DEF 14A 1 uqm-20171024xdef14a.htm DEF 14A uqm_Current_Folio_preDEF14A_Proxyvintage

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No.     )

 

 

 

 

 

Filed by the Registrant  [X]

 

Filed by a Party other than the Registrant  [  ]

 

Check the appropriate box:

[  ]

Preliminary Proxy Statement

[  ]

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

[X]

Definitive Proxy Statement

[  ]

Definitive Additional Materials

[  ]

Soliciting Material Pursuant to §240.14a-12

 

UQM TECHNOLOGIES, 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):

[X]

No fee required.

[  ]

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

[  ]

Fee paid previously with preliminary materials.

[  ]

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.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 

 

 


 

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Dear Shareholder:

 

On August 25, 2017, UQM Technologies, Inc. (“UQM” or the “Company”) entered into a stock purchase agreement (the “Purchase Agreement”) with China National Heavy Duty Truck Group Co., Ltd. (“CNHTC”) and its wholly-owned subsidiary, Sinotruk (BVI) Limited (the “Buyer”), pursuant to which the Buyer will acquire newly issued shares of common stock of UQM in two stages, and UQM and CNHTC plan to create a joint venture to manufacture and sell electric propulsion systems for commercial vehicles and other vehicles in China. The terms of the Purchase Agreement were unanimously approved by the boards of directors of both companies.

 

In the first stage, which closed on September 25, 2017, the Buyer acquired 5,347,300 shares, representing 9.9% of the total outstanding shares of UQM as of the date of the Purchase Agreement, for an aggregate consideration of approximately $5.1 million. In the second stage, the Buyer will acquire such number of additional shares (the “Second Stage Shares”) resulting in the Buyer owning a total of 34% of UQM’s then-outstanding common stock on a fully diluted basis, accounting for all outstanding stock options and warrants (38% on the basis of common stock shares currently outstanding) (the “Second Stage Transaction”).

 

Given the significant percentage of shares that may be issued in the Second Stage Transaction, the NYSE American stock exchange deems the Second Stage Transaction to result in a “change of control” requiring shareholder approval. Accordingly, at this year’s annual meeting, you will be asked to consider and vote on a proposal to approve the issuance by the Company of the Second Stage Shares pursuant to the terms of the Purchase Agreement in addition to other proposals as set forth in the accompanying proxy statement.

 

THE BOARD OF DIRECTORS OF UQM UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE ISSUANCE OF THE SECOND STAGE SHARES AS CONTEMPLATED BY THE PURCHASE AGREEMENT AND FOR THE OTHER PROPOSALS PRESENTED AT THE ANNUAL MEETING.

 

The proxy statement provides information about the matters you will be asked to consider and vote on at the Annual Meeting, including information about the Second Stage Transaction. UQM encourages you to read the entire proxy statement carefully, including the annexes and documents incorporated by reference. You may also obtain more information about the Company from documents the Company has filed with the Securities and Exchange Commission.

 

Thank you for your cooperation and continued support.

 

 

 

 

Very truly yours,

 

 

 

 /s/ DONALD W. VANLANDINGHAM

 

Donald W. Vanlandingham

 

Chairman of the Board

 

 

 

 /s/ JOSEPH R. MITCHELL

 

Joseph R. Mitchell

 

Chief Executive Officer and Director

 

 

 

 

 


 

 

 

UQM TECHNOLOGIES, INC.
4120 Specialty Place
Longmont, Colorado 80504

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 30, 2017

 

The 2017 Annual Meeting of Shareholders (the “Annual Meeting”) of UQM Technologies, Inc. (“we,” “us,” “our,” “UQM” or the “Company”) will be held on the 30th day of November, 2017, at 10:00 a.m., local time at 4120 Specialty Place, Longmont, Colorado 80504 for the following purposes:

 

 

1.

To approve the issuance by the Company of the Second Stage Shares (as defined in this proxy statement) pursuant to the terms of the stock purchase agreement, dated August 25, 2017 (the “Purchase Agreement”), entered into with China National Heavy Duty Truck Group Co., Ltd. (“CNHTC”) and its wholly-owned subsidiary, Sinotruk (BVI) Limited (the “Buyer”), for purposes of complying with Section 713 of the NYSE American Company Guide.

 

 

2.

To elect five directors for a term expiring at the 2018 Annual Meeting of Shareholders or until their respective successors have been duly elected and qualified.

 

 

3.

To approve an amendment and restatement of the Company’s Employee Stock Purchase Plan to increase the number of shares available for issuance by 500,000 shares.

 

 

4.

To approve, on an advisory basis, the compensation for our named executive officers.

 

 

 

 

 

5.

To vote, on an advisory basis, on the frequency of future advisory votes to approve compensation for our named executive officers.

 

 

 

 

 

 

6.

To ratify the appointment of Hein & Associates LLP to act as our independent registered public accounting firm for the year ending December 31, 2017.

 

 

 

7.

To transact such other business as may properly come before the Annual Meeting.

 

The record date for the Annual Meeting has been fixed at October 5, 2017. Only shareholders of record at the close of business on that date will be entitled to notice of and to vote at the meeting.

 

 

 

October 25, 2017

By order of the board of directors

 

 

 

/s/ DAVID I. ROSENTHAL

 

David I. Rosenthal, Secretary

 

 

YOUR VOTE IS IMPORTANT. Please vote, whether or not you expect to attend the Annual Meeting, as soon as possible. You may vote by using the Internet or by telephone or by signing and returning the paper proxy card by mail. Your vote is being solicited by the board of directors. If you attend the meeting, you may vote in person even though you have submitted a proxy.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON NOVEMBER 30, 2017:

 

The Company’s proxy statement for the Annual Meeting and its Transition Report on Form 10-K for the transition period from April 1, 2016 to December 31, 2016 (the “Annual Report”) are available online at www.envisionreports.com/UQM.

 

 

 


 

PROXY STATEMENT

 

UQM TECHNOLOGIES, INC.
4120 Specialty Place
Longmont, Colorado 80504

 

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 30, 2017

 

This proxy statement and proxy card are furnished in connection with the solicitation of proxies by our Board of Directors (the “Board”) to be voted at the Annual Meeting, which will be held at 4120 Specialty Place, Longmont, Colorado 80504, on November 30, 2017, at 10:00 a.m. local time. On October 25, 2017, we began mailing to shareholders as of the close of business on October 5, 2017 (the “Record Date”) this proxy statement and proxy card.

 

QUESTIONS AND ANSWERS ABOUT THE SECOND STAGE TRANSACTION AND ANNUAL MEETING

 

Why am I receiving these proxy materials?

 

You have received these proxy materials because you own shares of UQM Technologies, Inc. common stock as of the Record Date, and our Board is soliciting your proxy to vote your shares at the Annual Meeting. This proxy statement describes the proposals to be voted on at the Annual Meeting so that you can make an informed decision with respect to your vote.

 

On what items am I voting?

 

You will be voting on six proposals at the Annual Meeting, one of which relates to the sale of the Second Stage Shares to the Buyer (Proposal 1):

 

Proposal 1: approval of the issuance by the Company of the Second Stage Shares pursuant to the terms of the Purchase Agreement for purposes of complying with Section 713 of the NYSE American Company Guide.

 

Proposal 2: election of five directors for a term expiring at the 2018 Annual Meeting of Shareholders or until their respective successors have been duly elected and qualified.

 

Proposal 3: approval of an amendment and restatement of the Company’s Employee Stock Purchase Plan (the “ESPP”) to increase the number of shares available for issuance by 500,000 shares.

 

Proposal 4: advisory vote to approve the compensation for our named executive officers.

 

Proposal 5: advisory vote to recommend the frequency of future advisory votes to approve compensation for our named executive officers.

 

Proposal 6: ratification of the appointment of Hein & Associates LLP to act as our independent registered public accounting firm for the year ending December 31, 2017.

 

What are the principal terms of the transaction with the Buyer?

 

Pursuant to the Purchase Agreement, the Buyer will acquire newly issued shares of common stock of UQM in two stages. In the first stage, which closed on September 25, 2017, the Buyer acquired 5,347,300 shares, representing 9.9% of the total outstanding shares as of the date of the Purchase Agreement, for an aggregate consideration of approximately $5.1 million (the “First Stage Transaction”). In the second stage, the Buyer will acquire such number of additional shares (the “Second Stage Shares”) resulting in the Buyer owning a total of 34% of UQM’s then-outstanding common stock on a fully diluted basis, accounting for all outstanding stock options and warrants (38% on the basis of common stock shares currently outstanding) (the “Second Stage Transaction”). The purchase price for the Second Stage Shares (which is the same price at which the shares were sold in the First Stage Transaction) will be set at approximately $0.95 per share, which represents a 15 percent premium to the average daily trading price of Company common stock during the 30 days immediately prior to the signing of the Purchase Agreement.

 

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Based on the current total outstanding shares of common stock of UQM, the total number of shares of common stock of UQM to be acquired by the Buyer in the Second Stage Transaction would be 24,348,500 shares for total proceeds of approximately $23.2 million.

 

Closing of the Second Stage Transaction is subject to the approval of UQM’s shareholders of the issuance of the Second Stage Shares (Proposal 1). Closing of the Second Stage Transaction is also subject to approval by the Committee on Foreign Investment in the United States (“CFIUS”) under Section 721 of the Defense Production Act of 1950, as amended, as it will result in a material investment by a foreign-controlled entity in the Company. For more details about the Second Stage Transaction and the transaction with the Buyer, please see Proposal 1 to this proxy statement.

 

If shareholders approve the Second Stage Transaction, will I be required to sell my shares of UQM common stock?

 

No. The Second Stage Transaction involves the purchase by the Buyer of newly issued shares of common stock of UQM. It is not a purchase of shares from UQM’s existing shareholders or a merger agreement, pursuant to which UQM shareholders would receive consideration in exchange for their common stock. Thus, you are not requested to sell your shares and shareholders of the Company prior to the Second Stage Transaction’s closing will continue to own their shares of UQM common stock following the closing.

 

If the Second Stage Transaction is approved, will UQM remain a public company?

 

Yes. Following closing of the Transaction, UQM will continue to remain a public company with its shares listed for trading on the NYSE American stock exchange and the requirement to file its annual reports (including the audited financial statements contained therein) and other reports with the Securities and Exchange Commission (“SEC”).

 

What is the effect to UQM and its other shareholders if the Second Stage Transaction is completed and the Buyer becomes a significant shareholder?

 

Pursuant to the terms of the Purchase Agreement, upon closing of the First Stage Transaction on September 25, 2017, CNHTC exercised its right to nominate (subject to the Company’s reasonable consent) one non-voting observer to the Board (the “Board Observer”). Accordingly, the Board appointed Mr. Ma Chunji, who is the chairman of the board of directors of both CNHTC and the Buyer, as the Board Observer. Upon closing of the Second Stage Transaction, (i) the Company will increase the size of the Board to eight members, (ii) the Board Observer shall have all the rights of a full Board member and (iii) CNHTC will have the right to nominate two additional Board members. In addition, for as long as CNHTC owns at least 33% of the total outstanding shares of common stock of the Company, CNHTC will have the right to nominate three of the Board’s eight members, including the Chairman of the Board.

 

Following the successful completion of the Second Stage Transaction and for as long as CNHTC maintains an ownership interest of at least 25% of the Company’s common stock shares outstanding, the Company has also agreed to confer with CNHTC in advance (unless it is impractical to confer in advance) of undertaking certain extraordinary actions, including (i) issuing new shares of stock, (ii) increasing our Board size beyond eight directors, (iii) amending the Company’s by-laws, (iv) consummating agreements involving payments or encumbrances exceeding $500,000 annually, (v) entering any union agreement or plan, (vi) granting new equity compensation awards exceeding 1.5% of the current outstanding common stock, (vii) issuing any dividend or distribution of cash or property, or (viii) terminating the employment of (except for cause) or amending any of the employment agreements with current Company executives; provided,  however, that following receipt of any good-faith, material objections from CNHTC to any of the above actions, the Company will modify such actions to the extent commercially reasonable without violating restrictions or requirements arising under applicable corporation laws, director fiduciary duties or the Company’s articles of incorporation or bylaws.

 

In addition, as a result of the Buyer’s significant ownership percentage following the completion of the Second Stage Transaction, the Buyer will be able to affect the outcome of, or exert significant influence over, all matters requiring stockholder approval, including the election and removal of directors and any change in control. In particular, this concentration of ownership of our common stock could have the effect of delaying or preventing a change in control of us or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of us. This, in turn, could have a negative effect on the market price of our common stock. It could also prevent our shareholders from realizing a premium over the market prices for their shares of common stock. Moreover, the interests of this concentration of ownership may not always coincide with our interests or the interests of other shareholders. The concentration of ownership may also contribute to the low trading volume and volatility of our common stock.

 

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Does the Board recommend the Second Stage Transaction?

 

Our Board determined that the Second Stage Transaction, on the terms and conditions set forth in the Purchase Agreement, are fair to and in the best interests of the Company and our shareholders. The Board approved the Purchase Agreement, including the Second Stage Transaction, and directed the officers of the Company to sign the Purchase Agreement and to perform all of the obligations on the part of the Company under the Purchase Agreement in order that the Second Stage Transaction may be closed as expeditiously as possible.

 

Accordingly, our Board recommends that our shareholders vote “FOR” Proposal 1: approval of the issuance by the Company of the Second Stage Shares pursuant to the terms of the Purchase Agreement for purposes of complying with Section 713 of the NYSE American Company Guide.

 

What factors did the Board consider and what were its reasons for approving the Second Stage Transaction and recommending that the shareholders approve the issuance of the Second Stage Shares?

