and sell
shares of Common Stock upon exercise of the Awards; provided,
however, that this undertaking shall not require the Company to
register under the Securities Act the Plan, any Award or any Common
Stock issued or issuable pursuant to any such Award. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of Common
Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise
of such Awards unless and until such authority is
obtained.
14.
Adjustments Upon Changes in Stock. In
the event of changes in the outstanding Common Stock or in the
capital structure of the Company by reason of any stock or
extraordinary cash dividend, stock split, reverse stock split, an
extraordinary corporate transaction such as any recapitalization,
reorganization, merger, consolidation, combination, exchange, or
other relevant change in capitalization occurring after the Grant
Date of any Award, Awards granted under the Plan and any Award
Agreements, the exercise price of Options and Stock Appreciation
Rights, the maximum number of shares of Common Stock subject to all
Awards stated in Section 5 and the maximum number of shares of
Common Stock with respect to which any one person may be granted
Awards during any period stated in Section 5 and Section 10.4(f)
will be equitably adjusted or substituted, as to the number, price
or kind of a share of Common Stock or other consideration subject
to such Awards to the extent necessary to preserve the economic
intent of such Award. In the case of adjustments made pursuant to
this Section 14, unless the Committee specifically determines that
such adjustment is in the best interests of the Company or its
Affiliates, the Committee shall, in the case of Incentive Stock
Options, ensure that any adjustments under this Section 14 will not
constitute a modification, extension or renewal of the Incentive
Stock Options within the meaning of Section 424(h)(3) of the Code
and in the case of Non-qualified Stock Options, ensure that any
adjustments under this Section 14 will not constitute a
modification of such Non-qualified Stock Options within the meaning
of Section 409A of the Code. Any adjustments made under this
Section 14 shall be made in a manner which does not adversely
affect the exemption provided pursuant to Rule 16b-3 under the
Exchange Act. Further, with respect to Awards intended to qualify
as “performance-based compensation” under Section
162(m) of the Code, any adjustments or substitutions will not cause
the Company to be denied a tax deduction on account of Section
162(m) of the Code. The Company shall give each Participant notice
of an adjustment hereunder and, upon notice, such adjustment shall
be conclusive and binding for all purposes.
15.
Effect of Change in Control.
Unless otherwise provided in an Award
Agreement, notwithstanding any provision of the Plan to the
contrary:
15.1.
Options and Stock
Appreciation Rights. In the
event of a Participant’s termination of Continuous Service
without Cause or for Good Reason during the 12-month period
following a Change in Control, notwithstanding any provision of the
Plan or any applicable Award Agreement to the contrary, all Options
and Stock Appreciation Rights shall become immediately exercisable
with respect to 100% of the shares subject to such Options or Stock
Appreciation Rights, and/or the Restricted Period shall expire
immediately with respect to 100% of the shares of Restricted Stock
or Restricted Stock Units as of the date of the Participant’s
termination of Continuous Service.
19
15.2.
Performance
Compensation Awards. With
respect to Performance Compensation Awards, in the event of a
Change in Control, all incomplete Performance Periods in respect of
such Award in effect on the date the Change in Control occurs shall
end on the date of such change and the Committee shall (i)
determine the extent to which Performance Goals with respect to
each such Performance Period have been met based upon such audited
or unaudited financial information then available as it deems
relevant and (ii) cause to be paid to the applicable Participant
partial or full Awards with respect to Performance Goals for each
such Performance Period based upon the Committee’s
determination of the degree of attainment of Performance Goals or,
if not determinable, assuming that the applicable
“target” levels of performance have been attained, or
on such other basis determined by the
Committee.
15.3.
Timing.
To the extent practicable, any actions
taken by the Committee under the immediately preceding clauses (a)
and (b) shall occur in a manner and at a time which allows affected
Participants the ability to participate in the Change in Control
with respect to the shares of Common Stock subject to their
Awards.
15.4.