 

In making its determinations, our Board considered various factors, including:

 

 

 

 

 

the immediate and long-term benefit to UQM’s financial condition of receiving approximately $23.2 million in cash from the sale of the shares in the Second Stage Transaction, in light of UQM’s current cash position and longer-term liquidity concerns;

 

 

 

 

 

 

 

UQM has conducted, with the assistance of a business development firm, a formal process over several years to seek strategic partners and/or investors for its electric motors and controllers business in the growing Chinese market as well as explored other opportunities for strategic partnership and/or investment. This process resulted in a proposed transaction with a smaller China market participant in 2016, which sought a majority interest in the Company’s shares and which sought to amend the Company’s articles of incorporation and bylaws in ways to reduce minority shareholder voting rights. That transaction was not approved by the Company’s shareholders due to this request to reduce minority shareholder rights, and the transaction was ultimately terminated. Thereafter, following that process, the Company entered discussions with the Buyer that have resulted in a transaction which the Company believes offers even a more compelling opportunity to build its financial capacity, access and market presence in the China market, which represents the Company’s most strategic growth target;

 

 

 

 

 

 

 

CNHTC is the parent company of Sinotruk (Hong Kong) Limited (“Sinotruk”), a leading heavy duty commercial vehicle manufacturer in China and one of the largest commercial vehicle groups in the world. In the year ended December 31, 2016, Sinotruk reported revenues from its heavy and light duty commercial trucks and buses, parts, and components of $4.9 billion, and reported shipping over 172,000 commercial vehicles and over 106,000 engines; and

 

 

 

 

the market position, captive market and apparent prospects, and financial condition of the Buyer, as UQM’s major shareholder and as a well-positioned guiding “partner” in helping UQM establish its China business.

 

See “PROPOSAL 1: Approval of the Issuance of the Second Stage Shares—Board Considerations” for additional considerations by the Board.

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

 

This proxy statement contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements about the receipt and timing of required approvals and satisfaction of other conditions to the closing of the Second Stage Transaction, our intended use of the proceeds from the sale of the Second Stage Shares, our beliefs or current expectations of the future financial prospects, operations and corporate governance procedures of the Company following the closing of the Second Stage Transaction with the Buyer, as well as our current beliefs of the future prospects of the Company if the Second Stage Transaction does not occur, whether as a result of a failure of our

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shareholders to approve the issuance of the Second Stage Shares or otherwise. We intend the forward-looking statements throughout this proxy statement to be covered by the safe harbor provisions for forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual outcomes to differ materially from our expectations. Additional information about the risks and uncertainties faced by the Company are described in the Annual Report and any subsequent reports filed with the SEC. Any forward-looking statement speaks only as of the date on which it is made. UQM does not undertake or assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

THE ANNUAL MEETING OF THE COMPANY’S SHAREHOLDERS

 

Time, Place and Purpose of the Annual Meeting

 

The Annual Meeting will be held at 10 a.m., local time, on November 30, 2017 at 4120 Specialty Place, Longmont, Colorado 80504. The Annual Meeting is being held for UQM’s shareholders to vote on the proposals described in this proxy statement.

 

If we do not receive sufficient votes by proxy or in person to constitute a quorum or to approve the items presented at the Annual Meeting, as permitted under Colorado law and by our bylaws, we will adjourn the meeting until a future date.

 

Who Can Vote at the Annual Meeting

 

Holders of our common stock at the close of business on the Record Date (October 5, 2017) are entitled to vote. As of that date, there were 54,035,328 shares of our common stock outstanding, each share being entitled to one vote. There are no other classes of voting securities outstanding.

 

Quorum; Vote Required

 

The presence, in person or by proxy, of the holders of one-third of the outstanding shares of our common stock entitled to vote will constitute a quorum, which will allow us to hold the Annual Meeting and conduct business. If a quorum is present, the affirmative vote of a majority of the shares represented at the Annual Meeting and entitled to vote is required for passage of each of Proposal 1 (approval of the issuance of the Second Stage Shares), Proposal 2 (election of the directors), Proposal 3 (amendment and restatement of the ESPP), Proposal 4 (advisory vote on named executive officer compensation) and Proposal 6 (ratification of independent registered public accounting firm). In addition, for Proposal 5, the option of one year, two years or three years that receives the greatest number of votes will be considered the frequency selected by our shareholders of future advisory votes to approve compensation for our named executive officers.

 

Abstentions and broker non-votes (as described below) will be counted toward the presence of a quorum. No cumulative voting rights are authorized, and dissenters’ rights are not applicable to the matters on which shareholders are voting at the Annual Meeting.

 

Voting Your Shares

 

Method of Voting. Shareholders of record may vote as described below:

 

 

 

 

 

You may vote by using the Internet. The address of the website for Internet voting is www.envisionreports.com/UQM. Internet voting is available 24 hours a day and will be accessible until 10:00 p.m. Mountain Time on November 29, 2017. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.

 

 

 

 

 

You may vote by telephone. The toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day and will be accessible until 10:00 p.m. Mountain Time on November 29, 2017. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.

 

 

 

 

 

You may vote by mail. If you choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope.

 

 

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You may vote in person. You may deliver a completed proxy card at the meeting or vote in person. While shareholders also may attend the meeting and vote in person, we strongly encourage you to vote in advance by using the Internet, by telephone or by signing and returning your proxy card.

 

If you are a shareholder of record voting by using the Internet, by telephone or by signing and returning the proxy card, you appoint Joseph R. Mitchell and David I. Rosenthal as your representatives at the Annual Meeting. They will vote your shares at the Annual Meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the Annual Meeting.

 

If you own our common stock through a bank or broker, please refer to the voting instructions on the form you receive from such institution to see which voting options are available to you.

 

The method you use to vote will not limit your right to vote at the Annual Meeting if you decide to attend in person. Written ballots will be passed out to anyone who wants to vote at the Annual Meeting. If you hold your shares in “street name,” you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Annual Meeting.

 

Changing your Vote. You may revoke your proxy and change your vote at any time before the polls close at the Annual Meeting. You may do this by:

 

 

submitting a subsequent proxy by using the Internet, by telephone or by mail with a later date;

 

 

sending written notice of revocation to our Corporate Secretary at 4120 Specialty Place, Longmont, Colorado 80504; or

 

 

voting in person at the Annual Meeting.

 

Attendance at the meeting will not by itself revoke a proxy.

 

Broker Non-Votes. If your shares are held in “street name” through a bank or broker, your bank or broker may only vote your shares under certain limited circumstances if you do not provide voting instructions before the Annual Meeting, in accordance with New York Stock Exchange (“NYSE”) rules that govern the banks and brokers. These circumstances include voting your shares on “routine matters,” such as the ratification of the appointment of our independent registered public accounting firm described in this proxy statement (Proposal 6). With respect to Proposal 6, therefore, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted.

 

The remaining proposals are not considered routine matters under NYSE rules relating to voting by banks and brokers. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” Broker non-votes that are represented at the Annual Meeting will be counted for purposes of establishing a quorum, but generally not for determining the number of shares voted for or against any non-routine matter, and therefore will have no effect on the outcome of the vote with respect to any non-routine matter.

 

IN ORDER TO HAVE YOUR VOTING PREFERENCES REFLECTED IN THE VOTING TABULATION, YOU MUST PROVIDE INSTRUCTIONS DIRECTLY TO YOUR BANK OR BROKERAGE FIRM IN ACCORDANCE WITH THE VOTING INSTRUCTIONS YOU RECEIVE FROM SUCH INSTITUTION.

 

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Voting Recommendations of UQM’s Board

 

For the reasons described below in the proxy statement, our Board unanimously recommends voting your shares:

 

 

 

 

 

FOR the approval of the issuance by the Company of the Second Stage Shares pursuant to the terms of the Purchase Agreement, as required under Section 713 of the NYSE American Company Guide (Proposal 1).

 

 

FOR the election of each of the five nominated directors (Proposal 2).

 

 

 

 

 

FOR the approval of the amendment and restatement of the ESPP to increase the number of shares available for issuance by 500,000 shares (Proposal 3).

 

 

FOR the approval, on an advisory basis, of the compensation for our named executive officers (Proposal 4).

 

 

ONE YEAR for the recommendation, on an advisory basis, of the frequency of future advisory votes to approve compensation for our named executive officers (Proposal 5).

 

 

FOR the ratification of the appointment of Hein & Associates LLP as our independent registered public accounting firm (Proposal 6).

 

Announcement of Voting Results

 

We will report the voting results on Form 8-K within four business days following the conclusion of the Annual Meeting. The Form 8-K will be available through our website at www.uqm.com or at www.sec.gov.

 

Householding

 

We, along with some banks, brokers and other nominee record holders may be participating in the practice of “Householding” proxy statements and annual reports. This means that only one copy of the proxy materials may have been sent to multiple shareholders sharing a household. The Company will promptly deliver a separate copy of the proxy materials to any shareholder upon written or oral request to the Corporate Secretary of the Company, UQM Technologies, Inc., 4120 Specialty Place, Longmont, Colorado 80504, telephone: (303) 682-4900. Any shareholder who wants to receive separate copies of the proxy materials in the future, or any shareholder who is receiving multiple copies and would like to receive only one per household, should contact the shareholder’s bank, broker, or other nominee record holder, or the shareholder may contact the Company at the above address and phone number.

 

Solicitation of Proxies

 

The expense of this solicitation is being borne by the Company. Solicitation of proxies may be made by mail, telephone or electronic transmission on our behalf by our directors, officers or employees, who will not be additionally compensated for this work.

 

 

 

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PROPOSAL 1: Approval of the Issuance of the Second Stage Shares

 

Overview

 

On August 25, 2017, UQM entered into the Purchase Agreement with China National Heavy Duty Truck Group Co., Ltd. (“CNHTC”) and its wholly-owned subsidiary, Sinotruk (BVI) Limited (the “Buyer”), pursuant to which, the Buyer will acquire newly issued shares of common stock of UQM in two stages, and UQM and CNHTC plan to create a joint venture (the “JV”) to manufacture and sell electric propulsion systems for commercial vehicles and other vehicles in China. The terms of the Purchase Agreement were unanimously approved by the boards of directors of both companies.

 

In the First Stage Transaction, which closed on September 25, 2017, the Buyer acquired 5,347,300 shares, representing 9.9% of the total outstanding shares as of the date of the Purchase Agreement, for an aggregate consideration of approximately $5.1 million. In the second stage, the Buyer will acquire such number of additional shares (the “Second Stage Shares”) resulting in the Buyer owning a total of 34% of UQM’s then-outstanding common stock on a fully diluted basis, accounting for all outstanding stock options and warrants (38% on the basis of common stock shares currently outstanding) (the “Second Stage Transaction”). The purchase price for the Second Stage Shares (which is the same price at which the shares were sold in the First Stage Transaction) will be approximately $0.95 per share, which represents a 15 percent premium to the average daily trading price of Company common stock during the 30 days immediately prior to the signing of the Purchase Agreement.

 

Given the significant percentage of shares that may be issued in the Second Stage Transaction, the NYSE American stock exchange deems the Second Stage Transaction to result in a “change of control” requiring shareholder approval in accordance with Section 713 of the NYSE American Company Guide. Accordingly, we are seeking shareholder approval prior to the issuance of the Second Stage Shares pursuant to the terms of the Purchase Agreement.

 

Further Information about the Second Stage Transaction, including background regarding the transaction with the Buyer and the reasons why the Board believes the Second Stage Transaction is in the best interests of the Company and its shareholders, is discussed below.

 

Background

 

More than seven years ago, management and our Board realized a potential opportunity for sales of our products into the China market, which represents a fast-growing market and the largest potential market globally. In late 2013, the Board directed that management explore the best alternatives for increasing the Company’s business operations and prospects in China. After considering many alternative scenarios to enable direct sales into China, management determined that manufacturing products in an Asian-based facility with a well-positioned local partner offered the best strategic and economic alternative to service the large and growing Chinese domestic market.

 

In connection with pursuing a transaction with a company with experience in China, on September 25, 2013 the Board formed a Special Committee of independent directors of the Board (the “Special Committee”) to oversee and approve any significant transactions with a local partner. The Special Committee was reauthorized through a Special Committee Charter approved on June 2, 2017.

 

From 2014 through 2016, the Special Committee and an investment banking firm engaged by the Company considered and evaluated a number of potential strategic investors and/or partners that they believed would be a good fit for the Company and its strategic plans. In 2016, this process resulted in a proposed transaction (the “HK Transaction”) with Hybrid Kinetic Group Limited (“HK”), a smaller China market participant, which sought a majority interest in the Company’s shares and which sought to amend the Company’s articles of incorporation and bylaws in ways to reduce minority shareholder voting rights. The HK Transaction was not fully approved by the Company’s shareholders due to this request to amend the article of incorporation and reduce minority shareholder rights, and the transaction was ultimately terminated.

 

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Following the termination of the HK Transaction, the Board conducted a review of the China strategy in January 2017. The Board determined that all of the reasons supporting the decision to enter into an investment and joint venture agreement with a potential China partner remained. However, the Board noted the significant loss of autonomy the Company faced in selling a majority interest in the Company to HK, and the Board noted the vote of the shareholders approving the HK Transaction but rejecting any change which would have reduced the voting rights of minority shareholders. On that basis, the Company’s management and Board determined that the Company should continue its search for a strategic China partner, but should focus its search on investors in China who were willing to acquire a minority interest in the Company, rather than a majority interest or other controlling interest that would require a change in the Company’s articles of incorporation. Thereafter, the Company entered into discussions with the Buyer that have resulted in a transaction which the Company believes offers even a more compelling opportunity to build its financial capacity, access and market presence in the China market, which continues to represent the Company’s most strategic growth target.

 

Summary of the Second Stage Transaction

 

 

 

 

Transaction

The Company will issue and sell to the Buyer, a wholly-owned subsidiary of CNHTC, newly issued shares of the Company’s common stock upon the terms and conditions of the Purchase Agreement.

 

Purchase Price

Based on the current total outstanding shares of common stock of UQM, the total number of Second Stage Shares to be acquired by the Buyer in the Second Stage Transaction would be 24,348,500 shares for total proceeds of approximately $23.2 million. This price is equal to approximately $0.95 per share, reflecting a 15% premium over the trading average of the Company’s common stock on a volume weighted average basis over the 30 trading days ended on August 25, 2017, the execution date of the Purchase Agreement. The Purchase Agreement does not provide for any adjustment to the per share purchase price. However, the total number of Second Stage Shares to be issued may be adjusted depending on the total number of shares then outstanding at closing, such that the Buyer will own a total of 34% of such shares outstanding on a fully diluted basis, accounting for all outstanding stock options and warrants.

 

Use of Proceeds

We intend to use the proceeds from the sale of the Second Stage Shares for business growth, particularly for the establishment and development of the JV, and for working capital and other general corporate purposes.

 

Buyer Ownership:

Following closing of the Second Stage Transaction, the Buyer will own a total of 34% of UQM’s then-outstanding common stock on a fully diluted basis, accounting for all outstanding stock options and warrants.

 

Conditions to Closing the
Second Stage Transaction

Closing of the Second Stage Transaction is subject to the approval of UQM’s shareholders as set forth in this Proposal 1.  Closing of the Second Stage Transaction is also subject to approval by the Committee on Foreign Investment in the United States (“CFIUS”) under Section 721 of the Defense Production Act of 1950, as amended, as it will result in a material investment by a foreign-controlled entity in the Company.  The parties have agreed to submit a joint draft and final voluntary notice relating to the Second Stage Transaction to CFIUS as promptly as practicable following the execution of the Purchase Agreement, and the parties have further agreed to use reasonable best efforts to obtain all shareholder approvals and other consents and approvals from all governmental authorities that may be or become necessary for completion of the Second Stage Transaction.  The parties expect to receive the aforementioned shareholder and CFIUS approval within 120 days of the execution of the Agreement, with options to extend such period as needed. However, there can be no assurance that any such approval will be obtained within such timeframe or at all.

8

 


 

 

 

The closing of the Second Stage Transaction is also subject to the satisfaction or waiver by the respective parties of customary closing conditions and other conditions, including, among others:  (a) the accuracy at closing of the parties’ representations and warranties set forth in the Purchase Agreement and the parties’ compliance with their covenant obligations therein; (b) prior to the closing of the Second Stage Transaction, completion of a joint venture agreement (the “Joint Venture Agreement”) and a technology transfer agreement (the “Technology Transfer and Service Agreement”) between the parties governing development and sale of electric motor products in China, and (c) the filing of the Purchase Agreement with applicable Chinese governmental agencies.

 

 

Covenants Following the Closing of the Second Stage Transaction

Following the successful completion of the Second Stage Transaction and for as long as the Buyer maintains an ownership interest of at least 25% of the Company’s common stock shares outstanding, the Company has agreed to confer with CNHTC in advance (unless it is impractical to confer in advance) of undertaking certain extraordinary actions, including (i) issuing new shares of stock, (ii) increasing our Board size beyond eight directors, (iii) amending the Company’s by-laws, (iv) consummating agreements involving payments or encumbrances exceeding $500,000 annually, (v) entering any union agreement or plan, (vi) granting new equity compensation awards exceeding 1.5% of the current outstanding common stock, (vii) issuing any dividend or distribution of cash or property, or (viii) terminating the employment of (except for cause) or amending any of the employment agreements with current Company executives; provided,  however, that following receipt of any good-faith, material objections from CNHTC to any of the above actions, the Company will modify such actions to the extent commercially reasonable without violating restrictions or requirements arising under applicable corporation laws, director fiduciary duties or the Company’s articles of incorporation or bylaws.

 

In addition, following the closing of the Second Stage Transaction and for so long as CNHTC beneficially owns more than 9.9% of the Company’s common stock and the Joint Venture Agreement has not been terminated, the Company will not, without the prior written consent of CNHTC, take any action to materially modify the Company’s business strategy in China from that contemplated in the Joint Venture Agreement or the Joint Venture’s annual budget or business plan, including strategy regarding automotive passenger cars in China, sales to Chinese third parties, licensing of technology to Chinese entities or other matters related to the China new energy vehicle market.

 

9

 


 

  

 

 

 

Board of Directors Following Closing of the Second Stage Transaction

Upon closing of the First Stage Transaction on September 25, 2017, CNHTC exercised its right to nominate (subject to the Company’s reasonable consent) one non-voting observer to the Board (the “Board Observer”). Accordingly, the Board appointed Mr. Ma Chunji, who is the chairman of the board of directors of both CNHTC and the Buyer, as the Board Observer. Prior to the closing of the Second Stage Transaction, the Board Observer has no voting power on the Board. Upon closing of the Second Stage Transaction, (i) the Company will increase the size of the Board to eight members, (ii) the Board Observer shall have all the rights of a full Board member and (iii) CNHTC will have the right to nominate two additional Board members. In addition, for as long as CNHTC owns at least 33% of the total outstanding shares of common stock of the Company, CNHTC will have the right to nominate three of the Board’s eight members, including the Chairman of the Board.

 

Noncompetition

The Company and CNHTC have agreed to negotiate in good faith to establish the JV through which the Company will conduct its business in China. Following the closing of the First Stage Transaction until the later of the termination of the Joint Venture Agreement and the date on which CNHTC ceases to own any shares of common stock of the Company, the Company has agreed not to undertake business in China that would directly or indirectly compete with the JV’s or CNHTC’s business in China.

 

Lockup and Standstill

The Buyer has agreed that from the date of the Purchase Agreement until the end of the first anniversary following the closing of the Second Stage Transaction, neither the Buyer nor any of its affiliates will, directly or indirectly, purchase any shares of capital stock of the Company representing a majority of the voting power of all the capital stock of the Company.

 

The Buyer also agreed that it will not, during the period commencing on the date of the Purchase Agreement and continuing for a period of one year (the “Lock-Up Period”), lend, offer, pledge, or sell, directly or indirectly, any shares of common stock of the Company without the prior written consent of a majority of the Board, subject to certain exceptions. The parties agreed that the Lock-Up Period will be immediately terminated and the Buyer will be entitled to sell or offer for sale its common stock purchased in the First Stage Transaction if the closing of the Second Stage Transaction cannot be consummated through the failure to obtain CFIUS approval or the failure of the parties to execute and deliver the Joint Venture Agreement and the Technology Transfer and Service Agreement, due to no act or omission by the Buyer.

 

Termination and Effect

If the Purchase Agreement is terminated without the Second Stage Transaction closing, then the Purchase Agreement will become void and of no further force and effect, with no liability on the part of any party to the Purchase Agreement (or any shareholder, director, officer, employee, agent or representative of such party) to any other party, except with respect to the parties’ confidentiality and indemnification obligations and the survival of customary governing law, notice and similar miscellaneous provisions.  In addition, a termination of the Purchase Agreement will not impact the Buyer’s purchase of any shares prior to such termination date, including the shares purchased by the Buyer in the First Stage Transaction.

 

 

10

 


 

 

Registration Rights Agreement

Pursuant to the terms of the Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Buyer.  The Registration Rights Agreement provides that within 15 days of the earlier of 75 days after submission of the initial CFIUS application and three months after the date of the Purchase Agreement, the Company will file an initial registration statement covering the Buyer’s registrable securities.  The Buyer will have customary “piggyback” registration rights.  The Registration Rights Agreement also requires the Company to pay expenses relating to such registrations, indemnify the registration rights holders against certain liabilities, and pay the Buyer certain liquidated damages in the event its registration statements are not declared effective.

 

Board Considerations

 

In determining that the Second Stage Transaction is in the best interests of the Company and its shareholders, the Board and the Special Committee considered various factors, including the following (not necessarily in order of importance):

 

 

1.

Strategic objective of entry into China:

 

 

 

 

 

The Company’s management team and Board determined that the Buyer met their three most important criteria needed for a strategic partner in China: (1) strong capital position; (2) proven manufacturing capacity and other infrastructure in China; and (3) access to the Asia market.

 

 

 

 

 

 

 

Based on the understanding of the management team and the Board of the Company’s business, operations, financial condition and financing needs, earnings, growth prospects and products, they determined that it is critical that the Company expand its manufacturing, marketing and sales capacity into the growing Chinese market, the largest market in the world for electric vehicles. Accordingly, the Company has conducted, with the assistance of a business development firm focused on Asian opportunities, a formal process over the past few years to seek strategic partners and investors for the Company’s electric motors and controllers business in China, as well as to explore other opportunities for strategic partnership and/or investment.

 

 

 

 

 

 

 

The Company and its Board determined that to be a successful entrant into China, the Company needs additional capital reserves and a strong business affiliation with a China partner.

 

 

 

 

 

 

 

The completed First Stage Transaction and the contemplated Second Stage Transaction enable expansion into China and other international markets while providing the immediate and long-term financial benefit to the Company of receiving an aggregate of approximately $28.3 million in cash from the sale of its stock, thereby significantly enhancing the Company’s current cash position and alleviating longer-term liquidity concerns.

 

 

 

 

The Board believes that the transaction with the Buyer represents the best offer following an exhaustive market search aided by independent advisors with knowledge of the Asian markets. The Company’s management team and its Board believe this transaction provides compelling financial benefit and a strong likelihood of a successful entry into the China market.

 

11

 


 

 

 

 

2.

Concerns if the Company is unable to close the Second Stage Transaction or a similar transaction:

 

 

The Board and the Special Committee also considered the effect to the Company of not pursuing the transactions contemplated by the Purchase Agreement with the Buyer, including the Second Stage Transaction, or a similar transaction to acquire additional funds to continue its operations and pursue its desired strategy, and the consequences to the Company and its shareholders of this inaction, including:

 

 

o

At June 30, 2017, the Company had cash and cash equivalents of $2.1 million and working capital of $3.2 million. The Company’s net loss for the quarter ended June 30, 2017 was $1.3 million and its operating loss for the same quarter was $1.3 million. The Company’s current levels of cash and working capital will not continue to support this rate of operating losses until the future time at which the Company’s management and Board believes the Company will become profitable.

 

 

o

Even if the Company’s level of operations did not result in a continuing operating loss or the Company had sufficient cash and working capital on hand to satisfy its current rate of losses, the Company does not currently have sufficient funds for capital expenditures and initial working capital necessary to establish an Asia-based manufacturing facility to support the Chinese and other Asian markets. The Company’s management also believes, from its discussion with numerous China-based potential customers, that having an Asia-based manufacturing facility rather than exporting product from the United States is essential to its ability to generate sales in the China electric vehicle market.

 

 

Based on the analysis of the Company’s management on alternative sources of capital, including public or private sales of common stock, warrants, or convertible or nonconvertible debt securities and the likely price and other terms and conditions of such sales, the Board and the Special Committee determined that the significant cost of such financing, even if it could be obtained, to the Company and the attendant significant dilution to its shareholders was substantially less favorable to the Company than pursuing the Second Stage Transaction.

 

 

If the closing of the Second Stage Transaction cannot be consummated through the failure to obtain CFIUS approval or the failure of the parties to execute and deliver the Joint Venture Agreement and the Technology Transfer and Service Agreement due to no act or omission by the Buyer, then the Lock-Up Period will be immediately terminated and the Buyer will be entitled to sell or offer for sale its common stock purchased in the First Stage Transaction. Accordingly, any sales by the Buyer of a substantial number of shares of our common stock in the public market following a termination of the Lock-Up Period may cause the market price of our shares to decline.

 

 

3.

Adverse Factors:

 

 

The Second Stage Transaction might be delayed or might not close, including the risk that the required CFIUS approvals might not be obtained, and the likely loss of value to the Company if there is a delay or the Second Stage Transaction fails to close for any reason.

 

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The Buyer will have a significant ownership percentage following the Second Stage Transaction and participation on the Company’s Board, which will enable the Buyer to affect the outcome of, or exert significant influence over, all matters requiring Board or shareholder approval, including the election and removal of directors and any change in control. In particular, this concentration of ownership of our common stock could have the effect of delaying or preventing a change in control of us or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of us. This, in turn, could have a negative effect on the market price of our common stock. It could also prevent our shareholders from realizing a premium over the market prices for their shares of common stock. Moreover, the interests of this concentration of ownership may not always coincide with our interests or the interests of other shareholders. The concentration of ownership may also contribute to a low trading volume and volatility of our common stock.

 

 

The Company has must confer with CNHTC in advance of undertaking certain extraordinary actions and that CNHTC will have certain Board rights, as described under “-Summary of the Second Stage Transaction” above.

 

 

 

 

 

There may be commercial, cultural and other hurdles in executing the strategy of establishing a joint venture and market the Company’s products in China.

 

 

 

4.

Additional Factors:

 

 

The purchase price for the Second Stage Shares (which is the same price at which the shares were sold in the First Stage Transaction) will be set at approximately $0.95 per share, which represents a 15 percent premium to the average daily trading price of Company common stock during the 30 days immediately prior to the signing of the Purchase Agreement.

 

 

The terms and conditions of the Purchase Agreement, including, among other things, the representations, warranties, covenants and agreements of the parties, the conditions to closing, the form and governance of the Company post-closing and the termination rights of the parties, taken as a whole, were more favorable than those terms and conditions negotiated with other potential strategic partners and/or investors.

 

 

Pursuant to the terms of the Purchase Agreement, all of the Company’s independent directors will continue to serve on the Board following the consummation of the Second Stage Transaction.

 

The foregoing discussion of the information and factors considered by the Company’s management team, the Board, and the Special Committee is not intended to be exhaustive, but includes the material factors considered by them. The Board based its favorable recommendation to the Company’s shareholders on the totality of the information presented.

 

Portions of this explanation of the reasons for the transactions contemplated by the Purchase Agreement, including the Second Stage Transaction, and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the section entitled “Cautionary Statement Concerning Forward-Looking Information” elsewhere in this proxy statement. In addition, you are encouraged to read the Purchase Agreement carefully in its entirety, which was included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 30, 2017.

 

13

 


 

 

 

Interests of the Company’s Directors and Executive Officers in the Transaction

 

None of the directors or executive officers of UQM have any interest in the Buyer or any relationship with the Buyer other than from association with the Buyer and its executives through the course of the negotiation of the Purchase Agreement.

 

The Purchase Agreement contemplates no change in management following the closing of the Second Stage Transaction. Mr. Mitchell and our other executive officers are parties to employment agreements with the Company, the terms of which end on December 31, 2019 in each case. As a condition to the closing of the Purchase Agreement, Messrs. Mitchell and Ley have amended their employment agreements to extend the non-competition and non-solicitation time periods set forth in their current agreements from a period of one year to two years from the date of termination of employment for any reason. In addition, in exchange for the extension of the non-competition and non-solicitation periods, the amendments to the employment agreements increased the severance payable to Mr. Mitchell upon a termination without cause (or termination for good reason) to two years of base salary (from one year of base salary) and increased the severance payable to Mr. Ley upon a termination without cause (or termination for good reason) to two years of base salary (from six months of base salary). The parties have agreed that following the closing of the Transaction, the Company will continue to honor the terms of those employment agreements, as amended.

 

Required Vote

 

The affirmative vote of a majority of the shares represented at the Annual Meeting and entitled to vote is required for this proposal. Abstentions will be counted as present and entitled to vote on this proposal and will therefore have the effect of a negative vote. Broker non-votes will not be counted as present and entitled to vote on this proposal and will therefore have no effect on the outcome of this proposal.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ISSUANCE BY THE COMPANY OF THE SECOND STAGE SHARES.