Cancelation and
Payment of Awards. In addition,
in the event of a Change in Control, the Committee may in its
discretion and upon at least 10 days’ advance notice to the
affected persons, cancel any outstanding Awards and pay to the
holders thereof, in cash or stock, or any combination thereof, the
value of such Awards based upon the price per share of Common Stock
received or to be received by other shareholders of the Company in
the event. In the case of any Option or Stock Appreciation Right
with an exercise price (or Stock Appreciation Right Exercise Price
in the case of a Stock Appreciation Right) that equals or exceeds
the price paid for a share of Common Stock in connection with the
Change in Control, the Committee may cancel the Option or Stock
Appreciation Right without the payment of consideration
therefor.
15.5.
Obligations Binding on
Successors. The obligations of
the Company under the Plan shall be binding upon any successor
corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to all or
substantially all of the assets and business of the Company and its
Affiliates, taken as a whole.
16.
Withholding Obligations. To the extent
provided by the terms of an Award Agreement and subject to the
discretion of the Committee, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (a) tendering a cash
payment; (b) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common
Stock under the Award, provided, however, that no shares of Common
Stock are withheld with a value exceeding the minimum amount of tax
required to be withheld by law; or (c) delivering to the Company
previously owned and unencumbered shares of Common Stock of the
Company.
17.
Amendment, Suspension or
Discontinuance of the Plan.
17.1.
Amendment, Suspension or Termination
of the Plan. The Board may amend, suspend or terminate the
Plan or any portion of the Plan at any time and in such respects as
it shall deem advisable; provided, however, that, to the extent
required by Applicable Law, shareholder approval shall be required
for any amendment to the Plan. At the time of such amendment, the
Board shall determine, upon advice from counsel, whether such
amendment will be contingent on shareholder approval.
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17.2.
Shareholder Approval. The Board
may, in its sole discretion, submit any other amendment to the Plan
for shareholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of Section 162(m)
of the Code and the regulations thereunder regarding the exclusion
of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive
officers.
17.3.
Contemplated Amendments. It is
expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible
Employees, Consultants and Directors with the maximum benefits
provided or to be provided under the provisions of the Code and the
regulations promulgated thereunder relating to Incentive Stock
Options or to the nonqualified deferred compensation provisions of
Section 409A of the Code and/or to bring the Plan and/or Awards
granted under it into compliance therewith.
17.4.
No Impairment of Rights. Rights
under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
17.5.
Amendment of Awards. The
Committee at any time, and from time to time, may amend the terms
of any one or more Awards; provided, however, that the Committee
may not affect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
18.
Effective Date of Plan. This Plan shall
become effective on the date as of which the Plan is approved by
the Board, but no Award shall be exercised (or, in the case of a
stock Award, shall be granted) unless and until the Plan has been
approved by the shareholders of the Company, which approval shall
be within twelve months before or after the date of adoption of
this Plan.
19.
Termination or Suspension of the Plan.
The Plan shall terminate automatically on September 28, 2026. No
Award shall be granted pursuant to the Plan after such date, but
Awards theretofore granted may extend beyond that date. The Board
may suspend or terminate the Plan at any earlier date pursuant to
Section 17.1 hereof. No Awards may be granted under the Plan while
the Plan is suspended or after it is terminated. Unless the Company
determines to submit Section 10 of the Plan and the definition of
“Performance Goal” and “Performance
Factors” to the Company’s shareholders at the first
shareholder meeting that occurs in the fifth year following the
year in which the Plan was last approved by shareholders (or any
earlier meeting designated by the Board), in accordance with the
requirements of Section 162(m) of the Code, and such shareholder
approval is obtained, then no further Performance Compensation
Awards shall be made to Covered Employees under Section 10 after
the date of such annual meeting, but the Plan may continue in
effect for Awards to Participants not in accordance with Section
162(m) of the Code.
20.
Miscellaneous.
20.1.