 

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PROPOSAL 2: Election of Directors

 

Pursuant to the bylaws of the Company, the Board sets the number of directors. The Board currently consists of five members. The Board has nominated five candidates to stand for re-election to the Board, four of whom (Messrs. Vanlandingham, Roy, Sellinger and Sztykiel) are independent directors, as defined in the applicable rules of the SEC and the NYSE American. The other member is the Company’s Chief Executive Officer. Proxies may not be voted for more than five persons. The Board is not classified, and each director serves for a term of one year and thereafter until his successor is duly elected and qualified.

 

At the Annual Meeting, the shareholders will elect five members to the Board. In the absence of instructions to the contrary, the proxy holders will vote the shares represented by proxy in favor of the nominees listed below. The Company expects each of the nominees listed below to be able to serve as a director. If any nominee should become unavailable, however, it is intended that the proxy holders will vote for a substitute designated by management.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

 

Age

 

 

 

Position with the Company

 

 

 

Officer or
Director
Since

 

 

Business Experience

Donald W. Vanlandingham

 

77

 

Chairman of the Board, Member of the Compensation Committee and Member of the Governance and Nominating Committee

 

2003

 

Chairman of the Board of Directors of Ball Aerospace and Technologies Corporation, a wholly-owned subsidiary of Ball Corporation from 2002 to 2003; President and Chief Executive Officer of Ball Aerospace and Technologies Corporation from 1996 to 2002.

 

Joseph R. Mitchell

 

57

 

President and Chief Executive Officer

 

2012

 

President and CEO of UQM since January 2016. Interim President and CEO of UQM from July 2015 to January 2016. Senior VP of Operations of UQM from June, 2012 to December 2015. Director of Quality, North America for A123 Systems, Inc. from March to May, 2012. Director of Operations and Quality - North American Hybrid Electric Drives for Continental Automotive from 2008 to February, 2012.

 

 

 

15

 


 

 

 

Name

 

Age

 

Position with the Company

 

Officer or
Director
Since

 

Business Experience

Stephen J. Roy

 

67

 

Director, Chairman of the Audit Committee and Member of the Compensation Committee

 

 

2000

 

Principal, STL Capital Partners, LLC since 2002. Managing Director - Investment Banking for A. G. Edwards & Sons, Inc. from 1989 through 2002.

 

Joseph P. Sellinger

 

71

 

Director, Chairman of the Compensation Committee, and Member of the Audit Committee and the Governance and Nominating Committee

 

 

2008

 

Vice President, Anheuser Busch Companies and Chairman, President and Chief Executive Officer of the Anheuser Busch Packaging Group from 2000 to 2006.

 

John E. Sztykiel

 

60

 

Director, Chairman of the Governance and Nominating Committee and Member of the Audit Committee

 

2012

 

President, Chief Executive Officer and Director, Spartan Motors, Inc. from 2002 to February 2015.

 

 

We have provided below information about each director’s specific experience, qualifications, attributes or skills that led our Board to conclude, in light of our business and corporate strategy that such individual should serve as a director of the Company.

 

Mr. Vanlandingham, our Chairman, has been an independent director of the Company for 14 years. He brings many years of leadership and management experience as Chairman and Chief Executive Officer of a major technology and manufacturing company to his role on the Board. With experience in overseeing development of technology and complex equipment with attention to development schedules, production, quality, business development and budgets, he brings valuable insight to the Board as it oversees the Company’s operations and strategy.

 

Mr. Mitchell is our President and Chief Executive Officer. Mr. Mitchell has over 26 years of experience in the automotive sector with particular focus in operations and quality, and over 16 years of experience in hybrid electric automotive applications. Mr. Mitchell brings operational and management experience specific to UQM’s business and is a recognized leader in the electric propulsion industry.

 

Mr. Roy has been an independent director of the Company for over 17 years. With over 30 years of investment banking experience and ten years’ experience as a principal and co-founder of a private equity business, Mr. Roy brings valuable insight to the Company in finance and accounting, capital markets, business analysis and strategy. Mr. Roy has the financial background and skills to serve as an “audit committee financial expert.”

 

Mr. Sellinger has been an independent director of the Company since 2008. He brings extensive senior management experience with a major manufacturing company to his role on the Board. From his experience running a high volume manufacturing business with annual sales in excess of $1 billion, he provides valuable insight to the Board on operations, planning and implementation of strategy, risk management and other issues as the Company launches volume production of its products.

 

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Mr. Sztykiel has been an independent director of the Company since 2012. Mr. Sztykiel was the Chief Executive Officer of a manufacturer of trucks and truck components for 12 years. In this capacity, Mr. Sztykiel has extensive senior management and marketing experience in the North American truck market. Mr. Sztykiel’s extensive management experience in a manufacturing company servicing the truck market provides valuable insight to the Board on strategy, marketing and manufacturing of the Company’s products.

 

No family relationship exists between any director, executive officer, significant employee or person nominated or chosen by the Company to become a director or executive officer. There are no arrangements or understandings between any director and any other person pursuant to which any director was nominated as a director.

 

During the transitional nine months ended December 31, 2016, the Board held twelve meetings. Each incumbent director attended or participated in more than 80 percent of the meetings of the Board and Board committees on which he served during the period he was a director. Participation at meetings was sometimes by telephone, which is authorized under Colorado law. The Company encourages directors to attend the annual meeting of shareholders each year. At the 2016 Annual Meeting of Shareholders held November 22, 2016, all members of the Board attended. The independent directors serving on the Board periodically meet as a group without management present. None of the directors listed above have been involved during the last ten years in any legal proceedings that are material to an evaluation of the ability or integrity of that person to serve as a director of the Company.

 

Changes to Board if the Second Stage Transaction is Completed

 

Pursuant to the terms of the Purchase Agreement, upon closing of the First Stage Transaction on September 25, 2017, CNHTC exercised its right to nominate (subject to the Company’s reasonable consent) one non-voting observer to the Board. Accordingly, the Board appointed Mr. Ma Chunji, who is the chairman of the board of directors of both CNHTC and the Buyer, as the Board Observer. Mr. Ma is a senior economist with over 30 years’ experience in government, corporate management and strategic planning.

 

Prior to the closing of the Second Stage Transaction, the Board Observer has no voting power on the Board. Upon closing of the Second Stage Transaction, (i) the Company will increase the size of the Board to eight members, (ii) the Board Observer shall have all the rights of a full Board member and (iii) CNHTC will have the right to nominate two additional Board members. In addition, for as long as CNHTC owns at least 33% of the total outstanding shares of common stock of the Company, CNHTC will have the right to nominate three of the Board’s eight members, including the Chairman of the Board. Shareholders should note that while they will elect five directors at the Annual Meeting, the remaining three directors to be nominated by the Buyer pursuant to the terms of the Purchase agreement will not be nominated and elected until after the closing of the Second Stage Transaction.

 

Required Vote

 

Each of the five nominees for director will be elected upon the affirmative vote of a majority of the shares represented at the Annual Meeting and entitled to vote is required for this proposal. Abstentions will be counted as present and entitled to vote on this proposal and will therefore have the effect of a negative vote. Broker non-votes will not be counted as present and entitled to vote on this proposal and will therefore have no effect on the outcome of this proposal.

 

THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES PRESENTED.

 

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Board and Corporate Governance Matters

 

Selecting Nominees for Director

 

The Board has delegated to the Governance and Nominating Committee the responsibility for reviewing and recommending to the Board nominees for director. The Governance and Nominating Committee, in evaluating director candidates, considers factors such as professional background and skills, age and business experience, personal character and values, ethical standards, diversity, existing outside commitments and planned future commitments, among other things. However, the Governance and Nominating Committee has not established any specific minimum criteria or qualifications that a nominee must possess.

 

The Governance and Nominating Committee is responsible for recommending nominees for election at the Annual Meeting and for identifying one or more candidates to fill any vacancies that may occur on the Board. The Governance and Nominating Committee may use a variety of sources to identify new candidates such as recommendations from independent directors or members of management, search firms, discussions with business associates and other persons who may know of suitable candidates to serve on the Board and shareholder recommendations. Evaluation of candidates typically includes a review of the candidate’s qualifications by the Governance and Nominating Committee based upon the factors described above, interviews with one or more members of the committee and interviews with one or more members of the Board. The Governance and Nominating Committee then recommends suitable candidates to the full Board who then approves or rejects the nominee.

 

The Governance and Nominating Committee will consider director candidates proposed by shareholders using the same evaluation criteria as for candidates recommended from other sources. Any shareholder interested in submitting a prospective nominee for consideration by the Governance and Nominating Committee should submit the candidate’s name and qualifications addressed to: Corporate Secretary at 4120 Specialty Place, Longmont, Colorado 80504. See the section entitled “Proposals by Shareholders for the 2018 Annual Meeting” for additional information.

 

Board Diversity

 

Our Board is comprised of accomplished professionals who represent diverse and key areas of expertise including, national and international business, operations, marketing, manufacturing, finance and investing, management, entrepreneurship, government and science, research and technology. While we do not have a formal diversity policy with respect to director nominations, we believe that the diversity of skills, knowledge, opinions and fields of expertise represented on our Board is one of the Board’s core strengths. When identifying and selecting director nominees, the Governance and Nominating Committee considers the impact a nominee would have in terms of increasing the diversity of the Board with respect to professional experience, background, viewpoints, skills and areas of expertise together with considering diversity of race, gender and national origin of potential director candidates. We believe that the resulting diversity of directors allows the Board to engage in honest and challenging discussions, in service of the best decisions for the Company and its shareholders. The diversity of our directors’ skills allows each director an opportunity to provide specific leadership in his respective areas of expertise.

 

Board Leadership Structure

 

We have a Board leadership structure whereby the positions of Chairman of the Board and Chief Executive Officer are separate. We believe this structure provides the Board with independent leadership and oversight of management and allows the Chief Executive Officer to concentrate on the Company’s business operations.

 

Our Board is comprised of five directors, four of whom are independent directors. All of our independent directors are highly accomplished and experienced business leaders in their respective fields, who have demonstrated leadership in significant enterprises and are familiar with Board processes.

 

We believe the current Board leadership structure facilitates effective communication, oversight and governance of the Company consistent with the best interests of the Company’s shareholders and other stakeholders.

 

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Board Risk Oversight

 

Our Company faces a number of risks including financial, operational, reputational, credit and liquidity, governance and regulatory. The Chief Executive Officer and Chief Financial Officer are primarily responsible for identifying, assessing and managing these risks. The Board provides additional risk oversight in several ways, including: (a) discussing internal controls and financial reporting annually through review and approval of the Company’s annual budget, including a review of potential risks that could negatively impact the proposed budget and plan; (b) performing regular reviews with management regarding the Company’s liquidity and capital requirements; and (c) engaging in periodic discussions regarding operational, asset protection and security, regulatory and other risks with our Chief Executive Officer, Chief Financial Officer, and other Company officers, as it deems appropriate.

 

Communications from Shareholders to the Board

 

The Board recommends that any communications from shareholders be in writing and addressed to the Board in care of the Corporate Secretary, 4120 Specialty Place, Longmont, Colorado 80504. The name of any specific intended Board members should be noted in the communication. The Board has instructed the Corporate Secretary to forward such correspondence only to the intended recipients; however, the Board has also authorized the Corporate Secretary, prior to forwarding any correspondence, to review the correspondence, and in his discretion, not to forward certain items if they are deemed frivolous, of inconsequential commercial value or otherwise inappropriate for Board consideration.

 

Code of Ethics

 

The Company has adopted a Code of Business Conduct Ethics that applies to all directors, officers, employees, consultants, representatives and agents. The Code of Business Conduct Ethics is available on our website at www.uqm.com “Investors - Corporate Governance.” If the Company makes any substantive amendments to the Code of Business Conduct Ethics or grants any waiver from a provision of the code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.

 

Committees of the Board

 

Our Board has three standing committees - Audit, Compensation, and Governance and Nominating. Each of the Audit, Compensation, and Governance and Nominating committees is comprised entirely of independent directors and is led by a committee chair. All of our independent directors are encouraged to, and do, actively participate in the development of the Company’s business strategy in collaboration with the Chief Executive Officer and in the general oversight of the Company’s operations and financial affairs.

 

Mr. Roy serves as the committee chair of the Audit Committee. In this role, he exercises substantial influence and judgment over the Company’s financial affairs and financial reporting. The Audit Committee has a written charter adopted by the Board that specifies its duties including assisting the Board in its general oversight of the Company’s financial reporting, internal controls and audit functions, and its direct responsibility for the appointment, retention, compensation and oversight of the independent auditors. A copy of the Company’s Audit Committee charter is available on our website at www.uqm.com “Investors - Corporate Governance”. The Audit Committee consists of three directors, Messrs. Roy, Sellinger and Sztykiel and met three times during the transitional nine months ended December 31, 2016. All members of the Audit Committee are independent directors as defined in applicable rules of the NYSE American and the SEC. The Board has determined that Mr. Roy meets the qualifications of an “audit committee financial expert” in accordance with SEC rules. See also “Report of the Audit Committee” below.

 

19

 


 

  

Mr. Sztykiel serves as the committee chair of the Governance and Nominating Committee. In this role, he exercises substantial influence and judgment over the Company’s governance policies and the identification and evaluation of candidates for our Board. The Governance and Nominating Committee considers such matters as whether the size and composition of the Board is appropriate in the context of the Company’s business operations, monitors and addresses issues related to corporate governance and suggests changes when it deems appropriate and oversees the annual assessment of Board performance. A copy of the Company’s Governance and Nominating Committee charter is available on our website at www.uqm.com “Investors - Corporate Governance”. See also “Selecting Nominees for Director” above. The Governance and Nominating Committee consists of three directors, Messrs. Sellinger, Sztykiel and Vanlandingham and met one time during the transitional nine months ended December 31, 2016. All members of the Governance and Nominating Committee are independent directors as defined in applicable rules of the NYSE American and the SEC.

 

Mr. Sellinger serves as the committee chair of the Compensation Committee. In this role, he exercises substantial influence and judgment over the Company’s compensation practices, particularly as it relates to the structure and competitiveness of the Company’s executive compensation. The Compensation Committee reviews the performance and compensation of the Company’s Chief Executive Officer and administers the 2012 Equity Incentive Plan, Employee Stock Purchase Plan, Non-Employee Director Stock Option Plan and Stock Bonus Plan. The Compensation Committee consists of three directors. Messrs. Roy, Sellinger and Vanlandingham, and met four times during the transitional nine months ended December 31, 2016. All members of the Compensation Committee are independent directors as defined in applicable rules of the NYSE American and the SEC. The Compensation Committee has a written charter specifying its responsibilities which is available on our website at www.uqm.com “Investors - Corporate Governance.”