Acceleration of Exercisability and
Vesting. The Committee shall have the power to accelerate
the time at which an Award may first be exercised or the time
during which an Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Award stating
the time at which it may first be exercised or the time during
which it will vest.
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20.2.
Shareholder Rights. Except as
provided in the Plan or an Award Agreement, no Participant shall be
deemed a holder of, or to have any rights of a holder with respect
to any shares of Common Stock subject to an Award, unless and until
such Participant has satisfied all requirements for exercise of the
Award pursuant to its terms and no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distribution of other rights for which the
record date is prior to the date such Common Stock certificate is
issued, except as provided in Section 14 hereof.
20.3.
No Employment or Other Service
Rights. Nothing in the Plan or any instrument executed or
Award granted pursuant thereto shall confer upon any Participant
any right to continue to serve the Company in the capacity in
effect at the time the Award was granted or shall affect the right
of the Company to terminate (a) the employment of an Employee with
or without notice and with or without Cause or (b) the service of a
Director pursuant to the Bylaws of the Company, as amended, and any
applicable provisions of the corporate law of the state in which
the Company is incorporated, as the case may be.
20.4.
Transfer; Approved Leave of
Absence. For purposes of the Plan, no termination of
employment by an Employee shall be deemed to result from either (a)
a transfer of employment to the Company from an Affiliate or from
the Company to an Affiliate, or from one Affiliate to another, or
(b) an approved leave of absence for military service or sickness,
or for any other purpose approved by the Company, if the
Employee’s right to reemployment is guaranteed either by a
statute or by contract or under the policy pursuant to which the
leave of absence was granted or if the Committee otherwise so
provides in writing, in either case, except to the extent
inconsistent with Section 409A of the Code if the applicable Award
is subject thereto.
20.5.
Insider Trading Policy. By
accepting an Award, a Participant acknowledges that the Participant
is bound by all the terms and conditions of the Company’s
insider trading policy as may be in effect from time to time,
covering transactions in the Company’s securities by
Employees, officers, directors, and/or Key Consultants/Advisors of
the Company.
21.
General.
21.1.
Governing Law. This Plan and
all Awards granted hereunder shall be governed by and construed in
accordance with the laws of the State of Colorado, without
regard to such state’s conflict of law rules.
21.2.
Forfeiture Events. The
Committee may specify in an Award Agreement that the
Participant’s rights, payments and benefits with respect to
an Award shall be subject to reduction, cancellation, forfeiture or
recoupment upon the occurrence of certain events, in addition to
applicable vesting conditions of an Award. Such events may include,
without limitation, breach of non-competition, non-solicitation,
confidentiality, or other restrictive covenants that are contained
in the Award Agreement or otherwise applicable to the Participant,
a termination of the Participant’s Continuous Service for
Cause, or other conduct by the Participant that is detrimental to
the business or reputation of the Company and/or its
Affiliates.
21.3.
Clawback. Notwithstanding any
other provisions in this Plan, any Award which is subject to
recovery under any law, government regulation or stock exchange
listing requirement, will be subject to such deductions and
clawback as may be required to be made pursuant to such law,
government
regulation or stock exchange listing requirement (or any policy
adopted by the Company pursuant to any such law, government
regulation or stock exchange listing requirement).
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21.4.
Other Compensation
Arrangements. Nothing contained in this Plan shall prevent
the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is
required; and such arrangements may be either generally applicable
or applicable only in specific cases.
21.5.
Sub-plans. The Committee may
from time to time establish sub-plans under the Plan for purposes
of satisfying blue sky, securities, tax or other laws of various
jurisdictions in which the Company intends to grant Awards. Any
sub-plans shall contain such limitations and other terms and
conditions as the Committee determines are necessary or desirable.
All sub-plans shall be deemed a part of the Plan, but each sub-plan
shall apply only to the Participants in the jurisdiction for which
the sub-plan was designed.
21.6.