 

20

 


 

 

 

MANAGEMENT

 

The executive officers of the Company are:

 

Name

 

Age

 

Position

Joseph R. Mitchell

 

57

 

President and Chief Executive Officer

 

 

 

 

 

David I. Rosenthal

 

62

 

Treasurer, Secretary and Chief Financial Officer

 

 

 

 

 

Adrian P. Schaffer

 

55

 

Vice President of Sales and Business Development

 

 

 

 

 

Josh M. Ley

 

42

 

Vice President of Engineering

 

On January 5, 2016, Joseph R. Mitchell was appointed our President and Chief Executive Officer in conjunction with already being appointed Chief Operating Officer on July 20, 2015. Mr. Mitchell served as our interim President and Chief Executive Officer from July 20, 2015 until January 5, 2016. Mr. Mitchell joined the Company on June 1, 2012 and served as Senior Vice President of Operations. From March 2012 until joining the Company, Mr. Mitchell was Director of Quality, North America, for A123 Systems, Inc. Mr. Mitchell served as Director, Operations and Quality - North American Hybrid Electric Drives for Continental Automotive from January 2008 through March 2012. From January 2007 through January 2008, Mr. Mitchell served as Director of Operations and Hybrid Drive Segment Manager for Siemens VDO. Prior to that, Mr. Mitchell held a series of manufacturing and quality positions at Ballard Power Systems and Ford Motor Company.

 

David I. Rosenthal joined the Company as Treasurer, Secretary and Chief Financial Officer on May 1, 2013. From March 2011 until joining the Company, Mr. Rosenthal was a Financial Consultant for start-up and turnaround companies. From February 2010 until February 2011, Mr. Rosenthal was Interim President and Chief Executive Officer of Cyanotech Corporation, a publicly-traded manufacturer of nutritional supplement products. Mr. Rosenthal served as a director of Cyanotech from August 2000 until September 2011. From May 2008 until March 2009, Mr. Rosenthal served as Chief Financial Officer for Hickory Farms and from June 2007 until November 2007 served as Chief Financial Officer of Sanz, Inc., both portfolio companies of the private-equity firm Sun Capital Partners.

 

Adrian P. Schaffer joined the Company on December 1, 2011 as Vice President of Sales and Business Development. From February 2006 until joining the Company, Mr. Schaffer served as Vice President of Sales for the Industrial, Commercial and Energy Group of Linamar Corporation, a leading supplier to the global vehicle and mobile industrial markets. Mr. Schaffer also spent thirteen years with Motorola Corporation where he held positions in sales, business development and account management in Motorola’s Telematics, Powertrain, Autobody and Heavy Vehicle Electronics Groups, including most recently as Director of Global Marketing for the global automotive group.

 

Josh M. Ley joined the Company in January 1994 and was appointed Vice President of Engineering on March 4, 2015. Mr. Ley previously served as Motor Design Engineer and Manager of Motor Design Engineering for the Company.

 

There are no arrangements or understandings between any executive officer and any other person pursuant to which any executive officer was selected as an executive officer. None of the executive officers listed above have been involved during the last ten years in any legal proceedings that are material to an evaluation of the ability of that person to serve as an executive officer of the Company.

 

21

 


 

 

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Under Section 16(a) of the Exchange Act, the Company’s directors, its executive (and certain other) officers, and any persons holding more than ten percent of the Company’s common stock are required to report their ownership of the Company’s common stock and any changes in that ownership to the SEC. The Company is required to report in this statement any failure to file timely reports with the SEC during the transitional nine months ended December 31, 2016. Based solely on its review of Form 3, Form 4 and Form 5 filings, the Company believes that the following required Section 16(a) reports were not filed timely during the transitional nine months ended December 31, 2016.

 

Name

 

# of Late Forms

 

 

# of Transactions
Reported Late

 

 

Failure to File a
Required Form

 

Joseph R. Mitchell

 

 

1

 

 

 

1

 

 

 

 

David I. Rosenthal

 

 

2

 

 

 

2

 

 

 

 

Adrian P. Schaffer

 

 

2

 

 

 

2

 

 

 

 

Donald W. Vanlandingham

 

 

1

 

 

 

1

 

 

 

 

Stephen J. Roy

 

 

1

 

 

 

1

 

 

 

 

Joseph P. Sellinger

 

 

1

 

 

 

1

 

 

 

 

John E. Sztykiel

 

 

1

 

 

 

1

 

 

 

 

 

 

22

 


 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Compensation Philosophy and Objectives

 

Our executive compensation program is designed to attract, motivate and retain highly qualified executives, while providing performance-based incentives for the attainment of strategic business objectives, rewarding superior performance and aligning the interests of our executives with those of our shareholders.

 

Our management compensation program has three primary components:

 

 

 

 

Base pay

Provides an annual salary level consistent with market conditions, the individuals’ position, responsibility and contributions.

 

Bonus

Provides variable cash compensation based on the achievement of Company, organizational and individual performance objectives.

 

Long-term equity-based Incentive pay

Aligns a portion of each executive’s annual compensation to the long-term success of the Company and encourages an ownership mindset that aligns the interests of management with those of the Company’s other shareholders.

 

 

The minimum base pay component of executive compensation is specified in employment agreements with our executive officers. Bonus payments are performance-based payments that are payable annually in lump sum cash payments. Long-term equity-based incentive awards consist of shares of the Company’s common stock, stock options to acquire shares of the Company’s common stock or a combination of both.

 

Bonus payments and long-term incentive grants are determined by the Compensation Committee based principally on objective criteria consisting of each executive officer’s achievement of personal and Company-wide goals. Payments of bonus awards each fiscal year are based on a retrospective review of the prior fiscal year’s performance. The amount of the cash bonus payment and long-term incentive grant for each executive is determined based on the Committee’s deliberations regarding attainment of individual and Company-wide goals by Company executives. The Committee’s determination of the degree of attainment of these goals by each executive was subjective and based on the Committee’s deliberations. The Compensation Committee also annually reviews the base pay of our executive offices and may increase (but not decrease) the amount of base pay as specified in the respective employment agreement with each executive.

 

The Compensation Committee is composed of three members of our Board, each of which is independent as defined in applicable rules of the NYSE American and the SEC. The Compensation Committee does not delegate its authority to establish executive compensation to any other persons. The Compensation Committee approved the total compensation (and each of the individual elements of compensation) for Joseph R. Mitchell, President and Chief Executive Officer. The Committee also approved the compensation of the other named executive officers with input from the Chief Executive Officer.

 

In the twelve months ended March 31, 2015, the Compensation Committee engaged Pay Governance LLC to provide consulting services on executive compensation, pay scales and alternative executive compensation plans. The Compensation Committee anticipates that it may engage a compensation consultant at an interval of every three to five years to assist it in evaluating the competitiveness of its executive compensation program.

 

The Compensation Committee has also reviewed compensation data from a peer group of alternative energy companies that it believed to be in competition with the Company in the marketplace for executive talent. While the Compensation Committee does not set benchmark percentile targets for executive compensation, the compensation levels for the three primary elements of executive compensation are generally set to establish pay levels that are competitive with those of the identified peer group of companies.

 

23

 


 

 

 

The Compensation Committee has reviewed all compensation policies and practices for executive officers and employees to determine if there is risk arising from such policies and practices that could reasonably have a material adverse effect on the Company. The Compensation Committee reviews all aspects of performance in determining bonus awards and there are no specific threshold targets that increase bonuses. In addition, the Company’s maximum bonus award in any year is limited to two times the target bonus, and the Company has to date never exceeded a bonus payout of more than 100% of the target. Further, bonuses awarded may be recouped pursuant to our Clawback Policy. Therefore, the Committee believes there is a low risk for any material adverse effect on the Company arising from compensation policies and practices.

 

We have entered into employment agreements with our executive officers that contain severance payment provisions, including change in control severance payments, and provide a modest program of executive perquisites and personal benefits as are further described in the section “Employment Agreements” below. The purpose of the employment agreements is to provide financial security for the executive, to aid in retention and to encourage loyalty to and long-term employment with the Company.

 

Say-on-Pay Advisory Vote

 

As selected by our shareholders at the 2011 Annual Meeting of Shareholders and approved by our Board, an advisory vote to approve the compensation of our named executive officers is held annually, subject to the advisory vote to recommend the frequency of such vote as set forth in Proposal 5 for the Annual Meeting. At our 2016 Annual Meeting of Shareholders, over 76% of the Company’s voting shareholders approved, on an advisory basis, the compensation of our named executive officers. Our Compensation Committee considered the results of the advisory vote on executive compensation. In this proxy statement (Proposal 5), the Company proposes to continue the advisory vote to approve the compensation of our named executive officers on an annual basis.

 

Adoption of Compensation Clawback Policy

 

On July 7, 2015, our Board adopted the UQM Technologies, Inc. Clawback Policy. This clawback policy allows us to recoup executive incentive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws. The clawback policy applies to all forms of incentive compensation previously granted to executive officers, including stock options, cash bonuses, and restricted stock, that were granted during the three years prior to any accounting restatement. The amount to be recovered will be the excess of the executive compensation paid to the named executive officer based on the erroneous data over the executive compensation that would have been paid to the named executive officer had it been based on the restated results, as determined by the Compensation Committee.

 

Elements of Compensation

 

Base Salary. Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation for similar positions in the peer group of companies, as well as the experience and performance of the individual, our ability to replace the individual and other primarily judgmental factors deemed relevant by the Compensation Committee. Base salaries are reviewed annually by the Compensation Committee and the Board and may be increased, but not decreased without the consent of the executive, by the Board from time to time coincident with our annual review.

 

During the transitional nine months ended December 31, 2016, the Compensation Committee increased annual base salary for each executive by approximately 2.0%. These increases consisted of cost of living and merit based adjustments and are reflected in the current employment agreement for each executive.

 

Cash Bonus Compensation. The Compensation Committee annually considers the award of performance-based cash bonuses to compensate executives for achieving financial, operational and strategic goals and for individual performance. The amount of cash bonuses, if any, is established during deliberations by the Compensation Committee using its judgment after considering the objective and subjective factors discussed above and the individual’s performance. As a result, bonuses may vary greatly from one year to the next.

 

24

 


 

 

 

The Compensation Committee has established target cash bonus levels as a percentage of base salary for each executive officer based on the level of responsibility for each executive position and by reference to the level of target cash bonus payments by the peer group of companies. The target cash bonus levels for each of the Company’s executive officers as a percentage of each officer’s base salary is as follows:

 

Name of Executive Officer

 

Target Bonus Percentage

 

Joseph R. Mitchell

 

 

75

%

David I. Rosenthal

 

 

40

%

Adrian P. Schaffer

 

 

30

%

 

Actual cash bonus payments may either exceed or be less than the target level based on the Compensation and Benefit Committee’s judgment as to whether individual and Company-wide goals were met, exceeded or partially-met, subject to a maximum bonus award in any year of two times the target bonus.

 

For the transitional nine months ended December 31, 2016, cash bonuses paid to executive officers as a percentage of their base salary, were as follows:

 

Name of Executive Officer

 

Bonus Percentage Paid

 

Joseph R. Mitchell

 

 

28

%

David I. Rosenthal

 

 

14

%

Adrian P. Schaffer

 

 

11

%

 

The principal Company-wide goals for the transitional nine months ended December 31, 2016 used by the Compensation Committee for purposes of determining bonus payments included solidifying the Company’s base revenue, maintaining and improving gross margins, securing a long-term contract, controlling the rate of cash outflows with cost management and efficiencies, product innovation and product quality.

 

In reviewing management’s performance for the transitional nine months ended December 31, 2016 against the goals, in July 2017 the Compensation Committee noted management’s success in controlling cash outflows with cost management and efficiencies, product innovation and product quality, and its less satisfactory performance in securing a long-term strategic partner and solidifying base revenue. Based on this performance, the Compensation Committee determined that a cash bonus of 35% of the target level be awarded to the executives. In addition, the Compensation Committee awarded an additional 2% cash bonus to Mr. Mitchell.

 

Pursuant to the prior executive employment agreements (which were entered into in July of 2015), the Company paid retention bonuses to certain executives for remaining employed through June 30, 2017. In this regard, the Company paid Mr. Mitchell $100,000, Mr. Rosenthal $100,000, and Mr. Schaffer $75,000 in July 2017. On July 1, 2017, the Company entered into new employment agreements with each of Messrs. Mitchell, Rosenthal, and Shaffer. See “Executive CompensationEmployment Agreements” for additional information

 

Long-Term Incentive Compensation. The Compensation Committee annually considers the award of long-term incentive compensation to compensate executive officers for their efforts in positioning the Company for long-term growth. The Compensation Committee considers a number of qualitative factors in setting the long-term incentive compensation for each executive officer, including the specific goals listed above as well as each executive officer’s contribution to a variety of other Company-wide goals such as new customer and market development activities, supply chain optimization and improvement, technology base enhancements, new product development and launch activities, enhanced investor relations and implementation of certain extraordinary transactions, among other things.

 

25

 


 

 

 

Long-term incentive compensation may be paid in the form of Company common stock or in the form of a grant of stock options or any combination of stock and stock options. The Committee believes that equity-based compensation awards aid in the retention of the executive and serve to align the interests of the executive with those of the Company’s other shareholders. Equity-based compensation awards have a future service requirement (vesting period) of three years.

 

Qualitative criteria are generally used to establish goals and objectives that the Board believes add value to the Company and enhance its prospects for long-term growth and success. The Compensation Committee has established target levels for long-term incentive compensation for each executive officer based on the level of responsibility for each executive position and the peer group of companies. The target long-term incentive compensation level (as a percentage of each officer’s base salary) for each of the Company’s executive officers is as follows:

 

Name of Executive Officer

 

Target Long-Term
Incentive Compensation

 

Joseph R. Mitchell

 

 

100

%

David I. Rosenthal

 

 

65

%

Adrian P. Schaffer

 

 

50

%

 

The Compensation Committee reviewed performance for the transitional nine months ended December 31, 2016 in July 2017 and determined to award long-term incentive compensation to the executive officers at 35% of the target level. The long-term incentive compensation awards granted to executive officers in July 2017 for their performance against goals for the transitional nine months ended December 31, 2016, as a percentage of their base salary, were as follows:

 

Name of Executive Officer

 

Actual Long-Term
Incentive Compensation
Percentage Awarded

 

 

Stock Options
# of Shares

 

Joseph R. Mitchell

 

 

35.0

%

 

 

153,000

 

David I. Rosenthal

 

 

22.8

%

 

 

74,804

 

Adrian P. Schaffer

 

 

17.5

%

 

 

51,095

 

 

 

Employment Agreements

 

Each of our executive officers has an employment agreement with the Company, as described below. The agreements provide for compensation in the form of annual base salary, which cannot be decreased during the term of the agreement without the consent of the executive, a monthly automobile allowance, the opportunity for cash bonuses, stock awards and stock options and employee benefits available to other Company employees. The agreements also provide for potential payments upon termination without cause, termination for good reason, termination during the 24 month period following a change in control, disability, death, and non-renewal of the employment agreement by the Company. See “Executive CompensationEmployment Agreements” for additional information.

 

Tax and Accounting Considerations

 

All elements of our employee and executive compensation program generate charges to earnings under generally accepted accounting principles in the United States. Our allocations of the elements of total compensation are generally not influenced by the accounting treatment of each element. We do, however, consider the tax treatment of compensation elements as one factor in the allocation of each element.

 

26

 


 

 

 

Executive Compensation

 

The following tables and narrative discuss the compensation of our Chief Executive Officer, Chief Financial Officer and other highly compensated officer determined under the SEC rules for compensation earned or paid during the transitional nine months ended December 31, 2016 and twelve months ended on March 31, 2016. These persons are referred to as our named executive officers.

 

Summary Compensation Table

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and Principal
Position

 

Period
ended 
(2)

 

 

Salary

 

 

Bonus (3)

 

 

Stock
awards
(4)

 

 

Option
awards
(4)

 

 

All other
compensation
(5)

 

 

Total

 

 

 

 

 

 

 

 

($)

 

 

 

($)

 

 

 

($)

 

 

 

($)

 

 

 

($)

 

 

 

($)

 

Joseph R. Mitchell

 

 

Dec–16

 

 

 

251,625

 

 

 

93,000

 

 

 

 

 

 

100,980

 

 

 

14,663

 

 

 

460,268

 

President and Chief Executive Officer (1)

 

 

Mar–16

 

 

 

265,280

 

 

 

141,000

 

 

 

21,576

 

 

 

103,925

 

 

 

19,576

 

 

 

551,357

 

David I. Rosenthal

 

 

Dec–16

 

 

 

189,269

 

 

 

36,000

 

 

 

 

 

 

49,368

 

 

 

11,913

 

 

 

286,549

 

Treasurer, Secretary and Chief Financial Officer

 

 

Mar–16

 

 

 

247,326

 

 

 

57,000

 

 

 

10,549

 

 

 

50,813

 

 

 

15,011

 

 

 

380,699

 

Adrian P. Schaffer

 

 

Dec–16

 

 

 

168,065

 

 

 

24,300

 

 

 

 

 

 

33,726

 

 

 

32,588

 

 

 

258,679

 

Vice President of Sales and Business Development

 

 

Mar–16

 

 

 

219,618

 

 

 

37,800

 

 

 

7,206

 

 

 

34,708

 

 

 

14,204

 

 

 

313,536

 

 

 

 

 

 

(1)

Mr. Mitchell was appointed President and Chief Executive Officer on January 5, 2016. Prior to that, Mr. Mitchell was appointed interim Chief Executive Officer on July 20, 2015 and Chief Operating Officer.

 

 

(2)

UQM Technologies, Inc. changed its year-end date from March 31 to December 31 in 2016. The amounts reflected for March 2016 are for a twelve month period. The amounts reflected for December 2016 are for a nine month transition period.

 

 

(3)

Bonus payments listed for the nine months ended December 31, 2016 represent payments made in July 2017 with respect to performance in the nine months ended December 31, 2016. Bonus payments listed for the twelve months ended March 31, 2016 represent payments made in July 2016 with respect to performance in the twelve months ended March 31, 2016.

 

 

(4)

The amounts reported in the stock and option awards’ columns represent the aggregate grant date fair value computed pursuant to FASB ASC Topic 718 in the Company’s financial statements, not reduced by the estimated forfeiture rate. The assumptions used in determining the fair value are contained in footnote 10 to the Company’s consolidated financial statements contained in Item 8 of the Annual Report.

 

 

(5)

Amounts reported in the all other compensation column above are comprised of the following items:

 

27

 


 

 

  

All Other Compensation

 

Name

 

Period ended
(2)

 

 

401(k) plan
matching
contributions

 

 

Automobile
allowance

 

 

Employer
paid life
insurance
(3)

 

 

Moving,
professional
dues,
education &
other

 

 

Total

 

 

 

 

 

 

 

 

($)

 

 

 

($)

 

 

 

($)

 

 

 

($)

 

 

 

($)

 

Joseph R. Mitchell (1)

 

 

Dec–16

 

 

 

5,999

 

 

 

7,290

 

 

 

1,374

 

 

 

 

 

 

14,663

 

 

 

 

Mar–16

 

 

 

7,992

 

 

 

9,720

 

 

 

1,864

 

 

 

 

 

 

19,576

 

David I. Rosenthal

 

 

Dec–16

 

 

 

3,151

 

 

 

7,290

 

 

 

1,471

 

 

 

 

 

 

11,912

 

 

 

 

Mar–16

 

 

 

3,294

 

 

 

9,720

 

 

 

1,997

 

 

 

 

 

 

15,011

 

Adrian P. Schaffer

 

 

Dec–16

 

 

 

2,798

 

 

 

7,290

 

 

 

1,159

 

 

 

21,341

(4)

 

 

32,588

 

 

 

 

Mar–16

 

 

 

2,925

 

 

 

9,720

 

 

 

1,559

 

 

 

 

 

 

14,204

 

 

 

 

 

(1)

Mr. Mitchell was appointed President and Chief Executive Officer on January 5, 2016 and served as interim President and Chief Executive Officer from July 20, 2015 until January 5, 2016.

 

 

(2)

UQM Technologies, Inc. changed their year-end date from March 31 to December 31 in 2016. The amounts reflected for March 2016 are for a twelve month period. The amounts reflected for December 2016 are for a nine month transition period.

 

 

(3)

Premiums paid by the Company on Company-owned insurance policies to insure the salary continuation provisions contained in executive employment agreements which provide for the payment of three years annual base salary to the estate of the executive in the event of his death during the term of the employment agreement.

 

 

(4)

Includes income tax gross-ups on apartment living expenses of $14,517.

 

Stock Awards

 

We granted stock awards under the Company’s Stock Bonus Plan. The shares granted vest in three equal annual installments beginning on the first anniversary of the grant date.

 

Option Awards

 

We granted option awards under the Company’s 2012 Equity Incentive Plan. The options granted vest in three equal annual installments beginning on the first anniversary of the grant date. The options granted were incentive stock options and are exercisable for a term of ten years from the date of grant. The exercise price of the options is equal to the closing price of our common stock on the NYSE American stock exchange on the date of grant.

 

28

 


 

 

 

Outstanding Equity Awards at December 31, 2016

 

 

 

Option awards

 

 

Stock awards

 

Name

 

Number of
securities
underlying
unexercised
options
exercisable

 

 

Number of
securities
underlying
unexercised
options
unexercisable

 

 

Option
exercise
price

 

 

Option
expiration
date

 

Number of
shares of
stock that
have not
vested

 

 

Market
value of
shares of
stock that
have not
vested
(6)

 

 

 

(#)

 

 

(#)

 

 

($)

 

 

(#)

 

($)

 

 

 

 

Joseph R. Mitchell

 

 

 

 

 

199,856

(1)

 

 

0.68

 

 

7/11/2026

 

 

41,493

(4)

 

 

19,087

 

 

 

 

22,603

 

 

 

45,205

(2)

 

 

0.66

 

 

9/23/2025

 

 

 

 

 

 

 

 

 

 

 

18,185

 

 

 

9,093

(3)

 

 

1.71

 

 

8/18/2024

 

 

4,397

(5)

 

 

2,022

 

 

 

 

24,193

 

 

 

 

 

 

0.89

 

 

7/11/2022

 

 

 

 

 

 

 

 

 

 

 

25,000

 

 

 

 

 

 

1.03

 

 

5/31/2017

 

 

 

 

 

 

 

 

David I. Rosenthal

 

 

 

 

 

97,717

(1)

 

 

0.68

 

 

7/11/2026

 

 

20,287

(4)

 

 

9,332

 

 

 

 

28,612

 

 

 

57,224

(2)

 

 

0.66

 

 

9/23/2025

 

 

 

 

 

 

 

 

 

 

 

27,101

 

 

 

13,550

(3)

 

 

1.71

 

 

8/18/2024

 

 

6,552

(5)

 

 

3,014

 

 

 

 

14,000

 

 

 

 

 

 

0.69

 

 

4/30/2018

 

 

 

 

 

 

 

 

Adrian P. Schaffer

 

 

 

 

 

66,746

(1)

 

 

0.68

 

 

7/11/2026

 

 

13,857

(4)

 

 

6,374

 

 

 

 

19,543

 

 

 

39,087

(2)

 

 

0.66

 

 

9/23/2025

 

 

 

 

 

 

 

 

 

 

 

18,451

 

 

 

9,226

(3)

 

 

1.71

 

 

8/18/2024

 

 

4,460

(5)

 

 

2,052

 

 

 

 

71,854

 

 

 

 

 

 

0.89

 

 

7/11/2022

 

 

 

 

 

 

 

 

 

 

 

 

(1)

These unexercisable options were granted on July 12, 2016. One-third of the options will vest over the next three years starting on July 12, 2017.

 

 

(2)

These unexercisable options were granted on September 24, 2015. One-third of the options have vested, an additional one-third of the options are scheduled to vest on September 24, 2017.

 

 

(3)

These unexercisable options were granted on August 19, 2014. Two-thirds of the options have vested, an additional one-third of the options are scheduled to vest on August 19, 2017.

 

 

(4)

The restricted shares were granted on July 12, 2016. One-third of the shares will vest over the next three years starting on July 12, 2017.

 

 

(5)

These restricted shares were granted on August 19, 2014. Two-thirds of the shares have vested, an additional one-third of the share are to vest on August 19, 2017.

 

 

(6)

The market value has been determined based on the closing price of Company common stock on December 30, 2016 of $0.46 per share.

 

29

 


 

Employment Agreements

 

We have employment agreements with each of our named executive officers as described below.

 

Current Named Executive Officers

 

On July 20, 2015, the Company entered into employment agreements with Messrs. Mitchell, Rosenthal, and Schaffer, which continue through June 30, 2017. When Mr. Mitchell was appointed our President and Chief Executive Officer on January 5, 2016, we entered into a new employment agreement with Mr. Mitchell and amended the employment agreements with each of Messrs. Rosenthal, and Schaffer to revise the non-competition and non-solicitation obligations and the change of control definition to match what was contained in Mr. Mitchell’s employment agreement. As described above, these old agreements required that, in July of 2017, the Company pay retention bonuses to the following executives in the following amounts: Mr. Mitchell $100,000, Mr. Rosenthal $100,000, and Mr. Schaffer $75,000.

 

Upon expiration of their prior employment agreements, on July 1, 2017, the Company entered into new employment agreements with each of Messrs. Mitchell, Rosenthal, and Schaffer, which continue through December 31, 2019 with automatic twenty-four month period extensions unless the Company or the officer provides notice prior to the end of such term. The new employment agreements provide for an annual base salary of $350,000 for Mr. Mitchell, $259,684 for Mr. Rosenthal and $248,820 for Mr. Schaffer.  In addition, the Officers are eligible to receive (i) a discretionary annual cash bonus at a target level of 75% (in the case of Mr. Mitchell), 40% (in the case of Mr. Rosenthal) or 35% (in the case of Mr. Schaffer) of his respective base salary and (ii) long-term incentive equity grants at a target level of 100% (in the case of Mr. Mitchell), 65% (in the case of Mr. Rosenthal) or 55% (in the case of Mr. Schaffer) of his respective base salary.

 

In addition, as a condition to the closing of the Purchase Agreement, Messrs. Mitchell and Ley have amended their employment agreements to extend the terms of their respective non-competition and non-solicitation obligations to a period of twenty four months following termination of employment for any reason.

 

Each agreement provides that if an executive’s employment is terminated by the Company without Cause (as defined in the agreements) or for Good Reason (as defined in the agreements), such executive will be entitled to: (i) vested employee benefits, if any, to which such Officer is entitled pursuant to the terms and conditions of the Company’s benefit plans (the “Accrued Obligations”); and (ii) a cash payment equal to twenty-four (24) months (in the case of Mr. Mitchell) or six (6) months (in the case of Messrs. Rosenthal and Schaffer) of such executive’s then base salary plus an amount equal to the product of (y) 66% and (z) six (6) times the monthly amount that is charged to COBRA qualified beneficiaries for the same medical coverage options elected by such Officer immediately prior to the termination date.  Upon a termination due to Disability (as defined in the agreements), such executive will be entitled to: (i) the Accrued Obligations; and (ii) a cash payment equal to six (6) months of Executive’s then base salary less an amount equal to any disability compensation benefits received by executive pursuant to the Company’s disability benefit plans. Upon a termination due to death, such executive will be entitled to: (i) the Accrued Obligations; and (ii) a cash payment equal to six (6) months of executive’s then base salary. Upon a non-renewal of the agreements by the Company, such executive will be entitled to: (i) the Accrued Obligations; and (ii) a cash payment equal to six (6) months (in the case of Mr. Mitchell) or three (3) months (in the case of Messrs. Rosenthal and Schaffer) of executive’s then base salary.

 

All of the employment agreements provide that the Company shall maintain at its expense, life insurance coverage on the executive payable to the executive’s designees in an amount equal to three times the annual salary payable to the executive. Each executive is also entitled to an automobile allowance of $810 per month and usual and customary additional employee benefits in accordance with the Company’s benefit plan programs.