Unfunded Plan. The Plan shall
be unfunded. Neither the Company, the Board nor the Committee shall
be required to establish any special or separate fund or to
segregate any assets to assure the performance of its obligations
under the Plan.
21.7.
Recapitalizations. Each Award
Agreement shall contain provisions required to reflect the
provisions of Section 14.
21.8.
Delivery. Upon exercise of a
right granted under this Plan, the Company shall issue Common Stock
or pay any amounts due within a reasonable period of time
thereafter. Subject to any statutory or regulatory obligations the
Company may otherwise have, for purposes of this Plan, 30 days
shall be considered a reasonable period of time.
21.9.
No Fractional Shares. No
fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash,
additional Awards or other securities or property shall be issued
or paid in lieu of fractional shares of Common Stock or whether any
fractional shares should be rounded, forfeited or otherwise
eliminated.
21.10.
Other Provisions. The Award
Agreements authorized under the Plan may contain such other
provisions not inconsistent with this Plan, including, without
limitation, restrictions upon the exercise of the Awards, as the
Committee may deem advisable.
21.11.
Disqualifying Dispositions. Any
Participant who shall make a “disposition” (as defined
in Section 424 of the Code) of all or any portion of shares of
Common Stock acquired upon exercise of an Incentive Stock Option
within two years from the Grant Date of such Incentive Stock Option
or within one year after the issuance of the shares of Common Stock
acquired upon exercise of such Incentive Stock Option (a
“Disqualifying
Disposition”) shall be required to immediately advise
the Company in writing as to the occurrence of the sale and the
price realized upon the sale of such shares of Common
Stock.
21.12.
Section 16. It is the intent of
the Company that the Plan satisfy, and be interpreted in a manner
that satisfies, the applicable requirements of Rule 16b-3 as
promulgated under Section 16 of the Exchange Act so that
Participants will be entitled to the benefit of Rule 16b-3, or any
other rule promulgated under Section 16 of the Exchange Act, and
will not be subject to short-swing liability under Section 16 of
the Exchange Act. Accordingly, if the operation of any provision of
the Plan would conflict with the intent expressed in this Section
21.13, such provision to the extent possible shall be interpreted
and/or deemed amended so as to avoid such conflict.
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21.13.
Section 162(m). To the extent
the Committee issues any Award that is intended to be exempt from
the deduction limitation of Section 162(m) of the Code, the
Committee may, without shareholder or grantee approval, amend the
Plan or the relevant Award Agreement retroactively or prospectively
to the extent it determines necessary in order to comply with any
subsequent clarification of Section 162(m) of the Code required to
preserve the Company’s federal income tax deduction for
compensation paid pursuant to any such Award.
21.14.
Beneficiary Designation. Each
Participant under the Plan may from time to time name any
beneficiary or beneficiaries by whom any right under the Plan is to
be exercised in case of such Participant’s death. Each
designation will revoke all prior designations by the same
Participant, shall be in a form reasonably prescribed by the
Committee and shall be effective only when filed by the Participant
in writing with the Company during the Participant’s
lifetime.
21.15.
Expenses. The costs of
administering the Plan shall be paid by the Company.
21.16.
Severability. If any of the
provisions of the Plan or any Award Agreement is held to be
invalid, illegal or unenforceable, whether in whole or in part,
such provision shall be deemed modified to the extent, but only to
the extent, of such invalidity, illegality or unenforceability and
the remaining provisions shall not be affected
thereby.
21.17.
Plan Headings. The headings in
the Plan are for purposes of convenience only and are not intended
to define or limit the construction of the provisions
hereof.
21.18.
Non-Uniform Treatment. The
Committee’s determinations under the Plan need not be uniform
and may be made by it selectively among persons who are eligible to
receive, or actually receive, Awards. Without limiting the
generality of the foregoing, the Committee shall be entitled to
make non-uniform and selective determinations, amendments and
adjustments, and to enter into non-uniform and selective Award
Agreements.
This 2016 Stock Incentive Plan was adopted by
the Board of Directors