 

Change in Control

 

If a change in control occurs and, if within the twenty-four (24) month period immediately following such event, (a) the Company or its successor terminates an executive’s employment without Cause, or (b) an executive terminates his employment on account of a Material Change (as defined in the agreements), such executive shall be entitled to: (i) the Accrued Obligations; and (ii) a cash payment equal to twenty-four (24) months (in the case of Mr. Mitchell) or twelve (12) months (in the case of Messrs. Rosenthal and Schaffer) of such Officer’s then base salary plus the average annual discretionary cash bonus paid to such Officer for the preceding three calendar years plus an amount equal to the product of (y) 66% and (z) six (6) times the monthly amount that is charged to COBRA qualified beneficiaries for the same medical coverage options elected by such Officer immediately prior to the termination date.  In addition, all outstanding but unvested

30

 


 

options and restricted stock awards of the Company held by such executive will become fully vested and exercisable for the remainder of their original term.

 

Other Provisions

 

The employment agreements have customary confidentiality obligations. The employment agreements further provide that the executive, for a period of one (1) year after the term of his respective employment agreement (in the case of Messrs. Rosenthal and Schaffer) or two (2) years (in the case of Mr. Mitchell), will not become affiliated with any person, firm or corporation whose business is similar to or in competition with the Company. In addition, for a period of one (1) year after termination of the executive’s employment agreement (in the case of Messrs. Rosenthal and Schaffer) or two (2) years (in the case of Mr. Mitchell), the executive will not induce or attempt to induce any employee of the Company to leave the employ of the Company; nor will the executive induce or attempt to induce any customer, supplier or licensee to cease doing business with the Company.

 

Payments and Potential Payments upon Termination or Change in Control

 

Our current executive employment agreements provide compensation to Messrs. Mitchell, Rosenthal and Schaffer in the event of a termination of employment, including termination of employment (or deemed termination) following a change in control. The tables below show the potential payments or benefits upon a termination or change in control for each of the Company’s executive officers assuming the triggering event took place on December 31, 2016. The closing price per share of our common stock on the last trading day prior to December 31, 2016 was $0.43. Actual amounts can only be determined at the date of the triggering event. The amount of acceleration of unvested equity awards represents the intrinsic value of in-the-money non-vested stock options and non-vested stock awards as of December 31, 2016 that would vest upon termination or change in control.

 

 

 

 

 

 

 

 

 

 

 

 

Termination by us
for cause

 

Termination by us
without cause

 

Termination
due to death

 

Termination
due to a change
in control

 

 

($)

 

($)

 

($)

 

($)

Joseph R. Mitchell:

 

 

 

 

 

 

 

 

Base Salary/Severance

 

 

336,600

 

168,300

 

1,003,992

Life Insurance Proceeds

 

 

 

1,009,800

 

Acceleration of unvested equity awards

 

 

 

3,325

 

21,109

Total

 

 

336,600

 

1,181,425

 

1,025,101

 

 

 

 

 

 

 

 

 

David I. Rosenthal:

 

 

 

 

 

 

 

 

Base Salary/Severance

 

 

126,592

 

126,592

 

535,651

Life Insurance Proceeds

 

 

 

759,552

 

Acceleration of unvested equity awards

 

 

 

2,301

 

12,345

Total

 

 

126,592

 

888,445

 

547,996

 

 

 

 

 

 

 

 

 

Adrian P. Schaffer:

 

 

 

 

 

 

 

 

Base Salary/Severance

 

 

112,410

 

112,410

 

428,087

Life Insurance Proceeds

 

 

 

674,460

 

Acceleration of unvested equity awards

 

 

 

1,569

 

8,426

Total

 

 

112,410

 

788,439

 

436,512

 

31

 


 

 

DIRECTOR COMPENSATION

 

In 2009, the Compensation Committee retained the consulting firm Towers Watson to assist it in establishing appropriate compensation for the Company’s directors. Towers Watson evaluated the Board compensation practices of the peer group of alternative energy companies listed under “Compensation Philosophy and Objectives” above in the twelve months ended March 31, 2011 which the consulting firm selected based on its belief that the listed companies competed with the Company in the marketplace for executive talent. After considering the recommendations of the compensation consultant, the Board adopted a director compensation policy consisting of an annual cash retainer and equity-based compensation that it believes appropriately aligns the interests of directors with those of the Company’s shareholders.

 

For the transitional nine months ended December 31, 2016, directors of the Company who are not employees may elect to receive an annual retainer of $35,000 in cash or the grant of options with an exercise period of ten years to acquire that number of shares of the

 

Company’s common stock that is equivalent to $35,000 as determined by utilizing the Black-Scholes-Merton option pricing model on the date of grant or a combination of cash and options that together have a fair value of $35,000. Options granted under the plan vest immediately. In addition, the Chairman of the Board receives an additional annual cash retainer of $9,000 and the Chairman of the Compensation Committee, the Chairman of the Audit Committee and the Chairman of the Governance and Nominating Committee each receive an additional annual cash retainer of $5,000 each.

 

Non-employee directors also receive each year shares with a fair value of $14,000 on the date of grant, except for the Chairman of the Board who receives shares with a fair value of $17,000 on the date of grant. These shares vest immediately. In addition, each non-employee director receives a stock option for that number of shares of the Company’s common stock that is equivalent to $21,000, or $26,000 in the case of the Chairman of the Board, as determined by utilizing the Black-Scholes-Merton option pricing model on the date of grant. Options granted under this component of director compensation vest immediately. During the transitional nine months ended December 31, 2016, the directors received shares equal to 85% of the dollar values noted above.

 

In addition, each non-employee director upon his initial election to the Board is awarded 2,000 shares of the Company’s common stock at a purchase price of $0.01 per share. Directors who are employees of the Company are not entitled to additional compensation for their service as directors. Accordingly, Mr. Mitchell did not receive additional compensation for his service as a director.

 

The following table sets forth information concerning remuneration paid to directors of the Company during the transitional nine months ended December 31, 2016:

 

Non-Employee Director Compensation Nine Months Ended December 31, 2016

(Transition Period)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees earned or
paid in cash

 

 

Stock
awards
(1)

 

 

Options
awards
(1)

 

 

All other
compensation

 

 

Total

 

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

Donald W. Vanlandingham

 

 

33,000

 

 

 

14,450

 

 

 

14,918

 

 

 

 

 

 

62,368

 

Stephen J. Roy

 

 

30,000

 

 

 

11,900

 

 

 

12,049

 

 

 

 

 

 

53,949

 

Joseph P. Sellinger

 

 

30,000

 

 

 

11,900

 

 

 

12,049

 

 

 

 

 

 

53,949

 

John E. Sztykiel

 

 

30,000

 

 

 

11,900

 

 

 

12,049

 

 

 

 

 

 

53,949

 

 

 

 

 

 

(1)

The amount reported is the aggregate grant date fair value computed under FASB ASC Topic 718. The fair value of stock options is computed utilizing the Black-Scholes-Merton pricing model. The assumptions used in determining the fair value are contained in footnote 10 to the Company’s consolidated financial statements contained in Item 8 of the Annual Report. Stock and option awards vest in full on the date of grant.

 

32

 


 

 

 

The table below shows the aggregate number of shares of common stock granted under the Stock Bonus Plan held by each non-employee director as of December 31, 2016:

 

 

 

 

 

 

Name

 

Number of common shares

 

Donald W. Vanlandingham

 

 

79,960

 

Stephen J. Roy

 

 

74,045

 

Joseph P. Sellinger

 

 

71,688

 

John E. Sztykiel

 

 

47,416

 

 

 

The table below shows the aggregate number of options held by each non-employee director as of December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

Grant date

 

Number of options
outstanding

 

Option exercise
price

 

Option
expiration date

 

 

 

 

(#)

 

($)

 

 

Donald W. Vanlandingham

 

7/12/2016

 

27,625

 

0.68

 

7/11/2026

 

 

9/24/2015

 

16,250

 

0.66

 

9/23/2025

 

 

8/19/2014

 

13,240

 

1.71

 

8/18/2024

 

 

8/7/2013

 

14,383

 

1.19

 

8/6/2023

 

 

8/3/2011

 

58,095

 

2.04

 

8/2/2018

 

 

 

 

129,593

 

 

 

 

Stephen J. Roy

 

7/12/2016

 

22,313

 

0.68

 

7/11/2026

 

 

9/24/2015

 

13,125

 

0.66

 

9/23/2025

 

 

8/19/2014

 

10,694

 

1.71

 

8/18/2024

 

 

8/7/2013

 

14,383

 

1.19

 

8/6/2023

 

 

8/8/2012

 

51,220

 

0.79

 

8/7/2019

 

 

8/13/2010

 

14,789

 

2.63

 

8/12/2018

 

 

 

 

126,524

 

 

 

 

Joseph P. Sellinger

 

7/12/2016

 

22,313

 

0.68

 

7/11/2026

 

 

9/24/2015

 

13,125

 

0.66

 

9/23/2025

 

 

8/19/2014

 

10,694

 

1.71

 

8/18/2024

 

 

8/7/2013

 

14,383

 

1.19

 

8/6/2023

 

 

8/8/2012

 

56,757

 

0.79

 

8/7/2017

 

 

8/3/2011

 

17,073

 

2.04

 

8/2/2021

 

 

11/3/2009

 

12,111

 

4.73

 

11/2/2019

 

 

 

 

146,456

 

 

 

 

John E. Sztykiel

 

7/12/2016

 

22,313

 

0.68

 

7/11/2026

 

 

9/24/2015

 

13,125

 

0.66

 

9/23/2025

 

 

8/19/2014

 

10,694

 

1.71

 

8/18/2024

 

 

8/7/2013

 

14,383

 

1.19

 

8/6/2023

 

 

11/1/2012

 

36,741

 

0.88

 

10/31/2017

 

 

 

 

97,256

 

 

 

 

 

 

The Board determines the total amount of the annual retainer, bonus share award and stock option award payable to non-employee members of the Board.

 

33

 


 

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

The Company has entered into indemnification agreements with all members of the Board and with all of its officers. These agreements require that the Company to indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, and otherwise to the fullest extent permitted under Colorado law and the Company’s bylaws.

 

Since March 31, 2015, the Company did not have any transactions to which it has been a participant that involved amounts that exceeded or will exceed the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at March 31, 2016 and December 31, 2016, and in which any of the Company’s directors, executive officers or any other “related person” as defined in Item 404(a) of Regulation S-K had or will have a direct or indirect material interest.

 

The Company does not have a written policy regarding the identification, review, consideration and approval or ratification of “related person’s transactions.” Rather, such policy is evidenced by long standing principles set forth in the Company’s Code of Business Conduct Ethics and adhered to by the Board and the Audit Committee. The Audit Committee approves any transaction between the Company and a related person. A related person is any executive officer, director, or more than five percent shareholder of the Company’s stock, including any of their immediate family members, and any entity owned or controlled by such persons.

 

 

34

 


 

SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT

 

The following table shows the ownership of the Company’s $0.01 par value common stock by (i) beneficial owners of five percent or more of the Company’s common stock, (ii) each director, (iii) each of our named executive officers (as defined by Item 402(m)(2) of Regulation S-K) and (iv) all directors and executive officers as a group, as of September 27, 2017. Unless otherwise noted, each shareholder’s address is the address of the Company and exercises sole voting and investment power with respect to the shares beneficially owned.

 

Name of Beneficial Owner

 

Shares
of Common
Stock
Owned as
of
September
27, 2017

 

 

Shares
of
Common
Stock
Holder
has a
right to
acquire
by
November
26, 2017

 

 

Total
Shares
Beneficially
Owned

 

 

Percent
of
Class
(1)

 

Sinotruk (BVI) Limited
Units 2102–03 Shun Tak Centre, China Merchants
Tower, 168–200 Connaught Rd., Central,
Hong Kong

 

 

5,347,300

 

 

 

 

 

 

5,347,300

 

 

 

9.70

%

GDG Green Dolphin, LLC
1 N. Wacker Drive, Suite 2500
Chicago, Illinois 60606
(2)

 

 

3,148,523

 

 

 

 

 

 

3,148,523

 

 

 

5.71

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joseph R. Mitchell

 

 

117,822

 

 

 

163,295

 

 

 

281,117

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David I. Rosenthal

 

 

57,620

 

 

 

144,447

 

 

 

202,067

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adrian P. Schaffer

 

 

77,522

 

 

 

160,866

 

 

 

238,388

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald W. Vanlandingham

 

 

142,666

 

 

 

184,845

 

 

 

327,511

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stephen J. Roy

 

 

86,677

 

 

 

135,171

 

 

 

221,848

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joseph P. Sellinger

 

 

77,320

 

 

 

98,346

 

 

 

175,666

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John E. Sztykiel

 

 

53,048

 

 

 

105,903

 

 

 

158,951

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director and Executive Officers as a Group (eight persons)

 

 

632,755

 

 

 

1,112,634

 

 

 

1,745,389

 

 

 

3.16

%

 

 

* Less than 1%

 

 

 

 

 

(1)

Based on 54,035,328 shares of our common stock issued and outstanding as of September 27, 2017. Pursuant to Exchange Act Rule 13d-3(d)(1), shares of common stock of which a person has the right to acquire beneficial ownership at any time by November 26, 2017 are deemed outstanding and beneficially owned by the person for the purpose of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person.

 

 

(2)

Share data based on information in an amendment to a Schedule 13G filed on January 30, 2015 with the SEC by GDG Green Dolphin, LLC. The securities reported are held by GDG Green Dolphin, LLC and Gregory D. Glyman. As of December 31, 2014, the Schedule 13G indicates that (i) GDG Green Dolphin, LLC had shared voting and investment power with respect to 3,133,323 shares of common stock and (ii) Gregory D. Glyman had sole voting and investment power with respect to 15,200 shares of common stock and shared voting and investment power with respect to 3,133,323 shares of common stock.

35

 


 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table sets forth information as of December 31, 2016, with respect to the Company’s equity compensation plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan Category

 

Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights

 

 

Weighted–average
exercise price of
outstanding options,
warrants and rights

 

 

Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))

 

 

 

(a)

 

 

(b)

 

 

(c)

 

Equity compensation plans approved by security holders:

 

 

 

 

 

 

 

 

 

 

 

 

Equity Incentive Plan

 

 

2,487,161

 

 

$

1.12

 

 

 

2,554,193

 

Non–Employee Director Stock Option Plan

 

 

517,637

 

 

$

1.23

 

 

 

389,784

 

Stock Bonus Plan

 

 

102,048

 

 

$

0.84

 

 

 

252,227

 

Equity compensation plans not approved by security holders

 

 

 

 

 

 

 

 

 

Total

 

 

3,106,846

 

 

 

 

 

 

 

3,196,204

 

 

 

36

 


 

PROPOSAL 3: Proposal to approve an amendment and restatement of the Company’s Employee Stock Purchase Plan

 

The Board is submitting for approval by our shareholders the amendment and restatement of the Company’s Employee Stock Purchase Plan (the “ESPP”) to increase the number of shares available for issuance under the ESPP by 500,000 shares for a total of 1,200,000 shares.

 

The ESPP was originally approved by the Board on December 14, 1987 and by the Company’s shareholders on March 13, 1990. At the 2011 Annual Meeting of Shareholders, the Company’s shareholders approved an amendment and restatement of the ESPP to increase the number of shares available for issuance under the ESPP by 500,000 (from 200,000 to 700,000 shares). As of September 20, 2017, the Company had approximately 79,257 shares of its common stock remaining available for issuance under the ESPP.

 

The Board believes that the ESPP promotes the interests of the Company and its shareholders by encouraging employees of the Company to become shareholders, and therefore promotes the Company’s growth and success. In addition, the Board believes that (i) it is desirable and in the best interests of the Company and its shareholders to continue to provide employees of the Company with benefits under the ESPP and (ii) additional shares must be reserved for use under the ESPP. Accordingly, on August 30, 2017, the Board approved, subject to shareholder approval, an amendment and restatement of the ESPP to increase the number of shares available for issuance under the ESPP by 500,000 shares for a total of 1,200,000 shares.

 

The principal terms and provisions of the ESPP are summarized below. The summary, however, is not intended to be a complete description of all the terms of the ESPP and is qualified in its entirety by reference to the complete text of the ESPP, as proposed to be amended and restated, a copy of which is attached as Appendix A to this proxy statement and incorporated herein by reference.

 

Purpose of the ESPP

 

The purpose of the ESPP is to provide eligible employees who wish to become shareholders of the Company, or who wish to increase their ownership in the Company, with an opportunity to purchase shares of the Company’s common stock on a basis that is more convenient and more favorable than would otherwise be available. It is believed that employee participation in the ESPP will be mutually beneficial to both employees and the Company.

 

Nature of the ESPP

 

The ESPP provides for grants of rights to acquire shares of common stock to employees to be exercised using funds from payroll deductions. Upon exercise of the rights, the common stock will be delivered to the participant as soon as practicable. It is intended that the ESPP constitute an “Employee Stock Purchase Plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, the participant may receive beneficial tax treatment on the purchase and ultimate disposition of the shares purchased through the ESPP. See “-Summary of U.S. Federal Income Tax Consequences” below for additional information.

 

1,200,000 shares of common stock have been reserved for issuance pursuant to the terms of the ESPP, assuming shareholder approval of this proposal. The ESPP provides for quarterly offerings that begin on the first day of each calendar quarter (January 1, April 1, July 1, and October 1). The purchase price of common stock during any offer will be 85% of the Fair Market Value of a share of common stock on the first day of the calendar quarter or, if the exchange on which the common stock is traded is not open on that day, of the first trading day thereafter. For purposes of the ESPP, the “Fair Market Value” of common stock on any day means the composite closing price on the NYSE American or such successor exchange or if the common stock is not listed or admitted to trading on any national securities exchange or on the National Association of Securities Dealers Automatic Quotation System (Nasdaq), the average closing bid price if available. If the price of the common stock is not reported on any securities exchange or national market system, the Fair Market Value of the common stock on a particular date shall be determined by the Compensation Committee.

 

37

 


 

 

 

 

Amounts collected via payroll deduction are used to purchase common stock on a quarterly basis. In general, each employee eligible to participate in the ESPP may elect to have up to 10% of such employee’s Base Pay (as such term is defined in the ESPP), but in no event more than $25,000 per annum, used to purchase stock pursuant to the ESPP.

 

Administration of the ESPP

 

The Compensation Committee of the Board has the sole responsibility for the administration of the ESPP, and, subject to certain exceptions, has the exclusive right to interpret the provisions of the ESPP and to determine any questions arising under the ESPP or in connection with the administration of the ESPP, including, but not limited to, the remedying of any omission, inconsistency, or ambiguity, and the determination of benefits and eligibility. The Compensation Committee’s decisions, determinations, interpretations or other actions in respect of the ESPP are conclusive and binding upon all participants, former participants, beneficiaries, heirs, executors, and assigns. Any final determination by the Compensation Committee is binding on all parties.

 

Details of the ESPP

 

Any employee of the Company or the Company’s participating affiliates who has completed at least six months of service with the Company or a participating affiliate may participate in the ESPP if the employee’s customary employment is for more than 20 hours per week and for more than five months in any calendar year is eligible to participate in the ESPP. Non-employee directors, leased employees and independent contractors are not eligible to participate in the ESPP. Employees who own more than five percent of the total combined voting power or value of the stock of the Company or an affiliate of the Company are not eligible to participate. Although officers are generally eligible to participate, the Board may, in its discretion, provide that individuals who are designated “highly compensated employees” may not be eligible to participate in the ESPP.

 

Each employee who is not eligible to participate in the ESPP on the effective date of an offer (the first day of a calendar quarter) but who becomes eligible to participate during the term of the offer may not participate in that offer, but will be eligible to participate in the next and later offers so long as such individual remains eligible to participate pursuant to the terms of the ESPP.

 

The maximum number of shares permitted to be purchased pursuant to any offer is determined by a formula on a quarterly basis, which is generally calculated as follows, in each instance as more particularly set forth in the ESPP:

 

 

Step 1:

Determine the product of (i) the employee’s percentage of Base Pay for the calendar quarter chosen by the employee to be used to purchase stock pursuant to the ESPP, multiplied by (ii) the employee’s Base Pay projected for such calendar quarter (the “Purchase Consideration”);

 

 

Step 2:

Determine the quotient of (i) the Fair Market Value of the common stock on the offering date, divided by (ii) 85% (the “Purchase Price”); and

 

 

Step 3:

Determine the maximum number of shares permitted to be purchased by multiplying (i) the Purchase Consideration by (ii) the Purchase Price.

 

Notwithstanding the above general formula and the parameters set forth in the ESPP, the Board or the Compensation Committee may specify a maximum number of shares that each participant can purchase during an offer as well as the aggregate number of shares that may be purchased by all participants during the offer. If (i) the aggregate number of shares intended by the employees, in the aggregate, to be purchased pursuant to the exercise of rights granted pursuant to the ESPP offer is greater than (ii) the maximum number of shares specified by the Board or the Committee as being available for purchase, then the Board or the Committee will make a pro rata allocation of shares available for purchase among participants.

 

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Pursuant to Section 423(b) of the Code, no employee may purchase, pursuant to the ESPP, more than $25,000 of common stock per year (determined at the time the rights were granted). If an employee’s contributions to the ESPP exceed such amount in any given calendar year, then payroll deductions for that employee will cease and will not resume until the beginning of the next calendar year (assuming the individual is eligible to participate in the ESPP at such time).

 

All costs of administration of the ESPP are paid by the Company and its participating affiliates.

 

If a participant takes a leave of absence or has a period of inactive employment, and the participant continues to receive Base Pay, the participant can elect to continue payroll deductions during the first 90 days of the paid leave or period of paid inactive employment. If a participant does not receive Base Pay during a leave of absence or an inactive period and returns to active employment from inactive status or a leave of absence, the participant’s payroll deductions will resume automatically if the participant returns to active employment or from a leave of absence within 90 days. If the participant elects to discontinue contributions, the election will be treated as a withdrawal from the plan. In all events, the participant will be treated as having withdrawn from the plan on the ninety-first day of any period of inactive employment or leave of absence.

 

Employees may, at any time and for any reason, by giving written notice to the Company or following such other procedure as may be required or permitted by the Company, elect to withdraw from further participation in the ESPP.

 

Amendment and Termination of the ESPP

 

Each offering will commence on the first day of each calendar quarter and continue for one calendar quarter each. The Board may suspend offerings or terminate the ESPP at any time and for any reason.

 

The terms of the ESPP are subject to change at any time in the Company’s sole discretion, unless stockholder approval is required by Section 423 of the Code or by any other applicable law or administrative requirement. The Board may review and modify the operation and administration of the ESPP on a periodic basis. Upon termination of the ESPP, the entire account of each participant will be distributed as soon as practicable.

 

Summary of U.S. Federal Income Tax Consequences

 

The following is intended only as a general summary of the Federal income tax consequences of participation in the ESPP and does not purport to be a complete statement of such consequences. This summary does not address the state and local tax consequences of plan participation, which may differ from the Federal tax consequences. In addition, this summary does not address the estate tax consequences of plan participation.

 

The ESPP is not qualified under Section 401(a) of the Code. A participant’s contributions to the ESPP through payroll deductions are not tax deductible and instead are subject to employment and income taxes even though such amounts are not received by the employee and are instead paid directly to the ESPP. Such amounts are, however, treated as part of the employee’s cost basis of the common stock purchased under the ESPP.

 

No tax liability results upon either (i) the grant of a right to purchase stock pursuant to the ESPP, or (ii) the purchase of common stock pursuant to the ESPP. Instead, the employee becomes liable for Federal income tax on the disposition of the common stock acquired pursuant to the ESPP.

 

 

(1)

Stock Purchased Pursuant to the ESPP and Disposed of Following the Expiration of the Applicable Holding Period, or Upon the Employee’s Death

 

In order to receive the beneficial treatment provided under Section 423 of the Code, a participant must hold the acquired common stock for two years from the date of the offer, or one year from the date of purchase, whichever is later (the “holding period”). If an employee disposes of shares acquired under the ESPP after the expiration of the holding period, or if an employee dies while holding any share acquired under the ESPP, the employee recognizes income equal to the difference between (i) the employee’s adjusted tax basis in the shares acquired, and (ii) the purchase consideration received in connection with the sale of such shares.

 

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Except in the case of death, an employee’s adjusted tax basis of the shares in the employee’s hands at the time of the disposition will generally equal the price paid for the shares increased by the amount, if any, included in the employee’s gross income as compensation. In the case of death of the employee, the basis of the shares to the employee’s estate or heirs will be determined under Section 1014 of the Code.

 

The income arising from the sale of stock purchased pursuant to the ESPP and sold after the expiration of the applicable holding period is bifurcated into two component parts, each of which is subject to different tax treatment. The first component part is treated as ordinary income and must be included, as compensation, in the employee’s gross income in the taxable year of disposition or death. With respect to each share, such amount is equal to the lesser of:

 

 

 

 

 

the excess of (i) the Fair Market Value of such share at the time of the disposition or death, over (ii) the amount paid for such share, or

 

 

 

the excess of (i) the Fair Market Value of the share on the first day of the offering, over (ii) 85% of the Fair Market Value of the share on the first day of such offering.

 

The second component is treated by the employee as capital gain and is comprised of any gain from the disposition of such shares which is not treated as compensatory ordinary income.

 

The Company is not allowed a corresponding deduction for the amount treated as ordinary compensatory income.

 

 

(2)

Stock Purchased Pursuant to the ESPP and Disposed of Before the Expiration of the Applicable Holding Period

 

The income arising from the sale of stock purchased pursuant to the ESPP and sold before the expiration of the applicable holding period is similarly bifurcated into two component parts. The first component part is treated as ordinary income and must be included, as compensation, in the employee’s gross income in the taxable year of the disposition. Such amount is calculated as the excess of (i) the Fair Market Value of the share in the date of the purchase, over (ii) the purchase price paid for such share. The second component is treated by the employee as capital gain and is comprised of any gain from the sale of such shares which is not treated as compensatory ordinary income. Upon a disposition of shares prior to the expiration of the applicable holding period the Company is allowed a corresponding deduction in the same year, and in the same amount required to be included in gross income by the employee, assuming such amount is an ordinary and necessary business expense and satisfies the test respecting reasonable compensation.

 

Dividends declared and paid by the Company and any other distributions that are made with respect to common stock held in a participant’s account will be considered gross income to the participant.

 

Any gain or loss from the sale of any rights or other property distributed with respect to a share of common stock held on behalf of a participant is gain or loss to the participant.

 

New Plan Benefits

 

Because the benefits under the amended and restated ESPP as set forth in this proposal will depend on each eligible individual’s voluntary election to participate and the fair market value of the Company’s common stock at various future dates, it is not possible to determine the benefits that will be received by any eligible individual if this proposal is approved by our shareholders.

 

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Existing Plan Benefits

 

The following table sets forth the number of shares of the Company’s common stock that were purchased under the existing ESPP during the transitional nine months ended December 31, 2016 by the individuals and groups identified below.

 

Name and Position

 

Number of Shares

Joseph R. Mitchell President and Chief Executive Officer

 

0

 

 

 

David I. Rosenthal Treasurer, Secretary and Chief Financial Officer

 

0

 

 

 

Adrian P. Schaffer Vice President of Sales and Business Development

 

0

 

 

 

All executive officers

 

0

 

 

 

All directors who are not executive officers

 

0

 

 

 

All employees excluding executive officers

 

64,148

 

Required Vote

 

The affirmative vote of a majority of the shares represented at the Annual Meeting and entitled to vote is required for this proposal. Abstentions will be counted as present and entitled to vote on this proposal and will therefore have the effect of a negative vote. Broker non-votes will not be counted as present and entitled to vote on this proposal and will therefore have no effect on the outcome of this proposal.

 

THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN

 

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PROPOSAL 4: Advisory Vote to Approve Compensation for Our Named Executive Officers

 

Pursuant to Section 14A of the Exchange Act, shareholders have the opportunity to vote, on an advisory basis, on the compensation of our named executive officers. This advisory vote offers shareholders the opportunity to endorse or not endorse the Company’s executive compensation policies and practices described in this proxy statement. Last year, over 76% percent of the advisory votes cast by the Company’s shareholders approved of our executive compensation policies and practices. As selected by our shareholders at the 2011 Annual Meeting of Shareholders and approved by our Board, an advisory vote to approve the compensation of our named executive officers is held annually, subject to the advisory vote to recommend the frequency of such vote as set forth in Proposal 5 for the Annual Meeting.

 

Our executive compensation programs are designed with the objectives of attracting, motivating and retaining highly qualified executives, providing performance-based incentives for the attainment of strategic business objectives, rewarding superior performance and aligning the interests of our executives with those of our shareholders. Accordingly, we are submitting the following resolution for shareholder vote at the Annual Meeting:

 

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

 

For a more complete discussion of our compensation policies and practices please see the “Compensation Discussion and Analysis” section and the accompanying compensation tables and narrative disclosures in this proxy stateme